## Report on Re ductions Achieved from I nc entive-Based

Emission Re duction Meas ures in the San Joaquin Valley

AP PE NDIX B.2: 2008 Carl Moy er Me mo rial Air Quality

Standards Attai nm ent Pr og ram Guidelines Part III

Release Date: Se pt em ber 22, 20 14

He ari ng Dat e: Octo ber 2 3

, 2 014



# Calif or ni a E nvironme nt a l Protection Agen cy



# Air Resources Board

## THE CARL MOYER PROGRAM GUIDELINES

PART III of IV

PROGRAM ADMINISTRATIONADMINISTRATION OF THE CARL MOYER PROGRAM

Table of Contents

PART I. BACKGROUND AND DEFINITIONS

................................................... ................... 1 (Section 1) Background

................................................... ............................................... 1 (Section 2) Definitions

................................................... ................................................. 2

PART II: ARB-AIR DISTRICT INTERACTIONS

................................................... ................ 3 Part A: District Solicitation and Receipt of Progra m Funds ............................................ 3 (Section 3) Background

................................................... ............................................... 3 (Section 4) ARB Solicitation of District Applicatio ns

................................................... 3 (Section 5) District Applications for Program Fundi ng ................................................ 4 (Section 6) ARB Review and Approval of District Fun ding Applications ................... 6 (Section 7) Final Grant Awards

................................................... ................................... 7 (Section 8) Fund Disbursements to Air Districts

................................................... ....... 7 Part B: AB 923 -- $2 Motor Vehicle Fee

................................................... .......................... 8 (Section 9) AB 923 -- $2 Motor Vehicle Fee

................................................... ................ 8 Part C: Match Funding

................................................... .................................................. 1 0 (Section 10) Match Fund Formula

................................................... ............................. 10 (Section 11) Match Funds Sources

................................................... ........................... 10 (Section 12) Eligible Types of Match Projects

................................................... ......... 12

Part D: Fiscal Issues

................................................... ................................................... ... 13 (Section 13) Earned Interest

................................................... ...................................... 13 (Section 14) Program Administration and Outreach Fu nding ................................... 16 Part E: Reporting and Progress Tracking

................................................... .................... 17 (Section 15) Commitment of Project Funds

................................................... ............. 17 (Section 16) Contract Execution

................................................... ............................... 17 (Section 17) Annual Report

................................................... ....................................... 18 (Section 18) Invoice Payment

................................................... ................................... 20 (Section 19) Final Report

................................................... ........................................... 20 (Section 20) Cumulative Progress Tracking

................................................... ............ 22 (Section 21) Funding Year Close-Out

................................................... ....................... 22 Part F: Program Oversight

................................................... ............................................ 23 (Section 22) ARB Audit of Air Districts

................................................... .................... 23 (Section 23) “In Good Standing” Designation

................................................... ......... 25 (Section 24) Program Non-Performance

................................................... .................. 27 (Section 25) Program Streamlining

................................................... .......................... 28

PART III: AIR DISTRICT-APPLICANT INTERACTIONS

................................................... 29 (Section 26) Minimum Project Application Requiremen ts ......................................... 29 (Section 27) Application Evaluation and Project Sel ection ....................................... 31 (Section 28) Case-by-Case Approval

................................................... ........................ 33 (Section 29) Minimum Contract Requirements

................................................... ........ 34 (Section 30) Project Pre-Inspections

................................................... ........................ 37 (Section 31) Post-Inspection

................................................... ..................................... 39 (Section 32) Project Invoice and Payment

................................................... ............... 41 (Section 33) Grantee Annual Reporting

................................................... ................... 43 (Section 34) District Audit of Projects

................................................... ...................... 44 (Section 35) Nonperforming Projects

................................................... ....................... 451 PROGRAM ADMINISTRATION PART I. BACKGROUND AND DEFINITIONS

(Section 1) Background

The chapter outlines ARB’s responsibility for overa ll program administration and oversight, and describes the minimum administrative requirements ARB and air districts must follow to ensure the program achieves SIP-cred itable emission reductions. Air districts may choose to require more stringent admi nistrative procedures in implementing their local program.

Appendix H describes Carl Moyer Program “Best Pract ices”, which go beyond this chapter’s minimum program requirements and describe actions districts can take to run more effective and efficient programs. Best Practi ces for Carl Moyer Program administration are referenced in this chapter in su perscript.

These 2008 Guidelines, once formally adopted by the Air Resources Board, must be used for all projects funded using fiscal year 2008 -2009 (Carl Moyer Program Year 11) and subsequent years’ funds.

For projects funded using fiscal year 2007-2008 fun ds (Year 10), a district has the option of using either the 2005 Guidelines (and rel evant Program Advisories) or using these 2008 Guidelines. Districts may not pick and choose requirements from both sets of Guidelines. The 2008 Guidelines may only apply after the Board adoption date and only apply to projects for which contracts have bee n fully executed after such adoption date. In addition, if a district starts applying t he 2008 Guidelines to Year 10 projects, it must continue to apply the 2008 Guidelines to all s ubsequent Year 10 projects.

The date of Board approval of these Guidelines is a lso an important consideration for off-road projects that utilize the retrofit flexibi lity option described in Chapter 5, “OffRoad Compression-Ignition Equipment.” Briefly, tha t option allows off-road project applicants to waive the requirement for installing a retrofit device. That flexibility option may be applied to projects funded using fiscal year 2006-2007 (Year 9) and subsequent years’ funds as long as a project’s contract is ful ly executed after the Board approval

date for these 2008 Guidelines.

Further, restrictions on the use of Carl Moyer Prog ram funds for certain project types due to the availability of Goods Movement Emission Reduction Bond Program funding take effect on the date of Board approval of these 2008 Guidelines. Thus, relevant projects with contracts signed on or after the Boar d approval date of these 2008 Guidelines are subject to those funding restriction s; projects with fully executed contracts signed prior to the Board approval date a re not. Such restrictions are described in more detail in the applicable source c ategory chapters – “Chapter 3: OnRoad Heavy-Duty Vehicles”, “Chapter 4: On-Road Heav y-Duty Vehicle Fleet Modernization”, “Chapter 8: Locomotives” and “Chap ter 9: Marine Vessels.”2 PROGRAM ADMINISTRATION

(Section 2) Definitions

Carl Moyer Program Funds. Carl Moyer Program funds include state Carl Moyer Program funds awarded by ARB (as provide d by statute), including interest

earned on these State funds and local funds used as program match funding (see HS C §44287).

Clean Air Reporting Log (CARL). The Carl Moyer Program on-line project evaluation and tracking system administered by ARB.

Commitment of Funds. Funds are considered committed to a project when a specific Carl Moyer Program project eligible for those funds has been approved by the district Board or by a district Air Pollution Control Office r (APCO) or other delegated authority. See Section 15 of this chapter for details.

Contract. A legally binding and enforceable agreement betwe en an air district and a project applicant to fund, implement, and complete a Carl Moyer Program project by a specific date.

Earned Interest. Interest generated from State Carl Moyer Program f unds provided to air districts and held in interest-bearing accounts

.

Expend. The payment of Carl Moyer Program funds on a projec t invoice for an eligible Carl Moyer Program project for the purposes of meet ing the requirements of

HSC § 44287(k).

Fully Executed Contract. A legally binding Carl Moyer Program contract signe d by the district Air Pollution Control Officer (APCO) or ot her designated representative and the project vehicle, engine, or equipment owner or thei r legal representative.

Good Standing. A district is considered “in good standing” if it h as completed the most recent required Annual and Final Reports by the rep orting deadlines and the reports demonstrate compliance with the requirements of Sta te law and these program Guidelines. A district must also meet all other ap plicable requirements of State law and these guidelines, and fully address any ARB audit f indings in a timely manner. See Section 23 of this chapter for details.

Liquidate. Liquidated funds are those funds for which a dist rict has reimbursed an applicant for a valid and eligible project invoice. A contract is considered liquidated only

when a check or checks for the full contract amount (or all invoices associated with the project) have been fully paid.

Probation. A status potentially imposed upon an air district b y ARB for continual, significant, or widespread non-conformance with Car l Moyer Program requirements. See Section 24 of this chapter for details.3 PROGRAM ADMINISTRATION

Rural District Assistance Program. An element of the Carl Moyer Program in which districts pool their project funds to streamline pr oject outreach, solicitation, and review.

State Carl Moyer Program Funds. State Carl Moyer Program funds include State Carl Moyer Program funds appropriated to and awarde d to districts by ARB (as provided by statute) and interest earned on these s tate funds.

PART II: ARB-AIR DISTRICT INTERACTIONS

Part A: District Solicitation and Receipt of Progra m Funds

(Section 3) Background

ARB determines the tentative awards for each year i n accordance with the formula identified in Health and Safety Cods (HSC) section 44299.2(a). The timeline for each funding cycle is provided in Table 1. The process and minimum requirements for

distribution of these funds from ARB to air distric ts is described in this chapter.

Table 1: Timeline for Each Year of Funds

Date Action Mid-September ARB sends application packet to air d istricts. Mid-November Districts apply to ARB for funds Early January ARB notifies districts of final award s January - June Districts receive grant awards April 30 Deadline for districts to accept or declin e funds June 30 of Following Year Target date for contracts to be executed June 30 of Second Year Funds must be expended

(Section 4) ARB Solicitation of District Applicatio ns

(a) Each September, ARB shall send a solicitation l etter to each district’s Air Pollution Control Officer (APCO) to notify the dist rict that Carl Moyer Program funding is available and to provide the application that distr icts need to apply for program funds. The solicitation letter shall provide each district ’s tentative funding award, tentative match funding requirement, and match fund waiver re quest form.

(b) If a district has not expended State Carl Moyer Program funds within two years,

the solicitation letter from ARB to the air distric t shall indicate the district’s expenditure

shortfall.4 PROGRAM ADMINISTRATION

(Section 5) District Applications for Program Fundi ng

(a) Districts must submit a completed application p acket within 60 calendar days from the date of the solicitation. The completed a pplication packet must include the following documents:

(1) Completed Application: The application must be completed and the original signed by the district’s APCO. All inform ation requested on the application must be provided or the application wil l be considered incomplete. Districts requesting the minimum $200, 000 allocation may opt to direct their allocation directly to the Rural Di strict Assistance Program.

