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Catalyst for Improving the Environment
Site Visit Report
American Recovery and
Reinvestment Act Site Visit of the
Denver Street Storage Project,
City of Astoria, Oregon
Report No. 11-R-0172
March 22, 2011

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Report Contributors:	Eileen Collins
Jessica Knight
Michael Owen
Abbreviations
CWSRF Clean Water State Revolving Fund
FTE	Full-Time Equivalent
OAR	Oregon Administrative Rule
ODEQ	Oregon Department of Environmental Quality
OMB	Office of Management and Budget
Cover photo: Denver Street Storage Project under construction at the City of Astoria,
Oregon. (EPA OIG photo)

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• U.S. Environmental Protection Agency	11-R-0172
i JUL, \ Office of Inspector General	March 22 2011
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At a Glance
Catalyst for Improving the Environment
Why We Did This Review
The U.S. Environmental
Protection Agency's Office of
Inspector General conducts
site visits of American
Recovery and Reinvestment
Act of 2009 (Recovery Act)
clean water and drinking water
projects. We selected a project
for the City of Astoria,
Oregon, for review.
Background
The city is constructing an
underground storage tank, an
odor control facility, and a
sanitary sewer pipeline as part
of its Denver Street Storage
Project. The project is funded
by two Clean Water State
Revolving Fund loans totaling
$7,475,436 from the Oregon
Department of Environmental
Quality (ODEQ). One of the
loans provided $4,000,000 in
Recovery Act funds, of which
50 percent of the loan
principal will be forgiven if
the city complies with the loan
agreement.
For further information,
contact our Office of
Congressional, Public Affairs
and Management at
(202) 566-2391.
The full report is at:
www.epa.aov/oia/reports/2011/
20110322-11 -R-0172.pdf
American Recovery and Reinvestment Act
Site Visit of the Denver Street Storage Project,
City of Astoria, Oregon
What We Found
We conducted an unannounced site visit of the Denver Street Storage Project in
the City of Astoria, Oregon, during June 2010. As part of our site visit, we toured
the project, interviewed city representatives and contractor personnel, and
reviewed documentation related to Recovery Act requirements.
We did not identify any compliance issues with Buy American, Davis-Bacon Act,
or funding requirements. However, we found that:
•	The city and ODEQ understated the number of jobs created or retained
with Recovery Act funds. Although the construction work performed for
the 6-month period ending June 30, 2010, was 100 percent funded by the
Recovery Act, the city and ODEQ reported only 62 percent of the full-
time equivalent jobs created or retained in the quarterly reports.
•	For one of four contracts awarded, a change order did not meet applicable
procurement requirements. During removal of a tank, additional
contamination was discovered that resulted in the original award of
$9,960 being increased to $67,306, a difference of $57,346. The increase
required the city to award a new competitive contract, but it did not do so.
What We Recommend
We recommend that Region 10's Regional Administrator require ODEQ to require
the city to correct the reported number of jobs created or retained, obtain the
corrections for the reported number of jobs created or retained from the city and
maintain the corrected documentation in administrative records, and submit
corrections to the federal government. We also recommend that Region 10's
Regional Administrator require ODEQ to disallow $57,346 in costs incurred under
the change order unless the city is able to show that the costs meet applicable
Oregon requirements.
Region 10 and ODEQ agreed with recommendations 1, 2, and 4, but initially had
concerns with recommendation 3. The city agreed with all four recommendations.
After discussing the recommendations during the exit conference, the region
agreed with recommendation 3 and ODEQ concurred with the corrective action.

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. - •r.
|	\	UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
|	|	WASHINGTON, D.C. 20460
\. "I" . o*
THE INSPECTOR GENERAL
March 22, 2011
MEMORANDUM
SUBJECT: American Recovery and Reinvestment Act Site Visit of the
Denver Street Storage Project, City of Astoria, Oregon
Report No. ll-R-0172
FROM: Arthur A. Elkins, Jr. /f 4/ ' (/^
Inspector General
TO:	Dennis McLerran
Regional Administrator, Region 10
U.S. Environmental Protection Agency
This is our report on the subject site visit conducted by the Office of Inspector General of the
U.S. Environmental Protection Agency (EPA). The report summarizes the results of our site visit
of the Denver Street Storage Project in the City of Astoria, Oregon, funded under the American
Recovery and Reinvestment Act of 2009 (Recovery Act).
