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U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
Catalyst for Improving the Environment
Site Visit Report
American Recovery and
Reinvestment Act Site Visit of the
La Plata Water Treatment Plant
Phase II Project, Aibonito,
Puerto Rico
Report No. 11-R-0232
May 23, 2011
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Report Contributors: Jean Bloom
Jessica Knight
Glen Chabotar
Vanessa Rodriguez-Moya
Abbreviations
DBA Davis-Bacon Act
DWSRF Drinking Water State Revolving Fund
EPA U.S. Environmental Protection Agency
PRASA Puerto Rico Aqueduct and Sewer Authority
Cover photo: American Recovery and Reinvestment Act of 2009 construction activity at the
La Plata Water Treatment Plant Phase II Project site, Aibonito, Puerto Rico.
(EPA OIG photo)
Hotline
To report fraud, waste, or abuse, contact us through one of the following methods:
e-mail: OIG Hotline@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-0232
May 23, 2011
Why We Did This Review
The U.S. Environmental
Protection Agency (EPA), Office
of Inspector General, conducts
site visits of American Recovery
and Reinvestment Act of 2009
(Recovery Act) funded clean
water and drinking water
projects. We selected the project
in Aibonito, Puerto Rico, for
review.
Background
The Puerto Rico Aqueduct and
Sewer Authority (PRASA)
received $19.5 million in funding
under the Drinking Water State
Revolving Fund Program from
the Puerto Rico Infrastructure
Financing Authority, acting on
behalf of the Commonwealth of
Puerto Rico. The funding
agreement included a $2,606,900
loan of Recovery Act funds.
For
f\t i r
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/20117
20110523-11-R-0232.pdf
Catalyst for Improving the Environment
American Recovery and Reinvestment Act
Site Visit of the La Plata Water Treatment
Plant Phase II Project, Aibonito, Puerto Rico
What We Found
We conducted an unannounced site visit of the La Plata Water Treatment Plant
Phase II Project in Aibonito, Puerto Rico, in August 2010. We toured the
project site; interviewed personnel from PRASA, its subcontracted field
inspector, the Puerto Rico Department of Health, and the contractor's managers
and employees; and reviewed documentation related to Recovery Act
requirements.
During our review, we were unable to determine the total hours worked for
employees due to variances in labor hours reported on certified payroll reports
and employee pay stubs. As a result, we could not determine compliance with
the wage rate requirements or reporting requirements under the Recovery Act.
What We Recommend
We recommend that the Regional Administrator, Region 2, require that
PRASA reconcile the payroll hours reported, verify that previously reported
Section 1512 information reflects actual hours worked, and verify that future
hours reported are supported by payroll reports and pay stubs. We also
recommend that the Regional Administrator review PRASA's reconciliation
and verification responses and ensure compliance with Sections 1512 and 1606
of the Recovery Act. Region 2, PRASA, and the Puerto Rico Department of
Health agreed with all findings and recommendations.
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ussy
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
THE INSPECTOR GENERAL
May 23, 2011
MEMORANDUM
SUBJECT: American Recovery and Reinvestment Act Site Visit of the
La Plata Water Treatment Plant Phase II Project, Aibonito, Puerto Rico
Report No. ll-R-0232
FROM: Arthur A. Elkins, Jr.
Inspector General
TO: Judith A. Enck
Regional Administrator, Region 2
This is our report on the subject site visit conducted by the Office of Inspector General of the
U.S. Environmental Protection Agency (EPA). The report summarizes the results of our site visit
of the La Plata Water Treatment Plant Phase II Project in Aibonito, Puerto Rico, funded under
the American Recovery and Reinvestment Act of 2009 (Recovery Act).
We performed this site visit as part of our responsibility under the Recovery Act. The purpose of
our site visit was to determine whether the Puerto Rico Aqueduct and Sewer Authority complied
with selected requirements of the Recovery Act pertaining to the Drinking Water State Revolving
Fund program. The Puerto Rico Aqueduct and Sewer Authority received $19.5 million in funding
from the Puerto Rico Infrastructure Financing Authority, acting on behalf of the Commonwealth
of Puerto Rico, under the Drinking Water State Revolving Fund Program. The funding agreement
included a $2,606,900 loan of Recovery Act funds for the Aibonito project.
The estimated direct labor and travel costs for this report are $77,599.
Action Required
In accordance with EPA Manual 2750, you are required to provide a written response to this
report within 90 calendar days, or by August 22, 2011. You should include a corrective action
plan for agreed-upon actions, including milestone dates. Your response will be posted on the
Office of Inspector General's public website, along with our memorandum commenting on your
response.
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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 objection
to the further release of this report to the public. This report will be available at
http://www.epa.gov/oig.
If you or your staff have any questions regarding this report, please contact Melissa Heist,
Assistant Inspector General for Audit, at (202) 566-0899 or heist.melissa@epa.gov: or Robert
Adachi, Director of Forensic Audits, at (415) 947-4537 or adachi.robert@epa.gov.
