Surface Transportation Project Delivery Pilot Program; Caltrans Audit Report, 37299-37305 [E9-17896]

Agencies

• Federal Highway Administration
• DEPARTMENT OF TRANSPORTATION

[Federal Register Volume 74, Number 143 (Tuesday, July 28, 2009)]
[Notices]
[Pages 37299-37305]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-17896]


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DEPARTMENT OF TRANSPORTATION

Federal Highway Administration

[FHWA Docket No. FHWA-2009-0051]


Surface Transportation Project Delivery Pilot Program; Caltrans 
Audit Report

AGENCY: Federal Highway Administration (FHWA), DOT.

ACTION: Final report.

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[[Page 37300]]

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 (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 third 
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 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 third audit report in a Federal Register Notice published on May 
20, 2009, at 74 FR 23777. The FHWA received no comments. This notice 
provides the final draft of the third FHWA audit report for Caltrans 
under the pilot program.

    Authority:  Section 6005 of Public Law 109-59; 23 U.S.C. 315 and 
327; 49 CFR 1.48.

    Issued on: July 17, 2009.
Gregory G. Nadeau,
Acting Federal Highway Administrator.

Surface Transportation Project Delivery Pilot Program, Federal Highway 
Administration Audit of California Department of Transportation, 
January 26-30, 2009

Introduction

Overall Audit Opinion

    Based on the information reviewed, it is the Federal Highway 
Administration (FHWA) audit team's opinion that as of January 30, 
2009, the California Department of Transportation (Caltrans) 
continued to work toward meeting all responsibilities assumed under 
the Surface Transportation Project Delivery Pilot Program (Pilot 
Program), as specified in the Memorandum of Understanding (MOU) \1\ 
with FHWA and in the Caltrans Application for Assumption 
(Application).
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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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    With the completion of FHWA's third audit, the audit team has 
completed onsite audits of the majority of the Caltrans Districts. 
The audit team identified significant differences across the 
Districts in terms of the Pilot Program: resource availability and 
allocation, details of implementation, processes, and improvement 
and progress toward meeting all commitments. The highly 
decentralized nature of Caltrans operations is a major contributing 
factor to the variation observed. The decentralized nature of the 
organization necessitates clear, consistent and ongoing oversight by 
Caltrans Headquarters over District operations. A robust oversight 
program will help foster the exchange of information and the sharing 
of best practices and resources between Districts and will put the 
entire organization in a better position to more fully implement all 
assumed responsibilities and meeting all Pilot Program commitments.
    Due to the multiyear timeframes associated with more complex and 
controversial projects, the full lifecycle of project development 
(beginning with environmental studies and concluding with the 
issuance of a record of decision) has yet to be fully realized by 
the Pilot Program. Caltrans continues to gain experience in 
understanding the resource requirements and processes necessary to 
administer its Pilot Program. It is the audit team's opinion that 
Caltrans needs to continue to refine its approaches and resources to 
meet all Pilot Program commitments, especially given the likelihood 
of increasing resource demands associated with exclusively managing 
more complex and controversial projects under the Pilot Program.
    During the onsite audit, Caltrans staff and management continued 
to express ongoing interest in receiving feedback from the FHWA 
audit team related to program successes and areas in need of 
improvement. By addressing all findings in this report, Caltrans 
will continue to move its program toward full compliance with all 
assumed responsibilities and meeting all Pilot Program commitments.

Background

    The Safe, Accountable, Flexible, Efficient Transportation Equity 
Act: A Legacy for Users (SAFETEA-LU, Pub. L. 109-59) section 6005(a) 
established the Pilot Program, codified at title 23, United States 
Code (U.S.C.), section 327. The Pilot Program allows the Secretary 
of Transportation (Secretary) to assign, and the State to assume, 
the Secretary's 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 
FHWA.
    Caltrans published its 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 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)).
    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 audit 
process is four fold: (1) To assess a Pilot State's compliance with 
the required MOU and applicable Federal laws and policies, (2) to 
collect information

[[Page 37301]]

needed to evaluate the success of the Pilot Program, (3) to evaluate 
Pilot State progress in meeting its performance measures, and (4) to 
collect information for use in 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 that is published in the Federal 
Register. This audit report must be made available for public 
comment, and FHWA must respond to public comments received no later 
than 60 days after the date on which the period for public comment 
closes. The FHWA solicited comments on the third audit report in a 
Federal Register Notice published May 20, 2009, at 74 FR 23777. The 
FHWA received no comments during the comment period. This notice 
provides the final draft of the third FHWA audit report for Caltrans 
under the pilot program.

