Surface Transportation Project Delivery Pilot Program; Caltrans Audit Report, 7536-7541 [E9-3325]

Agencies

• Federal Highway Administration
• DEPARTMENT OF TRANSPORTATION

[Federal Register Volume 74, Number 30 (Tuesday, February 17, 2009)]
[Notices]
[Pages 7536-7541]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-3325]


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DEPARTMENT OF TRANSPORTATION

Federal Highway Administration

[FHWA Docket No. FHWA-2008-0053]


Surface Transportation Project Delivery Pilot Program; Caltrans 
Audit Report

AGENCY: Federal Highway Administration (FHWA), DOT.

ACTION: Final report.

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SUMMARY: Section 6005 of the Safe, Accountable, Flexible, Efficient 
Transportation Equity Act: A Legacy for Users (SAFETEA-LU) established 
the Surface Transportation Project Delivery Pilot Program, codified at 
23 U.S.C. 327. To ensure compliance by each State participating in the 
Pilot Program, 23 U.S.C. 327(g) mandates semiannual audits during each 
of the first 2 years of State participation. This final report presents 
the findings from the second FHWA audit of the California Department of 
Transportation (Caltrans) under the pilot program.

FOR FURTHER INFORMATION CONTACT: Ms. Ruth Rentch, Office of Project 
Development and Environmental Review, (202)-366-2034, 
Ruth.Rentch@dot.gov, or Mr. Michael Harkins, Office of the Chief 
Counsel, (202) 366-4928, Michael.Harkins@dot.gov, Federal Highway 
Administration, Department of Transportation, 1200 New Jersey Avenue, 
SE., Washington, DC 20590. Office hours are from 7:45 a.m. to 4:15 
p.m., e.t., Monday through Friday, except Federal holidays.


SUPPLEMENTARY INFORMATION:

Electronic Access

    An electronic copy of this notice may be downloaded from the Office 
of the Federal Register's home page at https://www.archives.gov and the 
Government Printing Office's Web site at https://www.access.gpo.gov.

Background

    Section 6005 of the Safe, Accountable, Flexible, Efficient 
Transportation Equity Act: A Legacy for Users (SAFETEA-LU) (codified at 
23 U.S.C. 327) established a pilot program to allow up to five States 
to assume the Secretary of Transportation's responsibilities for 
environmental review, consultation, or other actions under any Federal 
environmental law pertaining to the review or approval of highway 
projects. In order to be selected for the pilot program, a State must 
submit an application to the Secretary.
    On June 29, 2007, Caltrans and FHWA entered into a Memorandum of 
Understanding (MOU) that established the assignments to and assumptions 
of responsibility to Caltrans. Under the MOU, Caltrans assumed the 
majority of FHWA's responsibilities under the National Environmental 
Policy Act, as well as the FHWA's responsibilities under other Federal 
environmental laws for most highway projects in California.
    To ensure compliance by each State participating in the Pilot 
Program, 23 U.S.C. 327(g) requires the Secretary to conduct semiannual 
audits during each of the first 2 years of State participation; and 
annual audits during each subsequent year of State participation. The 
results of each audit must be presented in the form of an audit report 
and be made available for public comment. The FHWA solicited comments 
on the second audit report in a Federal Register Notice published on 
December 8, 2008, at 73 FR 74560. The FHWA received one anonymous 
comment questioning any time or money saved from participation in the 
pilot program. This notice provides the final draft of the second FHWA 
audit report for Caltrans under the pilot program.

    Authority: Section 6005 of Public Law 109-59; 23 U.S.C. 315 and 
327.

    Issued on: February 10, 2009.
 Jeffrey F. Paniati,
 Acting Deputy Federal Highway Administrator.

Surface Transportation Project Delivery Pilot Program Federal Highway 
Administration Audit of California Department of Transportation July 
28-August 1, 2008