(2) Match Fund Commitment: Districts must specify the source and amount of local match funding on the application. Distric ts requesting more than their tentative funding allocation must demonstrate that sufficient match funds are available to cover any additional funds r equested. Districts requesting the minimum allocation may request a mat ch waiver. ARB staff will verify that the listed amount and source of funds are available for the district to use under the Carl Moyer Program. Districts may meet up to 15 percent of their match requirement with in-kind contributions. Additional information regarding allowable sources of match funding can be found in Sections 10 and 11 of this chapter. See Best Practice #1

(3) District Board Resolution: The application must include a resolution of the district Governing Board that commits the district to comply with the Carl Moyer Program requirements and authorizes the district to accept funds from ARB and participate in the Carl Moyer Pr ogram, or to have such funds placed into the Rural District Assistanc e Program. For districts with a match requirement, the board resolution shal l authorize the APCO to supply sufficient funding to meet the match requ irement. If districts

include a board resolution that authorizes the dist rict to implement the Carl Moyer Program for multiple years, the district shou ld document the resolution as still being in effect each year by in cluding a copy of the resolution with the signed application. See Best Practice #2

(4) Policies and Procedures Manual: Districts must submit their Carl Moyer Program Policies and Procedures Manual to ARB in or der to be eligible for continued funding. The manual must describe the di strict’s policies, procedures, and organizational structure for implem enting the Carl Moyer Program. The submitted manual shall apply to the f unding cycle for which the district is applying. Districts may request ad ditional time to complete their Policies and Procedures Manual as part of the ir application; however, a complete Policies and Procedures Manual must be s ubmitted to and approved by ARB before a district is eligible to re ceive its initial funding

disbursement. The Policies and Procedures Manual m ust include, at a5 PROGRAM ADMINISTRATION minimum, the district’s policies and procedures for following program
components:

(A) Program structure and organization, including c oordination with

ARB (B) Solicitation of funds from ARB (C) Project solicitation, evaluation, and selection (including schedule for program implementation) (D) Environmental justice/at-risk communities (if a pplicable) (E) State and match fund obligation and expenditure (F) Fiscal practices and procedures (G) Light duty vehicle/fleet modernization projects (if applicable) (H) Pre- and post-inspections (I) Project reports (J) Contract components and contracting with applic ants (K) Invoice review, approval, and payment protocols (L) District audits of projects (M) Details regarding program components identified in the following sections of this chapter: 13(d), 14(c), 18(a), 27(l ), 30(b), 30(e), 30(f), 31(a), 31(c), 33(c), and 35(c).

(5) Status Report: Districts that are not in good standing must prov ide a Status Report demonstrating all funds received two years prior are expended, consistent with Sections 18 and 19 of thi s chapter, and that all funds received one year prior are committed via ful ly executed contracts. These fund expenditure and contract execution requi rements may be met cumulatively, consistent with Section 20 of this ch apter. Districts in good standing are not required to submit a Status Report

.

(b) Any district whose latest required Final Repor t does not demonstrate full expenditure of program funds within two years, as t racked cumulatively as required by

HSC § 44287(k) and § 44299.2(c) and Sections 18 through 20 of this chapt er, must do one of the following:

(1) Return the expenditure shortfall within 60 cale ndar days of the June 30 th
expenditure deadline, as required by HSC §44287(k).

(2) Have the amount of the expenditure shortfall de ducted from its pending funding allocation. The funds that were the basis for this deducted amount (i.e. the expenditure shortfall) shall conti nue to be considered behind schedule with regard to the two year expendi ture deadline, and shall continue to be tracked by the district based upon the original year they were reserved from the State. Funds deducted from a district’s allocation shall be redistributed to other eligible air districts as per Section 6(e) of this chapter.6 PROGRAM ADMINISTRATION

(c) Districts that do not fully expend their funds within two years and are required to take the actions identified in Section 5(b) (above) shall, at a minimum, be deemed not in good standing.

(d) ARB reserves the right to direct up to ten perc ent of each year’s State Carl Moyer Program funds to projects that operate o r impact air quality in multiple air districts (pursuant to HSC § 44286). ARB typically solicits and selects multid istrict projects each Spring, consistent with Section 27(n) of this chapter.

(Section 6) ARB Review and Approval of District Fun ding Applications

(a) If the district application for Carl Moyer Prog ram funding is incomplete or inadequate, ARB shall provide the district with a w ritten explanation of what is missing from the application within ten working days of its receipt.

(b) Complete applications that fulfill all criteria shall be approved no later than 60 calendar days after receipt.

(c) On a case-by-case basis, ARB may elect to appro ve an application that is missing a particular item and make the submittal of that item a stipulation of the Grant Agreement. For example, sometimes district staff i s unable to obtain a board resolution before the application deadline. In such a case, A RB may allow a board resolution to be submitted with the signed Grant Agreement or pri or to the district’s initial

disbursement.

(d) ARB shall review a district’s Policies and Proc edures Manual for minimum elements listed in Section 5(a)(4) of this chapter and within 30 days of its receipt either approve the manual or describe what additional info rmation or clarification is needed. ARB approval of district Policies and Procedures Ma nual shall be provided by e-mail or in other written format. Districts shall keep ARB approval of each year’s Policies and Procedures Manual as part of their program files. ARB approval of a district’s Policies and Procedures Manual denotes approval of the distr ict’s policies and procedures as written. A district’s policies and procedures as i mplemented can only be fully evaluated during the audit process.

(e) Those districts in good standing that have appl ied for additional funds during the application period and have demonstrated the availa bility of sufficient match funding will be considered for additional funding. ARB shall fo llow the formula identified in HSC §44299.2(a) to redistribute funds declined by a ir districts and funds reallocated due to district non-expenditure pursuant to Section 5(b)(2) of this chapter.7 PROGRAM ADMINISTRATION

(Section 7) Final Grant Awards

(a) Once district applications have been approved, ARB shall determine the final grant awards and corresponding amounts of required match funding.

(b) ARB shall prepare and submit two signed origina l copies of the Grant Award and Authorization Forms to qualifying districts.

(c) The APCO must sign both original copies of the Grant Award and Authorization Form. The districts retain one of the originally s igned forms for their files and return the other originally signed form to ARB.

(d) The deadline for acceptance of a grant award sh all be April 30 of each year.

(e) Districts have until June 30 th on the second calendar year after funds are accepted from ARB to expend the grant award.

(Section 8) Fund Disbursements to Air Districts

(a) In order to receive a disbursement, each distri ct must submit a Grant Disbursement Request to ARB. The Grant Disbursemen t Request form must be signed by a party authorized and designated by the distric t Governing Board.

(b) If there are stipulations on the Grant Award an d Authorization form, all stipulations must be met prior to submitting the in itial disbursement request.

(c) Protocol and minimum requirements for air distr icts to receive disbursements are

as follows:

(1) Initial Disbursement: A district may request an initial disbursement of up to ten percent of its allocation or $100,000, which ever is greater. A district also has the option to receive an initial allocatio n for up to an amount for which funds have been committed to specific, eligib le projects.

A district in good standing may receive its initial disbursement without demonstrating expenditure, contract execution, or c ommitment of prior year funds. In order to receive an initial disburs ement, a district which is not in good standing must demonstrate expenditure o f all funds awarded by ARB to the district two calendar years prior and contract execution for 90 percent of the funds awarded by ARB to the distr ict in the previous calendar year. Tracking of progress may be done cu mulatively, consistent with Sections 18 through 20 of this chapter.

(2) Subsequent Disbursements: Subsequent disbursements can be for up to an amount for which funds have been committed to sp ecific, eligible8 PROGRAM ADMINISTRATION projects. To receive a subsequent disbursement, di stricts must have committed their initial disbursement to specific, e ligible projects.

(3) Minimum Allocation Districts: An air district in good standing that has requested the minimum program allocation of $200,00 0 for the current funding cycle and that has fully expended its funding allocation fro m two years prior consistent with Sections 18 through 20 of this chapter (i.e., the district did not donate any part of its allocation from two years prior to the Pooled Rural District Program or to another distric t, or return the funds to ARB) may receive its full $200,000 disbursement fro m ARB without meeting the requirements of Section 8(c)(1) and (2) , above.

(d) Commitment of funds to a project may be demonst rated by the mechanisms described in Section 15 of this chapter, or by a le tter from the APCO certifying fund obligation. On a case-by-case basis, ARB may accep t other documentation of the commitment to fund specific projects.

(e) Districts will receive one check for both progr am administration and project funds, but shall account for the administration and projec t funds separately.

(f) Funds for program outreach and administration s hall be disbursed as follows:

(1) If the initial disbursement is 50 percent or le ss of the district’s total funding allocation for that year, the district shall receiv e 50 percent of its program administration funding for that year with the initi al allocation. A district may receive the remaining 50 percent of its program administration funding when total disbursements exceed fifty perce nt of the districts funding allocation.

(2) If the initial disbursement exceeds 50 percent of the district’s funding allocation for that year, the district shall receiv e 100 percent of its program administration funding with its initial allocation.

Part B: AB 923 -- $2 Motor Vehicle Fee

(Section 9) AB 923 -- $2 Motor Vehicle Fee

(a) State law allows districts to collect an additi onal $2 motor vehicle registration surcharge ($2 MV Fee), which must be used to fund t he following (HSC § 44223 and 44229(b)):

(1) Projects eligible for grants under the Carl Moy er Program

(2) The Agricultural Assistance Program9 PROGRAM ADMINISTRATION

(3) Purchase of new school buses pursuant to the Lo wer-Emission School Bus Program

(4) An accelerated vehicle retirement or repair pro gram that is adopted by

ARB.

(b) $2 MV Fees used to meet the Carl Moyer Program match fund requirement are subject to the same eligibility, reporting, and aud iting requirements as State-provided Carl Moyer Program funds. $2 MV Fee funds used to meet the match requirement are not required to be expended within two years. Howe ver, districts must expend sufficient match funds to meet the obligations for the State C arl Moyer Program funds received each year.

(c) Reporting and oversight of the $2 MV Fee depend s upon whether the fee is used to meet the Carl Moyer Program’s match requirement and whether the district takes SIP credit for $2 MV Fee projects. Table 2 summarizes the various scenarios for treatment of $2 MV Fee funds and projects. Sections 19(d) an d 22(b) of this chapter, respectively, describe reporting and oversight on the $2 MV Fee i n more detail.

Table 2: Summary of $2 MV Fee Requirements and Oversight

Requirements/ Oversight $2 MV Fee

Used as

Match $2 MV Fee

Used for

SIP Credit $2 MV Fee

Not Match/

not SIP

Expenditure of funds within two years (1)

-- --

Meet full and complete Carl Moyer Program

Guideline criteria √

-- --

Subject to ARB Audit √

-- --
Subject to ARB project eligibility evaluation (e.g., cost-effective and surplus) √ √ √

Fiscal reporting to ARB (list total funds expended in four basic categories) 2 √ √ √

Detailed reporting to ARB (project specifics submitted in current database) 2 √ √

--

1 - Sufficient funds must be expended, regardless o f their year of origin or source, to provide the re quired match by that year’s expenditure timeline. For exa mple, for Year 9, districts must expend their match by June 30, 2009. When those funds were received is n ot a factor in determining this deadline. 2 – See Section 19(d) of this chapter for details.10 PROGRAM ADMINISTRATION

Part C: Match Funding

(Section 10) Match Fund Formula

(a) Districts participating in the Carl Moyer Progr am are required to provide $1 in match funding for every $2 of state Carl Moyer Prog ram funding awarded by ARB, with a cap on statewide match funds of $12 million. The formula provided below shall be used by ARB to determine each district’s required m atching funds:

Each district’s annual allocation x $12,000,000

Total allocation to all districts

(b) A district receiving the minimum grant award of $200,000 may request a waiver of the match fund requirement if the district can d emonstrate appropriate staff commitment for program implementation and administr ation or if the district elects to donate its funding allocation to the Rural District Assistance Program.

