EPA OIG Renders “Qualified” Opinion on FYs 2020 and 2019 TSCA Service Fee Fund Financial Statements

On December 29, 2022, the U.S. Environmental Protection Agency (EPA) Office of Inspector General (OIG) published a report entitled The EPA’s Fiscal Years 2020 and 2019 Toxic Substances Control Act Service Fee Fund Financial Statements. The Frank R. Lautenberg Chemical Safety for the 21st Century Act (Lautenberg Act) requires EPA to prepare and OIG to audit the Toxic Substances Control Act (TSCA) Service Fee Fund financial statements each year. According to OIG, its primary objectives were to determine whether:

• The financial statements were fairly stated in all material respects;
• EPA’s internal controls over financial reporting were in place; and
• EPA management complied with laws and regulations.

TSCA requires that the fees EPA charges be sufficient and not more than reasonably necessary to defray approximately 25 percent of the costs of administering specific sections of TSCA.
 
OIG rendered a “qualified opinion” on EPA’s fiscal years (FY) 2020 and 2019 TSCA Service Fee Fund financial statements, “meaning that, except for material errors in expenses and income from other appropriations, the fiscal years 2020 and 2019 financial statements were fairly presented.” OIG notes one material weakness, stating that “EPA materially understated the fiscal year 2019 ‘Expenses from Other Appropriations’ line item of the financial statements by nearly $25 million.” OIG did not identify any instances of noncompliance that would result in a material misstatement to the audited financial statements.
 
OIG notes that during its user fee analysis, it found that the TSCA fee structure in the fees rule during FYs 2020 and 2019 “appeared reasonable based on the data available when the EPA developed the fees rule.” The TSCA fees collected did not adequately offset the FYs 2020 and 2019 actual or projected costs of administering certain provisions of TSCA, however, “primarily because there were fewer fee-triggering activities than the EPA had projected for that period.”
 
OIG recommends that the chief financial officer correct the methodology for accounting for TSCA direct and indirect expenses from other appropriations to ensure that all costs for administering TSCA Sections 4 and 5, parts of Section 6, and Section 14 “are properly recorded and reported in the financial statements.” OIG states that EPA agreed with its recommendation and provided acceptable planned corrective actions. According to OIG, the recommendation is resolved with corrective actions pending.