U.S. ENVIRONMENTAL PROTECTION AGENCY

OFFICE OF INSPECTOR GENERAL

Internal Control Lessons Learned 

for Hurricane Sandy Disaster 

Relief Appropriations Act Funds 

Report No. 13-P-0351 August 22, 2013 

Scan this mobile 

code to learn more 

about the EPA OIG. 
 

Report Contributors: Patrick Gilbride

 Erin Barnes-Weaver 

 Todd Goldman 

 Derek Mulvihill 

Abbreviations 

ARRA American Recovery and Reinvestment Act of 2009 

CWSRF Clean Water State Revolving Fund 

DRAA Disaster Relief Appropriations Act 

DWSRF Drinking Water State Revolving Fund 

EPA U.S. Environmental Protection Agency 

GAO Government Accountability Office 

OIG Office of Inspector General 

OMB Office of Management and Budget 

SRF State Revolving Fund 

Cover photo: Hurricane Sandy was the biggest Atlantic storm in history, spanning an area 

broader than Texas. (EPA image) 

Hotline 

To report fraud, waste, or abuse, contact us through one of the following methods: 

email: OIG_Hotline@epa.gov write: EPA Inspector General Hotline 

phone: 

fax: 

1-888-546-8740 

202-566-2599 

1200 Pennsylvania Avenue, NW 

Mailcode 2431T 

online: http://www.epa.gov/oig/hotline.htm Washington, DC 20460 
 

 

U.S. Environmental Protection Agency 

Office of Inspector General 13-P-0351 

August 22, 2013 

At a Glance
 

Why We Did This Review 

On January 29, 2013, the 

President signed the Disaster 

Relief Appropriations Act, 

which provided $50.5 billion in 

aid for Hurricane Sandy 

disaster victims and their 

communities. DRAA required 

federal agencies supporting 

Sandy recovery to implement 

internal controls to prevent 

fraud, waste and abuse of 

funds. The U.S. Environmental 

Protection Agency received 

nearly $608 million, the bulk of 

which was designated for the 

Clean Water and Drinking 

Water State Revolving Funds. 

We sought to determine 

whether the EPA has controls 

in place for the award and 

management of Sandy relief 

funds based on lessons from 

past reports on the American 

Recovery and Reinvestment 

Act of 2009. 

This report addresses the 

following EPA Goals or 

Cross-Cutting Strategies: 

 Protecting America’s 

waters. 

 Cleaning up communities 

and advancing sustainable 

development. 

For further information, contact 

our Office of Congressional and 

Public Affairs at (202) 566-2391. 

The full report is at: 

www.epa.gov/oig/reports/2013/ 

20130822-13-P-0351.pdf 

Internal Control Lessons Learned for Hurricane 

Sandy Disaster Relief Appropriations Act Funds
 

What We Found 

The Office of Management and Budget provided guidance to federal agencies 

supporting Sandy recovery on their submittal of internal control plans by March 

31, 2013. We reviewed 72 prior reports on ARRA and found that the following 

percent of reports addressed key OMB provisions specifically, addressed multiple 

provisions, or addressed no provisions: 

31.94%

29.17% 2.78%

4.17%

20.83%

11.11%

Source: OIG analysis. 

EPA has controls in place to manage Sandy relief funds as described in the 

agency’s internal control plan (dated March 28, 2013), such as conducting 

transaction testing on cash draws; performing semiannual administrative review 

of audits; and accelerating resolution of open audits. We identified additional 

controls for the agency to consider based on our prior report review: 

1. Strengthen oversight of sub-recipients and develop a checklist that states 

can use to help ensure compliance with DRAA. 

2. Work with states to incorporate inspections as part of routine oversight. 

3. Utilize information in recipient monitoring databases to regularly provide 

management reports on project progress and status of corrective actions. 

4. Include specific actions to identify states/projects at risk of not meeting 

deadlines and establish procedures to assist states with delayed projects. 

5. Update detection and reporting procedures to identify improper grant 

payments.
 

This report makes no recommendations. We encourage the agency to consider 

lessons we identified as the EPA moves forward with Sandy recovery activities.

 Noteworthy Achievements 

The EPA showed foresight to seek a waiver from OMB on expending funds within 

24 months given the long-term nature of SRF construction projects. The EPA 

also has plans in place to undertake many actions to address our suggestions. 
 

 

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

WASHINGTON, D.C. 20460 

THE INSPECTOR GENERAL 

August 22, 2013 

MEMORANDUM 

SUBJECT:	 Internal Control Lessons Learned for Hurricane Sandy Disaster Relief 

Appropriations Act Funds 

Report No. 13-P-0351 

FROM:	 Arthur A. Elkins Jr. 

