U.S. ENVIRONMENTAL PROTECTION AGENCY 

OFFICE OF INSPECTOR GENERAL 

Catalyst for Improving the Environment 

 Evaluation Report 

EPA Needs Definitive Guidance 

for Recovery Act and 

Future Green Reserve Projects 

Report No. 10-R-0057 

 February 1, 2010 
Report Contributors: John Coll 

 Dan Engelberg 

 Linda Fuller 

 Julie Hamann

 Melba Reed 

Abbreviations 

ARRA American Recovery and Reinvestment Act 

EPA U.S. Environmental Protection Agency 

OIG Office of Inspector General 

SRF State Revolving Fund 

Cover photos:	 From left: Vegetated curb extensions used in Portland, Oregon, to 

decrease stormwater runoff (EPA photo); the American Recovery and 

Reinvestment Act logo; cisterns at Chesapeake Bay Foundation 

Headquarters (photo courtesy Chesapeake Bay Foundation). 
U.S. Environmental Protection Agency 10-R-0057 

February 1, 2010 Office of Inspector General 

At a Glance 

Catalyst for Improving the Environment 

Why We Did This Review 

As part of our efforts to review 

the U.S. Environmental 

Protection Agency’s (EPA’s) 

management of American 

Recovery and Reinvestment 

Act (ARRA) funding, we 

evaluated whether EPA has 

developed and implemented 

adequate controls to ensure that 

States actively solicited for 

green reserve projects before 

reprogramming such funds to 

traditional projects. 

Background 

The Clean Water and Drinking 

Water State Revolving Funds 

provide low-interest loans for 

protecting water quality and 

public health. The ARRA 

provided $6 billion in 

capitalization grants to the 

States for these funds. ARRA 

required at least 20 percent of 

this funding to support green 

projects: water or energy 

efficiency, green infrastructure, 

or environmentally innovative 

activities. 

For further information, 

contact our Office of 

Congressional, Public Affairs 

and Management at 

(202) 566-2391. 

To view the full report, 

click on the following link: 

www.epa.gov/oig/reports/2010/ 

20100201-10-R-0057.pdf 

EPA Needs Definitive Guidance for Recovery 

Act and Future Green Reserve Projects 

What We Found 

EPA has not provided clear and comprehensive guidance to States for how to 

determine the eligibility of green reserve projects. EPA was promoting a green 

approach to wastewater and drinking water programs for at least a year prior to 

the ARRA’s enactment. Despite that experience, EPA did not develop and issue 

clear and comprehensive guidance in time to meet many of the States’ needs. 

For example, EPA did not provide guidance on how to solicit and select green 

projects until after many States had finished doing so, and some States felt the 

need to resolicit for green projects while others did not. 

EPA’s guidance and subsequent updates have not addressed important aspects of 

project selection. At the time of this review, EPA had not established water and 

energy efficiency threshold ranges for many types of green projects. Also, the 

Agency still had not provided sufficient information to States on how to develop 

business case justifications for non-categorical projects. Moreover, changes over 

time in EPA’s guidance for how to determine project eligibility resulted in EPA 

regions applying different standards for approving States’ green project proposals. 

EPA cannot provide a reasonable assurance that its green reserve projects will 

meet Congress’ objectives without issuing guidance that sets definitive 

expectations. Additionally, future green funding may face similar issues. 

What We Recommend 

In its formal response to the draft report, the Agency did not agree or disagree 

with the recommendations. Subsequently, OIG was told the Agency 

nonconcurred with the draft report’s recommendations and alternative 

recommendations were informally proposed which were acceptable to OIG. 

We amended the recommendations in this report to incorporate the informal 

proposal; however the recommendations are undecided pending formal Agency 

approval or rejection. The revised recommendations are for EPA to develop and 

revise guidance, information, and, as appropriate, specific criteria that States can 

employ to assist them in identifying green reserve projects. We also recommend 

that EPA conduct timely reviews of States’ submitted green projects and, where 

necessary, business cases. 

