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U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
Catalyst for Improving the Environment
Site Inspection Report
American Recovery and
Reinvestment Act Site Inspection
of the Clean Water State
Revolving Fund Projects at the
City of Long Beach, California
Report No. 11-R-0082
February 1, 2011
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Report Contributors: Glen Chabotar
Kevin Collins
Lela Wong
Mike Owen
Abbreviations
DBA Davis-Bacon Act
SWRCB State Water Resources Control Board
Cover photo: Colorado Lagoon Restoration project under construction at the
City of Long Beach, California. (EPA OIG photo)
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U.S. Environmental Protection Agency
Office of Inspector General
At a Glance
11-R-0082
February 1, 2011
Catalyst for Improving the Environment
Why We Did This Review
The U.S. Environmental
Protection Agency Office of
Inspector General conducts
site inspections of American
Recovery and Reinvestment
Act of 2009 clean water and
drinking water projects. We
selected the projects at the
City of Long Beach,
California, for review.
Background
The city received $5,813,786
in Recovery Act funds from
the California State Water
Resources Control Board
under the Clean Water State
Revolving Fund Program.
This amount comprised
$4,319,107 for the Colorado
Lagoon Restoration project,
$539,634 for the Los Angeles
River Vortex Separation
System, $403,200 for the Los
Angeles River Trash Nets, and
$551,845 for the Los Angeles
River Trash Separation
Device. The Recovery Act
funds were for principal
forgiveness.
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/
20110201-11-R-0082.pdf
American Recovery and Reinvestment Act
Site Inspection of the Clean Water State
Revolving Fund Projects at the City of
Long Beach, California
What We Found
We conducted unannounced site inspections of four projects at the City of Long
Beach, California, in May 2010. We toured the four projects. For the largest
project, the Colorado Lagoon Restoration project, we also conducted interviews of
city representatives and contractor personnel, and reviewed documentation related
to Recovery Act requirements.
Our site inspections identified a wage compliance issue that merits attention from
and action by the city, the California State Water Resources Control Board, and
the U.S. Environmental Protection Agency.
What We Recommend
We recommend that the U.S. Environmental Protection Agency Regional
Administrator, Region 9, require the California State Water Resources Control
Board to verify that the city is implementing controls to ensure compliance with
the Davis-Bacon Act and California state prevailing wage requirements.
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
THE INSPECTOR GENERAL
February 1,2011
MEMORANDUM
SUBJECT: American Recovery and Reinvestment Act Site Inspection of the
Clean Water State Revolving Fund Projects at the
City of Long Beach, California
Report No. ll-R-0082
FROM: Arthur A. Elkins, Jr.
Inspector General
TO: Tared Blumenfeld
Regional Administrator, Region 9
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 inspections of
the four projects located in the City of Long Beach, California, funded under the American
Recovery and Reinvestment Act of 2009.
We performed the site inspections as part of our responsibility under the Recovery Act. The
purpose of our site inspections was to determine the city's compliance with selected
requirements of the Recovery Act pertaining to the Clean Water State Revolving Fund Program.
The city received a total of $5,813,786 in Recovery Act funds.
The estimated cost of this report, calculated by multiplying the project's staff days by the
applicable daily full cost billing rate in effect at the time, is $91,326.
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 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. 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
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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, Product Line Director, at (415) 947-4537 or adachi.robert@epa.gov.
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Purpose
The purpose of our unannounced site inspections was to determine the
compliance of the City of Long Beach, California, with selected requirements of
the American Recovery and Reinvestment Act of 2009 that pertain to the Clean
Water State Revolving Fund Program.
Background
U.S. Environmental Protection Agency Region 9 awarded grant 2W-06000209 to
the California State Water Resources Control Board (SWRCB) on May 20, 2009.
The total amount awarded was $280,285,800. The purpose of the grant was to
provide funding under the Recovery Act to the SWRCB to capitalize its revolving
loan fund for the financing and construction of wastewater treatment facilities and
associated infrastructure, green infrastructure, nonpoint source projects, estuary
projects, and program administration.