Scope of the Audit

    This is the third FHWA audit of the Caltrans Pilot Program. The 
onsite portion of the audit was conducted in California from January 
26 through January 30, 2009. As required in SAFETEA-LU, each FHWA 
audit must assess compliance with the roles and responsibilities 
assumed by the Pilot State in the MOU. The audit also includes 
recommendations to assist Caltrans in administering a successful 
Pilot Program.
    The audit primarily focused on four key Pilot Program areas: (1) 
The Local Assistance (LA) program (Caltrans manages LA and Capital 
projects through independent organizational entities), (2) the role 
of the regional offices, (3) the effectiveness of and adherence to 
specified performance measures, and (4) the continued review of 
compliance with assumed responsibilities.
    Prior to the onsite audit, FHWA conducted telephone interviews 
with Federal resource agency staff at the U.S. Army Corps of 
Engineers (USACE) and U.S. Fish and Wildlife Service (USFWS) 
regional offices in California. The onsite audit included visits to 
the Caltrans Headquarters Office (HQ) in Sacramento and to four 
Caltrans District/Regional Offices: District 3/North Region 
(Marysville), District 4 (Oakland), District 6/Central Region 
(Fresno), and District 10 (Stockton). The audit team also visited 
the USFWS and USACE offices in Sacramento.
    This report documents findings within the scope of the audit as 
of the completion date of the onsite audit (i.e., January 30, 2009).

Audit Process and Implementation

    The intent of each FHWA audit completed under the Pilot Program 
is to ensure that each Pilot State complies with the commitments in 
its MOU with FHWA. The 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 FHWA audit 
scope 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.
    In addition, 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 under 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 team for the third audit 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;
     U.S. Fish and Wildlife Service;
     U.S.D.A. Forest Service.
    During the onsite audit, FHWA interviewed more than 80 Caltrans 
staff (from both the Capital and LA programs) in four District/
Region offices and Caltrans HQ. The audit team interviewed a cross-
section of staff including top senior managers, senior environmental 
planners, generalists, associate planners, and technical experts. 
The audit team also reviewed project files and records for over 35 
projects managed under the Pilot Program.
    The FHWA acknowledges that Caltrans identified specific issues 
during its third self-assessment performed under the Pilot Program 
(required by MOU section 8.2.6), and has established processes to 
address each issue. Some issues described in the Caltrans self-
assessment may overlap with FHWA findings identified in this audit 
report.
    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 comments received from Caltrans and revised sections of the 
draft report, where appropriate, prior to publishing it in the 
Federal Register for public comment.

Status of Findings From the Last Audit

    As part of the third audit, FHWA evaluated the corrective 
actions implemented by Caltrans in response to the audit findings in 
the second audit report.
    The FHWA observed that Caltrans continues to demonstrate 
compliance with two areas identified as ``Compliant'' in either the 
first audit (January 2008) or second audit (July 2008); the 
establishment of Pilot Program policies and procedures and 
interagency agreements that involve other agencies as signatories.
    While previous audits also found Caltrans to be ``Compliant'' 
with its commitment to put in place a consistent process to conduct 
formal legal sufficiency reviews, limited information was available 
to support any finding determination during the third audit because 
only one formal finding of legal sufficiency had been completed.
    The FHWA also reviewed the current status of ``Deficient'' and 
``Needs Improvement'' audit findings identified during the second 
FHWA audit in July 2008.
    ``Deficient'' audit findings:
    (1) Performance Measure: ``Effectiveness of relationships with 
the general public''--Caltrans reported progress in its third self-
assessment on the performance measure ``effectiveness of 
relationships with agencies and the general public.'' Caltrans 
developed a method to evaluate its relationships with the general 
public by assigning a survey rating measuring the quality of public 
meeting materials. The survey was completed for 27 projects for 
which public meetings were held since the initiation of the Pilot 
Program. (See related findings N10 and D2 below.)
    (2) Quality Assurance/Quality Control (QA/QC) Certification 
Process--Through project files reviews, the FHWA audit identified 
one instance where the environmental branch chief was not the final 
document reviewer (based on the signature dates included on the 
form). The audit team did verify that the External QC Certification 
form was correctly completed prior to proceeding with the Internal 
QC Certification form.
    (3) Environmental Document Process--Class of Action 
Determinations--The audit team observed that the project files 
reviewed in this audit contained the required concurrence by the HQ 
Environmental Coordinator for Environmental Assessment (EA) and 
Environmental Impact Statement (EIS) class of action determinations. 
(See related finding D5 below.)
    ``Needs Improvement'' audit findings:
    (1) Commitment of Resources--The audit team is aware that 
Caltrans has systems in place designed to capture time spent by 
staff on various tasks and activities required under the Pilot 
Program. However, interviews with Caltrans District staff working on 
LA projects revealed that work hours associated with the Pilot 
Program are not consistently entered into the Expenditure 
Authorization system using the Pilot Program-specific codes. 
Caltrans has not clearly identified how the information gathered by 
these time-recording systems helps Caltrans determine the 
sufficiency of staff resources needed under the Pilot Program.
    Resource tracking is an ongoing area of concern for the audit 
team. As the complexity of projects increases with maturation of the 
Pilot Program, the variability in reporting and tracking resource 
expenditures may affect the timely delivery and quality of 
environmental documents. (See related finding N5 below.)