Background

    The Safe, Accountable, Flexible, Efficient Transportation Equity 
Act: A Legacy for Users (SAFETEA-LU, Pub. L.109-59) section 6005(a) 
established the Surface Transportation Project Delivery Pilot Program 
(Pilot Program), codified at title 23, United States Code (U.S.C.), 
section 327. The Pilot Program allows the Secretary to assign, and the 
State to assume, the Secretary of Transportation's (Secretary) 
responsibilities under the National Environmental Policy Act (NEPA) for 
one or more highway projects. Upon assigning NEPA responsibilities, the 
Secretary may further assign to the State all or part of the 
Secretary's responsibilities for environmental review, consultation, or 
other action required under any Federal environmental law pertaining to 
the review of a specific highway project. When a State assumes the 
Secretary's responsibilities under this program, the State becomes 
solely responsible and liable for carrying out the responsibilities it 
has assumed, in lieu of the Federal Highway Administration (FHWA).
    To ensure compliance by each State participating in the Pilot 
Program, 23 U.S.C. 327(g) mandates that FHWA, on behalf of the 
Secretary, conduct semiannual audits during each of the first 2 years 
of State participation; and annual audits during each subsequent year 
of State participation. The focus of the FHWA audits is to assess a 
pilot State's compliance with the required Memorandum of Understanding 
(MOU) \1\ and applicable Federal laws and policies, to collect 
information needed to evaluate the success of the Pilot Program, to 
evaluate pilot State progress toward achieving its performance 
measures, and to collect information needed for the Secretary's annual 
report to Congress on the administration of the Pilot Program. 
Additionally, 23 U.S.C. 327(g) requires FHWA to present the results of 
each audit in the form of an audit report. This audit report must be 
made available for public comment, and FHWA must

[[Page 7537]]

respond to public comments received no later than 60 days after the 
date on which the period for public comment closes.
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    \1\ Caltrans MOU between FHWA and Caltrans available at: https://
environment.fhwa.dot.gov/strmlng/safe_cdot_pilot.asp.
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    The California Department of Transportation (Caltrans) published 
its Application for Assumption (Application) under the Pilot Program on 
March 14, 2007, and made it available for public comment for 30 days. 
After considering public comments, Caltrans submitted its application 
to FHWA on May 21, 2007, and FHWA, after soliciting the views of other 
Federal agencies, reviewed and approved the application. Then on June 
29, 2007, Caltrans and FHWA entered into an MOU that established the 
assignments to and assumptions of responsibility to Caltrans, which 
became effective July 1, 2007. Under the MOU, Caltrans assumed the 
majority of FHWA's responsibilities under NEPA, as well as FHWA's 
responsibilities under other Federal environmental laws for most 
highway projects in California. Caltrans' participation in the Pilot 
Program will be effective through August 2011 (23 U.S.C 327(i)(1)).

Scope of the Audit

    This is the second FHWA audit of Caltrans' participation in the 
Pilot Program. The onsite portion of this audit was conducted by the 
FHWA audit team in California from July 28 through August 1, 2008. As 
required in SAFETEA-LU, the second audit assessed Caltrans' compliance 
with the roles and responsibilities it assumed in the MOU and also 
provided recommendations to assist Caltrans in conducting a successful 
Pilot Program.
    The audit reviewed the following core areas: (1) Program 
management; (2) legal sufficiency; (3) performance measures; (4) 
documentation and file management; (5) training; and (6) quality 
assurance and quality control measurement. Prior to the onsite visits, 
FHWA conducted telephone interviews with staff in the Caltrans 
Headquarters (HQ) office and with staff in Federal resource agency 
regional offices (Environmental Protection Agency, U.S. Corps of 
Engineers, U.S. Fish and Wildlife Service, National Oceanic and 
Atmospheric Administration and U.S.D.A. Forest Service) and the 
California State Historic Preservation Office. The audit included 
onsite visits to three Caltrans District Offices: District 7 (Los 
Angeles), District 8 (San Bernardino), and District 11 (San Diego).