TO:	 Stefan Silzer, Director 

Office of Financial Management, Office of the Chief Financial Officer 

This is our report on the subject audit conducted by the Office of Inspector General of the 

U.S. Environmental Protection Agency. This report contains observations and suggestions identified by 

the OIG. This report represents the opinion of the OIG and does not necessarily represent the final EPA 

position. Final determinations on matters in this report will be made by EPA managers in accordance 

with established audit resolution procedures. 

Action Required 

You are not required to provide any further response to this report. We will post this report to our 

website at http://www.epa.gov/oig. 

If you or your staff have any questions regarding this report, please contact Rich Eyermann, 

acting assistant inspector general for audit, at (202) 566-0565 or Eyermann.Richard@epa.gov; 

or Patrick Gilbride, director for risk and program performance audits, at (303) 312-6969 or 

Gilbride.Patrick@epa.gov. 
 

 

 

Reason for Review 

On January 29, 2013, the President signed into law the Disaster Relief 

Appropriations Act, which provided $50.5 billion in aid for Hurricane Sandy 

disaster victims and their communities. Because relief funding of this magnitude 

often carries additional risk, federal departments and agencies must ensure that the 

funds appropriated under the DRAA are used for their intended purposes. The EPA 

received nearly $608 million under the DRAA (post-sequester amount of $577 

million). To provide assistance to the EPA, we conducted a review of past Office of 

Inspector General and Government Accountability Office reports on the American 

Recovery and Reinvestment Act of 2009 to compile a list of lessons learned for the 

agency’s Sandy recovery activities. This memorandum summarizes the results of 

our review. 

Background 

Hurricane Sandy made landfall on 

October 29, 2012, and struck the East 

Coast from North Carolina to Maine. Clean Water State Revolving Fund 

High winds and storm surge caused The Clean Water State Revolving Fund widespread flooding; loss of life; program was established in 1987 under the 

displacement of persons; and Clean Water Act. CWSRF programs provided 

more than $5 billion annually in recent years to significant damage to private property, fund water quality protection projects for public infrastructure and government wastewater treatment, nonpoint source 

facilities. A dangerous nor'easter pollution control, and watershed and estuary 

management. CWSRFs have funded over $89 followed 9 days later causing billion, providing over 30,012 low-interest additional damage and undermining loans to date. 

the recovery effort. New York and Drinking Water State Revolving Fund New Jersey were especially hard hit by 

these storms. Recovery efforts The Safe Drinking Water Act, as amended in 

continue today throughout the region. 1996, established the Drinking Water SRF to 

make funds available to drinking water systems 

to finance infrastructure improvements. The The DRAA requires federal agencies program also emphasizes providing funds to 

supporting Sandy recovery and other small and disadvantaged communities and to 

programs that encourage pollution prevention disaster-related activities to implement as a tool for ensuring safe drinking water. additional internal controls to prevent 

waste, fraud and abuse of recovery 

funds. Most of the EPA’s DRAA 

appropriation provided for the Clean Water and Drinking Water State Revolving 

Funds ($600 million). Additional DRAA provisions for the EPA included: 

	 Each state shall use not less than 20 percent but not more than 30 percent 

of the amount of its capitalization grant for principal forgiveness, negative 

interest loans or grants, or any combination of these. 

	 Funds shall only be used for projects whose purpose is to reduce flood 

damage risk and vulnerability or to enhance resiliency to rapid hydrologic 

13-P-0351 1 
 

 

 

change or a natural disaster at treatment works defined by the Federal 

Water Pollution Control Act or any eligible facilities under the Safe 

Drinking Water Act, and for other eligible tasks at such treatment works 

or facilities to further such purposes. 

	 The Administrator may retain up to $1,000,000 of such funds for 

management and oversight. 

	 Funds must be expended by grantees within 2 years following the 

agency’s obligation of funds for the grant. The agency must include a term 

in the grant that requires the grantee to return to the agency any funds not 

expended within the 24-month period. 

The Office of Management and Budget issued a memorandum to federal agencies 

supporting Sandy recovery that established the criteria for control plans required by 

the DRAA to be submitted by March 31, 2013 to OMB, GAO, and the agency’s 

Inspector General. OMB Memorandum M-13-07 required that, at a minimum, 

agency internal control plans for Sandy recovery-related program funding reflect 

consideration of the following elements: 

	 Conducting Additional Levels of Review. Agencies shall adopt more 

expansive review procedures, as appropriate, to scrutinize award 

decisions, payment transactions, and other critical process elements that 

impact the use of the Disaster Relief Appropriation Act’s funds. To ensure 

a higher degree of accountability, each agency shall include senior level 

officials in these reviews, as appropriate (e.g., areas of high risk). 

	 Increasing Monitoring and Oversight of Grant Recipients. To the 

extent appropriate to mitigate risk and possible budgetary constraints, 

agencies shall increase the frequency and specificity of grantee reporting, 

conduct additional site visits, and provide additional technical assistance 

and training to recipients of federal funding. 

