EPA-350-R-10-003
March 2010
U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
Catalyst for Improving the Environment
American Recovery and
Reinvestment Act of 2009
Overview of EPA's Progress
After One Year
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Deterring Fraud, Waste
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Office of Audit
Forensic Audit Dhris tan
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
Office of Inspector General
FRAUD, WASTE, AND ABUSE
Prevention, Detection, and Reporting
for Federal, State, Local, and Tribal Administrators
**
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To find out more about the U.S. Environmental Protection Agency
Office of Inspector General activities related to the
American Recovery and Reinvestment Act of 2009,
visit our Website at:
httD://www.eDa.aov/oia/recoverv.htm
Cover illustrations: Two outreach brochures prepared and distributed by the EPA Office of
Inspector General, and the logos for the American Recovery and Reinvestment
Act of 2009 and EPA.
Printed on 100% recycled paper (minimum 50% postconsumer)
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American Recovery and Reinvestment Act of 2009: EPA-350-R-10-003
Overview of EPA's Progress After One Year March 2010
Foreword
February 17, 2010, marked the 1-year anniversary of the enactment of the American
Recovery and Reinvestment Act of 2009 (Recovery Act). This report summarizes efforts
by the Office of Inspector General (OIG) of the U.S. Environmental Protection Agency
(EPA) in that first year to educate EPA, State, and other personnel on deterring fraud,
waste, and abuse, and to review whether the Agency awarded and managed its Recovery
Act funds in an efficient and effective manner. Our work indicates that EPA's leadership
has demonstrated a strong commitment to using Recovery Act funds appropriately,
although some challenges remain.
The Recovery Act provided EPA with $7.2 billion, and the Agency indicated that as of
February 18, 2010, it had made $7.1 billion available and paid out nearly $1 billion. The
OIG is working to determine whether EPA is using those funds in accordance with the
Recovery Act's requirements and is meeting the accountability objectives as defined by
the Office of Management and Budget.
Conducting outreach - both with the Agency and those receiving funds from EPA - has
been an important part of the OIG's efforts to help deter and detect fraud, waste, and
abuse. We have emphasized educating stakeholders and providing resources to help
them use funds appropriately. We have conducted nearly 100 awareness briefings,
outreach briefings, and training sessions, and have trained more than 3,000 individuals on
such areas as fraud prevention.
We have published audit and evaluation reports that provided important information to
the Agency and others during the early stages of Recovery Act implementation. These
reports looked at such issues as providing guidance for determining the eligibility of
green reserve projects, and whether organizations resolved open recommendations from
OIG reports prior to receiving Recovery Act funds. Numerous additional audits and
evaluations are underway. We also have 11 investigations in progress.
Challenges facing the Agency include managing ongoing programs as EPA places
needed emphasis on staffing work related to the Recovery Act. We will continue to
dedicate significant effort in the future to ensuring that EPA uses its Recovery Act funds
wisely.
Bill A. Roderick
Acting Inspector General
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American Recovery and Reinvestment Act of 2009: EPA-350-R-10-003
Overview of EPA's Progress After One Year March 2010
Table of Contents
EPA Provided $7.2 Billion under the Recovery Act 1
OIG Provided $20 Million for Oversight and Review 2
OIG Notes Its Accomplishments to Date 2
OIG Conducts Outreach to Help Deter Fraud, Improve Efficiency 3
OIG Publishes Reports Assessing EPA Progress 6
Additional OIG Audits and Evaluations Underway 10
OIG Notes EPA Successes 12
OIG Also Notes Continuing Challenges for the Agency 13
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American Recovery and Reinvestment Act of 2009:
Overview of EPA's Progress After One Year
EPA-350-R-10-003
March 2010
President Obama signed the American Recovery and Reinvestment Act of 2009
(Recovery Act) on February 17, 2009. The Recovery Act's purpose as it applies to the
U.S. Environmental Protection Agency (EPA) is to promote economic recovery by creating
jobs while also promoting a healthier environment. The Recovery Act provided EPA with
$7.2 billion for six programs. As of February 18, 2010, the Agency reported making
$7.1 billion available and paying out over $1 billion. Details on EPA's six programs follow.
EPA Programs Receiving Recovery Act Funds
Dollars:
Purpose:
$4 billion
Provide funds to upgrade wastewater treatment facilities
Dollars: $2 billion
Purpose: Provide funds to upgrade drinking water infrastructure
Dollars: $600 million
Purpose: Initiate and accelerate clean-up at National Priorities List sites
Dollars: $300 million
Purpose: Accelerate emission reductions from diesel engines
Dollars:
Purpose:
$200 million
Clean up contamination from underground storage tank petroleum leaks
Dollars:
Purpose:
$100 million
Carry out revitalization projects at brownfields sites
Source: EPA Recovery Act Website, http://www.epa.gov/recoverv/basic.html.
