The Environmental Protection Agency is running a $16.4 million deficit in its lead-based paint oversight, a report from the agency’s internal watchdog said, a poisonous situation stemming from the agency’s failure to measure what its program is costing. 

“By not recovering all of its costs of the program, the federal government did not collect funds that otherwise could have been available to offset the federal budget deficit,” said the report from the EPA’s Office of Inspector General.

It was unclear, and the EPA could not say, whether the agency could make up all or part of the deficit by raising fees this year or by collecting additional fees from previous participants.

The EPA is supposed to pay for its program to teach industry how to handle lead paint by charging for training and certification.  The system operates on a five-year cycle, and when investigators analyzed the current five-year period — from fiscal year 2009 to 2014 — they found the deficit.  For the last four years of the program, costs are expected to exceed revenue by $25.3 million.  Only a surplus in the first year of $8.9 million brings the final five-year total down to the $16.4 million investigators said is at risk.

And those numbers are far from precise, because the EPA can’t say what the program costs to run.

The agency hasn’t conducted the legally required biennial reviews of its costs to see if it needs to increase the fees.  In fact, before the investigators could conduct the audit, they had to get the EPA to “develop a rough estimate of its actual costs for FY’s 2010 and 2011 based on spending and labor use”. The figure the agency came up with — roughly $20 million a year — consists of salary and travel expenses for federal officials conducting oversight and investigations on lead-based paint, plus grants to states for their own lead paint programs. 

The Toxic Substances Control Act gives the EPA broad power over all lead-based paint activities, including oversight on its use in buildings, refurbishment of those buildings to remove the paint, and training to teach workers how to handle the paint.  The EPA’s lead-based paint programs are supposed to be relatively cost-neutral.  The agency collects a wide range of fees to fund its activities, such as accreditation of lead-based paint training programs and certification of renovation contractors.

But the agency has not taken the necessary steps to make sure the fee amounts are accurate, the inspector general said.

“EPA has not conducted a formal cost study to determine its actual lead-based paint program costs and decide whether it needs to adjust the fees to reflect changes in the costs,” investigators said.

The EPA needs to be especially vigilant in collecting fees, the report said, because participation in lead-based paint training programs has been significantly lower than officials had projected.  Expecting to accredit 284,000 individuals over two years – and collect their training fees – the agency found that just 100,000 people sought certification, roughly 35 percent of what had been anticipated.

The EPA declined to comment, saying the response it gave in the report was sufficient.

There was no issue with the way EPA handled the money it collected. Investigators found the agencies internal controls over fee collection to be sound and effective.  The problem, instead, is the establishment of the fee amounts.

The IG suggested the agency start reviewing those fees, and determine how high they need to be raised.  The EPA agreed with the recommendations, and said a review of fee amounts should be completed by November.

But EPA officials also expressed concern that the inspector general’s report may not be an accurate depiction of the program since, the analysis was based on an estimate of costs by the agency’s Office of Chemical Safety and Pollution Prevention (OCSPP).

“The cost data upon which the OIG has based its findings and recommendations was provided by OCSPP with the understanding that it was to be used as part of preliminary research only, and was hence not an authoritative and complete statement of program costs,” said a response from the EPA.  “Accordingly, OCSPP has significant concerns about the use of this preliminary data to make the findings presented in the draft report.”

In an era of fiscal belt-tightening, the inspector general said every dollar counts.

“The President’s Budget Message for FY 2012 states that reducing the long-term federal deficit must be a priority. The federal government is looking for ways to save money and cut unnecessary costs. We believe that EPA could help the federal government in this endeavor by collecting more lead fees to recover more of its costs,” the IG said.