EPA deems DPNR a high-risk agency

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ST. CROIX - Citing a lack of progress in addressing problems identified more than two years ago, the U.S. Environmental Protection Agency has declared the V.I. Department of Planning and Natural Resources a high-risk grantee, potentially placing EPA funding at risk if the problems are not fixed.

"I am writing to convey EPA's continuing concern regarding DPNR's lack of progress on addressing the findings and recommendations of EPA's January 2012 on-site evaluation and other issues identified during EPA's ongoing reviews of payment requests," a May 23 letter to DPNR Commissioner Alicia Barnes from Roch Baamonde, Chief of EPA Region 2 Grants and Audit Management Branch, states. "For more than two years, EPA and DPNR have been working together to address these findings, yet we have seen little progress."

DPNR is appealing the high-risk designation, and has asked the EPA to hold in abeyance certain actions it planned to start taking on DPNR's grants until the appeal is decided, DPNR Commissioner Alicia Barnes said.

It was not clear last week whether EPA would do so.

In a separate evaluation, the EPA's Office of Inspector General has also been looking into the effectiveness of the environmental programs the territory has implemented on EPA's behalf.

That audit will look at how the territory has done with implementing the programs and how EPA Region 2 has done with its oversight responsibilities, according to a project notification memorandum from the EPA's Office of Inspector General.

The main report from that audit is expected out sometime this winter, said Jeffrey Lagda, a spokesman for the EPA Office of Inspector General.

However, a smaller report, detailing problems with DPNR's Beach Water Quality Monitoring program that occurred earlier this year while that audit was being conducted, was made public in March. The issues outlined in that report are being addressed, officials said.


According to the May 23 letter, EPA found that DPNR has a management system which does not meet the standards for financial management systems set forth in federal regulations, and that the local agency has not conformed to the terms and conditions of previous grant awards.

Either one of those findings was enough to designate DPNR a high-risk grantee, according to the letter.

Although decisions on declaring DPNR a high-risk grantee had previously been deferred, Baamonde wrote that "Given the lack of progress demonstrated by DPNR, we are now compelled to make such a designation."

A report from the EPA January 2012 on-site review "identifies many management system weaknesses and questioned costs. None have yet been resolved," the letter states.

It goes on to note that Regional Administrator Judith Enck wrote Barnes in April 2013 about her concerns over DPNR's lack of progress in implementing corrective actions to address the findings and questioned costs from the Fiscal Year 2007 and 2008 single audits and the on-site evaluation in January 2012.

Enck's April 2013 letter recalls postponing the high-risk designation "to allow time to develop and implement appropriate corrective actions" and notes that EPA put DPNR on a "modified reimbursement method of payments" while DPNR worked with EPA to resolve the audits and address deficiencies.

The items that DPNR has to issue or address include a formal response and corrective action plan to deal with the findings and recommendations from the January 2012 review, reconciliations and adjustments for personnel charges in the central government's accounting system, submitting an acceptable method for allocating costs associated with non-working hours charged to the grants, and providing documentation to properly support indirect costs that were not allowed in the 2007 and 2008 audits.

"More than a year has passed since the Regional Administrator issued the letter and the situation remains essentially unchanged," the May 23 letter states.

High Risk

It goes on to say that with the high-risk designation, EPA would be implementing additional restrictions and requirements for DPNR, including that within 45 days, DPNR had to submit an "approvable" corrective action plan, which identifies specific actions DPNR will take in each problem area EPA identified in January 2012, anticipated milestones and completion dates, and responsible persons and units.

Those requirements also include assigning a person to lead the efforts to implement the corrective action plan, which would have to address all financial and administrative issues that EPA has identified. That person would work closely with EPA.

The letter notes that although DPNR submitted a proposed corrective action plan in February, it did not conform to the requirements, and is already outdated.

According to the letter, EPA plans to include a "significant progress" condition in new DPNR grants awarded in the future, which means that DPNR will not be able to request reimbursement for incurred costs until EPA decides the agency has made significant progress toward completing the commitments in the corrective action plan.

The letter also outlines additional steps EPA said it would begin to take starting July 1 on grants that remain open. Those steps include disallowing certain costs until DPNR has its methodologies approved, holding regular bi-weekly meetings between the agencies to monitor progress and for other purposes, and initiating the enforcement process for all grants that are expired and have outstanding deliverables.

The letter then sets out the appeals process.

