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U.S. Environmental Protection Agency
Office of Inspector General
At a Glance
2005-1-00144
August 8, 2005
Catalyst for Improving the Environment
Why We Did This Review
We performed this audit to
determine:
•	If Utah Water Quality State
Revolving Fund's financial
statements were fairly presented
in all material respects;
•	To what extent that Utah Water
Quality State Revolving Fund's
internal controls over financial
reporting could be relied upon;
and,
•	Whether the Utah Water Quality
State Revolving Fund complied
with applicable laws and
regulations.
Background
The requirement for audited
financial statements was enacted to
help ensure that State Revolving
Fund programs had management
practices, systems and controls in
place to provide reliable
information for managing the
federally funded program.
For further information,
contact our Office of
Congressional and Public Liaison
at (202) 566-2391.
To view the full report, click on
the following link:
www.epa.qov/oiq/reports/2005/
20050808-2005-1-00144.pdf
Utah Department of Environmental Quality Water Quality
State Revolving Fund Fiscal Year 2004 Financial Statements
What We Found
We rendered an unqualified opinion on the financial statements of Utah's Water Quality
State Revolving Fund (SRF) for the fiscal year ended June 30, 2004.
We qualified our opinion on compliance with applicable laws and regulations because:
•	The SRF entered into loans with 30-year repayment terms. The Clean Water Act
requires loans to be repaid within 20 years.
•	Utah violated Section 603(d) of the Clean Water Act by depositing hardship
assessments of $3,334,560 into the SRF and transferring hardship assessments of
$3,128,088 to the Hardship Fund.
•	The Department of Environmental Quality (DEQ) disbursed $479,961from the SRF
that was considered ineligible.
•	The SRF needs to fully meet the Single Audit responsibilities for pass-through entities
and ensure that loan recipients met the Single Audit requirements and findings are
adequately addressed.
We noted weaknesses in internal controls. DEQ internal controls failed to prevent the
SRF disbursement, recording and reporting of $479,961 in ineligible assistance.
What We Recommend
We recommend that EPA:
•	Require the DEQ to take the necessary steps to ensure proper review and approval of
transactions, including the proper use of accounting codes, to further ensure SRF
funds are used only when intended and for authorized purposes.
•	Require Utah to modify the three loans with extended financing terms to comply with
the Clean Water Act.
•	Prohibit Utah from making loans with terms extending beyond 20 years.
•	Cease allowing States to violate the Clean Water Act based on an Office of Water
draft policy.
•	Require Utah to transfer the remaining $206,472 in hardship assessments in the SRF
as well as any subsequent receipts, to the Hardship fund.
•	Require Utah to make appropriate adjustments to accounts and procedures to deposit
and account for the hardship assessment fees outside the SRF.
•	Require Utah to implement a Single Audit Review and corrective action policy
consistent with Federal Regulations.
•	Require the DEQ to take steps to ensure that established review and approval
procedures are understood and followed so that assistance is provided, recorded and
reported by the appropriate program. Add procedures to ensure that all assistance
recorded in the SRF are supported by documentation.

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