In congressional testimony on February 23, 2010, EPA's Senior Accountable Official for
the Recovery Act stated that all State Revolving Funds awarded to States were under
contract or construction as of February 18, 2010. Further, in EPA's quarterly Recovery
Act performance report (http://www.epa.gov/recovery/pdfs/2010 Q1 Perf Rpt.pdf)
showing cumulative results as of December 31, 2009, the Agency noted that:
For Superfund sites, 100 percent of Recovery Act funds were awarded and
construction was initiated at 33 sites.
For diesel emission reductions, 2,700 diesel engines had been retrofitted,
replaced, or retired.
For leaking underground storage tanks, 112 site assessments and 46 tank
clean-up projects were completed.
For brownfields, 98 percent of funding was obligated for cooperative
agreements and 27 assessments were initiated.
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American Recovery and Reinvestment Act of 2009:
Overview of EPA's Progress After One Year
EPA-350-R-10-003
March 2010
01 fi
The Office of Inspector General (OIG) is an independent office of EPA that detects and
prevents fraud, waste, and abuse to help the Agency protect human health and the
environment more efficiently and cost effectively. The Recovery Act provides the OIG
$20 million through September 30, 2012, for oversight and review. The OIG will assess
whether EPA is using its $7.2 billion of Recovery Act funds in accordance with the Act's
requirements and is meeting the accountability objectives as defined by the Office of
Management and Budget (OMB). Reflecting OMB's Recovery Act guidance, OIG's
objectives include ensuring:
Funds are awarded and distributed in a prompt, fair, and reasonable manner.
The recipients and uses of all funds are transparent to the public, and the public
benefits of these funds are reported clearly, accurately, and in a timely manner.
Funds are used for authorized purposes and potential for fraud, waste, error, and
abuse are mitigated.
Projects funded under the Act avoid unnecessary delays and cost overruns.
Program goals are achieved, including specific program outcomes and improved
results on broader economic indicators.
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Some of the OIG's key accomplishments as of January 31, 2010, are highlighted below.
OIG Accomplishments as January 31, 2010
Accomplishments
Total expenditures
Total full-time equivalents used
Awareness briefings, outreach briefings, and training sessions held
Individuals trained
Completed final published audit/evaluation reports
Audits/evaluations in process
OIG recommendations or risks identified for action, correction, or improvement
Environmental and business actions taken, improvements made, or risks
reduced in response to or influenced by OIG recommendations
Recovery Act complaints received
Investigations completed
Investigations in process
Convictions, indictments, and civil and administrative actions, as well as
allegations disproved from OIG investigations
Whistleblower reprisal allegations
Cumulative
Results
$3,391,406
21.4
95
3,368
7
20
12
2
32
0
11
2
0
Source: EPA OIG.
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American Recovery and Reinvestment Act of 2009:
Overview of EPA's Progress After One Year
EPA-350-R-10-003
March 2010
OIG Conducts Outreach to Help Deter Fraud, Improve Efficiency
As part of our outreach efforts, the OIG's Forensic Audit Division recently published a
brochure, Deterring Fraud, Waste & Abuse of EPA Funds, to alert the public to our
ongoing efforts in identifying fraud, waste, and abuse. The brochure describes who we
are; what we do; what we look for concerning fraud, waste, and abuse; and how we make
an impact. To view and download the brochure, go to
http://www.epa.gov/oig/reports/2010/OIG forensics brochure.pdf.
oEPA
Deterring Fraud, Waste
& Abuse of EPA Funds
EPA Office of Inspector General
Office of Audit
Forensic Audit Division
Office of Inspector General
FRAUD, WASTE, AND ABUSE
Prevention, Detection, and Reporting
for federal. State, Local, and Triba! Administrators
Brochures prepared by the
OIG Forensic Audit
Division (top) and Office of
Investigations. (EPA OIG)
As EPA prepared to award Recovery Act funds, the OIG took a number of
actions to alert Agency managers of risks and to recommend cost-effective
controls. The OIG participated in Agency workgroups and committees and
commented on the Agency's Recovery Act Risk Mitigation Strategy
(Stewardship Plan) to assist it in developing strategies and establishing
controls to implement the Recovery Act. Also, the OIG is using EPA
financial systems to monitor EPA awards and recipient draws of Recovery
Act funding. In some cases, the OIG contacted EPA and/or the recipient to
assess the support for the funds requested; the OIG will continue its vigilant
monitoring of reimbursement requests. Further, the OIG conducted
unannounced site visits of Recovery Act funding subrecipients to determine
whether subrecipients are complying with requirements; such visits will
continue.
