Surface Transportation Project Delivery Pilot Program; Caltrans Audit Report, 9638-9645 [2010-4432]

Agencies

• Federal Highway Administration
• DEPARTMENT OF TRANSPORTATION

[Federal Register Volume 75, Number 41 (Wednesday, March 3, 2010)]
[Notices]
[Pages 9638-9645]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-4432]


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DEPARTMENT OF TRANSPORTATION

Federal Highway Administration

[FHWA Docket No. FHWA-2009-0119]


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 fourth FHWA audit of the California

[[Page 9639]]

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 fourth audit report in a Federal Register Notice published on 
December 23, 2009, at 74 FR 68308. The FHWA received no comments. This 
notice provides the final draft of the fourth FHWA audit report for 
Caltrans under the pilot program.

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

    Issued on: February 23, 2010.
Victor M. Mendez,
Administrator.

Surface Transportation Project Delivery Pilot Program Federal Highway 
Administration Audit of California Department of Transportation July 
27-31, 2009

Introduction

Overall Audit Opinion

    Based on the information reviewed, it is the Federal Highway 
Administration (FHWA) audit team's opinion that as of July 31, the 
California Department of Transportation (Caltrans) has continued to 
make progress 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 fourth audit, Caltrans has been 
operating under the Pilot Program for 2 years. In compliance with the 
time specifications for the required audits, FHWA has completed the 
four semiannual audits in the first 2 years of State participation. As 
required under the Pilot Program, FHWA audits of Caltrans will now be 
on an annual basis. During the four audits conducted, the audit team 
has completed on-site audits at 9 of the 12 Caltrans Districts and the 
remaining Districts were within the scope of the Caltrans Regional 
Offices that were audited. The audit team continues to identify 
significant differences across the Districts in terms of the Pilot 
Program. Example of such differences include: resource availability and 
allocation; methods of implementation; processes and their improvement; 
and progress toward meeting all commitments. It is the audit team's 
opinion that 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 
Districts' implementation and operation of the Pilot Program. 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 meet all Pilot Program commitments.
    The FHWA commends Caltrans for its implementation of corrective 
actions in response to previous audit findings. However, these 
corrective actions and ``fixes'' have been put into practice on a case-
by-case basis. The FHWA recommends that Caltrans develop a 
departmentwide, holistic corrective action management approach and 
system that will develop and implement an internal process review to 
determine needed improvements to existing processes and procedures.
    Due to the multiyear timeframes associated with more complex and 
controversial projects, the full lifecycle of the environmental review 
aspect of project development (proceeding from initiation of 
environmental studies and concluding with the issuance of a record of 
decision or equivalent decision document) has yet to be fully realized 
within the period of the Pilot Program. Over the past 2 years, the FHWA 
California Division has continued to execute the FHWA role for 22 
project reviews and decisions excluded from 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 ever-more complex and 
controversial projects under the Pilot Program.
    During the on-site 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.

Limitations of the Audit

    The conclusions presented in this report are opinions based upon 
interviews of selected persons knowledgeable about past and current 
activities related to the execution of the Pilot Program at Caltrans, 
and a review of selected documents over a limited time period. The FHWA 
audit team's ability to conduct the audit and make determinations of 
Caltrans successful participation in having met its commitments under 
the Pilot Program

[[Page 9640]]

