U.S. ENVIRONMENTAL PROTECTION AGENCY 

OFFICE OF INSPECTOR GENERAL 

Catalyst for Improving the Environment 

Audit Report 

EPA Should Continue Efforts to 

Reduce Federal Advances and 

Federal Special Accounts 

 Report No. 10-P-0093 

 March 31, 2010 
 

 

 

 

Report Contributors:	 Paul Curtis 

Meg Hiatt 

 Denise Patten

 Robert Evans 

Kevin Ross 

Sheila May 

Abbreviations 

CFC Cincinnati Finance Center 

EPA U.S. Environmental Protection Agency 

GL General Ledger 

IA Interagency Agreement 

OCFO Office of the Chief Financial Officer 

OIG Office of Inspector General 

ORBIT OCFO Reporting and Business Intelligence Tool 

OSWER Office of Solid Waste and Emergency Response 

SA Special Account 
 

 

 

 

U.S. Environmental Protection Agency 10-P-0093 

March 31, 2010 Office of Inspector General 

At a Glance 

Catalyst for Improving the Environment 

Why We Did This Review 

Our purpose was to determine 

whether the U.S. Environmental 

Protection Agency (EPA) 

effectively manages funds 

advanced from federal agencies 

under interagency agreements 

(Advance IAs) and federal 

special accounts (SAs). The 

objectives of our review were to 

determine: (a) EPA’s policies, 

procedures, and practices for 

managing amounts advanced 

from federal agencies; and (b) the 

current balances of advances 

from federal agencies that could 

potentially be used in lieu of 

appropriated funds. 

Background 

EPA receives advance funding 

from federal sources through 

Advance IAs and Superfund SAs. 

Advance IAs and SAs are 

components of intragovernmental 

transactions, which occur 

between EPA and its federal 

trading partners. Approximately 

$60 million in Advance IAs and 

$28 million for federal SAs 

remained outstanding as of 

September 30, 2009. 

For further information, contact 

our Office of Congressional, 

Public Affairs and Management 

at (202) 566-2391. 

To view the full report, 

click on the following link: 

www.epa.gov/oig/reports/2010/ 

20100331-10-P-0093.pdf 

EPA Should Continue Efforts to Reduce 

Federal Advances and Federal Special Accounts

 What We Found 

We found that a $1.1 million advance from the U.S. Capitol Police remained 

open because an accounting adjustment had not been completed. The Agency 

recorded the adjustment in December 2009. In addition, we found three federal 

SAs that included incorrectly recorded receipts and/or expenditures totaling 

about $2.5 million as of February 2009. The Agency corrected $2 million 

during the audit in February and April 2009. 

EPA issued Superfund Special Account Guidance on July 16, 2002. The 

guidance provided accounting procedures for recording and tracking special 

account funds. However, that guidance does not address spending federal 

versus non-federal special account funds. Without clear guidance, programs 

expended non-federal funds before federal funds when both SA funds were 

available. As a result, amounts advanced by other federal agencies remained 

outstanding after the project was completed and some SA account receipts 

and/or expenditures remain misclassified. This included $579,126 in receipts 

and expenditures for the Johnny Cake Road Farm site being incorrectly 

recorded as non-federal. Outstanding federal SAs and misclassified SA funds 

complicate EPA’s efforts to reconcile and reduce trading partner differences. 

What We Recommend 

We recommend that the Office of the Chief Financial Officer record the 

$579,126 in SA funds on the Johnny Cake Road Farm site in the correct fund, 

and request the Office of Solid Waste and Emergency Response and the 

regional Superfund program offices to verify that special account receipts and 

expenditures are recorded in the proper fund code. The Agency concurred with 

our findings and recommendations. 
 

