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OFFICE OF INSPECTOR GENERAL
Catalyst for Improving the Environment
Audit Report
State of Oregon Safe Drinking Water
Revolving Loan Fund
Financial Statements with
Independent Auditor's Report, June 30, 2004
Report No. 2005-1-00157
September 12, 2005
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Abbreviations
CFR Code of Federal Regulations
EPA United States Environmental Protection Agency
OECDD Oregon Economic and Community Development Department
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§ UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
% / WASHINGTON, D.C.
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OFFICE OF
INSPECTOR GENERAL
September 12, 2005
MEMORANDUM
SUBJECT: Auditor's Report for the State of Oregon Safe Drinking Water
Revolving Loan Fund as of June 30, 2004
Report No. 2005-1-00157
Leah L. Nikaidoh, Acting Director for
FROM: Michael A. Rickey
Director, Assistance Agreement Audits
TO: Michael Bogert
Regional Administrator
EPA Region 10
Attached is a copy of the subject audit we sent to the State of Oregon. The audit contains
reports on the financial statements, internal controls, and compliance requirements applicable
to the Drinking Water State Revolving Fund Program in Oregon for the year ended June 30,
2004.
We have issued a qualified opinion on the financial statements and a qualified opinion on the
compliance requirements, as discussed in our report on compliance. In our report on internal
controls, we noted an issue involving the internal control structure and its operations that we
considered to be a material weakness.
In accordance with EPA Directive 2750, the Action Official is required to take action on the
findings and recommendations in this report within 150 days.
The Office of Inspector General has no objection to the release of this report to any member
of the public upon request. The report contains no confidential business or proprietary
information.
If you have any questions or concerns, please contact Mr. William Dayton at (916) 498-6590
or Mr. Darren Schorer at (206) 553-6288.
Attachment
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Table of Contents
At a Glance
Independent Auditor's Report on Oregon Safe
Drinking Water Revolving Loan Fund Program
Fiscal 2004 Financial Statements 1
Statement of Net Assets 3
Statement of Revenues, Expenses, and Changes in Net Assets 4
Statement of Cash Flows 5
Notes to Financial Statements 7
Independent Auditor's Report on the Internal Control Structure Based on an
Audit of the Financial Statements Performed in Accordance with
Government Auditing Standards 12
Internal Control Finding and Recommendation 14
Independent Auditor's Report on Compliance with the Requirements
Applicable to the Environmental Protection Agency's State Revolving
Fund Program in Accordance with Government Auditing Standards 15
Compliance Findings and Recommendation 17
Supplemental Information 18
State of Oregon Drinking Water State Revolving Fund
Schedule of Set-Aside Expenses (Unaudited)
Year Ended June 30, 2004 18
Distribution
19
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
OFFICE OF
INSPECTOR GENERAL
Independent Auditor's Report on
Oregon Safe Drinking Water Revolving Loan Fund Program
Fiscal 2004 Financial Statements
We have audited the accompanying Statement of Net Assets of the Oregon Safe Drinking Water
Revolving Loan Fund Program (the Program) as of June 30, 2004, and the related Statements of
Revenues, Expenses, and Changes in Net Assets, and Statement of Cash Flows for the year then
ended. These financial statements are the responsibility of the Program management. Our
responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards in the United
States of America and Government Auditing Standards issued by the Comptroller General of the
United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.
The Program was unable to document and support the assets, liabilities, net assets, and revenues
and expenditures of the Set-Aside Funds in accordance with Generally Accepted Accounting
Principles. The State of Oregon accounting system does not track revenues and expenditures on a
fiscal year basis for grant type programs, and we were not able to apply other auditing procedures
to satisfy ourselves as to opening balances and current year activity. Accordingly, the scope of
our work was not sufficient to enable us to express, and we do not express, an opinion on the
Set-Aside Fund or its results of operations for the year ended June 30, 2004.
In our opinion, except for the effect of the issues discussed in the preceding paragraph, the
financial statements referred to in the first paragraph present fairly, in all material respects, the
financial position of the Oregon Safe Drinking Water Revolving Loan Fund and the results of its
operation and its cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States of America.
As discussed in Note 1, the financial statements referred to above are intended to present the
financial position and results of operations of the Oregon Safe Drinking Water Revolving Loan
Fund, a component fund of the State of Oregon. These statements are not intended to present the
financial position or results of operations for the State of Oregon, the Oregon Department of
Human Services, or the Oregon of Economic and Community Development Department, in
1
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conformity with accounting principles generally accepted in the United States, of which the Safe
Drinking Water Revolving Loan Fund is a part.