during the four audits conducted have been further limited by the 
following:
     Not every District was audited. Each audit (including this 
audit) consisted of visits to selected Caltrans Districts.
     Incomplete project files. Project files and associated 
project documentation have, when reviewed, not always been complete 
(i.e., a full administrative record was not always available for review 
by the auditor team). This is especially true for projects where the 
project or related studies were initiated prior to commencement of the 
Pilot Program.
     The limited scope of Pilot Program activity to date 
conducted by Caltrans. Since Caltrans has not been operating under the 
Pilot Program for the period of time that is generally agreed to be 
required to complete the full lifecycle of most Environmental Impact 
Statements (EIS) and other complex projects, FHWA is not yet able to 
fully determine how Caltrans complies with all the responsibilities 
assumed in those project situations.
     Insufficient data to determine time savings. Similarly, it 
is too early in Caltrans' participation in the Pilot Program, and there 
is not enough data available, for FHWA to be able to report 
conclusively on time savings being achieved as a result of Caltrans 
participation in the Pilot Program.
     Lack of ability to view legal comments provided by 
Caltrans staff attorneys. As in prior audits, Caltrans did not permit 
access to its attorneys' written comments on assigned environmental 
documents. The inability to document the existence (not the substance) 
of such comments has made it difficult for the audit team to determine 
if the legal sufficiency process is being implemented in an effective--
as opposed to a timely--manner. While recognizing Caltrans' expressed 
concerns about the attorney-client privilege and acknowledging the 
dialogue that has taken place regarding these concerns and the 
appropriate documentation of this process, the audit team, mindful of 
the provisions of 23 CFR 1.5 as well as sections 8.1.6, 8.2.2, and 
8.2.4 of the MOU, is considering whether documentation beyond the 
timeline provided by Caltrans Legal Division's Legal Information 
Computer System database and individual findings of legal sufficiency 
is necessary for FHWA to evaluate fully Caltrans' compliance with these 
requirements.
     Distinction between the two Categorical Exclusion (CE) 
assumption processes. Since the assumption by Caltrans of the Safe, 
Accountable, Flexible, Efficient Transportation Equity Act: A Legacy 
for Users (SAFETEA-LU, Pub. L. 109-59) Section 6004 CE process is not a 
part of these audits, it is not possible to validate the correctness of 
determinations placing individual CEs under the aegis of each assumed 
responsibility.
     Continued errors in the quarterly reports. Since the 
quarterly reports continue to contain errors, it is difficult to have 
confidence that all National Environmental Policy Act (NEPA) documents 
have been reported and thus can be part of the FHWA audit plans.

Background

    The SAFETEA-LU Section 6005(a) established the Pilot Program, 
codified at title 23, United States Code, section 327. The Pilot 
Program allows the Secretary of Transportation (Secretary) to assign, 
and the State to assume, the Secretary's responsibilities under 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 is liable for carrying out the responsibilities 
it has assumed, in lieu of the 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 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 
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 fourth audit report in a Federal Register Notice 
published December 22, 2009, at 74 FR 68308. The FHWA received no 
comments during the comment period. This notice provides the final 
draft of the fourth FHWA audit report for Caltrans under the pilot 
program.
    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 is effective 
through August 2011 (23 U.S.C 327(i)(1)).

Scope of the Audit

    This is the fourth FHWA audit of the Caltrans Pilot Program. The 
on-site portion of the audit was conducted in California from July 27 
through July 31, 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 the continued review of compliance 
with assumed responsibilities.
    Prior to the on-site audit, FHWA conducted telephone interviews 
with Federal resource agency staff at the U.S. Army Corps of Engineers 
(USACE), the U.S. Fish and Wildlife Service (USFWS), the National Park 
Service, the National Oceanic and Atmospheric Administration and the 
Environmental Protection Agency regional office in California. The on-
site audit included visits to the Caltrans Offices in District 5 (San 
Luis Obispo), District 7 (Los Angeles), District 11 (San Diego), and 
District 12 (Irvine). Additionally, Caltrans legal staff was 
interviewed in Sacramento and USACE office in Irvine was visited.
    This report documents findings within the scope of the audit as of 
the completion date of the on-site audit on July 31, 2009.

