Use of Federal Grant Funds for a Sewage Treatment Project

A review was performed to determine whether federal grant funds the Environmental Protection Agency (EPA) provided to Portage County, Ohio, for a sewage treatment project were used for the purposes set forth in the grant agreement. The project grant audit was discussed with representatives of the EPA regional Inspector General. The audit workpapers had been destroyed pursuant to federal record disposal regulations. The purpose of the grant to Portage County was to finance construction of a new interceptor sewer system including pump stations and force mains, and a new secondary wastewater treatment plant.

In 1975, the project was audited to determine the allowability and reasonableness of reported project costs. It was determined that the total costs were allowable and that approximately $455,000 was reimbursable under the grant agreement terms. Allegations were made in 1978 that a local government official had funneled the federal loan funds to other county activities and personal use. An investigation followed, but none of the allegations were substantiated. Two audits were performed on the Portage County accounting records during the past 3 years. The audits considered whether the county had proper fund accountability and adequate documentation for all its funds. Neither audit report indicated that the federal grant funds were not used for the purposes intended under the grant conditions. Pursuant to the Clean Water Act, GAO responsibility is limited to whether the federal funds were used for grant purposes and does not extend to the county's operations. Therefore, GAO has no basis to review the merits of the county's decision as to how the federal funds were applied. Accordingly, GAO has no reason to believe that further work on its part would alter the conclusion that the funds were used according to the grant agreement.