	 Expediting Review and Resolution of Audit Findings. Agencies shall 

resolve all audit findings within 6 months after completion of the audit to 

the extent practicable. Agencies should avoid granting extension requests 

for audit report submissions and should explore the feasibility of 

conducting additional audit activities to review internal control procedures 

prior to funding the activity. 

	 Adopting Improper Payments Management Protocol. Agencies shall 

manage all Sandy-related funding with the same discipline and rigor as 

programs that are traditionally designated as high-risk for improper payments. 

	 Continuing Collaboration with the Inspector General Community. To 

identify and mitigate potential risk, agencies shall continue early and frequent 

engagement with Inspectors General to discuss issues affecting the DRAA's 

disaster-related programs and activities. 

The EPA issued its internal control plan to OMB on March 28, 2013, and we 

summarized our observations on the agency’s plan below. 

13-P-0351 2 
 

 

Noteworthy Achievements 

The EPA showed foresight to seek a waiver from OMB on the requirement to 

expend DRAA funds within 24 months. EPA staff noted that the 2-year 

requirement does not exist in the SRF base program and that it is difficult to 

construct a typical SRF construction project in 2 years. The EPA also has plans in 

place to undertake many actions to address our suggestions. 

Scope and Methodology 

American Recovery and Reinvestment We performed our review from April Act 2013 to July 2013 in accordance with 

generally accepted government The purpose of the American Recovery and 

Reinvestment Act was to quickly save and auditing standards. Those standards create jobs. Other objectives were to provide require that we plan and perform our temporary relief programs for those most 

review to obtain sufficient, impacted by the recession and invest in 

infrastructure, education, health, and “green” appropriate evidence to provide a energy. The approximate cost of the economic reasonable basis for our observations stimulus package was estimated to be $787 

based on our objectives. We believe billion at the time of passage (later revised to 

$831 billion). The Act included direct spending the evidence obtained provides a in infrastructure, education, health, and energy; reasonable basis for our observations federal tax incentives; and expansion of 

presented in this report. unemployment benefits and other social 

welfare provisions. For EPA, ARRA provided 

significant funding for states to finance high- We sought to determine whether the priority water infrastructure projects through a 

EPA has controls in place for the $4 billion appropriation to the CWSRF 

program and a $2 billion appropriation to the award and management of Sandy DWSRF program. relief funds based on lessons from 

past ARRA reports. While the EPA 

noted important distinctions between 

ARRA funding and Sandy relief funds, the agency agrees that ARRA provides a 

fruitful reference point for Sandy planning. To address our objective, we received 

briefings from agency program and regional offices on Sandy recovery activities, 

including oversight of the states of New York and New Jersey. The EPA’s Office 

of Regional Operations and Office of the Chief Financial Officer described key 

lessons from ARRA as well as emergency responses to Hurricane Katrina and the 

Deepwater Horizon Oil Spill that the agency considered in formulating its Sandy 

internal control plan (submitted to OMB on March 28, 2013). 

We reviewed prior EPA OIG and GAO ARRA reports, and prior EPA OIG 

non-ARRA reports on items referenced in the EPA’s internal control plan 

(e.g., SRF, improper payments, etc.), to identify applicable lessons for Sandy 

relief funds. We reviewed 72 prior reports on ARRA, including 68 EPA OIG and 

four GAO reports. We also reviewed the EPA’s Management Audit Tracking 

System for unimplemented recommendations on a judgmental sample of waterrelated reports given the majority of DRAA appropriations to the CWSRF and 

DWSRF. We identified 44 lessons learned from our review of prior reports and 

13-P-0351 3 
 

 

further narrowed list to five key lessons that repeated in three or more reports. 

We conducted a comparative analysis of our identified lessons learned against the 

EPA’s provisions in the DRAA and the agency’s internal control plan to 

determine the adequacy of planned internal controls. We vetted our five 

suggestions with the EPA and incorporated herein the agency’s comments and its 

descriptions of activities related to our five suggestions. 

Results of Review 

EPA has controls in place to manage Sandy relief funds as described in the 

agency’s internal control plan, such as conducting transaction testing on cash 

draws; performing semiannual administrative review of audits; and accelerating 

resolution of open audits. We identified additional controls for the agency to 

consider based on our prior report review. Our review of 72 prior ARRA reports 

identified the following number of those reports with elements relating to key 

OMB provisions specifically, addressing multiple provisions, or addressing no 

provisions: 

31.94%

29.17%

2.78%

4.17%

20.83%

11.11%

Source: OIG analysis. 

We identified five internal controls for the EPA to consider based on issues that 

arose in three or more of the 72 ARRA reports we reviewed: 

1.	 The EPA should strengthen oversight of sub-recipients and develop a 

checklist that states can use to help ensure compliance with DRAA. 

2.	 The EPA should work with states to incorporate inspections as part of 

routine oversight. 

3.	 The EPA should utilize information in recipient monitoring databases to 

regularly provide reports to management on progress of projects and status 

of corrective action plans. 