[[Page 9641]]

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 (including 
documentation) 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 fourth audit included representatives from 
the following offices or agencies:
     FHWA Office of Project Development and Environmental 
Review
     FHWA Office of the Chief Counsel
     FHWA Alaska Division Office
     FHWA Resource Center Environmental Team
     Volpe National Transportation Systems Center
     USFWS.
    During the onsite audit, FHWA interviewed 80 staff from the 
Caltrans four District offices, Caltrans legal staff, and the USACE. 
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 45 projects managed under the Pilot Program.
    The FHWA acknowledges that Caltrans identified specific issues 
during its fourth self-assessment performed under the Pilot Program 
(required by MOU section 8.2.6), and has established processes to 
address most issues. 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 this draft audit report. The 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 Since Last Audit

    As part of the fourth audit, FHWA evaluated the corrective actions 
implemented by Caltrans in response to the audit findings in the third 
audit report.
    Most of the compliant findings in the third audit report involved 
specific processes and procedures of the North and Central Region 
offices. As these offices were not visited during this fourth audit, we 
cannot report on the continuance of their compliance.
    The FHWA reviewed the current status of ``Deficient'' and ``Needs 
Improvement'' audit findings identified during the third FHWA audit in 
January 2009.
    ``Deficient'' audit findings status:
    1. Quarterly Reports--The quarterly reports Caltrans provides to 
FHWA under section 8.2.7 of the MOU continue to include an inaccurate 
listing of all approvals and decisions under the Pilot Program. This 
continued area of deficiency was also reported by Caltrans in their 
fourth self assessment.
    2. Performance Measure--``Monitor relationships with Federal and 
State resource agencies''--Caltrans reported in its fourth self-
assessment that a survey was conducted in early 2009 with those Federal 
and State resource agencies that it works with on Pilot Program 
projects.
    3. Delegation of Signature Authority--This issue has been rectified 
through issuance of clarifying direction to staff.
    4. Assignment of Section 6002 Responsibility under the Pilot 
Program--Caltrans has revised its Standard Environmental Reference 
(SER) to correct and clarify the template letters for inviting 
cooperating and participating agencies to participate in an EIS 
project, as per section 6002 of SAFETEA-LU.
    ``Needs Improvement'' audit findings:
    1. Quality Assurance/Quality Control (QA/QC) Certification 
Process--Ongoing improvement was observed in the completion of the QC 
certification forms. Nevertheless incorrect and incomplete QC 
certification forms were still identified.
    2. Self Assessment and Process Reviews--As per the suggestion of 
this finding, the Caltrans fourth self assessment included review of 
ongoing projects as well as completed projects.
    3. Air Quality Conformity Determinations--The project files 
reviewed during the fourth audit contained the necessary FHWA air 
quality conformity determination documentation, where applicable.
    4. Project Files/Uniform File System (UFS)--Some project files 
reviewed during this audit met the requirements of Section 8.2.4 of the 
MOU and SER Chapter 38 while other files reviewed did not meet these 
requirements.
    5. Commitment of Resources--Inconsistencies continued to be 
observed with regard to charging time spent on pilot program activities 
to the official Pilot Program code (6DELE).
    6. Training on Air Quality Conformity--Caltrans reported in its 
fourth self assessment that Air Quality training has been offered and 
is to be provided in the upcoming training plan.
    7. Assignments under the Pilot Program--Caltrans staff interviewed 
indicated a better understanding of the SAFETEA-LU Section 6002 (23 
U.S.C. 139) environmental review process requirements than indicated in 
the third audit.
    8. Performance Measure--``Monitor relationships with the general 
public''--The fourth Caltrans self assessment reported a new process 
for monitoring this performance measure had been implemented. 
Monitoring of how the relationships are evolving is now being 
conducted.
    9. Documentation of Class of Action Determination--For projects 
initiated under the Pilot Program, project files for class of action 
determination reviewed during the fourth audit, contained this 
documentation.
    10. Local Assistance Training Plan--This finding was not revisited 
as to its status during the fourth audit.

