Unprecedented Accountability and Transparency of Recovery Act Funds—Wave of the Future? Toronto, Ontario Chapter Professional Development Day October 20, 2010 Jeff Hart, CGFM, CFE AGA Past National President

AGENDA Overview of American Recovery and Reinvestment Act (ARRA) and Impact on EPA Operations Job Creation/Saving Environmental Results Some Questions & Key Points To Take Away

Some Questions For Today How has this unprecedented level of accountability and transparency raised the bar for all US-EPA programs?  Has it also raised the bar for all government programs?  Has it raised the bar in Canada?  Might it raise the bar around the world?

The American Recovery and Reinvestment Act (ARRA) President Obama signed the $787 Billion American Recovery and Reinvestment Act (ARRA, or Recovery Act) of 2009 into law on February 17, 2009 in Denver, CO

The Recovery Act’s 3 Goals Create new jobs and save existing jobs Spur economic activity and invest in long-term growth, and Foster unprecedented levels of accountability and transparency in government spending. Save and Create more than 3.5 million jobs over two years; Take a big step toward computerizing Americans’ health records, reducing medical errors, and saving billions in health care costs; Revive the renewable energy industry and provide the capital over the next three years to eventually double domestic renewable energy capacity; Undertake the largest weatherization program in history by modernizing 75 percent of federal building space and more than one million homes; Increase college affordability for seven million students by funding the shortfall in Pell Grants, increasing the maximum award level by $500, and providing a new higher education tax cut to nearly four million students; As part of the $150 billion investment in new infrastructure, enact the largest increase in funding of our nation’s roads, bridges, and mass transit systems since the creation of the national highway system in the 1950s; Provide an $800 Making Work Pay tax credit for 129 million working households, and cut taxes for the families of millions of children through an expansion of the Child Tax Credit; Require unprecedented levels of transparency, oversight, and accountability.

ARRA Funding - $787 Billion The Recovery Act provides $787 Billion, which breaks down to: $288 Billion in tax cuts $224 Billion in increased federal spending for education and health care as well as entitlement programs (such as extending unemployment benefits), and $275 Billion for Federal contracts, grants and loans.

Where is The $787 Billion Going? Circle chart taken right off Recovery.gov, and do not add up to $787B for some reason.

$275 Billion for Federal Contracts, Grants and Loans 300 different programs spanning dozens of Federal Agencies EPA $7.22 Billion for 6 programs $20 Million -- Inspector General

EPA’s ARRA Funding $7.22 Billion BF LUST DERA SF CWSRF DWSRF EPA’s $7.2 Billion was divided as such: I go into each of these programs in the following slides, and there is a list of acronyms at the back of the presentation. $4B for the Clean Water State Revolving Fund $2B for the Drinking Water State Revolving Fund $600M for the Superfund Program $300M for the Diesel Emissions Reduction Act Program $200M for the Leaking Underground Storage Tank Program $100M for the Brownfields Program $20M for the Office of the Inspector General

Region 8 ARRA Funding $384 Million $371M in Grants and Contracts $3.5M in ARRA Management and Oversight Funding $9.5M in set-asides for R8 Tribes This funding is managed out of HQ

Current Progress Q3 2010 Quarterly Report 15,764 jobs created or retained (36,092 to date) 935 in Region 8 57 % CWSRF funds spent 74% in Region 8 62% DWSRF funds spent

Current Progress Q3 2010 Quarterly Report 51 Superfund sites initiated construction 9 in Region 8 8,500 diesel engines retrofitted, replaced or retired--reduced the lifetime emissions of carbon dioxide by 230,000 tons and particulate matter by 1,100 tons 268 in Region 8 649 LUST site assessments begun 55 in Region 8 263 Brownfields site assessments initiated 10 initiated in Q2 2010 in Region 8 FY 2010 Quarter 3 Highlights As of June 30, 2010 Clean Water State Revolving Fund  1,777 projects have begun construction with 124 complete  $1.1 billion (30%) in funds went to “green” projects Drinking Water State Revolving Fund  1,324 projects have begun construction with 110 complete  $500 million (29%) in funds went to “green” projects Diesel Emissions Reductions  8,500 diesel engines have been retrofitted, replaced, or retired  These engines have reduced the lifetime emissions of carbon dioxide by 230,000 tons and particulate matter by 1,100 tons Brownfields  263 properties have been assessed with 8 properties cleaned up  15 properties totaling 23 acres are now ready for reuse Leaking Underground Storage Tanks  649 site assessments have begun with 340 completed  402 cleanups have begun with 326 completed Superfund  51 sites and 57 remedial action projects have on-site construction  Small business socio-economic contractors are leading cleanups at 45% of sites

