Audit Report

OIG-16-019

RESTORE ACT

Texas Made Progress in Establishing Centers of Excellence

December 11, 2015

Office of

Inspector General

Department of the Treasury

Contents

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Audit Report .................................................................................. 1

Background ................................................................................................ 2

Audit Results .............................................................................................. 4

 Competitive Selection of Centers of Excellence......................................... 4

 Grant Application and Award Notification................................................. 7

 Next Steps ........................................................................................... 7

Appendices

Appendix 1: Objective, Scope, and Methodology........................................ 9

Appendix 2: Texas Commission on Environmental Quality Response............. 11

Appendix 3: Treasury Management Response.... ........................................ 12

Appendix 4: Major Contributors to This Report........................................... 13

Appendix 5: Report Distribution................................................................ 14

Abbreviations and Acronyms 

Centers of Excellence Centers of Excellence Research Grants Program

TCEQ Texas Commission on Environmental Quality

RESTORE Act Resources and Ecosystems Sustainability, Tourist

 Opportunities and Revived Economies of the Gulf States

 Act of 2012

RFGA Request for Grant Application

Treasury Department of the Treasury

Trust Fund Gulf Coast Restoration Trust Fund
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This Page Intentionally Left Blank.
OIG Audit

Report

The Department of the Treasury

Office of Inspector General

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December 11, 2015

David A. Lebryk

Fiscal Assistant Secretary

This report presents the results of our audit of the State of Texas’s 

progress to establish a Centers of Excellence Research Grants 

Program (Centers of Excellence) authorized by the requirements set 

forth in the Resources and Ecosystems Sustainability, Tourist 

Opportunities, and Revived Economies of the Gulf Coast States Act 

of 2012 (RESTORE Act).

1 We performed this audit as part of our 

ongoing oversight of programs, projects, and activities to be 

funded under the RESTORE Act. Our audit objective was to assess 

the Texas Office of the Governor’s progress in establishing Centers

of Excellence for conducting research in the Gulf Coast region in 

accordance with Section 1605 of the RESTORE Act. Appendix 1 

provides more detail about our audit objective, scope, and 

methodology.

In brief, we found that the Texas Commission on Environmental 

Quality (TCEQ), on behalf of the Office of the Governor, made 

progress in establishing two Centers of Excellence in accordance 

with the requirements set forth in the RESTORE Act, the 

Department of the Treasury’s (Treasury) regulations2and grant 

application guidelines,

3

and Texas statutes and regulations. 

Specifically, TCEQ competitively selected two consortia, the Texas 

OneGulf Consortium and the Subsea Systems Institute, in 

January 2015, to serve as Centers of Excellence. In April 2015,

TCEQ submitted a grant application to Treasury to fund the centers

 

1 Pub. L. 112-141, 126 Stat. 588-607 (July 6, 2012)

2 On August 15, 2014, Treasury published the Interim Final Rule and the Preamble for 31 CFR Part 34, 

Department of the Treasury Regulations for the Gulf Coast Restoration Trust Fund. The Interim Final 

Rule became effective on October 14, 2014.

3 Treasury’s application requirements and process are detailed in the “Centers of Excellence Research 

Grants Program Guidelines and Application to Receive Federal Financial Assistance.”
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and was subsequently awarded $4,036,238 in June 2015. We 

make no recommendations in this report.

As part of our reporting process, we provided TCEQ an opportunity 

to comment on a draft of this report. In a written response, TCEQ 

management agreed with our audit report and expressed TCEQ’s 

commitment to continuing its RESTORE program with due 

accountability and responsibility, and to being good stewards of all 

RESTORE funds granted to Texas. TCEQ management’s response 

is provided in its entirety in appendix 2.

In a written response, Treasury management noted that it 

evaluated TCEQ’s application to fund Centers of Excellence and 

confirmed, among other things, that the selection process and

resulting selections met the requirements of the RESTORE Act and 

Treasury regulations. Management further noted that pursuant to 

its grant management procedures, Treasury disburses funds only 

after a grantee satisfies all criteria. Treasury management’s 

response is provided as appendix 3.

Background

The RESTORE Act established the Gulf Coast Restoration Trust 

Fund (Trust Fund) within Treasury to provide funds for 

environmental and economic restoration of the Gulf Coast region

that was damaged by the 2010 Deepwater Horizon oil spill. 

Deposits into the Trust Fund will be comprised of 80 percent of all 

civil and administrative penalties paid after July 6, 2012, under the 

Federal Water Pollution Control Act (the Clean Water Act).