Effective Practices

    The FHWA audit team observed the following effective practices 
during the fourth audit:
    1. One Caltrans District training coordinator implemented a system 
to

[[Page 9642]]

capture and track which employees in that district completed online 
training courses by creating and assigning a unique billing code for 
time spent taking such courses. This training coordinator then manually 
input this information into an employee's training plans.
    2. In some Districts, electronic files are set up and organized to 
mirror the UFS headings.
    3. In one Caltrans District, new environmental staff are required 
to attend an internal 23-day ``boot camp'' that introduces them to the 
processes, procedures, and related information needed for their 
position.
    4. The use of a memorandum to the file with a complete explanation 
of the circumstances and details regarding the ``down-scoping'' of a 
project from an EIS to an environmental assessment (EA), or from an EA 
to a CE.
    5. Explanatory notes in a project file under one UFS tab stating 
where the information for that tab is found filed under another tab 
within the project file.

Findings Definitions

    The FHWA audit team carefully examined Pilot Program areas to 
assess compliance in accordance with established criteria in the MOU 
and Application. The time period covered by this fourth audit report is 
from the start of the Caltrans Pilot Program (July 1, 2007) through 
completion of the third onsite audit (July 31, 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. or
    Audit determined that for a past Needs Improvement finding, the 
rate of corrective action has not proceeded in a timely manner; is not 
on the path to timely resolution of the finding.

Summary of Findings--July 2009

Compliant

    C1) Legal Sufficiency Timeline--Caltrans' Legal Division has 
developed a consistent process to conduct required legal sufficiency 
reviews by attorneys (per 23 CFR 771.125(b) and 774.7(d)). Based on 
interviews with staff and information provided during the audit, legal 
reviews of NEPA and Section 4(f) of the U.S. DOT Act of 1966 (Section 
4(f)) documents appear to be conducted within the times allotted by 
Caltrans internal performance goals.

Needs Improvement

    N1) Inadequate Guidance in the SER--Section 8.2.5 of the MOU 
requires ``At a minimum, Caltrans' quality control and quality 
assurance activities will include the review and monitoring of its 
processes relating to project decisions, environmental analysis, 
project file documentation, checking for errors and omissions, legal 
sufficiency reviews, and taking appropriate corrective action as 
needed.'' Several instances were identified where the guidance provided 
in the SER was unclear, misleading, or incomplete. This resulted in 
documents incorrectly completed and/or processes not implemented 
correctly. Examples of such instances were:
    a.) SER Chapter 38 requires that the SEP sign the Environmental 
Document Review Checklist once it is completed. Review of project files 
revealed Environmental Document Review Checklists that were either not 
signed by a Senior Environmental Planner (SEP) or not signed at all. 
Additionally, different versions of the checklist were found in various 
project files, none of which designated which signature line was to be 
completed by the SEP. These various instances of noncompliance with the 
SER requirement were observed within individual Districts and also from 
District to District.
    b.) SER Chapter 38 guidance does not distinguish between the 
``pilot program'' citation required to appear in individual Section 
4(f) Evaluations prepared for Section 6005 CE projects and those 
prepared for Section 6004 CE projects. The statement in the SER 
regarding the project being carried out by Caltrans under its 
assumption of responsibility pursuant to 23 U.S.C. 327 is only 
applicable to Section 4(f) evaluations for Section 6005 CEs under the 
Pilot Program. The CEs completed by Caltrans under the Section 6004 CE 
assumption should refer to 23 U.S.C. 326. Through interviews and 
project file reviews, confusion about this was identified and, at least 
in some cases, the apparent misunderstanding that the same language is 
to be used for both Section 6004 and Section 6005 CEs with individual 
Section 4(f) evaluations.
    c.) SER Chapter 33 discusses the process and documentation for 
conducting NEPA re-evaluations (to comply with 23 CFR 771.129). The 
chapter, last updated November 10, 2008, does not provide clear 
direction on how to process a re-evaluation under the Pilot Program. 
The chapter includes a reference to a joint FHWA/Caltrans guidance on 
NEPA consultation and re-evaluation, dated June 21, 2007, that states, 
``When the NEPA Pilot Program (NEPA assumption) begins, the joint 
guidance and the NEPA/CEQA Revalidation form will be revised as 
necessary.'' The FHWA/Caltrans joint guidance has not been revised to 
take the Pilot Program into consideration. There is a link to a review 
form that matches the form contained in the joint FHWA/Caltrans 
guidance and has FHWA removed as having approval authority; however, 
there is no guidance on the appropriate use of the form.
    d.) SER Chapter 25 references FHWA Order 6640.2 FHWA Actions to 
address Environmental Justice in minority and Low-Income Populations; 
however, the flowchart and guidance provided in that chapter do not 
fully reflect the definition of Disproportionately High and Adverse 
Effect on Minority and Low-Income Populations provided in that Order, 
nor does it clearly state the need to identify population served and/or 
affected by race, or national origin, and income level when determining 
such effects. The SER chapter provides discussion points and some 
sources for reference material, but does not provide specific guidance 
to NEPA practitioners for how to integrate a project level review into 
a NEPA process, to document proposed steps to guard against 
disproportionately high and adverse effects, or to document meaningful 
public involvement opportunities and consider the results.
    N2) Procedural and Substantive Requirements--MOU Section 5.1.4 
states that Caltrans will work with all other appropriate Federal 
agencies concerning the laws, guidance, and policies that such other 
Federal agencies are responsible for administering. Areas in need of 
improvement in working with Federal agencies included:

[[Page 9643]]

    a.) Through interviews with USACE and USFWS staff located in 
California, instances were identified where there was confusion as to 
the implementation of the Endangered Species Act (ESA) Section 7 
process and how it is related to the USACE permitting process. Verbal 
comments were made by resource agency staff that when working on local 
agency projects, the local project sponsors lacked clarity on the 
information regarding the ESA Section 7 compliance needed for the USACE 
permitting process. It was also learned that on more than one occasion, 
local agencies inappropriately acted as lead agency for ESA Section 7 
consultation and Section 404 of the Clean Water Act coordination.
    b.) The SER Chapter 38, Consultation and Coordination with Federal 
Agencies, requires Caltrans to include the following specific language 
in consultation documents being transmitted directly to Federal 
resource agencies:

    Caltrans is [transmitting/initiating * * * (describe product or 
action)] as the NEPA lead agency under the provisions of the 
Memorandum of Understanding (MOU) between the Federal Highway 
Administration and the California Department of Transportation 
Concerning the State of California's Participation in the Surface 
Transportation Project Delivery Pilot Program, which became 
effective on July 1, 2007. The MOU was signed pursuant to Section 
6005 of the 2005 Safe, Accountable, Flexible, Efficient 
Transportation Equity Act: A Legacy for Users (SAFETEA-LU) which 
allows the Secretary of Transportation to assign, and the State of 
California to assume, responsibility for FHWA's responsibilities 
under other Federal environmental laws. As this project is covered 
by the Pilot Program MOU, FHWA has assigned and Caltrans has assumed 
FHWA responsibility for environmental review, consultation, and 
coordination on this project. Please direct all future 
correspondence on this project to Caltrans.