The OIG's Office of Investigations has implemented a three-pronged
approach - education, outreach, and investigations - to spread the word
about the requirements of the Recovery Act and to deter and detect fraud
schemes. A key goal is to educate stakeholders and provide resources to help
them use funds appropriately.
We have provided Recovery Act-specific fraud training and presentations to
Agency personnel; State, tribal, and local officials; contractors; and grant
recipients. As of January 31, 2010, we had provided 95 briefings across the
country to over 3,300 personnel who are administering or receiving Recovery
Act funding. We have developed new and extensive liaison relationships with
State Revolving Fund coordinators; tribal water coordinators; State inspector
general offices; and contractor, grant recipient, and engineering personnel.
In addition, we have developed professional fraud awareness and education
materials, including pamphlets, postings, briefings, and Webinar broadcasts.
We have provided these materials to Agency personnel, State and tribal
administrators, contractors, and grant recipients. Where possible, we have
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American Recovery and Reinvestment Act of 2009:
Overview of EPA's Progress After One Year
EPA-350-R-10-003
March 2010
used technology to assist us. We have distributed over 6,000 pamphlets, posters, and
Hotline cards to stakeholders throughout the country. Brochures and information on
training opportunities are available at http://www.epa.gov/oig/recoverv trng.htm.
In April 2009, in conjunction with EPA's Office of Water, the OIG presented its first
fraud awareness Webinar. This Webinar reached 385 key decision makers, including
State and local Clean Water and Drinking Water State Revolving Fund coordinators. In
early September 2009, the EPA OIG, in conjunction with the Western Regional Inspector
General Council and the State of California OIG, conducted three on-site Recovery Act
fraud awareness and education briefings for State, county, and municipal employees, as
well as grant recipients, in San Diego, Los Angeles, and San Francisco, California.
Representatives from the Federal Bureau of Investigation, the U.S. Attorney's Office, and
OIG Tours Recovery Act Recipient's Facility
Above: Construction activity on the water
pump station and neutralization and
backwash equalization pump stations for
the Central Shoshone County Water
District project. (EPA photo)
Right: A view of the community's well in
its flooded state. (Photo courtesy Idaho
Department of Environmental Quality)
As part of the OIG's education and outreach efforts, on
September 10, 2009, staff from the EPA OIG toured the
first Recovery Act project in EPA Region 10 to begin
construction. The Central Shoshone County Water
District received a $12.2-million loan through the Idaho
Department of Environmental Quality State Revolving
Fund to construct a 5-million-gallon-per-day drinking
water facility in Enaville, Idaho, to replace the existing
community well which is often flooded. The project,
which began construction in May 2009 and will cost an
estimated $20.4 million, also includes installing water
meters to all 2,300 connections to allow for a
conservation-based rate structure. This allows the
project to meet Recovery Act requirements as a green
project. The project created about 30 new construction
jobs, according to Water District officials. During our
tour, we looked at what Idaho is doing with its
Recovery Act funds, and we gave a presentation on
fraud prevention to the facility's owner and resident
engineer as well as State officials.
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American Recovery and Reinvestment Act of 2009: EPA-350-R-10-003
Overview of EPA's Progress After One Year March 2010
the Department of Justice Antitrust Division were also involved. The briefings, attended
by over 550 participants, covered general and Recovery Act fraud indicators and
information on whistleblower protections for State, county, and municipal employees
involved in Recovery Act projects. Similar Webinars and briefings are scheduled.
Several western States - Alaska, Arizona, California, Idaho, Nevada, Oregon, and
Washington - have expressed concern that smaller Recovery Act fund recipients that had
never received federal funds before could be taken advantage of by unscrupulous
contractors and engineers. Further, these recipients may not know all the federal
requirements for managing and reporting on the use of federal funds. Many of the seven
States have either made it a requirement or strongly encouraged any recipient receiving
Recovery Act funds to attend our fraud presentation, and we have already made
approximately 25 such presentations. The handout for our "American Recovery and
Reinvestment Act Fraud Prevention" presentation can be accessed at
http://www.epa.gov/oig/ARRA/IG Community ARRA Handout.pdf.