13-P-0351 4 
 

 

 

4.	 The EPA’s plan should include specific actions to identify states/projects 

at risk of not meeting deadlines and establish procedures to assist states 

with projects not under contract/delayed. 

5.	 The EPA should update its detection and reporting procedures to identify 

improper grant payments. 

We found that the EPA’s Sandy internal control plan addressed OMB guidance 

requirements. We overlaid OMB’s key elements and our observations on five 

control suggestions on the EPA’s internal control plan. Appendix A shows the 

agency’s full plan with our analysis in green. 

The EPA agreed with our five control suggestions and described activities already 

undertaken related to each as follows: 

1. The EPA should strengthen oversight of sub-recipients and develop a checklist that states 

can use to help ensure compliance with DRAA. 

The EPA agrees on the importance of sub-recipient oversight. The SRF program provided New York 

and New Jersey with copies of review checklists to help ensure sub-recipient compliance with SRF 

requirements. In addition, the EPA has developed DRAA-specific guidance with the states to facilitate 

DRAA compliance. 

2. The EPA should work with states to incorporate inspections as part of routine oversight. 

The EPA agrees that inspections can enhance oversight. While the EPA does not have the statutory 

authority to require states to inspect projects, historically both New York and New Jersey have chosen 

to do so. Consistent with the OIG’s suggestion, they have indicated that they will follow this practice for 

DRAA-funded projects (typically, inspections occur once each at the project’s beginning and end, with 

larger projects receiving more frequent inspections). 

3. The EPA should utilize information in recipient monitoring databases to regularly provide 

reports to management on progress of projects and status of corrective action plans. 

The EPA agrees on the need to effectively use monitoring information to assess progress and 

corrective action. This is a key component of our Internal Control Plan. The “Performance and Results” 

section of the plan designates the review of existing databases such as Clean Water Benefits 

Reporting System, Drinking Water Benefits Reporting System and Compass Data Warehouse. EPA 

Order 5600.6A2 requires the use of the Post Award Database and Grantee and Compliance Database 

to monitor and track corrective actions. The SRF program guidance also requires monthly reporting 

from the states on outlays and disbursements by project. Program officials utilize these sources to 

provide monthly updates to management. 

4. The EPA’s plan should include specific actions to identify states/projects at risk of not 

meeting deadlines and establish procedures to assist states with projects not under 

contract/delayed. 

Both New York state and New Jersey, the two states that will be receiving SRF capitalization grants 

under DRAA, have a long track record of successfully managing billions of dollars worth of water 

infrastructure projects. To ensure projects are completed, the EPA requested a waiver from the 2 year 

expenditure requirement from OMB. In addition, in response to requests from both states, the EPA will 

provide support in tracking individual project status (Clean Water Benefits Reporting System and 

Drinking Water Benefits Reporting System and Compass Data Warehouse) to ensure that the funds 

are spent expeditiously. Further, the SRF program guidance requires monthly reporting from the states 

on outlays and disbursements by project. The EPA believes these measures address the underlying 

intent of the OIG’s suggestion. 

13-P-0351 5 
 

 

 

5. EPA should update its detection and reporting procedures to identify improper grant 

payments. 

The EPA agrees that it is imperative to address the risk of improper payments and our Internal Control 

Plan reflects this priority. OMB M-13-07 provides that “agencies shall manage all Sandy related funding 

with the same discipline and rigor as programs that are traditionally designated as high-risk for 

improper payments.” To ensure compliance with the OMB directive, the SRF program will continue to 

use its existing high-risk compliant protocol. The EPA will also continue to implement an OMBcompliant sampling methodology to identify improper payments through cash transaction testing. 

Source: OIG analysis based upon the EPA’s June 14, 2013 response to our discussion draft report. 

Conclusion 

This report makes no recommendations to the EPA. Rather, we suggest that the 

EPA consider the control suggestions we identified from past ARRA reports as 

the agency moves forward with its Sandy recovery activities. 

Agency Comments and OIG Evaluation 

The EPA agreed with our report suggestions and appreciated our efforts to 

acknowledge the agency’s proactive steps to address our suggestions. Appendix B 

includes the agency’s full response to our draft report. 

13-P-0351 6 
 

 

 

 

 

 

 

 

 

 

Status of Recommendations and 

Potential Monetary Benefits 

POTENTIAL MONETARY 

RECOMMENDATIONS BENEFITS (in $000s) 

Planned 

Rec. 

No. 

Page 

No. Subject Status1 Action Official 

Completion 

Date 

Claimed 

Amount 

Agreed-To 

Amount 

No recommendations. 

