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U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
Catalyst for Improving the Environment
Evaluation Report
EPA Faced Multiple Constraints to
Targeting Recovery Act Funds
Report No. 11 -R-0208
April 11, 2011
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RECDVERY.GOV
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Report Contributors: Benjamin Beeson
Gabby Fekete
Natalie Hanson
Jeffrey Harris
John Patrick
Denton Stafford
Olga Stein
Jill Trynosky
Steve Weber
Abbreviations
ARRA American Recovery and Reinvestment Act of 2009 (Recovery Act)
CWSRF Clean Water State Revolving Fund
DWSRF Drinking Water State Revolving Fund
EO Executive order
EPA U.S. Environmental Protection Agency
LUST Leaking Underground Storage Tanks
OIG Office of Inspector General
OMB Office of Management and Budget
SRF State Revolving Fund
Cover photos: From left: Vegetated curb extensions used to decrease stormwater runoff in
Portland, Oregon (EPA photo); Recovery Act sign in Massachusetts (EPA OIG
photo); pipes for water main extension project, Goffstown, New Hampshire
(EPA OIG photo)
Hotline
To report fraud, waste, or abuse, contact us through one of the following methods:
e-mail: OIGJHotline@epa.gov write: EPA Inspector General Hotline
phone: 1-888-546-8740 1200 Pennsylvania Avenue NW
fax: 703-347-8330 Mailcode 8431P (Room N-4330)
online: http://www.epa.gov/oig/hotline.htm Washington, DC 20460
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U.S. Environmental Protection Agency
Office of Inspector General
At a Glance
11-R-0208
April 11,2011
Catalyst for Improving the Environment
Why We Did This Review
The objectives of this
evaluation were to determine
the extent to which the U.S.
Environmental Protection
Agency's (EPA's) American
Recovery and Reinvestment
Act of 2009 (Recovery Act)
funds were targeted to
economically disadvantaged
communities, and the extent to
which jobs were created and
results were achieved in those
communities. We also sought
to determine the constraints
I faced by EPA in targeting
funds and achieving results.
Background
The Recovery Act provided a
total of $7.2 billion for six
programs administered by
EPA. The programs funded
I projects related to the Clean
Water State Revolving Fund,
Drinking Water State
Revolving Fund, diesel
emissions reduction, leaking
underground storage tanks,
Brownfields, and Superfund.
For further information,
contact our Office of
Congressional, Public Affairs
and Management at
(202)566-2391.
The full report is at:
www.epa.qov/oiq/reports/2011/
20110411-11-R-0208.pdf
EPA Faced Multiple Constraints to Targeting
Recovery Act Funds
What We Found
After obligating over $7 billion in Recovery Act funds, EPA is unable, both on a
programmatic and national basis, to assess the overall impact of those funds on
economically disadvantaged communities or those most impacted by the
recession. Recovery Act funds were intended to create or save jobs, address
environmental and other challenges, and assist those most impacted by the
recession. EPA specifically sought to address location-specific, community-based
public health and environmental needs with its Recovery Act dollars. While EPA
was able to track financial expenditures, it considered but could not execute an
effort to track the distribution of its Recovery Act funds to economically
disadvantaged communities. The effort was hindered by the absence of
definitions, data, and measures.
Multiple constraints limited EPA's ability to target funds to preserve and create
jobs, as well as reach those most impacted by the recession. Short timeframes and
the resulting emphasis on "shovel ready" projects also contributed to targeting
challenges. Further, the development and funding of potential new projects in
disadvantaged communities was hampered both by a lack of time and resources to
prepare applications as well as a lack of priority for those economically
disadvantaged communities that have environmental needs. Moreover, among the
Recovery Act-funded programs at EPA, the states made the funding decisions for
86 percent of the funds.
What We Recommend
We recommended that EPA establish a clear and consistent regime that can
address socioeconomic factors within the bounds of statutory and organizational
constraints. The Agency responded that it did not have the authority or mission to
target Recovery Act funds to disadvantaged communities and that these funds
have already been obligated. Nevertheless, EPA agreed that the recommendations
were consistent with its current efforts to improve the targeting and assessment of
low-income, tribal, and minority communities. We modified our recommendation
to focus on the achievement of Agency-wide objectives and priorities, and the
inclusion of environmental justice principles in EPA's decisions. We believe,
based on verbal representations, that the Agency agreed with our revised
recommendations, and we await its 90-day response to confirm that informal
communication.
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f
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
THE INSPECTOR GENERAL
MEMORANDUM
SUBJECT:
FROM:
TO:
April 11,2011
EPA Faced Multiple Constraints to Targeting Recovery Act Funds
Report No. ll-R-0208
Arthur A. Elkins, Jr.
Inspector General
Bob Perciasepe
Deputy Administrator
This is a report on the evaluation of EPA's constraints in targeting Recovery Act funds, conducted
by the Office of Inspector General (OIG) of the U.S. Environmental Protection Agency (EPA).
This report contains findings that describe the problems the OIG has identified and corrective
actions the OIG recommends. This report represents the opinion of the OIG and does not
necessarily represent the final EPA position. Final determinations on matters in this report will be
made by EPA managers in accordance with established audit resolution procedures.
The estimated direct labor and travel costs for this report are $580,784.
Action Required
In accordance with EPA Manual 2750, you are required to provide a written response to this
report within 90 calendar days. You should include a corrective actions plan for agreed-upon
actions, including milestone dates. Your response will be posted on the OIG's public website,
along with our memorandum commenting on your response. Your response should be provided
as an Adobe PDF file that complies with the accessibility requirements of section 508 of the
Rehabilitation Act of 1973, as amended. The final response should not contain data that you do
not want to be released to the public; if your response contains such data, you should identify the
data for redaction or removal. We have no objections to the further release of this report to the
public. We will post this report to our website at http://www.epa.gov/oig.
If you or your staff have any questions, please contact Wade Najjum at 202-566-0832 or
najjum.wade@epa.gov, Jeffrey Harris at 202-566-0831 or harris.jeffrey @epa.gov, or Jill
(Ferguson) Trynosky, Project Manager, at 202-566-2718 or trvnoskv.jill@epa.gov.
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EPA Faced Multiple Constraints to Targeting 11 -R-0208
Recovery Act Funds
Table of Contents
Chapters
1 Introduction 1
Purpose 1
Background 1
Noteworthy Achievements 3
Scope and Methodology 3
2 Full Impact of EPA's Recovery Act Funds on
Disadvantaged Communities Is Unknown 5
EPA Did Not Track Targeting of Recovery Act Funds to
Economically Disadvantaged Communities 5
Without Tracking, Impact of Recovery Act Funds on
Economically Disadvantaged Communities Unknown 6
Conclusion 7
3 EPA's Ability to Target Recovery Act Funds Was Limited 8
EPA Programs Have Varying Abilities to Incorporate Jobs and
Community Needs in Funding Decisions 8
Variations Existed Among EPA Guidance, Documents,
Public Outreach Materials, and Recovery Act Goals 10
Recovery Act Funding Decisions Not Driven by Job Creation 10
Recovery Act Milestones Inhibited Targeting Based on Need 11
Emphasis on Shovel-Ready Projects Adversely Impacted EPA's
Ability to Address Some Environmental and Economic Needs 12
States Selected Most of the Projects Receiving EPA
Recovery Act Funds 13
Conclusions 15
Recommendations 16
Agency Comments and OIG Evaluation 16
Status of Recommendations and Potential Monetary Benefits 18
Appendices
A Agency Response 19
B Detailed SRF Comments on Draft Report From the Office of Water and
OIG Response 24
C EPA Office of Policy's Screening-Level Analysis of EPA ARRA Grants 40
D Distribution 44
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Chapter 1
Introduction
Purpose
The supplemental funding of environmental programs by the American Recovery
and Reinvestment Act of 2009 (Recovery Act) was expected to achieve results not
traditionally tracked by the U.S. Environmental Protection Agency (EPA).
Anticipated results were to include creating and retaining jobs, promoting
economic recovery, and assisting those most impacted by the recession.
Moreover, EPA sought to address location-specific, community-based public
health and environmental needs, and it cited environmental justice as a factor in
Recovery Act implementation. This report evaluates the extent to which EPA's
Recovery Act funds were targeted to economically disadvantaged communities,
and the extent to which jobs were created and results were achieved in those
communities. It also analyzes the constraints EPA faced in targeting funds and
achieving results.
Background
The American Recovery and Reinvestment Act of 20091 was signed into law on
February 17, 2009. It authorized $787 billion in funding in the form of tax cuts,
contracts, grants, and loans, among other things, to achieve five primary purposes:
1. To preserve and create jobs and promote economic recovery
2. To assist those most impacted by the recession
3. To provide investments needed to increase economic efficiency by
spurring technological advances in science and health
4. To invest in transportation, environmental protection, and other
infrastructure that will provide long-term economic benefits
5. To stabilize state and local government budgets in order to minimize and
avoid reductions in essential services and counterproductive state and
local tax increases
1 Information on the Recovery Act, fund provision, and other federal programs implementing funding is available at
http://www.recovery.gov/.
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These five Recovery Act purposes were designed to feed into the following three
immediate goals of the Recovery Act:
1. Create new jobs and save existing ones
2. Spur economic activity and invest in long-term growth
3. Foster unprecedented levels of accountability and transparency in
government spending
Of the $787 billion in Recovery Act funds, EPA received $7.2 billion to award or
to disburse.2 Table 1 shows the funds broken down by the six EPA programs
involved.
Table 1: Amount of Recovery Act funds by program
EPA program
Clean Water State Revolving Fund (CWSRF)
Drinking Water State Revolving Fund (DWSRF)
Superfund
Diesel Emissions Reductions
Leaking Underground Storage Tanks (LUST)
Brownfields
Recovery Act funding amount
$4 billion
$2 billion
$600 million
$300 million
$200 million
$100 million
Source: EPA.
Recovery Act funding for EPA programs was designed to protect and increase
"green" jobs, sustain communities, restore and preserve the economic viability of
property, promote scientific advances and technological innovation, and ensure a
safer, healthier environment. In its Recovery Act Plan,3 EPA states that these
programs were "chosen carefully both for their ability to put people to work now
and for their environmental value." The plan further explains that the Agency
sought to address location-specific, community-based public health and
environmental needs using Recovery Act dollars, because investing in these needs
would assure that job creation, economic growth, and environmental benefits
accrue at the local level as well as nationwide.
The Recovery Act did not define "those most impacted by the recession."
However, Congress did specify in the joint conference report that they expected
the states, as much as possible, to target the additional subsidized monies to
communities that could not otherwise afford State Revolving Fund loan. This
provision applied to the funds disbursed through the State Revolving Fund (SRF)
EPA Recovery Act funds for the Clean Water State Revolving Fund, Drinking Water State Revolving Fund, and
the Leaking Underground Storage Tank program were distributed to states using existing financing formulas. States,
responsible for implementing these programs under agreements with EPA, selected the projects to fund. EPA
selected the Superfund and Brownfields projects funded. For the diesel emissions reduction projects, EPA selected
projects for 70 percent of the Recovery Act funds, and states selected projects for the remainder.
3 ENVIRONMENTAL PROTECTION AGENCY RECOVERY ACT PLAN: A STRONG ECONOMY AND A
CLEAN ENVIRONMENT, dated May 15, 2009, was approved by the Office of Management and Budget and is
available at http://www.epa.gov/recovery/plans/EPA.pdf.
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programs, which accounted for approximately 83 percent of EPA's Recovery Act
funds. A March 2009 EPA Office of Water memorandum to Regional Water
Management Division Directors provided "disadvantaged communities,
environmental justice communities", as examples of those that could not
otherwise afford an SRF loan.
The EPA Administrator promoted environmental justice4 as a factor in the
implementation of the Recovery Act. In an April 2009 letter, she reminded
another federal agency that Congress intended that consideration be given to the
needs of minorities and low-income communities in the use of Recovery Act
funds. In addition, the Executive Order on Environmental Justice (EO 12898)
specifies that each agency identify and address, as appropriate, disproportionately
high and adverse human health or environmental effects of its programs, policies,
and activities on minority populations and low-income populations.
Noteworthy Achievements
According to recipient reports, EPA's Recovery Act projects have created or
retained as many as 16,603 jobs per quarter5 from the start of funds distribution to
December 31, 2010. In congressional testimony delivered on February 23, 2010,
EPA's Senior Accountable Official for the Recovery Act stated that all SRF funds
awarded to states were under contract or construction as of the February 17, 2010,
deadline. As of February 2011, over 99 percent of EPA's Recovery Act funds had
been obligated.
