U.S. ENVIRONMENTAL PROTECTION AGENCY

OFFICE OF INSPECTOR GENERAL

American Recovery and 

Reinvestment Act Site Visit of 

Yauco – La Jurada Community 

Distribution System, 

Yauco, Puerto Rico 

Report No. 13-R-0413 September 23, 2013 

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about the EPA OIG. 
 

 

 

 

Report Contributors: Jean Bloom 

 Glen Chabotar 

 Vanessa Rodriquez-Moya 

Abbreviations 

DBA Davis-Bacon Act 

DWSRF Drinking Water State Revolving Fund 

EPA U.S. Environmental Protection Agency 

PRASA Puerto Rico Aqueduct and Sewer Authority 

PRDOH Puerto Rico Department of Health 

Cover photo: Pump Station at the Yauco - La Jurada Community Distribution System 

site in Yauco, Puerto Rico. (EPA OIG photo) 

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: 

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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 13-R-0413 

September 23, 2013 Office of Inspector General 

At a Glance
 

Why We Did This Review 

The U.S. Environmental 

Protection Agency (EPA), 

Office of Inspector General 

(OIG), conducts site visits of 

American Recovery and 

Reinvestment Act of 2009 

clean water and drinking water 

projects. The purpose of this 

unannounced site visit was to 

determine whether the recipient 

of funds complied with selected 

requirements of the Recovery 

Act and Drinking Water State 

Revolving Fund (DWSRF) 

program. 

The Puerto Rico Aqueduct and 

Sewer Authority (PRASA) 

received $19.5 million in 

Recovery Act funds from the 

Puerto Rico Infrastructure 

Finance Authority under the 

DWSRF program administered 

by the Puerto Rico Department 

of Health (PRDOH). The Yauco 

– La Jurada Community 

Distribution System project 

received $1,385,000 in 

Recovery Act funds through a 

DWSRF loan. 

This report addresses the 

following EPA theme: 

 Protecting water: A precious, 

limited resource. 

For further information, 

contact our public affairs office 

at (202) 566-2391. 

The full report is at: 

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

20130923-13-R-0413.pdf 

American Recovery and Reinvestment Act 

Site Visit of Yauco – La Jurada Community 

Distribution System, Yauco, Puerto Rico 

What We Found 

We conducted an unannounced site visit to the Recovery Act-funded project of 

the Yauco – La Jurada Community Distribution System in Yauco, Puerto Rico, 

in August 2010. The project consisted of furnishing and installing new water 

distribution lines, constructing two distribution tanks, and installing house service 

connections. We toured the project site, interviewed personnel from PRASA and 

the PRDOH, as well as the prime contactor’s manager and employees, and 

reviewed documentation related to Recovery Act requirements. 

Based on our site visit, no issues or concerns came to our attention that would 

require action from the Commonwealth of Puerto Rico, PRDOH, PRASA or EPA. 

The prime contractor did not provide sufficient documentation to confirm payment 

of wages to its employees. According to PRASA, the prime contractor went out of 

business before completing the project. The project was ultimately completed by 

the prime contractor’s insurers. PRASA experienced significant delays in 

acquiring documentation to support the review as a result of the prime 

contractor’s demise. 

According to PRASA, having a prime contractor going out of business before it 

completes a project is a rare and isolated event. With PRASA’s assistance, we 

received adequate documentation to support compliance with the requirements 

of the Recovery Act. 
 

 

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

WASHINGTON, D.C. 20460 

Judith Enck, Regional Administrator 

THE INSPECTOR GENERAL 

September 23, 2013 

MEMORANDUM 

SUBJECT: American Recovery and Reinvestment Act Site Visit of 

Yauco – La Jurada Community Distribution System, Yauco, Puerto Rico 

 Report No. 13-R-0413 

FROM: Arthur A. Elkins Jr. 