(Section 11) Match Funds Sources

(a) District match funds, with the exception of por t funds as allowed by Section 11(e), below, must be under the district’s fiduciary control. Funds allocated to an air district by the State of California, such as Lower Emission School Bus Program Funds or State bond funds, may not be used as Carl Moyer Program match funding. Districts may meet their matching fund requirement on an overall program basis rather than a project-by-project basis (HSC § 44287(e)).

(b) Motor vehicle registration surcharge fees (MV Fees), including the AB 2766 $4 MV Fee, and the AB 923 $2 MV Fee, may be used as match funds subject to the following provisions:

(A) In order to qualify as match funds, MV Fees mus t fund motor vehicle projects that meet the Carl Moyer Program criteria (HSC §44287(j)). Table 3 identifies what source categories are consi dered motor vehicles for the purposes of match funding.11 PROGRAM ADMINISTRATION Table 3: Eligibility of Motor Vehicle Registration Surcharge Fee

Projects as District Match

Eligible Not Eligible

Automobiles Locomotives

Trucks Marine vessels Buses* Stationary agricultural engines Self-propelled harvesters Aircraft Road graders Refrigeration units Earth movers Auxiliary generators Tractors Welding machines

Forklifts Pleasure craft Sweepers Cranes

* Lower Emission School Bus Program projects must m eet Carl Moyer Program cost-effectiveness and other criteria to co unt as match.

Note that statute allows the $2 MV Fee to be used t o fund any eligible Carl Moyer Program project – both motor vehicle and non-motor vehicle projects (HSC §44229(b)(1)). However, only motor v ehicle projects funded with MV Fees may be counted as match project s.

(B) MV Fees that pay for incremental fuel costs con sistent with Sections 12(a)(2) and (3) of this chapter may be used as mat ch funds. Fuel must be dedicated a source category potentially eligible for Carl Moyer Program project (such as heavy-duty trucks).

(C) MV Fees that pay for accelerated light-duty veh icle retirement and repair programs that meet all Carl Moyer program criteria may be used as match

funds.

(D) MV Fees used to fund Lower Emission School Bus Program projects may count towards the district match requirement if the y meet the Carl Moyer Program requirements and the cost-effectiveness thr eshold of $16,000 per weighted ton of pollutants reduced. All air distri ct or state incentive funds used to help pay for a school bus project must be i ncluded in this costeffectiveness calculation.

(E) $2 MV Fees used to fund Agricultural Assistance Program projects may not be counted towards the Carl Moyer Program match requirement (HSC §44287(i)).

(c) Other (non-MV Fee) locally-generated funds may be counted as match if they fund projects that meet all Carl Moyer Program requ irements and criteria, including those project types described in Sections 12(a)(1), (2), and (3).12 PROGRAM ADMINISTRATION

(d) Interest earned on Carl Moyer Program funds rec eived from ARB shall not be used for match funding.

(e) Funding provided by a port authority for a qual ifying project or for infrastructure that serves a qualifying project may count toward t he district’s Carl Moyer Program matching fund requirement.

(f) No more than 30 percent of a district’s match o bligation may come from a port authority. Port authorities may participate throug h projects involving their own equipment, or by soliciting port tenants to apply f or project funding.

(g) Private companies are not allowed to provide ma tch funding to satisfy the districts' match funding obligation.

(Section 12) Eligible Types of Match Projects

(a) The types of projects that can be funded to mee t the match funding requirement

include:

(1) Carl Moyer Program Projects: Match funds may be used to pay for any project that meets all Carl Moyer Program criteria and all other statutory limitations on the funds such as those specified in Section 11(b) of this chapter.

(2) Incremental Fuel Cost: Match funds may be used to pay for the incremental cost of liquid or gaseous fuel and elec tricity, other than standard gasoline or diesel, which serves a Carl Mo yer Program-eligible source category (such as heavy-duty trucks).

(3) Infrastructure Projects: Match funds may be used for electric and alternative fuel infrastructure projects that serve specific Carl Moyer Program qualifying project categories.

(4) In-Kind Contributions: Up to 15 percent of a district’s match requiremen t may be fulfilled through in-kind contributions. Di stricts may use any funds under their budget authority -- except for outreach funds districts receive from ARB as part of their annual program allocation and interest earned on Carl Moyer Program funds -- to cover their in-ki nd contribution. When using these other district funds for in-kind match, districts must follow all relevant statute, guidelines, and other legal requi rements for expending

such funds. In-kind contributions must be made in the same fiscal year as the funds being matched, must be proportional to th e time and amount dedicated to Carl Moyer Program activities, and sha ll not be carried over to other years. District in-kind match funds must be spent on program13 PROGRAM ADMINISTRATION administration and outreach as described in Section 14, and meet the documentation requirements identified in Section 14

.

(b) Districts found by ARB to have funded ineligibl e projects shall substitute eligible projects equal to the amount found ineligible or re turn the ineligible amount to the ARB. Districts found by ARB to have used ineligible fund ing sources for match funding shall be required to substitute eligible projects equal t o the amount found ineligible.

Part D: Fiscal Issues

(Section 13) Earned Interest

Interest earned on Carl Moyer Program funds must be reported to ARB. The interest income must be used to fund projects that meet the current Carl Moyer Program

Guidelines.

(a) Calculation of Earned Interest. All districts must maintain accounting records (e.g. general ledger) that track interest earned an d expended on Carl Moyer Program

funds.

(1) If a district maintains its Carl Moyer Program funds in a non-segregated account, the district must maintain accounting reco rds that track the revenue, expenditures, and interest earned by the C arl Moyer Program funds separately from other district programs.

(2) The calculation of interest must be based on an average daily balance or

some other reasonable and demonstrable method of al locating the proceeds from the fund back into the program.

(3) Earned interest must be tracked such that it is separately identifiable from other program funds. See Best Practice #4

(4) Each district’s methodology for calculating Car l Moyer Program interest

must be consistent with how it calculates earned in terest for its other fiscal

programs.

(b) Expenditures for Program Administration. A district shall follow the following minimum requirements in expending earned interest o n program administration:

(1) A district that segregates its Carl Moyer Progr am funds into separate accounts for program administration and Carl Moyer Program projects must use all interest earned in the project account to fund eligible Carl Moyer Program projects, and may use interest e arned in the program administration account for either Carl Moyer Progra m administration or Carl Moyer Program projects.14 PROGRAM ADMINISTRATION

(2) A district that earns interest collectively on both project and administration funding can use up to five percent of earned intere st on administrative expenses if the district has one million or more in habitants, and up to ten percent of earned interest on administrative expens es if the district has

less than one million inhabitants.

(c) Expenditure of Small Sums. Residual amounts of earned interest may also be combined with Carl Moyer Program and/or earned inte rest from previous years to fund a single project. When combining funds from differen t fiscal years, the district must use the Guidelines in effect at the time of the obligat ion.

(d) Expenditure and Reporting Timeline. Districts typically track and report on earned interest in one of two ways -- the Fiscal Ye ar Method or the Funding Cycle Method, as illustrated in Table 4. Using the Fisca l Year Method, Carl Moyer Program

Year X earned interest is that interest earned on a ll Carl Moyer Program funds in the fiscal year that begins in Year X (See Table 4). F or the Funding Cycle Method, Year X

earned interest is that interest earned on Year X C arl Moyer Program funds over the approximately two year period the district has to e xpend the funds. Whatever the method used to accrue and track earned interest, in terest on Year X funds must be liquidated by the expenditure deadline for Year ‘X+ 2’ funds (i.e. June 30 th four calendar years after Year X funding was awarded by ARB). Ye ar X earned interest shall be reported with Year ‘X+2’ funds, consistent with the schedule identified in Table 4. Table 5 identifies the liquidation deadlines for interest accrued through program Year 12.

Each district must indicate which method it utilize s to track and report on earned interest

in its Policies and Procedures Manual.15 PROGRAM ADMINISTRATION Table 4: Interest Accrual, Liquidation, and Reporti ng Timelines for Two Commonly Used Interest Generation Methods

Year X Year X+1 Year X+2 Year X+3 Year X+4

Jan

Feb

Mar
Apr May

June Invoices Paid
July
Aug Final Report Sep

Oct

Nov

Dec

Assumes Year X funds received from ARB on April 1 o f first year.

Table 5: Liquidation Deadlines for Earned Interest Fiscal Year Liquidation Deadline
Years 1-7 June 30, 2009 Year 8 (FY 2005-06) June 30, 2010 Year 9 (FY 2006-07) June 30, 2011 Year 10 (FY 2007-08) June 30, 2012 Year 11 (FY 2008-09) June 30, 2013 Year 12 (FY 2009-10) June 30, 2014

Districts must also report on interest expended as of June 30, 2008 with their Year 8 Final Report (due August 31, 2008 ). There is no earned interest expenditure requirement or deadline for this report.

(e) Reporting Requirements. Each district shall report interest earned on Fin al Reports to ARB on the schedules identified in Table s 4 and 5.

(1) Districts must report on projects funded with e arned interest the same way districts report on Carl Moyer Program-funded proje cts (i.e. by entering projects in the CARL and in their Annual and Final Reports).

(2) Documentation of earned interest generation and expenditure must be retained for a minimum of the project life plus two years, contract term plus two years, or date of final project invoice pa yment plus three years, whichever is longer. Fiscal Year Method (interest earned on all Carl Mo yer Program funds)

Funding Cycle Method (interest earned on Year X Car l Moyer Program funds)16 PROGRAM ADMINISTRATION

(Section 14) Program Administration and Outreach Fu nding

(a) District Funding. Air districts with one million or more inhabitant s may use up to five percent of their Carl Moyer Program funds on p rogram outreach and administration,

while districts with under one million inhabitants may use up to ten percent of their Carl Moyer Program funds.

(b) Allowable Costs. Administrative funds shall only be used for costs associated with the program implementation related tasks outli ned in these Guidelines and must be documented by the district. Administrative funds s hall be used for Carl Moyer Program administration and outreach including: district sta ff time; consultant fees; printing, mailing, and travel costs; project monitoring and c ompliance expenses; and indirect costs such as general administrative services, offi ce space, and telephone services.

(c) Required Documentation. Districts must maintain documentation of Carl Moyer Program funds used for administration an d outreach. Districts must keep the following documentation:

(1) Personnel documentation must make use of timesh eets or other labor tracking software. Duty statements or other docume ntation may also be used to verify the number of staff and actual hours or percent of time staff is devoted to Carl Moyer Program administration and outreach.

(2) Consultant fees must be documented with copies of the consultant

contract and invoices.

(3) Printing, mailing, and travel expenses must be documented with receipts

and/or invoices.

