The EPA’s watchdog, the Office of the Inspector General (OIG), released a report dated February 27, 2025, titled “Independent Audit of the EPA’s Fiscal Years 2022 and 2021 (Restated) Toxic Substances Control Act Service Fee Fund Financial Statements.”

 

The Toxic Substances Control Act (TSCA), as amended by the Frank R. Lautenberg Chemical Safety for the 21st Century Act, requires the EPA to prepare and the OIG to audit the accompanying financial statements of the TSCA Service Fee Fund.

The OIG audit objectives were to determine whether:

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

TSCA also requires that the fees the EPA charges be sufficient and not more than reasonably necessary to defray approximately 25 percent of the costs of administering specific sections of the Act or $25 million, whichever is lower.

The OIG report “noted the following material weaknesses: the EPA materially understated TSCA income and expenses from other appropriations and the EPA materially misstated TSCA earned and unearned revenue. We noted the following significant deficiency: the EPA needs to improve its financial statement preparation process.”

The OIG report also noted that the EPA didn’t publish an annual chemical risk evaluation plan for calendar year 2022. This failure was considered an instance of noncompliance with laws and regulations.

The OIG report made the following recommendations for the chief financial officer:

• Correct the calculation in the TSCA FY22-08A on-top adjustment to accurately capture the amounts for financial statement line items “Income from Other Appropriations” and “Expenses from Other Appropriations.”
• Provide training to appropriate staff on the standard operating procedures for calculating the income and expenses from other appropriations’ on-top adjustments.
• Correct the earned revenue and unearned revenue balances in the fiscal year 2022 TSCA Service Fee Fund financial statements.
• Develop and implement accounting models to properly record and track TSCA Service Fee Fund earned revenue- and unearned revenue-related activity.
• Develop and implement a plan to strengthen and improve the preparation and management review of the financial statements.
• Correct the errors in the fiscal year 2022 TSCA Service Fee Fund financial statements.
• The last recommendation in the report was for the assistant administrator for Chemical Safety and Pollution Prevention to:
• Develop and implement a plan to publish chemical risk evaluation plans at the beginning of each calendar year, as required by TSCA.

The OIG report noted Recommendations 1–4 and 6–7. For Recommendation 5, the Agency provided an estimated milestone date of February 3, 2025, which has passed. This corrective action is still pending.

The OIG report stated that it had “rendered a qualified opinion on the EPA’s fiscal years 2022 and 2021 [TSCA] Service Fee Fund financial statements, meaning that, except for material errors in expenses and income from other appropriations and earned and unearned revenue, the statements were fairly presented.”