    A letter in a project file from Caltrans to USFWS requesting 
initiation of formal ESA Section 7 consultation did not include the 
required language regarding the responsibilities assumed by Caltrans.
    N3) Section 4(f) Documentation--MOU Section 5.1.1 affirms that 
Caltrans is subject to the same procedural and substantive requirements 
that apply to the DOT in carrying out the responsibilities assumed 
under the Pilot Program. Through project file reviews and interviews 
with Caltrans staff, inconsistencies were identified with the 
documentation required in carrying out the Section 4(f) provisions. 
These included:
    a.) For one project, no documentation was provided in the EA or in 
the project file to support the assertion that ``[t]emporary uses do 
not normally constitute `use' under Section 4(f) policy.'' The FHWA 
regulation regarding ``temporary occupancies of land,'' 23 CFR 
774.13(d), states in pertinent part that there must be documented 
agreement with the official with jurisdiction over the Section 4(f) 
resource that the requisite conditions have been met. 23 CFR 
774.13(d)(5).
    b.) Two project files that together contained inadequate 
documentation of three potential Section 4(f) resources were 
identified. Documentation did not fully support statements that these 
resources were not, in fact, Section 4(f) resources. In one case, the 
official with jurisdiction even disputed the statement in the 
environmental document that the subject property was not a Section 4(f) 
resource and provided information to support a Section 4(f) resource 
identification. In another document, there was an implied de minimis 
effect by the use of the term; however, no supporting documentation was 
provided, nor was there any evidence of public involvement or 
coordination with the officials with jurisdiction over the Section 4(f) 
resource, as required by 49 U.S.C. 303(d) and 23 CFR 774.7(b).
    c.) In four project files reviewed during the audit, documentation 
did not reflect that the current Section 4(f) regulations are being 
adhered to in all NEPA processes. In these four projects, references 
were made to the prior FHWA regulations at 23 CFR 771.135 rather than 
to the updated regulations at 23 CFR Part 774.
    N4) Circulation of a Draft Section 4(f) Evaluation--Project file 
reviews and interviews with Caltrans staff identified confusion as to 
the requirements for the circulation of the Section 4(f) Evaluation to 
the Department of the Interior (DOI) for review. In one instance, 
Caltrans staff contacted the FHWA Division Office to determine 
circulation requirements and documentation indicates that the Section 
4(f) Evaluation was sent to FHWA for forwarding to DOI.
    N5) Section 4(f) Implementation--MOU Section 5.1.1 requires 
Caltrans to be subject to the same procedural and substantive 
requirements that apply to the DOT when carrying out the 
responsibilities it has assumed. Through project file reviews and 
interviews of Caltrans staff, several inconsistencies with the 
implementation and general understanding required in carrying out the 
Section 4(f) provisions were identified. These include:
    a.) Text in an EA that cited the Section 4(f) ``policy'' should 
have referred to the Section 4(f) ``regulations.'' The correct citation 
for this Section 4(f) Evaluation should have been the FHWA regulations, 
23 CFR Part 774.
    b.) Review of a final Environmental Assessment/Finding of No 
Significant Impact (EA/FONSI) and project files revealed a lack of 
understanding regarding the applicability of FHWA's Nationwide 
Programmatic Section 4(f) evaluation for the rehabilitation or 
replacement of historic bridges. Under the Programmatic, all five 
criteria of applicability set forth in this programmatic must be met 
and the explanation for meeting the criteria must be included in the 
document and the project file (https://www.environment.fhwa.dot.gov/projdev/4fbridge.asp). In addition, the draft EA for this project 
reached a Section 4(f) conclusion prior to executing the Section 106 
MOU with the State Historic Preservation Office.
    N6) Legal Division Staff--Caltrans' Legal Division consists of four 
largely autonomous offices\2\ serving different regions of the State. 
The MOU section 4.2.2 requires Caltrans ``to obtain adequate* * * staff 
capability'' including ``without limitation* * * [d]emonstrating, in a 
consistent manner, the capacity to perform Caltrans' assumed 
responsibilities under this MOU and applicable Federal laws.'' As noted 
in a previous audit report, Caltrans maintains a staff of attorneys in 
each of the four offices trained to support the Pilot Program, and 
tracks the training each of these attorneys receives related to 
environmental law. The audit team notes that many of the attorneys 
assigned to the Pilot Program have a great deal of general legal 
experience; however, over the life of the Pilot it has become apparent 
that the four legal offices vary widely when it comes to attorneys with 
significant experience in Federal environmental law. During this audit, 
it became clear that this inconsistency increased following the 
retirement of a highly experienced attorney near the end of 2008. This 
retirement has resulted in two of Caltrans' legal offices--each of 
which serves some of Caltrans' largest and busiest Districts--having on 
staff no attorneys with substantial experience in Federal environmental 
law. It is the audit team's understanding that legal sufficiency 
reviews are conducted independently within these autonomous offices, 
increasing the potential that legal sufficiency reviews may be applied 
in an inconsistent manner across the State.
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    \2\ The four offices are located in Sacramento, San Francisco, 
Los Angeles, and San Diego.