In accordance with Government Auditing Standards, we have also issued a report, dated February
9, 2005, on our consideration of the Oregon Safe Drinking Water Revolving Loan Fund's internal
control structure and a report dated February 9, 2005, on its compliance with laws and
regulations. Those reports are integral parts of an audit prepared in accordance with auditing
standards generally accepted in the United States of America and should be read in conjunction
with the report in considering the results of our audit.
Office of Inspector General
Environmental Protection Agency
February 9, 2005
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STATE OF OREGON
Safe Drinking Water Revolving Loan Fund
Statement of Net Assets
June 30, 2004
Assets
Current assets:
Cash and cash equivalents
Receivables:
Current maturities of loans
Interest receivable
Accounts receivable-Federal
Due from other agencies
Total current assets
Loans
$ 12,993,330
1,676,318
805,057
56.660
15,531,365
Set Asides
(Unaudited)
$ 5
333,370
62.938
396,313
Total
$ 12,993,335
1,676,318
805,057
333,370
119.598
15,927,678
Noncurrent assets
Loans receivable, net
50.016.891
50.016.891
Total assets
65.548.256
396.313
65.944.569
Liabilities and Net Assets
Liabilities:
Current liabilities:
Accrued liabilities/
accounts payable
Total current liabilities
25.694
25.694
214.282
214.282
239.976
239.976
Noncurrent liabilities
Due to other funds
Due to other agencies
Total noncurrent liabilities
100,000
100,000
62,422
116,622
179,044
162,422
116,622
279,044
Total liabilities
125.694
393.326
519.020
Net assets:
Restricted
65.422.562
2,987
65.425.549
Total liabilities and net assets
$ 65.548.256 $ 396.313
$ 65.944.569
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STATE OF OREGON
Safe Drinking Water Revolving Loan Fund
Statement of Revenues, Expenses, and Changes in Net Assets
For the year ended June 30, 2004
Set Asides
Loans
(Unaudited)
Total
Operating Revenues:
Interest income on SRF loans
Federal receipts
Total operating revenue
$ 1,158,539
301.653
1.460.192
13.058.257
13.058.257
$ 1,158,539
13.359.910
14.518.449
Operating Expenses:
Personal services
Services and supplies
Loan principal forgiven
Expenditures
Financial statement accruals
255,241
24,245
1,466,814
618,222
978,666
328,974
5.942
873,463
1,002,911
1,466,814
328,974
5.942
Total operating expenses
1.746.300
1.931.804
3.678.104
Operating income (loss)
(286,108)
11,126,453
10,840,345
Nonoperating Revenue (Expenses)
Interest on investments
State match
Total nonoperating revenue
138,601
10.872.140
11.010.741
138,601
10.872.140
11.010.741
Funds from EPA-Transfer-in
Funds from EPA-Transfer-out
11,278,757
CI 1.580.410")
11,278,757
(11.580.410")
Total transfers
11.278.757
CI 1.580.410")
(301.653")
Change in net assets
22.003.390
(453.957")
21.549.433
Net assets, beginning of year
43.419.172
456.944
43.876.116
Net assets, end of year
$ 65.422.562
$ 2.987
$ 65.425.549
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STATE OF OREGON
Safe Drinking Water Revolving Loan Fund
Statement of Cash Flows
For the year ended June 30, 2004
Loans
Cash flows from operating activities:
Loan principal repayments
Loan interest received
Employee services and benefits
Services and supplies
Cash received from EPA-Program Admin
Loan disbursements
Net cash provided (used) by operating activities
Cash flows from noncapital financing activities:
Funds received from EPA
Transfer from other State funds
Net cash provided (used) by noncapital financing activities
Cash flows from investing activities:
Interest on investments
Net cash provided (used) by investing activities
Net cash provided (used)
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
$ 1,513,315
1,059,086
(252,307)
(29,485)
276,316
06-359-493^)
C$13.792.568s)
11,278,757
10.872.140
22.150.897
138.601
138,601
8,496,930
4.496.400
$ 12.993.330
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STATE OF OREGON
Safe Drinking Water Revolving Loan Fund
Statement of Cash Flows
For the year ended June 30, 2004
Reconciliation of operating income (loss) to net
cash provided (used) by operating activities
Excess of revenue over expenses
Adjustments to reconcile operating income to
net cash used for operating activities
Allowance for principal forgiveness
(Increase) decrease in Federal Receivable
(Increase) decrease in loan interest receivable
(Increase) decrease in loans receivable
Increase (decrease) in liabilities
Increase (decrease) in vacation payable
Total adjustments
Net cash provided (used) for operating activities
$ (286,108)
683,402
(25,337)
(99,453)
(14,062,766)
16,279
ris.sss^)
(13,506,460)
$ ri3.792.568N)
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STATE OF OREGON
Safe Drinking Water Revolving Loan Fund
Notes to Financial Statements
The accompanying financial statements of the Oregon Safe Drinking Water Revolving Loan Fund
have been prepared in conformity with generally accepted accounting principles as prescribed by
the Governmental Accounting Standards Board (GASB), the Financial Accounting Standards
Board (FASB), and the American Institute of Certified Public Accountants (AICPA). In
accordance with GASB Statement No. 20, the Safe Drinking Water Revolving Loan Fund does
not apply FASB pronouncements issued after November 30, 1989.
