Costs are exceeding collections to the tune of $16.4 million when it comes to federal oversight of lead-based paint rules, according to a new audit.

That’s the word from the Environmental Protection Agency’s Office of Inspector General in a report dated Feb. 20, just days before deep cuts in the federal budget were scheduled to take place.

The analysis, based on EPA’s “rough estimates,” showed unrecovered costs of $16.4 million for fiscal years 2010 through 2014, according to the report.

Photos: EPA

EPA's lead-based paint abatement and RRP programs are operating at a deficit, according to an audit done by the EPA's Inspector General.

 “By not recovering all of its program costs, the federal government did not collect funds that otherwise could have been available to offset the federal budget deficit,” the inspector general said.

“A fees rule update could result in additional revenue of up to $16.4 million per five-year cycle.”

Why the Deficit?

The audit offered several reasons for why the agency was not recovering its costs. Auditors said:

• Renovation, Repair, and Painting (RRP) firm participation is lower than projected.
• EPA has not conducted a biennial cost review to determine its actual costs and decide whether it needs to adjust fees to reflect changes in costs.
• The current fee structure does not take into account all indirect costs needed to recover the full cost of administering the lead-based paint program.

EPA is charged with administering and regulating national training and certification systems for lead abatement (Lead-Based Paint Activities Program) and renovation activities (RRP), pursuant to the Toxic Substances Control Act.

The EPA inspector general found that the agency overestimated the level of firm participation in the RRP program. EPA’s 2009 economic analysis estimated the number of certification applications from firms subject to the regulations at 212,000 for the first year (2011) and 72,000 (2012) for the second year.

The abatement program requires that all lead-based paint activities be conducted according to certain work practice standards. That program became effective March 2000.

The RRP program, which became fully effective in April 2010, requires RRP activities that disturb lead-based paint to be conducted using lead-safe work practices.

Both programs allow states, territories and tribes to become authorized to administer and enforce the program in place of EPA. Currently, EPA has authorized 39 states, the District of Columbia, Puerto Rico, and three tribes for the abatement program and 12 states for the RRP program, according to the report.

Fees Raising Plan

TSCA authorizes EPA to establish fees to recover costs of administering and enforcing the standards and requirements applicable to lead-based paint training programs and contractors.

The inspector general found that although collections exceeded costs by $8.9 million in fiscal year 2010, the same was not true for 2011 through 2014, where costs exceeded collections by $25.3 million, which accounts for the net difference of $16.4 million.

Fees may go up for contractors seeking lead-safe certification.

In the report, the inspector general recommends that the agency’s March 2009 fees rule be updated to reflect the amount of fees necessary to recover program costs and apply indirect cost rates to all applicable direct costs to obtain full cost of the program.

In addition, it was also recommended the agency’s chief financial officer conduct biennial cost reviews.

The inspector general found no issue with the EPA’s handling of money after it was collected through the programs, noting that internal controls over fee collection were "generally effective."

EPA's Reaction

While it agreed with the recommendations and planned corrective actions, the agency initially expressed concern that the report was based on “preliminary data” from a rough cost estimate.

“The preliminary data was not an authoritative and complete statement of program costs,” EPA said.

The federal agency said that it would need to conduct a “much more accurate cost study after implementing the program for a full five -year certification cycle.”

The inspector general agreed that the agency needed a more accurate cost study, noting, however, that EPA should obtain a cost study every other year by conducting biennial cost reviews.

“EPA agrees and plans to conduct a biennial cost review of the lead-based paint program in FY 2013,” the report said.

The inspector general said the agency could help the federal government save money and cut unnecessary costs by collecting more lead fees and recovering more of its costs.