Surface Transportation Project Delivery Program; Arizona Department of Transportation Draft FHWA Audit Report, 67424-67430 [2023-21316]

Agencies

• Federal Highway Administration
• DEPARTMENT OF TRANSPORTATION

[Federal Register Volume 88, Number 188 (Friday, September 29, 2023)]
[Notices]
[Pages 67424-67430]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-21316]


-----------------------------------------------------------------------

DEPARTMENT OF TRANSPORTATION

Federal Highway Administration

[FHWA Docket No. FHWA-2023-0005]


Surface Transportation Project Delivery Program; Arizona 
Department of Transportation Draft FHWA Audit Report

AGENCY: Federal Highway Administration (FHWA), U.S. Department of 
Transportation (DOT).

ACTION: Notice; request for comment.

-----------------------------------------------------------------------

SUMMARY: The Moving Ahead for Progress in the 21st Century Act 
established the Surface Transportation Project Delivery Program 
(referred to as National Environmental Policy Act (NEPA) Assignment 
Program), allows a State to assume FHWA's environmental 
responsibilities for environmental review, consultation, and compliance 
under NEPA. When a State assumes these Federal responsibilities, the 
State becomes solely responsible and liable for carrying out the 
responsibilities it has assumed, in lieu of FHWA. This program mandates 
annual audits during each of the first 4 years of State participation 
to ensure compliance with program requirements. This is the third audit 
of the Arizona Department of Transportation's (ADOT) performance of its 
responsibilities under the NEPA Assignment Program. This notice 
announces and solicits comments on the third audit report for ADOT.

[[Page 67425]]


DATES: Comments must be received on or before October 30, 2023.

FOR FURTHER INFORMATION CONTACT: Ms. Colleen Vaughn, Office of Project 
Development and Environmental Review, (202) 633-0356, 
[email protected], Federal Highway Administration, U.S. Department 
of Transportation, 1200 New Jersey Avenue SE, Washington, DC 20590, or 
Ms. Michelle Andotra, Office of the Chief Counsel, (404) 562-3679, 
[email protected], Federal Highway Administration, U.S. 
Department of Transportation, 1200 New Jersey Avenue SE, Washington, DC 
20590. Office hours are from 8 a.m. to 4:30 p.m., EST, Monday through 
Friday, except Federal holidays.

SUPPLEMENTARY INFORMATION: 

Electronic Access

    An electronic copy of this notice may be downloaded from the 
specific docket page at www.regulations.gov.

Background

    The Surface Transportation Project Delivery Program, codified at 
Title 23, United States Code (U.S.C.), Section 327, commonly known as 
the NEPA Assignment Program, allows a State to assume FHWA's 
environmental responsibilities for review, consultation, and compliance 
for Federal-aid highway projects. When a State assumes these Federal 
responsibilities, the State becomes solely liable for carrying out the 
responsibilities it has assumed, in lieu of FHWA. The ADOT published 
its application for NEPA assumption on June 29, 2018, and solicited 
public comment. After considering public comments, ADOT submitted its 
application to FHWA on November 16, 2018. The application served as the 
basis for developing a memorandum of understanding (MOU) that 
identifies the responsibilities and obligations that ADOT would assume. 
The FHWA published a notice of the draft MOU in the Federal Register on 
February 11, 2019, at 84 FR 3275, with a 30-day comment period to 
solicit the views of the public and Federal agencies. After the close 
of the comment period, FHWA and ADOT considered comments and proceeded 
to execute the MOU. Effective April 16, 2019, ADOT assumed FHWA's 
responsibilities under NEPA, and the responsibilities for other Federal 
environmental laws described in the MOU.
    Section 327(g) of Title 23, U.S.C., requires the Secretary to 
conduct annual audits to ensure compliance with the MOU during each of 
the first 4 years of State participation and, after the fourth year, 
monitor compliance. The FHWA must make the results of each audit 
available for public comment. This notice announces and solicits 
comments on the third audit report for ADOT.
    Authority: Section 1313 of Public Law 112-141; Section 6005 of 
Public Law 109-59; 23 U.S.C. 327; 23 CFR 773.

Shailen P. Bhatt,
Administrator, Federal Highway Administration.