(4) If travel and per diem expenses are used to doc ument program administrative costs, allowable travel costs and pe r diem rates must be

described in the district’s Policies and Procedures Manual. District travel

cost criteria must be consistent with the district’ s written travel policies for other district programs. Alternatively, if these d efinitions are included in local administrative code or other documents, the d istrict may cite the document that governs its practices in the Policies and Procedures

Manual.

(5) Indirect cost calculation methodologies, if use d to determine indirect costs of program administration, must be fully described or referenced in the

district’s Policies and Procedures Manual. Distric ts must maintain

documentation for all costs referenced in the indir ect cost calculation

formula.

(d) The above documentation, records, and reference d materials must be made available for review during ARB or other State agen cy monitoring visits and audits.17 PROGRAM ADMINISTRATION

These records must be retained for a minimum of two years after submittal of the Final Report for that funding cycle to ARB.

(e) District Carl Moyer Program staff shall reconci le program funds with the appropriate district fiscal staff at least twice pe r year.

(f) Districts that charge unallowable costs for pro gram administration or outreach shall be required to substitute eligible administra tion and outreach expenses equal to the dollar amount found ineligible, or return the f unds for the unallowable cost to the

ARB.

Part E: Reporting and Progress Tracking

(Section 15) Commitment of Project Funds

(a) Funds are considered to be committed to a proje ct when the district officially selects an eligible project for funding through any of the following actions:

(1) The district’s governing board approves a proje ct for funding through a resolution, minute order, letter or other written i nstrument, or

(2) The APCO or other Board-authorized representati ve sends the successful applicant a project offer letter, or

(3) The district submits project applications it ha s approved for funding to CARL, or

(4) The district provides ARB with spreadsheets des cribing projects approved by district staff, or

(5) The contract between the district and the owner is fully executed.

(Section 16) Contract Execution

(a) All Carl Moyer Program funds must be committed to a project via executed contract between the district and the project engin e, vehicle, or equipment owner or other legal representative.

(b) Executed project contracts must meet all requir ements of Section 29 of these

Guidelines.

(c) Executed project contracts and contract amendme nts must be reconciled between district program staff and contract staff.18 PROGRAM ADMINISTRATION

(d) All executed project contracts and contract ame ndments must be kept in the district’s project file.

(Section 17) Annual Report

(a) ARB shall send districts a copy of the appropri ate Annual Report template to fill out, or make the report template available on ARB’s website. The Annual Report template shall include instructions for the report’ s completion.

(b) Districts shall submit an Annual Report on or b efore August 31 st of the year following each funding cycle’s allocation from ARB (See Table 6). This report shall provide information regarding projects associated w ith funds received during the previous calendar year that are under executed cont ract as of June 30 th of that year. At a minimum, districts shall update all of their proj ect information in the CARL and specify

the date of contract execution. See Best Practices #3 and #21

(c) The Annual Report must include the following in formation for projects associated with funds received one year prior:

(1) Project type, emission reductions, number of en gines funded, and funds under executed contract for each Carl Moyer Program project, including match fund projects.

(2) Projects from previous funding cycles that were reported as “under contract” but which are no longer under contract mu st be updated as such.

(3) Verification of executed contracts, as follows:

(A) Districts not in good standing shall submit cop ies of executed contracts for all Carl Moyer Program projects, incl uding match projects, to ARB. Districts may make and submit on e complete copy of their standard contract format and then sub mit only the pertinent pages (initial page, signature page, and page describing the project, including contract amount) of each con tract to ARB.

(B) Districts in good standing may provide a form s igned by the APCO, Chief Fiscal Officer (CFO), and Carl Moyer Program manager certifying the amount of funds under contract in li eu of copies of

executed contracts.

(4) Copies of executed but not previously submitted contracts for projects identified in Section 19(c)(1) of this chapter that commit Carl Moyer Program and local match funds to project s.19 PROGRAM ADMINISTRATION

(d) Districts may demonstrate progress in executing contracts cumulatively by substituting executed contracts for current year St ate Carl Moyer Program funding (i.e. early contract execution) for funds not yet under c ontract from a previous year.

(e) Districts that have not executed contracts to c over all project funds received during the previous calendar year shall work with t heir ARB Carl Moyer Program liaison to ensure the district is on target to expend all r equired program funds within two years, consistent with Sections 18 through 20 of this chap ter. At a minimum, such districts shall provide an e-mail or other written documentat ion briefly describing:

(1) The reason for the delay in executing contracts , and

(2) Their schedule for executing the remaining cont racts, returning funds to ARB, contributing the funds to the Rural District A ssistance Program, or other actions as needed to ensure project funds are expended within two years. Districts choosing to contribute funds to t he Rural District Assistance Program must do so by that year’s Novemb er application deadline (as identified in Table 6). Districts tha t either: 1) return funds awarded by ARB the previous calendar year or 2) con tribute funds received the previous calendar year to the Rural Di strict Assistant Program after that year’s November application dead line shall be considered not in good standing. Funds contributed to the Rural District Assistance Program prior to that year’s November ap plication deadline shall not impact a district’s good standing status.

Table 6: Key Carl Moyer Program Milestones for Calendar Year s 2008 Through 2011

2008 2009 2010 2011

Jan

Feb

Mar Apr ARB Awards

and Disburses

Year 10 Funds

to Districts ARB Awards

and Disburses

Year 11 Funds

to Districts ARB Awards

and Disburses

Year 12 Funds

to Districts ARB Awards

and Disburses

Year 13 Funds

to Districts

May

June Year 8 Expended

Year 9 Contracts Year 9 Expended

Year 10 Contracts Year 10 Expended

Year 11 Contracts Year 11 Expended

Year 12 Contracts July Aug Year 8 Final Report
Year 9 Annual Report Year 9 Final Report
Year 10 Annual Report Year 10 Final Report
Year 11 Annual Report Year 11 Final Report
Year 12 Annual Report Sep Year 11 Solicitation Year 12 Solicitation Year 13 S olicitation Year 14 Solicitation

Oct

Nov Year 11 Apps. Due Year 12 Apps. Due Year 13 Apps. D ue Year 14 Apps. Due

Dec

This table identifies the general milestones for ca lendar years 2008 through 2011. The exact mileston e and deadline dates are included in Sections 2 throu gh 19 of this chapter.20 PROGRAM ADMINISTRATION

(Section 18) Invoice Payment

(a) A district shall have two options for paying pr oject invoices:

(1) The district may make a full payment on the pro ject after receiving an invoice from the owner and completing a satisfactor y post-inspection of the project (consistent with Section 31 of this cha pter), or

(2) The district may make partial payments on proje ct contracts. A district choosing this option must include its policies and procedures for partial payments in its Policies and Procedures Manual.

(b) By June 30 th of each year, districts must have paid invoices fo r projects associated with all State Carl Moyer Program funds received from ARB that were awarded to them by ARB two calendar years prior. F unds are considered expended when an invoice for that project has been fully or partially paid by the air district and the invoice payment also meets the conditions identifie d in Section 18(c), below.

(c) An invoice payment must cover the incremental c ost of a new engine, vehicle, or piece of equipment that is currently operational in order for project funds for the contract to be considered fully expended as required by HSC § 44286(k). An electric agricultural irrigation pump is considered operational for the p urposes of this definition once it has been delivered to the project participant and has b een connected to the electricity grid.

(d) Districts may demonstrate progress in paying in voices cumulatively by taking credit for funds paid on projects from a more recen t year of State Carl Moyer Program funding (i.e. early invoice payment) in place of fu nds not yet expended, consistent with Section 20 of this chapter.

(e) Project invoices must meet all applicable requi rements of Section 32 of this chapter.

(Section 19) Final Report

(a) ARB shall send districts a copy of the appropri ate Final Report template to fill out, or make the report template available on ARB’s webs ite. The Final Report template shall include instructions for the report’s complet ion.

(b) Districts shall submit a Final Report to ARB no later than August 31 st of the second year following the calendar year ARB awards the funds to the district (see Table 6). This report shall provide information re garding projects associated with funds received from ARB that were awarded two years prior that have been expended as of

June 30 th of that year. See Best Practice #3 and #2421 PROGRAM ADMINISTRATION

(c) The Final Report shall include the following in formation for funds awarded two years prior that were received by the district from ARB:

(1) Project type, emission reductions, and number o f engines funded for each Carl Moyer Program project, including match fund pr ojects and projects funded with earned interest. Districts tracking pr ogress cumulatively must include this information for funds expended early a s needed to demonstrate overall expenditure of program funds wi thin two years. If applicable, a district shall also provide informati on for vehicles or equipment previously counted as expended as part of a partially paid contract (in a prior year Final Report) which are n o longer being pursued or which were liquidated at a cost less than previo usly reported.

(2) Amount of interest accrued on State Carl Moyer Program funds.

(3) Copies of invoices that document the amount of Carl Moyer Program funds and local district match expended for each pr oject. Districts in good standing may provide a form signed by the APCO, CFO , and district Carl Moyer Program manager certifying the funds have met the expenditure requirements of the Carl Moyer Program in lieu of p roviding project

invoices.

(4) A brief narrative specifying: results of enviro nmental justice/high risk communities efforts, if any; results of outreach ef forts to zero-emission and small business projects; district monitoring an d auditing efforts and results; enforcement actions; and recaptured funds.

(5) A document signed by the district APCO, CFO, an d district Carl Moyer Program Grant Administrator that indicates the proj ect and financial data submitted is complete, accurate, and the district’s responsibility, and that

there are no known instances of fraud.

(d) Projects funded with the $2 MV Fee which are no t Carl Moyer Program match projects shall be reported as follows:

(1) Districts claiming SIP credit for $2 MV Fee pro jects shall report project-byproject details, as described in Section 19(c)(1), above.

(2) Districts not claiming SIP credit for $2 MV Fee projects shall report fund expenditures for each of the four allowed uses iden tified in Section 9(a)(1) of this chapter, but are not required to report pro ject-by-project details.

(d) In the event previous years’ funds that were li quidated are returned to a district, those returned funds are to be committed to new pro jects along with the current year’s funds in accordance with the current year’s require ments. The district shall include the projects funded with the returned funds in the curr ent year’s Annual and Final Reports.22 PROGRAM ADMINISTRATION

For the purposes of progress tracking, such funds w ill continue to be considered expended.

(e) Receipt of an Annual or Final Report by ARB doe s not imply ARB approval of project eligibility. Air district staff is respons ible for project approval and funding eligibility determinations.

(f) Districts that are found to have funded ineligi ble projects shall be required to substitute eligible projects equal to the amount fo und ineligible or return the ineligible

amount to the ARB.

(Section 20) Cumulative Progress Tracking

(a) In meeting deadlines to commit funds, execute c ontracts, or expend funds, ARB shall track district progress cumulatively. Cumula tive progress tracking allows for comparison of the total funds spent by the expendit ure deadline, regardless of the funding year, with the amount required to be expend ed at that deadline in order to ensure anticipated emission reductions are achieved . For example, a district that must demonstrate expenditure of Year 8 funds by the two- year statutory deadline may utilize Year 9 funds expended early in place of Year 8 fund s not yet expended. In this case, if the district had received $5 million in total fundi ng in Years 1 through 8, it would have to demonstrate $5 million in cumulative fund expenditu re by the two year statutory

deadline for Year 8.