TO: 

 Region 2 

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

U.S. Environmental Protection Agency. This report summarizes the results of our site visit of the 

Yauco – La Jurada Community Distribution System in Yauco, Puerto Rico, funded under the American 

Recovery and Reinvestment Act of 2009. 

We performed this site visit as part of our responsibility under the Recovery Act. The purpose of our site 

visit was to determine the Puerto Rico Aqueduct and Sewer Authority’s compliance with select 

requirements under the Recovery Act pertaining to the Drinking Water State Revolving Loan program. 

The funding agreement included a loan for $1,385,000 of Recovery Act funds for the Yauco – La Jurada 

Community Distribution System. 

Because this report contains no recommendations, you are not required to respond to this report. This 

report will be available at http://www.epa.gov/oig. 

If you or your staff have any questions about this report, please contact Richard Eyermann, acting 

assistant inspector general for the Office of Audit, at (202) 566-0565 or eyermann.richard@epa.gov; 

or Robert Adachi, product line director, at (415) 947-4537 or adachi.robert@epa.gov. 
 

American Recovery and Reinvestment Act Site Visit of 13-R-0413 

Yauco – La Jurada Community Distribution System, 

Yauco, Puerto Rico 

Table of Contents 

Purpose........................................................................................................................ 1
 

Background ................................................................................................................. 1
 

Scope and Methodology............................................................................................. 1
 

Results of Site Visit..................................................................................................... 2
 

Buy American Requirements................................................................................ 2 

Contract Procurement .......................................................................................... 3 

Limits on Funds and Reporting ............................................................................ 3 

Wage Rate Requirements.................................................................................... 3 

Agency and Recipient Comments and OIG Evaluation .......................................... 4
 

Status of Recommendations and Potential Monetary Benefits ............................. 5
 

Appendix 

A Distribution ......................................................................................................... 6 
 

 

 

 

 

Purpose 

The purpose of our unannounced site visit to the project of the Yauco – La Jurada 

Community Distribution System in Yauco, Puerto Rico, funded by the American 

Recovery and Reinvestment Act of 2009, was to determine whether the Puerto 

Rico Aqueduct and Sewer Authority (PRASA) complied with selected 

requirements of the Recovery Act pertaining to the Drinking Water State 

Revolving Fund (DWSRF) program. 

Background 

The U.S. Environmental Protection Agency (EPA) awarded Recovery Act funds to 

the Commonwealth of Puerto Rico under the DWSRF program. PRASA received 

$19.5 million in Recovery Act funds from the Puerto Rico Infrastructure Finance 

Authority under the DWSRF Program administered by the Puerto Rico Department 

of Health (PRDOH). The Yauco – La Jurada Community Distribution System 

project received $1,385,000 in Recovery Act funds through a DWSRF loan. 

The project consisted of furnishing and installing new water distribution lines, 

constructing two distribution tanks, and installing house service connections. 

Scope and Methodology 

We did not perform this engagement in accordance with generally accepted 

government auditing standards. Specifically, we did not perform certain steps that 

would allow us to obtain information to assess PRASA’s internal controls and any 

previously reported audit concerns. As a result, we do not express an opinion on 

the adequacy of PRASA’s internal controls or its compliance with all federal, 

state or local requirements. 

We visited the Commonwealth of Puerto Rico during August 2010 and made 

unannounced onsite visits to various Recovery Act project sites. We visited the 

Yauco – La Jurada Community Distribution System project site on August 11, 

2010. 

We limited the scope of our visit to the following steps: 

1. Toured the construction project. 

2. Interviewed prime contractor employees and the prime contractor 

manager onsite and personnel from PRASA and PRDOH. 

3. Reviewed documentation provided by PRASA and the prime 

contractor on the following matters: 

a. Buy American requirements under Section 1605 of the 

Recovery Act. 

b. Wage Rate requirement (Davis-Bacon Act, or DBA) under 

Section 1606 of the Recovery Act. 