When criminal acts related to Recovery Act funds are reported, the EPA OIG will
investigate. To date, we have opened 11 criminal investigations involving Recovery Act-
related issues. We will also proactively initiate investigations to determine whether EPA
is spending its Recovery Act funds properly and deter instances of fraud, waste, and
abuse.
On April 29, 2009, Melissa Heist, Assistant Inspector General for Audit, testified before
the House Transportation and Infrastructure Committee during a hearing on progress
made to date on implementing the Recovery Act. "EPA will face significant new
financial and programmatic challenges as it awards and oversees Recovery Act funding,"
Ms. Heist testified. "If EPA does not assign sufficient staff to oversight, the Agency
increases the risk of fraud, waste, and abuse of federal funds," Ms. Heist said. She noted
EPA will rely heavily on State agencies as the primary fund recipients to properly
manage their subrecipients for most of the Recovery Act funding.
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American Recovery and Reinvestment Act of 2009:
Overview of EPA's Progress After One Year
EPA-350-R-10-003
March 2010
OIG Publishes Reports Assessing EPA Progress
The OIG has published several audit and evaluation reports assessing whether EPA is
using its Recovery Act funds in accordance with applicable requirements and is meeting
the accountability objectives defined by OMB. The complete reports can be accessed at
http://www.epa.gov/oig/recovery.htm.
EPA Needs Definitive Guidance for Recovery Act and Future Green Reserve
Projects (10 R-0057, issued February 1, 2010)
Vegetated curb extensions used
in Portland, Oregon, to decrease
stormwater runoff. (EPA photo)
EPA has not provided States with clear and comprehensive guidance on how to
determine the eligibility of green reserve projects awarded through the Clean Water and
Drinking Water State Revolving Funds. Consequently, EPA cannot provide a reasonable
assurance that such projects will meet the objectives of Congress. The Recovery Act
required that 20 percent of the $6 billion awarded through these funds support green
~ projects (water or energy efficiency, green infrastructure, or
environmentally innovative activities). Although EPA had been
promoting a green approach for at least a year prior to the enactment of
the Recovery Act, it did not develop and issue timely, clear, and
comprehensive guidance to meet many of the States' needs. EPA's
guidance and subsequent updates have not addressed important aspects
of project selection. At the time of this review, EPA had not
established water and energy efficiency threshold ranges for many
types of green projects, or provided sufficient information to States on
developing business case justifications. Moreover, changes in EPA's
guidance resulted in EPA regions applying different standards when
approving States' proposals.
We recommended that EPA develop and revise green reserve guidance for States and
review States' submitted green reserve projects and accompanying business cases. The
Agency agreed with our recommendations.
EPA Action Needed to Ensure Drinking Water State Revolving Fund Projects
(fleet the American Recovery and Reinvestment Act Deadline of February 17, 2010
(10 R-0049, issued December 17, 2009)
Facing numerous challenges, EPA and the States used various approaches to mitigate the
risk of Drinking Water State Revolving Fund projects not meeting the Recovery Act
reallocation deadline of February 17, 2010. The Recovery Act provided $2 billion for
this fund. As of November 1, 2009, 257 projects, totaling $323.9 million, were under
contract. We noted several concerns regarding EPA's role in ensuring that States meet
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American Recovery and Reinvestment Act of 2009:
Overview of EPA's Progress After One Year
EPA-350-R-10-003
March 2010
the deadline: (a) EPA was unaware of the national universe of projects not under
contract, (b) EPA did not establish procedures to assist States with projects not under
contract, and (c) EPA's Stewardship Plan did not contain specific actions to identify
States at risk of not meeting the deadline. EPA would have to reallocate funding for
projects not under contract by February 17, 2010; such a delay would
negatively affect job creation and economic recovery.
A drinking water project in North
Manchester, Indiana. (EPA OIG)
We recommended in a briefing report that EPA identify and monitor
projects not under contract, establish a contingency action plan, and
complete its written procedures for reallocating funds not under contract.
EPA implemented actions that met the intent of those recommendations
by increasing its participation in State efforts to establish contracts for
Recovery Act-funded projects by February 17, 2010. We also
recommended that EPA specify the actions it will take in its Stewardship Plan. EPA did
not implement this recommendation because it believed the States would make sufficient
progress. In testimony before the House Committee on Transportation and Infrastructure
on February 23, 2010, EPA's Senior Accountable Official for the Recovery Act stated that
all State Revolving Funds awarded to States were under contract or construction by the
deadline, and no funds would need to be reallocated.