 

 

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

WASHINGTON, D.C. 20460 

OFFICE OF 

INSPECTOR GENERAL 

March 31, 2010 

MEMORANDUM 

SUBJECT:	 EPA Should Continue Efforts to Reduce Federal Advances and 

Federal Special Accounts 

Report No. 10-P-0093 

FROM: Melissa M. Heist 

Assistant Inspector General for Audits 

TO:	 Barbara Bennett 

 Chief Financial Officer 

This is our report on the audit of advances from federal agencies under interagency agreements 

and federal special accounts, conducted by the Office of Inspector General (OIG) of the U.S. 

Environmental Protection Agency (EPA). This report contains findings that describe the 

problems the OIG has identified and corrective actions the OIG recommends. This report 

represents the opinion of the OIG and does not necessarily represent the final EPA position. 

Final determinations on matters in this report will be made by EPA managers in accordance with 

established audit resolution procedures. 

The estimated cost of this report – calculated by multiplying the project’s staff days by the 

applicable daily full cost billing rates in effect at the time – is $320,000. 

Action Required 

In accordance with EPA Manual 2750, you are required to provide a written response to this 

report within 90 calendar days. You should include a corrective actions plan for agreed upon 

actions, including milestone dates. We have no objections to the further release of this report to 

the public. This report will be available at http://www.epa.gov/oig. 

If you or your staff have any questions regarding this report, please contact Paul Curtis 

at 202-566-2523 or curtis.paul@epa.gov, or Meg Hiatt at (513) 487-2366 or 

hiatt.margaret@epa.gov. 
 

 

 

EPA Should Continue Efforts to Reduce 10-P-0093 

Federal Advances and Federal Special Accounts 

Table of Contents 

Purpose........................................................................................................................... 1 

Background .................................................................................................................... 1 

Noteworthy Achievements ............................................................................. 2 

Scope and Methodology ............................................................................................... 2 

Results of Review .......................................................................................................... 3 

Recommendations......................................................................................................... 5 

Agency Response ............................................................................................. 5 

Status of Recommendations and Potential Monetary Benefits................................. 6 

Appendices 

A Details on Scope and Methodology .................................................................... 7 

B Recommended Accounting Adjustments........................................................... 9 

C Distribution........................................................................................... 10 
 

10-P-0093 

Purpose 

The purpose of this audit was to determine whether the U.S. Environmental Protection Agency 

(EPA) is effectively managing funds advanced from federal agencies. The objectives of our 

review were to determine: 

•	 EPA’s policies, procedures, and practices for managing amounts advanced from federal 

agencies. 

•	 The current balances of advances from federal agencies that could potentially be used in 

lieu of appropriated funds. 

Background 

EPA receives advance funding from federal sources through interagency agreements (Advance 

IAs) and Superfund Special Accounts (SAs). Approximately $60 million for Advance IAs and 

$28 million for federal SAs remained outstanding as of September 30, 2009. 

Federal Advances 

The EPA Office of the Chief Financial Officer (OCFO) defines IAs as agreements in which EPA 

provides goods or services to another federal agency or to a State or local government and is 

reimbursed for its expenses. EPA records advances from other agencies for Advance IAs in 

general ledger (GL) account 2315 – Other Advances, Federal. This account establishes EPA’s 

liability for unearned revenue. The Agency recognizes earned revenue and reduces the liability 

when it incurs expenses against the IA. 

Federal Special Accounts 

Superfund Special Accounts are site-specific, interest-bearing sub-accounts within the Superfund 

Trust Fund. The Comprehensive Environmental Response, Compensation, and Liability Act 

authorizes EPA to retain and use funds from SAs to address response actions under the Act. 

Superfund Special Account Guidance, issued by OCFO on July 16, 2002, establishes financial 

management guidance for classifying special account proceeds and provides the accounting 

guidelines to separately track amounts retained in Special Accounts. EPA should record 

amounts received under a non-federal Cash-Out for future costs to be incurred in fund TR2 – 

Non-Federal Special Accounts. Federal Cash-Out settlement costs should be recorded in fund 

TR2A – Federal Special Accounts to be incurred in the future. Past cost collections, late 

payment interest collections, and interest revenue should be recorded in fund TR2B – Special 

Accounts. EPA records Superfund SA advances from other federal agencies in GL account 2316 

– Advances, Cash Outs, Federal. The Agency recognizes earned revenue and reduces the 

liability when it incurs expenses on SAs. 

