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EPA has no cost-savings definition or measure, IG reports

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Photo - An Inspector-General report says Environmental Protection Agency officials have no definition of "cost savings" and no credible way to calculate them. Seen here is EPA Administrator Lisa Jackson. (AP Photo)
An Inspector-General report says Environmental Protection Agency officials have no definition of "cost savings" and no credible way to calculate them. Seen here is EPA Administrator Lisa Jackson. (AP Photo)
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Environmental Protection Agency officials will spend in excess of $8 billion this year, but they will apparently do so without a working definition of "savings/cost avoidances" or a way of calculating if they've achieved any," according to the agency's Inspector-General.

"EPA does not have a policy describing what constitutes savings/cost avoidances and the methodology for calculating them," the IG said in a new report. "Without effective policies and procedures for estimating savings and cost avoidances, EPA will not be able to accurately report the results of its efficiency initiatives and influence internal and external management decisions."

That statement comes on page 14 of a report that examines how effectively EPA responded to President Obama's 2009 direction that all federal department and agencies come up with cost savings that would collectively total $100 million.

EPA officials initially responded by promising to achieve $33 million in savings, then later revised that number to $21 million. The savings were to be achieved by implementing 72 ideas put forth by EPA managers. The IG report made public this week focused specifically on how two EPA regions sought the promised savings.

In effect, the IG said the regions couldn't do so accurately because EPA as a whole can't define a cost saving and lacks a credible way of calculating a saving.

Among the IG's recommendations to EPA Administrator Lisa Jackson and other top agency officials were were these:

"1. Develop an Agency-wide policy that defines what the Agency considers cost savings, efficiencies, and avoidances.

"2. Develop an Agency-wide procedure for estimating savings, efficiencies, and cost avoidances to include requiring program offices and regions to consult with internal financial managers to obtain complete and up-to-date cost data.

"3. Develop a policy on estimating savings and cost avoidances relating to contracts based on similar prior contract data that will show the actions not taken or improved operations as opposed to using the Independent Government Cost Estimates (IGCEs)."

Agency officials disagreed with the IG's recommendations, according to the report, saying specifically of the first two recommendations that "introducing formality into the early stages of idea generation would severely hinder innovation and creativity."

The IG report noted that the office disagreed with the EPA response in part because "internal controls, which include policies and procedures, help organizations achieve results and should be an integral part of the entire cycle of planning, budgeting, management, accounting, and auditing."

The IG also noted that "EPA did not determine whether program offices and regions achieved the estimated $33 million in savings and/or cost avoidances (later reduced to $21 million) and whether the agency could have achieved greater savings by implementing the projects in other offices and regions."

Go here to read the full IG report.

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