O = recommendation is open with agreed-to corrective actions pending 

C = recommendation is closed with all agreed-to actions completed 

U = recommendation is unresolved with resolution efforts in progress 

13-P-0351 7 

1 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Appendix A 

OIG Analysis of the EPA’s Hurricane Sandy Internal Control Plan 

Agency: U.S. EPA Hurricane Sandy Internal Control Plan 

Explanation - The table below describes the incremental risks identified with each program 

administering Hurricane Sandy recovery funding as well as the internal control strategy (specific 

policies and procedures enhancements) for mitigating each of these risks. The risk assessment 

reflects the agency strategy on reducing improper payments, promoting effective grants 

management, and ensuring the integrity of acquisitions. Further, the plan addresses efforts to 

conduct additional levels of review, increase monitoring and oversight of grant recipients, 

enhance collaboration with the inspector general community, expedite review and resolution of 

audit findings, and adopt improper payments management protocol. 

Program Name: Clean Water State Revolving Fund (CWSRF) – $500 million1 

Funded Activities: Waste Water Infrastructure Financing. Grants fund state- managed SRF funds 

which provide loans (and some subsides) for waste water projects to protect public health and 

ensure compliance with the Clean Water Act (CWA). However, unlike other SRF appropriations, 

the supplemental funds are provided for the purpose: “to reduce flood damage risk and 

vulnerability or to enhance resiliency to rapid hydrologic change or a natural disaster at treatment 

works ... and for other eligible tasks at such treatment works or facilities necessary to further 

such purposes”.2 

Risks Associated 

with F unded 

Activities 

Mitigation Strategy OIG Observations 

(Lessons Learned No. from 

Prior Report Review) 

OMB Guidance Memo 

13-071 

Verify spending -

Ensure 

expenditures 

match progress to 

date and are for 

appropriate 

purpose (Improper 

Payments3

) and 

appropriate 

measures taken to 

prevent waste, 

fraud and abuse. 

Perform State Annual Review 

& conduct transaction testing 

on selected cash draws. SemiAnnual Administrative review 

of audits and open reviews. In 

addition, resolution of open 

audits will be accelerated. 

Policies and Procedures: 

EPA Order 5700.6A2 Policy 

on Compliance, Review and 

Monitoring, EPA Manual 

2750 Audit Management 

Procedures. 

1. EPA should strengthen 

oversight of sub-recipients and 

develop a checklist that states can 

use to help ensure compliance 

with DRAA. 

2. EPA should work with states to 

incorporate inspections as part of 

routine oversight. 

3. EPA should utilize information 

in recipient monitoring databases 

to regularly provide reports to 

management on progress of 

projects and status of corrective 

action plans. 

Conducting Additional 

Levels of Review 

Increasing Monitoring 

and Oversight of Grant 

Recipients 

Expediting Review and 

Resolution of Audit 

Findings 

Adopting Improper 

Payments Management 

Protocol 

1 SRF Notes a) Mechanism for CW & DW SRFs are similar but they implement different statutes and have 

some differences in eligibility, etc. b) EPA may also retain $1 million of the total $600 million for 

management and oversight c) States may choose to switch some funds from one SRF to the other. 

2 Copy of EPA and management portions of the DRAA legislation attached for reference. 

3 The agency plans to group all “Sandy” funds into a consolidated payment stream, which will be sampled for 

improper payments during the FY 2014 improper payments reporting cycle.
 

13-P-0351 8 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risks Associated 

with F unded 

Activities 

Mitigation Strategy OIG Observations 

(Lessons Learned No. from 

Prior Report Review) 

OMB Guidance Memo 

13-071 

Performance & Review State Annual Report 1. EPA should strengthen Increasing Monitoring 

Results – Ensure and conduct State Annual oversight of sub-recipients and and Oversight of Grant 

progress with 

workplan and 

Review & review CBR (Clean 

Water Benefits Reporting 

develop a checklist that states can 

use to help ensure compliance 

with DRAA. 

Recipients 

environmental System)/PBR (Drinking 

results / outcomes. Water Benefits Reporting 

System) data. Policies and 

Procedures: 5700.6A2 Policy 

on Compliance, Review and 

Monitoring; EPA Order 

5700.7 Environmental Results 

under EPA Assistance 

Agreements. 

2. EPA should work with states to 

incorporate inspections as part of 

routine oversight. 

3. EPA should utilize information 

in recipient monitoring databases 

to regularly provide reports to 

management on progress of 

projects and status of corrective 

action plans. 

4. EPA’s plan should include 

specific actions to identify 

states/projects at risk of not 

meeting deadlines and establish 

procedures to assist states with 

projects not under 

contract/delayed. 

Civil Rights - Provide certification of N/A Conducting Additional 

Compliance with compliance with Title VI Levels of Review 

Title VI. (Form 4700-4). Policies and 

Procedures: National 

administrative term and 

condition, "Civil Rights 

Obligations," included on all 

awards. 

OIG - Ensure 

collaboration with 

the Office of the 

Inspector General 

EPA has identified a point of 

contact in OIG for all 

Hurricane Sandy related 

issues. 