We performed this site visit as part of our responsibility under the Recovery Act. The purpose of
our site visit was to determine whether the city is in compliance with selected requirements of
the Recovery Act pertaining to the Clean Water State Revolving Fund Program. The Oregon
Department of Environmental Quality approved the city's project. The city received $7,475,436
through two Clean Water State Revolving Fund loans for the project. One of the two loans
provides $4,000,000 in Recovery Act funds.
The estimated direct labor and travel costs for this report are $158,833.
Action Required
In accordance with EPA Manual 2750, you are required to provide a written response to this
report within 90 calendar days, or on June 20, 2011. You should include a corrective action plan
for agreed-upon actions, including milestone dates. Your response will be posted on the Office of
Inspector General's public website, along with our memorandum commenting on your response.
Your response should be provided as an Adobe PDF file that complies with the accessibility
requirements of section 508 of the Rehabilitation Act of 1973, as amended. The final response

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should not contain data that you do not want to be released to the public; if your response
contains such data, you should identify the data for redaction or removal. We have no objection
to the further release of this report to the public. This report will be available at
http://www.epa.gov/oig.
If you or your staff have any questions regarding this report, please contact Melissa Heist,
Assistant Inspector General for Audit, at (202) 566-0899 or heist.melissa@epa.gov; or Robert
Adachi, Product Line Director, at (415) 947-4537 or adachi.robert@epa.gov.

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American Recovery and Reinvestment Act Site Visit of the
Denver Street Storage Project, City of Astoria, Oregon
11-R-0172
Table of C
Purpose		1
Background		1
Scope and Methodology		1
Results of Site Visit		1
Recommendations		4
Agency, Recipient, and Subrecipient Responses to Draft Report		5
OIG Comment on Responses		6
Status of Recommendations and Potential Monetary Benefits		7
Appendices
A Agency Response to Draft Report	 8
B Distribution 	 10

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Purpose
The purpose of our unannounced site visit was to determine whether the City of
Astoria, Oregon, complied with selected requirements of the American Recovery
and Reinvestment Act of 2009, P.L. 111-5 (Recovery Act), pertaining to the
Clean Water State Revolving Fund (CWSRF) program.
Background
The city is constructing an underground storage tank, an odor control facility, and
a sanitary sewer pipe as part of its Denver Street Storage Project. The project is
funded by two CWSRF program loans totaling $7,475,436 from the Oregon
Department of Environmental Quality (ODEQ). One of the two loans provided
$4,000,000 in Recovery Act funds. Fifty percent of this loan will be forgiven if
the city complies with the loan agreement.
Scope and Methodology
Due to the time-critical nature of Recovery Act requirements, we did not perform
this assignment in accordance with generally accepted government auditing
standards. Specifically, we did not perform certain steps that would allow us to
obtain information to assess the city's internal controls and previously reported
audit concerns. As a result, we do not express an opinion about the adequacy of
the city's internal controls or the city's compliance with all federal, state, or local
requirements.
We conducted an unannounced site visit at the city from June 8 to 10, 2010.
During our site visit, we limited the scope of our review to the following steps:
1.	Toured the proj ect.
2.	Interviewed city and contractor personnel.
3.	Reviewed documentation maintained by the city and its contractors to
assess compliance with:
a.	Buy American requirements under Section 1605 of the Recovery Act.
b.	Davis-Bacon Act wage requirements under Section 1606 of the
Recovery Act.
c.	Funding requirements under Section 1604 of the Recovery Act.
d.	Reporting requirements under Section 1512 of the Recovery Act.
e.	Contract procurement requirements.
Results of Site Visit
Our site visit did not identify any compliance issues with Buy American, Davis-
Bacon Act, or funding requirements. However, we found that: (1) the city's and
ODEQ's reporting for jobs created or retained was not accurate; and (2) a change
order for one of four contract awards by the city for the project did not comply
11-R-0172
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with Oregon's procurement requirements. The results of our site visit are
summarized below.