13-R-0413 1 
 

 

 

c. Limits on funds and reporting requirements under 

Sections 1604 and 1512 of the Recovery Act. 

d. Contract procurement. 

For Section 1606 testing, we judgmentally selected two pay periods (weeks ended 

July 24, 2010, and August 14, 2010) to determine whether employees were paid 

the prevailing DBA wages rates and to confirm payment to employees. We 

selected the week ended August 14, 2010 as it correlated with our site visit and 

judgmentally selected a week from the month prior to our site visit (week ended 

July 24, 2010). We requested and verified supporting documentation from the 

contractor and learned of cash payments made to employees for the payroll week 

ended August 14, 2010. We expanded the universe to the 46-week period starting 

February 13, 2010, through December 25, 2010, which included 454 transactions. 

The contractor did not provide all the documentation needed to determine 

compliance with the wage rate requirement. We requested, and PRASA provided, 

assistance in obtaining documentation from the prime contractor and the prime 

contractor’s bank to support payment to employees. 

Results of Site Visit 

Based on our site visit, no issues or concerns came to our attention that would 

require action from the Commonwealth of Puerto Rico, PRDOH, PRASA or EPA. 

The prime contractor did not provide sufficient documentation to confirm 

payment of wages to its employees. According to PRASA, the prime contractor 

went out of business before completing the project. The project was ultimately 

completed by the prime contractor’s insurers. PRASA experienced significant 

delays in acquiring documentation to support the review as a result of the prime 

contractor’s demise. According to PRASA, having a prime contractor going out 

of business before it completes a project is a rare and isolated event. With 

PRASA’s assistance, we received adequate documentation to support compliance 

with the requirements of the Recovery Act. Our specific review results are 

summarized below 

Buy American Requirements 

We did not identify any issues regarding the Buy American requirements set out 

in Section 1605 of the Recovery Act. Section 1605 of the Recovery Act requires 

that all iron, steel or manufactured goods be produced in the United States, unless 

certain exceptions apply. Based on interviews conducted and work performed, 

PRASA and the prime contractor were fully aware of the Buy American 

requirements. The Buy American requirements were included in the bid 

documents and the contract between PRASA and its prime contractor. Physical 

observation of materials onsite and Internet research conducted on the 

manufacturers and materials used for the project did not disclose any issue or 

concern with the Buy American requirements. 

13-R-0413 2 
 

 

 

Contract Procurement 

We did not identify any issues with contract procurement or unfair bidding 

practices. PRASA competitively awarded the construction contract based on 

public advertisement. PRASA received 27 bids and, based on the 

recommendation of its bid board, awarded the contract to the lowest responsive 

bidder. A sample of unsuccessful bidders confirmed their participation in the 

bidding process. Overall, the bidders contacted were satisfied with the 

procurement process. 

Limits on Funds and Reporting 

We did not identify any issues regarding the limits on funds and reporting 

requirements set out in Section 1604 and 1512 of the Recovery Act. Under 

Section 1604 of the Recovery Act, no funds can be used for any casino, other 

gambling establishment, aquarium, zoo, golf course, or swimming pool. We 

visited the project site and reviewed the prime contract to verify that it contained 

the appropriate language to comply with Section 1604 of the Recovery Act. 

Section 1512 of the Recovery Act requires the recipient to report the number of jobs 

created and the number of jobs retained by project or activity. We did not identify 

any issues regarding PRASA’s ability to meet the Recovery Act reporting and 

financial management requirements. We interviewed PRASA personnel to obtain an 

understanding of the reporting process and reviewed an example of the tables that 

include the Section 1512 reporting information submitted by PRASA to PRDOH. 

Wage Rate Requirements 

The prime contractor complied with the requirements set out in Section 1606 of 

the Recovery Act. Section 1606 requires all mechanics and laborers employed on 

projects funded directly by—or assisted in whole or in part with—Recovery Act 

funds to be paid wages at rates no less than the locally prevailing rate, as 

determined by the U.S. Department of Labor. 