Scope and Methodology
We performed our evaluation from November 2009 through November 2010. Our
evaluation covers the period from the Recovery Act's enactment in February 2009
through February 2011, to include the most current data available. We omitted the
Diesel Emissions Reduction Act program from our evaluation because it is being
evaluated separately by the EPA Office of Inspector General (OIG).
We interviewed EPA Recovery Act program staff to learn about selection criteria;
Office of Policy, Economics and Innovation personnel regarding data analysis;
Office of Environmental Justice personnel regarding the office's role in Recovery
Act efforts; and Environmental Council of the States staff regarding the states'
experience with the Recovery Act. We reviewed available Recovery.gov and EPA
4 EPA defines environmental justice as the fair treatment and meaningful involvement of all people regardless of
race, color, national origin, or income with respect to the development, implementation, and enforcement of
environmental laws, regulations, and policies.
5 Each quarter of jobs data represents a snapshot of the number of jobs created or retained as reported by Recovery
Act funding recipients for the particular quarter. Recipient-reported jobs created by EPA Recovery Act funds ranged
from 3,899 jobs in the first quarter of the funds distribution (July 1, 2009-September 30, 2009) to a high of 16,603
jobs reported in the fourth quarter of the funds distribution (April 1, 2010-June 30, 2010).
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data, as well as each program's Recovery Act plans, criteria, and project selection
process.
We surveyed program managers and staff members from the 10 EPA regions to
gather their opinions about the effectiveness of EPA's funding decisions,
communications, and processes related to the Recovery Act. In addition to the
regional survey, we visited program managers and staff members from six states
to determine the states' experience in working with EPA on expending Recovery
Act funds and targeting communities in need. Our sample included the states
receiving the greatest proportion of EPA's Recovery Act funds across the
programs of interest: California, Florida, Illinois, Massachusetts, Michigan, and
Ohio. In addition, we attended EPA's 2010 Environmental Justice Conference and
interviewed select presenters.
We also reviewed prior reports from the U.S. Government Accountability Office
on states' and localities' use of Recovery Act funds and EPA OIG reports on
green infrastructure, State Revolving Fund intended use plans, and Recovery Act
planning activities. The EPA OIG reports resulting from these activities are
available at http://www.epa.gov/oig/recovery.htm. The U.S. Government
Accountability Office reports are available at http://www.gao.gov/recovery.
We conducted this performance evaluation in accordance with generally accepted
government auditing standards. Those standards require that we plan and perform
the evaluation to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based upon our objectives.
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Chapter 2
Full Impact of EPA's Recovery Act Funds on
Disadvantaged Communities Is Unknown
After obligating over $7 billion, EPA is unable, both on a programmatic and
national basis, to assess the overall impact of its Recovery Act funds on
disadvantaged communities or environmental justice communities. EPA sought to
address location-specific, community-based public health and environmental
needs using its Recovery Act dollars. The EPA Administrator recognized that in
making Recovery Act investments, Congress intended that consideration be given
to the needs of minorities and low-income communities.6 EPA considered but
could not execute an effort to track the distribution of its Recovery Act funds to
economically disadvantaged communities. The effort was hindered by the absence
of definitions, data, and measures. Rather, EPA collected success stories
regarding the use of Recovery Act funds to meet community needs.
EPA Did Not Track Targeting of Recovery Act Funds to Economically
Disadvantaged Communities
In February 2009, EPA's Office of Environmental Justice raised the issue of
targeting EPA's Recovery Act funds to economically disadvantaged communities
to the Agency's Stimulus Steering Committee. In April, the committee agreed to
address the tracking of funds to these communities. The committee subsequently
requested options on the "story EPA wants to tell," specifically focusing on
economically disadvantaged communities given the economic stimulus focus of
the Recovery Act.
EPA's Office of Environmental Justice and the Agency's Stimulus Subcommittee
on Measurement researched existing federal and/or other definitions of
"economically disadvantaged" and presented options to the Agency's Stimulus
Steering Committee. The full committee reviewed the subcommittee's options
and directed that efforts should focus on mapping employment and income
indicators, the Economic Development Agency's "Distress Index," and EPA
Recovery Act dollars spent. In November 2009, the Office of Environmental
Justice met with a statistician to explore how the Economic Distress Index layer is
created and maintained. The office sought to determine whether the layer could be
used to measure the impact of EPA Recovery Act funds on economically
disadvantaged communities. Specific to the SRF programs, documents prepared
for the Agency's Stimulus Steering Committee noted that it would be difficult to
use the U.S. Economic Development Agency's statutory definition of "distressed
6 Memorandum from Administrator Jackson to Mr. Alonzo L. Fulgham, Acting Administrator, U.S. Agency for
International Development, April 20, 2009.
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communities", as well as the U.S. Department of Housing and Urban
Development and U.S. Department of Agriculture criteria, because the criteria
may not align with state SRF disadvantaged definitions. Further, maps using the
county as the unit of analysis may not provide a high enough resolution to
determine the impact of EPA's projects. Regarding the Leaking Underground
Storage Tank (LUST) and Brownfields programs in which the state agency was,
in some cases, the award recipient, EPA would need to take additional steps to
obtain further information on where projects occurred or could occur. The
Steering Subcommittee on Measurement's initial conclusion was that the use of
the layer may require resources for regular updates to the data. After this point, no
additional direction was given by the Agency's Stimulus Steering Committee, and
no further action was taken on this matter.
Without Tracking, Impact of Recovery Act Funds on Economically
Disadvantaged Communities Unknown
The Recovery Act included goals related to creating jobs and reaching those most
impacted by the recession. EPA did not have a plan or strategy in place to
integrate these goals into program operations and funding decisions. EPA did not
systematically identify or seek to direct program funds to those projects or
communities that are, for socioeconomic reasons, more in need than others.
Although EPA has an Office of Environmental Justice and several tools to help
identify potential environmental justice communities, it does not have baseline
assessment data on a nationwide basis for socioeconomic factors or
unemployment. Further, as of July 2010, EPA did not have a systematic
methodology with specific definitions, criteria, or tools to:
• Identify communities that are economically disadvantaged
• Ensure consistency among program offices or regions
• Evaluate the impact of funding decisions on disadvantaged communities
The Director of EPA's Office of Environmental Justice detailed these weaknesses
in a document prepared for our review, outlining the role of the office in the
Agency's Recovery Act implementation. The conclusion of the document stated:
There is an urgent need for EPA to adopt a consistent approach to
identifying minority, low-income and tribal/indigenous areas
disproportionately burdened by environmental and health concerns, [and
to determine] whether such an approach can serve as a surrogate for
cases such as ARRA funding where the primary factor is "economically
disadvantaged."
EO 12898 requires EPA to consider environmental justice in decision-making,
and the Administrator has made it a priority area. However, in implementing the
Recovery Act, EPA did not demonstrate an ability to identify or target these
communities through program operations.
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In response to questions regarding the accomplishment of the Recovery Act goals
to create or retain jobs and assist those most impacted by the recession, EPA
managers noted that unemployment data were not incorporated into Recovery Act
funding decisions. Stories of reported success in places such as Buckeye Lake,
Ohio, provide anecdotal evidence that some EPA Recovery Act projects reached
economically disadvantaged communities. However, EPA needs to include and
use targeting data in allocating funds so that it can effectively describe the impact
its funds had on economically disadvantaged communities and explain how it
helped achieve the purposes of the Recovery Act. Further, without targeting data,
EPA will not be able to meet the environmental justice requirements of EO
12898.
Success Story Example
Buckeye Lake, Ohio, remains one of the largest villages in the State of Ohio
without a public drinking water system. The village received $5 million from
the Recovery Act to fund a project to bring the area treated water. The median
household income for Buckeye Lake is below the State's average of $36,250.
There are a number of public health concerns surrounding the current wells
and small public water systems on which the village relies. Construction is
underway on the system, which will serve nearly 1,200 households when it is
completed.7 Ohio estimates that the project will result in the creation of 50
jobs.
Conclusion
Within months of its enactment, the EPA Administrator recognized that in making
Recovery Act investments, Congress intended that consideration be given to the
needs of minorities and low-income communities. EPA considered but could not
execute an effort to track the distribution of its Recovery Act funds to
economically disadvantaged communities. The effort was hindered by the absence
of definitions, data, and measures.
If EPA had, prior to the Recovery Act, adopted a consistent approach to
identifying minority, low-income, and tribal/indigenous areas disproportionately
burdened by environmental and health concerns, it still would have faced multiple
constraints to targeting funds and resources to these areas. Chapter 3 describes
these statutory, organizational, and programmatic constraints, and offers
recommendations for the Agency to address these constraints as it focuses on the
achievement of Agency-wide objective and priorities.
7 The project's estimated completion was July 2010. The water mains, booster station, and elevated storage tank
went into service in May 2010; 1,100 service connections were due at the end of September 2010. The project,
however, was incomplete as of February 28, 2011.
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Chapter 3
EPA's Ability to Target
Recovery Act Funds Was Limited
Multiple constraints limited EPA's ability to target funds to preserve and create
jobs, as well as reach those most impacted by the recession. EPA programs have
varying requirements to incorporate socioeconomic needs in project selection and
funding decisions. The Office of Management and Budget (OMB) issued multiple
guidance memoranda addressing, among other topics, how to report the numbers
of Recovery Act jobs created or retained. Short timeframes and the resulting
emphasis on "shovel ready" projects also contributed to targeting challenges. The
development and funding of potential new projects in disadvantaged communities
was also hampered by a lack of time and resources to prepare applications, as well
as a lack of priority for those economically disadvantaged areas that have
environmental needs. Moreover, among the Recovery Act-funded programs at
EPA, the states made the funding decisions for 86 percent of the funds.
EPA Programs Have Varying Abilities to Incorporate Jobs and
Community Needs in Funding Decisions
The majority of EPA's Recovery Act funding was for the CWSRF and DWSRF
grants infrastructure programs. The remainder of the funds was primarily for
cleanup projects, specifically Superfund, Brownfields, and LUST. Table 2
contrasts the amount of additional money received through Recovery Act funding
with fiscal year (FY) 2008 and 2009 funding levels.8 However, neither EPA nor
its state partners were required to track the number of jobs created or retained by
programs prior to the Recovery Act, so a similar comparison cannot be made for
jobs.
8 We omitted the Diesel Emissions Reduction Act program from our evaluation because it is subject to a separate
OIG program evaluation.
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Table 2: Recovery Act funds received and results
EPA
program
CWSRF
DWSRF
Superfundc
LUSTd
Brownfields
Funding level
Recovery Act
$4 billion
$2 billion
$600 million
$200 million
$100 million
2008
$689 million
$829 million
$262 million
$72 million
$94 million
2009
$689 million
$829 million
$267 million
$77 million
$97 million
Fourth
quarter
2010
jobs3
6,371
2,911
432
349
200
% funds
disbursed13
78%
82%
77%
63%
42%
Obligation
deadline
02/17/2010
02/17/2010
09/30/2009
09/30/2010
None
Source: EPA. Data for Jobs and Percentage of funds disbursed was current as of March 28, 2011.
Other values come from EPA's Recovery Act Plans. Funding levels are rounded to the nearest million.
3 Numbers shown are quarterly report numbers from the fourth quarter of 2010, the most recent
quarter of data available. According to the Agency, each quarter of jobs data represents a snap-
shot in time of the number of jobs created or retained as reported by the recipients that received
Recovery Act funding for the particular quarter [and] the results should not be added cumulatively.
Also according to the Agency, the number of jobs for all programs are only for first-level recipients
and do not include subrecipients and others that benefited from Recovery Act funding.
The percentage of funds disbursed is the amount disbursed divided by the actual budgeted
amount found in EPA's Recovery Act tracking system, not the amount appropriated.
According to the Superfund program, the $600 million in Recovery Act funding is comparable only
to the remedial cleanup amounts funded under FYs 2008 and 2009. The program provided the
funding amounts for FYs 2008 and 2009 shown in the table above. Superfund program staff also
informed us that the number of jobs for Superfund only reflects the jobs under EPA contracts and
cooperative agreements and does not include interagency agreements.
The Office of Solid Waste and Emergency Response informed us that the FY 2008 and 2009
figures should only include the LUST cleanup levels, not the total LUST levels that included
prevention funding; the office provided the numbers in the table above.
