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U.S. Environmental Protection Agency
Office of Inspector General
     11-R-0519
August 24, 2011
       ,            At  a  Glance
Why We Did This Review

We conducted this audit to
determine whether the U.S.
Environmental Protection
Agency (EPA) and selected
states are sufficiently
overseeing Clean Water State
Revolving Fund (CWSRF)
projects that were funded by
the American Recovery and
Reinvestment Act of 2009
(ARRA), to ensure that project
goals and ARRA requirements
are met.
Background
The CWSRF Program
received $4 billion of ARRA
funding for states to finance
high-priority infrastructure
projects needed to ensure
clean water. EPA made
ARRA grants to states and
Puerto Rico to capitalize their
State Revolving Fund
programs to finance eligible
high-priority water
infrastructure projects.

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/
20110824-11-R-0519.pdf
                                                                 Catalyst for Improving the Environment
            EPA and States Should Strengthen Oversight of Clean
            Water State Revolving Fund Recovery Act Projects
            What We Found
            State oversight of CWSRF projects does not always ensure subrecipient
            compliance with ARRA. We found that some states were not conducting adequate
            oversight of subrecipient compliance with the Buy American provisions of ARRA,
            and the frequency of inspections of ARRA-funded CWSRF projects varied among
            states.  EPA oversight guidance to the states is not detailed enough to ensure
            compliance with ARRA requirements. EPA believes that it lacks statutory
            authority to place requirements on states and gives states flexibility to implement
            their programs. However, if states do not conduct proper oversight, projects are at
            increased risk of fraud, waste, and abuse, and are also at risk for not complying
            with ARRA requirements or achieving ARRA's economic recovery goals.

            EPA's oversight of states does not ensure that ARRA requirements are met on
            CWSRF projects. We found that the ARRA inspection checklist does not include
            enough detailed questions to facilitate EPA oversight of state programs. Further,
            the Office of Water is not conducting and documenting reviews of state programs
            in a timely manner and does not use the resulting review reports to make national
            program decisions. Office of Water management did not make completion of the
            review reports a priority and did not use all of the ARRA funding Congress
            allocated for oversight. As a result, the EPA oversight process cannot ensure that
            states are complying with program requirements and identifying nationwide issues
            to improve the CWSRF program.
            What We Recommend
            We recommend that EPA implement a plan to supplement state inspections and
            require states to use an updated checklist during their inspections. We recommend
            that EPA update the checklists regions use for semiannual reviews of state
            programs and establish deadlines for completing the reviews. We also recommend
            that EPA analyze the reviews of state programs for nationwide trends and use the
            information to assist in making future program decisions. In responding to the
            draft report, EPA did not agree with all of our recommendations and provided
            alternative corrective actions for some. The Agency did not provide planned
            completion dates for the recommendations. For this reason, the recommendations
            are unresolved. In responding to the final report, the Agency will need to provide
            a corrective action plan and milestone dates for completion.

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