N/A Continuing 

Collaboration with the 

Inspector General 

Community 

Grant Conditions Semi-annual 1. EPA should strengthen Conducting Additional 

– Compliance administrative review of oversight of sub-recipients and Levels of Review 

with all terms and 

conditions 

compliance with grant 

terms and conditions. 

develop a checklist that states can 

use to help ensure compliance 

with DRAA. 

associated with Policies and Procedures: 

grant. EPA Order 5700.6A2 

Policy on Compliance, 

Review and Monitoring. 

2. EPA should work with states to 

incorporate inspections as part of 

routine oversight. 

3. EPA should utilize information 

in recipient monitoring databases 

to regularly provide reports to 

management on progress of 

13-P-0351 9 
 

 

 

 

 

 

 

 

 

 

 

 

Risks Associated 

with F unded 

Activities 

Mitigation Strategy OIG Observations 

(Lessons Learned No. from 

Prior Report Review) 

OMB Guidance Memo 

13-071 

projects and status of corrective 

action plans. 

4. EPA’s plan should include 

specific actions to identify 

states/projects at risk of not 

meeting deadlines and establish 

procedures to assist states with 

projects not under 

contract/delayed. 

Appropriate Use - Completion of annual ULO 4. EPA’s plan should include Conducting Additional 

Ensure all review and certification. specific actions to identify Levels of Review 

funds associated 

with the award 

are needed for 

applicable 

projects. 

Policies and P rocedures: 

Resource Management 

Directive System No. 2520-

03-P1 (Administrative 

Controls of Appropriated 

Funds); EPA Grants Policy 

states/projects at risk of not 

meeting deadlines and establish 

procedures to assist states with 

projects not under 

contract/delayed. 

Issuance (GPI)11-01 

Managing Unliquidated 

Obligations and Ensuring 

Progress under EPA 

Assistance Agreements (as 

amended by GPI 12-06 

Timely Obligation, Award 

and Expenditure of EPA 

Grant Funds). 

Tracking – EPA Creation of CFDA 66.482 - 4. EPA’s plan should include Increasing Monitoring 

will track the 

outlays and 

expenditures. 

Disaster Relief Appropriations 

Act (DRAA) Hurricane Sandy 

Capitalization Grants For 

specific actions to identify 

states/projects at risk of not 

meeting deadlines and establish 

procedures to assist states with 

and Oversight of Grant 

Recipients 

Clean Water State Revolving 

Funds and new appropriations 

/funds code (E2S2 – CWSRF 

Sandy Supplemental).* 

projects not under 

contract/delayed. 

5. EPA should update its 

detection and reporting 

procedures to identify improper 

grant payments. 

13-P-0351 10 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risks Associated 

with F unded 

Activities 

Mitigation Strategy OIG Observations 

(Lessons Learned No. from 

Prior Report Review) 

OMB Guidance Memo 

13-071 

Timely The estimated 3. EPA should utilize information Increasing Monitoring 

Expenditure – outlay/expenditure rates are in recipient monitoring databases and Oversight of Grant 

Additional 

procedures to 

based on the states’ needs and 

plans. (EPA will not be 

to regularly provide reports to 

management on progress of 

projects and status of corrective 

Recipients 

ensure funds are delaying the work) New action plans. 

used in a timely Jersey and New York have 

manner in the case indicated it could take many 4. EPA’s plan should include 

where a waiver is years to expend all the funds, specific actions to identify 

granted for the 

two year 

given the time it takes to 

implement construction 

states/projects at risk of not 

meeting deadlines and establish 

procedures to assist states with expenditure projects. The estimated projects not under 

requirement outlays/expenditures are as contract/delayed. 

(Section 904(c)). follows: Year 1: 0%; Year 2: 

2%; Year 3: 24%; Year 4: 

21%; Year 5: 19%; Year 6: 

11%; Year 7: 8%; Year 8: 7%; 

and Year 9: 8%. Policies and 

Procedures: SRF Guidance 

on Managing Hurricane 

Sandy Funds and Activities.* 

Selection Process Grants will be provided to 1. EPA should strengthen Conducting Additional 

– Ensure that New York and New Jersey oversight of sub-recipients and Levels of Review 

proper procedures 

and scrutiny is 

per the Clean Water Act. 

Projects are chosen by the 

develop a checklist that states can 

use to help ensure compliance 

with DRAA. 

provided during states in accordance with 

the recipient eligible project requirements 

selection process. and State priority ranking 

systems as required in CWA 

and DRAA. Contracts for the 

specified projects are 

competed via bid processes as 

required by the states and 

municipalities. Policies and 

Procedures: SRF Guidance 

on Managing Hurricane 

Sandy Funds and Activities 

and the Clean Water Act.* 

13-P-0351 11 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Program Name: Drinking Water State Revolving Fund (DWSRF) $100 million4 

Funded Activities: Drinking Water Infrastructure Financing. Grants fund state- managed SRF 

funds which provide loans (and some subsidies) for drinking water projects to protect public 

health and ensure compliance with the Safe Drinking Water Act (SDWA). However, unlike other 