Each of the EPA programs funded under the Recovery Act was created to address
specific environmental problems or human health concerns. Additional funding
for these programs from the Recovery Act was expected to result in outcomes not
traditionally tracked by EPA: creating and retaining jobs, promoting economic
recovery, and assisting those most impacted by the recession. However, the ability
of EPA to consider factors such as the economic conditions in communities
applying for Recovery Act funds was determined, in part, by the authorizing
statutes of the funded EPA programs.
Each program incorporates the socioeconomic conditions of communities in
project selection differently, if at all. For example, DWSRF allows states to
establish separate eligibility criteria and special funding options for economically
disadvantaged communities. The Safe Drinking Water Act defines a
disadvantaged community as "the service area of a public water system that meets
affordability criteria established after public review and comment by the State in
which the public water system is located." No universal definition of
"disadvantaged community" is available for public policy purposes. However, a
disadvantaged community generally is defined in socioeconomic terms, and
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median household income is a typical measure. Income data are also used to
identify people and households living below the poverty level.
In the Brownfields program, financial distress and economic need are part of the
selection criteria. The CWSRF does not have the same provision. However, the
Recovery Act stipulated that not less than 50 percent of its SRF capitalization
grants funds should provide additional subsidization to eligible recipients. This
level is reached through principal forgiveness and negative interest loans or
grants, thus increasing the eligibility of economically disadvantaged communities.
The Superfund and LUST programs do not dictate the incorporation of
socioeconomic factors in project selection or prioritization.
Variations Existed Among EPA Guidance, Documents, Public
Outreach Materials, and Recovery Act Goals
Overall, there was an absence of actionable EPA guidance or overall strategy on
how to achieve Recovery Act goals and Agency priorities beyond environmental
protection. Some managers stated that the Agency was only responsible for the
environmental protection and infrastructure purposes of the Recovery Act, with
job creation as a secondary consideration. Of the five Recovery Act purposes,
only one (to invest in transportation, environmental protection, and other
infrastructure that will provide long-term economic benefits) is directly related to
EPA's mission. Guidance from OMB to EPA as well as guidance from EPA to
states generally focused on achieving funding obligation deadlines and reporting
jobs created and retained.
There was no mention in EPA guidance documents of what actions could be taken
to further the accomplishment of any Recovery Act goal, other than
environmental protection and infrastructure improvement. However, in its
Agency-wide Recovery Act Plan, public correspondence, and promotional
materials, EPA stated it would be working toward the achievement of the other
goals. For example, EPA's Recovery Act Plan and individual program offices'
plans included a discussion of the need to reach disadvantaged and environmental
justice communities. In addition, several Recovery Act grants and contracts stated
within the purpose or description section that the funds were to "preserve and
create jobs and promote economic recovery." Further, in Recovery Act
promotional materials, EPA stated it anticipated that Recovery Act funds would
create thousands of jobs, jumpstart local economies, and protect human health and
the environment.
Recovery Act Funding Decisions Not Driven by Job Creation
Prior to the passage of the Recovery Act, EPA was not required to, and did not set
targets for, job creation. With passage of the Recovery Act, EPA did not establish
guidance on how this priority could be incorporated in Recovery Act project
selections. Per OMB guidance, job creation data were reported by fund recipients
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to a national database. EPA did not independently track the numbers or locations
of new or retained jobs.
For the most part, EPA program managers lacked data that showed where high
unemployment rates corresponded with environmental needs, as well as the
number of jobs created by the different types of EPA projects funded. Because of
these data gaps, managers were unable to guide states toward specific types of
projects or into areas with notable unemployment rates. As shown in table 3, only
1 of the 55 respondents to our EPA regional survey said that his or her region had
a list of areas most in need of job creation, and only 13 percent of respondents
acknowledged that their programs had goals for job creation. However, many
respondents cited job creation as the most important indicator of success for
EPA's national Recovery Act program. In contrast, for infrastructure
improvement needs, 23 percent of respondents were aware that the region had a
priority list, while more than half were aware of a priority list for environmental
protection needs.
Table 3: Regional survey responses
Survey question
Job creation
Does your region have a list of areas most in
need for job creation?
Does your region have goals for Recovery Act
job creation?
Infrastructure improvement
Does your region have a list of areas most in
need for infrastructure improvement?
Does your region have goals for Recovery Act
infrastructure improvement?
Environmental protection
Does your region have a list of areas most in
need for environmental protection?
Does your region have goals for Recovery Act
environmental protection?
Response
Yes
2%
13%
23%
32%
57%
51%
No
98%
87%
77%
68%
43%
49%
Source: DIG survey.
Recovery Act Milestones Inhibited Targeting Based on Need
Recovery Act requirements for the rapid allocation of funds limited the time
available to define, locate, and/or mitigate any additional barriers to achieving
goals outside routine program operations. The focus for the regions and program
offices was on meeting the deadlines mandated by the Recovery Act. EPA staff
and program managers responding to our survey also referred to the emphasis on
timeliness and changing guidance as impediments to Recovery Act
implementation. Our survey asked respondents to rate the extent to which six
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areas impeded the effective implementation of the Recovery Act. Fifty-five
percent of respondents rated "timeliness and adequacy of external guidance" as an
"impediment" or "significant impediment," referring to guidance provided from
OMB or the U.S. Department of Labor. Similarly, 49 percent of respondents
reported the "ARRA [Recovery Act] statutory requirements" were an
"impediment" or "significant impediment" to effective implementation. The most
common examples of impediments mentioned by regional survey respondents
were getting guidance or definitions on Recovery Act requirements such as
Davis-Bacon, Buy American, Green Project Reserve, infrastructure, and
reporting.
According to state officials, the tight timeframes established in the Recovery Act
are a significant barrier in utilizing the Recovery Act funds. States have
considerable latitude in selecting projects that meet their environmental goals and
needs, particularly in the intended use plan process for the SRFs. However,
Recovery Act requirements necessitated that some states amend their intended use
plans to ensure that projects funded met the deadlines. Despite the changes made,
recipients told us that several projects would have been completed regardless of
the Recovery Act efforts because the work had already been planned. A state
representative stated that the Green Project Reserve stipulation caused it to pass
over some valid, environmentally important public health projects to select those
that fit green requirements.
Emphasis on Shovel-Ready Projects Adversely Impacted EPA's
Ability to Address Some Environmental and Economic Needs
EPA managers and staff implementing Recovery Act guidance identified a
number of challenges in reaching communities in both economic and
environmental need with Recovery Act funds. These challenges were primarily
associated with the "shovel ready" requirement. The challenges included the lack
of time to prepare applications, lack of priority for areas with both economic and
environmental needs, and the inability of these communities to prepare timely and
complete proposals. EPA programs require all applicants (regardless of
environmental or health conditions) to meet program criteria. For Superfund
eligibility, the community must have already been on the National Priorities List.
For water and wastewater projects, applicants must demonstrate a level of
preparedness to include making sure that permits and design plans are obtained
and complete. During state visits, we were informed that applicants must
demonstrate a level of preparedness, including completion of design plans and
permitting processes, to have water and wastewater projects funded under the
Recovery Act. According to a consultant for a Recovery Act recipient, the items
needed for water and wastewater projects are costly and not a priority for
communities without financial resources to develop their own design plans. More
importantly, state representatives said that those communities that had not
prepared the necessary materials in advance were unable to compete for Recovery
Act funds.
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In our regional survey, 74 percent of respondents reported that the designation of
a community as environmental justice or disadvantaged had a minor or no impact
on Recovery Act funding decisions. Eleven percent responded that no
environmental justice areas were identified in their regions. Responses to the
question, "What do you believe is the most important indicator of the success of
EPA's ARRA [Recovery Act] efforts?" most often related to the Agency's ability
to spend the Recovery Act funds in a timely manner.
States Selected Most of the Projects Receiving EPA Recovery Act
Funds
States awarded assistance funds to the projects and communities for the DWSRF,
CWSRF, and LUST programs, and their decisions determined where EPA's
Recovery Act funds were distributed. Whether and how socioeconomic conditions
influenced project selection was at their discretion. States used a variety of
techniques to determine which projects and communities would be awarded
funds. A number of states used websites to solicit public input on specific projects
and general areas of interest or need. These states noted that the public response
was overwhelming and showed a high degree of need across their states.
The Recovery Act specifies, "Each State shall use not less than 50 percent of the
amount of its capitalization grants to provide additional subsidization to eligible
recipients in the form of forgiveness of principal, negative interest loans or grants
or any combination of these." The intent was for the states to target, as much as
possible, these additional subsidized funds to communities that could not
otherwise afford a loan (e.g., disadvantaged communities and environmental
justice communities). However, EPA does not know whether and to what extent
these communities were reached.
As depicted in table 4, states used the available flexibility in determining the
percentage of forgiveness for their recipients based on their individual state needs
and philosophies. For example, in Ohio, one of the states opting for broad public
input, managers decided to fund numerous projects throughout the state rather
than a few large projects. Ohio funded 287 projects with its $220 million in
Recovery Act CWSRF funding. Meanwhile, California, a geographically larger
state, funded 109 projects with its $280 million Recovery Act CWSRF funding.
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Table 4: Sampled states forgiveness levels
State
California
Florida
Illinois
Massachusetts
Michigan
Ohio
Funding level
(in dollars)
CWSRF
Recovery Act
$280,285,800
$132,286,300
$177,243,100
$133,057,300
$168,509,000
$220,623,100
DWSRF
Recovery Act
$159,008,000
$88,074,000
$79,538,000
$52,216,000
$67,454,000
$58,460,000
% principal
forgiveness
CWSRF
64%
52%
50%
96%
94%
100%
% principal
forgiveness
DWSRF
75%
67%
50%
96%
65%
1 00%
Source: EPA.
According to EPA, state law in Florida did not preclude the state from forgiving
loans under the Recovery Act even though such authority does not exist in the
base CWSRF program. Florida state officials explained that this provision gave
the state flexibility in CWSRF decision-making. In contrast, State of Illinois
officials advised that Illinois law had not provided for any forgiveness of
CWSRF; therefore, it had to make emergency rule changes to implement
Recovery Act funding. They further advised that Illinois also awarded Recovery
Act funding differently, funding 50 percent of project cost with Recovery Act
funding and forgiving 50 percent of Recovery Act funding on all projects.
States also differed in their execution of the LUST program. Ohio state officials
advised that the Ohio Bureau of Underground Storage Tank Regulations had
historically focused on compliance and enforcement of sites with liable owners or
other sites that had the ability to pay for the cleanup. As a result, they advised that
many sites without liable owners were not being addressed. They further advised
that Recovery Act LUST funding provided the opportunity to address such sites.
In California, state officials told us that the state had to obtain the authority to add
the Recovery Act funds into the budget. From the state's perspective, an
additional layer of federal rules had to be put on top of the state rules for cleaning
up LUSTs under the Recovery Act. Additionally, they advised that the state also
had to develop new grant agreement templates and guidance, and create an
infrastructure for reporting that did not previously exist.
For the Superfund and Brownfields programs, funding decisions were not made
by the states. For those programs, states generally did not have many comments
about their role in the Recovery Act selection process. However, in two of the six
states visited, managers commented that they would have liked to be more
involved in the site selection process for these programs.
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Conclusions
The extent to which EPA's Recovery Act funds were targeted and spent, jobs
created, and results achieved in economically disadvantaged communities are
unknown. EPA's contributions under the Recovery Act emphasized
environmental protection and remediation. These benefits were achieved through
supplemental funding of existing programs. EPA was able to meet Recovery Act
funding obligation deadlines; however, it was unable to systematically target or
track funds to fully address the Recovery Act's intent. EPA's Recovery Act-
funded projects were selected primarily by states. Priority was placed on "shovel
ready" projects—a characteristic that, in some cases, placed economically
distressed communities at a disadvantage, according to state officials.
There were both internal and external organizational constraints to the targeting of
EPA Recovery Act funds to economically disadvantaged communities. EPA
program offices are subject to varying requirements to incorporate socioeconomic
needs in project selection and funding decisions. Within EPA regions, we found
varying degrees of knowledge as to where high unemployment rates corresponded
with environmental needs and on the number of jobs created by the different types
of EPA projects funded by the Recovery Act. Because of these data gaps,
managers were unable to assist states in looking for specific types of projects or
into areas with notable unemployment rates. Moreover, among the Recovery Act-
funded programs at EPA, states made project selection decisions that accounted
for 86 percent of the funds.