Federal Trading Partners 

Advances from other federal agencies (both IAs and Superfund SAs) are components of 

intragovernmental transactions. Intragovernmetal transactions occur between EPA and its 

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10-P-0093 

Federal Trading Partners. EPA reports these transactions in its financial statements in 

accordance with Office of Management and Budget Circular No. A-136, Financial Reporting 

Requirements, which states: “The intergovernmental assets of an agency are separately reported 

on the face of the balance sheet. Non-entity assets, which may be intragovernmental or 

governmental (i.e., non-Federal), are separately disclosed in the notes... The intragovernmental 

liabilities of an agency are separately classified on the face of the balance sheet.” 

Government-wide Reporting Issue 

The Treasury Financial Manual requires verifying agencies to confirm and reconcile 

intragovernmental transactions with their trading partners. In our Audit of EPA's Fiscal 2009 

and 2008 (Restated) Consolidated Financial Statements (Report No. 10-1-0029), issued 

November 16, 2009, we noted that EPA reported $183 million in unreconciled differences with 

47 trading partners. Of that amount, Treasury reported $51 million as material differences. 

Advances from other Agencies are a part of these differences. EPA has difficulty reconciling 

these differences, primarily because of differing accounting treatments and accrual 

methodologies between federal agencies. For example, when other agencies recognize an 

expense when an advance is provided to EPA and EPA does not recognize revenue until the 

funds are expended, it creates a timing difference. 

Noteworthy Achievements 

We identified the following noteworthy achievements related to the management of Advance IAs 

and federal SAs: 

•	 The Cincinnati Finance Center (CFC) has improved communication with program offices, 

which has improved the federal IA management, monitoring, and close-out process. 

•	 EPA has developed an SA Senior Management Committee. 

•	 Each region has a lead SA coordinator that serves as a primary point of contact in each 

region for special accounts. 

Scope and Methodology 

We conducted the audit in accordance with generally accepted government auditing standards, 

issued by the Comptroller General of the United States. Those standards require that we plan 

and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe that the evidence 

obtained provides a reasonable basis for our conclusions based on our audit objectives. 

We conducted our audit from January 2009 to March 2010. We drew our samples from CFC’s 

reports of advance account balances by federal agency at September 30, 2008. These reports 

provided the details by federal agency for GL accounts 2315 and 2316. The population of 

federal advances GL account 2315 was 47 agreements. The population of federal SAs in GL 

account 2316 was 37 sites. We randomly selected 10 federal Advance IA agreements and 10 

federal SA samples to review. We interviewed Agency officials from CFC; the Office of Solid 

Waste and Emergency Response (OSWER); other program offices; and Regions 2, 3, 6, 7, 8, 9, 

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10-P-0093 

and 10 to determine the Agency’s policies and practices for managing Advance IAs and SA 

funds. We reviewed IAs, consent decrees, SA reports, and Agency financial records to 

determine how the Agency uses those funds. Further details on our scope and methodology are 

in Appendix A. 

Results of Review 

A $1.1 million advance to EPA had remained open since 2002 because the Agency had not 

completed an accounting adjustment to reclassify appropriated funds to reimbursable funds. The 

Agency spent appropriated funds on part of the project. An adjustment was necessary to 

reclassify these appropriated expenditures to the reimbursable Superfund appropriation. The 

appropriated funds had not been moved to the reimbursable appropriation. The Agency recorded 

the adjustment in December 2009. 

We also found that three federal SAs included misclassified receipts totaling $2.5 million as of 

February 2009. The Agency corrected $2 million during the audit, in February and April 2009. 

The Agency established separate fund codes for federal SAs and past costs when it issued its 

Superfund Special Account Guidance on July 16, 2002. However, EPA did not reclassify the 

funds after EPA issued the guidance. The guidance provides accounting procedures for 

recording and tracking SA funds, but does not address spending federal versus non-federal SA 

funds. Without clear guidance, programs expended non-federal funds before federal funds when 

both SA funds were available. Outstanding federal SAs and misclassified SA funds complicate 

EPA’s efforts to reconcile and reduce trading partner differences. 