The City of Long Beach received four loans totaling $5,813,786 from SWRCB
under the grant for the following projects:
• The Colorado Lagoon Restoration project received $4,319,107. The
project consists of installing low flow diversion structures and trash
separation devices, building a vegetated bioswale along the western arm of
the lagoon, and cleaning and modifying the existing culvert to improve the
tidal flushing.
• The Los Angeles River Vortex Separation System project received
$539,634. The project consists of installing a vortex separation system on
a large storm drain leading to a pump station on the Los Angeles River to
fully capture trash, debris, and sediment.
• The Los Angeles River Trash Nets project received $403,200. The project
consists of constructing a trash net system to capture trash and debris
before they are pumped into the Los Angeles River.
• The Los Angeles River Trash Separation Device project received
$551,845. The project consists of installing a trash separation device in the
forebay of a city pump station to fully capture trash and debris before they
are pumped into the Los Angeles River.
SWRCB used Recovery Act funds to offset 100 percent of the city's indebtedness
through principal forgiveness on all four loans.
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Scope and Methodology
Due to the time-critical nature of the Recovery Act requirements, we did not
perform the site inspections 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 city's internal controls and any previously
reported audit concerns. As a result, we do not express an opinion on the
adequacy of the city's internal controls or compliance with all federal, state, or
local requirements.
We conducted the unannounced site inspections on May 4-5, 2010. During our
inspections, we performed the following steps:
1. Toured the four proj ects.
2. Interviewed city and contractor personnel for the Colorado Lagoon
Restoration project.
3. Reviewed documentation maintained by the city and its contractors for the
Colorado Lagoon Restoration project on the following matters:
a. Buy American requirements under section 1605 of the Recovery
Act
b. Wage rate requirements under section 1606 of the Recovery Act
that are pursuant to the Davis-Bacon Act (DBA)
c. Reporting requirements under section 1512 of the Recovery Act
4. Reviewed documentation maintained by the city on the procurement of the
contracts for the four projects.
We did not review the remaining three projects for compliance with Buy
American, DBA, and Recovery Act reporting requirements. Two of the projects
were inactive at the time of the site inspections. The third project was active but
only had two or three employees on-site, thus limiting the work we could have
accomplished.
Results of Site Inspection
During our site inspections, we found that the contractor did not fully comply
with DBA and California's prevailing wage requirements. We summarize the
specific inspection results below.
Davis-Bacon Act Compliance
Our review of DBA compliance at the Colorado Lagoon Restoration project
found that employees were not paid the minimum required DBA or state
prevailing rates. Section 1606 of the Recovery Act requires all laborers and
mechanics employed on projects that are funded in whole or in part by the
Recovery Act be paid DBA rates. DBA rates are rates not less than those
prevailing on projects of a character similar in the locality as determined by the
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Secretary of Labor in accordance with United States Code, title 40, chapter 31,
subchapter IV. The loan agreement between SWRCB and the city requires
compliance with the DBA rates or the prevailing rates established under the
California Labor Code, whichever is higher.
We tested payroll data for one pay period. The pay period included 18 employees.
Three of the 18 employees were either clerical or management; such positions are
not subject to DBA or state prevailing wage requirements. Of the remaining 15
employees included in the test, 9 were paid below the minimum state prevailing
rates, which are higher than the DBA rates. One employee was also paid below
the DBA rate. These employees were underpaid $0.07 to $1.27 per hour. The total
amount underpaid for the pay period was $84.96.
We brought this issue to the contractor's attention. The contractor concurred with
the finding and stated that when the job started, the contractor was not notified of
the additional fringe benefit requirement because the Colorado Lagoon
Restoration project is a public works project. The contractor informed us on
September 2, 2010, that it had made the corrections to comply with the wage
requirements going forward. The contractor will review and adjust prior payments
retroactively to the start of the project. The noncompliance may have affected 26
pay periods starting with the week ending March 7, 2010, until September 2,
2010, when the contractor advised us of the correction. Although the estimated
total underpaid amount of approximately $2,200 is not substantial, we believe the
noncompliance is significant based on the number of occurrences and should be
brought to the attention of the U.S. Environmental Protection Agency, SWRCB,
and the city for consideration in future monitoring activities.