The supplemental funding of environmental programs by the Recovery Act was
expected to achieve results not traditionally tracked by EPA, to include creating
and retaining jobs, promoting economic recovery, and assisting those most
impacted by the recession. While the Agency faced numerous obstacles to the
pursuit of these objectives, it did not develop a strategy to overcome them to the
extent possible. We found no deliberate effort to (1) target funds toward the
creation of jobs in areas of high unemployment, (2) provide funds to those who
were most impacted by the recession, or (3) track the degree to which these
objectives were met. EPA was also hampered because of its limited ability to
identify disadvantaged communities. Without controls and a strategy, it would be
difficult for EPA program and state decisionmakers to duplicate their reported
success in reaching economically disadvantaged communities.
The EPA Administrator has made environmental justice an Agency-wide priority.
However, EPA lacks the ability to reach or target communities with these types of
socioeconomic constraints and is further challenged in its ability to measure the
impacts of EPA funding on these communities. A clear and consistent Agency
regime is needed to know whether EPA programs are a vehicle to achieve a
temporary goal, such as the economic stimulus provided by the Recovery Act, or
to achieve continuous goals, such as environmental justice.
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Recommendations
We recommend that the Deputy Administrator:
1. Establish a clear and consistent regime that can address
socioeconomic factors within the bounds of statutory and
organizational constraints. Such a regime should allow the Agency
to target program funds to achieve Agency-wide objectives and
priorities for the inclusion of environmental justice principles in all
of EPA's decisions.
2. Identify the sources of information needed by EPA program
offices and managers to assess the socioeconomic conditions in
communities. Within the bounds of statutory and organizational
constraints, this information should be used to identify and target
opportunities for which investment and grants, program funding, or
technical assistance would return the most benefits in terms of jobs
needed, infrastructure improvements, or economic benefit to the
community.
Agency Comments and OIG Evaluation
The Agency stated that implementing the first recommendation regarding the
targeting of Recovery Act funds was not practical because EPA had obligated
100 percent of its appropriated Recovery Act resources. Moreover, the Agency
responded that it did not have the authority or mission to target Recovery Act
funds to disadvantaged communities. Nevertheless, EPA did agree that the
recommendations were consistent with its current efforts to improve the targeting
and assessment of low-income, tribal, and minority communities. We modified
our first recommendation to focus on the achievement of Agency-wide objectives
and priorities, and to include environmental justice principles in EPA's decisions.
The Agency also suggested that we combine and modify our recommendations
that individual program offices identify sources of information needed to assess
socioeconomic conditions and build databases to identify the most opportune
targets where investment through grants, program funding, or technical assistance
would return the most benefits in terms of jobs needed, infrastructure
improvements, or economic benefit to the community. Specifically, the Agency
identified the screening tool under development for Plan EJ 2014 as an
appropriate vehicle, once available. The OIG agrees that it is not necessary to task
each program office separately to achieve the intent of these recommendations,
and we have combined the recommendations.
However, it is still our intent that EPA work to identify the sources of information
needed by EPA program offices and managers to assess the socioeconomic
conditions in communities. As described, the screening tool will assist EPA in
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considering potential environmental justice concerns more consistently as they
implement programs. However, until the screening and targeting tool is designed
and applied, the extent to which it will assist in planning and targeting future
efforts towards the most opportune targets where investment through grants,
program funding, or technical assistance would return the most benefits in terms
of jobs needed, infrastructure improvements, or economic benefit to the
community is unknown. During a February 2011 meeting to discuss Agency
comments and our recommendations, the Agency agreed with our
recommendations as revised. The recommendations are currently open, pending
completion of corrective actions.
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Status of Recommendations and
Potential Monetary Benefits
POTENTIAL MONETARY
RECOMMENDATIONS BENEFITS (in SOOOs)
Planned
Rec. Page Completion Claimed Agreed To
No. No. Subject Status1 Action Official Date Amount Amount
16 Establish a clear and consistent regime that can 0 Deputy Administrator
address socioeconomic factors within the bounds of
statutory and organizational constraints. Such a
regime should allow the Agency to target program
funds to achieve Agency-wide objectives and
priorities for the inclusion of environmental justice
principles in all of EPA's decisions.
16 Identify the sources of information needed by its 0 Deputy Administrator
program offices and managers to assess the
socioeconomic conditions in communities. Within the
bounds of statutory and organizational constraints,
this information should be used to identify and target
opportunities for which investment and grants,
program funding, or technical assistance would
return the most benefits in terms of jobs needed,
infrastructure improvements, or economic benefit to
the community.
0 = recommendation is open with agreed-to corrective actions pending
C = recommendation is closed with all agreed-to actions completed
U = recommendation is undecided with resolution efforts in progress
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Appendix A
Agency Response
MEMORANDUM
SUBJECT: Response to the Office of Inspector General Draft Report,
EPA Faced Multiple Constraints to Targeting Recovery Act Funds,
OPE-FY09-0023, November 9, 2010
TO: Arthur Elkins Jr.
Inspector General
Thank you for the opportunity to respond to the Office of the Inspector General's draft
evaluation report, EPA Faced Multiple Constraints to Targeting Recovery Act Funds., No. OPE-
FY09-0023, November 9, 2010. We at the U.S. Environmental Protection Agency greatly
appreciate your undertaking this review; we believe it will help us in achieving Administrator
Lisa P. Jackson's priorities.
My response incorporates comment from the EPA's Office of Water, the Office of
Administration and Resource Management, the Office of Solid Waste and Emergency Response,
the Office of Enforcement and Compliance Assurance, the Office of Policy and the Office of the
Chief Financial Officer. First, we would like to address some concerns with the report overall.
Second, we offer a response to each recommendation. Lastly, we provide additional comments
from the Office of Water to ensure that the final evaluation report contains accurate information.
OVERALL RESPONSE
Implementing the recommendations regarding the targeting of American Recovery and
Reinvestment Act funds is not practical because the EPA had obligated 100 percent of its
appropriated ARRA resources by September 30, 2010. The draft evaluation report repeatedly
suggests, though it does not explicitly state, that EPA should have targeted and tracked ARRA
project funding in consideration of "socioeconomic needs." Further, it was never possible for the
EPA to target funding based on such needs because ARRA did not authorize the EPA to do so,
and, as noted in the draft report, states made the funding decisions for 86 percent of the funds.
This was required by the underlying statutes for the programs for which Congress chose to
appropriate ARRA funds. In the enabling statutes for both State Revolving Fund programs the
states have the sole authority to select projects to be funded. Congress made a number of
fundamental changes to underlying statutory authorities for the SRFs via the ARRA
appropriation - for example, waiving the State Matching Fund requirement, providing authority
for grants and principal forgiveness in the Clean Water State Revolving Funds. If Congress
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intended the EPA or the states to "target" use of funds, it could have or would have done so.
Moreover, ARRA reporting requirements did not authorize the EPA to require states to track
consideration of "socioeconomic needs."
Given that states made the funding decisions for 86 percent of the funds, the EPA only
had the ability to impact the allocation of 14 percent or $700 million dollars. In regard to
distribution of the roughly 14 percent of the EPA's ARRA funds not provided to the states
through mandatory formulas, the funding decision process varied for the two programs involved:
Brownfields and Superfund. The nature of both programs, which address contaminated sites at
former industrial locations or abandoned waste sites, provide significant benefit to disadvantaged
communities often located near the cleanup projects. Our own analysis of the actual distribution
of Brownfields and Superfund awards by county compared to population and income factors
clearly shows that nearly 70 percent of the counties that received ARRA Superfund or
Brownfields grants had a higher percentage minority population than the median county in the
U.S. In addition, nearly 60 percent of ARRA Superfund and Brownfields grant money went to
counties with higher poverty rates than the statewide poverty rate.
OIG Response: The purpose of EPA's analysis of the distribution of Brownfields and Superfund
awards (see appendix C) is unclear; perhaps it is intended to illustrate that the targeting of disadvantaged
communities is occurring by design or is unnecessary. The excerpt is selective and ignores the analyses'
summary conclusion that "Grants tended to be awarded to counties with higher than average percentage
minority population, but lower that average percentage in poverty." The OIG decided not to not include
an analysis of Recovery Act spending in this report precisely because EPA does not have baseline
assessment data on a nationwide basis for either socioeconomic factors or unemployment, nor does it
have a systematic methodology with specific definitions, criteria, or tools to identify communities that
are economically disadvantaged. EPA's own analysis demonstrates the need for a clear and consistent
regime that can address socioeconomic factors, statutory constraints, and organizational constraints to
both guide EPA decisions and evaluate their impacts.
With respect to the disposition of future funding, the IG recommendations are consistent
with our current efforts to improve our targeting and assessment of low-income, tribal and
minority communities. In the past, EPA program and regional offices have relied upon and used
different screening tools, such as EJSEAT9 for targeted compliance reviews and enforcement
and EJ VIEW for grant or funding resources. To improve upon our existing efforts, Plan EJ
2014, which was announced for public comment in July 2010, has a screening tool as one of its
areas for tool development. Under this plan, the EPA is working to develop a common mapping
platform and a nationally consistent screening and targeting tool to enhance environmental
justice analysis, funding and decision making. Such a tool will help ensure that the EPA's
program managers consider potential environmental-justice concerns more consistently as they
implement programs within statutory mandates and that community stakeholders have more
access to information on how the EPA screens for potential environmental-justice concerns. An
implementation plan for the development and deployment of this environmental-justice
screening tool will be developed by early 2011.
9 Environmental Justice Strategic Enforcement Assessment Tool (OECA).
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OIG Response: Earlier, the Agency repeats several OIG observations of why it was not possible to
target or track the use of EPA funds for Recovery Act projects based on "socioeconomic needs,"
including that it was not within its authority. Above, the response states, "With respect to the
disposition of future funding, the IG recommendations are consistent with our current efforts to
improve our targeting and assessment of low-income, tribal and minority communities." This apparent
conflict between EPA's authorities and its stated intensions is the fundamental rationale behind our
first recommendation—that EPA establish a clear and consistent regime that can address
socioeconomic factors, statutory constraints and organizational constraints.. .to target program funds
to achieve Agency-wide objectives and priorities.
Lastly, it is not clear how the "Recommendations for Deputy Administrator" action on
page 16 result from the presented findings of the draft report. As noted previously, the findings
regarding the SRF programs acknowledge that states are responsible for making decisions on
project selection and funding and that the ARRA statutory priority for "shovel-ready" projects
may have impaired the ability of unprepared communities to receive ARRA funding. As the
"shovel-ready" priority used in ARRA has not been incorporated in the enabling statutes, this
observation has no relevance to the future base program (non-ARRA) activities. Findings about
the unique, specific conditions of ARRA do not bear on implementation of the base programs
absent those conditions, and thus it is not clear what the purpose would be to generalize
programmatically from findings under such unique circumstances.
OIG RECOMMENDATIONS AND THE EPA'S RESPONSE
Recommendation 1: "We recommend that the Deputy Administrator establish a clear
and consistent regime that can address socioeconomic factors, statutory constraints and
organizational constraints when targeting Recovery Act funds or other funds to Agency-wide
objectives and priorities."
Agency Response: The EPA has obligated 100 percent of its appropriated ARRA
program resources and outlaid over 71.4 percent. ARRA resource-distribution decisions were
made in 2009 and any regime developed now could not be retroactively applied. With respect to
the recommendation to apply such a regime to target "other funds to Agency-wide objectives and
priorities" where underlying statutes give states the sole authority to select projects, the EPA will
promote consideration of socioeconomic factors to the extent consistent with statutory
requirements.
Recommendations 2 and 3: "We recommend that the Deputy Administrator task the
Assistant Administrators of the program offices to identify the sources of information needed to
assess the socioeconomic conditions in communities with existing or potential Superfund, LUST,
and Brownfield sites, and clean and drinking water system needs."
"We recommend that the Deputy Administrator task the Assistant Administrators of the
program offices to build a database for use in identifying the most opportune targets where
investment through grants, program funding, or technical assistance would return the most
benefits in terms of jobs needed, infrastructure improvements, or economic benefit to the
community."
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Agency Response: We suggest modifying recommendations 2 and 3 into a single
recommendation as follows: "We recommend that the EPA identify the sources of information
needed to assess the socioeconomic conditions in communities and that this information be
considered when making future investment decisions, which will benefit underserved
communities, to the extent consistent with statutory authority for relevant programs."
The EPA suggests the revisions for the following reasons: Recommendation 2, as
originally worded, would have the Deputy Administrator task the Assistant Administrators to
identify "sources of information needed to assess the socioeconomic conditions in communities
with existing or potential Superfund, LUST, and Brownfield sites and clean and drinking water
system needs." Rather than tasking all the Assistant Administrators to identify sources of
information, it would be more efficient and effective for the EPA to create one tool to identify
sources of information needed to assess the socioeconomic conditions in communities and then
provide that information to all the Assistant Administrators and Regional Administrators so that
the EPA has a consistent approach to areas assessing socioeconomic needs. The screening tool
that the EPA is developing under Plan 2014 will be available for use by all EPA programs as
applicable.