EPA Recovery Act Recipient Reporting and Data Review Process (10 R-0020,
issued October 29, 2009)
Although we did not test implementation of EPA's procedures for reviewing quarterly
Recovery Act data, we believe the Agency sufficiently designed its internal controls to
detect material omissions and significant reporting errors. We conducted this review as
part of a government-wide effort to review federal agencies' processes for reviewing
Recovery Act data submitted by recipients of federal funds. We reviewed EPA's policies
and procedures for reviewing quarterly Recovery Act data and met with the Agency's
Recovery Act governing officials responsible for implementing these policies and
procedures throughout the Agency. We forwarded our results to the Recovery
Accountability and Transparency Board for consolidation in the overall government
report sent to Congress.
EPA Should Revise Its Grant Accrual Methodology to Address Impact of
Recovery Act Funds (09 X-0217, issued August 19, 2009)
The OIG expressed concern with the impact the Recovery Act will have on EPA's grant
accrual calculation for the Fiscal Year 2009 financial statements. Grant accruals in the
financial statements represent grantee costs incurred but not billed. We reported that
EPA's grant accruals for the Fiscal Year 2009 financial statements might not include
adjustments for additional funds received under the Recovery Act. EPA has historically
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American Recovery and Reinvestment Act of 2009:
Overview of EPA's Progress After One Year
EPA-350-R-10-003
March 2010
computed grant accruals based on the results of a grantee billing practice survey. EPA
planned to combine Recovery Act grants with traditional grants and use the combined
universe as the basis for its grant accrual calculation. However, Recovery Act funds are
intended to be used faster than traditional grants. Consequently, the results of the sample
would be skewed because the billing practices for Recovery Act grants would be
different than those for EPA's traditional grants and will not be representative of all
grants, including Recovery Act grants. This difference in billing practices could result in
a misstatement of accrued liabilities in the financial statements.
We recommended that the Chief Financial Officer modify the current grant accrual
methodology to account for the increase in and nature of grant expenditures due to the
Recovery Act. The Agency agreed and made needed modifications.
Assistance Agreement and Contract Recipients with Open Recommendations
May Affect Recovery Act Activities (09-X-0196, issued July 14, 2009)
Providing funds to recipients with known weaknesses and open recommendations
increases the risks of fraud, waste, abuse, and mismanagement of Recovery Act funds.
Open recommendations are those for which EPA or the recipient of an EPA assistance
agreement or contract has not completed corrective actions. As of June 30, 2009, we
found that 67 OIG reports involving assistance agreement and contract recipients had
open recommendations that could affect EPA's Recovery Act activities. OMB guidance
requires expediting actions on open recommendations to preclude continuing weaknesses
or deficiencies that can affect Recovery Act funding.
We recommended that EPA verify whether assistance agreement and contract recipients
have corrected weaknesses identified in OIG reports prior to awarding new funds. EPA
took action to ensure that the recipients identified in the report completed corrective
action prior to receiving additional funds and put in place procedures to ensure that
Agency staff verify the completion of open audit recommendations prior to future
awards.
Recommendation to Strengthen Management Integrity Processes Affecting
Recovery Act Activities (09-X-0145, issued April 27, 2009)
The OIG recommended that EPA issue additional Fiscal Year 2009 Management
Integrity guidance to EPA offices receiving additional funding under the Recovery Act.
In December 2008, the EPA had issued its Fiscal Year 2009 Management Integrity
guidance, which outlined requirements for conducting internal control reviews and
preparing annual assurance statements forwarded to the EPA Administrator. However,
with the issuance of the updated implementation guidance for the Recovery Act, we
believed it was imperative that EPA update its Management Integrity guidance to address
Recovery Act activities.
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American Recovery and Reinvestment Act of 2009:
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We recommended the guidance ensure EPA offices (a) emphasize effective design and
operation of key business processes that support Recovery Act activities and generate
data for reporting purposes, (b) integrate Recovery Act internal control reviews into their
multiyear strategies, and (c) certify how well internal controls are working in Fiscal Year
2009 assurance statements to the EPA Administrator. In response to our report, EPA
issued additional guidance for regional and program offices implementing Recovery Act
processes. This supplemental management integrity guidance provided offices with
instructions for including information in their Fiscal Year 2009 Federal Managers'
Financial Integrity Act letters and required Assistant and Regional Administrators to
provide an additional statement of assurance specific to Recovery Act efforts.