Colorado’s “Top 10” Categories of $1.588 Billion ARRA Funds State Fiscal Stabilization Fund $760,242,539 IDEA Part B Grants to States $148,730,571 MEDICAL ASSISTANCE PROGRAM $140,911,583 Title I Grants to Local Educational Agencies $110,905,813 Weatherization Assistance for Low-Income Persons (A) $79,531,213 State Energy Program (A) $49,222,000 Section 8 Housing Assistance Payments Program Special Allocations $35,545,846 EPA Drinking Water SRF $34,352,000 EPA Clean Water SRF $31,347,700 Tax Credit Assistance Program $27,349,670 Total CO budget=$19 billion, ARRA=8%

Gene L. Dodaro , Acting Comptroller General , U. S Gene L. Dodaro , Acting Comptroller General , U.S. Government Accountability Office “Experience tells us that the risk of fraud and abuse grows when billions of dollars are going out quickly, eligibility requirements are being established or changed, and new programs are being created.” GAO’s Role in Helping to Ensure Accountability and Transparency, March 9, 2009

A key objective of ARRA is to minimize fraud, waste, and abuse Even a 5% error rate places $40 billion of total program funding potentially at risk for fraud, waste and abuse The federal government expects States to embed anti- fraud, waste and abuse efforts into ongoing oversight of programs Existing systems and controls may not be capable of addressing increased expectations The public has zero tolerance for fraud, waste and abuse Additional funding for audits, law enforcement and inspector general oversight

OMB’s Recovery Act Guidance Stresses Accountability Funds awarded in a prompt, fair, reasonable manner Recipients and uses of funds transparent Funds used for authorized purposes and instances of fraud, waste, error, and abuse mitigated Unnecessary delays and cost overruns avoided Achieve programmatic goals

Section 1512 Reporting : Data Elements Data elements to be collected were published in Federal Register 4/1/09 Requires one report per award There are five sections: General Section: One report for each award that includes project period and awarding Federal agency Section 1: Project & Activity - Cash Received & Disbursements Section 2: Project & Activity - Outputs & Outcomes Status of Work Completed Jobs Created or Retained Section 3: Subrecipient Information Cash Disbursed by Recipient Date of subaward and grant period Section 4: Aggregate Awards - Total awards <$25,000 Source: Federal Register April 1, 2009

Certification and Maintenance of Effort Certification elevated to the Governor, Mayor or other State officials Upfront certification prior to spending Infrastructure investment has been reviewed Full responsibility is accepted as to the appropriate use of the taxpayers’ funds Maintenance of Effort Federal funds cannot be used to supplant local funding Must be used for additive projects, not applied to cut-backs Governments will need to document current level of effort Source: recovery.gov

Recovery Accountability and Transparency Act Board coordinate and conduct oversight quarterly reports recommendations may send Flash reports to the President and Congress problems that require immediate attention established and maintains a user friendly website, Recovery.gov, to foster . accountability and transparency

Recovery Accountability and Transparency Act Board The Honorable Earl E. Devaney, Chairman The Honorable Phyllis K. Fong, Inspector General Department of Agriculture The Honorable Todd J. Zinser, Inspector General Department of Commerce The Honorable Gregory H. Friedman, Inspector General Department of Energy The Honorable Daniel Levinson, Inspector General Department of Health and Human Services The Honorable Richard L. Skinner, Inspector General Department of Homeland Security The Honorable Glenn A. Fine, Inspector General Department of Justice The Honorable Calvin L. Scovel, Inspector General Department of Transportation The Honorable Eric M. Thorson, Inspector General Department of Treasury The Honorable J. Russell George, Treasury Inspector General for Tax Administration Mary Mitchelson, Acting Inspector General Department of Education

Recovery.gov Website Detailed data on contracts and grants Progress reports on spending and accomplishments Links to grant, loan, contract opportunities Map-based view of where the spending is going Subscription content to be informed with targeted changes Ability for access to bulk data for individual analysis Reports from GAO, IG, CEA Vignettes on results/accomplishments Responses addressing public feedback Source: Recovery Act Architecture Package v0.032

EPA Oversight Assistant Administrator---”Senior Accountable Official”--lead and coordinate all agency activities related to stimulus funding Steering Committee--senior managers monitor stimulus project planning and implementation meets weekly Inspector General--$20 million for oversight Public can track EPA's distribution of stimulus cash on the agency's Web site