. 
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

WASHINGTON, D.C. 20460 

OFFICE OF 

INSPECTOR GENERAL 

February 1, 2010 

MEMORANDUM 

SUBJECT:	 EPA Needs Definitive Guidance for Recovery Act and 

Future Green Reserve Projects 

FROM:

TO:	 Peter S. Silva 

Assistant Administrator, Office of Water 

This is our report on the subject evaluation conducted by the Office of Inspector General (OIG) 

of the U.S. Environmental Protection Agency (EPA). This report contains findings that describe 

the problems the OIG has identified and corrective actions the OIG recommends. 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 resolution procedures. 

The estimated cost of this report – calculated by multiplying the project’s staff days by the 

applicable daily full cost billing rates in effect at the time and adding travel costs – is $329,423. 

Action Required 

In accordance with EPA Manual 2750, you are required to provide a written response to this 

report within 90 calendar days. You should include a corrective actions plan for the undecided 

recommendations while resolution efforts continue. The corrective actions plan should include 

agreed-upon actions, including milestone dates. We have no objections to the further release of 

this report to the public. This report will be available at http://www.epa.gov/oig. 

If you or your staff have any questions regarding this report, please contact me at 202-566-0827 or 

najjum.wade@epa.gov; Dan Engelberg, Director, at 202-566-0830 or engelberg.dan@epa.gov; or 

Julie Hamann, Project Manager, at 913-551-7693 or hamann.julie@epa.gov. 

 Report No. 10-R-0057 

 Wade T. Najjum 

 Assistant Inspector General, Office of Program Evaluation 
EPA Needs Definitive Guidance for 10-R-0057 

Recovery Act and Future Green Reserve Projects 

Table of Contents 

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

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

Scope and Methodology............................................................................................. 2 

Results of Review ....................................................................................................... 3 

States Actively Soliciting Green Reserve Projects ............................................... 3 

EPA Needs to Establish Effective Guidance on 

Green Project Reserve Eligibility................................................................. 4 

EPA Cannot Effectively Conduct Oversight without Definitive Criteria................. 5 

Recommendations...................................................................................................... 6 

Agency Response and OIG Comments .................................................................... 6 

Status of Recommendations and Potential Monetary Benefits.............................. 7 

Appendices 

A Agency Response .............................................................................................. 8 

B Distribution ......................................................................................................... 11 
10-R-0057 

Purpose 

As part of our efforts to review the U.S. Environmental Protection Agency’s (EPA’s) 

management of American Recovery and Reinvestment Act (ARRA) funding, we sought to 

determine whether EPA has developed and implemented adequate controls to ensure that States 

actively solicit green reserve projects before reprogramming such funds to traditional projects. 

Background 

The 2009 ARRA provides $4 billion for EPA’s Clean Water State Revolving Fund (SRF) 

program and $2 billion for its Drinking Water SRF program. These SRF programs provide lowinterest loans and, in some cases, grants for infrastructure projects to protect water quality and 

public health. Federal Government grants and State matching funds provide funds to establish or 

capitalize the SRF programs. The States administer the SRF and distribute loans and grants 

based on public health and environmental priorities. 

EPA’s $6 billion of ARRA funding for water SRF programs is approximately four times as large 

as the Fiscal Year 2008 SRF appropriation. Also, ARRA provides for the first time that States 

reserve at least 20 percent of the funding for green projects designed to further environmental 

objectives. This special allocation for green projects ($1.2 billion) is 80 percent of the Fiscal 

Year 2008 appropriation from Congress for the SRFs. In addition to the ARRA, the President’s 

proposed Fiscal Year 2010 budget contains language supporting green infrastructure programs. 

EPA defines green infrastructure as applications and approaches that reduce, capture, and treat 

stormwater runoff at its source before it reaches the sewer system. Under the ARRA, green 

projects include those that promote green infrastructure and energy or water efficiency, as well as 

projects that demonstrate new or innovative ways to manage water resources in a sustainable way. 