Open Audit Recommendations Affecting Recovery Act Activities (09 X-0136,
issued April 9, 2009)
We identified open recommendations from three previously issued OIG reports that could
have an effect on Recovery Act funding. These reports were focused on opportunities to
improve EPA management. For a 2008 report on the need to provide revised terms and
conditions to regions for spending brownfields grant funds in a more timely manner, EPA
indicated these terms and conditions would be in place before EPA awarded any
Recovery Act grants. Another 2008 report found that EPA had no assurance that use of
cost-plus-award-fee contracts facilitates a higher level of performance than other types of
contracts, and EPA is revising its guidance regarding the use of such contracts. EPA
implemented corrective actions for this report before awarding Recovery Act funds. A
2007 report found that EPA often entered into interagency contracts without conducting
cost-reasonableness assessments or identifying alternatives, and we reemphasized the
need for EPA to address this issue. We are reviewing EPA's use of interagency
agreements for Recovery Act activities in a current assignment.
EPA Office of Inspector General Recommendations on Office of Management
and Budget Guidance for Recovery Act Implementation (09 P 0132, issued
March 31, 2009)
The EPA OIG reviewed the OMB Updated Implementing Guidance for the Recovery Act
and provided several comments to that office for consideration. We found that, overall,
the guidance was prescriptive for agencies to make funding available in a transparent,
need-driven way on an agency-by-agency basis. However, there did not appear to be a
process described for cross-agency coordination of grantee and other fund recipient
review to ensure that recipients are not obtaining funds from multiple sources for the
same project. We also noted cross-agency checks should be required, beyond the current
process, to ensure that a grantee, contractor, or recipient has not been debarred,
suspended, or otherwise disqualified from receiving federal funds, and does not have
outstanding federal obligations. Further, because States will be primary recipients of
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American Recovery and Reinvestment Act of 2009: EPA-350-R-10-003
Overview of EPA's Progress After One Year March 2010
Recovery Act funds, we indicated that the guidance should clarify the reviewing and
reporting responsibilities of State auditors.
The OIG has initiated the following audits and evaluations to determine whether EPA
and funding recipients manage projects effectively and meet Recovery Act objectives.
EPA's Assessment of Past Performance and Determination of Responsibility
for Contractors Awarded Recovery Act Funds: In 2009, EPA decided to
obligate approximately $211 million in Recovery Act funds to Superfund
contractors. OMB Recovery Act guidance requires agencies to actively monitor
contracts to ensure that performance, cost, and schedule goals were met. The
guidance emphasized the importance of completing timely contractor
performance evaluations. Our audit objectives ask whether (a) contractor
performance evaluations are completed in a timely manner, and (b) EPA's
contractor performance evaluation and responsibility determination processes
consider all available sources of information.
EPA's Recovery Act Targeting Criteria. The programs targeted by EPA's
portion of Recovery Act dollars address location-specific, community-based public
health and environmental needs. According to EPA's Recovery Act Plan, these
programs were carefully chosen for both their ability to put people to work now
and for their environmental value. Investing in these areas will assure that job
creation, economic growth, and environmental benefits accrue at the local level as
well as nationwide. We are evaluating the effectiveness of EPA's existing funding
processes and organizational structures in meeting Recovery Act goals.
EPA's Competition for Recovery Act Grants under the National Clean
Diesel Funding Assistance Program: The Recovery Act provides $300 million
to support EPA's National Diesel Emissions Recovery Act Plan, of which
$155 million was awarded competitively as part of the National Clean Diesel
Funding Assistance Program. The program's goal is to accelerate emission
reductions from older diesel engines to provide more immediate air quality
benefits and improve public health. Our objective is to determine whether
(a) EPA promoted competition for the National Clean Diesel Funding Assistance
Program to the maximum extent possible, and (b) the competitions meet the
goals and requirements of the Recovery Act.
Recovery Act Diesel Emission Retrofit Program. Diesel engines emit large
amounts of nitrogen oxides, particulate matter, and air toxics, which contribute to
serious public health problems. Diesel emissions come from a variety of on-road
10
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American Recovery and Reinvestment Act of 2009: EPA-350-R-10-003
Overview of EPA's Progress After One Year March 2010
and non-road engines, such as those used for freight, ports, transit, construction,
agriculture, and energy production. The Recovery Act provided EPA with
$300 million for grants to reduce diesel emissions in accordance with the 2005
Diesel Emissions Reduction Act, particularly in poor air quality areas, and to
promote economic recovery. We are evaluating the effectiveness of Recovery
Act grants in funding diesel retrofits and associated emissions reductions.
EPA's Use of Interagency Agreements for Recovery Act Activities: EPA
used interagency agreements to assist in managing some Recovery Act funding.