Federal Advances 

During the audit, we found an instance where $1.1 million of a $12.5-million advance from the 

U.S. Capitol Police remained open because expended appropriated funds had not been 

reclassified to the reimbursable appropriation. The obligation was related to a contract to 

provide services to the Capitol Police. The project’s performance period was from October 16, 

2001, to June 13, 2002. CFC and the program office delayed the deobligation or reclassification 

of the advance because they did not follow EPA procedures for closing out the IA. EPA’s policy 

is to deobligate remaining funds on an IA when a project is complete. For Advance IAs (fundsin) the Agency can then close the IA and return the remaining funds to the other agency. Funds 

can also be used to reclassify previous site expenditures from appropriated funds. In December 

2009, OSWER and CFC reclassified $1.1 million of expenditures from appropriated funds to 

reimbursable expenditures as a result of our audit. This allowed for an additional $1.1 million of 

appropriated funds to be used for other purposes. 

Federal Special Accounts 

Settlement funds received under SA authority are placed in interest-bearing SAs to perform 

response action work at sites in accordance with terms of the settlement agreement (e.g., consent 

decree). The OCFO Superfund Special Account Guidance provides guidance on recording the 

billing and collection of funds in SAs. It describes how the funds collected are placed in fund 

codes TR2 (non-federal), TR2A (federal), or TR2B (past costs), depending on the agreement. 

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10-P-0093 

We found that while the Agency has guidance on recording SA funds, there is no guidance 

describing the protocol for expending amounts from the three funds. EPA should use federal 

funds before non-federal funds on sites that have both federal and non-federal funds, to minimize 

trading partner differences. 

We found three federal SAs that contained receipts and/or expenditures recorded in the wrong 

fund code. The Agency has since corrected these entries for two SAs. 

Special Account #026M - Johnny Cake Road Farm. EPA incorrectly recorded 

$505,229 of receipts from the U.S. Marshals Service as non-federal receipts. 

Expenditures totaling about $73,897 were also incorrectly recorded as non-federal 

expenditures, for a total of $579,126. From our analysis of the consent decree and our 

interview with the Region 2 Special Account Coordinator in OSWER, we found that all 

receipts for the Johnny Cake Road Farm SA were from the U.S. Marshals Service and 

should have been recorded as federal receipts. Region 2 recorded the receipts and 

expenditures as non-federal based on the available guidance at the time and did not 

subsequently rerecord them to federal fund codes when the July 2002 SA guidance was 

issued. CFC is currently working with Region 2 to reclassify the entries. 

Special Account #06GW - Tex Tin. EPA recorded receipts for the Tex Tin SA in both 

the federal (TR2A) and non-federal (TR2) fund codes. However, EPA recorded all 

obligations and expenditures for this site in the non-federal fund code. As a result, the 

non-federal fund expenditures exceeded collections, creating a negative balance of 

$1,427,284. Originally, Region 6 had obligated the funds in the non-federal fund code in 

accordance with the guidance in place for SAs at that time. Because Region 6 obligated 

the funds in a non-federal fund, they also expended the funds from the non-federal fund. 

When the guidance changed, Region 6 correctly recorded the federal receipts in the 

federal fund code. Since the disbursements were still recorded in the non-federal fund 

code, the Tex Tin SA was left with the $1,427,284 negative balance in the non-federal 

fund code. Region 6 and CFC correctly adjusted the balances in fund codes TR2 and 

TR2A in April 2009. 

Special Account #07S2 - Hastings Groundwater. EPA originally recorded receipts of 

$223,163 and expenditures of $100,000 from the U.S. Department of Agriculture in the 

federal fund code TR2A. According to the consent decree, the receipts were for past 

costs incurred and not for future response costs at the site. Therefore, these funds should 

have been recorded in fund code TR2B. Region 7 and CFC corrected the entries in 

February 2009. 

