Region 8 Nonpoint Source Grant Oversight Needs Improvement Office of Inspector General Audit Report WATER Region 8 Nonpoint Source Grant Oversight Needs Improvement E1HWF7-08-0009-7100304 September 30,1997 EXECUTIVE SUMMARY PURPOSE Environmental Protection Agency (EPA) Region 8 nonpoint source (NPS) program staff requested that the Office of Inspector General (OIG) audit the Colorado, Utah, and Wyoming NPS grant expenditures. Because EPA planned to reduce its oversight of state NPS programs, regional program staff requested that OIG determine whether states ensured NPS costs were eligible for reimbursement.. OBJECTIVES Our audit objectives were to answer the following questions: Was Region 8's oversight sufficient to ensure state programs were accomplishing NPS pollution abatement and prevention objectives as stated in the Clean Water Act (CWA), EPA guidance, and regional guidance and policies? Did states ensure projects were in accordance with NPS objectives and consistent with state/EPA agreements and had individual projects accomplished their specific objectives? Were costs claimed allowable, reasonable, and allocable to the grant and in compliance with the grant terms and conditions and applicable federal statutes and regulations? Did state project managers obtain sufficient financial and programmatic information to ensure grant expenditures were appropriate? ------- RESULTS IN BRIEF Region 8 needed to require states to update their NPS management plans. Also, Region 8 needed to enforce program requirements. The Region needed to provide more program and technical assistance by developing policy papers that defined administrative costs and demonstration projects. Colorado, Utah, and Wyoming varied significantly in the level of resources applied to and commitment placed on their NPS programs. Wyoming did not commit sufficient resources to run an effective program, and the three states we reviewed had not developed adequate capacity to implement an NPS program without section 319 funding. We did not identify any questioned costs in our sample of NPS expenditures in Colorado and Wyoming but identified $265,182 of ineligible costs in Utah's matching fund pool. Region 8 Should Improve Oversight And Technical Assistance For State NPS Programs Region 8 should improve its oversight and enforcement of NPS program requirements, while moving toward providing more programmatic and technical assistance. The Region did not require and the states did not provide updated management plans due to anticipated CWA changes, states' low priority on updating management plans, and the lengthy assessment process for determining priorities. Region 8 sent unclear messages to states by not enforcing program requirements. The Region provided regional guidance and policy papers for the NPS program, but needed to define additional program terms so that states consistently implemented important portions of their NPS program. As a result, Region 8 and the states had limited assurance that states addressed the most significant nonpoint sources of pollution. State NPS Program Management Was Mixed States' NPS program management and resource commitment varied significantly. The state projects we reviewed were generally in accordance with NPS objectives and accomplished their specific project objectives. However, the three states did not commit sufficient state resources to fully implement their programs without continued federal funding. EPA's practice of allowing states to carry forward NPS funds from prior years' grants discouraged states from developing their own capacity and identifying other sources of funding to sustain their NPS programs. In addition, Wyoming's program suffered from its differences with Region 8 over oversight and reporting requirements. Utah's NPS program could suffer in future years if Utah's priorities shift and Utah does not reallocate its resources based on those priorities. Without continued federal funding the three states could not continue to implement their NPS program and ensure EPA and Congress that their programs addressed the most significant state NPS pollution problems. Utah and Wyoming Needed To Improve Some Financial Management Practices Utah and Wyoming needed to improve some NPS program financial management practices. We did not question any costs in our sample of NPS expenditures in Colorado and Wyoming. We identified $265,182 of ineligible costs in Utah's NPS project matching fund pools and identified areas needing improvement in Utah's and Wyoming's financial management practices. Utah's conservation association inadvertently included agricultural loan lines of credit in its NPS project matching fund pools. In addition, the association did not have supporting documentation for some costs and included other ineligible items in its project matching fund pools. Wyoming's burdensome contract amendment process resulted in one subgrantee performing work beyond the contract project period. Utah travel procedures did not require travelers to provide the purpose of their trip on in-state travel documents, and NPS project files did not include summary sheets for easy tracking of expenditures and related matching funds. Utah began reviewing its matching fund pools to remove ineligible costs and agreed to make necessary procedural changes in its travel procedures and project file management. RECOMMENDATIONS The Regional Administrator should establish milestones for each state to update its management plan and work with Wyoming to ensure that its management plan identifies NPS pollution priorities. The Region, in coordination with the Office of Water, needs to finalize its policy paper on administrative costs and develop a policy paper that defines ------- demonstration project. The Region 8 NPS staff needs to help states develop a plan to build states' capacity to operate an NPS program without reliance on section 319 funding. The Regional Administrator should require Wyoming to evaluate how it will meet NPS program commitments and work with Wyoming to realistically achieve program goals. The Regional Administrator needs to verify that Utah's matching funds are eligible prior to making final payment on any Utah NPS grant. In addition, the Regional Administrator should ensure that Wyoming and Utah make certain improvements to some of their financial management practices. AUDITEE COMMENTS AND OIG EVALUATION Region 8 and the three states generally agreed with the findings and recommendations. The Region and the states provided comments to clarify portions of the report and we have incorporated those comments and modified the report as appropriate. ------- |