Surface Transportation Project Delivery Pilot Program; Caltrans Audit Report, 5237-5243 [2011-1870]

Agencies

• Federal Highway Administration
• DEPARTMENT OF TRANSPORTATION

[Federal Register Volume 76, Number 19 (Friday, January 28, 2011)]
[Notices]
[Pages 5237-5243]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-1870]


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DEPARTMENT OF TRANSPORTATION

Federal Highway Administration

[FHWA Docket No. FHWA-2010-0151]


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 fifth 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 8 a.m. to 4:30 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 fifth audit report in a Federal Register Notice published on 
December 3, 2010, at 75 FR 75532. The FHWA received no comments. This 
notice provides the final draft of the fifth 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: January 20, 2011.
Victor M. Mendez,
Administrator.

Surface Transportation Project Delivery Pilot Program

Federal Highway Administration Audit of California Department of 
Transportation

July 26-30, 2010

Overall Audit Opinion

    Based on the information reviewed, it is the Federal Highway 
Administration (FHWA) audit team's opinion that as of July 30, 2010, 
the California Department of Transportation (Caltrans) 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 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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    The FHWA commends Caltrans for its implementation of corrective 
actions in response to previous FHWA audit report findings. The FHWA 
also observed that Caltrans continued to identify and implement on a 
statewide Pilot Program basis best practices in use at individual 
Caltrans Districts (Districts).
    With the completion of FHWA's fifth audit, Caltrans has now 
operated under the Pilot Program for 3 years. In compliance with the 
time specifications for the required audits, FHWA completed four 
semiannual audits in the first 2 years of State participation and 
has begun the annual audit cycle, beginning with this audit, which 
was completed July 30, 2010. Collectively, the FHWA audits have 
included on-site audits to 9 of the 12 Districts and to the Caltrans 
Regional Offices supporting the remaining 3 Districts. The audit 
team continues to identify significant differences across the 
Districts in terms of implementing Pilot Program policies, 
procedures, and responsibilities. Examples of such differences 
include: Resource availability and allocation; methods of 
implementation; methods of process evaluation and improvement; and 
levels of progress in meeting all assumed responsibilities. It is 
the audit team's opinion that the highly decentralized nature of 
operations across Districts continues to be a major contributing 
factor to the variations observed in the Pilot Program. As a result 
of this organizational structure, clear, consistent, and ongoing 
oversight by Caltrans Headquarters (HQ) over Districts' 
implementation and operation of the Pilot Program responsibilities 
is necessary. 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 to meet all Pilot Program commitments.
    Due to the multiyear timeframes associated with more complex and 
controversial projects, the full lifecycle of the environmental 
review aspect of project

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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 realized within the Pilot Program 
to date. Caltrans continues to gain experience in understanding the 
resource requirements and processes necessary to administer its 
Program. It is the audit team's opinion that Caltrans needs to 
maintain this continuous process improvement to refine its 
approaches and use of resources to meet all Pilot Program 
commitments, especially given the increasing resource demands 
associated with managing ever-more complex and controversial 
projects under the Pilot Program.
    Caltrans staff and management continue to request feedback from 
the FHWA audit team regarding program successes, best practices, and 
areas in need of improvement. By addressing all findings in this 
report, Caltrans will continue to move toward full compliance with 
all assumed responsibilities and Pilot Program commitments.
    As of the conclusion of the fifth FHWA audit, Caltrans has 
participated in the Pilot Program for 3 years. It is FHWA's opinion 
that Caltrans has continued to improve its processes and procedures 
and has benefited from participation in the Pilot Program. However, 
it also is FHWA's opinion that while Caltrans participation in the 
Pilot Program has been successful thus far, it is still functioning 
in a development context and has yet to reach full maturity. Ongoing 
repeat findings and program areas still in the process of being 
developed or improved contributed to this opinion.