Recommendation 3 calls for the EPA to build a database for use in identifying targets for
investment. The screening tool contemplated under Plan 2014 will draw on a number of existing
databases and will provide guidance on the use of these databases in identifying areas of concern.
Along with this response, I am offering more specific, detailed comments on the report,
and they are attached.
Should you have any questions, please let me know directly or have your staff contact
Nena Shaw, Special Assistant, Office of the Administrator, at (202) 564-5106.
In the meantime, I thank you once more for the opportunity to share our thoughts.
Bob Perciasepe
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OIG Response: We initially recommended that the Deputy Administrator establish a clear and
consistent regime that can address socioeconomic factors, statutory constraints, and organizational
constraints when targeting Recovery Act funds or other funds to Agency-wide objectives and
priorities. According to the EPA, it has obligated 100 percent of its appropriated ARRA program
resources and outlaid over 71.4 percent. Although the Agency used existing funding structures to
disburse the majority of its Recovery Act funds, any regime developed now could not be
retroactively applied to Recovery Act or other funds already disbursed. Moving forward, we
believe Agency decision-makers need clear and consistent criteria to determine how and where to
incorporate Agency-wide objectives and priorities for environmental justice into existing funding
structures. Therefore, we revise our recommendation to:
Recommendation 1: We recommend that the Deputy Administrator establish a clear and
consistent regime that can address socioeconomic factors within the bounds of statutory and
organizational constraints. Such a regime should allow the Agency to target program funds
to achieve Agency-wide objectives and priorities, including the inclusion of environmental
justice principles in all of EPA's decisions.
We also initially recommended that the Deputy Administrator task the Assistant Administrators of
the program offices to identify the sources of information needed to assess the socioeconomic
conditions in communities with existing or potential Superfund, LUST, and Brownfield sites, and
clean water and drinking water system needs. In addition, we initially recommended that the
Deputy Administrator task the Assistant Administrators of the program offices to build a database
for use in identifying the most opportune targets where investment through grants, program
funding, or technical assistance would return the most benefits in terms of jobs needed,
infrastructure improvements, or economic benefit to the community.
EPA suggests revising the two recommendations into one combined recommendation to allow for
more efficient and effective use of Agency resources. It suggests that, rather than task each
Assistant Administrator separately, EPA as an entity can create one tool to identify the sources of
information needed to assess the socioeconomic conditions in communities across the Agency.
The screening tool EPA is developing under Plan 2014 will be available for use by all EPA
programs as applicable.
We agree that it is not necessary to task each Assistant Administrator separately to achieve the
intent of these recommendations. However, we do not view the creation or use of a screening tool
as equivalent to developing a database or data system. As described, this screening tool will assist
EPA in considering potential environmental justice concerns more consistently as they implement
programs. However, until the screening and targeting tool is designed and applied, the extent to
which it will assist in planning and targeting future efforts towards the most opportune targets
where investment through grants, program funding, or technical assistance would return the most
benefits in terms of jobs needed, infrastructure improvements, or economic benefit to the
community is unknown. Therefore, we revise recommendations 2 and 3 into a single
recommendation:
Recommendation 2: We recommend that EPA identify the sources of information needed by
its program offices and managers to assess the socioeconomic conditions in communities.
Within the bounds of statutory and organizational constraints, this information should be
used to identify and target opportunities for which investment and grants, program
funding, or technical assistance would return the most benefits in terms of jobs needed,
infrastructure improvements, or economic benefit to the community.
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Appendix B
Detailed SRF Comments on Draft Report From the
Office of Water and OIG Response
1) At A Glance, paragraph 1, 1st sentence, "... EPA is unable, both on a programmatic and
national basis, to assess the overall impact of its Recovery Act funds on economically
disadvantaged communities..."
The EPA is able to determine how many jobs were created with each project and are able to
determine the level of subsidy each project received. We also have recipient locational data for
each project. This information is available in our respective reporting systems as well as in
Federalreporting.gov for jobs data. This can be assessed against economic indicators available
through other departments. It should be noted that the ARRA statute neither required nor
authorized the EPA to take any action or collect information with regard to economically
disadvantaged communities specifically. To have done so for the purposes of ARRA -
notwithstanding ARRA's lack of such directives and its unprecedented and extremely demanding
deadlines for action - would have detracted from the EPA's necessary focus on meeting ARRA's
unequivocal priority for immediate action to promote job creation.
OIG Response: As stated in our report and detailed in documents provided to us by the Director of
EPA's Office of Environmental Justice, as of July 2010, EPA did not have a systematic methodology
with specific definitions, criteria, or tools to identify communities that are economically
disadvantaged, ensure consistency among program offices or regions, and evaluate the impact of
funding decisions on disadvantaged communities. Specific to the SRFs, these documents noted that it
would be difficult to use the U.S. Economic Development Agency's statutory definition of "distressed
communities," as well as the U.S. Department of Housing and Urban Development and U.S.
Department of Agriculture criteria, because the criteria may not align with state SRF disadvantaged
definitions. Further, maps using the county as the unit of analysis may not provide a high enough
resolution to determine the impact of EPA's projects. Regarding the LUST and Brownfields programs
in which the state agency was, in some cases, the award recipient, EPA would need to take additional
steps to obtain further information on where projects occurred or could occur.
Although the Recovery Act did not specifically require EPA to take action on economically
disadvantaged communities, the Agency was encouraged to do so by Administrator Jackson and in
subcommittee language. Despite EPA's "necessary focus on meeting [the Recovery Act's]
unequivocal priority for immediate action to promote job creation," it is important to note that EPA's
existing statutory authorities do not include a job creation requirement, and that Recovery Act funds
did not change EPA's programmatic structure. It would therefore follow that EPA's focus in
disbursing Recovery Act funds would be on meeting the Agency's mission to protect human health
and the environment, as well as following the direction and priorities of the Administrator.
2) At a Glance, paragraph 2, 5rd sentence, "The development and funding of potential
new projects in disadvantaged communities was hampered, both by a lack of time and
resources to prepare applications as well as a lack of priority for those economically
disadvantaged communities..."
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Projects that had not begun substantial planning and design work would not have
created as many jobs in the immediate term as projects that were ready to proceed with
construction. Furthermore, since ARRA required all SRF projects to be under contract or
construction by February 17, 2010, projects not ready to move forward immediately
should not have been funded. Base (i.e., non-ARRA) SRF program resources remained
available to continue to support of ongoing planning and design work to ensure all
communities, including disadvantaged communities, that were not ready for ARRA
would still be ready for SRF funding at the appropriate time.
OIG Response: This sentence focused on disadvantaged communities' inability to develop
projects in time to use Recovery Act funds. During state visits, we were informed that those most
in need of receiving Recovery Act funding were unable to receive funding because of a lack of
preparedness. It is unclear, given our finding that socioeconomic data gaps made managers unable
to assist states in looking for specific types of projects or into areas with notable unemployment
rates, how these projects would be ready for "SRF funding at the appropriate time." In addition,
most EPA regional respondents to our survey did not possess lists of areas most in need for job
creation (98 percent) or infrastructure improvement (77 percent). Without a clear and consistent
regime to address the factors identified in this report and to direct Agency funds to the most
opportune targets for investment, it is unclear how EPA, including the SRF program, will know the
appropriate locations and times at which it will be most beneficial to the community to provide
resources.
3) At a Glance, paragraph 2, 6th sentence, "Moreover, among the Recovery Act-funded
programs at EPA, decisions for 86 percent of the funds were delegated to the States. "
This sentence implies that the EPA decided to delegate decisions under ARRA to the
states and ignores the fact that the enabling statutes for both SRFs require funding
decisions to be made by the states. Also, the use of "moreover" assumes that the states'
funding choices negatively impacted funding decisions. Decision making by the states, as
required by statute, is not counterproductive to assisting economically disadvantaged
communities as the report implies. Indeed, it can achieve substantial benefits the EPA is
not as well positioned to achieve. States must conduct a detailed financial assessment of
each potential loan recipient to ascertain the community's ability to repay the loans. As a
result, states are uniquely qualified to determine which communities could not otherwise
afford an SRF loan and what level of additional subsidy is necessary to yield a financially
viable infrastructure project.
OIG Response: This section of the report describes the multiple constraints that impacted
EPA's ability to target funds to preserve and create jobs, as well as reach those most impacted
by the recession. In the first paragraph of EPA's OVERALL RESPONSE section, it notes that
states made funding decisions for 86 percent of EPA's Recovery Act funds. There is no value
judgment regarding the states' decisions. We revised the statement to remove the term
"delegated". We use the term "Moreover," as defined by Merriam Webster, "to convey
information, in addition to what has been said." Revised report statement: "Moreover,
among the Recovery Act-funded programs at EPA, the states made the funding decisions for
86 percent of the funds. "
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4) At a Glance, paragraph 2, 7th sentence, "In the future, infrastructure and
environmental conditions in economically disadvantaged communities may become
increasingly vulnerable to deterioration as funding and assistance levels decrease. "
There is no information or evidence provided anywhere in the draft report to support
or substantiate this statement. As a practical matter, deterioration of infrastructure assets
is due to the age of assets as well as inadequate operations and maintenance (O&M)
spending. Further, the EPA does not know how Congress may choose to appropriate
funds and/or direct funding in the future nor do we know how the states may choose to
appropriate and/or direct state funding in the future.
OIG Response: The total stimulus funding for the two SRF programs was almost four times
larger than the FY 2009 appropriations for these programs. With the fourfold increase in
funds, EPA was able to reach more communities overall, including disadvantaged
communities. However, absent planning and a strategy for how to prioritize these factors in
funding, there is no assurance the results achieved can be repeated. There is not another
Recovery Act funding opportunity currently planned to continue this cycle. The Administrator
has cited the vulnerability of environmental justice and economically disadvantaged
communities in communication with the public. Combining those factors evidences the fact
that these communities could potentially deterioration further if they did not receive Recovery
Act funding. Nevertheless, acknowledging that other factors besides funding can impact
conditions, as well as the uncertainty of any future scenario, we deleted the sentence.
5) Report, Page 1, paragraph 1, 3rd sentence "Moreover, the agency sought to address
location-specific, community-based public health and environmental needs... "
This sentence represents a misunderstanding of the language used in the EPA
Recovery Act Plan, which simply makes the factual statement: "The programs targeted
by EPA's portion of Recovery Act dollars address location-specific, community-based
public health and environmental needs." Each EPA program targeted by Congress to
receive ARRA funding is clearly designed to address location-specific, community-based
public health and environmental needs.
OIG Response: We use the language "sought to address" because, in our evaluation of the
extent to which EPA's Recovery Act funds were targeted, jobs were created, and results
were achieved in economically disadvantaged communities, we did not find evidence that
EPA Recovery Act funding was clearly designed to address location-specific, community-
based public health and environmental needs. As described in our report, as of July 2010,
EPA did not have baseline assessment data on a nationwide basis for either socioeconomic
factors or unemployment, nor did it have a systematic methodology with specific
definitions, criteria, or tools to identify communities that are economically disadvantaged.
The absence of information creates a challenge to determine the extent to which these
location-specific, community-based public health and environmental needs are actually met
with Recovery Act funding. As noted in the Agency's response to our report, "the EPA is
working to develop a common mapping platform and a nationally consistent screening and
targeting tool to enhance environmental justice analysis, funding and decision making."
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6) Report, Page 1, paragraph 1, 3rd sentence " ...and it cited environmental justice as a
factor in Recovery Act implementation. "
Environmental justice appears as follows on page 6 of the Recovery Act plan
regarding the SRFs: "A greater share of federal funds provided for local clean water and
drinking water projects, including disadvantaged and environmental justice
communities." The share of federal funds was increased for all projects due to
elimination of state-match requirement and then further increased due to the provision of
additional subsidy to select recipient communities. Thus, every ARRA-funded SRF
assistance agreement, including those to disadvantaged and environmental-justice
communities, provided a greater share of federal funds for projects, and this goal was
met.
OIG Response: Administrator Jackson also cited environmental justice in a memorandum to
another federal agency on April 20, 2009, noting, "In enacting the Recovery Act, Congress
intended that funding benefit all people, regardless of race, age, color, national origin, or
income. This includes ensuring that consideration is given to the needs of minority and low-
income communities." Regardless of whether the increase in federal funds for all projects
resulted in additional Recovery Act-funded SRF assistance agreements that reached
disadvantaged and low-income communities, EPA did not have a deliberate, targeted
approach to reach these communities.