Buy American Requirements
We did not identify any compliance problems relating to the Buy American
requirements. We obtained an understanding of the procedure used for ensuring
that the material used complied with Buy American requirements. We also
obtained Buy American certifications for manufactured products we observed
during the site visit. The certification information indicated that major materials
observed on the project met the requirements.
Davis-Bacon Act Requirements
We did not identify any compliance problems relating to the Davis-Bacon Act
requirements. Under the loan agreement, contractors are required to pay
employees the higher of the Davis-Bacon Act or Oregon Bureau of Labor and
Industries prevailing wage rates. We compared the applicable wage requirement
for each employee of the construction contractor with each employee's wage as
reported on the certified payroll for the pay periods ending May 6, 2010, and
June 13, 2010. The review showed that the contractor paid employees the higher
of the Davis-Bacon Act or Oregon Bureau of Labor and Industries wage rates as
required under the loan agreement.
Funding Requirements
We did not identify any compliance problems relating to funding limitations of
the Recovery Act. We reviewed the city's loan documentation and inspected the
project to ensure that the city complied with section 1604 of the act, which states
that no Recovery Act funds can be used for any casino, other gambling
establishment, aquarium, zoo, golf course, or swimming pool. Our review and site
visit found that the city was in compliance with section 1604.
Reporting Requirements
We found that the city and ODEQ understated the number of jobs created or
retained with Recovery Act funds. Section 1512 of the Recovery Act requires
quarterly reporting of the number of jobs that were created and retained as a result
of Recovery Act funds. Although the construction work performed on the project
during the period January 1, 2010, to June 30, 2010, was 100 percent funded by
the Recovery Act, the city and ODEQ reported only 62 percent of the full-time
equivalent (FTE) jobs created or retained by the funding in the quarterly reports.
For example, the city and ODEQ reported 13.4 FTE jobs created or retained for
the period April 1, 2010, to June 30, 2010. However, our review of the city's
supporting records identified that 21.6 FTE jobs created or retained should have
been reported for the quarter ending June 30, 2010.
11-R-0172
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The number of jobs created or retained was understated because ODEQ staff
incorrectly interpreted Office of Management and Budget (OMB) guidance on
Recovery Act reporting. OMB Recovery Act guidance specifies that estimated
jobs created or retained are to be calculated based on the proportion of work hours
funded by the Recovery Act. According to city and ODEQ staff involved in
Recovery Act reporting, the number of jobs reported as created or retained was
calculated based on the percentage of the construction contract for the project
funded by the Recovery Act. Based on this methodology, the city applied a
62 percent Recovery Act funding level to calculate the number of jobs created and
retained. Our discussions with ODEQ staff identified that they believed their
reporting methodology was in compliance with the OMB Recovery Act guidance,
and they had advised the city to use the methodology. However, their reporting
methodology did not comply with OMB's guidance because 100 percent rather
than 62 percent of the construction work hours were funded by the Recovery Act
during the 6-month period ending June 30, 2010. The city and ODEQ should have
reported 100 percent of the FTE jobs created or retained with Recovery Act
funding during this period as specified by the OMB guidance.
OMB's Recovery Act guidance requires that recipients of Recovery Act funding
maintain corrections to erroneous and missing data submitted in prior quarterly
reports in their administrative records. The guidance also requires that recipients
submit the corrections to the federal government at a time to be specified in the
future.
Contract Procurement
As of the time of our site visit in early June 2010, the city had awarded four
contracts for the project. These four contracts consisted of: (1) construction,
(2) architectural and engineering, (3) testing and inspection, and (4) tank removal
and site restoration. The Oregon Administrative Rules (OARs) establish the
procurement requirements applicable to these four awards. The city complied
with the applicable procurements requirements specified by the OARs, with the
exception of a change order for the tank removal and site restoration contract.