1. Summary of Significant Accounting Policies
a. Reporting Entity
The Safe Drinking Water Revolving Loan Fund (SDWRLF) was created in 1998 as a fund
within the Oregon Economic and Community Development Department (OECDD), which is
part of the State of Oregon reporting entity. The SDWRLF operates under the provisions of
sections 285B.530 through 285B.548 and 285B.560 through 285B.599 of the Oregon Revised
Statutes (ORS).
In 1996 Congress created the Safe Drinking Water State Revolving Fund. The fund gives
each state money to establish loan funds. The funds are to assist in the construction and
improvement of local public water systems. These financial resources assist communities and
nonprofit non-community drinking water systems in planning, designing, and building
drinking water facilities to correct a noncompliance with current or future drinking water
standards, or to further the public health protection goals of the Federal (US) Safe Drinking
Water Act and Oregon's Drinking Water Quality Act. 1.
For these purposes, the State of Oregon receives an annual grant from the U. S.
Environmental Protection Agency (USEPA) based on submissions by the State for each
year's grant. Most of the grant is used to capitalize the loan financing program, for which a
20 percent match from the State is required. This match is currently met through State
Lottery revenue bonds. These bonds will be repaid using State Lottery proceeds.
b. Basis of Presentation
The SDWRLF program at the Oregon Economic and Community Development Department is
accounted for as an Enterprise Fund, a proprietary fund type. Enterprise Funds account for
operations financed and operated in a manner similar to private business enterprises. Funds
received by DHS and DEQ are not accounted for as an Enterprise Fund, but are accounted for
under the State of Oregon Accounting Manual rules in the State Financial Management
System (accounting system), which is the system of record.
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STATE OF OREGON
Safe Drinking Water Revolving Loan Fund
Notes to Financial Statements
1. Summary of Significant Accounting Policies (continued)
c. Measurement Focus and Basis of Accounting
All funds are accounted for on a flow of economic resources measurement focus, and are
maintained on the accrual basis of accounting. Under the accrual basis of accounting,
revenues are recognized when earned and expenses are recorded at the time related liabilities
are incurred. Financial activities of OECDD, DHS, and DEQ are included in this report in a
"consolidated Format." All assets and liabilities associated with the operation of this fund are
included on the balance sheet. Fund equity (i.e. net total assets) is reported as Net Assets.
Proprietary fund operating statements present increases (e.g. revenues) and decreases (e.g.
expenses) in net assets.
d. Budgetary Accounting
The State of Oregon's budgets are approved on a biennial basis. Safe Drinking Water
Program expenditures are monitored against approved budgets, quarterly allotments, and cash
advances. Limitations lapse at the end of the biennium. The Emergency Board of the Oregon
Legislature approves any increases or decreases to the Legislatively approved budget when
the Legislature is not in session. The SDWRLF has continuous spending authority in ORS
285B.563.
e. Cash, Cash Equivalents, and Investments
Cash and cash equivalents include: cash on hand, and cash held by the Oregon State Treasury.
