U.S. Environmental Protection Agency
                   Office of Inspector General

                   At   a  Glance
                                                           08-P-0290
                                                   September 29, 2008
                                                               Catalyst for Improving the Environment
Why We Did This Review

We conducted this special
review to determine whether
the States receiving State
Revolving Funds comply with
the subrecipient monitoring
requirements of the Single
Audit Act, Clean Water Act,
and Safe Drinking Water Act.
We also reviewed procedures
the States use to prevent and
detect fraud in the State
Revolving Funds.
Background
The State Revolving Funds are
the U.S. Environmental
Protection Agency's (EPA's)
largest programs, with
approximately $74 billion in
loans and other type of
assistance outstanding as of
June 30, 2007. About
$1.5 billion was awarded in
2008. The goal of subrecipient
monitoring is to ensure projects
meet performance goals and
borrowers spend federal funds
in accordance with the intent of
the laws and regulations.

For further information,
contact our Office of
Congressional and Public
Liaison at (202) 566-2391.

To view the full report,
click on the following link:
www.epa.qov/oiq/reports/2008/
20080929-08-P-0290.pdf
Innovative Techniques for State Monitoring of
Revolving Funds Noted
 What We Found
In general, the States we reviewed complied with subrecipient monitoring
requirements. Our review identified several innovative techniques and
procedures some States use to comply with the subrecipient monitoring
requirements of the Single Audit Act, Clean Water Act, and Safe Drinking Water
Act. Two States take advantage of current technology, such as e-mail and the
Internet, to reduce the number of on-site inspections yet are able to track current
construction activity. Two other States analyze subrecipient audit reports not
only to track financial condition but also to make trend and ratio analyses to
project on a subrecipient's ability to repay a loan in the future.

We did note two minor areas EPA should address. Only 59 percent of the States
we reviewed identify the federal award information to the recipient, and EPA's
Annual Performance Evaluation should include an evaluation of the States'
subrecipient monitoring procedures. We suggest that EPA require all States to
notify borrowers of federal award information to assure they can comply with the
Single Audit Act. We also suggest that EPA include a review of how States
monitor borrowers as part of its annual review procedures.

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