&EPA
            United States
            Army Corps of Engineers
                       September 1983
            United States
            Environmental Protection
            Agency
            Office of Water
            Program Operations (WH-547)
            Washington DC 20460
Operating Procedures for
"Monitoring Construction
Activities"--
at Projects Funded under the
Environmental Protection
Agency's Construction
Grants Program

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 OPERATING PROCEDURES FOR MONITORING CONSTRUCTION ACTIVITIES




AT PROJECTS FUNDED UNDER THE ENVIRONMENTAL PROTECTION AGENCY'S




                  CONSTRUCTION GRANT PROGRAM
                 U.S. Army Corps of Engineers/



             U.S. Environmental Protection Agency



                        September  1983

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                         TABLE OF CONTENTS
                                                            Page
1.    Purpose 	     1
2.    References 	     1
3.    General 	     2
4.    Interim Inspection 	     2
5.    Frequency of Inspections 	     2
6.    Related Activities 	     3
7.    Preconstruction Conference	     3
8.    Documentation and Preparation 	     4
9.    Interim Inspection Procedures 	     5
10.   Scope of Interim Inspections	     6
11.   Grant Management and Record Keeping 	     7
12.   Construction Management 	     9
       a.  Progress Charts and Schedules
       b.  Payment Requests
       c.  Change Orders
       d.  Claims

13.   Construction	    13
       a.  Quantity
       b.  Quality

14.   Final Construction Inspection 	    15
15.   Reporting 	    15
16.   Follow-up	    17

Appendix A - Inspection Related Functions 	     I
Appendix B - Grantee Files 	    II
Appendix C - Guide to Grantee's Cost Accounting
             and Internal Control System 	    IV
Appendix D - Contract Administration Checklist 	    VI
Appendix E - Construction Management Evaluations (CMEs)
             and Project Management Conferences (PMCs)	    VIII

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                                -1-

1.    PURPOSE:   The primary purpose of this document is to provide
     general operating guidance to "Agencies"  (Corps/States/EPA)
     performing construction inspections and related activities on
     projects  funded under the Environmental Protection Agency's
     Construction Grants Program.

     The Corps, State or EPA representative ("Inspector")  is the
     person(s)  responsible for conducting official project
     inspections to determine grantee compliance with program
     requirements during the construction phase of a Step 3 grant.

2.    REFERENCES:

     a.  40 CFR Parts 30, 33 and 35.

     b.  EPA Handbook of Procedures (Second Edition).

     c.  EPA Construction Grants 1982 (CG-82)

     d.  ER 415-2-4, Corps Support for EPA Construction Grants
         Program, October 1, 1983.

     e.  EPA Regional Guidance Documents.

     f.  EPA/Corps of Engineers Interagency Agreement.

     g.  EPA/Corps Regional Interagency Agreements.

     h.  State Delegation Agreements.

     i.  EPA Construction Inspection Guide  (1976, 3 volumes).

     j.  (EPA)  Management of Construction Change Orders -- A Guide
         for Grantees (1983).

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                                -2-
     k.  EPA Construction Management Evaluation (CME) Manual
          (1983).

     1.   (EPA) Accounting Guide for Construction Grants (October,
         1977).

3.   GENERAL;  The Agency role in the EPA Construction Grants
     Program will vary according to the status of the delegation of
     grant management functions in individual States.  The re-
     commendations contained herein should be considered as
     guidance and modified as necessary in view of the specific
     responsibilities and procedures outlined in State Delegation
     Agreements and EPA/Corps Regional Interagency Agreements.  It
     is expected that these Agreements, as appropriate, will be
     revised or supplemented to reflect this guidance.

4.   INTERIM INSPECTION;  The purpose of the interim inspection is
     to determine if the grantee is effectively managing
     its construction grant by:  (a)  meeting all standard and
     special grant conditions, (b)  maintaining adequate record
     keeping and accounting systems,  and (c) providing adequate
     construction and contract management,  including maintenance of
     project schedules and construction quality control.  Also, as
     appropriate and in keeping with the limits of his
     responsibility, the Inspector will provide the grantee with
     needed grants management advice  and assistance.

5.   FREQUENCY OF INSPECTIONS;  The frequency with which projects
     are inspected should be determined by  the rate of progress
     being achieved and the nature of problems or issues arising
     during construction.  Generally, each  project should be
     inspected monthly.   Where the project  is found to be
     progressing well and the grantee has demonstrated a high
     level of project management capability, bi-monthly or even
     quarterly visits may suffice.