Investments are considered to be cash equivalents when the maturity date is within 90 days of
the date of the date of acquisition. Investments are reported on the financial statements at fair
value. Changes in the fair value of investments are recognized as revenue. The custodial
agent determines the fair value of debt and equity securities, using pricing services, or prices
quoted by one or more independent brokers.
f. Receivables
Receivables are amounts due representing revenues earned or accrued in the current period.
Interest receivable includes interest due on loans to local governments and special districts.
Loans receivable are shown net of an allowance for principal forgiveness. An allowance for
un-collectible accounts is not established because the program has not had any defaults and
none are anticipated.
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STATE OF OREGON
Safe Drinking Water Revolving Loan Fund
Notes to Financial Statements
2. Loans Receivable
Loans Receivable: 2003 2002
Through June 30 2004 (Unaudited^) (Unaudited^)
Number of Loans Outstanding 46 39 34
Total Amount Outstanding $51.693.209 $38.313.845 $16.949.277
Loans Receivable project statuses at June 30, 2004 are as follows:
Loans in Repayment $ 31,982,124
Projects in Construction 20,923,899
Allowance for Principal Forgiveness (1.212.814)
Total Loans Receivable $ 51.693.209
Loans mature at various intervals. The following schedule summarizes future loan
repayments from loans in repayment.
Fiscal Year ending June 30 Principal Interest
2005 $ 1,281,381 $ 961,592
2006 1,318,558 925,159
2007 1,355,822 887,328
2008 1,395,210 848,098
2009 1,435,774 807,379
Thereafter 25.195.379 6.340.556
Total Payments $ 31.982.124 $ 10.770.112
3. Employee Retirement Plan
The Public Employees Retirement System (PERS) is a statewide defined benefit retirement
plan for units of state government, school districts, community colleges, and political
subdivisions of the State. PERS is administered by the Public Employees Retirement Board
(Board) under the guidelines of Chapter 238 of the Oregon Revised Statutes, and it provides
retirement and disability benefits, cost-of-living adjustments, and death benefits to plan
members and beneficiaries.
PERS is a single pension plan that features both a cost-sharing multiple-employer pension
plan and an agent multiple-employer pension plan. For units of state government, community
colleges, and school districts, participation in the PERS cost-sharing multiple-employer plan
is mandatory.
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STATE OF OREGON
Safe Drinking Water Revolving Loan Fund
Notes to Financial Statements
3. Employee Retirement Plan (continued)
The PERS defined benefit retirement plan is reported in a pension trust fund of the State
primary government. PERS issues a separate, publicly available financial report that includes
audited financial statements and required supplementary information. That report may be
obtained by writing to the Fiscal Services Division, Public Employees Retirement System,
11410 SW 68th Parkway, Tigard, Oregon 97223.
The PERS funding policy provides for plan contributions to accumulate sufficient assets to
pay retirement benefits when due. Plan member contributions are established by State statute.
The Board determines state employer contributions, based on an actuarially determined rate.
As of June 30, 2002, employees of state agencies are required to contribute 6 percent of their
salary to the plan and their State employers are required to contribute 4.71 percent. Current
law permits employers to pay employee contributions to the retirement fund.
The employer contributions paid to PERS by the SDWRLF were equal to the required
contributions for each year. No pension liability existed at June 30, 2004, determined in
accordance with Statement No. 27 of the Governmental Accounting Standards Board.
4. Unemployment Benefits
State departments are subject to the Department of Employment Act. State employees who
qualify are entitled to benefit payments during periods of unemployment. Each State
Department is required to reimburse the Department of Employment for benefit payments
made to their former employees. There were no expenses relating to these benefits for the
year ended June 30, 2004.
5. Commitments
Projects awarded but not disbursed at June 30, 2004:
Number of Projects
29
6. Federal Grants Available
USEPA grants available to fund Safe Drinking Water projects at June 30, 2004, total
$45,348,264. As of June 30, 2004, OECDD SDWRLF has expended all the state matching
moneys required to match the 1997 thru 2000 USEPA grants. State matching requirements
for the USEPA grant years 2001 thru 2003 of $7,954,300 is funded, of which $6,629,727
remains available for disbursement as of June 30, 2004.