7) Report, Page 1, paragraph 2, 2nd sentence "The Act authorized$787 billion in
funding in the form of tax cuts, contracts, grants, and loans, among other things, to
achieve five primary purposes:..."
Stating that the $787 billion in ARRA funds was for five primary purposes implies
that all $787 billion was equally intended to produce all five outcomes. This is incorrect.
For instance, goal #3 is "to provide investments needed to increase economic efficiency
by spurring technological advances in science and health." This goal clearly applies to
programs, created or funded by ARRA, that provide research funding or economic
development funding to particular fields of science or health. The funds provided to the
EPA programs were for infrastructure spending. The five goals encompass the purpose of
the aggregate of all appropriations in the Act. Each line item of the Act was not intended
to meet each goal.
OIG Response: The statement appears in our "Background" section and provides the reader
with information about the amount of funding associated with the Recovery Act and its
primary purposes. The purposes are from section 3a of the act.
We recognize that each line item of the Recovery Act was not intended to meet each of the
five goals; however, the act did not state, nor did the Administrator direct, that the EPA
Recovery Act funds would only be used for infrastructure spending. In its Agency-wide
Recovery Act Plan, public correspondence, and promotional materials, EPA stated it would
be working toward the achievement of the other goals, stating in the purpose or description
section of Recovery Act grants and contracts that the funds were to "preserve and create jobs
and promote economic recovery."
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8) Report, Page 2, last paragraph, 2nd sentence, "However, Congress did specify that a portion
of EPA 's funds should be awarded as subsidies to communities that could not otherwise
afford infrastructure loans. "
This suggestion that the affordability language was statutory is misleading and factually
incorrect. The draft report is presumably referring to, without quoting, a sentence in the joint
explanatory statement that accompanied the statutory language of the conference report. This
sentence does not appear in the statute nor does any language that in any way constrains the
states' discretion on how to allocate the subsidies. The conference report states: "The bill does not
include language proposed by the House that would require a specific amount for communities
that meet affordability criteria set by the Governor. However, the Conferees expect the States to
target, as much as possible, the additional subsidized monies to communities that could not
otherwise afford an SRF loan." Further, for the DWSRF, which has an additional subsidy for
disadvantaged communities' provision in its enabling statute, ARRA actively divorced a state's
decision to provide additional subsidy under ARRA from the subsidy for disadvantaged
assistance.
OIG Response: The sentence, along with the sentence in comment 9, was changed to more
accurately reflect the language included in the March 2009 Office of Water memorandum. The
report sentence cited above does not state that Congress constrained the states' discretion on
how to allocate the subsidies. The Recovery Act contains the following requirement:
That notwithstanding the requirements of section 603 (d) of the Federal Water Pollution
Control Act or section 1452(f) of the Safe Drinking Water Act, for the funds
appropriated herein, each State shall use not less than 50 percent of the amount of its
capitalization grants to provide additional subsidization to eligible recipients in the
form of forgiveness of principal, negative interest loans or grants or any combination
of these...
Our report sentence further reflects congressional recognition that issues such as
socioeconomic disadvantage should be considered in awarding Recovery Act funds, as stated
in the Joint Explanatory Statement in Conference Report 111-16, "The Conferees expect the
States to target, as much as possible, the additional subsidized monies to communities that
could not otherwise afford an SRF loan."
9) Report, Page 3, paragraph 1, 1st complete sentence, "A March 2009 EPA Office of
Water memo to Regional Water Management Division Directors further defined
communities that could not otherwise afford an SRF loan, as "(e.g., disadvantaged
communities, environmental justice communities)"."
This quote from the March 2009 memo has not been accurately interpreted. The
memo did not define communities that could not otherwise afford a SRF loan. It merely
conveyed the conference language as described above with the addition of the language
in parenthesis. The provision of examples is not a definition. The SRF program
knowingly and appropriately used "e.g." in this situation to convey examples of
communities that could not afford a loan.
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OIG Response: The sentence, along with the sentence in comment 8, was changed to more
accurately reflect the language included in the March 2009 memorandum. Revised report
statement: "A March 2009 EPA Office of Water memorandum to Regional Water Management
Division Directors provided 'disadvantaged communities, environmental justice communities'
as examples of those that could not otherwise afford an SRF loan."
10) Report, Page 5, 1st sentence, first paragraph, "... EPA is unable, both on a
programmatic and national basis, to assess the overall impact of its Recovery Act
funds on disadvantaged communities... "
The EPA is able to determine how many jobs were created with each project, is able
to determine the amount of subsidy each project received and has the locational data for
each project. The EPA can assess that information against locational economic indicators
maintained by other departments (for example, median household income).
OIG Response: As stated in our report and detailed in documents provided to us by the
Director of EPA's Office of Environmental Justice, as of July 2010, EPA did not have a
systematic methodology with specific definitions, criteria, or tools to identify communities
that are economically disadvantaged, ensure consistency among program offices or regions,
and evaluate the impact of funding decisions on disadvantaged communities. Specific to the
SRFs, these documents noted that it would be difficult to use the U.S. Economic
Development Agency's statutory definition of "distressed communities," as well as U.S.
Department of Housing and Urban Development and U.S. Department of Agriculture criteria,
because the criteria may not align with state SRF disadvantaged definitions. Further, maps
using the county as the unit of analysis may not provide a high enough resolution to
determine the impact of EPA's projects. Regarding the LUST and Brownfields programs in
which the state agency was, in some cases, the award recipient, EPA would need to take
additional steps to obtain further information on where projects occurred or could occur.
Although the Recovery Act did not specifically require EPA to take action on economically
disadvantaged communities, the Agency was encouraged to do so by Administrator Jackson
and in subcommittee language. Despite EPA's "necessary focus on meeting [the Recovery
Act's] unequivocal priority for immediate action to promote job creation," it is important to
note that EPA's existing statutory authorities do not include a job creation requirement, and
that Recovery Act funds did not change EPA's programmatic structure. Therefore, EPA's
necessary focus in disbursing Recovery Act funds would be on meeting the Agency's mission
to protect human health and the environment, as well as following the direction and priorities
of the Administrator.
11) Report, Page 5, Ist paragraph, 4th sentence, "Congress intended consideration to be
given to the needs of minorities... "
That Congress intended consideration to be given to the needs of minorities in
making Recovery Act decisions is not reflected in either ARRA or ARRA conference
report language. This assertion is made with no supporting examples or citations.
OIG Response: This statement and its context appear on page 3 of our report. It is from an
April 2009 letter from Administrator Jackson; we added a specific footnote to provide further
clarification on page 5. Additional footnote added to report: "Memorandum from
Administrator Jackson to Mr. Alonzo L. Fulgham, Acting Administrator, U.S. Agency for
International Development, April 20, 2009."
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12) Report, Page 6, 2nd paragraph, 2nd sentence, "EPA did not have apian or strategy
in place it could utilize to integrate these goals into program operations and funding
decisions."
While the SRFs did not develop any new plans for integrating environmental justice
into program operations for ARRA, the DWSRF, consistent with its enabling statute,
required funds to be made available for small systems, allowed need on a per household
basis according to state affordability criteria to be a part of priority setting, and allowed
for states to use subsidy through their existing disadvantaged assistance programs. Both
SRFs allow rates to be set based on affordability. These are existing elements of the
programs.
OIG Response: The sentence cited refers to EPA as an Agency, not specific program offices.
In addition, the section that contains this sentence refers to work done specifically for the
Recovery Act, not to existing programmatic elements. In our regional survey, we found that
regions did not have a consistent definition for disadvantaged communities. Moreover, as
explained in our report, EPA did not systematically identify or seek to direct program funds to
projects or communities that are, for socioeconomic reasons, more in need than others. In the
case of the SRF program, for example, these decisions were left to individual states.
13) Report, Page 6, 2nd paragraph, 2nd sentence, "EPA did not systematically identify or
seek to direct program funds to those projects or communities that are, for
socioeconomic reasons, more in need than others. "
The enabling statute for both SRFs requires funding decisions to be made by the
states. This sentence inaccurately implies that the EPA could have made funding
decisions and disregards the fact that the EPA was legally precluded from making
funding decisions for the states.
OIG Response: EPA did not identify or provide direction to program decisionmakers on the
most opportune targets for achieving environmental and public health goals in communities
that are, for socioeconomic reasons, more in need than others. It is correct that Recovery Act
reporting requirements did not authorize the EPA to require states to track consideration of
"socioeconomic needs." However, the Recovery Act does not prohibit the Agency itself
from tracking the consideration of socioeconomic factors. With the Administrator's priority
to include environmental justice principles in all of [EPA's] decisions, tracking this
information would inform the Agency on the extent to which need exists in these
communities and identify the progress made through Agency efforts.
14) Report, Page 6, 3rd paragraph, Text Box Quotation
The quote comes from an unidentified OEJ source document. At minimum, the
material must be documented and identified in a footnote. We note that the text provided
is a sentence fragment, despite the use of a period, and appears to selectively quote from
a complete sentence. Absent the necessary context of the source document, there is no
way to address or evaluate this statement.
OIG Response: The source document cited in the report was created by the Director of
EPA's Office of Environmental Justice and provided to the OIG. The quote is direct, not
selective.
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15) Report, Page 6, 4thparagraph, 1st sentence, "In response to questions regarding the
accomplishment of the Recovery Act goals to create or retain jobs and assist those
most impacted by the recession, EPA managers noted that unemployment data were
not incorporated into Recovery Act Funding decisions. "
Again, the report fails to distinguish between formula grant programs and programs
where funding decisions are made at the EPA. We would note that at the state level, most
DWSRF disadvantaged-assistance programs assess user rate as a percentage of median
household income, which we believe is a better indicator of an economically
disadvantaged community than unemployment data. Additionally, SDWA allows for
need on a per household basis according to state affordability criteria to be a part of
priority setting. It is not clear why EPA managers would or should be privy to this
information when funding decisions are statutorily required to be made by states.
OIG Response: The sentence describes the comments we received in response to the
questions on job creation and EPA's ability to target economically disadvantaged areas.
Respondents were asked, "Based on your experience, if a community was designated as an
environmental justice or disadvantaged community, what impact did that have on EPA's
APvRA (Recovery Act) award process?" Seventy-four percent of respondents reported that
the designation had "minor impact" or "no impact" on Recovery Act funding decisions,
and 11 percent responded "No such communities identified." In addition, an SRF
representative said that he could not see how any job tracking would have happened, and
that there was likely little consideration of unemployment figures in the decision-making
process.
16) Report, Page 8, paragraph 1, 1st sentence, "EPA 's ability to target funds to preserve
and create jobs as well as reach those most impacted by the recession was limited by
multiple constraints."
The principal constraint is underlying statutory authority, and it must be recognized
first. The EPA obviously cannot act in a manner contrary to the underlying enabling
statutes. Furthermore, every dollar spent on infrastructure and made possible through
ARRA creates jobs and positively impacts the recession, as noted by studies conducted
by both the Council of Economic Advisors and the Congressional Budget Office.
OIG Response: In our regional survey, only 21 percent of respondents viewed underlying
statutory authority as an impediment to executing Recovery Act funds. While the SRF
program managers at EPA headquarters may view this as the principal constraint, it is not an
opinion shared by all managers in the Agency. In addition, the Administrator's priority for
environmental justice is that it must be included "in all of our decisions." The Agency
response to this report states that "the IG recommendations are consistent with our current
efforts to improve our targeting and assessment of low-income, tribal and minority
communities." If the Agency determines there are statutory restrictions prohibiting it from
advancing this priority and/or EO 12898 in some of its programs, it should communicate this
message to the public, delineating where it can and cannot work toward its priority.
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17) Report, Page 8, paragraph 1, 3rd and 4th complete sentences, "Short timeframes and
the resulting emphasis on "shovel-ready "projects also contributed to targeting
challenges. The development and funding of potential new projects in disadvantaged
communities was hampered by a lack of time and resources to prepare applications
as well as a lack of priority for those economically disadvantaged areas that have
environmental needs."
Projects that had not begun substantial planning and design work would not have
created as many jobs in the immediate term as projects that were ready to proceed with
construction. Furthermore, since ARRA required all SRF projects to be under contract or
construction by February 17, 2010, projects not ready to immediately move forward
should not have been funded. It should be noted that the "short timeframes" and
"emphasis on 'shovel-ready' projects" were established by Congress in the ARRA. Base
(i.e., non-ARRA) SRF program resources remained available to continue support of
ongoing planning and design work to ensure all communities, including disadvantaged
communities, that were not ready for ARRA would still be ready for SRF funding at the
appropriate time.