States receiving ARRA funds must meet accelerated timeframes. If a State has not identified 

sufficient green projects, the State can request a waiver to transfer funds to traditional SRF 

projects. The earliest the States could seek such an application was August 17, 2009. ARRA 

also requires that by February 17, 2010, all funds must be committed to eligible projects, with 

States having signed certifications that project applicants have signed contracts or the projects 

are under construction. If a State fails to meet the February 2010 deadline, EPA is required to 

deobligate the funds. 

States that have sufficient qualified green projects under previous SRF solicitations do not need 

to solicit additional projects. States that do not have sufficient green projects under the ARRA 

must continue to actively solicit and accept applications to be eligible to receive the 20-percent 

reserve. In its May 2009 guidance, EPA defined adequate solicitation to include activities such 

as placing prominent messages on State SRF and recovery Websites and sending solicitation 

funding applications to municipalities. 

EPA has developed project descriptions and examples to assist States in selecting projects that 

qualify for the ARRA’s green project reserve. The Agency defines project types that clearly 

meet the ARRA’s intent as “categorical.” Other projects may have benefits that meet ARRA’s 

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green intent but may not be readily classified as such. These projects require a “business case” 

or documentation of how the project or portion of the project achieves identifiable and 

substantial benefits that qualify as green project benefits. EPA has provided contractor 

assistance and issued four guidance documents to assist States in implementing the green reserve 

program. 

Scope and Methodology 

We conducted this review between May and November 2009. We conducted this review in 

accordance with generally accepted government audit standards, issued by the Comptroller 

General of the United States. 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. Because the 

ARRA is new, the Office of Inspector General (OIG) has not conducted any prior reviews in this 

area. 

We interviewed officials in EPA’s Office of Water, specifically the Offices of Wastewater 

Management and Groundwater and Drinking Water, which work with the SRF programs. We 

also interviewed officials in the Office of Administration and Resources Management’s Office of 

Grants and Debarment. We interviewed officials in EPA Regions 1, 2, 3, 5, and 6. We sent a 

survey to EPA regions about how their States were implementing ARRA’s active solicitation 

requirement. 

We obtained information on State solicitation and identification of green reserve projects. We 

selected States based on EPA’s identification of States that planned to solicit for ARRA SRF 

projects. States selected for our review were Connecticut, Michigan, New Hampshire, New 

York, Oklahoma, and West Virginia. We interviewed State officials to learn about their 

solicitation and project selection activities. We reviewed Websites for solicitations and Intended 

Use Plans for the selected States. 

We reviewed the ARRA to gain an understanding of the legislative requirements. To determine 

how EPA planned for States to solicit and identify eligible green reserve projects, we reviewed 

the following EPA guidance: 

•	 Award of Capitalization Grants with Funds Appropriated by P.L. 111-5, the American 

Recovery and Reinvestment Act of 2009, March 2, 2009. 

•	 Adequate solicitation of Green Project Reserve applications under the American 

Recovery and Reinvestment Act, May 13, 2009. 

•	 Energy Efficiency Business Case for Wastewater Pumping Systems for ARRA Green 

Project Reserve, May 14, 2009. 

•	 The Green Project Reserve: Principles and approach to developing a Business Case for 

water and energy efficiency projects and Questions and & Answers on ARRA GPR, 

June 22, 2009. 

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Results of Review 

Although EPA was promoting a green approach to wastewater and drinking water programs for 

at least a year prior to the ARRA, EPA was not able to develop and issue clear and 

comprehensive guidance soon enough to meet State needs once the ARRA was enacted. EPA 

did issue a guidance document generally defining the program on March 2, 2009, about 2 weeks 

after the passage of ARRA on February 17, 2009. However, that guidance and subsequent 

updates have not addressed important aspects of project selection. For example: 

•	 EPA did not provide guidance on how to solicit or select green projects until after many 

States had finished soliciting for projects. Some of those States felt obligated to re-solicit 

for green projects, while others re-examined their existing lists and developed green 

projects from those lists. 