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                                -3-
6.   RELATED ACTIVITIES;  Appendix A lists related grant
     management functions, some of which may be  evaluated during
     an interim inspection.   While this guidance document does  not
     attempt to cover all aspects of these functions,  some
     peripheral discussion is included where the function has a
     direct relationship to the interim inspection.

7.   PRECONSTRUCTION CONFERENCE:  The preconstruction  conference
     is the first meeting which will be attended by all  parties
     involved in construction of the project.  (The preconstruc-
     tion conference should be followed or preceeded by  a Project
     Management Conference (PMC); see Appendix E).   The  Inspector
     should use the preconstruction conference to advise the
     participants of the Agency role in the grants program and  to
     establish procedures and responsibilities for the interim
     inspection process.  The following are typical points that
     should be clarified during this meeting:

          a.  Points of contact with the grantee and grantee's
              management staff.  Determine from  the grantee who
              should be contacted on interim inspection  matters.
              The grantee's "Authorized Representative"  should  be
              notified of formal actions.  A list of contacts
              should also include the State/EPA  project  officers
              and the resident engineer/inspectors(s).  An
              understanding should be developed  regarding clear cut
              lines of authority and responsibility.

          b.  Grantee/State/Corps/EPA interrelationships.

          c.  Access to the work will be provided to representa-
              tives of the Corps, EPA and State  whenever it is  in
              progress, and the contractor will  provide  proper
              facilities as required by the Inspector.

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                                -4-
          d.  Schedules and notification procedures.

          e.  Flow of documents, e.g., payment requests,
              change orders, inspection reports.

          f.  Change order review and approval process.

          g.  Payment review process, including development of
              payment schedules.

          h.  Where appropriate, distinctions between
              Corps/State/EPA roles in construction monitoring
              and O&M activities.

          i.  Use of an EPA approved form or format for formal
              inspection reports submitted by the Corps.

     Since the Agency's tie to the project is with the grantee
     (through the construction grant), and the contract is between
     the grantee and the contractor, Agency contacts with or
     influence on the project must be made with or exercised
     through the grantee or his authorized representative.  Direct
     contact with the contractor by the Inspector or any other
     Agency representative should be limited to the minimum
     necessary to gain a full understanding of contract
     matters.

8.    DOCUMENTATION AND PREPARATION:   The Inspector will need copies
     of various grant and contract documents in order to prepare
     for and conduct interim inspections.   Arrangements should
     be made to obtain,  as needed,  the following:

          a.  Copies of the grant award documents with all
              standard and special conditions and amendments.

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          b.   Copies of approved contract  plans  and  specifications
              and all addenda.

          c.   Copies of engineering  services  contracts.

          d.   Copies of executed construction contracts with  com-
              pleted bid schedule, notice  to  proceed, and approved
              change orders.

          e.   Access to all payment  requests, including backup
              documentation.

          f.   Copies of all milestone approval letters and  other
              pertinent grant and contract correspondence.

          g.   Copies of construction permits.

9.    INTERIM INSPECTION PROCEDURES;   The Inspector should become
     thoroughly familiar with the project  by  examining the  plans
     and specifications, the construction  grant agreement(s), and
     other available documents.   Due to limited resources,  it may
     not be possible to thoroughly review  every aspect of grant
     and contract management at  each interim  inspection.  On
     larger projects the Inspector may have to select areas to
     review at each inspection such  that,  over the life of  a
     project, all significant aspects of grant and construction
     management, and construction quality, quantity and initial
     operability will be covered. However, every effort  should be
     made to look over the entire construction site at each visit.

     On smaller projects only a total inspection should be
     considered a complete inspection.

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                                -6-
     The nature of the program also requires that the Inspector
     become familiar with various engineering disciplines in
     order to inspect the civil, mechanical and electrical portions
     of a project.  On some larger or more complex projects, it may
     be necessary to draw on the expertise of specialists within
     the Agency to assure adequate inspection coverage.
     Inspections should be coordinated in a timely manner with all
     interested parties; however, the number of participants should
     be limited to those having direct responsibility for grant
     and/or contract management.  Keep in mind that the grantee has
     the ultimate responsibility for the project and all
     coordination should be through its designated representatives.
     All inspection activities should be conducted in a courteous
     and professional manner.  In addition to pointing out
     deficiencies, the inspection should be used to provide
     assistance (as appropriate) to the grantee in grant related
     matters.