Requirement for Transition Plan

    The Safe, Accountable, Flexible, Efficient Transportation Equity 
Act: A Legacy for Users (SAFETEA-LU) Section 6005(a) established the 
Pilot Program, codified at 23 U.S.C. 327. Under the provisions of 23 
U.S.C. 327(i)(1), as enacted in SAFETEA-LU, ``the program shall 
terminate on the date that is 6 years after the date of enactment of 
this section'' which will be August 10, 2011. Additionally, the MOU 
between FHWA and Caltrans contains a provision designed to implement 
23 U.S.C. 327(i), as enacted by SAFETEA-LU. Specifically, the 
provision provides that Caltrans and FHWA must jointly ``develop a 
plan to transition the responsibilities that Caltrans has assumed 
back to the FHWA so as to minimize disruption to the project, 
minimize confusion to the public, minimize burdens to other affected 
Federal, State, and local agencies, and, ensure, to the maximum 
extent possible, Caltrans will be able to complete by August 10, 
2011, all anticipated environmental approvals.'' The MOU further 
provides that the transition plan must be completed and approved by 
both Caltrans and FHWA no later than March 10, 2011. In the section 
2203(c) of the Surface Transportation Extension Act of 2010, Part 
II, Public Law 111-322, Congress modified 23 U.S.C. 327(i)(1) by 
extending the program termination date to 7 years after the date of 
enactment of SAFETEA-LU. As a result of this amendment, the program 
termination date is now August 10, 2012. The MOU will need to be 
amended to take this new termination date into account by delaying 
actions on the development of the transition plan by one year.

Effective Practices

    The FHWA audit team observed the following effective practices 
during the fifth audit:
    1. Caltrans HQ has sought out, shared, and implemented (or is 
implementing) best practices in use at the District level to use on 
a statewide basis. Examples include:
    (a) Use of a standard form to document Class of Action 
determination;
    (b) Use of the File Maker Pro environmental database system to 
track projects and milestones; and
    (c) Creation of a Section 4(f) point of contact in each District 
to serve as a technical resource for District staff.
    2. Use of monthly newsletters and e-mails from HQ environmental 
coordinators to inform District environmental staff of key issues, 
timely topics, and changes in practices.
    3. The Sacramento Legal Office permanently assumed 
responsibility for all environmental law issues in two Districts 
where staff turnover resulted in limited expertise to support legal 
sufficiency reviews. As the number of legal sufficiency reviews 
performed under the Pilot Program has not been significant, 
concentrating reviews amongst a key group of attorneys should assist 
with a consistent level of review of environmental documents and the 
development of expertise under the Pilot Program.
    4. Development of an on-line training course on Section 4(f) 
determinations that is nearing completion.
    5. Expansion of the scope of the Caltrans self-assessment 
process to include review of Pilot Program areas identified as 
potential weaknesses by HQ Environmental Coordinators.
    6. A variety of approaches are being used by individual 
Districts to capture, track, and ensure that environmental 
commitments identified in environmental documents are being met. 
Identified District specific approaches used to accomplish this 
include:
    (a) Training environmental staff in environmental commitments 
tracking;
    (b) Dedicating resources to track commitments, ensuring that the 
commitments are circulated at key stages of the project cycle, and 
checking that the commitments have been met at the completion of a 
project;
    (c) Using dedicated formats to capture, describe, and ensure 
that environmental commitments are transferred and incorporated into 
contract documents;
    (d) Requiring environmental awareness training for construction 
personnel prior to the start of construction; and
    (e) Training appropriate staff on incorporation of environmental 
commitments into plan, specification, and estimate packages.

Background

    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 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 
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.
    Caltrans published its draft Application to participate in 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.

Scope of the Audit

    This is the fifth FHWA audit of Caltrans participation in the 
Pilot Program. The on-site portion of the audit was conducted in 
California from July 26 through July 30, 2010. 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 successful 
participation in the Pilot Program.
    The audit primarily focused on assessing compliance with assumed 
responsibilities. Key Pilot Program areas evaluated during this 
audit included:
     Section 4(f) process determination and documentation;