(b) Cumulative progress tracking shall not include funds received from ARB for specific multi-district projects selected via ARB’s multidistrict solicitation (pursuant to

HSC § 44286).

(c) Cumulative progress tracking shall include fund s received by a district via the Rural District Assistance Program. Cumulative prog ress tracking shall not include funds donated by a district to the Rural District Assista nce Program or returned to ARB before the November application deadline identified in Tab le 1 on the year after the funds are

received from ARB.

(Section 21) Funding Year Close-Out

(a) ARB shall designate as “closed out” each fundin g year for which a district has submitted all required reports and demonstrated tha t every dollar of Carl Moyer Program funds for that funding year, inc luding match funding and earned interest, has been properly invoiced and pro ject contracts have been liquidated.

(b) For the purposes of cumulative progress trackin g, funds from a project are considered “fully expended” when an invoice for tha t project has been paid (even if it is a partial payment) on an operational engine, vehicl e, or piece of equipment. However,23 PROGRAM ADMINISTRATION

in order to close out a year, all funds for each pr oject must have been liquidated on an operational, in-use project and all contracts must be fully paid.

(c) All partially paid contracts for projects inclu ded in district’s Final Report must be fully liquidated by June 30 th of the second year after that year’s expenditure d eadline. For example, Year 8 funds have an expenditure deadl ine of June 30, 2008. All partially paid contracts and contract amounts credited in the Year 8 Final Report must be liquidated two years later (i.e. by June 30, 2010). Any funds associated with a contracted commitment for an engine, vehicle or equ ipment project that is cancelled from a contract shall no longer be considered expen ded beginning at the time of project

cancellation.

(d) Projects for which a successful post-inspection has verified that the vehicle or equipment is operational, but for which a small par t of the contracted amount is withheld for the purposes of progress payments consistent wi th how a district indicates it makes progress payments in its Policies and Procedures Ma nual shall be considered liquidated for the purposes of progress tracking. Progress pa yments which have been liquidated as per this section which are not paid to the grant ee due to non-performance shall be subject to the reporting and expenditure requiremen ts of Section 21(e), below.

(e) Funds which have been fully paid (liquidated) t o a grantee but which are returned to the district by the grantee due to project non-p erformance shall be subject to the same reporting and expenditure deadlines as other S tate Carl Moyer Program funds received from ARB in the calendar year the funds ar e returned.

(f) Districts that have submitted the required Annu al and Final Reports for Years 1 through 6 and have had no ARB audit findings pertai ning to fund non-expenditure may close out their programs for these years by having the APCO, CFO, and Carl Moyer Program manager certify in writing that the invoices for these projects have been paid in full and that there are no known instances of fraud in implementing the program for that year. Alternatively, a distri ct may provide copies of any invoices not already provided to ARB that demonstrate that a ll projects have been completed and invoices liquidated.

Part F: Program Oversight

(Section 22) ARB Audit of Air Districts

(a) State law provides ARB with the oversight respo nsibility and authority to audit Carl Moyer Programs and related emission reduction incentive programs (HSC § 44291

and § 39500). ARB audits are designed to ensure that dis trict programs achieve expected emission reductions and are implemented in a manner consistent with program guidelines and State law. Besides identify ing program deficiencies, audits are also designed to provide ARB with a mechanism for i dentifying the strengths of district24 PROGRAM ADMINISTRATION

programs. ARB’s specific audit procedures are desc ribed in more detail in the Carl Moyer and School Bus Program Auditing Policies and Procedures Manual.

(b) $2 MV Fee projects are subject to audit or eval uation as follows:

(1) A Carl Moyer Program match project funded with the $2 MV Fee shall be subject to the same auditing and oversight requirem ents and protocols as other Carl Moyer Program match projects.

(2) A non-match project funded with the $2 MV Fee m ay be evaluated by ARB as part of an audit. Evaluation of these proje cts shall be limited to project eligibility, such as whether the project is surplus to regulations and cost-effective. Any irregularities regarding non- match $2 MV Fee project eligibility shall be reported separately from Carl Moyer Program audit findings.

(c) ARB shall audit a sufficient number of district s each year – commensurate with approximately 10 percent of program funds -- to ens ure proper program implementation. The frequency of district audits is as follows:

(1) Large districts will be audited at least once e very 4 years.

(2) Medium districts will be audited at least once every 6 years.

(3) Small districts will be audited at least once e very 8 years.

(d) To ensure objectivity and the efficient use of resources, ARB shall use a riskbased approach to select specific districts for aud it during a given year and to select specific district projects to audit. Consistent wi th this approach, districts that demonstrate good performance when audited will like ly be audited less frequently in the future than similarly-funded districts with poorer audit results.

(e) ARB’s responsibilities during an audit include the following:

(1) Audits shall be conducted in a manner that refl ects the public responsibility and accountability entrusted to ARB.

(2) ARB shall maintain open channels of communicati on with the district under audit. ARB’s audit procedures contain a numb er of provisions to enable open communications. Such provisions includ e fully explaining the audit’s scope and procedure at the beginning of the process, discussing preferred channels of communication with the distri ct, informing the district of potential issues as they unfold, affording numer ous opportunities for district input throughout the audit, thoroughly dis cussing any findings and recommendations with the district during the exit i nterview, and allowing the district an opportunity to formally respond to the audit report.25 PROGRAM ADMINISTRATION

(3) To ensure objectivity and predictability, ARB s hall base its findings and recommendations on materials such as State law, ARB ’s Program Guidelines and Advisories, Program Grant Award and Authorizations, e-mail communications between ARB and the district, a district’s Policies and Procedures Manual, and a district’s local requi rements.

(4) All audit reports, district responses, and rela ted documents shall be readily available to the public.

(5) ARB shall conduct sufficient follow-up activiti es, including assisting districts and conducting follow-up reviews, to ensu re that any identified deficiencies are promptly and effectively rectified

.

(f) Air district responsibilities during an audit i nclude the following:

(1) Districts shall ensure that program files and o ther requested information are readily available to audit staff.

(2) District management shall, at a minimum, partic ipate in the entrance and

exit interviews and shall ensure that district staf f are cooperative with audit

staff.

(3) District staff shall communicate fully with aud it staff and with district management throughout the course of an audit.

(4) Districts shall make every effort, including re questing assistance from ARB if necessary, to ensure that identified deficiencie s are promptly and effectively rectified. Districts shall report on t heir progress at specified

intervals.

(Section 23) “In Good Standing” Designation

(a) A district shall be designated as “in good stan ding” if it complies with the following requirements:

(1) Meets all the Annual Report requirements identi fied in Section 17 of this chapter, including submittal of an accurate and com plete Annual Report in a timely manner, and adequately addressing the requ irements of Section 17(e), if applicable.

(2) Meets all the invoice payment and Final Report requirements identified in Sections 17 through 19, including submittal of an a ccurate and complete Final Report in a timely manner and demonstration o f full fund expenditure within two years. A district has until its mid-Nove mber application deadline26 PROGRAM ADMINISTRATION (See Table 1) on the year after funds are received to donate funds to the Rural District Assistance Program or return funds t o ARB. A district shall not be considered in good standing if it donates fu nds to the Rural District Assistance Program or returns funds to ARB after th is deadline. If a district fully expends its program funds in a subse quent year, it shall be reconsidered for good standing status.

(3) Fully addresses all Carl Moyer Program audit fi ndings that do not raise significant concerns with a district’s program impl ementation. Districts shall have an opportunity to fully address ARB’s au dit findings before having their “good standing” status revoked. The r equired timeline for addressing an audit finding shall be detailed in AR B’s audit report for the district. A district for which an audit finds majo r and significant issues with its implementation of the Carl Moyer Program may ha ve its “in good standing” status revoked immediately.

(4) Meets all other requirements of the Carl Moyer Program as identified in

statute and these Guidelines.

(b) No district shall be designated as in good stan ding until ARB has found it meets the requirements of this section. ARB shall make t he first determination of whether or not a district is in good standing after the August 31, 2008 deadline for the Year 8 Final Report and Year 9 Annual Report. Each district’s d esignation shall be reevaluated annually after the August 31 reporting deadline to determine if a district continues to be in good standing.

(c) ARB shall notify a district in writing if the d istrict has been designated as in good standing. A district not designated in good standi ng shall, at its request, be notified as to the reason(s) for not being so.

(d) A district’s “in good standing” status can be r evoked at any time for failure to meet the requirements of Section 23(a), above. A d istrict on probation as per Section 24 shall not be considered in good standing.

(e) Districts in good standing have additional flex ibility to administer the Carl Moyer Program as described in the following se ctions of this chapter:

(1) Section 5(a) – Submittal of Status Report

(2) Section 6(e) – Eligibility for Additional Fundi ng Allocation

(3) Section 8(c) – Required Actions for Grant Disbu rsement

(4) Section 17(c)(4) – Annual Report Contract Submi ttal

(5) Section 19(c)(4) – Final Report Invoice Submitt al27 PROGRAM ADMINISTRATION

(Section 24) Program Non-Performance

(a) An air district may be placed on probation due to continual, significant, or widespread non-compliance with the Carl Moyer Progr am statute or these Guidelines. ARB may find egregious or widespread non-compliance as a result of an ARB audit or through another mechanism. Non-compliance with pro gram Guidelines or statute include, but are not limited to, the following exam ples:

(1) Failure to expend program funds within two year s as required by HSC 44287(k) and tracked cumulatively consistent wi th Section 20 of this chapter.

(2) Misuse of Carl Moyer Program funds, including f unding of ineligible projects.

(3) Insufficient or improper program oversight and enforcement, including widespread deficiencies in project contracting, ins pections, or audits.

(4) Insufficient, incomplete, or inaccurate project documentation.

(5) Failure to submit timely and accurate Annual an d Final Reports to ARB.

(b) Prior to placing a district on probation, ARB s hall offer a meeting between the

ARB Executive Officer and the district APCO to iden tify the areas of program noncompliance and any steps that could be taken to imm ediately resolve the issue and keep the district out of probation.

(c) A district on probation shall:

(1) Provide a mitigation plan, which shall include its commitments for actions and a timeline for addressing all of the program de ficiencies. ARB shall evaluate the district’s mitigation plan and weigh t he proposed actions and timeline against the severity of program non-compli ance. ARB shall approve the mitigation plan if it includes adequate and expeditious commitments for addressing the identified problem(s ).

(2) Complete training provided by ARB, focusing on the subject area for which it was placed on probation.

(3) Attend all quarterly Incentive Program Implemen tation (IPI) team meetings.

ARB may impose additional requirements, depending u pon the scope and/or severity of the district’s non-compliance with program requirem ents.28 PROGRAM ADMINISTRATION

(d) No later than one year from the date the distri ct was placed on probation, ARB

shall evaluate the district to determine whether it has met the requirements of this section and has fully addressed the issue(s) for wh ich it was placed on probation. ARB

shall brief the district on the results of their ev aluation and allow the district to provide additional input before making a final decision on the district’s probationary status. ARB shall then take one of the following actions:

(1) Remove the district from probation.