4 As of 

February 2015, the Trust Fund had received approximately $816 

million as a result of the Federal government’s settlement with the 

Transocean defendants.5In July 2015, BP Exploration & Production 

Inc. agreed to settle with the Federal government and the Gulf 

Coast States for $18.7 billion, of which approximately $5.5 billion

 

4 Pub. L. 92-500 (as amended) 

5 On February 19, 2013, the civil settlement between the Department of Justice and Transocean 

defendants (Transocean Deepwater Inc., Transocean Offshore Deepwater Drilling Inc., Transocean 

Holdings LLC, and Triton Asset Leasing GmbH) was approved. Among other things in the settlement, 

the Transocean defendants paid a $1 billion civil penalty plus interest. Of this amount, $800 million plus 

interest was deposited into the Trust Fund.
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plus interest relates to civil and administrative penalties under the 

Clean Water Act. Of this amount, $4.4 billion is expected to be 

deposited into the Trust Fund over 15 years. On October 5, 2015, 

the Department of Justice published the settlement in a proposed 

consent decree for a 60 day comment period ending on 

December 4, 2015. After considering comments, the Federal 

government and the Gulf Coast States will determine whether to 

seek court approval of the consent decree.

The RESTORE Act allocates money in the Trust Fund to the 

following components: (1) 35 percent will be made available to the 

Gulf Coast States (Alabama, Florida, Louisiana, Mississippi, and 

Texas) in equal shares under the Direct Component; (2) 30 percent 

plus 50 percent of interest earned on the Trust Fund will be made 

available for grants under the Comprehensive Plan Component;

(3) 30 percent will be made available for grants under the Spill 

Impact Component; (4) 2.5 percent plus 25 percent of interest 

earned on the Trust Fund will be made available to the Science 

Program Component; and (5) 2.5 percent plus 25 percent of 

interest earned on the Trust Fund will be made available to the 

Centers of Excellence Component. Treasury’s Office of the Fiscal 

Assistant Secretary is responsible for administering the Direct 

Component and the Centers of Excellence Component. The Gulf 

Coast Ecosystem Restoration Council is responsible for 

administering the Comprehensive Plan Component and the Spill 

Impact Component. The National Oceanic and Atmospheric 

Administration is responsible for administering the Science Program

Component.

Under Sections 1603 and 1605 of the RESTORE Act, 2.5 percent 

of funds plus interest earned on the Trust Fund will be made 

available to the Gulf Coast States in equal shares to establish 

Centers of Excellence for the purpose of conducting research in the 

Gulf Coast region. Each Center of Excellence must focus on 

science, technology, and monitoring in at least one of the following 

disciplines: (1) coastal and deltaic sustainability, restoration and 

protection, including solutions and technology that allow citizens to 

live in a safe and sustainable manner in a coastal delta in the Gulf 

Coast region; (2) coastal fisheries and wildlife ecosystem research 

and monitoring in the Gulf Coast region; (3) offshore energy 
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development, including research and technology to improve the 

sustainable and safe development of energy resources in the Gulf 

of Mexico; (4) sustainable and resilient growth, economic and 

commercial development in the Gulf Coast region; and 

(5) comprehensive observation, monitoring, and mapping of the 

Gulf of Mexico.

The duties of each Gulf Coast State must be carried out by the 

applicable Gulf Coast State entity or task force, as defined in the 

act. In the case of Texas, the RESTORE Act specified that the 

duties will be carried out by the Office of the Governor or an 

appointee. A TCEQ Commissioner, in his official capacity with 

TCEQ, was appointed by the Governor to carry out the duties for 

the State.

Audit Results

We found that TCEQ, on behalf of the Texas Office of the 

Governor, made progress in establishing Centers of Excellence in 

accordance with the requirements set forth in the RESTORE Act, 

Treasury’s regulations and grant application guidelines, and Texas 

statutes and regulations. In January 2015, TCEQ competitively 

selected two consortia, the Texas OneGulf Consortium and the 

Subsea Systems Institute, to serve as Centers of Excellence.

Competitive Selection of Centers of Excellence

Section 1605 of the RESTORE Act specifies that the Gulf Coast 

States use the amounts made available from the Trust Fund to 

award competitive grants to nongovernmental entities and 

consortia in the Gulf Coast region, including public and private 

institutions of higher education, for the establishment of Centers of 

Excellence. Treasury regulations require a 45 day public review and 

comment period for each State’s rules and policies, including the 

competitive process. This requirement does not apply to State 

statutes and regulations that apply to grants made by the State 

under the Centers of Excellence grant program. In the case of 
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Texas, TCEQ followed State statutes and regulations6to

competitively select two Centers of Excellence. 

Texas statutes and regulations stipulate that for procurements 

exceeding $25,000, a State agency must post either the entire bid 

or a notice that includes all information necessary to make a 

successful bid or proposal in the State’s daily business forum. In 

addition, the agency must continue to either post notice of the 

procurement until the latest of 21 calendar days after the date the 

notice is first posted; the date the State agency will no longer 

accept bids; or the date the State agency decides not to make the 

procurement. A contract or procurement award made by a State 

agency that violates the applicable minimum time for posting is 

void.