We performed tests to determine whether employees were paid DBA wages rates 

and to confirm payment to employees. Specifically, we compared the wages paid 

on the certified payroll reports to the DBA Wage Determinations to determine 

whether employees were paid wages equal to or above the required wage rate 

specified by the U.S. Department of Labor. 

We determined that the prime contractor was aware of the Recovery Act 

Section 1606 requirements, and demonstrated its knowledge by preparing the 

certified payroll reports and reviewing the payroll transactions for compliance 

with the requirements. For example, from February 2010 through May 2010 there 

were 89 instances where employees were not paid the minimum wages as 

required by the DBA. The contractor noted the errors and made the corrections in 

June 2010, prior to our review. We noted no additional instances. 

13-R-0413 3 
 

 

 

We reviewed the payment of wages to employees and determined cash payments 

were made to employees for the week ended August 14, 2010. Since cash 

payments can be an indicator of fraud, we expanded our universe of Section 1606 

compliance testing for the 46-week period February 13, 2010, through 

December 25, 2010. We found cash payments to employees for 10 payroll periods 

(period ending August 14, 2010, through the period ending October 16, 2010). 

Our universe included 454 transactions, of which 316 were non-cash payroll 

transactions and 138 were cash payments. 

We made multiple requests to the contractor for documentation to support the 

payment of wages to employees. In September 2011, we obtained Office of 

Inspector (OIG) General Office of Counsel services, submitted a formal request to 

PRASA, and requested employee affidavits for the 138 cash payments and 

supporting documentation for 191 of the 316 non-cash payroll transactions. 

With PRASA’s assistance, we received documentation to support 95 percent of 

the payroll transactions examined (432 of 454 payroll transactions). We received 

canceled checks, affidavits from the prime contractor and its employees, or bank 

printouts to support payments to the employee. We verified all cash payments 

using the information provided. 

PRASA, dealing directly with the prime contractor’s bank, was unable to provide 

canceled checks for 22 of the requested transactions due to inaccurate check 

numbers provided by the prime contractor. Due to the cost to PRASA associated 

with obtaining additional canceled checks from the bank, we did not make any 

further requests to obtain the outstanding checks. Based on the volume of 

canceled checks provided, we concluded there was limited risk in this area. 

Agency and Recipient Comments and OIG Evaluation 

We discussed our site visit results at an exit conference with representatives of 

PRDOH, PRASA and Region 2 on August 8, 2013. Originally, we recommended 

that PRDOH require PRASA to review potential contractors’ internal controls 

associated with the payment of payroll transactions prior to awarding any future 

contracts involving federal funds to reduce the risk associated with cash payments. 

Based on additional information provided both during and after the exit conference, 

PRASA was able to document that its standard procedures include a review of 

internal controls prior to awarding any contracts, and those procedures were 

followed. As a result, we removed this recommendation from our final report, and 

this report no longer contains any recommendations. 

13-R-0413 4 
 

 

 

 

 

 

 

 

 

 

 

 

1 

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-R-0413 5 
 

 

 

Appendix A 

Distribution 

Office of the Administrator 

Regional Administrator, Region 2 

Deputy Regional Administrator, Region 2 

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 

Director, Grants and Interagency Agreements Management Division, 

Office of Administration and Resources Management 

Director, Office of Policy and Resource Management, 

Office of Administration and Resources Management 

Deputy Director, Office of Policy and Resource Management, 

Office of Administration and Resources Management 

Director, Caribbean Environmental Protection Division, Region 2 

Audit Follow-Up Coordinator, Region 2 

Audit Follow-Up Coordinator, Office of Policy and Resource Management, 

Office of Administration and Resources Management 

Public Affairs Officer, Region 2 

Executive Infrastructure Director, Puerto Rico Aqueduct and Sewer Authority 

Director, Potable Water Division, Puerto Rico Department of Health 

13-R-0413 6