Although the initial contract award for the tank removal and site restoration was
awarded in accordance with OAR 137-049-0160, the city's subsequent change to
the contract did not comply with this OAR. OAR 137-049-0160 establishes
criteria and requirements for competitive intermediate procurements, including
change orders. This rule allows awards estimated to not exceed $100,000 to be
made based on obtaining at least three competitive quotes and using selection
criteria that may be limited to price or some combination of price, experience,
specific expertise, availability, project understanding, contractor capacity,
responsibility, and similar factors. The initial award was based upon three
competitive quotes and lowest price.
11-R-0172
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During the removal of the tank, additional soil contamination and ground water
contamination was discovered. As a result, the city issued a change order that
increased the contract price above the maximum threshold allowed. Under OAR
137-049-0160(6), price increases for contracts awarded through the intermediate
procurement process cannot exceed 50 percent of the original contract price. The
original award was for $9,960, and the city's change order increased the costs
incurred under the contract to $67,306. Therefore, the change order increased the
price by $57,346, or by more than 575 percent. The city was required to award a
new competitive contract.
According to the city, it issued the change order because it did not have the time
to pursue the competitive award process. The city explained that the
contamination was required to be addressed quickly because of right-of-way and
potential emergency issues. The city said that the excavated area where the tank
and some contamination were removed represented a potential emergency
because it was an "attractive nuisance" to the public.
Although the city considered the contamination area to pose a potential
emergency, the city did not declare an emergency and comply with the emergency
procurement process specified by OAR 137-049-0150. This OAR establishes the
criteria and process for awarding emergency contracts. The OAR requires a
written declaration. The OAR also specifies that the contracting agency ensure
competition that is reasonable and appropriate under the emergency
circumstances, and may include written requests for offers, oral requests for
offers, or direct appointments without competition in cases of extreme necessity.
We were unable to determine whether the increase in the contract price was fair
and reasonable because the city did not comply with OAR 137-049-0160 or OAR
137-049-0150. As a result, the state should disallow $57,346 in costs incurred
under the change order for funding provided by the CWSRF loans unless the city
is able to show that the costs meet applicable OAR procurement requirements.
Recommendations
We recommend the Region 10 Regional Administrator require that ODEQ:
1.	Require the City of Astoria to correct the reported number of jobs
created or retained using a methodology that complies with OMB's
Recovery Act guidance for quarterly reports covering the 6-month
period ending June 30, 2010, and all subsequent periods with job
reporting errors.
2.	Obtain the corrections for the reported number of jobs created or
retained from the City of Astoria and maintain the corrected
documentation in administrative records.
11-R-0172
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3.	Submit the corrections referenced in recommendation 2 for the City of
Astoria to the federal government after a schedule has been established
by future Recovery Act guidance.
4.	Disallow $57,346 in costs incurred under the change order for funding
provided by the CWSRF loans unless the City of Astoria is able to
show that the costs meet applicable OAR procurement requirements.
Agency, Recipient, and Subrecipient Responses to Draft Report
We issued a discussion draft on February 23, 2011. Although not requested,
Region 10 submitted formal written comments to the findings and
recommendations in response to the discussion draft on March 2, 2011. We also
held an exit conference on March 3, 2011, with the region, ODEQ, and city to
obtain their verbal comments on the discussion draft. Based on the discussion of
the recommendations and corrective actions during the exit conference, the region
provided revised formal written comments on March 11, 2011. ODEQ provided
documentation to support that actions were being taken to address the
recommendations on February 25, March 2, and March 3, 2011. The city also
provided documentation showing corrective actions taken on February 7 and
March 8, 2011. The region's complete revised written response is in appendix A.
The documentation provided by ODEQ and the city is not included in the report;
however, it is available on request.
The region, ODEQ, and city agreed with the findings. The region also agreed with
recommendations 1, 2 and 4, but initially had concerns with implementing
recommendation 3. OEDQ agreed with recommendations 1, 2, and 4. However,
ODEQ expressed concern with recommendation 3. The city agreed with all four
recommendations.
