Catalyst for Improving the Environment 

Audit Report

 

EPA Can Improve Managing 

of Working Capital Fund 

Overhead Costs 

Report No. 09-P-0129 

March 30, 2009

U.S. ENVIRONMENTAL PROTECTION AGENCY 

OFFICE OF INSPECTOR GENERAL 
Report Contributors: Paul Curtis Phil Cleveland 

 Robert Smith Gloria Taylor-Upshaw 

 Cynthia Poteat Robert Nyarko

 Kelly Bonnette John Richberg 

 Lynda Taylor 

Abbreviations 

CBSS Customer and Business Support Staff 

EPA U.S. Environmental Protection Agency 

FTE Full-Time Equivalent 

OCFO Office of the Chief Financial Officer 

OEI Office of Environmental Information 

OIG Office of Inspector General 

OTOP Office of Technology Operations and Planning 

WCF Working Capital Fund 
09-P-0129 

March 30, 2009

Catalyst for Improving the Environment

Why We Did This Audit

We performed this audit to 

determine what costs were 

included in the Working 

Capital Fund (WCF) overhead 

and the value added by the 

overhead costs, and to identify 

opportunities for WCF cost 

savings. 

Background 

The U.S. Environmental 

Protection Agency's (EPA’s) 

WCF began in Fiscal Year 

1997. The role of the WCF is 

to provide a centralized source 

of administrative and support 

services for EPA. The WCF 

strives to reduce the costs of 

services in the Agency 

through improved efficiencies 

gained by achieving 

economies of scale, greater 

consumer bargaining power, 

and reduction in overhead. 

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/2009/

20090330-09-P-0129.pdf

 

EPA Can Improve Managing of 

Working Capital Fund Overhead Costs

 What We Found

 

While we did not identify any significant cost savings for the WCF, we did 

identify two areas requiring management attention: 

• The WCF staffing process is not fully documented. Office of Technology 

Operations and Planning (OTOP) management allocates the number of FullTime Equivalents to WCF cost centers based on discussions during annual 

budget formulation. Documentation supporting staffing allocations was 

minimal, and we did not identify any policies documenting the process. 

• We identified three issues relating to unreasonable allocation of WCF 

employee time. Two OTOP employees had travel costs assigned to the WCF 

but no related payroll costs. Salary costs for 4 managers were allocated 

entirely to the WCF even though 5 of the 53 employees they supervised did 

not charge time to the WCF. An OTOP employee went on a detail outside 

the WCF but the employee’s time continued to be charged to the WCF. 

 What We Recommend

We recommend that the OTOP Director document the WCF staffing process and 

methodology. We also made recommendations to address the unreasonable 

allocations noted. In response to the draft report, EPA agreed with our 

recommendations and its proposed corrective actions should address our 

recommendations. 

U.S. Environmental Protection Agency 

Office of Inspector General 

At a Glance 
 

March 30, 2009

MEMORANDUM

SUBJECT: EPA Can Improve Managing of Working Capital Fund Overhead Costs 

 Report No. 09-P-0129 

FROM: Melissa M. Heist 

 Assistant Inspector General for Audit 

TO: Linda Travers 

 Acting Assistant Administrator, Office of Environmental Information 

 Myra Galbreath 

 Director, Office of Technology Operations and Planning 

This is our audit of EPA’s Working Capital Fund overhead costs 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 projects’ staff days by the 

applicable daily full cost billing rates in effect at the time – is $661,477. 

Action Required 

In accordance with EPA Manual 2750, we are closing this report on issuance in our tracking 

system. You should track progress of your corrective actions in the Management Audit Tracking 

System. 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 has any questions regarding this report, please contact Paul Curtis at 

(202) 566-2523 or Curtis.Paul@epa.gov, or Robert L. Smith at (202) 566-2531 or 

Smith.RobertL@epa.gov. 

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

WASHINGTON, D.C. 20460 

OFFICE OF 

INSPECTOR GENERAL
EPA Can Improve Managing of 09-P-0129 

Working Capital Fund Overhead Costs 

 

Table of Contents

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

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

Noteworthy Achievements......................................................................................... 1 

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

Results of Audit........................................................................................................... 2 

WCF Staffing Process Not Documented.............................................................. 2 

Unreasonable Allocations of WCF Employee Time ............................................. 2 

 

Recommendations...................................................................................................... 3 

Agency Response and OIG Evaluation...................................................................... 3 

Status of Recommendations and Potential Monetary Benefits.............................. 4 

Appendices 

A Details on Scope and Methodology.................................................................. 5 

B Agency Response to Draft Report.................................................................... 6 

C Distribution ......................................................................................................... 8 

 

 
09-P-0129 

1 

Purpose

The purpose of this audit was to examine the U.S. Environmental Protection Agency’s (EPA’s) 

Working Capital Fund (WCF) overhead costs. We sought to determine what costs were included 

in WCF overhead and the value added by the overhead costs, and to identify opportunities for 

WCF cost savings. 