Amount of Funds
$ 38,272,943
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STATE OF OREGON
Safe Drinking Water Revolving Loan Fund
Notes to Financial Statements
6. Federal Grants Available (continued)
USEPA Grant Awards available at June 30, 2004:
2000 Grant Available $ 1,333,512
2001 Grant Available 9,247,925
2002 Grant Available 11,588,025
2003 Grant Available 11,179,251
2004 Grant Available $11.999.551
Total USEPA Grants Available $45.348.264
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
OFFICE OF
INSPECTOR GENERAL
Independent Auditor's Report
on the Internal Control Structure
Based on an Audit of the Financial Statements
Performed in Accordance with Government Auditing Standards
We have audited the financial statements of the Oregon Safe Drinking Water Revolving Loan
Fund Program (the Program) as of and for the year ended June 30, 2004, and have issued our
report thereon dated February 9, 2005.
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America and standards applicable to financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.
Management for the Oregon Safe Drinking Water Revolving Loan Fund is responsible for
establishing and maintaining an internal control structure. In fulfilling its responsibilities,
estimates and judgments by management are required to assess the expected benefits and related
costs of internal control policies and procedures. The objectives of an internal control structure
are to provide management with reasonable, but not absolute, assurance that assets are
safeguarded against loss from unauthorized use or disposition and that transactions are executed
in accordance with management's authorization and recorded properly to permit the preparation
of financial statements in accordance with Generally Accepted Accounting Principles. Because
of inherent limitations in any internal control structure, errors or irregularities may nevertheless
occur and not be detected. Also, projection of any evaluation of the structure to future periods is
subject to the risk that procedures may become inadequate because of changes in conditions or
that the effectiveness of the design and operation of policies and procedures may deteriorate.
In planning and performing our audit of the financial statements of the Oregon Safe Drinking
Water Revolving Loan Fund for the year ended June 30, 2004, we obtained an understanding of
the internal control structure. With respect to the internal control structure, we obtained an
understanding of the design of relevant policies and procedures and whether they have been
placed in operation, and we assessed control risk in order to determine our auditing procedures
for the purpose of expressing our opinion on the financial statements and not to provide an
opinion on the internal control structure. Accordingly, we do not express such an opinion.
Our consideration of the internal control over financial reporting would not necessarily disclose
all matters in the internal control over financial reporting that might be material weaknesses under
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standards established by the American Institute of Certified Public Accountants. A material
weakness is a condition in which the design or operation of one or more of the internal control
components does not reduce to a relatively low level the risk that misstatements in amounts that
would be material in relation to the financial statements being audited may occur and not be
detected within a timely period by employees in the normal course of performing their assigned
functions. We noted matters involving the internal control structure and its operations that we
consider to be a material weakness as defined above. The material weakness is described in the
accompanying schedule of Internal Control Finding and Recommendation.
This report is intended for the information of management of the Oregon Safe Drinking Water
Revolving Loan Fund and the United States Environmental Protection Agency. However, this
report is a matter of public record and distribution is not limited.
Office of Inspector General
Environmental Protection Agency
February 9, 2005
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Internal Control Finding and Recommendation
Lack of Documentation of Set-Aside Funds
The Oregon Safe Drinking Water Revolving Loan Fund Program's accounting system was unable
to document and support the assets, liabilities, net assets, and revenues and expenditures of the
Set-Aside fund in accordance with Generally Accepted Accounting Principles as required by
Title 40 CFR 35.3550(i). The State of Oregon accounting system does not track revenues and
expenditures on a fiscal year basis for grant type programs. The Program did provide set-aside
information during the audit but was unable to reconcile it to the general ledger. Further, the
information provided during the audit does not agree with the information provided in the
financial statements.
Recommendation: We recommend that EPA require the Oregon Department of Human Services
to develop a trial balance for the set-asides that is reconcilable to the general ledger. This may
require working with the State's Controller to develop a general ledger report for set-asides from
the State's accounting system.
State Response: Oregon agreed with our recommendation, and stated:
Your recommendation . . . that the Department of Human Services develop a trial balance for
the set-asides that is reconcilable to the general ledger has been reviewed and accepted by
our financial services manager .... Enclosed are new financial statements that satisfy the
recommended action presented in your audit report.
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
OFFICE OF
INSPECTOR GENERAL
Independent Auditor's Report
on Compliance with the Requirements Applicable to the
Environmental Protection Agency's State Revolving Fund Program
in Accordance with Government Auditing Standards
We have audited the financial statements of the Oregon Safe Drinking Water Revolving Loan
Fund Program (the Program) as of and for the year ended June 30, 2004, and have issued our
report thereon dated February 9, 2005.
