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OFFICE OF INSPECTOR GENERAL
Catalyst for Improving the Environment
Public Liaison Report
Review of State of Alaska's
Actions for the River Terrace
Recreational Vehicle Park,
Soldotna, Alaska
Report 2005-P-00029
September 28, 2005

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Report Contributors:	Dan Cox
Shek Mark
Abbreviations
A DEC
EPA
OIG
RTRVP
Alaska Department of Environmental Conservation
Environmental Protection Agency
Office of Inspector General
River Terrace Recreational Vehicle Park
Cover Photo: The site of the former dry cleaners at the River Terrace Recreational Vehicle
Park, Soldotna, Alaska. The building currently houses a fish processing facility.
(Photo by EPA Office of Inspector General)

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U.S. Environmental Protection Agency
Office of Inspector General
At a Glance
2005-P-00029
September 28, 2005
Why We Did This Review
A complainant expressed
concern regarding the use of
Federal grant money by the
State of Alaska for a cleanup
effort at the River Terrace
Recreational Vehicle Park
(RTRVP), Soldotna, Alaska.
This review addresses issues
based on the complainant's
concerns.
Background
U.S. Environmental Protection
Agency (EPA) Region 10
awarded a $3 million earmark
grant to the State of Alaska for
contamination cleanup that had
begun at the RTRVP site. A
dry cleaning facility had been
in operation at the site, and
contamination was detected in
the soil and groundwater. The
site is currently used as a fish
processing facility.
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/
20050928-2005-P-00029.pdf
Catalyst for Improving the Environment
Review of State of Alaska's Actions for the River
Terrace Recreational Vehicle Park, Soldotna, Alaska
What We Found
We found the following regarding the questions we sought to answer:
Are past costs used for the matching grant share valid?
Alaska's use of its past costs from a separate project to match
Federal funds for the RTRVP grant is unallowable. We concluded
that the matching costs claimed, for a nearby Alaska Department
of Transportation project, should not have been considered a
match for the RTRVP grant because the money was spent on a
different project. EPA Region 10 returned this submission to
Alaska due to a technical issue, and Alaska has not yet
re-submitted the match request.
Is the Alaska Department of Environmental Conservation's
practice of selecting contractors for work to be performed on the
project in accordance with allowable contracting procedures?
Alaska followed acceptable contracting practices that sufficiently
allowed for competition and were not sole source.
Are the legal costs incurred and associated with this grant
allowable?
Charges by Alaska's Department of Law for services related to
certain litigation matters are allowable because they were
incidental to the administration of the grant and not incurred in
litigation with the Federal Government.
Can the grant expiration date be extended beyond its current
expiration date because of additional work?
Extension of the grant funding beyond the current expiration date
of June 30, 2006, is allowable because the grant is not required to
be considered expired until the funds are expended.
What We Recommend
We recommend that the Regional Administrator for Region 10 not
allow the State of Alaska expenditures for the Alaska Department of
Transportation site as match funds for the RTRVP grant. Region 10
did not agree that the match should be disallowed, but we maintain our
position.

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^£0SX
i ^JL^-7 -	UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
| X\\/y I	WASHINGTON, D.C. 20460
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OFFICE OF
INSPECTOR GENERAL
September 28, 2005
MEMORANDUM
SUBJECT:	Review of State of Alaska's Actions for the River Terrace
Recreational Vehicle Park, Soldotna, Alaska
Report No. 2005-P-00029
FROM:	Paul D. McKechnie /s/
Director for Public Liaison
Office of Congressional and Public Liaison
TO:	Michael Bogert
Regional Administrator
Region 10
Attached is our final report on our review of State of Alaska's Actions for the River Terrace
Recreational Vehicle Park, Soldotna, Alaska, conducted by the Office of Inspector General
(OIG). We initiated this assignment pursuant to a citizen's complaint.
This report contains findings and a recommendation the OIG has identified as well as
Environmental Protection Agency (EPA) Region 10's comments relevant to our
recommendations. This report represents the opinion of the OIG and the findings contained in
this report do not necessarily represent the final EPA position. Final determinations on matters
in this report will be made by EPA managers in accordance with established audit resolution
procedures.