Development of the Stewardship Plan Required broad participation Plan addresses following areas: Grants management Interagency Agreements Contracts management and procurement issues Payroll and human capital Budget Execution Performance reporting Financial reporting OCFO Briefing: 2009 EPA Comptroller/FMO/Budget Workshop San Antonio, TX - April 2009

DRAFT RECOVERY ACT STEWARDSHIP PLAN EXECUTIVE SUMMARY May 5, 2009   The Recovery Act Steering Committee established an Agency-wide Internal Controls Workgroup that was charged with creating the Recovery Act Stewardship Plan. Subcommittees are made up of Program Office, administrative, and Regional representatives with an OIG advisor. The Stewardship Plan is based on the five GAO Internal Control Standards: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. Risk mitigation strategies from the OMB 02/18/2009 and 04/03/2009 Recovery Act Guidance documents and the OIG’s “Initial Plan for Oversight of Recovery Act Funds” were addressed. Additionally, OIG Open Audit Issues, OEI’s Management Action Plan, other agencies’ best practices (DOJ, USPS, Commerce, DOI, and NSF), and the Agency’s Katrina Stewardship Plan were all considered during the development of the Recovery Act Stewardship Plan.

OIG Focus IG focus on OMB accountability objectives Evaluate the process for awarding funds Review the quality of data systems Assess performance IG will conduct: Performance audits Financial audits Investigations of fraud, waste, and abuse OCFO Briefing: 2009 EPA Comptroller/FMO/Budget Workshop San Antonio, TX - April 2009

Types of OIG Reviews Forensic Audits Performance Audits Program Evaluations Investigations

Forensic Audits of Recipients and Subrecipients

Identifying Candidates Unusual Patterns of Drawdowns Prior Report Findings Hotlines Recovery Accountability and Transparency Board Referrals Prior Issues with Recipient or Subrecipient

What Does the OIG Review? Construction Site Progress/Materials Individuals Working Buy American Requirements Davis Bacon Requirements

Loan-Recipient Office What Is OIG Reviewing? Loan-Recipient Office Procurement Financial Systems Project Oversight Recipient Reporting

On-Going Performance Audits Competition for DERA Grants Contractor Performance Evaluations EPA and State Oversight of Clean Water SRF Projects Implementation of Recovery Act Stewardship Plan for Superfund Remedial Program Contracts

On-Going Performance Audits Resources for Recovery Act Oversight Use of Interagency Agreements Financial Reporting of ARRA Effectiveness of EPA Data Quality Review Process

GAO Findings to Date May 26, 2010--Clean Water Projects Are Underway, but Procedures May Not Be in Place to Ensure Adequate Oversight Dec. 10, 2009—One Quarter of Recovery Act Funds Administered by States and Localities Has Been Paid Out Nov. 19, 2009--Recipient Reports: Good Initial Efforts to Ensure Accurate Reporting but Significant Data Quality Issues Need Addressing Sept. 23, 2009--Need for Recovery Act Accountability and Reporting Challenges to Be Fully Addressed

GAO Findings to Date May 26, 2010--Clean Water Projects Are Underway, but Procedures May Not Be in Place to Ensure Adequate Oversight June 22, 2010--EPA Submitted Accurate and Timely Recovery Act Financial Reports September 27, 2010-- EPA Effectively Reviewed Recovery Act Recipient Data but Opportunities for Improvement Exist --Identified errors in 3 percent of recipient entries. EPA did not identify any of these errors as significant. Several OIG site inspections revealed nothing that would require action.

GAO Findings to Date May 26, 2010--Clean Water Projects Are Underway, but Procedures May Not Be in Place to Ensure Adequate Oversight Dec. 10, 2009—One Quarter of Recovery Act Funds Administered by States and Localities Has Been Paid Out Nov. 19, 2009--Recipient Reports: Good Initial Efforts to Ensure Accurate Reporting but Significant Data Quality Issues Need Addressing Sept. 23, 2009--Need for Recovery Act Accountability and Reporting Challenges to Be Fully Addressed