When the SAs were originally established, only fund code TR2 existed to record both federal and 

non-federal SA receipts and expenditures. However, new SA guidance was established in July 

2002, which established separate SA funds for Federal Cash-Out Settlement Future Costs 

(TR2A), Non-Federal Cash-out Settlement Future Costs (TR2), and Past Costs (TR2B). When 

the new guidance was issued, the regions did not initiate corrective actions to have the finance 

office reclassify the applicable receipts and expenditures from the non-federal TR2 to the federal 

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10-P-0093 

TR2A SA fund account because the regions were not aware of the distinction between federal 

and non-federal SA fund codes. Therefore, the receipts and expenditures remained recorded as 

non-federal. 

Recommendations 

We recommend that the Office of the Chief Financial Officer: 

1.	 Record the $579,126 in federal SAs for the Johnny Cake Road Farm site in the correct 

fund codes. 

2. Request OSWER and the regional Superfund program offices to perform: 

a. A baseline review of consent decrees to verify that special account receipts and 

expenditures are recorded in the proper fund codes. 

b.	 Annual reviews of SAs with negative balances and adjust receipts and/or 

expenditures as necessary. 

Agency Response and OIG Evaluation 

In a discussion held on March 24, 2010, the Agency concurred with our findings and 

recommendations. 

5 
 

 

 

 

 

 

 

10-P-0093 

Status of Recommendations and 

Potential Monetary Benefits 

POTENTIAL MONETARY 

RECOMMENDATIONS BENEFITS (in $000s) 

Rec. 

No. 

Page 

No. Subject Status1 Action Official 

Planned 

Completion 

Date 

Claimed 

Amount 

Agreed To 

Amount 

1 5 Record the $579,126 in federal SAs for the Johnny 

Cake Road Farm site in the correct fund codes. 

O Office of the 

Chief Financial Officer 

3/31/11 

2 5 Request OSWER and the regional Superfund 

program offices to perform: 

a. A baseline review of consent decrees to 

verify that special account receipts and 

expenditures are recorded in the proper fund 

codes. 

O Office of the 

Chief Financial Officer 

3/31/11 

b. Annual reviews of SAs with negative 

balances and adjust receipts and/or 

expenditures as necessary. 

- - NOTE: OSWER reclassified $1.1 million of 

appropriated expenditures to federal advance 

expenditures as a result of our review. 

C Office of Solid Waste and 

Emergency Response 

7/15/2009 $1,100 $1,100 

O = recommendation is open with agreed-to corrective actions pending 

C = recommendation is closed with all agreed-to actions completed 

U = recommendation is undecided with resolution efforts in progress 

6 

1 
 

 

 

 

 

 

 

10-P-0093 

Appendix A 

Details on Scope and Methodology 

During our audit, we analyzed the Agency’s process for establishing, monitoring and using 

federal advances and SA funds. We reviewed files for federal advance and federal SAs. We 

conducted interviews with OCFO and program officials. 

GL 2315 Reconciliation: CFC Support to General Ledger Balance (9/30/2008) 

A total of $14.7 million for 47 IAs was outstanding in GL 2315 as of September 30, 2008. 

We selected a random sample of 10 advances from this population of federal advances. We 

reviewed the Advance IAs and interviewed project officers to determine how they manage the 

advances. We used Financial Data Warehouse queries and the IA files to determine the financial 

status of each advance. The agreements selected were: 

Table A-1: Selected Federal Advance Agreements at September 30, 2008 

Agreement # Advance Expenses Amount 

RW95939709 $12,500,000.00 ($11,365,311.80) $1,134,688.20 

RW89939695 4,346,601.67 (2,931,205.88) 1,415,395.79 

RW70955756 937,031.00 - 937,031.00 

RW11948130 785,500.00 (781,779.42) 3,720.58 

RW17939930 187,900.10 (151,296.27) 36,603.83 

RW89922435 483,432.00 (399,206.20) 84,225.80 

RW86922259 75,000.00 (71,281.95) 3,718.05 

RW47921617 414,318.09 (295,000.00) 119,318.09 

RW97922256 99,800.00 (99,791.09) 8.91 

RW19922450 1,440,000.00 (238,235.38) 1,201,764.62 

Source: OIG internally generated data. 