•	 At the time of this review, EPA had not established water and energy efficiency threshold 

ranges for many types of green projects. 

•	 EPA still had not provided enough information to States about how to develop business 

case justifications for non-categorical projects. 

•	 Changes in how to determine project eligibility resulted in EPA regions applying 

different standards for approving States’ green project proposals, creating confusion for a 

number of States. 

Without adequate guidance, EPA regions and States cannot adequately determine the extent to 

which these projects reduce energy and water usage compared to projects traditionally funded 

under the SRF program. EPA also cannot adequately determine whether these projects meet 

Congress’ objectives. Further, this guidance is important if Congress appropriates additional 

funds for green projects in coming years. 

States Actively Soliciting Green Reserve Projects 

States have actively conducted solicitation efforts for green reserve projects. In a survey of 

EPA’s 10 regions, respondents from 38 of the 50 States (76 percent) told us that their States 

solicited for clean water green reserve projects and 35 of the 50 States (70 percent) solicited for 

drinking water green reserve projects. States conducted a variety of solicitation activities. For 

example, some States placed prominent messages on State Websites, sent funding applications to 

municipalities, and conducted targeted meetings with watershed organizations. A number of 

States in our review solicited beyond the traditional group of applicants. For example, the 

Oklahoma Clean Water SRF program advertised to environmental groups, including the Nature 

Conservancy and the Sierra Club, as well as to municipalities and public water systems. 

These efforts appear to have been successful, at least in terms of meeting the indistinct guidance 

supplied by EPA. In September 2009, EPA expected all States to meet the 20-percent green 

reserve provision for both the Clean Water and Drinking Water SRF programs. Some States 

received a large surplus of applications. For example, the New York Clean Water SRF program 

received nearly 300 applications, totaling more than $450 million, for the $86.5 million in its 

green reserve. However, EPA drinking water SRF officials also reported that some States were 

having difficulty meeting the green project reserve requirements. 

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EPA Needs to Establish Effective Guidance on Green Project Reserve Eligibility 

EPA has not provided the clear and unambiguous direction required to establish ground rules for 

this new program. The guidance to the regions and States for determining green project reserve 

eligibility has been incomplete or inconsistent. As early as January 2008, more than a year prior 

to the ARRA, EPA was promoting the need for establishing a systematic approach to reducing 

energy consumption and energy costs. However, because EPA considered the SRFs to be largely 

State-led programs, EPA initially took a hands-off approach on how States should determine 

project eligibility, providing States with only minimal guidance. Yet, it appears that some States 

were uneasy with this approach due to concern that they could lose green reserve funding if EPA 

did not approve submitted projects. This inconsistency has led to differing approaches by EPA 

regions and confusion in some States. EPA needs to develop unambiguous guidance on green 

reserve funding eligibility, especially if this program continues in future years. 

In its initial March 2, 2009, ARRA guidance, EPA did not require States to solicit for green 

projects. States could select green reserve projects from applicants already waiting for SRF 

loans. Solicitation was necessary only when a State could not identify a sufficient number of 

eligible projects in its SRF pipeline. However, EPA did recommend that States consider 

soliciting for green projects to establish a buffer in case some projects dropped out of the 

program. 

EPA did not issue guidance in time to assist States soliciting for green reserve projects. On 

May 13, 2009, about 3 months after ARRA was enacted and after most States had begun their 

solicitation efforts, EPA expanded its solicitation guidance. This guidance provided States with 

examples of appropriate types of solicitation actions, such as placing prominent messages on 

State SRF and recovery Websites and sending solicitation funding applications to municipalities. 

EPA’s intent was to use this guidance to determine the adequacy of the States’ solicitation 

efforts. However, by the time EPA issued this guidance, most States had initiated their 

solicitation processes without the benefit of the guidance. All six States in our review had 

started their solicitation process and several of them had already completed those efforts. 