The findings in this report are only applicable for OIG Ombudsman purposes. Additionally,
these findings are not binding in any enforcement proceeding brought by EPA or the Department
of Justice under the Comprehensive Environmental Response, Compensation, and Liability Act
to recover costs incurred not inconsistent with the National Contingency Plan. We have no
objection to the further release of this report to the public.

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Action Required
In accordance with EPA Manual 2750, you are required to provide a written response to this
report within 90 days of the date of this report. You should include a corrective actions plan for
agreed upon actions, including milestone dates. We have no objection to the further release of
this report to the public. For your convenience, this report will be available at
http://www.epa.gov/oig.
If you or your staff have any questions regarding this report, please contact me at
(617) 918-1471, or Dan Cox, Assignment Manager, at (916) 498-6592.

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Table of Contents
At a Glance
Purpose		1
Background 		1
Scope and Methodology		2
Results of Review		2
Are past costs used for the matching grant share valid?		2
Is ADEC's practice of selecting contractors for work to be performed
on the project in accordance with allowable contracting procedures?		3
Are the legal costs incurred and associated with this grant allowable?		4
Can the grant expiration date be extended beyond its current
expiration date because of additional work?		4
Recommendation		4
Agency Comments and OIG Evaluation		5
Appendices
A Agency Response 		6
B Distribution 		10

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Purpose
The U.S. Environmental Protection Agency (EPA) Office of Inspector General (OIG) conducted
a review of issues that a complainant brought to the OIG's attention related to the status of
Alaska's actions for the River Terrace Recreational Vehicle Park (RTRVP) in Soldotna, Alaska.
Based on the issues raised, we sought to determine:
•	Are past costs used for the matching grant share valid?
•	Is the Alaska Department of Environmental Conservation's (ADEC's) practice of selecting
contractors for work to be performed on the project in accordance with allowable contracting
procedures?
•	Are the legal costs incurred and associated with this grant allowable?
•	Can the grant expiration date be extended beyond its current expiration date because of
additional work?
Background
The RTRVP site is located in Soldotna, Alaska, adjacent to the Kenai River, a renowned sport
fishing location on the Kenai Peninsula. The entire site encompasses 9.5 acres. From the
mid-1960s to the late 1980s, a dry cleaning facility operated at the site. The dry cleaning facility
is now used as a fish processing facility. After the dry cleaner ceased operations, the dry
cleaning solvent tetrachloroethylene (PCE) and its degradation products were detected in the soil
and groundwater in amounts that exceeded Alaska's soil and groundwater cleanup levels. The
contaminated area encompasses approximately an acre.
Although the site was not listed on the
National Priorities List, it was designated an
emergency removal site under Superfund.
EPA and ADEC signed a memorandum of
understanding August 7, 1997. Under the
agreement, EPA was responsible for
cleaning up the contaminated soil, and has
already done so (primarily through
removal). ADEC was responsible for
cleaning up the contaminated groundwater.
The RTRVP property owner had elected to
regain primary responsibility to perform the
characterization work and monitor the
groundwater while meeting ADEC's
conditions.
In spring 1999, ADEC determined that work
performed by the property owner was not
progressing well. ADEC obtained access to
the site through a court order and performed
a Remedial Investigation/Feasibility Study.
Site
Location
Soldotna!
Source: USGS 1:25000
Kenai (EKJ) NW Quadrangle
~ V
1000 2000
Approsdmcite Scale (feet)
Site Location - River Terrace RV Park - Figure 1
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The study found additional contamination. On August 31, 2000, EPA issued a Record of
Decision to address the contamination. In Fall 2000, ADEC approved the use of a biological
treatment method (Hydrogen Releasing Compound) to treat the contaminated groundwater.
The State expended substantial resources on litigation and legal advice due to the property
owner's refusal to grant site access and the owner's challenges to most of ADEC's actions.