The region commented in its written response that the final report should
recognize the prompt actions by ODEQ and the city resolving recommendations
1, 2, and 4. With regard to recommendation 3, the region commented that current
OMB guidance does not provide a mechanism to revise previous job reporting
entries that were incorrect. The region said recommendation 3 made sense, but is
dependent upon action by OMB at an uncertain future date. As a result, the region
said it would like to explore with OIG the best way the final report should note
this action so that the city, ODEQ, and the region can satisfy the recommendation
definitively and avoid being reported as delinquent in timely carrying out the
corrective action. After discussing the recommendations during the exit
conference, the region agreed with all four recommendations. The region also
agreed to include a corrective action for recommendation 3 in the response to the
final report. The region said that the response to the final report would disclose
that ODEQ will submit the corrections for the quarterly reports if and when OMB
establishes a schedule for reporting adjustments to address recommendation 3.
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ODEQ agreed with recommendations 1, 2, and 4, and provided documentation
that it said addressed the recommendations. In response to recommendation 3,
ODEQ commented that the recommendation would be difficult to address.
However, ODEQ concurred with the corrective action wording that the region
said would be in its response to the final report to address the recommendation.
Although the city agreed with the findings and recommendations, the city orally
commented that it was expecting to see further discussion on actions already
taken to address the findings. The city said that it understands that these actions
will be included in the final report. The city also stated that corrective actions
have been taken. Therefore the city said it does not see any outstanding issues and
requested that that be reflected in the final report.
OIG Comment on Responses
The documentation provided by ODEQ and the city during February and March
2011 shows that the city and ODEQ have expeditiously taken actions to address
the findings. The documentation shows that the city has corrected the job
reporting errors in accordance with OMB's Recovery Act guidance and ODEQ
has obtained the corrected job numbers. These corrective actions satisfactorily
address recommendations 1 and 2. The documentation provided by ODEQ on
March 2, and 3, 2011, shows that ODEQ has disallowed the $57,346 in costs
incurred under the change order for funding provided by the CWSRF loans.
Therefore, ODEQ's corrective action satisfactorily addresses recommendation 4.
No further action is required by EPA, ODEQ, or the city for recommendations 1,
2, and 4.
The region's planned corrective action for recommendation 3 satisfactorily
addresses the recommendation. The region will need to include the corrective
action in its response to the final report.
With regard to the city's comment that it was expecting to see further discussion
on actions already taken to address the findings in the discussion draft, the city
informed us of the actions on February 3 and 7, 2011. We appreciate that the city
and state expeditiously initiated corrective actions after we briefed them on the
findings and potential recommendations. We did not review and evaluate these
corrective actions during February 2011 because the discussion draft was written
and undergoing our review process by February 1, 2011. Therefore, the corrective
action information was provided too late for incorporation into the discussion
draft. As a result, we reviewed documentation supporting the corrective actions as
part of the discussion draft response process.
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Status of Recommendations and
Potential Monetary Benefits
RECOMMENDATIONS
POTENTIAL MONETARY
BENEFITS (In $000s)
Rec.
No.
Page
No.
Subject
Status1
Planned
Completion
Action Official	Date
Claimed
Amount
Ag reed-To
Amount
Require ODEQ to require the City of Astoria to
correct the reported number of jobs created or
retained using a methodology that complies with
OMB's Recovery Act guidance for quarterly reports
covering the 6-month period ending June 30, 2010,
and all subsequent periods with job reporting
Region 10
Regional Administrator
03/08/11
Require ODEQ to obtain the corrections for the
reported number of jobs created or retained from
the City of Astoria and maintain the corrected
documentation in administrative records.
Require ODEQ to submit the corrections
referenced in recommendation 2 for the City of
Astoria to the federal government after a schedule
has been established by future Recovery Act
guidance.
Require ODEQ to disallow $57,346 in costs
incurred under the change order for funding
provided by the CWSRF loans unless the City of
Astoria is able to show that the costs meet
applicable OAR procurement requirements.
Region 10	03/08/11
Regional Administrator
Region 10	06/22/11
Regional Administrator
Region 10	03/03/11
Regional Administrator
$57.3
$57.3
1 O = recommendation is open with agreed-to corrective actions pending
C = recommendation is closed with all agreed-to actions completed
U = recommendation is undecided with resolution efforts in progress
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Appendix A
Agency Response to Draft Report
/tDS\
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
REGION 10
1200 Sixth Avenue, Suite 900
Seattle, WA 98101-3140
I SB
m
CD
OFFICE OF
WATER AND WATERSHEDS
March 11, 2011
MEMORANDUM
SUBJECT: American Recovery and Reinvestment Act Site Visit to Astoria, Oregon, Project
The Region 10 Office of Water and Watersheds appreciates the opportunity to review the
Discussion Draft Site Visit Report to the Denver Street Storage Project in Astoria, Oregon (No.