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American Recovery and Reinvestment Act 11 -R-0232
Site Visit of the La Plata Water Treatment Plant
Phase II Project, Aibonito, Puerto Rico
Table of Contents
Purpose 1
Background 1
Scope and Methodology 1
Results of Site Visit 1
Buy American Requirements 2
Wage Rate Requirements 2
Contract Procurement 3
Limit on Funds and Reporting Requirements 3
Recommendations 4
Agency, Recipient, and Subrecipient Responses to Draft Report 4
OIG Comment on Responses 4
Status of Recommendations and Potential Monetary Benefits 5
Appendix
A Distribution 6
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Purpose
The purpose of our unannounced site visit was to determine the Puerto Rico
Aqueduct and Sewer Authority's (PRASA's) compliance with selected
requirements of the American Recovery and Reinvestment Act of 2009 (Recovery
Act) that pertain to the Drinking Water State Revolving Fund (DWSRF) Program.
Background
The La Plata Water Treatment Plant Phase II Project in Aibonito, Puerto Rico,
includes various improvements to the local drinking water treatment plant. The
project is funded as part of a $19.5 million funding agreement under the DWSRF
Program from the Puerto Rico Infrastructure Financing Authority, acting on
behalf of the Commonwealth of Puerto Rico. The funding agreement includes a
$2,606,900 loan of Recovery Act funds for the Aibonito project.
Scope and Methodology
Due to the time-critical nature of the Recovery Act requirements, we did not
perform this site visit in accordance with generally accepted government auditing
standards. Specifically, we did not perform certain steps that would allow us to
obtain information to assess PRASA's internal controls and any previously
reported audit concerns. As a result, we do not express an opinion on the
adequacy of PRASA's internal controls or its compliance with federal, state, or
local requirements.
We conducted an unannounced site visit during the week of August 9, 2010.
During our visit we:
1. Toured the proj ect site
2. Interviewed employees and managers on site, personnel from PRASA, its
subcontracted field inspector, and the Puerto Rico Department of Health
3. Reviewed documentation maintained by PRASA and the prime contractor
on the following matters:
a. Buy American requirements under Section 1605 of the Recovery
Act
b. Wage Rate requirements (Davis-Bacon Act (DBA) under Section
1606 of the Recovery Act)
c. Contract procurement
d. Limit on funds and reporting requirements under Sections 1604
and 1512 of the Recovery Act
Results of Site Visit
During our site visit, we were unable to determine whether the contractor was in
compliance with wage rate requirements under Section 1606 of the Recovery Act,
11-R-0232 1
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involving DBA. We were also unable to determine whether PRASA was in
compliance with Section 1512 of the Recovery Act. We summarize the specific
site visit results below.
Buy American Requirements
We did not identify any Buy American issues of concern beyond those identified
by PRASA. Our review of Buy American compliance was limited because
PRASA was working to address Buy American issues previously identified for
this project. As part of its Buy American oversight, PRASA conducts site visits at
each project site and inventories all materials and equipment. PRASA officials
then review all supporting material and equipment submittals and identify any
issues and areas of noncompliance. PRASAs' Buy American compliance review
is summarized in a project-specific summary table. According to PRASA, the
Buy American issues for this project involve instances in which the contractor
certifications are not complete or the certifications do not comply with Buy
American requirements. As a result of these issues, PRASA has withheld
payment from the contractor until the noncompliance is addressed.
PRASA provided the Office of Inspector General with a copy of its November
2010 summary table for the La Plata project. The table provides a detailed
summary for each submittal and identifies multiple instances of incomplete
documentation. We reviewed the supporting documentation for a sample of
submittals to verify the accuracy and completeness of PRASA's Buy American
review. Based on our review of the provided documentation, we found that
PRASA's Buy American summary table accurately reflected what was provided
by the contractor and made accurate determinations regarding Buy American
compliance.
Wage Rate Requirements
We were unable to determine whether the contractor was in compliance with the
wage rate requirements of the Recovery Act. Section 1606 of the Recovery Act
requires all mechanics and laborers employed on projects funded directly by, or
assisted in whole or in part with, Recovery Act funds to be paid wages at rates no
less than the locally prevailing rate, as determined by the U.S. Department of
Labor. These wages are commonly known as DBA wages and generally include a
requirement that employers submit certified payroll reports to the U.S.
Department of Labor. While we found that the contractor was paying at least the
required hourly prevailing wage, we were unable to verify whether the hours
reported on the certified payroll reports were accurate. We reviewed certified
payroll reports and corresponding pay stubs for five pay periods and found 12 out
of 34 instances in which the number of hours worked reported on the certified
payroll report did not match the number of hours reported on the pay stubs, as
shown in Table 1.
