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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
      Comprehensive Sewer System
      Rehabilitation, Subsystem PS-5,
      Saugus, Massachusetts

      Report No. 11-R-0192
      March 29, 2011
        -**
           RECOVERY.GOV

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Report Contributors:                           lantha Maness
                                               Bill Spinazzola
                                               John Trefry
Cover photo: Service lateral connection pipe liner, Saugus, Massachusetts. (EPA OIG photo)

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                 U.S. Environmental Protection Agency
                 Office of Inspector General

                 At  a   Glance
                                                      11-R-0192
                                                   March 29, 2011
                                                          Catalyst for Improving the Environment
Why We Did This Review

The U.S. Environmental
Protection Agency's Office of
Inspector General conducts
site visits of American
Recovery and Reinvestment
Act of 2009 (Recovery Act)
clean water and drinking water
projects. We selected a project
in Saugus, Massachusetts, for
review.

Background
Project costs for the Saugus
sewer system rehabilitation
project totaled $2,504,691.
The town received a
$2,290,239 loan from the
Massachusetts Clean Water

State Revolving Fund to fund
the project. Using funds
provided under the Recovery
Act, the Clean Water State
Revolving Fund provided
principal forgiveness of
$210,702. The town is
required to repay the
remaining loan amount of
$2,079,537.
American Recovery and Reinvestment Act
Site Visit of the Comprehensive Sewer System
Rehabilitation, Subsystem PS-5, Saugus,
Massachusetts
 What We Found
We conducted an unannounced site visit of the Comprehensive Sewer System
Rehabilitation, Subsystem PS-5, in Saugus, Massachusetts, in December 2009. We
toured the project site; interviewed town representatives, engineering personnel,
and contractor personnel; and reviewed documentation related to Recovery Act
requirements.

Based on our visit, no significant issues or concerns came to our attention that
would require immediate action by the U.S. Environmental Protection Agency, the
State of Massachusetts, or the Town of Saugus.
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/
20110329-11-R-0192.pdf


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            I       UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
            S                     WASHINGTON, D.C. 20460

  ^    ^
                                                                    THE INSPECTOR GENERAL

                                    March 29, 2011

MEMORANDUM

SUBJECT:   American Recovery and Reinvestment Act Site Visit of the
             Comprehensive Sewer System Rehabilitation, Subsystem PS-5,
             Saugus, Massachusetts
             Report No. ll-R-0192
FROM:      Arthur A. Elkins, Jr.
             Inspector General

TO:         Curt Spalding
             Regional Administrator, Region 1
             U.S. Environmental Protection Agency
This is our report on the subject site visit conducted by the Office of Inspector General of the
U.S. Environmental Protection Agency. The report summarizes the results of our site visit of the
Town of Saugus, Massachusetts, sewer system rehabilitation, subsystem PS-5.

We conducted an unannounced site visit of the Comprehensive Sewer System Rehabilitation,
Subsystem PS-5 in Saugus, Massachusetts, in December 2009. The purpose of our site visit was
to determine the town's compliance with selected requirements of the American Recovery and
Reinvestment Act of 2009 (Recovery Act) pertaining to the Clean Water State Revolving Fund
program. The Massachusetts Clean Water State Revolving Fund loaned $2,290,239 to the town
to help fund the project. The total project costs were $2,504,691.  The Recovery Act provided
principal forgiveness of $210,702.

The estimated direct labor and travel costs for this report are $92,317.

Action Required

Because this report contains no recommendations, you are not required to respond to this report.
The report will be made available at http ://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, Product Line Director, at
(415)  947-4537 or adachi.robert@epa.gov.

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Purpose
             The purpose of our review was to determine whether the Town of Saugus,
             Massachusetts, is in compliance with selected requirements of the American
             Recovery and Reinvestment Act of 2009 (Recovery Act) under the Clean
             Water State Revolving Fund Program.
Background
             The town received a $2,290,239 loan from the Massachusetts Clean Water
             State Revolving Fund to help fund the Saugus Comprehensive Sewer
             System Rehabilitation, Subsystem PS-5, project. The total project costs
             were $2,504,691. The Recovery Act provided principal forgiveness of
             $210,702. The town will repay the remaining loan of $2,079,537.

