800R76105
- C-
August 1976
Managing
The Money
How EPA Assures
Financial Integrity in
the Federal Wastewater
Treatment Works
Construction Grants
Program
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I I nder the Federal Water Pollution Control Act
Amendments of 1972, the U S Environmen-
tal Protection Agency's wastewater treatment
plant construction grants program has become
the largest public works effort in the Nation
Congress authorized $18 billion in grants to
States and municipalities to enable them to
build or expand wastewater treatment facilities
needed to meet water quality goals
The Federal funding share is 75 percent of
the costs of individual projects, and State or
local governments contribute 25 percent
Based on a recent Bureau of Labor Statistics
study, each billion dollars spent for wastewater
treatment facilities generates approximately
20,000 on-site, year-long jobs In addition, off-
site jobs are created in production and transpor-
tation of materials and equipment and in engi-
neering and technical fields
EPA estimates that wastewater treatment con-
struction activities will support at least 200,000
jobs by mid-1977, when the entire $18 billion is
expected to be obligated for specific projects
Although no significant improprieties or irregu-
larities have occurred in this mammoth under-
taking, the magnitude of the program creates a
climate of potential problems As a result, EPA
has taken several strong measures to preserve
the financial integrity of the construction grants
program and to strengthen the Agency's stew-
ardship of public funds allocated for this pur-
pose.
Procurement Regulations
EPA has issued regulations governing suba-
greements, or contracts, awarded under the
construction grants program This includes new
procedures for procurement of architectural/
engineering services
The regulations are designed to encourage
an open selection process for engineers Cost
reviews are required for engineering proposals
(cost analysis may also be used in selected
cases), and for negotiated change orders under
construction contracts The regulations prohibit
cost-plus-percentage-of-cost contracts since this
type of contract provides no incentive to reduce
costs They also prohibit fees based on a
percentage of construction costs since the fees
can bear no relationship to the engineer's effort
if construction costs are rising fast Mandatory
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Federal requirements have been included in
standard contract clauses for both consulting
engineering and construction contracts
In developing these measures, EPA sought
suggestions and comments from the public,
State and local governments, and professional
engineering groups Joint workshops were held
throughout the Nation to explain the procedures
to the architectural/engineering community,
grantees, States and other parties
Auditing Practices Guidelines
A guide has been developed by EPA's Office
of Audit for use by its auditors as well as by
certified public accounting firms under contract
to the Agency The guide applies to the audit of
grant funds spent in the planning, design, and
construction of wastewater treatment plants
throughout the United States
The guide, which updates and formalizes
existing audit practices, includes comments and
suggestions from five vitally interested groups
• American Institute of Certified Public Accoun-
tants
• General Accounting Office
• National Intergovernmental Audit Forum
• The American Consulting Engineers Council
• Professional Engineers in Private Practice
These groups, along with water program and
legal specialists within EPA, were instrumental in
making the guide an effective working tool
Expansion of Monitoring
EPA has concluded an agreement with the
Corps of Engineers and the General Services
Administration to assist in expansion of Federal
monitoring of projects under construction
Efforts will focus on the quality of supervision
provided by the grantee and the resident in-
spector EPA will continue to rely heavily on the
grantee to insure proper, speedy completion of
construction
Added Staffing
More attention is being given individual con-
struction grant projects by allotment of addi-
tional personnel and other resources to the
program The construction grants effort was
strengthened when the President authorized 300
new EPA positions, including 250 entirely new
positions and 50 transfers of personnel from
other EPA programs
Increased Program Management
Emphasis on the management of the con-
struction grants program has been increased by
appointment of a National Program Manager to
better coordinate the program, accelerate the
grants process and give added focus to individ-
ual projects
Public Participation
EPA will continue to encourage citizen in-
volvement in the construction grants process,
particularly on a community level Ample oppor-
tunity is provided for public participation, partic-
ularly in the early stages of planning for waste-
water treatment facilities
Vital to Public Trust
These measures are viewed by EPA as being
much more than financial management controls
They also are vital steps in building and main-
taining the public trust needed to sustain prog-
ress, not only in the field of water pollution
abatement, but in the entire environmental
movement as well
For More Information
For more information and assistance, write to
EPA Water Program Operations, Municipal Con-
struction Division (WH-547), Washington, DC
20460
More Help on Auditing
Personnel assigned to construction grant audits
by EPA has been increased from about 25 man-
years in Fiscal Year 1975 to approximately 160
man-years in Fiscal 1977 This will help the
Agency perform pre-award, interim, and final au-
dits
it U S GOVERNMENT PRINTING OFFICE: 1976—626.61O 3.1
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