EPA entered into interagency agreement with the U.S. Army Corp of Engineers
to assist with Superfund site clean-ups and the Indian Health Service to assist
with wastewater and drinking water projects on Indian lands. Our audit
objectives ask whether (a) Recovery Act interagency agreements identify clear
lines of responsibility, and (b) EPA awards Recovery Act interagency
agreements based on sound business decisions.
EPA's Resource Allocation for Recovery Act Contract and Assistance
Agreement Oversight: The Recovery Act allows EPA to use 3 percent of the
funds to manage and oversee the programs funded under the Act. As described
in OMB guidance, one of the responsibilities of the Recovery Accountability and
Transparency Board is reviewing whether there are sufficient qualified
acquisition and grant personnel overseeing covered funds. To answer that
question, we are seeking to determine whether EPA has sufficient qualified
acquisition and assistance agreement staff to handle Recovery Act and non-
Recovery Act work.
EPA and State Recovery Act Clean Water State Revolving Fund Projects:
The Recovery Act provided $4 billion to Clean Water State Revolving Fund
programs to assist with upgrading wastewater treatment facilities. The objective
of our audit will be to determine how effectively EPA and States ensure
Recovery Act Clean Water State Revolving Fund projects achieve intended
project and environmental goals. We will focus on how States oversee projects
and how EPA oversees States.
Implementation of Recovery Act Stewardship Plan for Superfund Remedial
Program Contracts: OMB guidance requires an agency's Senior Management
Council to review Recovery Act reporting and performance across the agency,
establish and oversee developing and implementing agency guidance to identify
and mitigate risk, and ensure correcting weaknesses relating to Recovery Act.
EPA developed a Stewardship Plan that summarized the risks and controls that
were needed to ensure that Recovery Act funds met their objectives. The OIG is
conducting an audit to review (a) the implementation of EPA's Stewardship Plan
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American Recovery and Reinvestment Act of 2009:
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for Superfund contracts as it relates to cost controls, and (b) EPA's use of project
management principles and techniques in managing Recovery Act Superfund
work to avoid unnecessary cost overruns and delays.
Financial Reporting for the Recovery Act: OMB's Updated Guidance for the
Recovery Act requires the Agency to submit weekly financial and activity reports
to OMB. As part of our oversight of EPA's implementation of the Recovery Act,
we will determine whether (a) EPA's financial reports comply with Recovery
Act and OMB guidance, (b) amounts EPA reported to OMB reconcile to EPA's
financial system, and (c) financial reports were submitted in a timely manner. To
answer these objectives, we will review the effectiveness of controls for accurate
and timely reporting.
Recovery Act Construction Site Visits: During the Recovery Act's first year,
OIG initiated nine site visits to construction sites and municipal and local
government subrecipients that were awarded Recovery Act State Revolving Fund
assistance. These site visits examine construction progress and compliance with
Recovery Act requirements. We are also visiting subrecipients' offices (often
local governments or municipalities). The objective of these reviews is to
determine whether the recipients of Recovery Act funds complied with the
requirements of the Act, State Revolving Fund loan agreements, and federal
requirements.
EPA's leadership has demonstrated a strong commitment to ensuring Recovery Act funds
are used for their intended purposes and meet the objectives of the Act. Early on they
sought our advice on management and oversight issues, and established several internal
committees. These internal committees meet regularly to discuss Agency progress in
meeting Recovery Act objectives. The OIG participates in an advisory role on these key
committees.
For the State Revolving Fund programs, EPA issued guidance for awarding Recovery
Act funding in March 2009. This guidance informed States of their application
responsibilities and discussed the unique provisions in the Recovery Act. Under these
programs, all 50 States and Puerto Rico maintain revolving loan funds that provide
sources of low-cost financing for a wide range of water quality infrastructure projects.
The amount of funds available to each State is based on established formulas.
EPA Administrator Lisa Jackson sent letters to State governors expressing her
commitment to assisting and partnering with States to achieve Recovery Act goals.
EPA's Senior Accountable Official under the Recovery Act called State officials who
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American Recovery and Reinvestment Act of 2009:
Overview of EPA's Progress After One Year
EPA-350-R-10-003
March 2010
appeared to be facing challenges in meeting the February 17, 2010, deadline to reallocate
any funds allocated to projects not under contract or construction. This official met with
National Governors Association representatives to discuss concerns about the challenges
they face in meeting Recovery Act goals. EPA Drinking Water State Revolving Fund
staff visited the EPA regions, conducted conference call with the States, and conducted
Webcasts on various Recovery Act requirements and reporting. EPA regional staff
talked with States weekly or biweekly (in the six regions we reviewed). EPA regional
staff and the OIG conducted joint training for recipients, contractors, and vendors on
Recovery Act requirements and preventing fraud, waste, and abuse.