The lack of sufficient EPA guidance from the beginning of the program created confusion and 

disagreements among EPA, the regions, and the States on which projects were eligible for 

funding. This is particularly evident regarding water meters. EPA’s March 2, 2009, guidance 

defined water meter projects as categorically green, and a number of States submitted projects 

that replaced water meters. However, in its June 22, 2009, business case guidance, EPA 

provided clarification, stating that a project that proposes to replace existing water meters with 

newer water meters is not categorically green. In these situations, a business case is required 

documenting any water and/or energy efficiency improvements from such replacement. In the 

Drinking Water SRF program, EPA’s guidance did not provide water or energy efficiency 

thresholds. To its credit, EPA has established a 20-percent increase in its energy efficiency 

threshold for its Clean Water SRF program. Therefore, some States were not sure which projects 

were acceptable as “green.” Some regions had approved automated meter reading projects as 

categorically green without consideration of energy efficiencies. Other regions considered 

energy efficiencies as a factor in approving automated meter reading projects. 

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Some States have struggled to apply the incomplete and changeable guidance. For example, the 

Oklahoma Department of Environmental Quality stated, based on EPA’s March 2009 guidance, 

that it had a number of fundable water automated reading system projects for Drinking Water 

SRF green reserve funds. However, these projects were rejected by EPA Region 6. Region 6 

rejected these projects using EPA’s June business case guidance and direction from EPA 

Headquarters, and concluded that the projects did not have sufficient energy efficiencies and the 

automated meter readers would result in jobs being lost. In July, after receiving additional 

guidance from EPA Headquarters, Region 6 partially reversed its decision not to fund 

Oklahoma's automated meter reading projects. EPA approved funding a portion of the project: 

the instrumentation necessary to gather and transmit the meter readings to a central location 

rather than the entirety of the projects. Oklahoma officials characterized EPA’s decision to 

change as an instance of “learning as we go.” 

EPA could better support States in the development of business cases. For example, EPA could 

develop a standard set of criteria for “business cases” to provide consistency and transparency 

for documenting why a project is eligible. This standard format will also guide the States in 

determining sufficient documentation required, which will enable a more efficient EPA review 

process. West Virginia developed such criteria, and this proved beneficial to that State’s public 

water systems and engineering consultants. 

EPA Cannot Effectively Conduct Oversight without Definitive Criteria 

EPA regional oversight of State solicitation activities and determination of eligibility has varied. 

Some regions proactively ensured their States solicited for green projects; others just relied on 

EPA Headquarters’ guidance. Some regions developed checklists to identify green projects but 

others did not. One region developed internal controls for business cases while others waited for 

additional EPA Headquarters information. As mentioned previously, regions varied in how they 

assessed the eligibility of certain types of projects such as automated meter readers. 

Due to the non-definitive guidance from EPA, States have proposed several projects for which 

eligibility is more uncertain than it should have been. The six States subject to our detailed 

review identified 37 non-categorical Clean Water and Drinking Water projects that were 

supported with “business cases.” However, at the September 2009, only 10 of the 37 projects 

had been approved by EPA. A representative of the New Hampshire Department of 

Environmental Services told us that he is unsure whether New Hampshire’s documentation of 

the energy efficiency of one of its business cases is adequate; EPA’s uncertain guidance has kept 

the question open. 

Clear and definitive guidance is management’s control and would assist in providing 

accountability and transparency to the green reserve program. Despite the States’ efforts, 

without definitive green reserve guidance or criteria, EPA is not in a position to consistently 

determine whether these projects meet the objectives for which Congress appropriated these 

funds. EPA regions and States cannot determine the extent to which these projects reduce 

energy and water usage compared to projects traditionally funded under the SRF program. In 

addition, EPA cannot determine whether changes are needed in the program to better achieve 

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green reserve objectives. Consequently, EPA cannot provide assurance the program is meeting 

its intended goals. 

Recommendations 

We recommend that the Assistant Administrator for Water: 

1. Develop and revise guidance, information, and, as appropriate, specific criteria that States 

can employ to assist them in identifying projects qualifying for funding from the State’s 

green project reserve. 