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[[Page 9644]]

    N7) Training--Section 4.2.2 of the MOU requires Caltrans to 
maintain adequate organizational and staff capacity to effectively 
carry out the responsibilities it has assumed under Section 3 of the 
MOU. The following inconsistencies were noted during interviews:
    a.) Interviews and personnel training record reviews identified two 
tools used by Caltrans to determine the capacity of Caltrans staff to 
carry out Pilot Program responsibilities including a Learning 
Management System (LMS) and Individual Development Plans (IDPs). The 
audit team observed that these tools, and possibly others, are used in 
varying ways and with varying success across Districts to (1) identify 
training needs or gaps in areas of expertise and (2) plan and track the 
training each employee receives. Given this variation and use of these 
tools and approaches, it is unclear how District leadership ensures 
that all Caltrans employees have the capacity to carry out assigned 
responsibilities assumed under the Pilot Program and how this 
information can be collected.
    b.) Interviews reflected a lack of knowledge in two areas. As is 
detailed in other portions of this audit report, several instances of 
inadequate staff capacity for determining compliance process 
requirements related to the Section 4(f) and ESA Section 7 processes 
were observed during this audit. This is an example of a needed 
competency that does not appear to be being met and/or being tracked. 
As was also noted earlier in this report, there is varying 
understanding of the re-evaluation process and requires additional 
training for staff to be competent in the understanding of this 
process.
    c.) As the demand for and use of online training courses increases, 
there is currently no consistent method for Caltrans to track which 
employees have completed online training courses and to incorporate 
this information into the LMS and into the employee IDPs. In order to 
ensure that Caltrans employees implementing NEPA duties have the 
knowledge and skills to assume the responsibilities under Section 3 of 
the MOU, Caltrans should begin to track this information and also 
determine which online training courses should be prerequisites for 
performing certain NEPA assumption activities.
    N8) 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. Caltrans has 
instituted specific procedures for maintaining project files and has 
provided training on these procedures. Inconsistencies in the 
application of these procedures, reported in previous audit findings, 
were also identified in this audit. Inconsistencies in 12 of the 47 
project files reviewed during the audit, including:
    a.) Required project documentation was missing from several project 
files. Examples of missing documentation included: a Biological 
Opinion; ESA Section 7 concurrence documentation; internal and external 
communications related to the project; letters from the District Local 
Agency Engineer to the local agency transmitting the Preliminary 
Environmental Study form with the list of the required technical 
studies for the project; and noise abatement decision report.
    b.) Some required file documentation missing from project files was 
eventually located elsewhere in the District Office. Examples of items 
missing from the project file, but brought to auditors upon request, 
included cooperating agencies' letters, FHWA project level air quality 
conformity determinations, Caltrans' noise abatement decision reports, 
a project's Section 106 MOA, and evidence of the circulation of Section 
4(f) documents to the DOI. Required documentation could not be located 
during the audit.
    c.) The required documentation according to 23 CFR 
771.111(h)(2)(vi), which states that the State must provide 
``transcript of each public hearing and a certification that a required 
hearing or hearing opportunity was offered'' could not be located 
during the audit. In two instances, the public hearing transcript was 
not found nor was any certification (or other documentation) that a 
hearing had been held.
    d.) In several instances, project files were missing required UFS 
tabs (though they contained pertinent documentation) and some sections 
contained no information or explanation as to why the tabs were missing 
or tab sections were empty.
    N9) Varying Oversight/Analysis of Commitment of Resources -- 
Section 4.2.2 of the MOU requires that ``Caltrans will maintain 
adequate organizational and staff capability, including competent and 
qualified consultants where necessary or desirable, to effectively 
carry out the responsibilities it has assumed under part 3 of this MOU. 
This includes, without limitation:
    [cir] Using appropriate environmental technical and managerial 
expertise;
    [cir] Devoting adequate staff resources; and
    [cir] Demonstrating, in a consistent manner, the capacity to 
perform Caltrans' assumed responsibilities under this MOU and 
applicable Federal laws.''
    Previous audits have tried to determine how Caltrans monitors its 
resources to implement the Pilot Program, but based on audit 
interviews, were unable to identify a uniform process. Through 
interviews and material reviewed during this audit, it was determined 
that the existing system used by Caltrans to track resources showed 
inconsistent use of billing codes and in one case identified an error 
not previously found by Caltrans. During the interviews with Caltrans 
environmental personnel, inconsistencies continued to be identified in 
the reporting and use of these Pilot Program codes. These 
inconsistencies include:
    (a) Lack of familiarity with the activities eligible to be billed 
to the Pilot Program,
    (b) Lack of supervisory direction as to what activities should be 
billed to the Pilot Program;
    (c) Failure to report all times eligible for billing under the 
appropriate codes for both Capital and Local Assistance programs (codes 
6DELE and 6LADELE, respectively);
    (d) Varying degrees of oversight, or no oversight of the billing 
codes for the Pilot Program performed in the Districts.