According to information from the V.I. Legislature's Post-Audit Division, DPNR has received $3.14 million in grant funding from EPA in FY 2014.


Barnes said that DPNR has been working with EPA to address the issues, and that she was therefore "surprised" at getting the letter declaring DPNR a high-risk grantee.

"It was surprising to receive that letter in the midst of us moving forward with discussions," she said.

She said she felt there were some inaccuracies in the way things were presented.

According to the DPNR appeal letter, EPA did not formally notify the agency before the May 23 letter that its revised corrective action plan was not approvable, nor did it provide the specific reasons why EPA would not accept the proposed corrective measures.

The appeal also argues that DPNR has been providing additional supporting documentation, explanations and clarification to try to resolve findings in the 2007 and 2008 audits.

Barnes said the V.I. Finance Department had also been brought into the discussions with EPA, in an attempt to resolve issues EPA has with the government's computerized financial management system, the Enterprise Resource Planning System.

"We are working to address their concerns," Barnes said.

The appeal contends that DPNR has complied with the grant regulations, because it uses and accounts for federal grants in accordance with local laws and procedures and works with the V.I. Finance Department to ensure that proper accounts are reflected in the Enterprise Resource Planning System.

The appeal also argues that DPNR has shown its commitment to resolve the problems.

It goes on to respond to specific issues and concerns that EPA brings up in the designation letter.

Beach water monitoring

In a separate matter, while the EPA Office of Inspector General was conducting its on-site evaluation of the territory's environmental programs earlier this year, that agency discovered that DPNR had not monitored the beaches on St. Thomas and St. John for pathogens under its Beach Water Quality Monitoring Program between Feb. 3 and 16.

Auditors discussed the problem in a Quick Reaction Report titled "EPA Oversight Needed to Ensure Beach Safety in U.S. Virgin Islands."

Such reports are issued "when we have a serious concern that needs to be addressed immediately," Lagda said.

The territory received a $303,000 EPA Beach Act grant for Fiscal Years 2013 and 2014 for weekly monitoring of 43 beaches.

Under the grant, DPNR is responsible for analyzing the monitoring results and informing the public of instances of beach contamination, according to the report, which notes that 23 of the 43 beaches monitored are on St. Thomas and St. John, and 20 are on St. Croix.

Water samples are collected from the nearshore areas of the designated beaches and then tested for the presence of enterococci bacteria, to determine water quality and fecal contamination.

The report notes that in violation of the terms of its Beach Act grant, DPNR did not monitor the beaches on St. Thomas and St. John between February 3 and 16. DPNR restarted beach sampling on Feb. 17.

No contract

According the report, EPA Region 2 was aware DPNR did not have a contract with the company that was collecting beach monitoring samples and had not paid the company for sampling work since July 2012. Region 2 provided documentation indicating that it had repeatedly contacted DPNR about the issue for a year, "with no results."

However, no one had come up with a contingency plan for collecting samples, analyzing results and posting warnings if the sampling stopped, which is exactly what happened in February, according to the report.

DPNR did issue press releases informing the public that the beaches had not been monitored for those weeks.

The report recommended that the EPA Regional Administrator immediately take steps to ensure that beach monitoring and public notification in the territory meet EPA guidelines, and that they continue. The report questioned whether press release notification was adequate to reach tourists using the beaches.

The report also recommended that the administrator determine whether DPNR has a sustainable beach monitoring program in place that can provide continuous beach monitoring and adequate public notification. If the finding is that the territory's beach monitoring program is not sustainable, the recommendation is for EPA to manage the program until DPNR can meet EPA guidelines.

EPA Region 2 concurred with the two recommendations, and noted that the contractor stopped collecting samples for a two-week period because DPNR had failed to make payment. According to the report, DPNR estimated it would take up to six months to execute a contract, and intended to use its staff to collect samples until a contract was in place.

Region 2 also noted the financial management problems and other difficulties DPNR has, but said it believes DPNR is capable of running a beach monitoring program with adequate public notification. Region 2 and DPNR are working to address the beach monitoring program deficiencies, according to the report.

As for the larger evaluation of DPNR's effectiveness in implementing EPA programs and EPA Region 2's effectiveness in its oversight responsibilities, Lagda said that Office of Inspector General is in the discussion phase with the agency about its findings, and anticipates issuing a public report either late this year or in early 2015.

- Contact reporter Joy Blackburn at 714-9145 or email jblackburn@dailynews.vi.

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