We have also audited the Program's compliance with requirements governing the following:
• Allowability for Specific Activities;
• Allowable Costs/Cost Principles;
• Cash Management;
• State Matching;
• Period of Availability of Funds and Binding Commitments;
• Program Income;
• Reporting;
• Sub-recipient Monitoring; and
• Special tests and provisions.
The above compliance requirements are applicable to the Oregon Safe Drinking Water Revolving
Loan Fund Program for the year ended June 30, 2004. The management of the Program is
responsible for compliance with those requirements. Our responsibility is to express an opinion
on those requirements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether material
noncompliance with the requirements of the State Revolving Fund program occurred. An audit
includes examining, on a test basis, evidence about the Program's compliance with those
requirements. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, except for the matters discussed in the findings and recommendation section that
follows, the Program complied, in all material respects, with the specific program requirements
listed above for the year ended June 30, 2004.
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This report is intended for the information of management of the Oregon Safe Drinking Water
Revolving Loan Fund Program and the United States Environmental Protection Agency.
However, this report is a matter of public record and distribution is not limited.
Office of Inspector General
Environmental Protection Agency
February 9, 2005
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Compliance Findings and Recommendation
Lack of Proper Accounting for Set-Asides
The Oregon Safe Drinking Water Revolving Loan Fund Program has not complied with
accounting requirements for set-aside activities. Title 40 CFR 35.3550(i) requires States to use
accounting, audit, and fiscal procedures conforming to Generally Accepted Accounting Principles
as promulgated by the Governmental Accounting Standards Board. The Program has been unable
to provide a trial balance that lists assets, liabilities, equity, and revenues and expenses on a fiscal
year basis because the State accounting system does not track revenues and expenditures on a
fiscal year basis for grant programs. Further, set-aside information provided in the financial
statements does not agree with information provided during the audit.
Recommendation: We recommend that EPA require the Oregon Department of Human Services
to develop a trial balance for the set-asides that is reconcilable to the general ledger. This may
require working with the State's Controller to develop a general ledger report for set-asides from
the State's accounting system.
State Response: Oregon agreed with our recommendation, and has developed a system to
properly account for set-aside costs, as discussed under the Internal Control Finding and
Recommendation section.
Technical and Managerial Capacity Determinations
The Program performs technical and managerial capacity determinations prior to execution of
loan agreements in accordance with 40 CFR 35.3520 (d)(2), which states that assistance from the
Fund may not be provided to systems that lack the technical, financial, and managerial capability
to ensure compliance with requirements of the Safe Drinking Water Act, unless owners of the
systems agree to undertake feasible and appropriate changes to ensure compliance over the long
term. However, the determinations frequently identified deficiencies that needed to become loan
conditions but in many cases were not. For example, one Department of Human Services
managerial review determined that the loan recipient needed to develop a written emergency
response plan, and identify the plan in the loan agreement. However, the plan was not identified
because the program had insufficient procedures to ensure all requirements identified by the
review were included in the final loan agreement.
State Response: Oregon agreed with our finding, and provided a list of corrective actions to
make sure these requirements are met. The list included: (1) provide more training for project
staff; (2) increase review by the Infrastructure Manager; (3) develop new eligibility checklists to
identify the specific actions needed resulting from the technical and managerial capacity review;
and (4) investigate creating a special condition in the contract that identifies capacity review
letters and makes the letter an exhibit of the contract. These actions should be sufficient to
correct the problem.
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Supplemental Information
Cost Category
State of Oregon
Drinking Water State Revolving Fund
Schedule of Set-Aside Expenses (Unaudited)
Year Ended June 30, 2004
Technical Program Local
Administration Assistance Management Assistance
Total
Payroll
Contracts
Other Operating Costs
$
131,963
198,526
28,640
$
0
103,864
0
$
103,246
182,929
178,859
$
383,013 $
251,758
34,089
618,222
737,077
241,588
$ 359.129 $ 103.864 $ 465.034 $ 668.860$ 1.596.887
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Distribution
EPA Region 10
Regional Administrator
Director, Water Division
State Revolving Fund Coordinator
Audit Followup Coordinator
EPA Headquarters
Director, Grants Administration
Agency Followup Coordinator
State Revolving Fund Audit Manager
State Revolving Fund Branch, Office of Wastewater Management
State of Oregon
Office of Public Health Systems, Department of Human Services
Office of Economic and Community Development Department
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