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s	U.S. Environmental Protection Agency	11-R-0141
i? M m t,			.	March 1,2011

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 - \ Office of Inspector General
SKI
f At a Glance
Catalyst for Improving the Environment
Why We Did This Review
The American Recovery and
Reinvestment Act of 2009
(ARRA) provided the U.S.
Environmental Protection
Agency (EPA) with
$300 million in grant funds for
diesel emissions reduction
activities. We conducted our
review to determine whether
these funds were effective in
obtaining diesel retrofits and
emissions reductions.
Background
In fiscal year 2008, EPA
began funding projects
through grants authorized by
the Energy Policy Act of
2005, Title VII, Subtitle G,
also known as the Diesel
Emissions Reduction Act
(DERA). Under this
authority, EPA
competitively awards grants
for projects to achieve
significant reductions in
diesel emissions that
improve air quality and
protect public health. In
addition, EPA awards grants
to support state diesel
emissions reduction
programs.
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/
20110301-11-R-0141.pdf
EPA Should Improve Guidance and Oversight to
Ensure Effective Recovery Act-Funded
Diesel Emissions Reduction Act Activities
What We Found
Documentation of grant activities did not always demonstrate that funded DERA
work achieved the desired emissions reductions. For two subgrants involving
13 completed engine replacements costing $343,753, supporting documentation
did not clearly indicate the emissions certification level of the new engines. Also,
for three subgrants to replace six vehicles costing $268,000 in DERA funds, the
engine model year was different from the vehicle model year. These documentation
errors could result in EPA overestimating emissions reductions for these projects.
Additionally, two subgrantees installed unverified technology costing $15,900 on
15 buses. Further, quarterly reports included errors on specific project details that
could affect the accuracy of EPA's final emissions reduction projections for these
grants. Additional EPA guidance and oversight is needed to ensure that projects
achieve the planned emissions reductions and that activities are reported accurately.
For the state DERA grant reviewed, two subgrantees replaced three vehicles costing
$108,425 even though they planned to replace these vehicles in 2010. EPA grant
conditions stipulate that grantees must use funds for early replacements, not to
replace vehicles or engines that would have been replaced due to normal attrition.
However, neither the grant conditions nor EPA guidance explains how to determine
normal attrition. We believe these expenditures do not meet the intent of DERA,
and that EPA should better define early replacement for its state grant awards.
The methodology used by prime grantees to report the number of jobs funded by
ARRA appeared reasonable. However, for one grant the prime grantee did not
adjust job hours to account for cost sharing by the subgrantee. As a result, the job
hours reported as funded by ARRA were slightly overstated.
What We Recommend
We recommend that the Assistant Administrator for Air and Radiation require the
Director, Office of Transportation and Air Quality, to (1) develop oversight
procedures to provide reasonable assurance that grantee progress reports are
accurate and that emissions certification levels are verified, (2) require that DERA
grant and subgrant agreements specify the emissions certification level or year of
new engines installed as part of vehicle replacement and engine repower projects,
(3) issue guidance clearly defining eligible costs for early replacements of vehicles
and engines for state grants, and (4) recoup unsupported expenditures of funds.
The Office of Air and Radiation agreed with our recommendations and is taking
actions to implement them.

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