As a result, the State sought Federal financial assistance. On October 18, 2000, Congress
appropriated $3 million toward the cleanup effort at the Kenai River, and on May 6, 2002,
EPA Region 10 awarded the funding through grant XP-97025501. The grant was for "site
investigations of soil and water contamination, assessment and cleanup on a contaminated site
and/or sites near the Kenai River." The State interpreted that as applying to the RTRVP site, as
stated in its September 14, 2001 grant application. To date, the funds have been expended solely
for the RTRVP site. The appropriation and resulting grant said the State can meet the match
requirement of 45 percent with non-Federally funded pre-award expenditures for the project.
Scope and Methodology
We performed our review in accordance with Government Auditing Standards, issued by the
Comptroller General of the United States. We conducted the review from September 24, 2004,
through June 3, 2005. To accomplish our objectives, we conducted interviews with the
complainant, State of Alaska, and EPA representatives. We researched laws, rules, and
regulations applicable to the issues raised by the complainant; and reviewed relevant documents
obtained from the complainant, State of Alaska, and EPA representatives. We did not review the
system of internal controls due to the limited scope of our evaluation and the fact that such a
review was not relevant to our objectives.
The findings in this report are not binding in any enforcement proceedings brought by EPA or
the Department of Justice under the Comprehensive Environmental Response, Compensation,
and Liability Act to recover costs incurred not inconsistent with the National Contingency Plan.
Results of Review
We found the following regarding each of the questions that we sought to answer.
Are past costs used for the matching grant share valid?
The complainant alleged the State of Alaska did not use appropriate match funds for the grant.
We concluded that the State did attempt to use non-allowable match funds, as the State of Alaska
submitted past costs from an Alaska Department of Transportation (ADOT) site for matching.
When Congress appropriated the $3 million for the groundwater contamination project near the
Kenai River, Congress specified in its October 18, 2000, Conference Report that "match
requirements can be met with non-Federally funded pre-award expenditures by the State of
Alaska for this project." Statutory grant requirements are generally specified in a grant
instrument. However, the May 8, 2002, grant agreement is silent on this. There are no other
matching requirements specified for this grant other than what is in the Conference Report.
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Additionally, in its September 14, 2001, Application for Federal Assistance, the State also
specified the funding request as for a single project. To date, the State has claimed cleanup
expenditures for only the RTRVP site. Therefore, we concluded that the funding should be
applicable only to the RTRVP site.
On September 14, 2001, the State submitted a $2,379,234 funding request for pre-award
expenditures for only the RTRVP project from fiscal years 1994 through 2001, which EPA
accepted.
On January 28, 2004, the State submitted a request for $1,149,437 in expenditures used for the
Alaska Department of Transportation project in Soldotna to be considered match funds for the
RTRVP project. Geographically, the Department of Transportation site is also near the Kenai
River, prompting the State to stipulate that past expenditures from this site qualify for matching.
This submission was returned by EPA Region 10 on a technical issue. The State has not
resubmitted the request to use the funding as a match for the RTRVP project, pending the
determination of whether these costs are allowed for matching.
The RTRVP site had been identified as the covered project under the subject grant. Therefore,
any match funds should be those that the State expended specifically on the RTRVP site. Using
expenditures for another site - the Alaska Department of Transportation site - is unallowable. In
the State's September 14, 2001, grant application, it specified "ADEC Groundwater Remediation
Project" (singular) rather than projects (plural). Further, the contaminants requiring removal at
each of the sites differ - dry cleaning solvents tetrachloroethylene and its degradation products
from the RTRVP site, and salt (chloride) and petroleum hydrocarbon at the Department of
Transportation site. By nature of the contamination at each site, the sites are different.
Is ADEC's practice of selecting contractors for work to be performed on the project
in accordance with allowable contracting procedures?
The complainant alleged that the State used sole-source contractors, resulting in cost
inefficiencies due to the lack of competition. We concluded that ADEC followed acceptable
contracting practices that were competitive and not sole source.
Alaska has a comprehensive procurement system. The Division of Finance's Alaska
Administrative Manual, Chapters AAM 81 and AAM 82, provide the Term Contracting process
to secure professional service contracts, and ADEC follows this process. Additionally, ADEC
has a divisional checklist that prescribes steps to be followed to obtain competitive professional
services.