OA-FY10-0158). This project is funded in part by the American Recovery and Reinvestment
Act (ARRA) through the EPA Clean Water State Revolving Fund (CWSRF) and Oregon
Department of Environmental Quality's (DEQ's) Water Pollution Control Revolving Fund. This
Discussion Draft reports two findings, an error in reporting the jobs created or retained through
ARRA funding, and a change order that did not meet applicable procurement requirements.
It is worth noting that the OIG reviewed the multiple facets of ARRA compliance. They
found no issues regarding compliance with Buy American requirements, Davis-Bacon Act wage
requirements, and Funding under Section 1604 of ARRA.
We have reviewed the report's findings regarding the error in reporting jobs created or
retained by the ARRA funding and the change order related to the tank removal. We agree with
both findings.
In the months since the OIG investigators first informed us of these potential errors, DEQ
and the City of Astoria have taken steps to remedy the two situations. DEQ recognizes the
State's error in interpreting the OMB guidance when advising Astoria on the appropriate jobs
calculation methodology. Should OMB allow communities to revise previous entries, Astoria
No. OA-FY10-0158
FROM: Mike Bussell /S/
Director, Office of Water & Watersheds
TO:
Robert Adachi
Director of Forensic Audits
OIG
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will make the change. Under current OMB guidance, there is no mechanism to revise previous
entries.
Astoria recognized that the change order, issued upon discovery of additional soil and
ground water contamination, is not adequately supported for reimbursement by DEQ through the
CWSRF. Astoria has rescinded their request for payment and neither the CWSRF, DEQ's
Revolving Fund, nor ARRA currently fund this questionable change order.
The OIG Discussion Draft contains four Recommendations. The Final Report should
recognize the prompt actions by DEQ and Astoria that make three of the Recommendations
moot.
The first recommended action is that the City of Astoria correct the number of jobs
reported in June 2010 and subsequent reporting periods. The City corrected their calculation of
jobs created and retained for these periods once the proper interpretation of the OMB guidance
was brought to their attention. This action has been completed.
The second recommended action is for the correct number of jobs created or retained to
be kept in the administrative records. This has been completed as well.
The third recommended action would have Astoria submit the correction to jobs created
or restored when new guidance makes it possible. This makes sense to do. However, we note
that complying with this recommendation is dependent upon action by OMB at an uncertain
future date. We would like to explore with OIG the best way the final report should note this
action so that the City of Astoria, DEQ, and Region 10 can satisfy the recommendation
definitively and avoid being reported as delinquent in carrying out this action in a timely manner.
The fourth recommended action is for DEQ and EPA to disallow the costs incurred under
the change order. This has been addressed through DEQ processing Astoria's request to rescind
these costs and EPA's notification of an erroneous payment. No further action is needed by EPA
or DEQ.
If you have any questions about this response, please feel free to contact me or Michelle
Tucker, our CWSRF coordinator, at tucker.michelle@epa.gov (206-553-1414).
cc: Bob Phillips, Audit Coordinator
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Appendix B
Distribution
Office of the Administrator
Regional Administrator, Region 10
Director, Grants and Interagency Agreements Management Division,
Office of Administration and Resources Management
Agency Followup Official (the CFO)
Agency Followup Coordinator
General Counsel
Associate Administrator for Congressional and Intergovernmental Relations
Associate Administrator for External Affairs and Environmental Education
Audit Followup Coordinator, Region 10
Public Affairs Officer, Region 10
Director, Office of Water and Watersheds, Region 10
Director, Oregon Department of Environmental Quality
Clean Water State Revolving Fund Loan Program Manager, Oregon Department of
Environmental Quality
City Manager, City of Astoria, Oregon
Public Works Director, City of Astoria, Oregon
City Engineer, City of Astoria, Oregon
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