[[Page 37302]]

    (2) District Training Approaches and Implementation--During the 
three FHWA audits, the audit team identified considerable variation 
in training needs assessments, approaches, and responsibilities 
across Districts and also within individual Districts. The observed 
variations in training approaches may result in potentially widely 
varying levels of competency among staff. In order to achieve a 
sufficient level of competency among all staff, Caltrans HQ 
environmental staff need to actively monitor each District's 
training methods and ensure that consistency is achieved in terms of 
training assessment and delivery. (See related findings N7 and N12 
below.)
    (3) Pilot Program Performance Measures--These two performance 
measures have been addressed by Caltrans in the following manner:
    (a) Performance Measure: ``Timely Completion of NEPA Process''--
Caltrans has expanded this performance measure to include tracking 
the time from initiating environmental studies to the approval date 
of the draft and final environmental documents. The performance 
measure also now differentiates the timeframes by EAs and EISs. 
Previously, project timeframes were reported in aggregate instead of 
by environmental document type.
    (b) Performance Measure: ``Maintain documented compliance with 
requirements of all Federal laws and regulations being assumed.''--
Caltrans reported in its third self-assessment that 100 percent of 
final environmental documents contained documentation of: Section 7 
of the Endangered Species Act, as amended (section 7) biological 
opinions and letters of concurrence, State Historic Preservation 
Officer concurrences under section 106 of the National Historic 
Preservation Act (section 106), and section 4(f) of the U.S. 
Department of Transportation Act of 1966 (section 4(f)) findings and 
conclusions. (See related finding N8 below.)
    (4) Quarterly Reports--The quarterly reports Caltrans provides 
to FHWA under section 8.2.7 of the MOU continue to include 
inaccurate/incomplete information on environmental document 
approvals and decisions under the Pilot Program. Each of the first 
five quarterly reports received by FHWA have been revised, some 
several times, to address data reporting errors including: Omitted 
categorical exclusions, EAs, findings of no significant impacts, re-
evaluations, section 4(f) analyses, and section 7 and section 106 
consultations, as well as numerous consultations and categorical 
exclusions (CEs) reported in error. The third self-assessment 
reported that a quarterly report protocol was developed and 
implemented prior to preparing the fifth quarterly report. However, 
the audit team determined that the fifth report also included errors 
and omissions (omitted EA, re-evaluation and notice of intent, and 
section 7 consultations reported in error) and a revised report was 
submitted. (See related finding D1 below.)
    (5) Varying Understanding of Section 6004/Section 6005 CEs--The 
audit team did not observe any misunderstanding of section 6004 and 
section 6005 SAFETEA-LU CE determinations in the District Offices 
visited in the third audit.
    (6) Creating and Maintaining Project Protocols and Project 
Files--The Caltrans' third self-assessment reported that corrective 
action discussions were completed with staff managing projects with 
incomplete project files and/or those not conforming to the Uniform 
Environmental File System (UFS) protocol. Additionally, it was 
reported that discussions of the retention of electronic 
communications were completed with District staff. (See related 
findings C1 and N4 below.)
    (7) QA/QC Process Implementation--Caltrans' third self-
assessment reported on the number of ways that Caltrans actively 
monitors conformance with the Pilot Program QC procedures. Methods 
include ongoing communication with senior environmental planners 
regarding the QC processes, discussions at staff meetings, review by 
senior environmental planners of environmental documents and HQ 
Environmental Coordinators actively monitoring conformance with the 
QC procedures. (See related finding C4 below.)

Key Elements of Implementation

    One purpose of each FHWA audit of a State Pilot Program is to 
identify and collect information on Pilot Program implementation 
practices for consideration by potential future Pilot Program 
participants. Key programmatic elements used by Caltrans to 
administer its Pilot Program include documenting policies and 
procedures in Standard Environmental Reference (SER) Chapter 38, 
annotated outlines for environmental documents, QC certification 
forms, environmental document review checklists, and monthly NEPA 
delegation statewide teleconferences.

Effective Practices

    The FHWA audit team observed during interviews and through 
project file reviews completed in Districts 3, 4, 6, 10 and the 
North and Central regions the following effective practices:
    (1) Central Region practices:
    (a) The environmental document template used for each project 
establishes the format and provides technical cues at locations 
where specific data should be entered by environmental document 
authors. The use of document templates helps to ensure compliance 
with environmental laws and to improve document consistency and 
quality.
    (b) For large projects, once the Preliminary Environmental Study 
(PES) form has been completed by Caltrans staff, environmental 
staffers perform joint field reviews with the local agencies and 
their consultants. This affords Caltrans and local agency staff the 
opportunity to discuss the NEPA process requirements and the 
required technical studies needed to complete the process.
    (c) Individual Development Programs (IDPs) are critical elements 
in the training process for Caltrans staff (in both the Capital and 
LA programs). Senior environmental planners regularly and 
consistently use IDPs to guide and track staff training.
    (2) The LA staff in District 10 use a work plan and tracking 
sheet that serves as a work flow chart for LA projects in the 
District. This tool is useful because it helps Caltrans and local 
governments understand the requirements, sequencing, and timing of 
environmental compliance activities throughout the project 
development process.