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     The reevaluation process;
     The impact of furloughs and loss of staff;
     Project files;
     Resource agency consultation and coordination;
     Training;
     Quarterly reports;
     Quality Assurance Quality Control (QA/QC) process; and
     NEPA process documentation.
    Prior to the on-site audit, FHWA completed telephone interviews 
with Federal resource agency staff at the U.S. Army Corps of 
Engineers (USACE), the National Park Service, the National Oceanic 
and Atmospheric Administration, the Advisory Council on Historic 
Preservation, and the Environmental Protection Agency. The on-site 
audit included visits to the Caltrans Offices in District 3/North 
Region (Marysville), District 4 (Oakland), District 5 (San Luis 
Obispo), District 7 (Los Angeles), District 8 (San Bernardino), and 
District 12 (Irvine). Additionally, FHWA auditors visited the 
Sacramento offices of the USACE and U.S. Fish and Wildlife Service 
(FWS) to interview staff.
    This report documents findings within the scope of the audit as 
of the completion date of the on-site audit on July 30, 2010.

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 QC 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 fifth 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.
     FWS.
    During the onsite audit, FHWA interviewed more than 70 staff 
from 6 District offices and the USACE and FWS. The audit team also 
reviewed project files and records for over 80 projects managed by 
Caltrans under the Pilot Program.
    The FHWA acknowledges that Caltrans identified specific issues 
during its fifth self-assessment performed under the Pilot Program 
(required by MOU section 8.2.6), and is working on corrective 
actions to address the identified 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.

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 each audit and make 
determinations of Caltrans' compliance with assumed responsibilities 
and commitments under the Pilot Program has been further limited by 
the following:
     Select Districts visited by FHWA audit team. The FHWA 
audit team has not visited each District during the audit process. 
Each audit (including this audit) has consisted of visits to 
Districts with significant activity under the Pilot.
     Caltrans staff availability during audits. Some 
Caltrans staff selected to be interviewed by the audit team were out 
of the office and unavailable to participate in the onsite audit. 
This limited the extent of information gathering.
     Incomplete project files. Project files and associated 
project documentation have, when reviewed by the audit team, not 
always been complete. This is especially true for projects where the 
project or related studies were initiated prior to commencement of 
the Pilot Program. A full assessment of compliance with Pilot 
Program policies and procedures is not possible unless all required 
documents are available for review.
     Limited scope of Pilot Program project development 
activity. Caltrans has not operated under the Pilot Program for a 
sufficient period of time to manage the full lifecycle of most 
Environmental Impact Statements (EIS) and other complex projects. 
Therefore, FHWA is not yet able to fully determine how Caltrans will 
comply with its responsibilities assumed under the Pilot Program for 
these project situations.
     Insufficient data to determine time savings reported by 
Caltrans in the completion of environmental documents. Due to the 
short period of time that the Pilot Program has been in place, a 
sufficient number of projects of varying complexities have not been 
completed to adequately support a determination on the potential 
time savings resulting from participation in the Pilot Program.
     Distinction between the two Categorical Exclusion (CE) 
assumption processes--Section 6004 and Section 6005. Since the 
assumption by Caltrans of the SAFETEA-LU 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. The 
quarterly reports prepared by Caltrans listing all environmental 
approvals and decisions made under the Pilot Program continue to 
contain omissions and errors. As a result, it is difficult for FHWA 
to exercise full oversight on Pilot Program projects unless a 
complete accounting of all NEPA documents produced under the Pilot 
is available and taken into account during the FHWA audit.

Status of Findings Since Last Audit (July 2009)

    As part of the fifth audit, FHWA evaluated the corrective 
actions implemented by Caltrans in response to the ``Deficient'' and 
``Needs Improvement'' findings in the fourth FHWA audit report.
    1. Quarterly Reports--The quarterly reports Caltrans provided to 
FHWA under MOU Section 8.2.7 continued to include inaccuracies 
related to environmental document approvals and decisions made under 
the Pilot Program. The FHWA does acknowledge that Caltrans is in the 
process of implementing the File Maker Pro environmental database 
system on a statewide basis to assist in the developing of a 
comprehensive database of environmental projects and milestones to 
improve the accuracy of the information reported in the quarterly 
reports.
    2. QA/QC Certification Process--Project file reviews completed 
during the fifth audit continued to identify incorrect and 
incomplete QC certification forms. Caltrans continues to address 
inadequacies in this process through staff specific training when 
inconsistencies are identified, most notably during the self-
assessment process.
    3. QA/QC Assurance--Under the Pilot Program, NEPA documentation 
must clearly identify that FHWA has no role in the environmental 
review and decisionmaking process for assigned projects. However, 
environmental document reviews continued to identify instances when 
FHWA was referenced as being involved in the decisionmaking process.
    ``Needs Improvement'' audit findings status:
    1. Inadequate Guidance in the Standard Environmental Reference 
(SER)--Caltrans updated the SER to address FHWA's