Audit Process and Implementation

    Each FHWA audit conducted under the Pilot Program is planned to 
ensure a pilot State's compliance with the commitments in its MOU with 
FHWA. FHWA does not evaluate specific project-related decisions made by 
the State because these decisions are the sole responsibility of the 
pilot State. However, the scope of the FHWA audits does include the 
review of the processes and procedures used by the pilot State to reach 
project decisions in compliance with MOU section 3.2.
    Also, Caltrans committed in its Application (incorporated by 
reference in MOU section 1.1.2) to implement specific processes to 
strengthen its environmental procedures in order to assume the 
responsibilities assigned by FHWA hHunder the Pilot Program. The FHWA 
audits review how Caltrans is meeting each commitment and assesses 
Pilot Program performance in the core areas specified in the Scope of 
the Audit section of this report.
    The Caltrans' Pilot Program commitments address:
     Organization and Procedures under the Pilot Program;
     Expanded Quality Control Procedures;
     Independent Environmental Decisionmaking;
     Determining the NEPA Class of Action;
     Consultation and Coordination with Resource Agencies;
     Issue Identification and Conflict Resolution Procedures;
     Record Keeping and Retention;
     Expanded Internal Monitoring and Process Reviews;
     Performance Measures to Assess the Pilot Program;
     Training to Implement the Pilot Program;
     Legal Sufficiency Review.
    The FHWA audit team included representatives from the following 
offices or agencies:
     FHWA Office of Project Development and Environmental 
Review;
     FHWA Office of Chief Counsel;
     FHWA Alaska Division Office;
     FHWA Resource Center Environmental Team;
     Volpe National Transportation Systems Center;
     Advisory Council on Historic Preservation;
     U.S.D.A. Forest Service.
    During the onsite audit, FHWA interviewed more than 75 Caltrans 
staff (from both the Capital and Local Assistance programs) in the 3 
District offices and Caltrans' Legal Division staff in each of its 4 
offices. The audit team interviewed a cross-section of staff including 
top senior managers, senior environmental planners, generalists, 
associate planners, and technical experts. The audit also included a 
review of the project files and records for over 30 projects managed 
under the Pilot Program.
    FHWA acknowledges that Caltrans identified specific issues during 
its second self-assessment performed under the Pilot Program (required 
by MOU section 8.2.6), and has processes in place to work toward 
resolving each issue. Some issues described in the Caltrans self-
assessment may overlap with FHWA findings in this audit report. This 
audit report documents findings within the scope of the audit and as of 
the dates of the onsite portion of the audit.
    In accordance with MOU section 11.4.1, FHWA provided Caltrans with 
a 30-day comment period to review the draft audit report. FHWA reviewed 
the comments received from Caltrans and revised sections of the draft 
report, where appropriate, prior to publishing it in the Federal 
Register for public comment.

Progress Since the Last Audit

    As part of the second FHWA audit of the Caltrans' Pilot Program, 
FHWA verified that Caltrans demonstrated continued compliance in the 
``Compliant'' findings areas identified in the first audit in January 
2008. These compliant findings were:
    1. Legal Sufficiency--Caltrans' Legal Division has developed a 
consistent process to conduct formal legal sufficiency reviews by 
attorneys (and has provided basic legal sufficiency training to each 
reviewing attorney).
    2. Establish Pilot Program Policies and Procedures--Caltrans 
currently, in general, complies with MOU section 1.1.2 commitments to 
establish Pilot Program policy and procedural documentation (as 
detailed in Caltrans' Application).
    3. Background NEPA Training--Caltrans' existing Environmental Staff 
Development Program, outlined in the Application, has processes in 
place to ensure that Environmental Staff involved in NEPA documentation 
have the underlying foundational skill sets required in addition to the 
added skills required to address responsibilities under the Pilot 
Program.
    4. Training Plan--Caltrans conducted a training needs assessment 
specific to the Pilot Program and developed a training plan titled 
``Caltrans Surface Transportation Project Delivery Pilot Program 
Training Plan (Oct. 1, 2007).''
    5. Interagency Agreements that Involve Other Agencies as 
Signatories--Caltrans complied with MOU section 5.1.5 as it pertains to 
the National Historic Preservation Act, Section 106

[[Page 7538]]