     Where the Corps is performing inspections, the State should be
     notified as provided for in procedures set forth in the
     Regional Interagency Agreement.   Generally, written notice is
     given to the State at least two weeks in advance of the
     specific inspection.

     Provision should also be made for inspections which are not
     announced to the grantee.  The frequency of unannounced
     inspections will be determined by the Inspector's findings
     or information brought to his attention.

10.  SCOPE OF INTERIM INSPECTIONS;   There are three major areas of
     project management that must be covered during the course of
     interim inspections.  These include:  (a)  grant management
     and record keeping, (b)  contract administration and (c) con-
     struction quantity and quality.   These items are discussed in
     detail in Pars.  11-13, below.

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11.   GRANT MANAGEMENT AND RECORD KEEPING;   The  grantee  has  the
     ultimate responsibility for management of  its  construction
     grant.  Some grantees handle the entire grant  management
     process with their own forces,  while  others may  utilize  the
     services of their consulting engineer or private accountants
     and attorneys.   The Inspector must first determine the
     responsibilities and authorities of the various  grantee
     representatives and the location of all files.  Generally,
     grant management files are maintained in the grantee's office
     and the consulting engineer's office.  Construction records
     will normally be located at the job site.   The inspection
     should ascertain:

          a.  Are authorities and responsibilities  for  managing  the
              grant adequately defined, and are all aspects of
              grant management appropriately assigned?

          b.  Are payment requests and funds being  properly
              managed (timely requests and disbursements)?

          c.  Are grant standard and special conditions being met?
              Milestone activities which are conditions of  EPA pay-
              ments should especially be monitored  in advance of
              the milestone date and the grantee advised accord-
              ingly.  The requirements for most milestone activi-
              ties vary as the Federal laws and regulations have
              changed over the years.  The Inspector should always
              check the grant requirements of the particular
              project being inspected.  Typical milestone
              submittals include:

              (1)  Final plan of operation.

              (2)  Final operation and maintenance  manual.

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                           8 

          (3)  Compliance dates for special grant conditions.

          (4)  NPDES compliance schedules dates.

          (5)  Budget/project period  (dates).

          (6)  Initiation of operation date.

          (7)  Performance certification date.

          (8)  MBE/WBE compliance documentation: submittal
              dates.

     d.  Are grant records complete, segregated, orderly and
         up-to-date?  A review of the grantee's record keeping
         system should be made during the first interim
         inspection and may be repeated during later
         inspections.  The purpose of this review is
         not to audit the contents of the files, but to
         evaluate the results of advice given during the
         PMC on the content, methods, and procedures and thus
         assure that the grantee's filing system will
         facilitate the final payment, EPA audits and grant
         closeout.  Appendix B contains further discussion of
         this item and a checklist for review of files.
         (Provide the grantee with a copy of EPA's Accounting
         Guide for Construction Grants, 1977).

Generally, the requirements of 40 CFR 30.800 and 30.805
include maintaining records which provide an accurate,
current, and complete disclosure of the financial transactions
of the grant.  These records should show the amount, receipt,
and disposition of all grant related funds, and the total
costs (both direct and indirect)  of the project.  These
records must be maintained in a manner that separates allow-

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                                -9-
     able and unallowable project costs.   The Inspector  should
     check to see that the grantee's records fulfill  these  require-
     ments.   (On large grants,  he may wish to enlist  assistance
     from an auditor.)  See Appendix C.

12.   CONSTRUCTION MANAGEMENT;   Resident  services  and  contract
     management are normally furnished under a service contract  by
     a consulting engineer.  Some grantees may perform inspections
     using their own forces.  Appendix D is a checklist  of  typical
     items that should be monitored by the Inspector.  This is not
     meant to be all inclusive, and the  Inspector should review  the
     requirements of the construction contract documents and the
     engineering services contract to determine other points of
     interest.   The following items should receive special  emphasis
     during an inspection, since they could significantly impact
     the overall progress and fiscal status of the grant:

          a.  Progress Charts and Schedules - The contractor is
              normally required to submit a progress  chart  to the
              grantee and keep it current.  The Inspector should
              determine that a progress  chart has been prepared  for
              each contract and that it  reasonably reflects
              proposed and actual progress.  If it appears  that
              the contrator is behind schedule, the grantee should
              be notified and advised to take appropriate action to
              require the contractor to  outline his plan to meet
              the schedule and to require timely completion.  All
              such actions should be carefully documented.   (40  CFR
              35.2204 (b) (3) requires a formal grant amendment for
              significant changes to the project schedule.)  The
              grantee should be cautioned not to take any action
              that could result in a claim for acceleration or for
              delay of the progress of work.  If it appears that
              the contractor will not complete the work  within the