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 third audit 
report is from the start of the Caltrans Pilot Program (July 1, 
2007) through completion of the third onsite audit (January 30, 
2009) with the focus of the audit on the most recent 6 month period. 
This report presents audit findings in three areas:
     Compliant--Audit verified that a process, procedure or 
other component of the Pilot Program meets a stated commitment in 
the Application and/or MOU.
     Needs Improvement--Audit determined that a process, 
procedure or other component of the Pilot Program as specified in 
the Application 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 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 and/or MOU. Corrective action is required prior to the 
next audit.

Summary of Findings--January 2009

Compliant

    (C1) Completion of the PES form--As stated in Chapter 6 of the 
LA Procedures Manual, completing the PES form for each project is 
one of the roles and responsibilities of LA staff. The audit team 
learned through interviews with LA staff in the Central Region 
office that training had been provided on how to complete the PES 
form. The audit team also confirmed through file reviews that the 
PES forms in the Central Region were completed correctly.
    (C2) Tracking and Managing Projects--The Central Region office 
developed a sophisticated data management and tracking system using 
the File Maker software application for tracking and managing 
Capital projects (i.e., projects on the State Highway System (SHS)). 
The Central Region has standard practices to ensure that all 
projects are entered into the system and tracked appropriately. The 
system included data validation features such as color coded items 
to identify missed deadlines or inactive projects. The audit team 
found that all environmental staffers in the office appear to be 
able to input data into the system. The File Maker system is used to 
track, manage, and provide reports on the Capital projects in the 
Region. As a result, the audit team was able to determine that the 
Central Region

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office is compliant with section 8.2.7 of the MOU, requiring 
Caltrans to report to FHWA any approvals and decisions Caltrans 
makes with respect to the responsibilities it has assumed under the 
Pilot Program.
    (C3) Project Files/UFS--Section 8.2.4 of the MOU and procedures 
specified in SER Chapter 38 require that Caltrans staff maintain 
project files and general administrative files for all Capital and 
LA projects in accordance with the UFS.
    The audit team found that the North and Central Regions have 
taken additional steps to ensure that project files are organized 
correctly and that the proper information can be located easily. 
Additional sub-tabs have been added to the UFS file tab system to 
improve the clarity and consistency across the Districts in these 
Regions. The new sub-tabs were added for topic areas likely to 
contain large amounts of information (e.g., biology, special status 
species, coordination correspondence).
    (C4) QA/QC Process--The Central Region has established a QA/QC 
unit. The audit team interviewed members of this unit during the 
onsite visit at the Regional office. To ensure compliance with 
section 8.2.5 of the MOU, the QA/QC unit implemented, for its 
Capital program staff, a QC process that involves an internal review 
and QA/QC branch chief signature that exceeds the requirements of 
the QC plan in the SER Chapter 38.