(2) Continue the district probation for a period of up to one additional year.

(3) Continue the district probation for a period of up to one additional year and adjust the district’s annual funding allocation for the probationary period to

reflect that amount which the district is able to s pend in accordance with program Guidelines and statute. ARB shall realloca te a district’s unallocated funds pursuant to this section to other air districts based upon the formula set forth in HSC §44299.2(a)

(4) In the event the district remains on probation, ARB may adjust the mitigation plan requirements.

(Section 25) Program Streamlining

(a) A district that has demonstrated continued exce llence in program implementation and is in good standing may apply to ARB to have sp ecific elements of these Guidelines waived or amended (Streamlining Plan). The distric t’s Streamlining Plan application must include the following three elements.

(1) Evidence that the district has consistently run an outstanding program, including but not limited to:

(A) Results of an ARB audit of the district’s progr am; (B) Continued submission of timely and accurate Ann ual and Final Reports, Policies and Procedures Manual, and other documentation; (C) Continued participation in IPI meetings, work g roups, and other program forums; (D) Adoption of program Best Practices (as deemed a ppropriate by the district), as identified in these guidelines;

A district that ARB has recently audited and found to run an outstanding program shall receive greater consideration for mor e program autonomy than a district whose program has not been as thoro ughly reviewed.29 PROGRAM ADMINISTRATION

(2) A detailed description of the administrative ex emptions requested.

(3) A Streamlining Plan, which details how the dist rict intends to implement the Carl Moyer Program with the requested exemption s. The Streamlining Plan must demonstrate that that the proposed change s shall not undermine the effectiveness, transparency, or accou ntability of the Carl Moyer Program.

(b) ARB shall review a district’s Streamlining Plan application within 30 days of its receipt and either approve the application, disappr ove the application, or request additional clarification. A district shall not imp lement the Streamlining Plan until receiving written approval from ARB.

(c) Examples of exemptions a district may request i n its Streamlining Plan include:

(1) Authority to approve case-by-case projects that don’t exceed a certain maximum funding cap.

(2) Exemption from submitting Annual and/or Final R eports.

(3) More flexibility to pre- and post-inspect less than 100 percent of projects.

(4) More flexibility for district auditing of proje cts.

(d) Continued approval of the Streamlining Plan sha ll be contingent upon the district meeting the plan’s requirements, and continued exce llence in overall program implementation. If ARB is considering revoking a d istrict’s Streamlining Plan, ARB shall call a meeting to discuss its concerns and identify any immediate steps that can be taken to ensure resolution occurs within a mutually acceptable period of time. If timely resolution is not possible, ARB shall notify the di strict in writing that they are revoking the district’s Streamlining Plan. ARB’s notificati on shall include an explanation for the plan’s revocation.

PART III: AIR DISTRICT-APPLICANT INTERACTIONS

(Section 26) Minimum Project Application Requiremen ts

(a) Districts and ARB shall conduct outreach to inf orm potential project applicants of the availability of grants and the requirements and objectives of the Carl Moyer Program. (HSC § 44290) See Best Practices #5 and #6

(b) Project applications must include all the sourc e category-specific information needed to populate and calculate project cost-effec tiveness in CARL. Example project30 PROGRAM ADMINISTRATION

application data are available on ARB’s website at www.arb.ca.gov/msprog/moyer/moyer.htm. See Best Practices #7 and #8

(c) Information regarding required previous years o f existing engine usage documentation (miles traveled, hours operated, or f uel consumed per year) may be found in the applicable source category chapter. T he usage amount included in the project application must be used to evaluate projec t cost-effectiveness and maximum grant award.

(d) Applications must include a signature section f or third parties. A third party may complete an application or part of an application o n an owner’s behalf if the vehicle, engine, or equipment owner signs the application. The third party signature section must include signature and date lines, and blanks f or the third party to indicate the amount and source of payment, if any.

(e) Project applications must include a disclosure statement that the owner or the owner’s designee must sign.

(1) The disclosure statement shall specify whether the applicant has submitted an application for incentive funds to any other entity or program for the same project (for example, repowering of th e same project engine). If so, the applicant must disclose to whom the othe r application was submitted, and whether funds have been awarded or m ay be awarded. If funds have been awarded or may be awarded, the fund ing amount must

be disclosed.

(2) An applicant may re-apply for project funding i f a previous application for the same project has been rejected by the district and is no longer being considered for funding.

(3) An applicant shall disclose the value of any cu rrent financial incentive that directly reduces the project cost, including tax cr edits or deductions, grants, or other public financial assistance for th e same engine. The incremental cost of the project shall be reduced by the amount of the

current financial incentive.

(4) An applicant who is found to have submitted mul tiple applications for the same engine and who has not disclosed any current f inancial incentive in the disclosure required by Section 26(e)(1), above, shall at a minimum, be disqualified from funding for that engine from all sources within the control of a district or ARB. Such an applicant may also b e banned from submitting future applications for any Carl Moyer P rogram funding. ARB and the districts may also seek civil or criminal p enalties for such nondisclosure.31 PROGRAM ADMINISTRATION

(5) The applicant shall also certify in the disclos ure statement that he or she has reviewed the application and that the applicati on information is

accurate and correct.

(Section 27) Application Evaluation and Project Sel ection

(a) In accordance with HSC Section 44288(a), distri cts must review all applications for completeness upon receipt and notify the applic ants in writing within five working days of receipt if their application is not complet e. The notification must clearly state what is required to make the application complete. All notifications of an incomplete application must be copied, with the original provi ded to the owner and the copy placed in the applicant file along with a copy of the inco mplete application. This written notification must be accomplished using one of the options below: See Best Practices #38

(1) A letter.

(2) An email message.

(3) A boiler plate form with check-offs.

(4) A phone call to the applicant, followed by a da ted note or other documentation of the call to the project file.

(b) Air districts are responsible for determining t hat project applications are credible, made in good faith, and in compliance with the Carl Moyer Program and its objectives based upon the documentation submitted by the appli cant. See Best Practice #20

(c) All complete applications must be reviewed by t he district for eligibility. This process must include all of the following:

(1) Entering or uploading the data from the applica tion into the ARB database (CARL) or the district equivalent to ensure that it meets the emission

reductions and cost-effectiveness criteria of the C arl Moyer Program. Districts not using CARL are responsible for ensuri ng the accuracy of their

database calculations of cost-effectiveness and eli gible funding amounts. Applications to fund ineligible source categories o r which are otherwise clearly ineligible for Carl Moyer Program funding d o not need to have their data entered or uploaded into the ARB database or d istrict equivalent.

(2) Checking to ensure the project meets all of the minimum requirements outlined in the chapter for the appropriate source category, including:

(A) Documentation of historical vehicle, equipment, or engine usage. (B) Documentation of project costs. (C) Engine or retrofit device Executive Orders, if applicable.32 PROGRAM ADMINISTRATION (D) Proof of a vehicle compliance check, as needed, for on-road projects. (E) Other documentation identified in the relevant source category chapter.

(d) Districts must have a system for tracking appli cations. At a minimum, the tracking system shall include the minimum informati on needed to readily identify the project applicant, project type, and project eligib ility, and to calculate project costeffectiveness and maximum grant award in CARL.

(e) The district shall maintain a copy of each appl ication and a file for each project selected for funding. A district may use a solely electronic file system only after the district satisfactorily demonstrates to ARB that al l documentation is maintained and can be easily accessed on demand.

(f) Districts must keep project applications until three years after the end of the project life for projects selected for funding, and until three years after the project application deadline for projects not selected for funding.

(g) Districts have the authority and responsibility for selecting Carl Moyer Program eligible projects in areas within their jurisdictio n. Projects approved for funding must meet all applicable requirements of these guideline s. Once a district has checked the eligibility of projects, the district must follow i ts Policies and Procedures Manual in selecting projects to fund. See Best Practices #17, #18, #19, and #26

(h) The record of each project’s rating and ranking , receipt date, or other project selection criteria must be maintained with the appl ication.

(i) Districts must ensure that the emission reducti ons provided by selected projects are surplus to compliance deadlines of adopted regu lations and other legal requirements.

(j) The following requirements apply to those distr icts that do not currently operate

and maintain their own database:

(1) Information for projects selected for funding s hall be entered into the CARL to ensure each project meets the emission redu ction requirements and cost-effectiveness criteria of the Carl Moyer P rogram.

(2) No project shall be funded unless the CARL indi cates the emission reduction requirements and cost-effectiveness crite ria of the Carl Moyer Program have been met.

(3) If the CARL indicates the project does not meet either the emission reduction requirements or the cost-effectiveness cr iteria of the Carl Moyer Program and the district representative thinks the project33 PROGRAM ADMINISTRATION should actually qualify, the district representativ e may contact his or her ARB liaison to further evaluate project eligibility

.

(k) A file shall be created for all projects select ed for funding. See Best Practice #11

(l) Districts must promptly notify successful appli cants in writing or by phone that they have been selected for funding. Documentation of grantee notification must be included in the project file. A district’s methodo logy for notifying grantees of their prospective award must be included in its Policies and Procedures Manual.

(m) Districts with a population greater than one mi llion inhabitants must select from their applicant pool in a way that ensures that 50 percent or more of their Carl Moyer Program funds (including the smog check fee and tire fee) are expended on projects that are located and/or operate in environ mental justice/high risk communities. (HSC § 43023.5) See Best Practices #12 through #16

(n) ARB shall include a solicitation packet on its website for multidistrict projects that are solicited and selected by ARB pursuant to HSC § 44286. The multidistrict project solicitation packet shall include the application r equirements and application due date, project eligibility criteria, and project selection criteria.

(Section 28) Case-by-Case Approval

(a) An air district may request ARB approval of a p roject or other Carl Moyer Program element that varies from the req uirements of these Guidelines on a case-by-case basis. ARB may approve such a proje ct or other program element if this approval would not adversely impact achievemen t of real, surplus, quantifiable, enforceable, and cost-effective emission reductions , would not significantly reduce program transparency, and is not prohibited by stat ute.

(b) Case-by-case approvals must be made by ARB Carl Moyer Program staff in writing (such as in an e-mail or letter).

(c) An air district receiving case-by-case approval for a project must keep the written approval from ARB in the project file. Written cas e-by-case approval for other program elements must be kept by an air district and be rea dily available for ARB audit staff.

(d) Approval for case-by-case projects must be made prior to contract execution.

(e) ARB shall respond to a district request for cas e-by-case approval within two weeks of the request with an approval, disapproval, or request for additional

information.34 PROGRAM ADMINISTRATION

(Section 29) Minimum Contract Requirements

(a) General Requirements. Districts participating in the Carl Moyer Program must execute contracts with applicants who shall receive funds under the Carl Moyer Program. All Carl Moyer Program project contracts must include the elements

described in this section. See Best Practices #9, #10, #22, and #29

(b) Party Names and Date. All contracts shall state the name of the distric t and the owner as parties to the contract. Contracts shall include signature blocks with an area for the dates the contract is signed. See Best Practice #21, #27, and #28

(c) Notices. All contracts shall include contact information f or both parties to the contract, including how to send and receive notices

.

