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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
Sanitary Sewer System
Improvements, Ingenio Community,
Toa Baja, Puerto Rico
Report No. 11-R-0233
May 24, 2011


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Report Contributors:
Jean Bloom
Roopa Batni
Jessica Knight
Abbreviations
DBA	Davis-Bacon Act
EPA	U.S. Environmental Protection Agency
OIG	Office of Inspector General
PRASA Puerto Rico Aqueduct and Sewer Authority
Cover photo: Sanitary sewer system improvements vacuum pump station site,
Ingenio Community, Toa Baja, 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.qov/oiq/hotline.htm	Washington, DC 20460

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At a Glance
Catalyst for Improving the Environment
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 the Ingenio Community, Toa
Baja, Puerto Rico, for review.
Background
The Ingenio Community, Toa
Baja, project received
$12,705,360 of Recovery Act
funds under the Clean Water
State Revolving Fund program—
$910,832 for principal
forgiveness and a $11,794,528
loan. The loan agreement is
between the Puerto Rico
Infrastructure Finance Authority,
acting on behalf of the
Commonwealth of Puerto Rico,
and the Puerto Rico Aqueduct
and Sewer Authority (PRASA).
For further information, contact
our Office of Congressional,
Public Affairs and Management
at (202) 566-2391.
The full report is at:
www.epa.aov/oia/reports/2011/
20110524-11 -R-0233.pdf
American Recovery and Reinvestment Act
Site Visit of Sanitary Sewer System
improvements, ingenio Community, Toa Baja,
Puerto Rico
What We Found
We conducted an unannounced site visit of the Sanitary Sewer System
Improvements Project in the Ingenio Community, Toa Baja, Puerto Rico, in
August 2010. We toured the project site and interviewed personnel from
PRASA, its project management consultants and subcontracted field inspectors,
the Puerto Rico Environmental Quality Board, and the prime contractor and
one subcontractor. We reviewed documentation related to Recovery Act
requirements. Our site visit found ongoing construction activity in four separate
locations, all related to the sanitary sewer system improvement project. The
main area of construction activity was located at the vacuum pump station.
During our review, PRASA informed us of a potential Buy American
noncompliance and the actions being taken to resolve the matter. Also, we
identified two subcontract agreements that did not contain the Recovery Act
requirements. The prime contractor submitted a signed amendment for only one
of the two subcontracts, stating that the other subcontractor was no longer
working on the project. Nonetheless, the prime contractor should obtain that
amendment from the second subcontractor.
What We Recommend
We recommend that the Regional Administrator, Region 2, follow up with
PRASA on the resolution of the potential Buy American noncompliance issue.
We also recommend that the Regional Administrator require PRASA to verify
that each of the prime contractor's subcontract agreements include the
applicable Recovery Act clauses and ensure the requirements were adhered to.
Region 2 and PRASA agreed with the findings and recommendations. The
Puerto Rico Environmental Quality Board did not provide any comments on
our findings and recommendations.

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May 24, 2011
MEMORANDUM
SUBJECT: American Recovery and Reinvestment Act
Site Visit of Sanitary Sewer System Improvements,
Ingenio Community, Toa Baja, Puerto Rico
Report No. ll-R-0233
FROM: Arthur A. Elkins, Jr. ,	^
Inspector General
TO:	Judith A. Enck
Regional Administrator, Region 2
THE INSPECTOR GENERAL
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 Sanitary Sewer System Improvements Project in the Ingenio Community, Toa Baja,
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 Clean Water State Revolving
Fund program. The loan agreement is between the Puerto Rico Infrastructure Finance Authority,
acting on behalf of the Commonwealth of Puerto Rico, and the Puerto Rico Aqueduct and Sewer
Authority. The Ingenio Community project received $12,705,360 in Recovery Act funds under
the Clean Water State Revolving Fund program.
The estimated direct labor and travel costs for this report are $95,987.
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

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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 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 further release of this report to the public. The 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-0233
Site Visit of Sanitary Sewer System Improvements,
Ingenio Community, Toa Baja, Puerto Rico
	 Table of C	
Purpose		1
Background		1
Scope and Methodology		1
Results of Site Visit		2
Buy American Requirements		2
Wage Rate Requirements		2
Contract Procurement		2
Limit on Funds and Reporting Requirements		3
Recommendations		3
Agency, Recipient, and Subrecipient Responses to Draft Report		3
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) pertaining to the Clean Water State Revolving Fund Program.
Background
PRASA received a $12,705,360 loan from the Puerto Rico Infrastructure Finance
Authority. The purpose of the loan was to fund sanitary sewer system
improvements for the Ingenio and Villa Calma Communities and Puerto Rico
Road 867. The loan agreement includes $910,832 in principal forgiveness. The
balance of the loan has a 20-year maturity with an interest rate of 2 percent per
annum.
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 determine whether previous audit work was
completed in this area, nor did we assess PRASA's internal controls. As a result,
we do not express an opinion on the adequacy of PRASA's internal controls or its
compliance with all federal, state, or local requirements.
We conducted our site visit during the weeks of August 9 and August 16, 2010.
During our visit, we:
1.	Toured the construction proj ect
2.	We interviewed personnel from PRASA, its project management
consultants and subcontracted field inspectors, the Puerto Rico
Environmental Quality Board, and the prime contractor including its
employees and managers and one subcontractor.
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.
11-R-0233
1