Term contracts are generally set up for a fixed period of time, with option terms. Term contracts
are established without specifying any scope under any given project, but rather by identifying
tasks that may be required in the future. ADEC uses this contracting tool to establish a pool of
viable term contractors to perform any anticipated work. Term contractors for the pool are
selected through a competitive procurement process required by State statutes and regulations.
Typically, ADEC publishes a Request for Proposal to solicit competitive proposals for any
planned project requiring outside expertise, such as a contaminated site assessment. For each
Request for Proposal, ADEC convenes a five-person Evaluation Committee that independently
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reviews and scores the technical portions of each proposal. The project manager (who chairs the
committee) then collects all member scorings and submits the results to the Division of
Information and Administrative Services for review and approval.
ADEC's contracting practice is acceptable and not a sole-source practice. Because the outside
services rendered under the grant reviewed were performed by term contractors qualified under
this system, we have no basis to criticize the selection for lack of competition.
Are the legal costs incurred and associated with this grant allowable?
The complainant alleged that funds from the grant were used for defending certain State
employees, contrary to the purpose of the grant. We concluded that the legal costs incurred and
associated with the grant are allowable.
The State's Department of Law charges ADEC for consultative services provided. With respect
to this grant, the Department of Law's billed costs to ADEC consist of two types - those for
administrative efforts and those related to litigation against ADEC employees. The
administrative costs related to administrative efforts, such as property access and title search.
The time billed for litigation matters generally related to lawsuits with the responsible party for
the RTRVP site. We determined that both types of expenditures are allowable under the grant,
because they are considered incidental to the administration of the grant. Generally, legal costs
are allowable unless they relate to litigation with the Federal Government, and we did not note
any item that was for litigation with the Federal Government.
Can the grant expiration date be extended beyond its current expiration date
because of additional work?
The complainant expressed concern regarding whether the expiration date for the grant can be
extended. We concluded that the expiration date for the grant can be extended.
EPA representatives stated that the appropriated funds provided through this grant do not expire
until expended. EPA OIG's Office of Counsel confirmed the grant can be extended because the
appropriation does not have an expiration date. Currently, the grant is set to expire June 30,
2006, but that date was set by Region 10 rather than the appropriation, and was based on the
State's application. An extension may be necessary because of delays due to litigation and other
matters. The State of Alaska expressed a desire to apply for an extension if the circumstances
make it desirable and feasible, and EPA Region 10 representatives said extension of the grant
will be allowed.
Recommendation
1. We recommend that the Regional Administrator for Region 10 not allow the State of
Alaska expenditures for the Alaska Department of Transportation site as match funds for
the RTRVP grant.
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Agency Comments and OIG Evaluation
EPA Region 10 generally concurred with our findings regarding the complainant's concerns,
except for our recommendation on the State of Alaska's use of expenditures from its ADOT site
as a match for the RTRVP grant. The Region stated that our recommendation is "misleading and
inappropriately speculative, and that the OIG does not answer the validity of the match for the
grant amount we awarded." Accordingly, the Region disagrees with the OIG recommendation to
disallow the ADOT expenditures for matching.
The congressional appropriation stipulated that the $3 million funding be used for ".. .the State of
Alaska Department of Environmental Conservation groundwater remediation project [singular]
near the Kenai River...." Based on examining the grant application and other related documents,
we believe that it referred to only one project, and since the RTRVP park project has been
identified in the State's reimbursement requests, the RTRVP park project is the sole project that
needs to be addressed with respect to expenditures related to the appropriation. The ADOT
project was never identified as part of the RTRVP park project, so the ADOT project must be
recognized as a separate project.
Region 10 also stated that a project may involve several sites pertinent to the cleanup of an
underground plume of contamination. The RTRVP site and the ADOT site have two different
plumes and have different contaminates. The former is related to dry cleaning solvents, while
the latter pertains to salt (chloride) and petroleum hydrocarbon. Hence, the two sites cannot be
attributed to a single contamination, and thus should not be lumped as a single project. Also, the
Region referred to the rebuilding of a nearby bridge and indicated it may show additional
contamination. We did not address rebuilding the bridge in the report and are not taking a
position on whether those costs are allowable. However, the ADOT site was at no time
determined as directly related to the dry cleaning RTRVP site, which is a maintenance facility
site not related to the bridge rebuilding project. We believe the bridge project is coincidental and
irrelevant to the cleanup at the RTRVP site, because the two sites are not under the same
contamination plume.