Programmatic Agreement (PA) by completing an addenda to the PA within 6 
months after the effective date of the MOU to reflect Caltrans' 
assignment of authority under the Pilot Program.
    6. State Commitment of Resources--The initial evaluation of 
resources to implement the Pilot Program and the assignment of 
resources, as of the date of the first audit, is compliant with MOU 
section 4.2.
    FHWA also evaluated progress in resolving ``Deficient'' and ``Needs 
Improvement'' audit findings from the first FHWA audit.
     Caltrans addressed ``Deficient'' audit findings from the 
January 2008 audit as follows:
    (1) Statement Regarding Assumption of Responsibility--The required 
statement regarding assumption of responsibility required by MOU 
section 3.2.5 appeared on the cover page of each environmental document 
reviewed in the second audit.
    (2) Records Management--Caltrans demonstrated progress in the area 
of records management. The audit team confirmed that project files were 
present in Districts 7, 8, and 11 as required under the Caltrans 
Uniform Filing System (UFS). Caltrans is working toward full compliance 
of the implementation of MOU section 8.3, the Caltrans Application 
(Section 773.106(b)(3)(i) and (ii)), and the Caltrans Standard 
Environmental Reference (SER) Chapter 38.
    (3) QA/QC Process--The audit team observed progress in implementing 
the Quality Assurance/Quality Control (QA/QC) process for environmental 
documents developed under the Pilot Program in the following areas:
    a. Completion of the Quality Control Certification forms--The 
completion of the Internal and External Quality Control Reviews 
Certification forms improved based on FHWA audit team project file 
reviews completed in Districts 7, 8, and 11 during the second audit.
    b. Peer Reviewer--In April 2008, Caltrans revised Chapter 38 of the 
SER to clarify the description of the peer reviewer function for the 
QA/QC process for environmental documents produced under the Pilot 
Program. All of the QC forms reviewed by FHWA in Districts 7, 8, and 11 
that were prepared after the change to the SER complied with this 
requirement.
    c. Internal and External Quality Control Reviews--Caltrans revised 
the Internal and External QC certification forms and the Environmental 
Document Preparation and Review Tool (Environmental Document Checklist) 
to address feedback from Caltrans staff, the initial Caltrans self-
assessment, and the January 2008 FHWA audit.
     Caltrans addressed ``Needs Improvement'' audit findings 
from the January 2008 audit as follows:
    (1) QA/QC Process Related to SER Chapter 38 Procedural and Policy 
Changes--Caltrans has created a new section in the SER, titled ``SER 
Posting History,'' which presents a chronology of changes made in the 
SER (i.e., SER chapter changed, date of change, summary of change).
    (2) Self-assessment issues and corrective actions--The second self-
assessment completed by Caltrans correlated each identified issue 
needing improvement to the corrective action(s) being taken to address 
each issue.
    (3) QA/QC process implementation and documentation--Caltrans 
revised SER Chapter 38 in April 2008 to clarify the QA/QC process 
requirements, the technical specialist review, the internal peer 
review, the class of action determination, signature authorities, and 
the options each District may use to communicate that an environmental 
document is ready for signature. Through interviews with staff in the 
four Caltrans Districts (Districts 4, 7, 8, and 11) visited, the audit 
team determined that the Districts are using some format of a ``Ready 
for Signature'' QC form to transmit to the District Deputy Director 
that the environmental document is ready for signature.

Key Elements of Implementation

    One of the purposes of each FHWA audit of a State Pilot Program is 
to identify and collect information for consideration by potential 
future Pilot Program participants. Key elements that are being used by 
Caltrans in the implementation of the Pilot Program include their SER, 
particularly Chapter 38-NEPA Delegation, Caltrans annotated outlines 
for environmental documents, quality control certification forms, 
environmental document review checklists, and monthly NEPA delegation 
statewide teleconferences.
    During the interviews and project files reviews completed in 
Districts 7, 8, and 11, the audit team observed the following effective 
practices:
    (1) Use of standard ``spreadsheet'' template to convey the comments 
of HQ NEPA coordinators on environmental documents to District staff--
Through interviews with HQ NEPA coordinators and review of project 
files, the audit team observed a systematic mechanism used to 
communicate comments on environmental documents. The HQ NEPA 
coordinator consolidates the comments on each environmental document 
reviewed and provides the comments to the District point of contact via 
a standard ``spreadsheet'' template. The template file includes 
information on each document section, the comment and action needed, 
and identifies the commenter. The audit team identified records of 
these communications in project files. This approach provides a 
systematic and transparent mechanism to transfer and document 
communications between HQ and District staff on environmental 
documents.
    (2) Use of intranet sites at Districts to access Pilot Program 
materials and documents--The audit team determined through interviews 
with staff at Districts 7, 8, and 11 that each of these Districts use 
an intranet site (not accessible to the public) to post District 
specific documents related to the Pilot Program. Maintaining an 
internal system for all users at the District to access the latest 
District specific Pilot Program documents provides for improved 
consistency in implementing the Pilot Program.
    (3) File transfer as standard operating procedure when transferring 
projects between staff--The audit team determined through interviews 
with Caltrans staff that file transfer procedures were in selective use 
at some Districts visited during the audit, to address employee 
turnover or the transitioning of projects between staff. File transfer 
practices include a file transfer meeting where the generalist hands 
off all documents to the Senior Planner overseeing the individual's 
work.

Overall Audit Opinion

    Based on the information reviewed, it is the FHWA audit team's 
opinion that to date, Caltrans has been carrying out the 
responsibilities it has assumed in keeping with the intent of the MOU 
and the Application. During the onsite audit, Caltrans staff and 
management continued to indicate ongoing interest in obtaining 
constructive feedback on successes and areas for improvement. By 
addressing the findings in this report, Caltrans will continue to move 
the program toward success.