2. Conduct a timely review of the States’ submitted green projects and, where necessary, 

accompanying business cases, in accordance with the pertinent statutory provisions and 

EPA guidance, information, and criteria. 

Agency Response and OIG Comments 

EPA officials neither agreed nor disagreed with OIG’s initial recommendation to “develop 

threshold ranges for green projects” as they apply to drinking water systems. However, EPA 

officials said that States need additional flexibility in pursuing water and energy efficiency goals 

for drinking water systems. Drinking Water SRF officials argued that , “...although many larger 

systems may be able to achieve 20% efficiency improvements for energy projects, for a smaller 

system (where DWSRF funds are often targeted), smaller percentage savings could still be 

considered ‘significant’ for that system, especially if it is a well targeted and much needed 

efficiency project.” OIG officials met with Agency officials and discussed their concerns. The 

Agency officials suggested changes to the recommendations that would meet their concerns 

while addressing the concerns OIG had raised in the draft report. The OIG carefully reviewed 

these suggestions and amended the recommendations to those contained above. 

A complete copy of the Agency response is in Appendix A. All recommendations will remain 

undecided while the Agency and the OIG continue with resolution efforts. 

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Status of Recommendations and 

Potential Monetary Benefits 

POTENTIAL MONETARY 

RECOMMENDATIONS BENEFITS (in $000s) 

Rec. 

No. 

1 

2 

Page 

No.

6 

6 

 Subject 

Develop and revise guidance, information, and, 

as appropriate, specific criteria that States can 

employ to assist them in identifying projects 

qualifying for funding from the State’s green project 

reserve. 

Conduct a timely review of the States’ submitted 

green projects and, where necessary, 

accompanying business cases, in accordance with 

the pertinent statutory provisions and EPA 

guidance, information, and criteria. 

Status1 

U 

U 

Action Official 

Assistant Administrator 

for Water 

Assistant Administrator 

for Water 

Planned 

Completion 

Date 

Claimed 

Amount 

Agreed To 

Amount 

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

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

U = recommendation is undecided with resolution efforts in progress 

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Appendix A 

Agency Response 

December 28, 2009 

MEMORANDUM 

SUBJECT: Draft Evaluation Report: EPA Needs Definitive Guidance for Recovery 

Act and Future Green Reserve Projects - Project No. 2009-901 

FROM: Peter S. Silva 

 Assistant Administrator 

TO: Dan Engelberg 

 Director, Water and Enforcement Issues 

Office of Inspector General 

Thank you for your letter of November 13, 2009, providing the draft evaluation report 

“EPA Needs Definitive Guidance for Recovery Act and Future Green Reserve Projects.” In 

general, the report provides helpful insight into the type and extent of guidance needed for the 

Green Project Reserve (GPR). As we move forward with the GPR requirement in the 2010 

Appropriation, EPA will take the Office of Inspector General’s recommendations into 

consideration. The attached document includes our responses to specific recommendations. We 

have already begun the process of developing guidance. The first step was to conduct listening 

sessions with States and Regions, as well as with non-profit organizations and groups associated 

with each of the four targeted project types. We will also draw on the draft Clean Water SRF 

(CWSRF) white paper “Tapping the Untapped Potential of the CWSRF”, which explored 

existing authority to fund many of the types of projects targeted by the GPR, as well as numerous 

fact sheets and policy memos that helped the SRF programs get a quick handle on what projects 

should be included in the GPR for ARRA. We will also be using the lessons learned during 

ARRA to expand the list of sample green projects and better articulate what makes a good 

business case for projects that do not appear on the list, so that the guidance is clearer in the 2010 

GPR guidance. 