GL 2316 Reconciliation: CFC Support to General Ledger Balance (9/30/2008) 

A total of $42 million for 37 SAs was outstanding for GL 2316 as of September 30, 2008. We 

selected a random sample of 10 sites from this population of SAs. We reviewed the consent 

agreements, and interviewed Superfund officials in Regions 2, 3, 6, 7, 8, 9, and 10 to determine 

how they manage the special account funds. We used the Financial Data Warehouse, the 

OCFO Reporting and Business Intelligence Tool (ORBIT) standard SA checkbook reports, and 

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10-P-0093 

SA by fund code reports to determine the financial status of the federal SAs. The federal SAs 

selected were: 

 Table A-2: Selected Federal SAs at September 30, 2008 

Site Name Federal Agency Site # Balance 

Johnny Cake Road Farm U.S. Marshals Service 026M $72,499.68 

Post Office/Air Force Post Office/Air Force 03BD 38,580.89 

Tex Tin General Services Administration 06GW 2,812,500.00 

Hastings Groundwater U.S. Department of Agriculture 07S2 123,163.33 

Wellington Mine U.S. Forest Service 085F 199,309.48 

Milltown Reservoir U.S. Department of Treasury 0823 6,684,508.99 

Midvale Slag U.S. Department of Treasury 0871 2,204,946.00 

Newmark Wellfield U.S. Department of Justice 09J5 6,500,000.00 

Baldwin Park Unit Treasury Judgment Fund 09M4 490,000.00 

Navy Navy 10K3 40,000.00

 Source: OIG internally generated data. 

Internal Control Structure 

In planning and performing our audit, we reviewed management controls related to our audit 

objectives. We examined EPA’s Fiscal Year 2008 Federal Managers’ Financial Integrity Act 

Annual Assurance Letters issued by the Regional Administrators and Assistant Administrators. 

In Fiscal Year 2008, Region 8 identified a finding in the negative available balances by fund 

code for the Superfund SAs in Region 8. Region 8 stated corrective actions would be planned by 

the end of Fiscal Year 2008 to resolve this issue. As of January 2010, the negative balances had 

been corrected. In addition, we examined EPA’s review in compliance with the Office of 

Management and Budget Circular A-123, Appendix A, to identify any weaknesses related to 

federal advances and SAs. EPA identified no material weaknesses in its A-123, Appendix A, 

review of internal controls related to federal advances and federal SAs. 

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Appendix B 

Recommended Accounting Adjustments 

Table B-1: Johnny Cake Road Farm - SA# 026M 

Receipts 

Current Reclassify Corrected 

Fund Balance Amount Balance 

TR2 $505,229 ($505,229) $0 

TR2A 72,500 7,500 80,000 

TR2B 153,946 497,729 651,675 

Total $731,675 $0 $731,675 

Expenditures 

Current Reclassify Corrected 

Fund Balance Amount Balance 

TR2 $73,897 ($73,897) $0 

TR2A 0 7,500 7,500 

TR2B 0 66,397 66,397 

Total $73,897 $0 $73,897 

Source: Agency Financial Records (ORBIT Special Account Report by Fund) 

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Appendix C 

Distribution 

Office of the Administrator 

Chief Financial Officer 

Assistant Administrator for Solid Waste and Emergency Response 

Deputy Chief Financial Officer 

Agency Follow-up Coordinator 

General Counsel 

Associate Administrator for Congressional and Intergovernmental Relations 

Associate Administrator for Public Affairs 

Audit Follow-up Coordinator, Office of the Chief Financial Officer 

Audit Follow-up Coordinator, Office of Solid Waste and Emergency Response 

Acting Inspector General 

10