Background 

EPA's Working Capital Fund was established in Fiscal Year 1997 under the authority of Section 

403 of Public Law 103-356, the Government Management Reform Act of 1994. Permanent 

authority was in EPA’s 1998 Appropriations Act. The WCF is a revolving fund authorized by 

law to finance a cycle of operations in which the costs for goods or services provided are charged 

to the users. The WCF operates like a commercial business within EPA where customers pay for 

services received, thus generating revenue. The WCF’s role is to provide a centralized source of 

administrative and support services for EPA. The WCF strives to reduce the costs of services 

through improved efficiencies gained by achieving economies of scale, greater consumer 

bargaining power, and reduced overhead. 

EPA’s Chief Financial Officer is responsible for the financial health of the Fund and makes all 

final decisions. The WCF Board provides policy, planning, and operations oversight to the Fund 

and ensures WCF use is consistent with Agency mission priorities. The Board mediates any 

issues not resolved through the chain-of-command and raises the issues for resolution, as 

appropriate, to the Chief Financial Officer. WCF Activity Managers have overall management 

responsibility for providing and overseeing service to customers. 

WCF services are provided through four activities: data processing and telecommunications, 

Integrated Financial Management System, postage, and e-relocation services. The Office of 

Environmental Information (OEI) is primarily responsible for data processing and 

telecommunications services, and OEI’s Office of Technology Operations and Planning (OTOP) 

is a major provider of WCF services. The Office of the Chief Financial Officer (OCFO) is 

responsible for the Integrated Financial Management System and e-relocation services. The 

Office of Administration and Resources Management is responsible for postage services. 

In Fiscal Year 2007, WCF revenues totaled about $196 million. Overhead costs totaled about 

$21 million. During our audit field work, we identified 139 EPA employees who had a portion 

of their time allocated to the WCF. 

Noteworthy Achievements 

In August 2008, WCF staff and OTOP hosted the fourth annual WCF Conference in Research 

Triangle Park, North Carolina. The 3-day event offered information on a variety of WCF topics, 

including an overview of the WCF’s operation, WCF metrics, and current and future service 

offerings. In several sessions, data processing activity service managers outlined the ordering 

and cancellation processes for their services. 
09-P-0129 

2 

Scope and Methodology 

We conducted this 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 findings and conclusions based on our audit 

objectives. To meet the audit objectives, we identified the number of OEI and OCFO Full-Time 

Equivalents (FTEs) included in WCF overhead cost centers, determined the value added by those 

centers, and examined the current WCF supervisory structure. We conducted our field work 

from February 2008 to January 2009, at EPA Headquarters in Washington, DC, and Research 

Triangle Park, North Carolina. For additional details on scope and methodology, see 

Appendix A. 

Results of Audit 

We did not identify any significant cost savings for the WCF. However, we have identified two 

areas that we believe require OTOP management’s attention: (1) WCF’s staffing process not 

being documented, and (2) unreasonable allocations of WCF employee time. Details follow. 

WCF Staffing Process Not Documented 

OTOP’s WCF staffing process was not fully documented. OTOP management allocates 

the number of FTEs to WCF cost centers based on informal discussions between service 

managers and WCF management during its annual budget formulation process. We did 

not identify any policies that documented the staffing process. The Government 

Accountability Office’s Standards for Internal Controls in the Federal Government state 

“... Internal controls and all transactions and other significant events are to be clearly 

documented.” The staffing process is an important element in the WCF’s control 

activities; without maintaining documentation explaining process, the effectiveness of 

this control activity is reduced. 

WCF employees are not required to keep timesheets because WCF managers estimate 

that the costs of setting up an adequate timekeeping system outweigh the benefits of such 

a system. Given that WCF employees are not required to record their actual time 

worked, it is especially important that OTOP document its WCF staffing process, so that 

it can be consistently applied in future years. 

Unreasonable Allocations of WCF Employee Time 

Cost accounting principles require that costs be allocated on a reasonable and consistent 

basis. We identified three issues relating to unreasonable allocation of WCF employee 

time. 