Region 8 ARRA Monthly Report Sept. 2010 Outlay Rate and Jobs Reported Program (A) Amount Awarded (B) Total Outlays (thru 6/30/10) (B/A) Cumulative % National Average % Outlays Reported Jobs (for FY10 Q3)** Drinking Water SRF $134,452,000 $99,708,207 74% 62% 357 Clean Water SRF $126,354,000 $93,932,258 57% 363 604b $1,303,000 $761,574 58% N/A (included in CWSRF) 5 Superfund $64,150,180 $32,960,256 51% 56% 140 DERA $17,770,597 $12,551,798 71% 43% 45 LUST $9,773,000 $4,286,841 44% 38% 19 Brownfields $5,429,900 $2,009,292 37% 26% 6 Totals $359,232,677 $246,210,226 69% 935 *Full Jobs Created number unavailable for Eureka IAG

R8 Outlays Compared to Awards Cumulative through the end of May 2010 Amounts in millions 74% 74% 51% 71% 44% 37% 58%

Regional Accomplishments Cumulative through FY10 Q3 (6/31) Nearly $312M in CW and DW SRF projects have started construction. 1 Superfund project achieved design completion. 1 Brownfields property has been cleaned up. 1,000 diesel engines have been retrofitted, replaced or retired. 25,000 tons of CO2-equivalent emissions have been avoided. 32 LUST assessments and 15 cleanups have been completed.

Selected 2010 Brownfields Accomplishments City of Missoula, MT $25,000 -- asbestos abatement at former freight depot Now a community nutrition center + 17 low-income homes Provides fresh local food for neighborhood with household income level $7,000 below median households receiving public assistance is twice as high as the city overall http://www.nmcdc.org/bstreet.html

Selected 2010 DERA Accomplishments Sioux Falls, SD School District Replacing 10 buses, new lower-emission models + installing 20 pre-heaters New engines + idle reduction + fuel conservation programs Highest honor possible--Gold Level “Green Fleet Certification”

ARRA Success – Diesel Emissions Reduction Act (DERA), Decker, Montana State of MT in partnership with Decker Coal Company $700k to repower 4 high emissions oversized coal-hauling dump truck engines Old engines used Ultra Low-Sulfur Diesel fuel but still emitted high levels of particulate matter and toxics Contact: Kyle Olson, EPA Region 8, Office of Partnerships and Regulatory Assistance 303-312-6002, olson.kyle@epa.gov

Jobs, Health, + 76% Return on Investment 9.29 mechanical and administrative jobs created or retained in environmental justice community $532k in health care cost savings associated with premature mortality chronic & acute bronchitis respiratory symptoms asthma exacerbation nonfatal heart attacks hospital admissions emergency room visits work loss days, and minor restricted activity days

Exceeded Original Pollution Reduction Goals by 114% CO=carbon monoxide HC=hydrocarbon NOx=nitrogen oxide

Implications to EPA ARRA significantly increased EPA’s Budget and Increases Risk of Error/Mistakes With limited time to obligate funds and high priority from the Administration to spend funds quickly/accurately/well, stewardship of funds takes on a “higher profile” Unprecedented transparency to public – EPA records/results open to increased scrutiny OCFO Briefing: 2009 EPA Comptroller/FMO/Budget Workshop San Antonio, TX - April 2009

Some Themes From PSMW-Halifax (June 2010)—Same in U.S. Difficult Economy Structural Deficits Unsustainable “Back to Balance” Cut Services/Costs Increased Public Pressure to Reduce Costs Yet Maintain/Increase Services

Implications of Increased Transparency & Accountability Increased Scrutiny Increased Risk & Decreased Tolerance for Mistakes & “Mismanagement” Increased Demand for Improved Management/Results Increased Demand for Quality Data/Info

Open Government Directive December 2009, Office of Management and Budget publish government information online, improve information quality, create and institutionalize an open government culture, and create an enabling policy framework for open government.

High Note! Implications/Opportunities for Us FM’s Role More Important Than Ever Increased Attention on: Data/Info for Decision-making Internal/Management Controls ID & Mitigating Risks (financial & program) Measuring/Improving Program Results

Recovery.gov opening book on open government “Agencies at all levels of government must view this as not just a passing management phenomenon, but as a way to rethink how government communicates with the public. …the new accountability and transparency movement will likely increase public expectations for real-time spending information.

October 17, 2010-- Jeffrey C. Steinhoff, executive director of KPMG Government Institute and managing director of KPMG LLP “…government managers will be on the hot seat like never before. Is government turning a new page in accountability, transparency and intergovernmental relations? It will be up to everyone to find new ways to meet the goals of open government and satisfy a public that is more insistent than ever on knowing what it is getting for its tax dollars.”

Questions? Jeff Hart jeffshart@comcast.net 303-907-4664