SRF appropriations, the supplemental funds are provided for the purpose: “to reduce flood 

damage risk and vulnerability or to enhance resiliency to rapid hydrologic change or a natural 

disaster at treatment works ... and for other eligible tasks at such treatment works or facilities 

necessary to further such purposes”.5 

Risks Associated 

with F unded 

Activities 

Mitigation Strategy OIG Observations 

(Lessons Learned No. from 

Prior Report Review) 

OMB Guidance Memo 

13-071 

Verify spending - Perform State Annual Review 1. EPA should strengthen Conducting Additional 

Ensure & conduct transaction testing oversight of sub-recipients and Levels of Review 

expenditures 

match progress to 

on selected cash draws. SemiAnnual Administrative review 

develop a checklist that states can 

use to help ensure compliance 

with DRAA. 

Increasing Monitoring 

and Oversight of Grant date and are for of audits and open reviews. In Recipients 

appropriate addition, resolution of open 2. EPA should work with states to 

purpose (Improper audits will be accelerated. incorporate inspections as part of Expediting Review and 

Payments) and Policies and Procedures: routine oversight. Resolution of Audit 

appropriate 

measures taken to 

EPA Order 5700.6A2 Policy 

on Compliance, Review and 3. EPA should utilize information 

in recipient monitoring databases 

Findings 

Adopting Improper 

prevent waste, Monitoring, EPA Manual to regularly provide reports to Payments Management 

fraud and abuse. 2750 Audit Management 

Procedures. 

management on progress of 

projects and status of corrective 

action plans. 

Protocol 

Performance & Review State Annual Report 1. EPA should strengthen Increasing Monitoring 

Results – Ensure and conduct State Annual oversight of sub-recipients and and Oversight of Grant 

progress with 

workplan and 

Review & review CBR 

(Clean Water Benefits 

Reporting System)/PBR 

develop a checklist that states can 

use to help ensure compliance 

with DRAA. 

Recipients 

environmental (Drinking Water Benefits 

results/outcomes. Reporting System) data. 

Policies and Procedures: 

5700.6A2 Policy on 

Compliance, Review and 

Monitoring; EPA Order 

5700.7 Environmental Results 

under EPA Assistance 

Agreements. 

2. EPA should work with states to 

incorporate inspections as part of 

routine oversight. 

3. EPA should utilize information 

in recipient monitoring databases 

to regularly provide reports to 

management on progress of 

projects and status of corrective 

action plans. 

4. EPA’s plan should include 

specific actions to identify 

states/projects at risk of not 

4 SRF Notes a) Mechanism for CW & DW SRFs are similar but they implement different statutes and have some
 

differences in eligibility, etc. b) EPA may also retain $1 million of the total $600 million for management and
 

oversight c) States may choose to switch some funds from one SRF to the other. 

5

 Language taken from DRAA statute. 

13-P-0351 12 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risks Associated 

with F unded 

Activities 

Mitigation Strategy OIG Observations 

(Lessons Learned No. from 

Prior Report Review) 

OMB Guidance Memo 

13-071 

meeting deadlines and establish 

procedures to assist states with 

projects not under 

contract/delayed. 

Civil Rights - Provide certification of N/A Conducting Additional 

Compliance with compliance with Title VI Levels of Review 

Title VI. (Form 4700-4). Policies and 

Procedures: National 

administrative term and 

condition, "Civil Rights 

Obligations," included on all 

awards. 

OIG - Ensure 

collaboration with 

the Office of the 

Inspector General. 

EPA has identified a point of 

contact in OIG for all 

Hurricane Sandy related 

issues. 

N/A Continuing 

Collaboration with the 

Inspector General 

Community 

Grant Conditions Semi-annual 1. EPA should strengthen Conducting Additional 

– Compliance administrative review of oversight of sub-recipients and Levels of Review 

with all terms and 

conditions 

compliance with grant 

terms and conditions. 

develop a checklist that states can 

use to help ensure compliance 

with DRAA. 

associated with Policies and Procedures: 

grant. EPA Order 5700.6A2 2. EPA should work with states to 

Policy on Compliance, incorporate inspections as part of 

Review and Monitoring. routine oversight. 

3. EPA should utilize information 

in recipient monitoring databases 

to regularly provide reports to 

management on progress of 

projects and status of corrective 

action plans. 

4. EPA’s plan should include 

specific actions to identify 

states/projects at risk of not 

meeting deadlines and establish 

procedures to assist states with 

projects not under 

contract/delayed. 

Appropriate Use - Completion of annual ULO 4. EPA’s plan should include Conducting Additional 

Ensure all review and certification. specific actions to identify Levels of Review 

funds associated 

with the award 

are needed for 

applicable 

projects 

Policies and P rocedures: 

Resource Management 

Directive System No. 2520-

03-P1 (Administrative 

Controls of Appropriated 

Funds); EPA Grants Policy 

Issuance (GPI)11-01 

Managing Unliquidated 

states/projects at risk of not 

meeting deadlines and establish 

procedures to assist states with 

projects not under 

contract/delayed. 

