18-30042-08

Purpose of the Report

In accordance with Title 24 of the Alaska Statutes and a special request by the Legislative Budget and Audit Committee, we conducted an audit of the Village Safe Water Program (VSW) administered by the Department of Environmental Conservation (DEC).

The objectives of the report fall into two categories. The first category involves how the VSW program distributes grant funding to various communities served by the program. Objectives include: (1) assessing the reasonableness of the criteria used to identify and scale sanitation projects for various communities; (2) reviewing how funding priorities are established for construction grant funding; (3) assessing how well the program has done in communicating ranking and assessment criteria to communities seeking grant funding.

The second category of objectives involves reviewing and assessing the changes made by DEC in how the VSW program is administered. Changes have been made primarily in response to a November 2003 Legislative Audit report and concerns by federal funding agencies. Objectives include: (1) assessing the effectiveness of newly established controls over project construction costs; and (2) the impact over how administrative costs being charged to outstanding projects will have on the final cost and design.

Report Conclusions

• Systems selected for communities are consistent with both established DEC criteria and legislative intent.
• Construction and financial controls have improved in recent years, but minor exceptions persist.
• Ranking of applications for construction grant funding is consistent with established criteria.
• VSW program managers did a good job of communicating the changes made to construction grant criteria to affected communities.
• Use of the Rural Utility Business Advisor (RUBA) evaluation process has delayed starting projects already appropriated, and is preventing some rural communities from submitting grant applications.
• VSW’s retroactive assessments of administrative costs on past projects and, more significantly, construction material cost increases have an impact on the scope and nature of already appropriated projects.

Findings and Recommendations

1. The legislature should consider clarifying the eligibility requirements for the Village Safe Water (VSW) in order to better target funding.The VSW program has historically been used as the primary conduit for funding directed to improve the sanitation conditions in Alaska’s remote rural, primarily Native communities. In recent years, the VSW program has provided construction grants for communities that do not fit this profile.The program has begun receiving interest and applications from neighborhood subdivision organizations or nonprofit corporations representing a group of households rather than being affiliated with a local governing body. VSW managers report they have dealt with organizations that have been specifically formed to apply for sanitation grants. Although managers are uneasy whether such communities meet the central intent of the VSW program, they have been advised by the Department of Law (DOL) that such organizations are eligible for grant funding.
2. DEC’s Division of Water Facilities Program Manager should ensure that project application files are complete and provide fully documented support for inclusion the VSW budget request.
3. Managers of the VSW program should require communities to receive a successful utility business assessment as a condition for applying for a construction grant.VSW requires communities to successfully complete a RUBA assessment prior to releasing appropriated funds necessary to start construction. Currently, there are 17 communities, involving 22 separate appropriations totaling over $44.7 million, with projects on hold awaiting successful completion of a RUBA essential indication assessment.We recommend VSW management require a successful RUBA assessment as a condition of applying for a construction grant. Such a requirement would avoid situations where funding is held up over multiple construction seasons and would provide greater assurance the community is administratively capable of sustainably operating the newly built system.