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The Alexander Hamilton Award Nominees

Nomination for FY 2003 PCIE Award

Nominating entity:       EPA Office of Inspector General
Award: Alexander Hamilton Award
Category: Audit
Contact: Melissa Heist, Assistant Inspector General for Audit, 202-566-0899
Nominees: Name: Cost Accounting at the Environmental Protection Agency Audit Team
Office or Group: EPA Office of Inspector General
    Edward Gekosky
    Paul Curtis
    Robert Smith
    Alan Bogus
    Arthur Budelier
    Francis Martinsky
Citation: For promoting cost accounting within EPA and the Federal government.

Nomination Statement

This nomination recognizes those individuals who worked extensively within the Environmental Protection Agency (EPA) and across the Federal government to promote cost accounting as a means for improving the efficiency of government operations. Their early identification of the need for not only accurate financial statements at year-end, but also accurate, timely cost information on an ongoing basis was one of the factors that contributed to EPA being only the second agency to achieve a green status score for the President's Management Agenda item on financial performance. At the time the Office of Management Budget (OMB) raised EPA's status grade to green, it noted that EPA's status had changed because EPA had demonstrated linkage of day-to-day core mission program management decisions to financial information.

Until recently, each year the EPA-OIG's financial auditors had concluded in their report on EPA's financial statements that the EPA was not in substantial compliance with the Federal Financial Management Improvement Act, in part, because it could not meet the requirements of the Managerial Cost Accounting Standards to provide cost per output to management in a timely fashion. They reported that EPA managers often based their decisions on the availability of funds with much less concern being given to the cost of operations. While the Agency's cost accounting capabilities had evolved to the point that it could report cost by EPA goal, this generally did not provide information at a detailed enough level to meaningfully make comparisons and decisions among various environmental or administrative activities. For example, EPA managers need information about the cost to issue a permit, develop a new drinking water standard, or register a pesticide in order to effectively manage these activities and achieve the greatest environmental benefits with available resources.

The auditors used numerous forums, in addition to the annual financial statement audit reports, to promote sound cost accounting. For example, within the Agency they recommended that cost accounting be reported as a Federal Manager's Financial Integrity Act weakness. They also reported cost accounting as a top management challenge in the Agency's Annual Performance Report to focus OMB and Congressional attention on the issue. They discussed cost accounting with OMB and the General Accounting Office at annual meetings held to discuss agencies' audited financial statements. They raised it at meetings of the PCIE's Audited Financial Statement Workgroup. These discussions helped them gain support for their position that good financial management was more than obtaining a clean opinion on year-end financial statements, and it was equally important to have systems in place that provided ongoing timely and accurate financial information for decision-making. OMB's President's Management Agenda recognizes the importance of sound cost accounting by making this one of the factors in achieving a green status score for financial management. Also, the OMB's Performance Assessment and Results Tool requires agencies to report efficiency measures.

Recently, EPA purchased a business intelligence tool which when fully implemented will put cost accounting information on Agency managers' desktops. This will greatly facilitate the use of cost accounting throughout EPA. In addition, EPA continues to expand the number of reports available in the Agency's Financial Data Warehouse in order to facilitate the linkage of Agency performance and cost information. All of these actions, initiated in part due to audit recommendations, have increased the availability and use of cost accounting information to maximize results achieved from available resources.

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