No Salary Costs Associated with WCF Travel. We identified two OTOP employees 

whose travel costs were assigned to the WCF but no related payroll costs were assigned 
09-P-0129 

3 

to the Fund for those employees. It is not reasonable for an OTOP employee to charge 

travel expenses to the WCF without a related payroll charge for the time spent in travel 

status. WCF management has not developed a mechanism to capture the time charges of 

employees who incur travel costs but do not work for the WCF. As a result, WCF salary 

costs may be borne by other appropriations and all costs are not reflected in the 

accounting reports.

Salary Allocations for National Computer Center Managers Should be Reduced. 

The salary costs of 4 managers in OTOP’s National Computer Center are allocated 

entirely to the WCF, but 5 out of 53 employees they supervise do not charge any time to 

the WCF appropriation. WCF management did not consider charging less than 

100 percent of the managers’ time to the WCF because the majority of the staff worked 

on the WCF. It is not reasonable that managers who spend part of their time supervising 

non-WCF employees charge 100 percent of their time to the Fund. A portion of the 

managers’ time should be charged to the appropriate non-WCF areas. 

Salary for a Detail Employee Should Not Be Allocated to WCF. One OTOP 

employee went on a 120-day detail to the Office of Enforcement and Compliance 

Assurance in October 2007, but the employee’s time was allocated to the WCF until 

January 2008. It is not reasonable that the salary costs of an employee assigned to 

another office be allocated to the WCF. The Director of OTOP’s Customer and Business 

Support Staff (CBSS) said the allocation of the detailed employee salary continued until 

January 2008 because the Office of Human Resources did not process the employee’s 

form SF-52, Request for Personnel Action, timely. According to the CBSS Director, the 

Fixed Account Number has since been changed retroactive to the employee’s detail start 

date. We did not verify this information.

Recommendations 

We recommend that the Director, Office of Technology Operations and Planning: 

1. Document the OTOP WCF staffing process and methodology by developing a policy 

that details the process. 

2. Develop a method to properly assign salary costs to the WCF for non-WCF 

employees whose travel costs are charged to the Fund. 

3. Reduce the percentage of time charged to the WCF to reflect the time spent 

supervising employees who charge their time to non-WCF appropriations. 

Agency Response and OIG Evaluation 

EPA agreed with all our audit recommendations and its proposed corrective actions should 

address our recommendations. The draft report contained four recommendations, but we deleted 

one recommendation (related to the salary for a detail employee being allocated to the WCF) 

based upon OTOP’s response to the draft report. 
09-P-0129 

4 

Status of Recommendations and 

Potential Monetary Benefits 

RECOMMENDATIONS 

POTENTIAL MONETARY 

BENEFITS (in $000s) 

Rec. 

No. 

Page 

No. Subject Status1 Action Official 

Planned 

Completion 

Date 

Claimed 

Amount 

Agreed To 

Amount 

1 3 Document the OTOP WCF staffing process and 

methodology by developing a policy that details 

the process. 

O Director, Office of 

Technology Operations 

and Planning 

08/15/09 

2 3 Develop a method to properly assign salary costs 

to the WCF for non-WCF employees whose travel 

costs are charged to the Fund. 

C Director, Office of 

Technology Operations 

and Planning 

02/26/09 

3 3 Reduce the percentage of time charged to the 

WCF to reflect the time spent supervising 

employees who charge their time to non-WCF 

appropriations. 

O Director, Office of 

Technology Operations 

and Planning 

08/15/09 

1 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 
09-P-0129 

5 

 Appendix A 

Details on Scope and Methodology 

To meet our audit objectives, we identified the number of OEI and OCFO FTEs included in 

WCF overhead cost centers, determined the value added by the WCF overhead costs centers, and 

examined the current WCF supervisory structure. These 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 the evidence obtained 

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

We analyzed WCF policies and procedures and gained an understanding of WCF internal 

controls over performance measures, financial reports, and contractual agreements through 

discussions with OEI and OCFO staff. To determine what costs were included in WCF 

overhead, the value added by the overhead costs, and opportunities for cost savings, we 

performed the procedures below. 

• We obtained a general understanding of the WCF’s organizational structure, prepared 

organizational charts for activities, and briefly described related functions. 

• We reviewed Fiscal Year 2008 and 2007 FTE budget allocation reports for OTOP and 

OCFO. In addition, we determined the basis for the FTE allocations in general. 

• We determined the purpose and description of each overhead cost pool and identified all 

OEI and OCFO employees who charge time directly to a cost center, determined their 

functions, and reviewed for duplication of efforts between cost centers. 

• We learned the nature of the contract costs that are included in the overhead cost centers 

and determined why the contractor support is necessary. 