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                     -10-
    required completion date, the grantee should be
    advised that assessment of liquidated damages as a
    contract requirement is an option which may be
    exercised only by the grantee.  It should also be
    stressed that it is in the grantee's interest to
    assess liquidated damages.  EPA will not participate
    in inspection costs beyond the EPA approved contract
    completion date unless the time extension is
    authorized by an approved change order.   If the
    project completion date is delayed, a grant amendment
    will be required if costs incurred after the initial
    completion date are to be considered for EPA
    participation.

b.  Payment Requests - The grantee's payment requests to
    EPA should include only that backup documentation
    required by EPA.  Documentation which should be
    available for review includes the contractor's
    periodic partial payment request, engineer's
    invoices, and miscellaneous costs.  The Inspector
    should review the contractor's payment request and
    compare it to conditions at the job site to assure
    that the quantities for which payment is being
    requested generally conform to visual observations of
    actual progress.  This should not be done in minute
    detail, although the Inspector should develop a
    tracking system to satisfy himself that the amounts
    claimed by the contractor on payment requests are
    reasonably accurate.  This would also include
    verification of any stored materials and change order
    work claimed on the request.   (Change orders must be
    properly executed and approved by all agencies having
    authority before EPA reimbursement can be made.)

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                 -II-
EPA normally permits retainage to be withheld on the
contractor's partial payment requests.   The Inspector
should review the terms of the contract to assure
that the specified retainage clause is  being properly
administered, and, near the end of project, that the
grantee is retaining only an amount sufficient to
protect its interests in completing the project.
The Inspector's review of the grantee's payment
request should be coordinated with the  overall EPA
grant payment review and approval process.

Change Orders - Change orders represent a major area
of concern in the grants program  (Ref.j).  The
Inspector should be alert to conditions that might
give rise to the need for change orders, so he can
advise the grantee on how best to proceed, manage
costs and facilitate approval.  During  interim
inspections the following areas should be emphasized,
particularly with small grantees.

(1)  Provide advice to the grantee on the need for
     the proposed change/ as appropriate.

(2)  Assure that the grantee is processing change
     orders in a timely fashion,  including those for
     time extensions.

(3)  Advise the grantee on what is required during
     the review process on such matters as prior
     approval, proper format, justification, working
     estimates, records of negotiation, reasonable
     pricing, etc.

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                     -12-
     (4)  Assure that the resident inspector or engineer
         has copies of all executed change orders.

     (5)  Become knowledgeable of the facts regarding the
         change order to assist later in the review pro-
         cess .

     (6)  If other than a State, the Agency should
         coordinate with the State.

     (7)  Inspect the completed change order work.

d.  Claims - A claim is any written demand by the
    contractor for additional costs or time.  Most  claims
    are settled prior to extensive litigation or arbitra-
    tion and are treated as routine change orders.   It is
    the occasional claim that is not settled that is of
    special concern to EPA.  As in the case of change
    orders, the Inspector should advise the grantee on
    matters concerning all claims.  The same factors
    listed in Par. 12.c, above, must be addressed
    in the processing of claims, with special emphasis on
    timely and accurate documentation by the grantee.
    However, when it appears that the contracting parties
    cannot agree on a mutual settlement, the Inspector
    should immediately advise the project manager
    (EPA/State/Corps)  that the claim may result in
    litigation  or arbitration.  Costs associated with
    litigating claims may be allowable if the work  is
    determined  to be otherwise allowable and the costs
    were not incurred as a result of grantee
    mismanagement or errors by its consultant(s).

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                               -13-
              (See Appendix A to  Subpart  I  (40 CFR).)  Prior
              approval and, in some  cases,  a  grant  amendment  are
              required for EPA participation  in  litigation  costs
              associated with claims.   A  grantee should be  advised
              to contact the project officer  for complete details
              on allowable costs  and procedures  for handling
              formal claims.