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concerns regarding several instances where guidance provided was 
unclear, misleading, or incomplete. However, additional instances 
were observed during the fifth audit regarding unclear, misleading, 
or incomplete information in the SER.
    2. Procedural and Substantive Requirements--The identified areas 
of confusion regarding implementation of the Endangered Species Act 
(ESA) Section 7 process have been addressed and the process of 
consulting with the FWS under ESA Section 7 has been improved.
    3. Section 4(f) Issues:
    (a) Documentation--Project file reviews and interviews with 
Caltrans staff confirmed continuing inconsistencies in the 
documentation required to meet the Section 4(f) provisions.
    (b) Circulation of a Draft Section 4(f) Evaluation--Project file 
reviews and interviews with Caltrans staff identified confusion 
regarding the requirement to circulate Section 4(f) Evaluations to 
the Department of the Interior for review.
    (c) Section 4(f) Implementation--Project file reviews and 
interviews with Caltrans staff identified several inconsistencies 
with the implementation and general understanding required in 
carrying out Section 4(f) provisions.
    Caltrans is continuing to address each issue. For example, 
Caltrans requested and received two FHWA-led Section 4(f) trainings, 
each 2 days in length, with specific requests to address areas that 
FHWA has identified as problematic during the Pilot Program audit. 
Caltrans is also completing an on-line Section 4(f) training that 
will be posted on the ``Training on Demand'' Web site.
    4. Legal Division Staff--Significant variability existed in the 
Federal environmental law experience of the attorneys in the four 
Caltrans legal offices. Most notably, the retirement of a highly 
experienced attorney near the end of 2008 resulted in two of 
Caltrans' legal offices serving some of Caltrans' largest and 
busiest Districts with no attorneys on staff with substantial 
experience in Federal environmental law. Since October 2009, the 
Sacramento Legal Division assumed permanent responsibility for all 
environmental law issues in the legal office affected by the 
retirement of the experienced attorney in 2008.
    5. Training--In the past, inconsistencies in training were 
identified in the areas of Section 4(f) and Section 7 processes. 
There were also observed inconsistencies in the use of tools to 
identify training needs and to track employees' training histories, 
as well as no method for employees to track completion of any online 
training available on the Caltrans Web site. A method to record the 
completion of on-line trainings by Caltrans staff is now available 
with implementation of its use underway.
    6. Maintenance of Project and General Administrative Files--
Caltrans has instituted specific procedures for maintaining project 
files in accordance with the Uniform Filing System (UFS) 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.

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 audit report is 
from the start of the Caltrans Pilot Program (July 1, 2007) through 
completion of the fifth onsite audit (July 30, 2010) with the focus 
of the audit on the most recent 12 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 2010

Compliant

    Caltrans was found to be compliant in meeting the requirements 
of the MOU for the key Pilot Program areas within the scope and the 
limitations of the audit, with the exceptions noted in the Deficient 
and Needs Improvement findings in this audit report set forth below. 
Caltrans continues to provide FHWA with all required oversight 
reports, per MOU Section 8.2 (e.g., Quarterly Reports listing 
project approvals and decisions made under the authority of the 
Pilot Program and the Self-assessment Summary Reports) and has fully 
cooperated with FHWA during the audit process. Even with the loss of 
staff, furloughs, and budget constraints Caltrans continues to be 
compliant in their commitment of resources needed to carry out the 
responsibilities assumed under the Pilot Program.