OIG Response: The report sentences in question refer to EPA's inability to develop and fund
new projects in disadvantaged communities using Recovery Act funds. The Agency response
supports this finding. The ability of a project to create more jobs than another was not a factor
EPA considered in selecting Recovery Act projects. While EPA states that, "Projects that had
not begun substantial planning and design work would not have created as many jobs in the
immediate term as projects that were ready to proceed with construction," SRF
representatives told us that because the Recovery Act did not specifically instruct then to
make job creation part of their selection criteria, they did not modify any SRF criteria to
allow preference for projects that create more jobs than others, whether in the immediate or
long term. Further, as repeated in this response, EPA left the selection to the discretion of the
states for a large majority of the Recovery Act funds. During more than one state visit, we
were told the challenges outlined in our report particularly impeded the ability of
disadvantaged communities to obtain Recovery Act funding. The processes and procedures
for the Recovery Act and EPA programs' statutory requirements limit the ability of EPA to
directly reach economically disadvantaged communities. These limitations were compounded
by the lack of a coordinated Agency strategy to target communities most in need; hence
"current efforts to improve our targeting and assessment of low-income, tribal and minority
communities."
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18) Report, Page 8, paragraph 1, 5th complete sentence, "Moreover, among the
Recovery Act-funded programs at EPA, decisions for 86 percent of the funds were
delegated to the States. "
This reflects the underlying statutory authority of the programs for which Congress
chose to appropriate ARRA funds. The enabling legislation for both SRF programs
requires states to decide which are to be funded. This sentence disregards the fact that the
EPA was legally precluded from making funding decisions for the states. Furthermore,
the term "delegation" implies that the EPA decided or was compelled to allow states to
have such authority when, in fact, such authority is specifically given to states through
implementing statutes.
OIG Response: See response to comment 3. (This section of the report describes the
multiple constraints that impacted EPA's ability to target funds to preserve and create jobs,
as well as reach those most impacted by the recession.) In the first paragraph of EPA's
OVERALL RESPONSE section, it notes that states made funding decisions for 86 percent of
EPA's Recovery Act funds. There is no value judgment regarding the states' decisions. We
revised the statement to remove the term "delegated." We use the term "Moreover," as
defined by Merriam Webster, "to convey information, in addition to what has been said."
Revised report statement: "Moreover, among the Recovery Act-funded programs at EPA,
the states made the funding decisions for 86 percent of the funds. "
19) Report, Page 8, paragraph 1, 6th complete sentence, "In the future, infrastructure
and environmental conditions in economically disadvantaged communities may
become increasingly vulnerable to deterioration as funding and assistance levels
decrease."
There is no information or evidence provided anywhere in the draft report to support
or substantiate this claim. As a practical matter, deterioration of infrastructure assets is
due to inadequate operations and maintenance (O&M) spending. Further, the EPA does
not know how Congress may choose to appropriate funds and/or direct funding in the
future nor do we know how states may choose to appropriate and/or direct state funding
in the future.
OIG Response: The total stimulus funding for the two SRF programs was almost four
times larger than the FY 2009 appropriations for these programs. With the fourfold increase
in funds, EPA was able to reach more communities overall, including disadvantaged
communities. However, absent planning and a strategy for how to prioritize these factors in
funding, there is no assurance the results achieved can be repeated. There is not another
Recovery Act funding opportunity currently planned to continue this cycle. The
Administrator has cited the vulnerability of environmental justice and economically
disadvantaged communities in communication with the public. Combining those factors
evidences the fact that these communities could potentially deterioration further if they did
not receive Recovery Act funding. Nevertheless, acknowledging that other factors besides
funding can impact conditions, as well as the uncertainty of any future scenario, we deleted
the sentence.
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20) Report, Page 11, paragraph 1, 2nd sentence, "These data gaps made managers
unable to assist States to look for specific types of projects or into areas with notable
unemployment rates."
In the case of the SRFs, states did not identify this type of data as a need. The
individual state programs are better situated to understand and identify such areas or
communities in their state and may prefer to use other data to determine economic need.
Furthermore, unemployment data is widely available for state programs, if so needed.
OIG Response: Our report speaks to the Agency as a whole, not to only the SRFs. As
indicated in the Agency OVERALL RESPONSE, EPA is working to "develop a ...
nationally consistent screening and targeting tool to enhance environmental justice analysis,
funding and decision making. Such a tool will help ensure that the EPA's program managers
consider potential environmental-justice concerns more consistently as they implement
programs within statutory mandates and that community stakeholders have more access to
information on how the EPA screens for potential environmental-justice concerns." Without
baseline assessment data on where socioeconomic factors or unemployment coincide with
environmental need, EPA cannot effectively advise states on the incorporation of these
factors into program decisions.EPA anticipates that the Plan EJ 2014 screening tool, when
implemented, could aid in identifying employment needs, working with the states to
determine need, and creating a harmonized Agency environmental justice program.
21) Report, Page 11, paragraph 1, 6th sentence, "In contrast, for infrastructure
improvement needs, twenty three percent of respondents were aware of apriority list
in the region, while for environmental protection needs, more than half were aware of
apriority list."
For the SRF programs, each state must maintain an intended use plan and priority list
for SRF infrastructure improvements. In addition, each state also possesses relatively
comprehensive data on infrastructure needs through the Clean Watersheds Needs Survey
and the Drinking Water Needs Survey. Because state SRF programs make funding
decisions, as required by statute, the awareness that EPA regional staff may have of
priority lists is irrelevant to the decisions made by states.
OIG Response: The sentence in question refers to the survey conducted as part of our
evaluation. The Regions were not able to inform the states in making decisions regarding
infrastructure or priority setting, which limited the Agency's ability as a whole to assess
impact. We were told by SRF representatives in headquarters that regional representatives
review the state intended use plans, looking at eligibility, reviewing the subsidy amount and
checking for consistency with the State priorities. Regardless of the existence of
comprehensive data at the state level, EPA has not consolidated and contrasted these data
on a national basis. Awareness of employment impacts and community needs is relevant in
light of the Agency's efforts to improve its targeting and assessment of low-income, tribal
and minority communities. The sentence merely contrasts the relatively low state of
knowledge regarding jobs among regional staff and their relatively greater knowledge of
infrastructure and environmental needs.
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22) Report, Page 12, paragraph 3, 4th sentence, "EPA programs require all applicants
(regardless of environmental or health conditions) to meet program criteria. "
This sentence seems to imply that such program criteria present challenges to state
programs that are attempting to reach disadvantaged communities. Program criteria are
intended to ensure compliance with all applicable laws and to ensure fairness in
determining potential recipients.
OIG Response: We believe it is important to explain to the public that, regardless of economic
or environmental circumstances, EPA could not award Recovery Act funds in any place or
manner it chose. This sentence is a statement of fact; there are no implications. Applicants
were required to complete application requirements and program criteria before receiving
Recovery Act funds.
23) Report, Page 12, paragraph 3, 6th sentence, "For water and waste water projects,
applicants must demonstrate a level of preparedness to include making sure that
permits and design plans are obtained and complete. "
The draft report provides no factual basis for this assertion. Given planning and
design are eligible activities for funding under SRFs, this is clearly incorrect. However, it
is true, that absent designs and permits, a project may not have been "ready to proceed",
thus less likely to receive funding, consistent with the APvRA statutory direction.
OIG Response: We attributed this sentence to the states sampled in our evaluation. We
appreciate the concurrence from the Agency that "It is true, that absent designs and permits, a
project may not have been 'ready to proceed', thus less likely to receive funding." Revised
report statement: During state visits, we were informed that applicants must demonstrate a
level of preparedness, including completion of design plans and permitting processes, to have
water and wastewater projects funded under the Recovery Act.
24) Report, Page 13, paragraph 2, 1st sentence, "States awarded assistance funds to the
projects and communities for the DWSRF, CWSRF, and LUST programs and their
decisions primarily determined where EPA 's Recovery Act funds for those programs
were distributed."
Delete "primarily" from the sentence and insert "for those programs" between
"EPA's Recovery Act funds" and "were distributed."
OIG Response: We agree and made the suggested change in the report text. Revised
report statement: States awarded assistance funds to the projects and communities for
the DWSRF, CWSRF, and LUST programs, and their decisions determined where EPA's
Recovery Act funds for those programs were distributed.
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25) Report Page 13, paragraph 2, 3rd sentence, "A number of States used websites to
solicit public input on specific projects and general areas of interest or need. "
Public comment is required by statute for completion of SRF Intended Use Plans.
OIG Response: The sentence in question refers to the states' use of websites to solicit
opinions, interest, and specific suggestions from the general public for Recovery Act
funding. This activity was separate from the public comment process for intended use plans.
26) Report, Page 13, paragraph 3, 3rd sentence, "The intent was for the States to target,
as much as possible, these additional subsidized funds to communities that could not
otherwise afford a loan... "
This section mixes joint explanatory statement language and language from EPA
guidance. It should clearly quote one source or the other. This language does not appear
in ARRA statute, and the joint explanatory statement language does not have the full
effect of a law. The SRF capitalization grants guidance clearly identifies this nonbinding
language, but the EPA could not require compliance with it in the absence of
corresponding statutory language. ARRA clearly gave flexibility to target subsidy toward
achieving multiple goals.
OIG Response: The sentence cited is based on our analysis of available information. We do
not state that the language is binding or places any specific requirements upon the states, and
we agree at multiple points in the report that the Recovery Act provided flexibility toward
achieving multiple goals. The Recovery Act contains the following requirement:
That notwithstanding the requirements of section 603(d) of the Federal Water
Pollution Control Act or section 1452(f) of the Safe Drinking Water Act, for the
funds appropriated herein, each State shall use not less than 50 percent of the amount
of its capitalization grants to provide additional subsidization to eligible recipients in
the form of forgiveness of principal, negative interest loans or grants or any
combination of these...
The sentence cited above further reflects congressional recognition that issues such as
socioeconomic disadvantage should be considered in awarding Recovery Act funds, as stated
in the Joint Explanatory Statement in Conference Report 111-16, "The Conferees expect the
States to target, as much as possible, the additional subsidized monies to communities that
could not otherwise afford an SRF loan."
27) Report, Page 13, paragraphs 4 and 5 in their entirety (and Table 3-3): The examples
and chart do not get to whether and to what extent communities that could not
otherwise afford a loan were reached, which is the focus of the OIG's discussion in
this section as it deals with the SRFs. It is unclear what the OIG is trying to state or
imply through these paragraphs and chart.
OIG Response: There are no implications in these paragraphs or charts; they are provided
to show the funding received by and forgiveness percentages for each of the six states in
our sample. We provide the reader with information on the amount of funds each state was
working with, the variability in principal forgiveness amounts, and the flexibility the
Recovery Act provided to apply forgiveness, as mentioned in the Agency comments.
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Report, Page 14, paragraph 1, 1st sentence, "In Florida, State officials advised that
state law already provided for some forgiveness of CWSRF funding."
This is incorrect. The program allows for some portion of a CWSRF recipient loan to
be funded or repaid from a separate state-established and funded grant program. Prior to
ARRA, no CWSRF programs could legally forgive loans or provide grants from CWSRF
program funds. It is possible the state official meant that current Florida law did not
preclude the state from forgiving loans under ARRA even though such authority does not
exist in the base CWSRF program, as contrasted to other states, which needed emergency
legislation to allow such forgiveness.
OIG Response: We have adjusted the text accordingly. Revised report statement:
According to EPA, state law in Florida did not preclude the state from forgiving loans under
the Recovery Act even though such authority does not exist in the base CWSRF program.
28) Report, Page 15, paragraph 2, 1st and 2nd sentences, "There were both internal and
external organizational constraints to the targeting of EPA Recovery Act funds. EPA
program offices are subject to varying requirements to incorporate socioeconomic
needs in project selection and funding decisions. "
The principal constraint remains statutory authority and should be identified as such.
Further, the text should acknowledge there may actually be no requirement to include
socioeconomic needs in project selection and funding decisions, which is the case for the
CWSRF. In the case of the DWSRF, it is not required but is left to the discretion of the
state as described in SDWA 1452(b)(3)(A)(iii).
OIG Response: We reiterate that, in our regional survey, only 21 percent of respondents
viewed underlying statutory authority as an impediment to executing Recovery Act funds.