              The Inspector should not attempt to engage in
              negotiations or manage the  situation  for the  grantee.
              The grantee should  be  encouraged to perform an
              independent analysis of the issues and negotiate
              settlement of those issues  which have merit.
13.  CONSTRUCTION:
              Quantity - An important purpose of the interim in-
              spection is to assure that the project is constructed
              in accordance with the approved plans and specifica-
              tions.   The Inspector must review the contract
              documents and develop a system for documenting
              completed activities.  Each interim inspection
              should  address work added since the last inspection
              and address prior deficiencies.  The cumulative
              effect  should be to greatly reduce the total effort
              on the  final construction inspection.  Over the life
              of the  project, all significant aspects of the pro-
              ject should have been covered.  The Inspector should
              keep in mind that much of the work accomplished
              between inspections will be concealed as the
              construction progresses and thus not be accessible
              for inspection.  His efforts should be directed more
              toward  the overall project and on major structures,
              major equipment and operating systems rather than on
              minor components or details.

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                                -14-
          b.  Quality - Responsibility for quality control  (QC) may
              rest with the contractor, the resident engineer, or,
              as in most cases, a combination of the two.  The
              Inspector should determine from the contract
              documents the extent of QC responsibility that each
              party has.  Following are items that should be given
              special attention during the interim inspection:

              (1)  Review the resident inspector's daily reports or
                   diary.  Check the reports prepared since the
                   last interim inspection to see what deficiencies
                   may have been noted and what actions were taken
                   (and recorded in the daily log) to correct
                   the deficiencies.

              (2)  Review contractor certified submittals of shop
                   drawings on a selective basis to assure that
                   they meet the requirements of the contract
                   documents.  The submittals should be processed
                   by the grantee's engineer* in a timely manner
                   and copies furnished to the resident engineer.

              (3)  Review concrete, soil compaction and other QC
                   tests required by the contract.  If any tests
                   failed, determine what action was taken by the
                   resident engineer.

              (4)  Review documentation on performance tests to
                   assure compliance with contract documents.
* Engineer accepts, accepts with reservations or requests
  resubmittal.

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                               -15-
              (5)   Make selective  field  observations,  in  addition
                   to the overall  field  inspection,  to determine
                   that QC requirements  are being  carried out.

              (6)   Any deficiencies noted should be  reported  to the
                   grantee or its  representative and included in
                   the trip report.  Hazards to public health,
                   safety and welfare should be corrected as  soon
                   as possible.

14.  FINAL CONSTRUCTION INSPECTION;  Although the  final construc-
     tion inspection is considered to be a separately delegable
     activity by EPA, it is so interrelated with interim inspec-
     tions that it needs to be addressed in this guidance
     document.  As discussed above, each interim inspection is
     simply one step toward the final construction inspection.  If
     interim inspections are properly conducted and  documented,
     the final construction inspection should be simply a
     formality to wrap up loose ends and address any uncorrected
     construction deficiencies.  The Inspector should use his
     judgment on the necessity for follow-up inspections on
     construction deficiencies.  Major deficiencies  may require
     one or more follow-up inspections,  while minor  ones should be
     left for the consulting engineer to certify prior to the
     construction closeout.  Commitments on the time required to
     correct deficiencies should be obtained.

15.  REPORTING;   Every interim inspection should be  documented with
     a written report.  Formats and procedures may vary according
     to Regional agreements and Agency policy.  As a minimum, each
     report should address the following:

              a.  Basic grant information.

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                          -16-

         b.  Basic contract information.

         c.  Status of grant.

         d.  Status of each contract.

         e.  List of attendees.

         f.  List of deficiencies noted since last report
             with recommended actions for resolution.

         g.  Comments on status of any previous deficiencies.

         h.  List of known disputes, claims or potential
             claims or change orders.

Any deficiencies that are to be noted on the report are to be
discussed with the grantee and engineer during the interim
inspection to assure that there is a clear understanding of
the matter and what should be done to correct the problem.
Grant management procedures for resolution of deficiencies
will depend on the status of delegation in each State.
Distribution of interim inspection reports will also be
subject to Regional agreements.  Generally, the State, the
grantee and its consulting engineer should be furnished
copies.  The contractor should not be furnished copies of
inspection reports, since it could mistakenly interpret
comments as directives that would prejudice the grantee's
contracting authority.  Reports should be transmitted by
letter, the content of which should identify significant
findings and/or construction deficiencies.  The transmittal
letter should be short, concise and able to stand on its
own merit.

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                               -17-
16.   FOLLOW-UP;   The Inspector should determine who is responsible
     for taking various corrective actions and have a system for
     assuring that the responsibile official(s)  is advised and
     does,  in fact, act.