TCEQ published a Request for Grant Applications (RFGA) in the 

Texas Electronic State Business Daily and also made the RFGA 

available to the public through the Texas e-Grants system, seeking 

entities to serve as the State’s Centers of Excellence. The RFGA 

was issued on October 27, 2014, for a 21 day period consistent 

with the State’s public notice requirement. TCEQ sought comments 

and questions from potential applicants consistent with TCEQ’s

established grant rules. Questions and comments received were 

reviewed by TCEQ, and responses were provided through posted 

addenda to the RFGA.

The RFGA advised bidders that the State intended to select and 

establish two Centers of Excellence. One center would focus on a 

combination of the five disciplines of science and technology 

outlined in Section 1605 of the RESTORE Act; while the other 

center would focus strictly on one of the five disciplines

concentrated on environmentally sensitive offshore energy 

exploration, development, and production. TCEQ required that each 

Center of Excellence applicant be a consortium of participants for 

the purpose of fostering collaboration between interested parties.

This collaboration is consistent with the RESTORE Act requirement 

that States give priority to entities and consortia that demonstrate 

the ability to establish the broadest cross section of participants 

 

6 30 TAC Sec. 14.1 (2014) et seq., “Grants” and TCEQ’s General Administrative Procedures
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with interest and expertise in the required Center of Excellence 

focus disciplines.

To adhere to Texas laws prohibiting conflicts of interest in 

procurement actions, TCEQ imposed a period of no-contact 

between applicants and TCEQ representatives involved in selecting 

the Centers of Excellence from the time the RFGA was issued until 

the selections were announced. 

In response to the RFGA, TCEQ received multiple proposals from 

consortia applying to serve as the Center of Excellence focused on 

a combination of the five RESTORE Act disciplines. However, there 

was only one proposal for the Center of Excellence that would 

focus solely on offshore energy exploration, development, and 

production. TCEQ requested that certain agencies serving on the 

Texas RESTORE Act Advisory Board7 nominate members to serve 

on an independent proposal evaluation team. After this team’s 

initial scoring of the proposals, TCEQ requested that the two 

highest scoring applicants under consideration for the multidiscipline Center of Excellence submit a “Best and Final 

Application” that was evaluated by a different independent 

evaluation team. Proposals were evaluated on the following 

criteria: qualifications of major consortium participants,

qualifications of other consortium participants, key technical 

personnel, consortium organization, the general nature of the 

activities to be performed, and the anticipated cost-effectiveness.

In a press release dated January 16, 2015, the State’s designated

TCEQ Commissioner8announced the selection of two consortia to 

establish Centers of Excellence in Texas. The Texas OneGulf 

Consortium, led by Texas A&M University Corpus Christi, will 

focus on all five disciplines detailed in the RESTORE Act. The 

 

7 The Texas RESTORE Act Advisory Board is made up of representatives for 11 State agencies: TCEQ,

Texas Parks and Wildlife, Texas General Land Office, Texas Workforce Commission, Texas Department 

of Transportation, Texas Railroad Commission, Texas Department of Agriculture, Texas Comptroller of 

Public Accounts, Texas Water Development Board; Public Utility Commission of Texas and the Office of 

the Governor – Economic Development and Tourism Division. As part of their duties, members help 

develop the multiyear implementation and State expenditure plan for the State, as required by the 

RESTORE Act. 

8 TCEQ is led by three commissioners. On March 28, 2013, the Governor of Texas designated one of 

them to represent the State of Texas on the Gulf Coast Ecosystem Restoration Council.
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Subsea Systems Institute, led by the University of Houston, will 

focus on the discipline of environmentally sensitive offshore energy 

exploration, development, and production. TCEQ plans to follow 

the State’s established policies and procedures for administering 

the Centers of Excellence grants.

Grant Application and Award Notification

In April 2015, TCEQ submitted its “RESTORE Act Centers of 

Excellence Research Grant Program Financial Assistance 

Application” to Treasury for funding. As required in the application, 

TCEQ included a description of the competitive process used to 

select the Centers of Excellence, the policies and procedures that 

TCEQ plans to use to administer the Centers of Excellence grants,

and a summary of TCEQ’s experience with issuing and monitoring 

subawards. The application also called for an estimated budget, 

key personnel, and a timeline including tasks and major milestones, 

which were also provided.

On June 9, 2015, Treasury issued a notice of award granting 

TCEQ $4,036,238 to establish two Centers of Excellence.

Next Steps

TCEQ will subaward grants in equal amounts to Texas A&M 

University Corpus Christi for the Texas OneGulf Consortium and

the University of Houston for Subsea Systems Institute to formally 

establish Texas’s Centers of Excellence.
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* * * * * *

We appreciate the courtesies and cooperation extended by your 

staff as we inquired about these matters. Major contributors to this 

report are listed in appendix 4. A distribution list for this report is 

provided as appendix 5. If you have any questions, you may 

contact me at (202) 927-5762 or Cecilia Howland, Audit Manager, 

at (202) 927-8782. 