• We examined supporting documentation for Fiscal Year 2007 contract costs in cost 

centers G0 (Consolidated National Computer Center Divisional General and 

Administrative), G2 (National Technology Services Division Planning General and 

Administrative), H3 (National Computer Center Production Overhead), and GH (General 

and Administrative in Enterprise Desktop Solutions Division).

• We evaluated the current WCF supervisory structure to determine its appropriateness and 

reasonableness, and reviewed government-wide criteria on supervisor-to-employee ratio. 

• We determined the roles and responsibilities of all WCF employees above a GS-13. 

• We reviewed recent WCF financial reports and the 2007 overhead analysis prepared by a 

Certified Public Accountant. 
09-P-0129 

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Appendix B 

Agency Response to Draft Report 

February 26, 2009 

MEMORANDUM

SUBJECT: Draft Audit Report Assignment No. 2007-000445, EPA Can Improve Managing of 

Working Capital Fund Overhead Costs 

FROM: Myra J. Galbreath, Director 

Office of Technology Operations and Planning 

 And Chief Technology Officer 

TO: Paul C. Curtis, Director 

 Financial Statement Audits 

 Office of Inspector General 

We have completed our review of Office of Inspector General (OIG) Draft Audit Report 

Assignment 2007-000445, EPA Can Improve Managing of Working Capital Fund Overhead 

Costs and provide the following comments as requested: 

1. Recommendation #1: Document the OTOP WCF staffing process and methodology 

by developing a policy that details the process. 

Concur in part -- Currently, the WCF Staffing process is documented in each year’s 

budget development working files. During the FY 2010 budget development cycle, 

we will ensure that the process and methodology used in determining FTE 

percentages charged to the different WCF cost centers is clearly documented. In 

addition, we will include the relevant email discussions on the formulation process as 

part of the formal record. 

Estimated date of completion: August 15, 2009 

2. Recommendation #2: Develop a method to properly assign salary costs to the WCF 

for non-WCF employees whose travel costs are charged to the Fund. 

Concur -- The two incidents identified in the audit were errors uncharacteristic of our 

funding operations and have been corrected. We have reemphasized that travel 

funding should be the same as the employee’s fixed account number (FAN). 

Estimated date of completion: Completed 
09-P-0129 

7 

3. Recommendation #3: Reduce the percentage of time charged to the WCF to reflect 

the time spent supervising employees who charge their time to non-WCF 

appropriations. 

Concur -- We have reviewed the percentage of time charged to the WCF for NCC 

management and will adjust the Fixed Account Numbers (FAN) to reflect a mix of 

WCF and appropriated percentages beginning in the FY 2010 WCF budget 

formulation process. 

Estimated completion date: August 15, 2009 

4. Recommendation #4: Promptly adjust the Fixed Account Number for employees who 

are on detail, to ensure improper cost allocations do not occur and cost accounting 

reports remain accurate. 

Non-concur -- We regularly review Fixed Account Numbers (FAN) and adjust them 

accordingly. The FAN number charged to an employee is driven by the HR process 

and specifically by the SF-52. 

The individual on detail to another organization was to be charged to that 

organizations accounting and the correct FAN was placed on the SF-52. In this 

particular instance, the FAN was not updated in PeoplePlus to the receiving 

organization accounting as it should have been. We retroactively corrected the FAN 

to the employee’s detail start date. 

Estimated completion date: Completed 

Thank you for the opportunity to comment on the draft report. If you have any questions 

concerning the information provided please contact Cindy Simbanin at 202-566-0304. 
09-P-0129 

8 

Appendix B 

Distribution 

Office of the Administrator 

Acting Chief Financial Officer 

Acting Assistant Administrator for Administration and Resources Management 

Acting Assistant Administrator for Environmental Information 

Agency Follow-up Official (the CFO) 

Acting Deputy Chief Financial Officer 

Agency Follow-up Coordinator 

Acting General Counsel 

Acting Associate Administrator for Congressional and Intergovernmental Relations 

Acting Associate Administrator for Public Affairs 

Working Capital Fund Staff, Director 

Director, Office of Technology Operations and Planning 

Acting Director, Policy and Programs Developmental Staff 

Acting Director, Office of Financial Management 

Working Capital Fund Board Members 

Acting Director, Office of Financial Management 

Acting Director, Office of Financial Services

Director, Reporting and Analysis Staff 

Director, Research Triangle Park Finance Center 

Director, Washington Finance Center 

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

Audit Follow-up Coordinator, Office of Administration and Resources Management 

Audit Follow-up Coordinator, Office of Environmental Information 

Audit Follow-up Coordinator, Office of Environmental Information/Office of Technology 

 Operations and Planning 

Audit Liaison, Washington Finance Center 

Acting Inspector General