While the SPvF program managers at EPA headquarters may view this as the principal
constraint, it is not the Agency-wide opinion. The terminology "varying requirements" already
reflects the comment that there may be no requirement to consider socioeconomic need. Also,
nothing prohibits the Agency from encouraging this consideration and providing a clear and
consistent regime to implement both the Administrator's priority and EO 12898 related to
environmental justice.
In the Agency's Overall Response to this report, EPA states, "the funding decision process
varied for ... Brownfields and Superfund. The nature of both programs, which address
contaminated sites at former industrial locations or abandoned waste sites, provide significant
benefit to disadvantaged communities often located near the cleanup projects. EPA states that
its own analysis of the actual distribution of Brownfields and Superfund awards by county
compared to population and income factors clearly show that nearly 70 percent of the counties
that received ARRA Superfund or Brownfields grants had a higher percentage minority
population than the median county in the U.S."
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29) Report, Page 15, paragraph 2, 3rd sentence, "Within EPA Regions we found varying
knowledge of where high unemployment rates corresponded with environmental
needs..."
It is not clear why regions should possess such data and what they would do with
such information. As noted throughout, in the SRF programs, states are solely charged
with selecting and funding projects. These questions should have been posed to state
managers, rather than the EPA.
OIG Response: We posed many of these same questions to state managers during our visits.
However, in assessing EPA's overall knowledge of and ability to target, track, and assess
impact on economically disadvantaged communities, it only follows that we would focus our
evaluation on EPA headquarters and regions. This is consistent with the Agency's Plan EJ
2014: "In the past, EPA program and regional offices have relied upon and used different
screening tools ... To improve upon our existing efforts, Plan El 2014, which was announced
for public comment in luly 2010, has a screening tool as one of its areas for tool development.
Under this plan, the EPA is working to develop a common mapping platform and a nationally
consistent screening and targeting tool to enhance environmental justice analysis, funding and
decision making". EPA anticipates that, when implemented, such a tool will help ensure that
the EPA's program managers consider potential environmental-justice concerns more
consistently as they implement programs within statutory mandates and that community
stakeholders have more access to information on how the EPA screens for potential
environmental-justice concerns.
30) Report, Page 15, paragraph 2, 5th sentence, "Moreover, among the Recovery Act-
funded programs at EPA, project selection decisions were delegated to the States for
86% of the funds. "
The enabling legislation for both SRF programs grants states a range of authorities,
including which projects are to be funded. Further, the implication is that somehow the
EPA would have been better suited to make funding decisions. For the SRF programs,
this is clearly not true. State environmental and public-health agencies implement most
Clean Water Act and Safe Drinking Water Act programs and, as a result, are much more
familiar with community needs and challenges. Congress granted SRF programs and
authority to the states for this reason and for many others. This allows the states to
flexibly address their environmental and public health needs and priorities. Congress
passed ARRA with full knowledge of SRF program requirements.
OIG Response: See comment 3. (This section of the report describes the multiple constraints
that impacted EPA's ability to target funds to preserve and create jobs, as well as reach those
most impacted by the recession. In the first paragraph of EPA's OVERALL RESPONSE
section, it notes that states made funding decisions for 86 percent of EPA's Recovery Act
funds. There is no value judgment regarding the states' decisions. We revised the statement to
remove the term "delegated." We use the term "Moreover," as defined by Merriam Webster,
"to convey information, in addition to what has been said." Revised report statement:
"Moreover, among the Recovery Act-funded programs at EPA, the states made the funding
decisions for 86 percent of the funds. "
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31) Report, Page 15, paragraph 3, 3rd sentence, "We found no deliberate effort to target
or track funds... "
The enabling legislation for both SRF programs grants states a range of authorities
and funding determinations, including which projects are to be funded. For the SRF
program, the EPA possesses and tracks substantive data regarding each loan recipient of
SRF ARRA funds, and matching jobs data reported under ARRA Section 1512 is
available via Federalreporting.gov.
OIG Response: We do not disagree that the information is available. However, the focus
here is on the Agency's efforts to track or target funds to economically disadvantaged
communities and the synthesis of this information for identifying overall impact, not simply
on job tracking. We found no deliberate efforts to target these communities.
11-R-0208 39
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Appendix C
EPA Office of Policy's Screening-Level Analysis of
EPA ARRA Grants
1/13/2011
We (EPA Office of Policy) analyzed data on the 178 counties (or county equivalents) that received one or
more EPA Superfund or Brownfields ARRA grants.
Key findings
• Grants tended to be awarded to counties with higher than average percentage minority population,
but lower than average percentage in poverty.
• Minority population:
o Over 70% and 80%, respectively, of the Superfund and Brownfields grant money went to
counties where the percent minority population was above that of the median county in
the US.
o Over $485 million of ARRA Superfund and Brownfields grant money went to counties
where the percent minority population was above that of the median county in the
country.
o Nearly 70% of the counties that received ARRA Superfund or Brownfields grants had a
higher percentage minority population than the median county in the US.
• Populations in poverty:
o Nearly 60% of ARRA Superfund and Brownfields grant money went to counties with
higher poverty rates than the statewide poverty rate, a slightly higher share than would be
expected if counties were selected randomly (59% actual versus 56% if random).
o Only 3% of the grant money went to counties in the bottom quintile of poverty rate, and
only 35% went to the bottom 50% of counties. This suggests that dollars went to states
with lower poverty rates overall, but had some tendency to go to the poorer counties
within the selected states.
Methods
Grant data was provided by OEI/OARM as total dollars per county (or equivalent) within each program
(Superfund or Brownfields). Grant data was matched to county-level demographic data. A grant to Fort
Peck Tribal Nation was analyzed using demographics for Roosevelt County, Montana. A grant to "Bade
County" Florida was assumed to apply to Miami-Bade County. All 178 locations will be referred to as
"counties" here. The data includes 10 counties that received both types of grants.
For demographic data, we obtained the new Census Bureau data from the American Community Survey
five-year sample (ACS 2005-2009), and analyzed demographic variables including county-level
percentage of individuals below the Federal poverty threshold, median household income, and percentage
of individuals who were minorities (defined here as all other than non-Hispanic white alone).
Counties and grant dollars were analyzed relative to demographics using several metrics including share
of dollars or counties receiving grants, where demographic indicators were below various cutoffs. We
also summarized demographic indicators among those receiving grants versus the US overall.
11-R-0208 40
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Results
Results of this screening analysis suggest these grants tended to be awarded to counties with higher than
average percentage minority population, but lower than average percentage in poverty.
Among the 178 counties that received grants, 46 (26%) were in counties that were among the top quintile
(top 20%) of US counties ranked by percentage minority, a larger share than would be expected if awards
were randomly distributed across all counties. Across all counties receiving grants, the population was
43% minority (as a population weighted average), while the US population was just 34% minority. Nearly
70% of the counties that received ARRA Superfund or Brownfields grants had a higher percentage
minority population than the median county in the US.
In fact, 74% of the dollars awarded went to counties that were above the median county in terms of
percentage minority. Over 70% and 80%, respectively, of the Superfund and Brownfields grant money
went to counties where the percent minority population was above that of the median county in the US.
Over $485 million of ARRA Superfund and Brownfields grant money went to counties where the percent
minority population was above that of the median county in the country.
A different pattern was seen for income-related demographics. Across all counties receiving grants, the
population was 12.9% in poverty (as a population weighted average), while the US population was 13.5%
in poverty. Median household income was also about 9% higher for the population in counties receiving
grants than in the US overall.
Only 3% of the grant money went to counties in the bottom quintile of poverty rate, and only 35% went to
the bottom 50% of counties.
However, when comparing each county to the state-specific poverty rate, it appears that grants tended to
slightly favor counties with higher poverty rates relative to their state overall. Nearly 60% of ARRA
Superfund and Brownfields grant money went to counties with higher poverty rates than the statewide
poverty rate, a slightly higher share than would be expected if counties were selected randomly (59%
actual versus 56% if random).
This pattern suggests that dollars may have gone to states with lower poverty rates overall, but had some
tendency to go to the poorer counties within the selected states.
Detailed results are attached.
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EPA ARRA GRANTS FOR BROWNFIELDS AND SUPERFUND
# of counties (or county equivalents) analyzed
# of counties (or county equivalents) with grants
# of counties with grants, where above the US pop. avg.
as % of counties with grants
Expected % if random
Relative rate
# of counties with grants, where above the avg. county
as % of counties with grants
Expected % if random
Relative rate
# of counties with grants, where above the median county
as % of counties with grants
Expected % if random
Relative rate
# of counties with grants, where above the state pop. avg.
as % of counties with grants
Expected % if random
Relative rate
# of counties with grants, where in top quintile of counties
as % of counties with grants
Expected % if random
Relative rate
Dollars of grants
Dollars, where above the US pop. avg.
as % of dollars
Expected % if random
Relative rate
Dollars, where above the avg. county
as % of dollars
Expected % if random
Relative rate
Dollars, where above the median county
as % of dollars
Expected % if random
Relative rate
Dollars, where above the state pop. avg.
as % of dollars
Expected % if random
Relative rate
Dollars, where in the top quintile of counties
as % of dollars
Expected % if random
Relative rate
Population-weighted avg (avg of people), where grant
Population-weighted avg (avg of people) in US (as reported by Census)
Population-weighted avg (avg of people) in US/PR (calculated here)
Relative rate
County avg (avg of counties), where grants
County avg (avg of counties), in US
Relative rate
% minority
3221
178
57
32%
24%
1.32
91
51%
38%
1.36
123
69%
50%
1.38
76
43%
24%
1.80
46
26%
20%
1.29
$ 659,452,005
$ 207,953,585
32%
24%
1.30
$ 394,144,874
60%
38%
1.59
$ 485,271,840
74%
50%
1.47
$ 267,660,472
41%
24%
1.72
164,339,016
25%
20%
1.25
42.5
34.2
35.0
1.21
27.6
22.6
1.22
% poverty
3221
178
85
48%
58%
0.82
42
24%
40%
0.59
72
40%
50%
0.81
97
54%
56%
0.98
13
7%
20%
0.37
$ 659,452,005
$ 242,421,868
37%
58%
0.63
$ 145,186,027
22%
40%
0.55
$ 232,277,868
35%
50%
0.70
$ 387,507,589
59%
56%
1.06
19,663,420
3%
20%
0.15
12.9
13.5
13.9
0.93
13.4
16.2
0.83
Median
household
income*
3221
178
106
60%
83%
0.72
45
25%
56%
0.45
34
19%
50%
0.38
107
60%
76%
0.79
1
1%
20%
0.03
$ 659,452,005
$ 314,366,443
48%
83%
0.58
$ 145,128,991
22%
56%
0.39
$ 125,542,170
19%
50%
0.38
$ 340,829,521
52%
76%
0.68
2,547,405
0%
20%
0.02
$ 57,541
$ 51,425
$ 52,973
1.09
$ 51,093
$ 42,818
1.19
unemployment
as ratio
3221
178
70
39%
56%
0.70
50
28%
46%
0.61
61
34%
50%
0.69
90
51%
57%
0.88
11
6%
20%
0.31
$ 659,452,005
$ 181,779,741
28%
56%
0.49
$ 157,442,600
24%
46%
0.52
$ 169,013,821
26%
50%
0.51
$ 366,433,229
56%
57%
0.97
15,818,247
2%
20%
0.12
30.8
31.3
31.7
0.97
30.9
33.5
0.92
Cutoff for top quintile counties
Cutoff for median county
Cutoff for US average county
Cutoff for US population average
% minority
>38.7
>13.8
>22.6
>34.2
% poverty
>20.6
>14.8
>16.2
>13.5
Median
household
income
<34,132
<41,322
<42,818
<51,425
unemployment
as ratio
>40.5
>32.6
>33.5
>31.3
* For household income, comparisons show data below, not above, relevant cutoffs.
Sources: ACS 2005-2009, and EPA grants data.
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30%
0%
Counties receiving
EPA Brownfields or Superfund ARRA grants
did not tend to be in the top two quintiles of counties
in terms of poverty rate
all counties
counties with grants
0-10% . 10-13% , 13-16% . . 3.6-21% , 21-66%,
County s poverty rate (grouped by quint Me of counties)
Source: EPA Office of Policy Analysis
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Appendix D
Distribution
Office of the Administrator
Deputy Administrator
Agency Followup Official (the CFO)
Agency Followup Coordinator
General Counsel
Associate Administrator for Congressional and Intergovernmental Relations
Associate Administrator for External Affairs and Environmental Education
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