Needs Improvement

    (N1) Maintenance of Project and General Administrative Files--
MOU Section 8.2.4 requires that Caltrans maintains 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 in 
accordance with the UFS and has provided training on these 
procedures. Inconsistencies in the application of these procedures, 
which have been reported in previous audit findings, were also 
identified throughout the Districts visited in this audit. Examples 
of inconsistencies observed in 10 of the approximately 80 project 
files reviewed during the audit included:
    (a) Instances where required documentation was missing in 
project files but was produced by Caltrans staff at the request of 
the auditors. Examples of such missing documents included a letter 
documenting the State Historic Preservation Officer's concurrence on 
effect determination; correspondence between Caltrans and FWS 
regarding a Biological Opinion for a project; and project level 
conformity determinations by FHWA; and
    (b) Missing, out of order, or incomplete UFS tabs.
    (N2) Performance Measure--``Monitor relationships with agencies 
and the general public''--MOU Section 10.2.1.C requires Caltrans to 
``assess change in communication among Caltrans, Federal and State 
resource agencies, and the public.'' Caltrans conducted the first 
annual resource agency survey in 2009 and a second survey in 
February 2010. The Second Annual Resource Agency Survey Report was 
delivered in May 2010. Each report lists an average rating for each 
survey question and a comparison is made from the previous report 
average ratings. The Survey Report does not report each agency's 
rankings separately, which would produce a more accurate assessment 
of Caltrans' individual relationship with Federal and State 
agencies. It is FHWA's recommendation that the specific agencies' 
rating information be shared with FHWA so that agency specific 
relationship issues could be identified and corrective actions could 
be discussed.
    (N3) Coordination with Resource Agencies--Through interviews 
with resource agency staff, the audit team learned the following:
    (a) Under MOU Section 7.1.1, Caltrans ``agrees to seek early and 
appropriate coordination with all appropriate Federal, State, and 
local agencies in carrying out any of the responsibilities and 
highway projects assumed under Part 3 of this MOU.'' Based on 
information obtained during audit interviews with representatives 
from a USACE District office, the audit team learned that Caltrans 
is not conducting pre-application coordination with this office nor 
engaging in appropriate coordination on NEPA reviews which is 
limiting the agencies' flexibility to develop project alternatives 
and mitigation options.
    (b) MOU Section 7.1.2, Caltrans ``agrees to make all reasonable 
and good faith efforts to identify and resolve conflicts with all 
appropriate Federal, State, and local agencies during the 
consultation and review process in carrying out any of the 
responsibilities assumed under Part 3 of this MOU.'' Interviews with 
representatives from a Caltrans District Office, a USACE District 
Office, and a FWS Field Office, determined that longstanding 
conflicts (i.e., insufficient