Needs Improvement

    (N1) QA/QC Certification Process--Section 8.2.5 of the MOU and 
SER Chapter 38 require Caltrans staff to review each environmental 
document in accordance with the policy memorandum titled 
``Environmental Document Quality Control Program under the NEPA 
Pilot Program'' (July 2, 2007). The audit team observed improvement 
since the previous audit (July 2008) in the completion of the QC 
certification forms. However, the audit team still identified 
incomplete and incorrectly completed QC certification forms. These 
inconsistencies were also identified in the third Caltrans self-
assessment and corrective actions were discussed in that report.
    (N2) Self-Assessment and Process Reviews--Section 8.2.6 of the 
MOU and SER Chapter 38 require Caltrans to regularly perform an 
internal formal process review for environmental compliance, 
referred to by Caltrans as a self-assessment. A summary report of 
the Caltrans self-assessment is provided to FHWA prior to each FHWA 
audit. The audit team has identified aspects of the self-assessment 
process that need improvement in order for this process to meet its 
stated intent. These areas include:
    (a) Review of projects during the self-assessment. To fully 
assess compliance with the project development process and 
responsibilities assumed under the Pilot Program, Caltrans needs to 
evaluate projects at all phases of project development, as well as 
compliance with project filing procedures. A complete review should 
include not only projects that have reached decision points and have 
been reported in the quarterly reports to FHWA, but also projects 
yet to reach a decision point.
    (b) More details on performance measures. As the self-assessment 
is the primary method of data collection and evaluation of success 
in meeting Pilot Program performance measures, more details and 
discussion regarding each performance measure should be included in 
the self-assessments. Examples of areas that need further 
explanation include: (1) The sampling procedures used for checking 
EA/EIS project files organized according to the established filing 
system and (2) the sampling procedures used for checking the 
completeness of the QC certification forms.
    (c) Limited scope of the self-assessment review. A significant 
proportion of the third self-assessment focused on the effectiveness 
of corrective actions implemented by Caltrans to address 
deficiencies noted in its second self-assessment and actions taken 
to address FHWA Pilot Program audit findings. While an important 
component of the self-assessment process, review of improvement 
regarding noted deficiencies from prior internal and external audits 
is only one aspect of a successful self-assessment process. The bulk 
of the self-assessment process should be focused on confirmation 
that all Pilot Program requirements are being fully met, including 
pursuit of newly occurring areas of weakness/potential weakness.
    (d) To ensure that Caltrans is effectively reviewing all 
elements of assumed responsibility as stated in the MOU and 
Application, it must present a systematic review of all Pilot 
Program processes and procedures. Caltrans has yet to establish a 
methodology/approach to specify how it will conduct its self-
assessment process. In particular, the process it is using and 
intends to use to determine, for each audit, what Pilot Program 
elements warrant review, the level of review to be performed on each 
selected element, the depth of the review (e.g., the sample size of 
documents reviewed, the number of districts contacted/staff 
interviewed, the frequency of reviews), and the coverage of each 
self-assessment (what parts of the Program have been/need to be 
reviewed/re-reviewed). The current self-assessment process has yet 
to demonstrate that Caltrans is evaluating its Program in a manner 
that will determine for all applicable components if ``its process 
is working as intended, to identify any areas needing improvements 
in the process'' (MOU Section 8.2.6). Evidence to suggest that the 
self-assessment process needs improvement is demonstrated by new 
Needs Improvement and Deficient audit findings identified by the 
FHWA audit team in this audit in areas recently reviewed (but not 
identified) under Caltrans self-assessment. In addition, the FHWA 
audit team identified new Deficient findings in Pilot Program areas 
not evaluated by the self-assessment process.
    (N3) Air Quality Conformity Determinations--Section 8.5.1 of the 
MOU and SER Chapter 38 require Caltrans staff to document the air 
quality conformity analysis for each project by submitting a request 
to FHWA for a formal conformity determination. The request for the 
conformity determination should be submitted to FHWA as soon as 
possible after the preferred alternative is identified. The FHWA 
conformity determination must be received before the final NEPA 
action is completed.
    Through interviews and project file reviews in the Districts 
visited, the audit team identified a misunderstanding by the 
Caltrans staff regarding the air quality conformity determination 
process. This misunderstanding and confusion was not observed in the 
first two audits. Several Caltrans staff interviewed in both the 
North and Central Regions were not aware of their responsibilities 
to request formal FHWA conformity determinations for projects 
processed through the LA program. Interviews identified a lack of 
communication and misunderstandings between Caltrans staff and local 
agencies regarding air quality conformity analysis and 
determinations. In two of seven project files reviewed for air 
quality conformity determinations, FHWA conformity determination 
letters were missing. For another file, the conformity letter was 
not included in the project file but was subsequently located by 
Caltrans staff and included in the file during the audit.
    (N4) Project Files/UFS--Section 8.2.4 of the MOU and SER Chapter 
38 require Caltrans to maintain project files and general 
administrative files. To support statewide consistency in file 
content and organization, the UFS has been developed for mandatory 
use for all Capital and LA projects.
    Despite the ``Compliant'' finding regarding the North and 
Central regions described under item C3 above, the audit team 
identified that some project files were not established as soon as 
environmental studies had begun, as required by SER Chapter 38.
    Additional inconsistencies identified included:
    (a) Several instances where project files were missing UFS tabs 
and some sections contained no information or an explanation as to 
why the tabs were missing or tab sections were incomplete (i.e., 
empty).
    (b) Required project documentation was missing from several 
project files. Examples of missing documents include PES forms, QA/
QC certification forms, air quality conformity determination 
letters, State Historic Preservation Office concurrence letters for 
section 106 determinations, ``Plans, Specifications and Estimates'' 
information, and various transmittal letters.
    (c) Project file reviews identified unsigned/incomplete 
documentation including incomplete environmental document filing 
checklists, unsigned environmental document preparation and review 
tools, and unsigned LA EA document title pages.
    (N5) Commitment of Resources--Section 4.2.2 of the MOU requires 
Caltrans to maintain adequate organizational and staff capability 
effectively to carry out the responsibilities it has assumed, 
including devoting adequate staff resources to the Pilot Program. In 
the Districts/Regions visited, interviews with the Caltrans staff 
working on LA projects revealed the following:
    (a) Inconsistencies associated with charging time spent on Pilot 
Program activities to the official Work Breakdown Structure (WBS) 
code (6DELE). Staff

