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U.S. Environmental Protection Agency	15-P-0298
Office of Inspector General	Septembers, 2015
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At a Glance
Why We Did This Review
During our review of a hotline
complaint made against the
Hawaii Department of Health
(DOH), the U.S. Environmental
Protection Agency's (EPA's)
Office of Inspector General
(OIG) learned that Region 9
issued a Notice of Non-
Compliance to the Hawaii DOH
in 2014 relating to the Drinking
Water State Revolving Fund
(DWSRF) program.
Specifically, we became aware
that $8,787,000 was available
for award to the Hawaii DOH
for its fiscal year (FY) 2015
DWSRF capitalization grant.
We conducted this review to
determine whether Region 9
should proceed with the award
of the FY 2015 capitalization
grant.
This report addresses the
following EPA goals or
cross-agency strategies:
•	Protecting America's
waters.
•	Launching a new era of
state, tribal, local and
international partnerships.
Send all inquiries to our public
affairs office at (202) 566-2391
or visit www.epa.gov/oiq.
The full report is at:
www.epa.qov/oiq/reports/2015/
20150928-15-P-0298.pdf
Early Warning Report: EPA Region 9 Should Withhold
Award of the Fiscal Year 2015 Drinking Water State
Revolving Fund Grant to the Hawaii Department of Health
What We Found
On October 24, 2014, Region 9 issued a Notice of
Non-Compliance to the Hawaii DOH because DOH:
Has not managed DWSRF funds in a sound,
efficient and prudent manner, due to lack of
adequate personnel and effective tools and
processes.
Has not committed and expended all funds in the
DWSRF as efficiently as possible and in an
expeditious and timely manner, which violates
the Code of Federal Regulations and grant
terms and conditions. As of June 2014, DOH
had total unspent funds of $100 million (including $33 million in EPA funds).
Due to a Notice of
Non-Compliance
issued to the Hawaii
DOH and lack of
adequate progress on
a corrective action
plan, the EPA should
withhold about
$8.8 million in FY 2015
DWSRF capitalization
grant funds.
An attachment to the Notice of Non-Compliance contained 30 items that the
Hawaii DOH was required to address. On January 30, 2015, DOH submitted a
corrective action plan to address the items. During our review of the hotline
complaint, we found that the DOH had not made adequate progress in
implementing the corrective action plan. In particular, we noted that the DOH:
•	Has not provided an acceptable Intended Use Plan for the state's FY 2016.
•	Executed only 87 percent of the targeted loan commitments of $56 million,
resulting in a shortage of $7.4 million.
•	Disbursed only 80 percent of the targeted disbursements of $60 million,
leaving $11.8 million in undisbursed funds.
In addition, based on our observations, projects on the fundable list may not be
ready to proceed and estimated start dates may not be realistic.
Recommendation
We recommend that the Regional Administrator, Region 9, exercise fiduciary
responsibility and withhold FY 2015 funds of $8,787,000 for the Hawaii DOH
DWSRF capitalization grant until the region is satisfied with the corrective action
plan implementation progress.
Noteworthy Achievements
On September 10, 2015, the OIG briefed Region 9 on this report. On
September 21, 2015, Region 9 initiated an enforcement action against Hawaii
DOH for not meeting its loan commitment and disbursement targets. Region 9
advised Hawaii DOH that the FY 2015 DWSRF capitalization grant would be
withheld and that the region may withhold further awards. Hawaii DOH has
30 days to appeal the region's decision.

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