(d) Disclosure of Funds. The owner or owner’s designee must sign a disclos ure

statement.

(1) The disclosure statement shall certify that onc e the owner or designee signs the project contract, the owner or designee s hall not submit another application or sign another contract for the same s pecific project (such as repowering of the project engine) with any other so urce of funds, including but not limited to other districts or ARB (for a mu lti-district solicitation). An owner or designee may receive funding from multiple air districts or grant programs if these entities are coordinating to join tly fund the project.

(2) The disclosure statement shall indicate whether the owner or designee has received prior incentive funding for the projec t vehicle, engine, or equipment, as well as the funding source, amount, a nd contract term associated with the previous incentive grant.

(3) Any owner, designee, or other third party who i s found to have submitted multiple applications without the disclosure requir ed in Section 26(e)(1), or signed multiple contracts for the same specific pro ject shall, at a minimum, be disqualified from funding for that project from all sources and may also be banned from submitting future applications to an y and all Carl Moyer Program solicitations. ARB and the districts may a lso levee fines and/or seek criminal charges for such conduct.

(e) Contract Term. All contracts shall specify the term of the contr act. The contract

term shall include two time frames

− “project completion” and “project implementation”

− to ensure that the district and ARB can fully enfor ce the contract during the life of the Carl Moyer Program-funded project. See Best Practice #23 and #24

(1) Project Completion. Project completion is the time frame starting with the date of execution of the contract to the date the p roject post-inspection confirms that the project has become operational. This includes the time35 PROGRAM ADMINISTRATION period when an engine or vehicle is ordered, delive red and installed. The contract shall include a specified time frame in wh ich project completion shall occur, so that the funds are expended within the two-year required

timeframe. See Best Practices #32

(2) Project Implementation. The project implementation time frame is the second part of the contract term, and must equal th e project life used in the project cost-effectiveness calculation. The co ntract shall specify that the owner is required to operate and maintain their Carl Moyer Program-funded project according to the terms of the contract for the full project implementation period.

(f) Project Specifications. All contracts shall include detailed information on the baseline and new vehicles, equipment, and/or engine s that were used in the project cost-effectiveness calculation. This requirement m ay be met by including the project application as an attachment to the contract as lon g as the application is accurate and complete. A program-eligible new vehicle, piece of equipment and/or engine that is verified or certified to achieve greater reductions than the original project new vehicle, piece of equipment and/or engine may be substituted with prior approval of the district. All contracts shall specify the amount the engine i s to operate within California (or the district) each year based on hours, miles, or fuel usage. Contracts must also contain a statement that the project complies with the Carl M oyer Program Guidelines and criteria and shall meet all program requirements for the ful l contract term.

(g) Maintenance. All contracts shall require the owner to maintain the vehicle, equipment and/or engine according to the manufactur er’s specifications for the life of the project, and shall include a prohibition on eng ine tampering. The owner shall maintain a working hour meter for projects that use hours of operation as a means of calculating emission reductions and cost-effectiven ess. If the hour meter fails, the owner shall immediately notify the district, and re mains responsible for validating any hours not recorded by the hour meter. The owner mu st either repair or replace the nonoperating meter or provide other documentation of e quipment operating hours acceptable to the district.

(h) Payment. Before a Carl Moyer Program payment may be made t o a project participant, the project contract must be executed, an eligible invoice must be received by the district, and the project post-inspection mu st be successfully completed to document the completion of the work specified in th e invoice. The equipment must be operational before the final payment is issued. Al l contracts must include the following
payment terms:

(1) Maximum Contract Amount. The maximum contract amount must not exceed the maximum funding level corresponding to t he $16,000 per weighted ton program cost-effectiveness limit, nor may the maximum contract amount exceed the project incremental cost . The maximum36 PROGRAM ADMINISTRATION contract amount must also comply with any funding c aps and other criteria for the specific project category as identified in these Guidelines.

(2) Itemized Invoices. Payment terms must require itemized invoices from the engine supplier for repowers or paid invoices from the vehicle owner for new vehicles, and satisfactory post-inspection by t he district prior to payment of the owner’s invoice. An invoice payment for a specific vehicle, engine, or piece of equipment may not exceed the am ount indicated on the project contract for that vehicle, engine, or p iece of equipment. Invoices must meet the minimum requirements of Sect ion 32 to be eligible for Carl Moyer Program funding.

(i) Reporting. All contracts must include a provision for owners to submit annual reports commencing no later than 18 months after pr oject post-inspection and continuing annually thereafter throughout the proje ct implementation phase of the

contract. See Best Practice #33 The district shall include the dates the Annual R eport is due.

(1) If the district monitoring phase (i.e. project implementation phase) of the contract term exceeds five years, the owner’s repor ting responsibility may be reduced to once every other year after the initi al five years of reporting.

(2) If the project is a zero-emission technology, r eporting may be reduced to biennially for the first six years of the contract term. No Annual Reports are required thereafter.

(3) During the project implementation phase, the di strict is responsible for monitoring the project to assure the project is ope rational and the project

emissions reductions are realized.

(4) The contract shall inform the owner that noncom pliance with the reporting requirements shall require on-site monitoring or in spection(s).

(j) On-Site Inspections and Audits. All contracts shall include language that allows the district, ARB, or their designee to conduct a f iscal audit of the project and/or to inspect the project engine, vehicle, or equipment a nd associated records during the contract term. Contracts must require the owner t o maintain and retain the project records for at least two years after contract expir ation or three years after final project payment, whichever is later.

(k) Repercussions for Nonperformance. Districts shall include repercussions for non-compliance with the obligations of the contract

.

(1) The contract shall specify that by executing th e contract, the owner understands and agrees to operate the vehicle, equi pment, and/or engine according to the terms of the contract and to coope rate with the district and ARB in implementation, monitoring, enforcement, and other efforts to37 PROGRAM ADMINISTRATION assure the emission benefits are real, quantifiable , surplus, and

enforceable.

(2) The contract must describe the repercussions to the owner for noncompliance with contract requirements, including but not limited to cancelling the contract and recapturing project fun ds.

(3) The contract must inform the owner that ARB and the district have the authority to fine the owner or seek other remedies available under the law for noncompliance with Carl Moyer Program requireme nts and nonperformance with the contract. Districts may co nsider unforeseen circumstances beyond the owner’s control in determi ning repercussions for nonperformance.

(4) The contract must state that the ARB, as an int ended third party beneficiary, reserves the right to enforce the term s of the contract at any time during the contract term to ensure emission re ductions are obtained.

(Section 30) Project Pre-Inspections

(a) Once an application is deemed eligible, a pre-i nspection must be completed by

the district. See Best Practice #30 Districts may choose to allow public agencies (e. g. public works departments, transit organizations, and schoo l districts) to provide documentation of the engine and its use in lieu of a pre-inspecti on.

(b) The pre-inspection shall, at a minimum, include the following:

(1) Collect the serial number of the baseline engin e and any additional information necessary to assist in the verification of the baseline engine application information. Engines without a visible and legible serial number must be uniquely identified by having the en gine block stamped with a Carl Moyer Program number (or alternative pe rmanent marking, such as an engine tag) when the engine is in the pr oject vehicle or equipment.

(2) All baseline vehicle, equipment, or engine info rmation directly related to the application emission reduction calculations (en gine Tier, vehicle model year, etc...) must be verified to be equivalent to th at used to evaluate project cost-effectiveness.

(3) Verify the project usage (hours or miles) meter reading if used in the project cost-effectiveness calculation, and verify that stated project usage is reasonable given the usage meter reading.38 PROGRAM ADMINISTRATION

(4) Verify the engine is operational (with a start- up) and that the engine is working as described in the application (document f unction and use).

(5) At least one photo shall be taken of each engin e for the project file. The photo must include the legible serial number of the engine (if available) and/or any other identifying markings. Districts m ust include in their Policies and Procedures Manual a method for catalog ing, referencing, storing and easily retrieving project-specific phot os. These methods may include electronic filing for digital photos, the i nclusion of project-specific information (applicant name, date, project number, etc.) within each photograph or inscribing each photo with pertinent project-specific information. ARB approval of the district’s Polic ies and Procedures Manual shall indicate approval of the photo documen tation methodology.

(c) A pre-inspection form must be used to document the pre-inspection. The required elements the district must complete on a p roject pre-inspection form include:

(1) Owner’s name, address and telephone number.

(2) Location of the engine.

(3) Verification of the project baseline engine, ve hicle, and/or equipment information as described in the application.

(4) Space for the inspector to record whether the e ngine is in running condition, make comments, and attach pictures.

(d) A hard copy of the completed pre-inspection for m shall be maintained in the district’s project file.

(e) A district may enter into a Master Contract wit h a vehicle or equipment dealer to pre-inspect on-road retrofit projects. All other p rojects must be pre-inspected personally by district staff. A district that enters into suc h a contract must ensure the following:

(1) The vehicle or equipment dealer must complete a nd sign the appropriate inspection forms and provide photographic evidence that the equipment is correctly identified on the form. Photographic evi dence must include the engine tag and emissions information.

(2) The district must define in its Policies and Pr ocedures Manual its protocol for ensuring the correct verified project retrofit will be properly installed on the eligible project vehicle.

(3) The district must define in the Master Contract clear and substantial consequences for fraud by the dealer.39 PROGRAM ADMINISTRATION

(4) The district must randomly inspect at least ten percent of vehicles/equipment that have been pre-inspected by the dealer pursuant to the Master Agreement.

(f) The project pre-inspection must be completed pr ior to a project contract execution. A district may apply to ARB for approva l to conduct pre-inspections after contract execution on a case-by-case basis. Case-b y-case approval of such a procedure shall depend upon the following:

(1) The district describes the program benefits it would achieve by conducting pre-inspections after contract signature.

(2) Language is included in the project contract to indicate contract terms may be adjusted or the contract may be deemed void base d upon information collected during the pre-inspection. The district must also include a process for informing the project participant of su ch.

(3) The district’s Policies and Procedures Manual c learly specifies the process for conducting pre-inspections after contra ct execution and any additional procedures enacted to ensure the project achieves real, surplus, enforceable, and quantifiable emission red uctions. Work on the project engine, vehicle, or equipment may not comme nce until after the pre-inspection.

(Section 31) Post-Inspection

(a) Post-inspections shall be completed on all proj ects funded under the Carl Moyer Program. See Best Practice #30

(1) The district shall conduct a post-inspection af ter it receives an invoice for a project from the owner or otherwise receives notice the project is complete. If the post-inspection occurs before the district receives the project invoice, when the invoice is received it mu st be reviewed for consistency with the new engine, vehicle, or equipm ent information from the post-inspection form.

(2) For public fleets such as transit organizations where more than 20 of the vehicles in the fleet are included in the project, the district may choose to inspect a statistically significant random sample o f the vehicles included in the project.