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             APPENDIX A - INSPECTION RELATED FUNCTIONS

The following are separately delegable functions that may be per-
formed by the Corps, the State, EPA or a combination.  Each is
closely related to functions performed during interim inspections.
The Inspector should review the Regional and State delegation
agreements and be familiar with the activities, responsibilities,
and authorities (if any) that distinguish each of these functions
from those of the related portions of the interim inspection.  Some
may be accomplished during the interim inspection.

     1.   Overall grant management.
     2.   Approval of contract documents and authority to award.
     3.   Preconstruction conferences.
     4.   Project Management Conference (PMC).
     5.   Review and approval of progress payments.
     6.   Review and approval of change orders.
     7.   Conventional/extended Construction Management Evaluation
          (CME).
     8.   WBE/MBE tracking.
     9.   Claims resolution assistance.
     10.  Outlay management.
     11.  Review and approval of O&M manual and final Plan of
          Operation.
     12.  Final project inspection.
                                                  APPENDIX A
                                                  Page 1 of 1

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                               -II-
                    APPENDIX B - GRANTEE FILES

A well organized and properly maintained filing system is essential
to the proper administration of an EPA construction grant.  It
will also prove to be invaluable during the final audit and
closeout of a project.  This list of recommendations is not meant
to be all inclusive, but serves to point out the typical problem
areas experienced by EPA reviewers on past projects.

     1.   All files for each Step 3 EPA grant should be maintained
         separately from any other Step 1, Step 2 or Step 2+3
         EPA grant.

     2.   All EPA files should be maintained separately from
         any other agency files (FmHA, HUD, etc.).

     3.   All files should clearly distinguish between EPA allowable
         and unallowable items.

     4.   All files should be neatly organized by subject matter in
         separate folders and located in a file cabinet or drawer.

     5.   Contents of individual folders should be filed in a timely
         manner and in chronological order.
                                                  APPENDIX B
                                                  Page 1 of 2

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APPENDIX B - GRANTEE PROJECT FILE TOPICAL SUBJECT LISTING (SAMPLE)
Grant
Administration
Documents
Construction
Management
Records
Accounting
Source
Documents
0 USEPA Grant Offer
  & Conditions
0 Grant Amendments
0 State NPDES Permit
0 Auth, to Award
0 Interagency Agree-
  ments
0 Plan of Operation
0 User Charge System
0 Contracts & Sub-
  agreements
0 Flood Disaster
  Protection Act
0 Sewer Use Ordinance
0 O&M Manual
0 Davis-Bacon Act
  Compliance
0 Force Account
  Approvals
0 EEO, MBE/WBE
  Requirements
0 Real Property
  Acquisition
  Documents
0 Pretreatment
  Systems
0 Emergency Pre-
  paredness Plans
0 Maintenance
  Management Systems
0 Copeland Act
0 As-Bid Construction
  Contracts
0 Bid Tabs
0 Executed Contract
  Agreements & Sup-
  porting Documents
  Schedule
0 Progress Payments
0 Change Orders
0 Claims
0 Inspection Reports
0 Materials Test
  Reports
0 Meeting Minutes
0 Correspondence
0 SubmittaIs Logs
0 As-Built Drawings
0 Equipment War-
  ranties
0 Payment Schedule
0 Outlay Reports
0 Force Account
  Payroll Records
0 Invoices
0 Property Control
  Fixed Assets
  Records
0 Cash Income Re-
  ceipts
0 Cash Disburse-
  ments  (Cancelled
  Checks)
0 Construction Dis-
  bursements
0 Transaction Appro-
  val Records
0 Bank Statements
                                                  APPENDIX B
                                                  Page 2 of 2

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                               -IV-

         APPENDIX C - GUIDE TO GRANTEE'S COST ACCOUNTING
                    AND INTERNAL CONTROL SYSTEM

1.   Does the grantee1s organization provide for separation of
     responsibilities for operations review from control over
     financial transactions?

2.   Has the grantee established project accounting records to
     record, on a current basis, all incurred costs applicable to
     EPA work?

3.   Are books and records used to document and control construc-
     tion fund receipts and cash disbursements?

4.   Do the grantee's books and records conform to a uniform
     accounting system?  Are accounting procedures documented?

          a.  Is a general ledger with control accounts used?

          b.  Are subsidiary cost accounts established to segregate
              project costs?

          c.  Are grant unallowable costs segregated in the
              grantee's accounting system?

          d.  Does the accounting system differentiate between
              unallowable and allowable, and direct and indirect
              costs?
5.    Are project costs summarized and reconciled with control
     accounts contained in the grantee's general ledger?