Findings Definitions

    The FHWA audit team carefully examined Pilot Program areas to 
assess compliance in accordance with established criteria (i.e., MOU, 
Application). The time period covered by this second audit report is 
from the start of the Caltrans Pilot Program (July 1, 2007) through 
completion of the second onsite audit (August 1, 2008). This report 
presents audit findings in three areas:

[[Page 7539]]

     Compliant--Audit verified that a process, procedure or 
other component of the Pilot Program meets a stated commitment in the 
Application for Assumption and/or MOU.
     Needs Improvement--Audit determined that a process, 
procedure or other component of the Pilot Program as specified in the 
Application for Assumption and/or MOU is not fully implemented to 
achieve the stated commitment or the process or procedure implemented 
is not functioning at a level necessary to ensure the stated commitment 
is satisfied. Action is recommended to ensure success.
     Deficient--Audit was unable to verify if a process, 
procedure or other component of the Pilot Program met the stated 
commitment in the Application for Assumption and/or MOU. Action is 
required to improve the process, procedure or other component prior to 
the next audit; or
    Audit determined that a process, procedure or other component of 
the Pilot Program did not meet the stated commitment in the Application 
for Assumption and/or MOU. Corrective action is required prior to the 
next audit.

Summary of Findings--July 2008

Findings--Compliant
    (C1) Training of Legal Division Staff--In compliance with MOU 
section 12.1.1 and section 773.106(b)(3)(iii) of Caltrans' Application, 
Caltrans' Legal Division maintains a staff of qualified attorneys 
supporting the Pilot Program and tracks the trainings attended by each 
attorney. Attorney training is organized into five core areas (Legal 
Sufficiency, Section 4(f), Section 7 of the Endangered Species Act, 
Environmental Tools (internal to Caltrans), and Audit). Additionally, 
the four Assistant Chief Counsels (ACC) with environmental law 
responsibilities work together to identify additional training 
opportunities available statewide. Each ACC has approval authority to 
fund additional training opportunities for attorneys on their team.
    (C2) Conformity Determinations--Section 8.5 of the MOU requires 
that FHWA's California Division Office document the project level 
conformity determination by transmitting a letter to Caltrans to be 
included in the Final Environmental Impact Statement (EIS) or 
Environmental Assessment (EA). Based on interviews with Caltrans staff 
and review of 15 project files, conformity decisions were completed in 
accordance with MOU section 8.5.
Findings--Needs Improvement
    (N1) Commitment of Resources--Section 4.2.2 of the MOU requires 
Caltrans to maintain adequate organizational and staff capability to 
effectively carry out the responsibilities it has assumed. Interviews 
with Caltrans District staff working on Capitol Projects revealed that 
the Work Breakdown Structure (WBS) code established to track actual 
time spent on Pilot Program activities is not used in a consistent 
manner. Inconsistent use and understanding of the WBS code to track 
labor expenditures under the Pilot Program provides inaccurate 
information on the resources used to support the Pilot Program. 
Caltrans should continue to clearly define, communicate and emphasize 
consistent use of the WBS to staff supporting the Capital Projects 
component of the Pilot Program, which activities to track using the 
designated WBS code for the Pilot Program.
    Interviews with Caltrans District staff working on Local Assistance 
Projects revealed an inability to track actual time spent on Pilot 
Program activities through the use of the Expenditure Authorization 
system.
    Given this two part finding, it is unclear whether Caltrans is able 
to accurately and fully assess the current and future resource needs 
for implementation of the Pilot Program.
    (N2) District Training Approaches and Implementation--MOU section 
4.2.2 requires Caltrans to maintain adequate organizational and staff 
capability to effectively carry out the responsibilities it has assumed 
under the Pilot Program. A fundamental component of staff capability is 
maintaining a training program that ensures staff competency to meet 
Pilot Program responsibilities. The responsibility of identifying 
individual staff training needs largely falls to managers at the 
District level. Audit observations in the three Districts visited 
(Districts 7, 8, and 11) during this audit, along with the one District 
visited (District 4) during the previous audit, confirmed that 
considerable variation in training approaches exist between District 
managers, which can result in potentially widely varying levels of 
competency among staff. This variation in staff training levels could 
affect staff competency levels and compliance with commitments under 
the Pilot Program. As Caltrans HQ and Districts continue to assess and 
address staff training needs, Caltrans needs to actively monitor how 
District staff training needs are assessed and demonstrate consistency 
among and within Districts in the delivery of training in order to 
achieve a sufficient level of competency among all associated staff. 
Inconsistencies identified through Caltrans self-assessments and audit 
findings also serve as a source to identify training needs, including:
    (a) Project Files--When to initiate a project file and what 
information it should contain;
    (b) Internal QA/QC Certification Form--Who the reviewers should be 
and when they should sign the form;
    (c) Class of action determinations--What documentation is used, 
when a determination is required, and who must be involved;
    (d) Differentiating between Categorical Exclusions (CE) that fall 
under section 6004 and section 6005 MOUs between Caltrans and FHWA; and
    (e) What approvals and decisions are to be included in quarterly 
reports on the Pilot Program and at what project stage they are to be 
reported;
    (f) Environmental document transmittals for the legal sufficiency 
process; and
    (g) Environmental document and project file transmittals to 
transfer projects between staff.
    (N3) Performance Measure Evaluation--MOU section 10.1.1 requires 
Caltrans to develop performance measures for the Pilot Program. MOU 
section 10.1.2 requires FHWA to evaluate these performance measures 
during the audits and include the evaluation in the audit reports.
    FHWA noted the following areas in need of improvement with respect 
to two Pilot Program performance measures--``Timely Completion of NEPA 
Process'' and ``Compliance with NEPA and other Federal laws and 
regulations.''
    (a) Performance Measure: Timely Completion of NEPA Process.
    (i) Caltrans measures the time to complete the environmental 
document review and approval process for draft and final documents. 
While the document review component is one element that Caltrans may 
use to evaluate performance under the Pilot Program, this performance 
measure evaluates a relatively minor part of the overall project 
timeline. In all cases where this current measure is reported, Caltrans 
needs to provide full disclosure of the limitations of the measure, 
preferably noting that the time period covered is only a small part of 
the overall NEPA process. Caltrans should consider expanding this 
measure to include other elements assumed under the Pilot Program to 
more robustly

