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U.S. Environmental Protection Agency	19-P-0041
f AA \ Office of Inspector General	December 4,2018
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" At a Glance
Why We Did This Project
The Office of Inspector General
(OIG) of the U.S. Environmental
Protection Agency (EPA) initiated
this audit of the city of Houston's
use of funds and contracting
practices under the Clean Water
State Revolving Fund (CWSRF)
to determine whether:
•	The CWSRF funds are being
properly used to fund eligible
projects.
•	Contracts awarded for
CWSRF projects are in
compliance with applicable
eligibility requirements.
•	The city adequately monitors
and appropriately reports the
results of its prime
contractor's use of Minority
and Women Business
Enterprises.
Eligible CWSRF uses include
constructing publicly owned
wastewater treatment works,
implementing a nonpoint source
pollution control management
program, and developing and
implementing an estuary
conservation/management plan.
This report addresses the
following:
•	Ensuring clean and safe
water.
•	Partnering with states and
other stakeholders.
Send all inquiries to our public
affairs office at (202) 566-2391
or visit www.epa.gov/oiq.
Listing of OIG reports.
City of Houston Complied with Clean Water
State Revolving Fund Requirements
What We Found
We found that the procurement practices
followed by the city of Houston in the award of
contracts for its sanitary sewer and collection
system rehabilitation projects complied with
CWSRF requirements. Also, the city adequately
monitored its prime contractor's use of Minority
and Women Business Enterprises. The city has
no requirement for reporting Minority and Women
Business Enterprises utilization to the EPA;
rather, the Texas Water Development Board is required to submit annual
utilization reports of its loan recipients to the EPA based on 40 CFR Part 33.
Regarding project eligibility, we found that certain work orders for point repairs
issued under contracts for the collection system rehabilitation project may not
be considered eligible under the CWSRF. The point repair work resulting from
customer complaints could be considered operation and maintenance and, as
such, would not be eligible for funding under the CWSRF. The city issued
several point repair contracts to help address the high volume of customer
complaints throughout the city. We were told by the city that similar repair work
performed by city crews is usually considered operation and maintenance work
while the work performed by the contractors is considered a capital
improvement. If the contractors and city crews are doing similar work, the OIG
sees no basis for the city to treat the work differently.
Of the six contracts sampled, the OIG determined that only two of the
contracts, totaling $6,908,318, for the sanitary sewer rehabilitation project,
were eligible under the CWSRF. The four remaining contracts, totaling
$10,049,971, for the collection system rehabilitation project, include point
repair work to address customer complaints. The OIG was unable to draw a
definitive conclusion on the eligibility of the work performed under these
contracts.
Recommendation and Agency Response
We recommended that the Regional Administrator, EPA Region 6, determine
whether the point repair work performed is eligible under the CWSRF and
recoup any expenses for work determined not eligible. EPA Region 6 has
addressed the recommendation and has determined that the work is eligible.
The region's determination meets the intent of the recommendation. The OIG
considers the corrective action complete.
We questioned whether
point repairs to address
customer complaints
under four Houston
contracts were eligible
under the CWSRF, and
EPA Region 6 concluded
that they were.

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