Deficient

    D1) Quality Control Quality (QA/QC) Assurance--Under the Pilot 
Program, and as reflected in the language cited on each environmental 
document assigned to Caltrans per MOU Section 3.2.5, NEPA documentation 
should reflect that FHWA has no role in the environmental review and 
decisionmaking process for assigned projects. Through project file and 
document reviews, three instances were observed where in a document or 
in the project file, there were references to FHWA being involved in 
the decisionmaking process.
    D2) 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). Incomplete and incorrectly completed QC certification forms 
continue to be identified. Five of the seven identified instances 
occurred in 2008. Examples of these are:
    a) Four instances in which review signatures on QA/QC forms were 
not

[[Page 9645]]

obtained the proper sequence in accordance with the Caltrans 
established QA/QC processes;
    b) Three project files where QA/QC forms were either incomplete or 
missing.
    D3) Quarterly Reporting--MOU Section 8.2.7 requires Caltrans to 
submit a report to FHWA each quarter for the first 2 years of Pilot 
program listing all approvals and decisions Caltrans makes with respect 
to responsibilities assumed under the MOU. Quarterly reports submitted 
by Caltrans for the first eight quarters of Pilot program participation 
were reviewed for this audit. Each of the first seven quarterly reports 
has been revised; some reports have been revised multiple times. In 
summary, for the first seven quarterly reports, a total of 63 new 
projects were added in report revisions and 29 projects initially 
reported were subsequently deleted. The reporting issues spanned across 
the majority of districts reporting projects, and seven districts 
submitted revisions to four or more quarterly reports. Inaccurate 
project reporting has been a consistent issue affecting the quarterly 
report process and has been identified in previous FHWA audit reports. 
Among the errors discovered were reporting errors related to 
incorrectly characterizing projects (e.g., CEs under Section 6004 and 
Section 6005), and omissions associated with untimely reporting of 
project approvals and decisions by district staff (i.e., a subsequent 
quarterly report included a project that was approved in the previous 
quarter). The approach used by each district to collect project 
information for the quarterly reports is highly variable and is one key 
contributor to continued reporting inaccuracies.
    The current Caltrans approach to developing the quarterly reports 
continues to be deficient. The accuracy of the reports on project 
approvals and decisions affects FHWA oversight of the Pilot Program. 
For example, if Caltrans does not report to FHWA a project being 
administered under the Pilot Program, the project may not be included 
in the audit process. Additionally, now that the FHWA onsite audit 
process will move to an annual basis (semi-annual audits were required 
during the first 2 years of the Pilot Program), the project approval 
and decision reporting takes on increased significance as less in-field 
auditing will occur.

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. 2010-4432 Filed 3-2-10; 8:45 am]
BILLING CODE 4910-22-P