[[Page 7540]]

evaluate the timely completion of the NEPA process.
    (ii) Caltrans uses baseline data to evaluate progress since 
assuming Pilot Program responsibilities. Thirty-five environmental 
documents reviewed and approved prior to the effective data of the MOU 
(34 EAs and 1 EIS) are used to draw from for performance measure 
purposes. Variables such as project size, scope, and complexity, as 
well as any required scheduling coordination with resource agencies, 
could affect the start time of document reviews and as such any 
comparisons with Pilot Program projects need to consider these factors. 
The current approach of using the median time from the beginning of the 
administrative review process for a document to the document approval 
date, prior to and during the Pilot Program does not provide a 
realistic or reliable basis of comparison. At a minimum, the metric 
does not account for the type of document being reviewed or any of the 
other variables involved in the projects. A more effective 
representation of project timing would be to compare the timing of 
projects prior to and during the Pilot Program by document type (i.e., 
compare EIS projects to EIS projects) and other relevant variables, 
such as project size, scope and complexity.
    (b) Performance Measure: Compliance with NEPA and other Federal 
laws and regulations (Maintain documented compliance with requirements 
of all Federal laws and regulations being assumed). Caltrans measures 
performance by evaluating the percentage of environmental documents 
(draft and final) with a completed Environmental Document Preparation 
and Review Tool and Internal Certification Environmental Document 
Quality Control Reviews form. Caltrans set at the start of the Pilot 
Program a desired outcome of this performance measure of a 100 percent 
completion rate. Based on the results of the first two Caltrans self-
assessments, the acceptable completion rate was modified to a phased-in 
approach over a 2-year period of time (increasing from 75 percent to 95 
percent).
    The audit team was unable to identify the basis Caltrans used to 
modify the acceptable completion rate for this performance measure. As 
Caltrans is using the completion of the Environmental Document 
Preparation and Review Tool and Internal Certification Environmental 
Document Quality Control Reviews form as a method of demonstrating 
compliance with NEPA and other Federal laws and regulations, a 
completion rate of less than 100 percent would not correlate with the 
demonstration of compliance with assumed responsibilities under the 
Pilot Program.
    For every compliance related performance measure that is not at 100 
percent, Caltrans needs to document each item of noncompliance in the 
project file and correct each deficiency identified.
    Caltrans (with FHWA involvement under MOU section 10.1.1) needs to 
develop an approach to evaluate the effectiveness of each performance 
measure and to establish a process to communicate changes implemented 
for each performance measure.
    (N4) Quarterly Reports--The quarterly reports Caltrans provides to 
FHWA under section 8.2.7 of the MOU have not consistently included an 
accurate listing of all approvals and decisions under the Pilot 
Program. Quarterly reports received by FHWA have been revised and 
resubmitted by Caltrans to address reporting data gaps. Audit team 
review of the content of the quarterly reports and discussions with 
Caltrans staff who develop input for the quarterly reports suggested 
that the processes leading to report production is inconsistent in 
approach to what approvals and decisions are to be reported to Caltrans 
HQ by the District offices. Clear guidance to the Districts is needed 
on what approvals and decisions are to be reported and at what stage 
they are to be reported.
     (N5) Varying Understanding of Section 6004/Section 6005 CEs--
Sections 3.1.1 and 3.1.2 of the MOU define the scope of assignment in 
terms of the Section 6004 MOU (State Assumption of Responsibility for 
