Auditors: VVWRA mislead FEMA on project, jeopardizing $33.1M

Auditors say the regional wastewater authority offered misleading information to the Federal Emergency Management Agency when it performed a major pipeline replacement project completed in the summer of 2016.

Specifically, the Victor Valley Wastewater Reclamation Authority overstated the costs of two alternative project options and vastly understated the price tag of the project it ultimately chose to undertake, according to a recent report by auditors with the U.S. Department of Homeland Security’s Office of the Inspector General.

Because of the purportedly misleading information, the OIG has recommended that FEMA disallow $33.1 million in grant funds awarded to the authority for the ambitious effort.

David Wylie, spokesman for the VVWRA, said in an email Thursday that the report and its recommendations were under review by FEMA and that the authority submitted all close-out documentation, which is also now under review by FEMA and the California Office of Emergency Services (Cal OES).

“VVWRA looks forward to FEMA completing its review and fully funding the project,” Wylie added.

FEMA did not agree with the OIG’s recommendation, Robert Fenton, the regional administrator for Region IX, explained in a memo to the OIG’s Western Regional Office Director Humberto U. Melara.

Instead, FEMA will wait and review the final project documentation once it’s submitted by Cal OES.

FEMA did, however, concur with three other recommendations: To not obligate $6 million the authority requested for cost overruns; to coordinate with federal officials to address possible regulatory infractions by the authority and a contractor; and to review $8.2 million in emergency funding for five projects outside the audit’s scope.

The report, released April 26, is the second of two to be issued by the OIG related to VVWRA’s $42-million pipeline replacement project and it’s no less damning than the first.

That initial report, released in January 2017, focused on contracting and accounting practices and concluded with a similarly upsetting recommendation: Disallow $31.7 million in the three contracts reviewed by the OIG because the wastewater authority allegedly mismanaged those emergency funds.

If FEMA was to disallow those funds, then auditors would change their latest recommendation to disallowing $1.4 million in order to equal $33.1 million.

The wastewater agency has refuted those findings, which officials say came as a shock and were not aligned with previous conversations with auditors who conveyed to the authority they had generally complied with federal regulations in accounting for and extending grant funds.

As late as November, VVWRA General Manager Logan Olds had expressed optimism that the tens of millions of dollars in emergency funds were not in jeopardy after Cal OES reviewed the largest portion of the project — accounting for 81 percent of its overall price — and agreed with the nearly $36 million cost.

Now the OIG, 16 months after its initial report, has pivoted as expected to the allegedly misleading information the authority provided to FEMA to develop the scope of work for the project.

The Upper Narrows Pipeline Replacement Project permanently replaced temporary pipeline installed after severe storms in December 2010. The storms had washed out and ruptured a portion of nearly 30-year-old sewer line in the Mojave River, spilling 42 million gallons of sewage into the river in the process.

Through an engineering contractor not named in the report, VVWRA is accused of overstating to FEMA by about $9 million the costs of two alternatives — repairing damaged section of pipe with and without hazard mitigation measures — that were passed over in favor of constructing the replacement pipeline outside of the Mojave Riverbed.

The replacement and relocation method involved complex horizontal directional drilling and tunneling to dig thousands of feet under the river, railroad and Victorville streets.

VVWRA, through its unnamed contractor, is accused of presenting this method as the least expensive of the three options and suggesting it could cost as little as $12 million, according to the report.

Auditors noted that the report was not meant to determine the most appropriate pipeline repair strategy.

But they do say the contractor revised a bid document eight times between September 2013 and January 2014, adding millions of dollars to the project without notifying the state or FEMA. Had FEMA known, they said, the federal agency likely would have readdressed the other alternatives.

In feedback submitted to the OIG, the wastewater authority said officials relied on the contractor to prepare preliminary estimates, adding that certain costs might have been omitted because engineering work at the time was not complete.

Authority officials said they were also not concerned with the accuracy of estimated costs because the contractor had advised them that once FEMA accepted the project, the federal agency would provide the necessary funds to finish it.

They also said that “the development of cost estimates is FEMA’s responsibility,” according to the report, and FEMA “can choose or ignore the information provided by recipients.”

Source: Shea Johnson, Daily Press