[[Page 37304]]

interviews identified two main reasons for incomplete adherence to 
use of the WBS code: Not having the time to determine the amount of 
time and enter it in the time sheet system; not tracking Pilot 
Program labor expenditures at all.
    (b) LA staffers expressed frustration to the audit team 
regarding the amount of work to be accomplished by current LA staff 
in the Districts. Concerns were frequently expressed regarding 
inadequate staffing, lack of timeliness in filling vacant positions, 
and the difficulty coping with the pressure to advance projects in a 
timely manner and on schedule.
    The audit team learned that Caltrans is considering updating and 
enhancing the LP 2000 system which should present an opportunity to 
improve resource tracking for LA staff, and projecting future staff 
needs.
    (N6) Adequate QA/QC Review of Technical Studies--The second 
Caltrans self-assessment identified that the peer review of the 
biological resources technical studies was sometimes less thorough 
than the same reviews performed for SHS projects. The audit team 
confirmed this finding through interviews with LA staff in one 
District visited. Caltrans has committed to ensure that the 
appropriate level of environmental analysis is conducted for all 
NEPA documents for projects on both the SHS and also on local 
streets and roads.
    A corrective measure was identified in the self-assessment to 
remind the staff biologists that the peer review of biological 
resource technical studies for the LA projects uses the same 
standard as for Capital projects. The audit team concurs in this 
corrective measure and also recommends that additional follow-up 
review occurs to ensure that it is being implemented.
    (N7) Training on Air Quality Conformity--MOU section 12.1.1 
requires Caltrans to provide training ``in all appropriate areas 
with respect to the environmental responsibilities that Caltrans has 
assumed.'' Three of four LA and Capital environmental planners 
interviewed in the Central Region office indicated an ongoing need 
for training in the area of air quality conformity, its role in the 
Statewide Transportation Improvement Program, the Transportation 
Improvement Plan, and emissions budgets. Interviewees indicated that 
additional training or primers by Caltrans' air quality specialists 
are needed for environmental planners due to this being such a 
dynamic area affecting many projects. Caltrans should assess if 
other environmental planners in other Districts/Region offices also 
find this area problematic and require additional training in this 
area. Air quality specialists should also work with environmental 
planners in their Districts to ensure that everyone understands 
their role and the required processes.
    (N8) Procedural and Substantive Requirements--MOU section 5.1.1 
requires Caltrans to be subject to the same procedural and 
substantive requirements that apply to FHWA in carrying out the 
responsibilities assumed. Through interviews with USACE and USFWS 
staff located in California, the audit team learned that there have 
been a few instances where environmental requirements were not 
completely and correctly implemented.
    (a) In at least one instance, based on the biological assessment 
of the project, take of threatened or endangered species was 
anticipated and quantified. However, Caltrans made a request for 
informal, not formal consultation, to the USFWS. This process 
decision is contrary to the implementing regulations of section 7 of 
the ESA.
    (b) In other instances, the USACE reported that environmental 
assessment documents prepared pursuant to NEPA and reviewed by the 
USACE under section 404 of the Clean Water Act, contained 
insufficient information to support decisionmaking and chosen 
alternatives. Further, as part of their Clean Water Act section 404 
permit verification, the conclusions made by Caltrans in relation to 
ESA requirements were not supported. This noncompliance prevented 
the USACE from issuing its required permit without the proper 
consultation with the USFWS.
    It is the opinion of the audit team, based on these 
observations, that Caltrans staff and/or the consultants hired by 
Caltrans to conduct biological assessments, submit permit 
applications, and perform NEPA analyses, could benefit from training 
in various environmental laws and regulations. It is also noted that 
the technical reviews and other QC reviews should have identified 
these errors. The MOU section 10.2.1.C performance measure to 
monitor relationships with Federal resource agencies needs to be 
implemented.
    (N9) Assignments Under the Pilot Program--MOU section 3.2.2 
requires Caltrans to comply with the requirements of all applicable 
environmental laws. Caltrans staff interviewed indicated a lack of 
understanding of the SAFETEA-LU section 6002 (Sec.  6002; 23 U.S.C. 
139) environmental review process definition and role of 
participating agencies, particularly in comparison to that of 
cooperating agencies.
    In a review by the audit team of four EIS project files, the 
audit team found that the cooperating and participating agency 
invitation letters sent by Caltrans were not totally accurate and 
were confusing. The letters were based on the template invitation 
letter provided in the SER, with links to the Local Assistance 
Manual. This template contains the following errors and confusing 
language:
    (a) The subject line for the letter only mentions an invitation 
to become a participating agency, with no indication of an 
invitation to also be a cooperating agency, when both apply. Yet, in 
the body of the letter, there is a combined discussion of 
cooperating agency status and participating agency status.
    (b) In the list of activities that will be occurring during the 
NEPA process, there are two instances listing both FHWA and Caltrans 
as providing various information. Under the Pilot Program, as stated 
in the first paragraph of the letter, FHWA is not involved in the 
project.
    (c) The letter does not clarify the different roles and 
responsibilities of participating and cooperating agencies.
    (d) The letter states that an agency will be a cooperating 
agency only if it has ``jurisdiction for permit.'' That is not in 
accordance with 40 CFR 1598.5 which defines cooperating agency as, 
``any Federal agency other than the lead agency which has 
jurisdiction by law or special expertise with respect to any 
environmental impact involved in the proposal.''
    Caltrans needs to ensure that the SAFETEA-LU environmental 
review process (Sec.  6002; 23 U.S.C. 139) is fully and correctly 
implemented.
    (N10) Performance Measure--``Monitor Relationships With the 
General Public''--MOU section 10.2.1.C requires Caltrans to monitor 
relationships with the general public. This is the first audit to 
evaluate this performance measure, as such a tool had not previously 
been developed for this performance measure. This measure is 
intended to assess the effectiveness of any changes in communication 
that could affect an existing relationship among Caltrans and the 
general public. The tool or indicator measure developed involves 
Caltrans staff and/or consultants performing self assessments to 
evaluate public meeting materials. To fully assess this 
relationship, however, the views of the other party must be 
considered as well. The current performance measure does not reflect 
the general public's views on communication with Caltrans regarding 
Federal-aid highway projects. More details need to be provided 
regarding the projects for which the public meeting materials are 
being evaluated. Different projects require different and 
appropriate materials depending on the scope and issues involved in 
the project. Using a generic rating for all projects, with no 
additional information or explanation, may not truly reflect the 
desired outcome.
    (N11) Documentation of Class of Action Determinations.--Through 
project file reviews, the audit team found inconsistencies in the 
class of action determination documentation. The SER Chapter 38 
``Defining the Class of Action'' requires for EAs and EISs, that 
either a Deputy District Director for Environmental (or designee) or 
a District Local Area (DLA) Engineer and a District senior 
environmental planner make a determination with the concurrence of 
the Division of Environmental Analysis Environmental Coordinator.
    Four of six EIS project files reviewed by the audit team did not 
include documentation on the class of action determination. For one 
project, the class of action was changed from an EIS to an EA, but 
no documentation was identified in the file to explain the change or 
to demonstrate concurrence on the decision to down scope the 
environmental document type. For another project, the project file 
did not contain an explanation for the change of action from an EA 
to an EIS.
    (N12) LA Training Plan--Under section 12.1.1 of the MOU, 
Caltrans is responsible for ensuring that its staff is properly 
trained and that training will be provided ``in all appropriate 
areas with respect to the environmental responsibilities Caltrans 
has assumed.'' This section of the MOU also states that ``Caltrans 
agrees to have all appropriate employees (including consultants 
hired for the purpose of carrying