11-R-0232
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Table 1: Hour variations between certified payroll reports and pay stubs
Incident
1
2
3
4
5
6
7
8
9
10
11
12
Pay period ending
7-24-10
7-24-10
7-24-10
7-31-10
7-31-10
7-31-10
8-07-10
8-07-10
8-07-10
8-07-10
8-14-10
8-14-10
Certified payroll
hours
0 overtime
0 overtime
40 regular
40 regular
6 overtime
31 regular
14 regular
0 overtime
40 regular
0 overtime
34 regular
34 regular
Pay stub hours
1 overtime
1 overtime
37 regular
37 regular
6.5 overtime
23 regular
13 regular
2 overtime
32 regular
2 overtime
37 regular
37 regular
Variance
1 hour
1 hour
3 hours
3 hours
0.5 hour
8 hours
1 hour
2 hours
8 hours
2 hours
3 hours
3 hours
Source: OIG analysis of data provided by the contractor.
According to the contractor, the discrepancy in hours occurred because the pay
stubs and the certified payroll reports are prepared by different people, who at
times kept separate records. We could not determine which hours reported were
correct because of insufficient supporting documentation. The contractor stated
that the hours reported on the pay stubs are the correct hours but did not provide
any supporting documentation to substantiate this claim. Because we could not
determine the total hours worked for each employee, we could not verify that
employees were paid DBA wages for each hour worked, and thus, we could not
make a determination regarding compliance with Recovery Act wage rate (DBA)
requirements.
Contract Procurement
We did not identify any issues with contract procurement or unfair bidding
practices. PRASA competitively awarded the construction contract based on
public advertisement. Twelve bids were received, and PRASA awarded the
contract to the lowest responsive bidder. A sample of unsuccessful bidders
confirmed their participation in the bidding process.
Limit on Funds and Reporting Requirements
We did not identify any issues or concerns with PRASA's compliance with
Section 1604 requirements, which state that no Recovery Act funds can be used
for any casino, other gambling establishment, aquarium, zoo, golf course, or
swimming pool. We reviewed the prime contract, scope of work, and project cost
breakdown, and inspected the project site to ensure that PRASA complied with
Section 1604 of the Recovery Act.
We were unable to determine whether PRASA is in compliance with Section
1512 of the Recovery Act. We reviewed the process by which PRASA provides
its Section 1512(c) reporting information as required by the loan agreement.
11-R-0232
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PRASA submits summary tables to the Puerto Rico Environmental Quality Board
and the Puerto Rico Department of Health on a monthly basis. These tables
provide the necessary information regarding project background, completion
status, payments and reimbursements, and jobs created and retained. PRASA
compiled the jobs created and retained information using the employee hours
reported in the certified payroll reports. Because we could not reconcile the
certified payroll hours to supporting documentation, we could not confirm
whether jobs created and retained information reported to the Commonwealth of
Puerto Rico were accurate and/or reliable. Therefore, we were unable to
determine PRASA's compliance with Section 1512.
Recommendations
We recommend that the Regional Administrator, Region 2, require that PRASA:
1. Reconcile the hours reported on the certified payroll reports and the
corresponding pay stubs for all pay periods reported under the project and
submit the reconciliation to the Regional Administrator, Region 2.
2. Using the results of the reconciliation from recommendation 1, verify that
previously reported Section 1512 jobs created and retained information
reflects the actual hours worked on the project.
3. Verify that future hours reported under this project are supported by
certified payroll reports and pay stubs.
We also recommend that the Regional Administrator, Region 2:
4. Review PRASA's reconciliation and verification in response to
recommendations 1 and 2 and take the appropriate actions to ensure
compliance with Sections 1512 and 1606 of the Recovery Act.
Agency, Recipient, and Subrecipient Responses to Draft Report
We issued a discussion draft on March 30, 2011. Formal written comments were
not requested. We held an exit conference on April 19, 2011, with Region 2,
PRASA, and the Puerto Rico Department of Health to obtain their verbal
comments on the report.
OIG Comment on Responses
Region 2, PRASA, and the Puerto Rico Department of Health agreed with all
findings and recommendations.
11-R-0232
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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
4 Require that PRASA reconcile the hours reported 0 Regional Administrator,
on the certified payroll reports and the Region 2
corresponding pay stubs for all pay periods
reported under the project and submit the
reconciliation to the Regional Administrator,
Region 2.
4 Require that PRASA, using the results of the 0 Regional Administrator,
reconciliation from recommendation 1, verify that Region 2
previously reported Section 1512 jobs created and
retained information reflects the actual hours
worked on the project.
4 Require that PRASA verify that future hours 0 Regional Administrator,
reported under this project are supported by Region 2
certified payroll reports and pay stubs.
4 Review PRASA's reconciliation and verification in 0 Regional Administrator,
response to recommendations 1 and 2 and take Region 2
the appropriate actions to ensure compliance with
Sections 1512 and 1606 of the Recovery Act.
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
11-R-0232
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Appendix A
Distribution
Office of the Administrator
Regional Administrator, Region 2
Director, Grants and Interagency Agreements Management Division,
Office of Administration and Resources Management
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
Audit Followup Coordinator, Region 2
Public Affairs Officer, Region 2
Executive Infrastructure Director, Puerto Rico Aqueduct and Sewer Authority
Director, Potable Water Division, Puerto Rico Department of Health
Director, Caribbean Environmental Protection Division, Region 2
11-R-0232
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