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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