The Region said that to question the potential award match was premature because the Region
had not received an application for the remaining funds. The State on January 28, 2004, had
submitted for matching expenditures $1,149,437 incurred under the ADOT project. This was
returned by EPA due to incorrect data, and does not represent just a technicality. As stated to us,
it had not been subjected to a review and approval process. The State said it was going to
resubmit the application, and we are commenting on that. We do not recommend the practice of
disallowing a claim before its receipt. We recommend that costs submitted for matching under
the XP Grant be expenditures directly related to the work performed at the RTRVP Park, as
intended under the congressional appropriation.
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Agency Response
Appendix A
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
REGION 10
1200 Sixth Avenue
Seattle, WA 98101
Reply to
Attn Of: OWW-137
MEMORANDUM
Subject: Region 10's Comments on the Public Liaison Report titled, 'Review of State of
Alaska's Actions for the River Terrace Recreational Vehicle Park, Soldotna,
Alaska,' Office of the Inspector General (OIG Assignment Number 2004-01516)
From:	Michael Bogert
Regional Administrator
EPA Region 10
To:	Paul D. McKechnie
Director for Public Liaison
Office of Congressional and Public Liaison
Thank you for the opportunity to review and comment on the draft Public Liaison Report
titled, "Review of State of Alaska's Actions for the River Terrace Recreational Vehicle Park,
Soldotna, Alaska." The report was prepared in response to a complaint received regarding the
use of Federal grant money by the State of Alaska for a cleanup effort at the River Terrace
Recreational Vehicle Park (RTRVP) located in Soldotna, Alaska. I concur with the Report's
summary and findings regarding the complainant's concerns, with the exception of its treatment
of the validity of the State match. I request that the analysis, summary and recommendation
regarding the validity of the grant's match be revised.
The report both summarizes the history of cleanup at RTRVP and reviews the
complainant's concerns well. The groundwater contamination at RTRVP has a long history, and
its remediation continues today. The discussion of the concerns and the findings are clear. We
are satisfied with the IG's conclusions on three of the four questions.
I am concerned that the discussion of the state's match for the grant is incomplete and
that the associated recommendation is misleading and inappropriately speculative. The Report's
response does not answer the question of the validity of the match for the grant amount we
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awarded. We believe the state provided an appropriate and allowable match for the grant. The
Report should concur with this conclusion.
The Report's response focuses on a potential match source should the State submit an
application to cover additional work costs. To question the validity of a match for a potential
future grant award is premature at this point. We have not received an application for the
remaining funds. If in the future the State submits an application for the remaining funds and
advances the value of the Alaska Department of Transportation's (ADOT) work as the match, we
will examine at that time whether the DOT work is eligible to be considered for the match.
Similarly, I disagree with the Recommendation in the Report, to disallow the ADOT
expenditures as a match before we receive another grant application. We respect the caution
inherent in your recommendation, but believe the recommendation is inappropriately speculative.
Our expanded discussion is provided in the Attachment.
I would prefer instead that the Public Liaison Report address the match issue associated
with the current grant. I would also request that the recommendation refrain from advocating
disallowing the match until EPA has an opportunity to review a new application with its match
proposal. The summary in the "What We Found" section should be revised accordingly.
I am pleased to hear that the grant got a clean bill of health for actions to date. Region 10
is committed to ensuring that the earmark funds are used for the purpose specified in the FY
2001 Appropriations Act, and that they comply with associated Guidance. Region 10 is also
committed to ensuring that the expenditures of the funds assist EPA in meeting its Strategic Goal
of restoring and maintaining oceans, watersheds, and aquatic ecosystems to protect human
health, support economic and recreational activities, and provide healthy habitat for fish, plants
and wildlife.