[[Page 37305]]

out the Secretary's responsibilities) attend such training.'' 
Additionally, the Application states that DLA environmental staffers 
``will provide training to local agencies and their consultants to 
ensure that LA environmental documents follow statewide procedures 
and meet Federal requirements.''
    Section 12.1.2 of the MOU requires that a training plan be 
updated annually during Caltrans' participation in the Pilot 
Program. This training plan is shared with FHWA on an annual basis. 
The training plans submitted for Fiscal Year (FY) 07-08 and FY 08-09 
included information only on Capital program training and did not 
include information on training for DLA staff or how staff will 
provide training to local agencies and consultants. The information 
gaps in the FY08-09 Training Plan include:
    (a) The lack of a formalized training plan for DLA staff on DLA-
specific processes--Four interviewees and pre-audit information 
collection revealed no evidence of a formal training plan to carry 
out the LA responsibilities under the Pilot Program, including 
training for DLA staff and staff in local agencies and consultants. 
Interviews in all Districts/Regions visited indicated varying 
training activities have occurred; however, this information--or an 
explanation on the approach--is not included in the training plan.
    (b) The lack of an ongoing training procedure for local agencies 
and consultants, including expected courses or outreach to be 
offered. Six interviewees stated that there is no formal approach 
being used by Caltrans Districts to ensure proper training or 
outreach is provided to local agencies and consultants. Given the 
very large number of LA projects in some Districts, and the 
typically high staff turnover within local agencies, Caltrans needs 
to formalize and implement an ongoing training plan to ensure that 
LA program staff can carry out the responsibilities under the Pilot 
Program and work with the local agencies and consultants to ensure 
compliance with statewide procedures and Federal requirements 
assumed by Caltrans.