During our review of EPA's competition for Diesel Emission Reduction Act grants, we
noted some EPA activities that contributed to promoting competition and that may
benefit other grant competitions. The Office of Transportation and Air Quality within the
Office of Air and Radiation issued a national Request for Applications and guidance for
reviewers and selection officials, collected questions and provided answers universally,
and conducted and coordinated outreach efforts with EPA partners. The national Request
for Applications and guidance helped promote consistency among regional grant
selection processes. Once the Request for Applications was issued, Office of Air and
Radiation staff in Washington, DC, collected the questions submitted by potential
applicants and provided answers that were accessible to all potential applicants, either
on-line or via Webinars. Finally, EPA conducted extensive outreach to inform potential
applicants of the competition, how to take advantage of existing contacts, and how to
establish new ones. Region 6 personnel told us they used the mailing list generated
through the Blue Skyways Collaborative to notify potential applicants and conducted a
joint Webinar with Region 7. Office of Air and Radiation national office staff told us
that they coordinated with tribes, congressional representatives, the Environmental
Council of the States, the Diesel Technology Forum, and other stakeholders. These
actions increased competition and ensured that the process was fair and impartial.
During our reviews, we noted that EPA is facing a staffing challenge in implementing the
Recovery Act while it continues to manage ongoing programs. In its response to a
Recovery Accountability and Transparency Board survey, EPA stated that implementing
the Recovery Act was its top priority. However, to accomplish this, the Agency had to
reduce its efforts on non-Recovery Act grant and contract work. EPA cited delays in
non-Recovery Act awards and close-outs, less frequent post-award monitoring, and
extending milestones under its Grants Management Plan. EPA stated that it would
continue to assess this reduction in effort to ensure it does not jeopardize EPA's internal
controls for effective grants and contracts management. EPA also indicated that
Recovery Act funds available for implementation are only available through Fiscal Year
2011. EPA estimates that there will be additional work beyond this time frame and the
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American Recovery and Reinvestment Act of 2009: EPA-350-R-10-003
Overview of EPA's Progress After One Year March 2010
Agency will have to continue to reallocate base program resources (staff) to support these
efforts.
Our reviews also identified a concern with EPA's Stewardship Plan. OMB's
Implementing Guidance for the Recovery Act required agencies to develop mitigation
plans that align with specific risks. Agencies were to identify quantifiable measures of
performance, including ranges of acceptable and unacceptable performance. Agencies
were to identify a trigger to determine whether it should initiate a contingency plan. In
July 2009, EPA's then-Acting Chief Financial Officer stated that the Stewardship Plan
was intended to lay out the Agency's strategy to monitor and mitigate risk in
implementing the Recovery Act. We noted that EPA's Stewardship Plan did not always
contain specific action to be taken to identify risks. Also, in some cases, EPA's
Stewardship Plan did not identify a responsible official or an action to be taken in
response to an identified risk. Further, we identified instances where the Plan did not
describe the actions the Agency will take when monitoring, and control activities indicate
there is an increased risk that Recovery Act goals will not be met.
In 2009, the OIG identified EPA's "Management of Stimulus Funds" as an Agency
management challenge for EPA's consideration during its Federal Managers' Financial
Integrity Act review. In 2010, EPA will continue to face many similar challenges. EPA
will continue to be challenged by managing recipients' activities to achieve Recovery Act
goals and requirements while commencing expenditures as quickly as possible. Now that
EPA has awarded the majority of Recovery Act funds, the Agency's focus will have to
shift to oversight and monitoring. As already noted, Agency staff will have to manage
the stimulus grants and contracts in addition to their normal workload. Also, EPA will
continue to rely heavily on State agencies - the primary fund recipients - to properly
manage subrecipients that receive Recovery Act funds. Given the significant economic
problems many States face, they may not have the resources to oversee these funds.
Lastly, EPA's Superfund program provided Recovery Act funding through contracts
(many existing). With the emphasis on awarding funds and getting work started quickly,
there is a risk that the contractors will not be ready and able to accept the additional work.
These additional activities will strain EPA's current acquisition workforce.
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It's your money
It's your environment
I
I
Q
Report fraud, waste or abuse
e-mail: OIG Hotline@epa.gov
write: EPA Inspector General Hotline 2491T
1200 Pennsylvania Avenue NW
Washington DC 20460
fax: 202-566-2549
phone: 1-888-546-8740
www.epa.gov/oig/hotline/how2file.htm
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