the Categorical Exclusion program, 23 U.S.C. 326). An inconsistent 
understanding of determinations of Section 6005 versus Section 6004 
project applicability was identified from interviews and review of 
project files during the audit. For each CE, District staff need to 
understand the purpose, use of Caltrans procedures associated with CEs 
and consistently complete and maintain in the project file the 
Categorical Exemption/Categorical Exclusion Determination form and the 
Categorical Exclusion Checklist.
    (N6) Creating and Maintaining Project File Protocols--Section 8.2.4 
of the MOU requires that Caltrans maintain project files that include 
all letters and comments received from governmental agencies, the 
public, and others relating to the Pilot Program responsibilities. In 
addition, section 8.2.5 of the MOU requires Caltrans to review and 
monitor project file documentation through its QA/QC process. In 
District 7, 8, and 11, the audit team identified a lack of consistent 
filing and record keeping procedures related to the storage of 
electronic communications. Caltrans does not maintain a systematic 
process and has not established formal directives regarding electronic 
correspondence and/or documents, a lack which could result in the loss 
of electronic data.
    (N7) Maintenance of Project and General Administrative Files--
Section 8.2.4 of the MOU requires Caltrans to maintain project and 
general administrative files pertaining to its discharge of the 
responsibilities assumed under the Pilot Program. The audit team 
identified inconsistencies with established project files maintenance 
procedures through file reviews conducted during the audit. The 
following inconsistencies were noted:
    (a) Files with incomplete and/or missing required documentation;
    (b) Files missing UFS file tabs;
    (c) Electronic correspondence and data not printed and/or located 
in the project file; and
    (d) Project file materials maintained separately from the project 
file.
    Additionally, the audit team identified a lack of direction and 
consistency among Caltrans staff on what items should be included in 
the official administrative file. A lack of consistency of filing 
procedures existed among generalists interviewed during the audit.
    (N8) Establishment of Environmental Project Files--The audit team 
observed a lack of clear understanding and inconsistent implementation 
among Caltrans staff on when to establish environmental project files. 
SER Chapter 38 ``Instructions for Using the UFS'' states ``Establishing 
environmental project files based on this UFS as soon as environmental 
studies begin, and maintaining these files are mandatory.''
    (N9) QA/QC Process Implementation--The Caltrans QA/QC process 
developed to comply with section 8.2.5 of the MOU has not been 
consistently implemented for all projects assumed under the Pilot 
Program. Caltrans requires that each environmental document be reviewed 
according to the processes established in the policy memo 
``Environmental Document Quality Control Program under the NEPA Pilot 
Program'' (July 2, 2007). The audit team identified through interviews 
with Caltrans staff and through project files reviews that an 
inconsistent understanding and implementation of the steps in the QA/

[[Page 7541]]

QC process for environmental documents existed.
    The audit identified a general lack of understanding of the purpose 
of the use of the Internal Certification with respect to its role in 
the Pilot Program responsibilities assumed. This lack of understanding 
involves the overall reasoning and logic for the comprehensive 
progression of authorities of the reviews needed in completion of the 
certification form. The audit identified a lack of clear understanding 
among Caltrans staff that the environmental branch chief must be the 
final signatory. Considering these misunderstandings and the deficient 
finding (D2) below, the Audit team recommends that Caltrans evaluate 
the use of the QC Certification Forms to assess whether the intended 
goals of its use are being met.