/s/ 

Deborah L. Harker 

Director, Gulf Coast Restoration Audits 
Appendix 1

Objective, Scope, and Methodology

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As part of our oversight of programs, projects, and activities 

authorized by the Resources and Ecosystems Sustainability, Tourist 

Opportunities, and Revived Economies of the Gulf Coast States Act 

of 2012 (RESTORE Act), we initiated an audit of the State of 

Texas’s progress to establish a Centers of Excellence Research 

Grants Program (Centers of Excellence) in March 2014. The 

objective of our audit was to assess the Texas Office of the 

Governor’s progress in establishing Centers of Excellence in 

accordance with Section 1605 of the RESTORE Act.

To accomplish our objective, we conducted fieldwork at Texas 

Commission on Environmental Quality (TCEQ) headquarters in 

Austin, Texas, and at our office in Washington, D.C. We performed 

our fieldwork between March 2014 and July 2015 which 

comprised the following steps.

 We reviewed applicable Federal laws, regulations, and 

procedures related to the establishment of the Centers of 

Excellence, including:

 RESTORE Act requirements;

 Department of the Treasury (Treasury) Interim Final 

Rule for RESTORE Act and Preamble, 31 CFR Part 34, 

effective October 14, 2014; and

 Treasury RESTORE Act Centers of Excellence 

Research Grants Program Guidelines and Application 

to Receive Federal Financial Assistance, November

2014.

 We reviewed Texas administrative code and standards, 

policies and procedures, and applicable Office of the 

Governor’s documents:

 Tex. Water Code Sec. 5.124 (2014), “Authority to 

Award Grants”;

 30 TAC Sec. 14.1 (2014) et seq., “Grants”; 

 Texas Contract Management Guide, “Ethical 

Standards and Policies”; and

 Office of the Governor’s letter appointing the TCEQ 

Commissioner as Texas’s representative to the Gulf 

Coast Ecosystem Restoration Council, March 28, 
Appendix 1

Objective, Scope, and Methodology

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2013.

 We reviewed TCEQ documents, including:

 Request for Grant Application (RFGA) 

Solicitation #582-15-52002, “Grants for Center 

of Excellence under RESTORE” issued 

October 27, 2014, and subsequent addenda;

 General Administrative Procedures, 

“Procurements & Contracts;”

 Guide for Administrative Procedures, “Point of 

Payment;” 

 Purchasing and Contracting Guidelines User 

Manuals; and

 Delegation Matrix of Authority for Contracts, Grants, 

Encumbrances and Procurement, January 17, 2014.

 We interviewed key TCEQ officials and staff responsible for 

establishing the Texas Centers of Excellence, including: 

Commissioner; General Counsel; Special Projects 

Coordinator; Procurement and Contracts Section Manager; 

Special Counsel; Contract Staff Attorney; and the Executive 

Assistant to the Commissioner.

We conducted this performance audit in accordance with generally 

accepted government auditing standards. Those standards require 

that we plan and perform the audit to obtain sufficient, appropriate 

evidence to provide a reasonable basis for our findings and 

conclusions based on our audit objectives. We believe that the 

evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.
Appendix 2 

Texas Commission on Environmental Quality Response 

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Appendix 3

Treasury Management Response

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Appendix 4

Major Contributors to This Report

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Cecilia K. Howland, Audit Manager

Michael A. Levin, Auditor-in-Charge

Lawrence Gonzalez, Auditor

Kevin A. Guishard, Referencer
Appendix 5

Report Distribution

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Department of the Treasury

Deputy Secretary

Under Secretary for Domestic Finance

Fiscal Assistant Secretary

Deputy Assistant Secretary, Fiscal Operations and Policy

Office of the Deputy Chief Financial Officer, Risk and Control 

Group

Office of Strategic Planning and Performance Management

Office of Management and Budget

OIG Budget Examiner

State of Texas

Commissioner, Texas Commission on Environmental Quality

State Auditor, Texas State Auditor's Office 
Treasury OIG Website 

Access Treasury OIG reports and other information online: 

http://www.treasury.gov/about/organizational-structure/ig/Pages/default.aspx 

Report Waste, Fraud, and Abuse 

OIG Hotline for Treasury Programs and Operations – Call toll free: 1-800-359-3898 

Gulf Coast Restoration Hotline – Call toll free: 1-855-584.GULF (4853) 

Email: Hotline@oig.treas.gov

Submit a complaint using our online form: 

https://www.treasury.gov/about/organizational-structure/ig/Pages/OigOnlineHotlineForm.aspx