13-P-0351 13 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risks Associated 

with F unded 

Activities 

Mitigation Strategy OIG Observations 

(Lessons Learned No. from 

Prior Report Review) 

OMB Guidance Memo 

13-071 

Obligations and Ensuring 

Progress under EPA 

Assistance Agreements (as 

amended by GPI 12-06 

Timely Obligation, Award 

and Expenditure of EPA 

Grant Funds). 

Tracking – EPA Creation of CFDA 66.483 - 4. EPA’s plan should include Increasing Monitoring 

will track the 

outlays and 

expenditures. 

Disaster Relief 

Appropriations Act (DRAA) 

Hurricane Sandy 

Capitalization Grants For 

Drinking Water State 

Revolving Funds and new 

appropriations/funds code 

(E3S2 – CWSRF Sandy 

Supplemental.)* 

specific actions to identify 

states/projects at risk of not 

meeting deadlines and establish 

procedures to assist states with 

projects not under 

contract/delayed. 

5. EPA should update its 

detection and reporting 

procedures to identify improper 

grant payments. 

and Oversight of Grant 

Recipients 

Timely The estimated 3. EPA should utilize information Increasing Monitoring 

Expenditure – outlay/expenditure rates are in recipient monitoring databases and Oversight of Grant 

Additional 

procedures to 

based on the states’ needs and 

plans. (EPA will not be 

to regularly provide reports to 

management on progress of 

projects and status of corrective 

Recipients 

ensure funds are delaying the work) New action plans. 

used in a timely Jersey and New York have 

manner in the case indicated it could take many 

where a waiver is years to expend all the funds, 

granted for the given the time it takes to 

two year implement construction 

expenditure projects. The estimated 

requirement outlays/expenditures are as 

(Section 904(c)). follows: Year 1: 0%; Year 2: 

2%; Year 3: 24%; Year 4: 

21%; Year 5: 19%; Year 6: 

11%; Year 7: 8%; Year 8: 

7%; and Year 9: 8%. Policies 

and Procedures: SRF 

Guidance on Managing 

Hurricane Sandy Funds and 

Activities.* 

Selection Process Grants will be provided to 1. EPA should strengthen Conducting Additional 

– Ensure that New York and New Jersey oversight of sub-recipients and Levels of Review 

proper procedures 

and scrutiny is 

per the Safe Drinking Water 

Act. Projects are chosen by 

develop a checklist that states can 

use to help ensure compliance 

with DRAA. 

provided during the states in accordance with 

the recipient eligible project requirements 

selection process. and State priority ranking 

13-P-0351 14 
 

 

 

 

 

 

Risks Associated 

with F unded 

Activities 

Mitigation Strategy OIG Observations 

(Lessons Learned No. from 

Prior Report Review) 

OMB Guidance Memo 

13-071 

systems as required in SDWA 

and DRAA. Contracts for the 

specified projects are 

competed via bid processes as 

required by the states and 

municipalities. Policies and 

Procedures: SRF Guidance 

on Managing Hurricane 

Sandy Funds and Activities 

and the Safe Drinking Water 

Act.* 

13-P-0351 15 
 

 

 

 

 

Appendix B 

Agency’s Response to Draft Report 

cc: Craig Hooks Barbara Freggens Matt King 

Nanci Gelb Adam Fett Bonnie Gitlin 

Howard Corcoran Sandy Dickens Marilyn Ramos 

 Maryann Froehlich Nancy Stoner Richard Eyermann 

David Bloom Mike Shapiro Kevin Christensen 

John O’Connor Hamilton Humes Patrick Gilbride 

Istanbul Yusuf Andrew Sawyers Erin Barnes-Weaver 

13-P-0351 16 
 

 

Appendix C 

Distribution 

Office of the Administrator 

Director, Office of Financial Management, Office of the Chief Financial Officer 

Assistant Administrator for Water 

Assistant Administrator for Administration and Resources Management 

Agency Follow-Up Official (the CFO) 

Agency Follow-Up Coordinator 

General Counsel 

Associate Administrator for Congressional and Intergovernmental Relations 

Associate Administrator for External Affairs and Environmental Education 

Deputy Chief Financial Officer 

Principal Deputy Assistant Administrator, Office of Water 

Principal Deputy Assistant Administrator, Office of Administration and Resources Management 

Director, Office of Wastewater Management, Office of Water 

Director, Office of Grants and Debarment, Office of Administration and Resources Management 

Deputy Director, Office of Financial Management, Office of the Chief Financial Officer 

Audit Follow-Up Coordinator, Office of the Chief Financial Officer 

Audit Follow-Up Coordinator, Office of Water 

Audit Follow-Up Coordinator, Office of Administration and Resources Management 

13-P-0351 17