Findings--Deficient

    (D1) Performance Measure--Section 10.1.3 of the MOU requires 
Caltrans to collect data and monitor its progress in meeting the 
performance measures in section 10.2 of the MOU, including performance 
measure 10.2.1(C)(i): ``Assess change in communication among Caltrans, 
Federal and State resource agencies, and the public.'' Currently, 
Caltrans has no metric to evaluate this performance measure.
    (D2) QA/QC Certification Process--To comply with MOU section 8.2.5 
and SER Chapter 38, Caltrans requires staff to review each 
environmental document in accordance with the policy memo titled 
``Environmental Document Quality Control Program under the NEPA Pilot 
Program'' (July 2, 2007). The audit team observed the following 
deficiencies through Caltrans staff interviews and project file 
reviews:
    (a) SER Chapter 38 section, ``Quality Control Program,'' requires 
the environmental branch chief's ``quality control review,'' to always 
constitute the last review. In six instances identified by the audit 
team, the environmental branch chief was not the final reviewer based 
on the dates indicated on the forms.
    (b) The SER Chapter 38 requires that the Caltrans' independent 
review of the environmental document not begin until the External QC 
Certification form has been completed. It was observed in three 
instances that the completion of the Internal Certification QC form 
predated the completion of the External Certification QC form.
    (D3) Submission of Environmental Documents for Legal Review--Three 
of the four environmental documents the audit team identified as having 
undergone legal review prior to the July 2008 audit were not submitted 
in accordance with the procedures specified in the Division of 
Environmental Affairs (DEA) memorandum dated July 2, 2007, 
``Environmental Document Quality Control Program under the NEPA Pilot 
Program'' (nor, by reference, the then-operative October 15, 2007, 
Caltrans Legal Division memorandum, ``Procedures for Determining Legal 
Sufficiency for Environmental Documents under the NEPA Pilot 
Program''). The procedural deviations identified are as follows:
    (a) One NEPA environmental assessment, meeting Caltrans' criteria 
for a ``Complex EA'' per the July 2, 2007, DEA memorandum (public 
controversy and controversy over project purpose), underwent legal 
review prior to approval without the program office having provided the 
reviewing attorney any of the supporting documentation for ``Complex 
EAs'' required by the July 2, 2007, and October 15, 2007, memoranda.
    (b) Two other transmittals were sent to request the initiation of 
the formal Legal Sufficiency review without the reviewing attorney 
having been provided all six items required by the July 2, 2007, and 
the October 15, 2007, memoranda. In those cases, however, the attorney 
did eventually receive all required items.
    (c) It was observed that a District's transmittal of a Final EIS 
for Legal Sufficiency review predated the Environmental Branch Chief's 
certification on the Internal Certification form. The SER Chapter 38 
requires that the transmittal to the Legal Division will include the 
completed and signed Internal and External QC certification forms.
    (D4) Environmental Document Process--Class of Action 
Determinations--The audit team found an inconsistent understanding and 
implementation of the process for documentation of class of action 
determinations and concurrences. The NEPA process, dictates that the 
thought process and analysis necessary for the determination of the 
class of action for a project should be documented as part of the 
project's record keeping. Sections 771.111(a) and (b) of Title 23, Code 
of Federal Regulations discuss the determination and identification of 
the class of action for a project and to verify compliance with these 
regulations requires some documentation.
    Additionally, Chapter 38 of the SER provides a means of documenting 
class of action determinations via the Preliminary Environmental 
Analysis Report for State Highway System projects or via the 
Preliminary Environmental Study form for Local Assistance projects. The 
procedures also require class of action determinations for all EAs 
(including Complex EAs) and EISs to be made with the concurrence of the 
Headquarters Environmental Coordinator. The SER states that, 
``obtaining the concurrence of the Headquarters Environmental 
Coordinator may be done through an e-mail which includes the project 
description, proposed class of action, and rationale. The Coordinator's 
e-mail response will provide concurrence.''
    The audit team observed through project file review in the 3 
Districts visited, the process described in the SER was not 
consistently followed. In more than six instances, project files did 
not contain any record of a class of action determination or 
concurrence. This area was cited as Needs Improvement in the January 
2008 audit. Interviews with Caltrans staff and review of project files 
showed varying understanding and compliance with the SER and with 
Caltrans Application section 773.106 (b)(3)(ii) and MOU section 5.1.1 
regarding procedural and substantive requirements.

Response to Comments and Finalization of Report

    Only one comment was received by FHWA during the 30-day comment 
period for the draft audit report. An anonymous comment was submitted 
that questions the cost and time saving benefits of this Pilot Program. 
In considering this comment, it appears that this comment relates more 
to the need for the Pilot Program as opposed to the results of the 
audit, especially since the comment was submitted prior to the audit 
report being publicly available. As such, the FHWA feels that there is 
no need to revise the draft audit report findings to be responsive to 
this comment, with the exception of the addition of this section.

 [FR Doc. E9-3325 Filed 2-13-09; 8:45 am]
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