WASHINGTON (Reuters) - The Environmental Protection Agency may be overstating the impact of its enforcement programs, even as the amount of penalties assessed by the agency declined, a government report said on Tuesday.

The report issued by the Government Accountability Office (GAO) recommended that the EPA, which enforces major federal laws such as the Clean Air Act and the Clean Water Act, overhaul its reporting methods.

Overall, the GAO's report found that adjusted for inflation, the EPA's total assessed penalties declined from $240.6 million in fiscal year 1998 to $137.7 million in 2007.

Lawmakers accused the Bush administration of trying to cover up the decline in enforcement through inflated pollution reduction and environmental savings estimates.

"Environmental enforcement has simply not been a priority for the Bush EPA," Rep. Bart Stupak, a Democrat from Michigan, said in a statement. "While this report shows how environmental enforcement has declined, it doesn't expose the real story behind the numbers: cases not brought, polluters not pursued, and fines not collected."

The GAO concluded, however, the environmental agency may be underreporting the amount of pollution it reduces or eliminates because EPA reports only a one-year pollution reduction estimate for any case, although the reductions may last for multiple years.

"Taken as a whole, these various shortcomings hamper the transparency and accuracy of EPA's reporting and create the potential for Congress and the public to misunderstand the agency's enforcement outcomes," the report said.

To rectify these issues the GAO said the EPA should begin to begin to disclose the penalties collected by the U.S. Treasury as well as the penalties assessed by the agency. The EPA should also clearly distinguish between assessed and collected penalties.

The GAO also recommended the EPA specify when reporting the outcome of enforcement cases that it only estimates the amount of pollution reduced for one year at full compliance.

In response to the report, the EPA said in a statement it would work to address many of the GAO's concerns, but the agency did not agree to report the money the agency receives from enforcement cases. The EPA said the penalties are collected by various offices and the amount of money actually received is not known "until some time after settlement is announced."

Also, the EPA said reporting the assessed penalties alone is a greater deterrent than announcing both assessed and collected penalties.