             Only three of five construction contracts were awarded at the time of our
             site visit. Contract 10-09, for pipe lining and spot replacement of sewers,
             was substantially complete. Contract 11-09, for service lateral connection
             lining, was active. Contract 12-09, for manhole rehabilitation, was also
             active. Vendors were selected for contracts 15-09 and 16-09, but the
             contracts had not been finalized.
Scope and Methodology
             Due to the time-critical nature of Recovery Act requirements, we did not
             perform this assignment in accordance with generally accepted
             government auditing standards. Specifically, we did not perform certain
             steps that would allow us to obtain information to assess the town's
             internal controls and any previously reported audit concerns. As a result,
             we do not express an opinion on the allowability of costs incurred, the
             adequacy of internal controls, or compliance with all federal, state, or local
             requirements.

             We conducted our site visit on December 1-3, 2009. During our visit, we:

                    1.     Toured the proj ect
                    2.     Interviewed town representatives, representatives of the
                          town's engineering firm, and the prime contractor and
                          subcontractor
                    3.     Reviewed documentation maintained by the town and its
                          contractors on the following matters:
                          a.      Buy American requirements under Section 1605  of
                                 the Recovery Act
                          b.      Wage rate requirements (Davis-Bacon Act) under
                                 Section 1606 of the Recovery Act
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                          c.  Reports on Use of Funds under Section 1512 of the
                              Recovery Act
                          d.  Contract procurement
Results of Site Vis it
             Based on our visit, no significant issues or concerns came to our attention
             that would require immediate action by the U.S. Environmental Protection
             Agency, the State of Massachusetts, or the Town of Saugus. The results of
             our procedures are summarized below.

             Buy American Requirements

             We did not identify any significant issues regarding Buy American
             requirements. The town and its contractors are fully aware of the Buy
             American requirements under Section 1605 of the Recovery Act. Based on
             our physical observations of the site, materials used for the project comply
             with Buy American requirements.

             With the exception of one contract, the Buy American requirements were
             included in the original bid specifications and contract documents. The
             Buy American requirements were excluded from the original bid
             specifications for contract 12-09. The original bid specifications for
             contract No. 12-09 were dated July 31, 2009, 5 months after the Recovery
             Act became law. The specifications were advertised on August 5, 2009,
             bids were opened on August 19, 2009, and a contract was signed on
             October 26, 2009. On October 19, 2009, the Buy American requirements
             were added to the contract as  a no-cost change order.

             Wage Rate Requirements

             We did not identify any significant issues in our review of wage rate
             requirements. Saugus and its construction contractor, National Water Main
             Cleaning Co., are complying with the wage rate requirements of Section
             1606 of the Recovery Act. Saugus included the wage rate requirement of
             the Recovery Act in its construction contracts.  We compared labor rates
             on the contractor's certified payroll to the labor rates of the National Water
             Main Cleaning Co. employees that we interviewed during our site visit.
             We did not note any significant exceptions. We also compared labor rates
             on the certified payroll to the  Massachusetts and New Jersey Davis-Bacon
             Wage Decision for heavy construction types. We noted that the employees
             are paid wages in excess of the required wages.
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             Financial Management and Reporting

             We did not identify any issues regarding the town's ability to meet
             Recovery Act financial management and reporting requirements. We
             determined that the town can provide accounting and financial information
             required by the Recovery Act Section 1512 and Office of Management
             and Budget guidance M-09-21.

             Contract Procurement

             We did not identify any issues regarding the procurement of the
             construction  contracts. The town is complying with its stated procurement
             practices for construction contracts and procured its contracts
             competitively. The town advertises requests for bids in local newspapers
             and a state-maintained database. The construction contract was
             competitively awarded based on public advertisement. Based on the
             recommendation of its engineering firm, the town awarded contracts to the
             lowest bidder. Unsuccessful bidders confirmed their participation in the
             bidding process.

Recommendations

             We have no recommendations.

Response  and  Office of Inspector General Comment

             Because there were no recommendations, the town and the region did not
             provide comments to the draft report and did not require an exit
             conference.
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              Status of Recommendations and
                  Potential Monetary Benefits
                                                                      POTENTIAL MONETARY
                           RECOMMENDATIONS                                BENEFITS (in $OOOs)
                                                            Planned
 Rec.   Page                                                   Completion    Claimed   Agreed-To
 No.   No.             Subject            Status1    Action Official       Date      Amount   Amount
                  No recommendations
      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


                             Distribution

Office of the Administrator
Regional Administrator, Region 1
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 1
Public Affairs Officer, Region 1
Director, Division of Municipal Services, Massachusetts Department of
      Environmental Protection
Town Manager, Town of Saugus, Massachusetts
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