If you have any questions about our comments, please call me at (206) 553-1234, or Bill
Gissel, the grant's project officer, at (907) 586-7620.
Attachment
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Attachment
Region 10 Response
OIG Assignment Number 2004-01516
Recommendation
1. We recommend that the Regional Administrator for Region 10 not allow the State
of Alaska expenditures for the Alaska Department of Transportation site as match
funds for the RTRVP grant.
R10 Response: We do not concur with this recommendation. The FY 2001 Appropriations Act
provided $2,903,600 ($3,000,000 minus a small rescission) in an earmark for this project. To
date, ADEC has applied for and EPA has awarded a grant of $2,020,022 leaving $883,578
available for future application. Our approval of the grant recognized a match of $1,652,745, or
45%, consisting primarily of the state's pre-award expenditures at River Terrace as well as some
anticipated future costs. The project, clean-up of groundwater contamination near the Kenai
River, is not completed, and we do not have an application for these remaining_funds at this time.
We believe it is premature to restrict a potential match that may be presented in a future
grant application for the remaining funds. It is also premature to conclude that the Alaska
Department of Transportation's (ADOT's) work nearby will not qualify as the match.
The Conference Report that accompanied the Agency's FY 2001 Appropriations Act
included the following language:
'$3,000,000 for the State of Alaska Department of Environmental Conservation groundwater
remediation project near the Kenai River.' The match requirement can be met with non-
Federally funded pre-award expenditures by the State of Alaska_for this project (emphasis
added). This language_does not specify the River Terrace RV Park. It specifies a groundwater
remediation project.
We believe that the draft Recommendation is based on definitions of "site" and "project"
that differ from EPA's. The Appropriations language does not specify a site; it is not site-
specific. It specifies a project and a purpose, namely a groundwater remediation project near the
Kenai River. A groundwater remediation project often deals with the clean-up of an underground
plume of contamination. It may be difficult to predict the extent of the plume, and a clean-up
project may involve several sites as the contamination is uncovered. Thus, we believe multiple
sites are allowable and eligible for expenditures of these funds.
The project's current site (River Terrace) is located near a bridge across the Kenai River,
which is to be rebuilt by the Alaska Department of Transportation. It is possible that further
contamination may be discovered when the bridge abutments are removed. If it appears that the
River Terrace plume extends to the bridge abutments, then the ADOT costs could be eligible as a
match. Even if the groundwater contamination indicates a different source, the related
investigation, assessment and remediation expenditures could be potentially eligible as the
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match. These site costs could be eligible because they would be part of the same project, for
"groundwater remediation.. .near the Kenai River."
ADEC's grant application specified 'River Terrace and Sites Around the Kenai River' as
the Areas affected by the project. For that reason, we awarded the grant with the Project Title
and description as "site investigations of soil and water contamination, assessment and cleanup
on a contaminated site and/or sites near the Kenai River."
We recognize that any future application for these funds must meet the requirements of
the statutory language described in the FY 2001 Consolidated Appropriations Act and the
February 28, 2001 "Guidance for Award of Grants and Cooperative Agreements for the Special
Projects and Programs Authorized by the Agency's FY 2001 Appropriations Act." It must also
meet the grant requirements outlined in 40 CFR Part 31 and A-87.
In conclusion, we would be acting prematurely if we were to restrict potential
expenditures by the State of Alaska towards meeting the matching funds requirement of the
Federal funds today. The expenditures for this activity may be eligible for consideration as
match for the remaining funds in this earmark. We are likely to address this question soon, as
ADEC has indicated that they will be applying for the remaining funds in the near future.
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Appendix B
Distribution
Regional Administrator, Region 10
Region 10 Audit Followup Coordinator
Office of the Administrator
Assistant Administrator for Solid Waste and Emergency Response
Assistant Administrator for Enforcement and Compliance Assurance
Agency Followup Official (the CFO)
Agency Followup Coordinator
Audit Liaison, Office of Solid Waste and Emergency Response
Audit Liaison, Office of Enforcement and Compliance Assurance
Associate Administrator for Congressional and Intergovernmental Relations
Associate Administrator for Public Affairs
General Counsel
Inspector General
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