The contract also contains the following provision: "Contractor shall forfeit, as a
penalty to the City, Fifty Dollars ($50) for each laborer, worker or mechanic
employed for each calendar day, or portion thereof, that such laborer, worker or
mechanic is paid less than the prevailing wage rates for any work done by
Contractor, or any subcontractor, under this Contract." Assuming the compliance
situation applied to all 26 weeks, the total penalty would be approximately
$58,500.
Buy American Requirements
We did not identify any Buy American issues of concern. The Buy American
requirement was included in the contract bid documents and loan agreements. The
contractor certified that it had read the requirement and is able to comply.
According to the contractor, the requirement was communicated to all suppliers.
City officials also stated that purchase orders were required to be submitted to the
city for review. During our site visit, we observed and traced two different types
of pipe being used at the Colorado Lagoon Restoration project. No issue was
noted.
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Recovery Act Reporting Requirements
We did not identify any Recovery Act reporting issues of concern. We reviewed
the loan agreement between SWRCB and the city and obtained an understanding
of the expenditure payment process. A third-party field inspector monitors work
at the construction site. According to city officials, the contractor creates a
monthly invoice, and the field inspector reviews it. City project managers review
and approve the invoice and accompanying supporting documentation before
submitting to SWRCB for reimbursement. After city project managers receive
payment from SWRCB, funds are released to the contractor within 30 days.
We reviewed the job creation/retention report submitted by the city to SWRCB
under Recovery Act section 1512 for the quarter ended March 31, 2010. Hours
used in the job creation/retention calculations were properly supported.
Contract Procurement
We did not identify any issues of concern. All contracts were competitively bid
and awarded to the lowest responsive bidder.
Recommendation
We recommend that the U.S. Environmental Protection Agency Regional
Administrator, Region 9:
1. Require SWRCB to verify that the City of Long Beach is
implementing controls to ensure compliance with DBA and state
prevailing wage requirements.
Agency, Recipient, and Subrecipient Comments
We issued a discussion draft on December 21, 2010. Formal written comments
were not requested. We held an exit conference on January 6, 2011, with the city,
SWRCB, and region to obtain and discuss their comments.
The discussion draft contained two recommendations. The city and Region 9 did
not comment on recommendation 1 to require SWRCB to verify that the city is
implementing controls to ensure compliance with DBA and state prevailing wage
requirements. SWRCB representative stated that it will work with the city to
ensure the city has proper controls in place for wage compliance.
City representatives did not agree with recommendation 2 to advise the SWRCB
and the city to consider imposing a penalty under the contract provision that provides a
$50-a-day-per-worker penalty if any worker is paid less than the amount required. One
city representative stated that the underpayment was not substantial and that the
penalty was excessive and unnecessary since the contractor has already made the
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adjustments retroactively. He believed it was an honest mistake and the contractor
corrected it as soon as it was brought to its attention. Assessing the penalty may
hurt the city's relationship with the contractor and could harm the city's
reputation, considering the amount of the penalty versus the amount of the error
uncovered.
Another city representative stated that the city has proper controls in place to
ensure DBA and state wage compliance and that this is the first time the city had a
labor compliance issue in 25 years. The city always employs a person who is
dedicated to labor compliance. At the time the errors occurred, the city's labor
compliance employee was no longer working in that capacity, and the city was
using temporary employees to perform the function. The city representative
believed that the transition in personnel was the reason for the noncompliance.
The SWRCB representative also believed that the penalty was not warranted and
that it does not have the authority to enforce the penalty.
Region 9's representatives stated that EPA does not have the authority to mandate
the penalty and that it would support dropping the penalty recommendation.
OIG Response
We considered the city's comments for not assessing the penalty acceptable. We
have adjusted the report to eliminate that recommendation.
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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 SWRCB to verify that the City of Long 0 Regional Administrator,
Beach is implementing controls to ensure Region 9
compliance with DBA and state prevailing wage
requirements.
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 9
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
Director, Grants and Interagency Agreements Management Division,
Office of Administration and Resources Management
Audit Followup Coordinator, Region 9
Public Affairs Officer, Region 9
Mayor, City of Long Beach, California
Executive Director, California State Water Resources Control Board
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