(3) The inspector shall record the project informat ion on the inspection form and verify it with the information listed in the co ntract. All new vehicle, equipment, or engine information directly related t o the application emission reduction calculations (engine Tier, vehic le model year, retrofit40 PROGRAM ADMINISTRATION device certification level, etc.) must be verified to be equivalent to that used to evaluate project cost-effectiveness.

(4) The engine must be operational in the equipment or vehicle as stated in the contract. The inspector must visually witness all engines start up and mobile projects run.

(5) The vehicle, equipment, or engine information m ust be documented with photos. The photo must include the serial number of the engine (if legible) and/or any other identifying markings. Districts m ust include in their Policies and Procedures Manual a method for catalog ing, referencing, storing and easily retrieving project-specific phot os. These methods may include electronic filing for digital photos, the i nclusion of project-specific information (applicant name, date, project number, etc.) within each photograph or inscribing each photo with pertinent project-specific information. ARB approval of the district’s Polic ies and Procedures Manual shall indicate approval of the photo documen tation methodology.

(b) A post-inspection form shall be used to documen t the post-inspection. The completed form shall be maintained in the project f ile. The information required to be verified and included on the post inspection form i ncludes:

(1) Owner’s name, address and telephone number.

(2) Location of the engine.

(3) Baseline engine information (make, model, model year, horsepower, and serial number) as written in the application and/or contract.

(4) Space for the inspector to record whether the b aseline engine was scrapped or destroyed.

(5) New engine information (make, model, model year , horsepower, and serial number).

(6) Space for the inspector to record whether the e ngine is in running

condition and to make comments.

(7) Post-inspection of a verified retrofit device m ust include the name of the manufacturer, diesel emission control strategy fami ly name, product serial number, and, if available, month and year of manufa cture (usually indicated as MM-YY). The month and year of manufac ture may not be

listed on the retrofit label if this information ca n be readily obtained from the retrofit manufacturer by reference to the seria l number. Retrofits

without the information identified in this subsecti on (i.e. Section 31(b)(7)) are considered non-compliant with ARB retrofit labe ling requirements;41 PROGRAM ADMINISTRATION districts must note whatever information is missing on the post-inspection form and report the non-compliant label to ARB.

(c) The existing (old) engine must be destroyed and rendered useless. See Best Practice #31

(1) The destruction of the engine must be documente d by district staff. District staff must verify either in-person or thro ugh photographic or video evidence that the destroyed engine serial number ma tches that on the project contract.

(2) District staff must verify that engines without a visible and legible serial number are uniquely identified by the correct distr ict stamp or other permanent marking prior to engine destruction, as p er Section 30(b)(1) of this chapter.

(3) Methodology for verifying engine destruction mu st be identified in the district’s Policies and Procedures Manual. ARB app roval of the Policies and Procedures Manual shall indicate ARB approval o f the district’s methodology for verifying engine destruction.

(4) Destruction methods and requirements specific t o the on-road fleet modernization category, off-road equipment replacem ent, and the light duty vehicle category are described in those chapte rs.

(Section 32) Project Invoice and Payment

(a) An itemized invoice for a project must be recei ved by the district before payment may be made. A project invoice must include enough detail to ensure only eligible project costs are being reimbursed, yet clear and c oncise enough to be understandable.

The district shall review the itemized invoice and only pay for eligible expenses.

(b) Charges for equipment and parts on engine repow er projects are only eligible for funding if they are required to ensure the effectiv e installation and functioning of the new engine, but are not part of typical vehicle or equi pment maintenance or repair. Ineligible repower costs include tires, axles, paint, brakes, and mufflers. Ineligible marine vessel repower costs are described in the marine vessel ch apter of these Guidelines.

(c) In order to be eligible for Carl Moyer Program funding, labor expenses must be included in the project invoice, which should detai l the number of hours charged and the hourly wage.

(d) Taxes, installation costs for eligible hardware , and transport costs for eligible hardware are eligible for Carl Moyer Program fundin g at the district’s discretion.42 PROGRAM ADMINISTRATION

(e) A potential grantee may not order or make a dow n payment on a new engine, piece of equipment, or vehicle prior to district ap proval of the project, either via contract execution or approval by the governing board or boa rd designee. Dealers ordering engines, equipment, or vehicles prior to district a pproval of grant applications assume all financial risk, and are in no way ensured progr am funds. A grantee may not receive engines, equipment, or vehicles, nor may work begin on a repower or retrofit project, until the project contract is fully executed.

(f) Payment on a project may only be made after rec eipt of a project invoice and after the district post-inspection indicates the pr oject is in place and operational. An electric agricultural irrigation pump is considered operational for the purposes of this definition once it has been delivered to the projec t participant and has been connected to the electricity grid.

(1) Partial payments may be made only if the paymen t process and requirements have been reviewed and approved by the district and are described in the contract. Progress payments shall only be made after the owner provides the district with sufficient evidenc e of completing predetermined milestones, such as engine delivery. The district must maintain a clear record of progress payments in the file and in the administration/fiscal unit of the district. Progre ss payments include final payments that are withheld until all reporting requ irements are met (also known as “withhold payments”). See Best Practice #33

(2) Payments typically shall be made directly to th e project applicants. However, payments may be made directly to the deale r or distributor only if such payment arrangements are specified in the c ontract. Partial payments may be made only if the payment process an d requirements have been reviewed and approved by the district.

(3) Additional project invoicing requirements for t he on-road fleet modernization category are included in that chapter

.

(g) For all on-road projects, if a compliance check was not previously completed, the district shall verify with its ARB district liaison that there are no outstanding violations prior to payment.

(h) For projects where the participant must comply with an ARB regulation early to receive funding, invoices may not be paid until the project participant has provided documentation that early compliance has been achiev ed. A project participant may demonstrate early compliance via a detailed letter signed by the vehicle or equipment owner or legal representative or, if the regulation requires ARB to certify compliance, through ARB certification. Districts are not to be held liable if a grantee falsifies this

documentation.43 PROGRAM ADMINISTRATION

(i) Invoices received after the project post-inspec tion has been complete must be evaluated for consistency with the project post-ins pection form, as per Section 31(a) of this chapter.

(j) The district shall maintain copies of all invoi ces and documentation of payment in the project file.

(Section 33) Grantee Annual Reporting

(a) Districts shall require all project participant s (“grantees”) to submit annual reports commencing no later than 18 months after the projec t post-inspection and annually thereafter for the term of the contract, with the f ollowing exceptions:

(1) If the district’s monitoring phase of the contr act term exceeds five years, the grantee’s reporting responsibility may be reduc ed to once every other year after an initial five years of satisfactory re porting.

(2) If the project involves a zero-emission technol ogy, grantee reporting may be reduced to biennially for the first six years. No annual reports are required thereafter.

(b) The annual report shall be in a format prescrib ed by the district and shall contain all of the following information: See Best Practice #34

(1) Owner’s name, address, and telephone number.

(2) Information needed to uniquely identify the pro ject engine, vehicle, or equipment, such as engine make, model, horsepower, and serial number.

(3) Estimated percentage of time the vehicle or equ ipment has been operated in California since the previous annual report.

(4) Readings of the usage meter (hour meter, odomet er, EMU, etc.). If usage is more than 30 percent above or below that identif ied in the project application, the grantee shall describe any conditi ons (such as weather, permits, major maintenance, etc...) that significantl y impacted project

usage.

(c) The districts shall review the annual report fo r completeness, accuracy, and usage. A hard copy of the annual report, initialed and dated by the reviewing staff, shall be maintained in the project file. A district choo sing an alternative method to indicate its review and approval of annual reports must identify such alternative method in its

Policies and Procedures Manual.44 PROGRAM ADMINISTRATION

(d) If the project’s usage does not average out to within 70 percent of the annual usage specified in the contract over at least a 3 y ear period (i.e. no more than 30 percent below the stated usage), the district shall take appropriate action to ensure the

contracted emission reductions are realized. Activ ity for agricultural irrigation pump projects with a one-year project life must be withi n 70 percent of that stated in the project contract. Options for addressing actual us age that is more than 30 percent below that stated in the contract include, but are not limited to:

(1) Extending of the project contract for additiona l years (if this doesn’t overlap with an applicable rule implementation requ irement).

(2) Returning of project funds in proportion to the loss in emission reductions.

(3) Transfer ownership of the vehicle or equipment to an entity committed to comply with the contract terms.

(e) If an annual report is incomplete, inaccurate o r not received from an owner on schedule, the district shall make a reasonable atte mpt to obtain a complete and accurate report from the owner. If the district is unable to obtain the report, all of the engines in that project shall be audited by the dis trict, as per Section 34 of this chapter.

(f) Districts shall keep a list of project particip ants from whom any reports are more than six months late. Project participants with re ports that are more than six months late shall not be granted any additional Carl Moyer Program funds until all reports are satisfactorily submitted.

(Section 34) District Audit of Projects

(a) Districts shall conduct audits of projects that have been funded for at least one year (based upon pre-inspection date) and are also within two years of contract expiration as follows:

(1) At least five percent (or a statistically signi ficant number, whichever is less) of projects, and

(2) All of the projects whose owners fail to submit their most recently required project annual report as per Section 33 of this cha pter within six months of their reporting deadline.

(b) Districts shall conduct audits for the followin g projects at the end of their contract

term as follows:

(1) At least five percent (or a statistically signi ficant number, whichever is less) of projects, and45 PROGRAM ADMINISTRATION

(2) All of the projects whose owners fail to submit their final project annual report as per Section 33 of this chapter, and

(3) All of the projects that were found to be great er than 30 percent below the contracted activity level during any audit conducte d as per Section 34(a),

above.

(c) Audits shall be completed by district staff and shall, at a minimum, include verifying that the engines paid for are still opera tional in the same equipment and meet the mileage, fuel usage, or hours of operation indi cated in the executed contract. This shall be performed by checking the serial number of the engine; witnessing the operation of the engine; and checking the odometer, hour meter/usage device, fuel receipts, or EMU.

(d) If project activity is more than 30 percent bel ow the annual average of the level of use committed to in the contract, the district shal l take appropriate action to ensure the emission benefits are realized and captured during the term of the contract. In addition, the district shall audit all of the other engines o wned by the same participant and included in the same Carl Moyer Program funded proj ect.

(Section 35) Nonperforming Projects

(a) A district shall work with nonperforming projec t grantees to ensure Carl Moyer Program project requirements are met and emission reductions are

achieved. See Best Practice #35

(b) A district shall make all reasonable efforts to recoup Carl Moyer Program funds from nonperforming applicants as needed to ensure f unded emission reductions are

achieved. See Best Practice #36 A district’s efforts to recoup funds may be guided by

circumstances such as:

(1) The existence of fraud or intentional misuse of funds, or

(2) The amount of Carl Moyer Program funding involv ed, or

(3) The ability of the applicant to repay the funds

.

(c) A district shall describe its procedures for de aling with nonperforming grantees in

its Policies and Procedures Manual.