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information provided, lack of compliance with environmental 
commitments and disagreements on regulatory timeframes, action areas 
and compensative mitigation requirements) are not being addressed 
and ``good faith'' efforts to resolve conflicts between these 
Federal agencies and a few Districts are lacking. These agencies 
reported that due to these conflicts, efforts to carry out 
responsibilities under applicable Federal laws are not being 
implemented to the fullest extent.
    (N4) 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. Project file 
reviews and staff interviews identified the following 
inconsistencies:
    (a) The Section 7 consultation was incomplete and the Section 7 
finding was not included in the NEPA documentation of a project's 
Finding of No Significant Impacts (FONSI); and
    (b) An Environmental Assessment document did not identify that 
the project was in a 100-year flood zone and therefore, a 
``practicability'' finding was not made in the FONSI. As a result, 
the project was not in compliance with Executive Order 11988 
Floodplain Management and 23 CFR 650.
    (N5) Compliance with Procedural and Substantive Requirements--
MOU Section 5.1 requires Caltrans to be subject to the same 
procedural and substantive requirements that apply to the U.S. 
Department of Transportation (DOT) in carrying out the 
responsibilities assumed under the Pilot Program. Such procedural 
and substantive requirements include compliance with Federal laws, 
Federal regulations, Executive Orders, DOT Orders, FHWA Orders, 
official guidance and policy issued by tDOT or FHWA, and any 
applicable Federal Court decisions, and interagency agreements such 
as programmatic agreements, memoranda of agreement, and other 
similar documents that relate to the environmental review process. 
Documentation errors during the NEPA process were noted in 11 of 
approximately 80 project files reviewed during the audit. Project 
file reviews identified incomplete or inaccurate NEPA documents and 
other related project materials. Some of these instances included:
    (a) A FONSI that did not include a response to comments received 
on the Environmental Assesment regarding traffic operations and 
their impacts on the project;
    (b) A FONSI that did not include a statement that the Section 7 
consultation had been performed in compliance with the ESA;
    (c) Two CE determinations failed to reference the most current 
noise studies performed prior to the approvals of the CEs;
    (d) One CE determination failed to reference the most current 
traffic analysis performed prior to the approval of the CE and;
    (e) A project file contained a fact sheet for the project that 
contained incorrect information on the level of environmental 
documentation. Even if this fact sheet was not released to the 
public, it is part of the project file and would become part of the 
administrative record, and thus contain incorrect information.
    (N6) Re-evaluation Process--MOU Section 5.1 requires Caltrans to 
be subject to the same procedural and substantive requirements that 
apply to DOT in carrying out the responsibilities assumed under the 
Pilot Program. This includes the process and documentation for 
conducting NEPA re-evaluations to comply with 23 CFR 771.129. 
Additionally, SER Chapter 33 discusses re-validations and re-
evaluations. Project file reviews and staff interviews identified 
varying degrees of compliance with these procedures. Project file 
reviews completed in some Districts determined that the re-
evaluations completed complied with SER Chapter 33. However, in 
other Districts project files identified the following 
inconsistencies:
    (a) A re-evaluation was used to combine portions of two EISs. 
The FHWA re-evaluation process does not accommodate such an 
approach. Other elements of this re-evaluation that appeared to 
deviate from established procedures included: (1) A change was made 
to the project that was not evaluated in either of the original EISs 
or the subsequent re-evaluations performed on the respective 
projects and (2) a previous conformity determination was relied on 
for the segment covered by one of the EISs, whereas a new conformity 
determination was done on the segment from the second EIS. There was 
no conformity determination for the combined project;
    (b) In another project file review, no evidence was found that a 
Section 106 Area of Potential Effect (APE) was revised after a post-
final environmental document change occurred that expanded the 
footprint of the proposed project outside of the original APE. No 
documents in the project file were identified to support that 
Caltrans had performed an evaluation to determine if the change had 
an effect on the validity of the original environmental document or 
the Section 106 determination of effects;
    (c) A re-evaluation of an original CE determination contained, 
as a part of the re-evaluation, the addition of another project CE 
determination. The District concurrently issued a Section 6005 CE 
for the ``combined'' project, without including a new project 
description. The project file contained the new CE with the re-
evaluation attached. Documentation in the file indicated that the 
second project was not to be added to the original CE, since that 
would make the first project ineligible for a Federal funding 
category;
    (d) A re-evaluation did not include documentation of an 
affirmative determination that the NEPA document was still valid; 
and
    (e) Instances were observed by the audit team that re-
evaluations were approved without the original project file or 
approved environmental document being in the District Office. In one 
instance, a re-evaluation was approved by a District without 
reviewing the project file or final environmental document. 
According to information provided to the audit team, the project 
file had been removed from the office and could not be located.
    The audit team feels that additional clarification and guidance 
needs to be provided by Caltrans to the environmental staff as to 
the purpose and use of the re-evaluation process. A re-evaluation is 
done to determine if the approved environmental document or the CE 
designation remains valid. In the re-evaluation process, the 
original decision and analysis needs to be reviewed for its 
validity.
    (N7) Section 4(f) and ``Locally Significant'' Historic 
Resources--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. The SER Chapter 20, Section 4(f) and Related Requirements, 
sets forth procedures for documenting impacts to Section 4(f) 
properties in Caltrans-assigned environmental documents, while the 
Forms and Templates section of the SER contains annotated outlines 
for such documents. However, the SER does not address how Caltrans 
should determine whether a historic resource which is significant at 
the local level should be considered eligible for protection under 
Section 4(f). In the case of one project reviewed by the audit team, 
it was unclear from review of the project file and from interviews 
with Caltrans staff what process was used for making the 
determination and what internal and external coordination and 
consultation was required. It is the audit team's opinion that the 
SER should include a process to ensure consistency in the 
determination of the historic significance of local resources.
    (N8) Training: Inconsistent Level of Training for Staff--MOU 
Section 12.1.1 requires Caltrans to ensure 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.'' Section 4.2.2 of the MOU also requires that 
Caltrans maintain adequate staff capability to effectively carry out 
the responsibilities it has assumed.
    The audit team found an inconsistent application of the training 
plan for generalists in two Districts. Interviews with several SEPs 
in two Districts indicated that oversight or tracking of training 
for generalists is not uniform and identified the need for a more 
systematic approach. The interviews found that training attended by 
generalists is not consistently monitored by their SEPs, nor is the 
training plan consistency applied or tracked to ensure employees 
attend the proper training given to support the generalist's 
responsibilities. While the audit team did learn that a more 
systematic training plan for generalists (i.e., the generalist 
roadmap) had recently been developed, it remains an important issue 
to ensure that staff attends the training prescribed by the plan to 
ensure they have the proper skill set to effectively carry out 
responsibilities under the Pilot Program.
    (N9) Training: Inconsistent Understanding of Required 
Processes--MOU Section 4.2.2 requires Caltrans to maintain adequate 
organizational and staff capacity to effectively carry out the 
responsibilities it has assumed under MOU Section 3. The following 
inconsistencies were noted during interviews with Caltrans staff:

[[Page 5242]]

    (a) Interviews with two SEPs and project file reviews indicated 
a lack of understanding of the Section 4(f) process and options 
available for implementation and documentation of the Section 4(f) 
process. A lack of understanding and knowledge was identified in the 
areas of the determination of de minimis impacts findings, the use 
of established Section 4(f) programmatic agreements, and the 
required documentation, evaluation, and explanation to be included 
in the environmental documents;
    (b) Interviews with one HQ Environmental Coordinator and one SEP 
reflected a lack of awareness of any policy or guidance for the use 
of the Statute of Limitations notice and;
    (c) Interviews with SEPs in two Districts reflected a lack of 
awareness and knowledge of the ``Blanket'' CE for approval of design 
exceptions. While the use of this may be limited, a general 
understanding and awareness is expected by Caltrans staff. Several 
SEPs either did not know of the ``Blanket'' CE or were unaware of 
how and when to use it.

Deficient

    (D1) Reports Listing Approvals and Decisions (i.e., Quarterly 
Reports)--MOU Section 8.2.7 requires Caltrans to submit a report 
listing all Pilot Program approvals and decisions made with respect 
to responsibilities assumed under the MOU with FHWA (each quarter 
for the first 2 years; after the first 2 years no less than every 6 
months). Caltrans has chosen to continue to provide quarterly 
reports to FHWA. Inaccurate project reporting continues to be an 
ongoing issue affecting the quarterly report process and has been 
identified in every previous FHWA audit report. Among the reporting 
errors identified in this audit were:
    (a) Omission of two EAs;
    (b) Omission of one FONSI;
    (c) Omission of a biological opinion;
    (d) Incorrect approval date for a CE determination;
    (e) Incorrect listing of a re-evaluation/revalidation for a 
Section 6004 CE determination as Section 6005 CE determination; and
    (f) Incorrectly included a re-evaluation/revalidation of a 
project with no Federal funding or required approvals, and therefore 
not a part of the Pilot Program.
    The current Caltrans approach to developing the quarterly 
reports continues to be deficient. The accuracy of the reports on 
project approvals and decisions affects the FHWA oversight of the 
Pilot Program. The FHWA acknowledges that Caltrans is in the initial 
stages of statewide implementation of the File Maker Pro 
environmental database. It is anticipated that the implementation of 
this database system will improve the accuracy of information 
provided in the quarterly reports to FHWA.
    (D2) Section 4(f) Documentation--MOU Section 5.1.1 affirms that 
Caltrans is subject to the same procedural and substantive 
requirements that apply to DOT in carrying out the responsibilities 
assumed under the Pilot Program. The SER Chapter 20, Section 4(f) 
and Related Requirements, sets forth procedures for documenting 
impacts to Section 4(f) properties in Caltrans-assigned 
environmental documents, while the Forms and Templates section of 
the SER contains annotated outlines for such documents, including 
appropriate language for addressing de minimis impacts (49 U.S.C. 
303(d); 23 U.S.C. 139(b); 23 CFR 774.17). As was also noted in the 
fourth FHWA audit of the Pilot Program, project file reviews and 
interviews with staff during this audit identified inconsistencies 
in the documentation requirements for carrying out the Section 4(f) 
provisions. These included:
    (a) For a bridge replacement project located within a National 
Forest, no documentation was provided in the EA document or in the 
project file regarding the Section 4(f) status of the recreational 
facilities in the immediate project vicinity or any possible project 
impacts to those resources;
    (b) A project file contained a letter from the official with 
jurisdiction over the Section 4(f) recreational resource stating the 
impacts to the resource would be de minimis. Neither the EA document 
nor the project file contained the supporting documentation for that 
determination, as required under 23 CFR 774.7(b).