                                                  APPENDIX C
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                                -V-
                            APPENDIX C

6.    Are written approvals given for each step of the disbursements
     review process?

7.    Is appropriate documentation maintained to support  all direct
     charges to the project?

8.    Is change order work separately identified in the respective
     project cost records?

9.    Are the project cost records used as the basis for:

          a.  The grantee's "Outlay Report and Request for
              Reimbursement"?

          b.  The consultant's request for reimbursement?

10.  Are the grantee's accounting records subjected to an indepen-
     dent audit at least once every two years?

11.  Are cost and price analyses of contractor proposals carried
     out in accordance with EPA grant regulations?
                                                  APPENDIX C
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                               -VI-

          APPENDIX D - CONTRACT ADMINISTRATION CHECKLIST

1.   Limits of inspection service provided.

2.   Daily inspection report is prepared and adequate; follow-up
     actions on deficiencies are properly noted.

3.   Approved plans and specifications on site.

4.   As-built drawings are maintained.

5.   Shop drawing register is established and maintained.

6.   Progress schedule is posted and current.

7.   Contractor's progress is monitored.

8.   Stored materials register is established and maintained.

9.   Delays are documented and action taken to improve progress.

10.  Copies of all executed change orders on site.

11.  Project sign located in prominent position.

12.  Wage rates and EEO notice posted by contractor.

13.  Continuous operation of existing plant assured; bypassing
     during construction (if applicable) is justified and  approved
     by State Agency.

14.  Construction (quality and quantity) conforms to plans and
     specifications and latest payment request.

                                                  APPENDIX D
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                               -VII-

                            APPENDIX D

15.  Materials properly stored and protected.

16.  Materials testing is being performed and  documented.

17.  Performance testing is being performed and documented.

18.  Payrolls are submitted weekly and reviewed.

19.  Environmental effects mitigation implemented.

20.  Required submittals identified, scheduled, coordinated.

21.  Claims file established; claims investigations documented.

22.  Materials acceptances/rejections documented.

23.  Contractor notified of required retesting and/or replacement?

24.  Materials testing/replacement documented?
                                                  APPENDIX D
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                              -VIII-
      APPENDIX E - CONSTRUCTION MANAGEMENT EVALUATIONS (CMEs)
             AND PROJECT MANAGEMENT CONFERENCES  (PMCs)

A CME is a thorough evaluation (on-site) of all aspects of project
management and is generally conducted when construction is 40% -
60% complete.  The CME should be held earlier (20% - 40% stage)
if a PMC has not been conducted.
The objective of CMEs is to evaluate grantees' management of
construction grant projects and, through this process, gain
insight into the overall management of the construction grant
program as well as into practices which bring about the reduction
of waste, fraud and mismanagement of Federal funds.

Typically, the on-site CME should be conducted by a three or more
member team composed of staff from the EPA Regional Office (who
will generally serve as team leader), the State Agency and the
Corps.  The team leader would be responsible for reviewing grantee
records, procurement procedures and grant management procedures in
the grantee's office.  Reviews by the other team members would be
concentrated on the project field records, construction management
procedures, and physical construction.

A conventional CME is expected to take four or five days to
complete.  Where larger, more complex projects are involved,  an
extended CME  with a five to ten day review period  would be
required.
                                                  APPENDIX E
                                                  Page 1 of 2

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                               -IX-
                            APPENDIX E

The Program Management Conference (PMC)  is conducted to provide
guidance to grantees on record-keeping requirements, construction
management techniques and overall grant project management
procedures.  It is generally one to three days in duration,
depending on the capabilities of the individual grantee, and should
be conducted before the start of construction on virtually all Step
3 and Step 2+3 projects.

The conduct of the PMC is an appropriate function for the Corps or
State agency.  Normally, it should be held immediately after the
preconstruction conference and concentrate on the detailed
requirements of construction grant project management.  However, in
certain cases it may be beneficial to conduct portions of the PMC
(records system, accounting system, grant conditions review, etc.)
prior to the preconstruction conference.

A PMC is not required for projects already under construction.

Procedures for conducting CMEs and PMCs are described in the CME
manual  (REF.K).
                                                  APPENDIX E
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