Deficient

    (D1) Quarterly Reports--The quarterly reports Caltrans provides 
to FHWA under section 8.2.7 of the MOU continue to consistently 
include an inaccurate listing of all approvals and decisions under 
the Pilot Program. The quarterly reports received by FHWA for the 
first five quarters have all contained substantial errors and have 
had to be revised and resubmitted to FHWA by Caltrans.
    Discussions with Caltrans staff developing input for the 
quarterly reports identified inconsistent approaches and procedures 
in the processes leading to report production. Communication is not 
always timely between the project generalists and the staff 
responsible for project tracking and reporting. Additionally, two of 
the four Districts visited during the third audit were unable to 
readily produce a list of the projects within that District that 
fall under the Pilot Program. The audit team finds the quarterly 
reporting process and products deficient.
    (D2) Performance Measure--``Monitor Relationships With Federal 
and State Resource Agencies''--MOU section 10.2.1.C requires 
Caltrans to ``assess change in communication among Caltrans, Federal 
and State resource agencies.'' In all three Caltrans self-
assessments (December 2007, June 2008, and December 2008) under 
``Progress in Meeting Pilot Program Performance Metrics'' Caltrans 
stated that this performance measure has not yet been implemented. 
The audit team understands that Caltrans has engaged a consultant to 
undertake a survey of Federal and State resource agencies to assess 
their relationships with Caltrans; however, the minimal degree of 
progress after 18 months of the Pilot Program renders Caltrans' 
performance on this requirement deficient at the time of the audit.
    (D3) Delegation of Signature Authority--In six of the eight 
Caltrans District Offices reviewed in this audit, the audit team 
learned of the delegation of signature authority for EISs and 
individual Section 4(f) Evaluations that occurred in October 2007.
    In September 2007, Caltrans asked for clarification of signature 
authority for EISs as stated in the Application and section 1.1.2 of 
the MOU. The FHWA responded with clarification of this signature 
authority through a letter from FHWA to Caltrans dated September 12, 
2007. This letter stated that the Draft EIS can be signed by either 
the Deputy District Director for Environmental Planning or the 
District Director, at the Caltrans' District discretion. Final EISs 
are to be signed by District Directors, and not further delegated. 
There was no request for clarification for individual Section 4(f) 
Evaluations and therefore, that signature authority remains as 
agreed to with the Deputy District Director.
    During the audit, the audit team learned of two memos, dated 
October 2007, that delegated, for six Districts, the signature of 
individual Section 4(f) Evaluations to the Environmental Office 
Chiefs and the signature of EISs to the Environmental Division Chief 
or the District Director.
    This delegation is inconsistent with the FHWA clarification 
letter. Additionally, Chapter 38 of the SER is inconsistent 
regarding this delegation of signature authority for Draft EISs, 
indicating two different delegation signature authorities, one to 
the Deputy District Director and one to the Deputy District Director 
for Environmental Planning, in the sections ``Signature 
Authorities'' and ``Signature Protocols.''
    (D4) Assignment of Section 6002 Responsibility under the Pilot 
Program--Under MOU section 3.2.2, Caltrans is responsible for 
complying with the requirements of any applicable environmental law. 
Therefore, Caltrans is responsible for complying with SAFETEA-LU 
section 6002 (23 U.S.C. 139) which defines provisions of the 
environmental review process. The SAFETEA-LU section 6002(d) (23 
U.S.C. 139(d)) states that a Federal lead agency for a highway 
project conducting a NEPA process under section 6002, in this case 
Caltrans, ``shall identify, as early as practicable in the 
environmental review process for a project, any other Federal and 
non-Federal agencies that may have an interest in the project, and 
shall invite such agencies to become participating agencies in the 
environmental review process for the project.''
    In three of the six EIS project files reviewed, there were 
participating agency invitations sent out to only 5 to 10 agencies 
per project. For those projects, the audit team, thorough interviews 
and review of project files, learned that more local, State, 
Federal, or tribal governmental agencies, either may have or already 
had, expressed an interest in the project and were therefore 
required to be an invited participating agency.
    The Caltrans' third self-assessment included a section on 
``Understanding of Section 6002 Requirements,'' and did not report 
any finding that requires a corrective action.
    Based on its review of project files and interviews with 
Caltrans staff, the audit team finds Caltrans' compliance with its 
Pilot Program responsibilities to be deficient with regard to the 
intent and requirements of SAFETEA-LU section 6002 regarding 
inviting participating agencies.
    (D5) Corrective Action for Audit Deficiency--In three of the 
project files reviewed by the audit team that contained a class of 
action determination documentation, the class of action 
determination concurrence was issued the day before the third audit 
began, or actually, in two instances, the concurrence was issued 
during the audit. This is a failure to fully address the deficiency, 
``Environmental Document Process--Class of Action Determination,'' 
noted in the previous audit.

Response to Comments and Finalization of Report

    The FHWA received no comments during the 30-day comment period 
for the draft audit report. Therefore, the FHWA feels that there is 
no need to revise the draft audit report findings and finalizes the 
audit report with this notice.

[FR Doc. E9-17896 Filed 7-27-09; 8:45 am]
BILLING CODE 4910-22-P