    (c) The Section 4(f) discussion in the environmental document of 
another project (for which no NEPA approval had been made at the 
time of the audit) was unclear as to which type of Section 4(f) 
documentation and approval was being contemplated. The applicable 
section of the EA included the discussion of four different types of 
Section 4(f) approvals:
    1. The EA described the project as qualifying for a Nationwide 
Programmatic Section 4(f) evaluation, but did not reach a conclusion 
pursuant to the applicable Programmatic.
    2. The document then included a discussion similar to what is 
used in an individual Section 4(f) Evaluation, including impacts to 
Section 4(f) properties, avoidance alternatives, and measures to 
minimize harm, ending by stating that no preferred alternative had 
been identified for the project.
    3. The EA also contained a Section 4(f) constructive use 
discussion, which reached no conclusion.
    4. Finally, the project file contained an e-mail stating that 
although the EA was missing expected language regarding de minimis 
impacts and a concurrence letter from the officials with 
jurisdiction, the Caltrans Branch Chief would sign the QA/QC sheets 
``with the assurance that the above items will be completed.''
    (D3) QA/QC Certification Process--MOU Section 8.2.5 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. During project 
file reviews by the audit team, the following instances of 
incomplete or incorrect QC certification forms since the July 2009 
audit were observed:
    (a) An EA and Section 4(f) Evaluation was approved contingent on 
changes that still needed to be made to the document;
    (b) One QC certification form was approved by the Quality 
Control Reviewer, Preparer, and Branch Chief without the technical 
reviewer's signature due to pending comments;
    (c) Five other QC certification forms contained undated review 
signatures or the signatures were not obtained in the proper 
sequence in accordance with the Caltrans established QA/QC 
processes;
    (d) Two QC certification forms were missing the signatures of 
required reviewers. In those cases, a memo was included in the files 
documenting this oversight. One memo noted that the NEPA document 
that was approved for the project had been incomplete. No additional 
explanation was provided; and
    (e) Two external QC certification forms contained signatures 
that were obtained after the internal QC certification form 
signatures. The SER Chapter 38 process requires the QC external 
certification form to be completed before the internal certification 
review can be initiated.
    (D4) Maintenance of Project and General Administrative Files--
MOU Section 8.2.4 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. Previous audits identified 
inconsistencies with the application of these procedures (i.e., 
missing required documents, missing UFS tabs) and inconsistencies 
throughout the Districts visited in this audit were also identified. 
This audit also identified inconsistencies with file maintenance in 
at least 15 of the approximately 80 project files reviewed. Examples 
of these include:
    (a) Various types of required project documentation were missing 
from project files. Examples of missing documents included:
     Signed final environmental documents;
     Noise abatement decision report;
     Historic Properties Survey Report;
     Environmental Commitment Records;
     internal and external QC certification forms (some 
signed but undated);
     Signed copies of the Preliminary Environmental Analysis 
Report/Preliminary Environmental Scoping forms;
     Section 106 Memorandum of Agreement; and
     Information on the types of Section 4(f) resources and 
the projects' impacts upon them.
    (b) Two instances in which the project files were not available 
for review; in one case, the file has been improperly disposed, 
while in the other case, it was uncertain whether the project file 
had been misplaced or had never been set up.

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

[[Page 5243]]

report findings and finalizes the audit report with this notice.

[FR Doc. 2011-1870 Filed 1-27-11; 8:45 am]
BILLING CODE 4910-22-P