These improvements will build upon significant efforts undertaken by the Office of 

Water to support ARRA implementation and the GPR in particular. For example, EPA issued 

guidance within two weeks of the American Recovery and Reinvestment Act (ARRA) being 

signed into law. The portion of the guidance addressing the new GPR requirement not only 

explicitly defined each of the four types of projects targeted by GPR, it also contained lists of 

eligible projects to help states easily identify qualified projects. EPA also provided states with 

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the flexibility to identify other projects by justifying their decision through a business case. The 

initial guidance was followed by a number of additional efforts focused specifically on GPR 

issues. First, the State Revolving Fund (SRF) programs hosted several webcasts regarding the 

GPR on March 12, May 14, and May 21, 2009. Second, Drinking Water Protection Division 

Director Steve Heare emailed a Drinking Water SRF (DWSRF) memorandum to all the Regional 

SRF Coordinators on May 20, 2009. This memo explains the components that should be 

included in a business case and provides details regarding the type of documentation that should 

be referenced in or submitted with the business case. Third, EPA developed a document 

providing example business cases for drinking water projects. This document was released in 

draft form to regions and states on August 12, 2009 and was published and posted on EPA’s 

recovery website in September 

(http://www.epa.gov/water/eparecovery/docs/2009_09_25_DWSRF_GPR_Business_Case_Exa 

mples.pdf). 

Again, we appreciate you sharing your draft report for our review and comment, and look 

forward to our continuing collaboration in the future. If you have any questions, please contact 

me or Cynthia Dougherty, Director of the Office of Ground Water and Drinking Water, at 

(202) 564-3750. 

Attachment 

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Office of Water Responses to Recommendations in 

Office of Inspector General Draft Evaluation Report 

“EPA Needs Definitive Guidance for Recovery Act and Future Green Reserve Projects.” 

Recommendation #1 – Develop threshold ranges for green projects, such as water and energy 

efficiency, and develop specific criteria necessary for business cases. 

Response: The CWSRF established a numeric threshold for energy efficiency improvements at 

POTWs to help states easily identify categorically green projects and determine which projects 

needed a business case to justify them as eligible for GPR. It was determined early on by 

DWSRF staff that numeric thresholds (i.e. 20% energy savings) were not as appropriate for 

drinking water systems as for wastewater systems. The DWSRF took the position that, although 

many larger systems may be able to achieve 20% efficiency improvements for energy projects, 

for a smaller system (where DWSRF funds are often targeted), smaller percentage savings could 

still be considered ‘significant’ for that system, especially if it is a well targeted and much 

needed efficiency project. Similarly, it is also difficult to quantify what water savings should be 

considered ‘green’. A drinking water system could have a huge volume of water savings (in 

gallons), but it might only be a small percentage of the total flow. Conversely, a project could 

result in significant percentage of water savings; however, it may only be a small volume of 

water. These points were relayed at the meeting with the OIG on August 11, 2009, to discuss the 

findings of the audit. At that meeting, DWSRF staff suggested that the recommendation be 

softened to say that EPA could offer acceptable ‘parameters’ for water and energy efficiency 

projects. 

Recommendation #2 – Conduct a timely review of the States’ submitted green projects and, 

where necessary, accompanying business cases in accordance with the EPA-defined criteria. 

Response: In addition to evaluating the green projects proposed by states and any necessary 

business cases, EPA Regions will be following up with state visits twice a year. During these 

visits, Regions will review a sample of project files to ensure the projects proceed as proposed 

and result in the environmental benefits anticipated by Congress when the Green Project Reserve 

was established. Also, Headquarters DWSRF conducted regional reviews that included state 

discussions and Headquarters CWSRF visited 49 states. During these reviews, Headquarters 

provided feedback to the regions and states on the implementation of ARRA, including GPR. 

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Appendix B 

Distribution 

Office of the Administrator 

Assistant Administrator, Office of Water 

General Counsel 

Agency Follow-up Official (the CFO) 

Agency Follow-up Coordinator 

Associate Administrator for Congressional and Intergovernmental Relations 

Associate Administrator for Public Affairs 

Audit Follow-up Coordinator, Office of Water 

Acting Inspector General 

11