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Results of Site Visit
We were informed of a potential Buy American noncompliance and identified an
issue with procurement requirements. We summarize the results of our review
below.
Buy American Requirements
We are unable to conclude whether the Buy American requirement for the project
has been satisfied. During our visit, PRASA expressed a concern regarding a
potential Buy American noncompliance and is working with interested parties to
resolve the matter. As a result, we did not complete our planed work in this area.
Wage Rate Requirements
No issues came to our attention that would require further action, although we did
identify one instance of noncompliance with DBA requirements regarding the
inappropriate use of wage rates. Contractors certify compliance with DBA rates
by signing weekly certified payrolls, and we reviewed certified payrolls and
verified wages with the applicable DBA rates to determine compliance. We
inquired with the contractor and PRASA about the identified noncompliance. The
prime contractor acknowledged the noncompliance and corrected the affected
employee's pay rate. We audited a total of three payroll periods and performed a
cursory review of the certified payrolls for the entire month of July, and found
that the identified employee did not have any further instances of DBA
noncompliance. Thus, no further action is needed.
Contract Procurement
We did not identify any issues or concerns with contract procurement or unfair
bidding practices. The construction contract was competitively awarded based on
public advertisement. Nineteen bids were received and, based on the
recommendation of its bid board, PRASA awarded the contract to the lowest
responsive, responsible bidder. Unsuccessful bidders confirmed their participation
in the bidding process.
The prime contract requires that each subcontract include the Recovery Act
requirements. We reviewed the prime contractor's two subcontracts and found no
applicable Recovery Act requirements or clauses for either. We made PRASA and
the prime contractor aware of this issue. We subsequently received one of two
signed amendments that included the Recovery Act requirements. However, the
prime contractor did not submit a signed amendment for the second subcontract,
stating that the subcontractor was no longer working on the project. Nonetheless,
the subcontractor was required to comply with Recovery Act requirements for
services performed on the project. Therefore, the prime contractor should obtain
that amendment from the subcontractor.
11-R-0233
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Limit on Funds and Reporting Requirements
We did not identify any issues of concern. Under Section 1604 of the Recovery
Act, no funds can be used for any casino, other gambling establishment,
aquarium, zoo, golf course, or swimming pool. We visited the project site,
reviewed the prime contract to verify it contained the appropriate language to
comply with Section 1604, and performed a limited review of the prime
contractor's general ledger and supporting invoices to ensure compliance with
Section 1604 of the act.
We did not identify any issues regarding PRASA's ability to meet Recovery Act
financial management and reporting requirements. We interviewed PRASA
personnel to obtain an understanding of the reporting process and reviewed an
example of the tables that include the Section 1512 reporting information
submitted by PRASA to the Puerto Rico Environmental Quality Board and the
Puerto Rico Department of Health.
Recommendations
We recommend that the Regional Administrator, Region 2:
1.	Follow up with PRASA on the resolution of the potential Buy American
noncompliance issue.
2.	Require PRASA to verify that each of the prime contractor's subcontract
agreements include the applicable Recovery Act clauses and ensure the
requirements were adhered to.
Agency, Recipient, and Subrecipient Responses to Draft Report
We issued a discussion draft on March 22, 2011. No formal written comments
were received or required. We held an exit conference on March 31, 2011, with
PRASA, the Puerto Rico Environmental Quality Board, and the region to obtain
their verbal comments on the discussion draft.
The discussion draft report contained two recommendations. PRASA agreed with
our findings and informed us of actions it is taking. Regarding the potential Buy
American noncompliance issue, PRASA stated the issue remains a potential
noncompliance, and PRASA continues to work with interested parties to resolve
the matter. PRASA also informed us it is working with the prime contractor on
obtaining the signed contract amendment, which would include the appropriate
Recovery Act requirements and clauses. At the time of our meeting, PRASA had
requested, but not received, the signed amendment.
11-R-0233
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The Puerto Rico Environmental Quality Board did not comment on our findings
or recommendations. However, the board informed us that the loan amount of
$11,794,529 and the principal forgiveness amount of $910,831 needed to be
adjusted. The correct amounts are $11,794,528 for the loan and $910,832 for
principal forgiveness.
The region did not comment on our findings or recommendations at the exit
conference. On April 15, 2011, the region sent an e-mail stating it agreed with our
recommendations.
OIG Comment on Responses
We verified the loan and principal forgiveness amounts to the loan and project
funding documents. We adjusted the report accordingly.
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Status of Recommendations and
Potential Monetary Benefits
RECOMMENDATIONS
POTENTIAL MONETARY
BENEFITS (In $000s)
Rec.
No.
Page
No.
Subject
Status1
Action Official
Planned
Completion
Date
Claimed
Amount
Agreed To
Amount
3 Follow up with PRASA on the resolution of the
potential Buy American noncompliance issue.
3 Require PRASA to verify that each of the prime
contractor's subcontract agreements include the
applicable Recovery Act clauses and ensure the
requirements were adhered to.
Regional Administrator,
Region 2
Regional Administrator,
Region 2
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-0233
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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
Chief of Infrastructure Projects, Puerto Rico Environmental Quality Board
Director, Caribbean Environmental Protection Division, Region 2
11-R-0233

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