Surface Transportation Project Delivery Program

Draft FHWA Audit #3 of the Arizona Department of Transportation

Executive Summary

    This is Audit #3 of the Arizona Department of Transportation's 
(ADOT) assumption of National Environmental Policy Act (NEPA) 
responsibilities under the Surface Transportation Project Delivery 
Program. Under the authority of Title 23, United States Code (U.S.C.), 
Section 327, ADOT and the Federal Highway Administration (FHWA) 
executed a memorandum of understanding (MOU) on April 16, 2019, to 
define ADOT's NEPA responsibilities and liabilities for Federal-aid 
highway projects and other related environmental reviews for highway 
projects in Arizona. This MOU covers environmental review 
responsibilities for projects that require the preparation of 
environmental assessments (EA), environmental impact statements (EIS), 
and unlisted (identified as individual by ADOT) categorical exclusions 
(CE).
    The FHWA conducted a third audit of ADOT's performance according to 
the terms of the MOU from March 28 to April 1, 2022. Prior to the 
audit, the FHWA audit team reviewed ADOT's environmental manuals and 
procedures, NEPA project files, ADOT's response to FHWA's pre-audit 
information request (PAIR), and ADOT's NEPA Assignment Self-Assessment 
Report. During the third audit, the audit team conducted interviews 
with staff from ADOT's Environmental Planning (EP), Civil Rights 
Office, Communications, Construction Districts, Contracts & 
Specifications, as well as the Gila River Indian Community Tribal 
Historic Preservation Office (THPO), the Hopi THPO, the Salt River 
Pima-Maricopa Indian Community THPO, the Arizona State Historic 
Preservation Officer (SHPO), and the Arizona Attorney General's Office 
(AGO), and prepared preliminary audit results. The audit team presented 
these preliminary results to ADOT leadership on April 1, 2022.
    The audit team found that ADOT has carried out the responsibilities 
it assumed consistent with the intent of the MOU and ADOT's 
application. The ADOT continues to develop, revise, and implement 
procedures and processes required to deliver its NEPA Assignment 
Program. This report describes several general observations and 
successful practices, as well as identified non-compliance observations 
where ADOT must implement corrective actions prior to the next audit. 
While ADOT has expressed lack of full agreement on some of the past 
audit observations, the audit team does recognize that ADOT continues 
to act on those past observations. By doing so, ADOT continues to 
assure successful program assignment.

Background

    The purpose of the audits performed under the authority of 23 
U.S.C. 327 is to assess a State's compliance with the provisions of the 
MOU as well as all applicable Federal statutes, regulations, policies, 
and guidance. The FHWA's review and oversight obligation requires FHWA 
to collect information to evaluate the success of the NEPA Assignment 
Program; to evaluate a State's progress toward achieving its 
performance measures as specified in the MOU; and to collect 
information for the administration of the NEPA Assignment Program. This 
report summarizes the results of the third audit in Arizona and ADOT's 
progress towards meeting the program review objectives identified in 
the MOU.

Scope and Methodology

    The overall scope of this audit review is defined both in statute 
(23 U.S.C. 327) and the MOU (Part 11). The definition of an audit is 
one where an independent, unbiased body makes an official and careful 
examination and verification of accounts and records. Auditors who have 
special training with regard to accounts or financial records may 
follow a prescribed process or methodology in conducting an audit of 
those processes or methods. The FHWA considers its review to meet the 
definition of an audit because it is an unbiased, independent, 
official, and careful examination and verification of records and 
information about ADOT's assumption of environmental responsibilities.
    The audit team consisted of NEPA subject matter experts (SME) from 
FHWA Headquarters, Resource Center, Office of the Chief Counsel, and 
staff from FHWA's Arizona Division. This audit is an unbiased official 
action taken by FHWA, which included an audit

[[Page 67426]]

team of diverse composition, and followed an established process for 
developing the review report and publishing it in the Federal Register.
    The audit team reviewed six NEPA Assignment Program elements: 
program management; documentation and records management; quality 
assurance/quality control (QA/QC); performance measures; legal 
sufficiency; and training. The audit team considered four additional 
focus areas for this review: the procedures contained in 40 CFR part 93 
for project-level conformity; the procedures contained in Section 4(f) 
of the U.S. Department of Transportation Act of 1966, codified at 49 
U.S.C. 303 and 23 U.S.C. 138 (otherwise known as Section 4(f)); 
environmental justice evaluations (Environmental Justice per Executive 
Order (E.O.) 12898, Federal Actions to Address Environmental Justice in 
Minority Populations and Low-Income Populations, and Tribal 
consultation per the National Historic Preservation Act (NHPA) of 1966, 
36 CFR 800 et seq., E.O. 13175, Consultation with Indian Tribal 
Governments); and additionally, ADOT's environmental commitment 
tracking process. This report concludes with a status update for FHWA's 
observations from the first and second audit reports.
    The audit team conducted a careful examination of ADOT policies, 
guidance, and manuals pertaining to NEPA responsibilities, as well as a 
representative sample of ADOT's project files. Other documents, such as 
ADOT's PAIR responses and ADOT's Self-Assessment Report, also informed 
this review. In addition, the audit team interviewed ADOT, Arizona AGO, 
Tribal THPO staff, as well as the Arizona SHPO via videoconference.
    The timeframe defined for this third audit includes highway project 
environmental approvals completed between January 1 to December 31, 
2021. During this timeframe, ADOT completed NEPA approvals and 
documented NEPA decision points for six projects. Due to the small 
sample size, the audit team reviewed all six projects. This consisted 
of one Tier 1 EIS, one EA with a Finding of No Significant Impact, and 
four unlisted CEs. The FHWA also reviewed information pertaining to 
project tracking and mitigation commitment compliance for all projects 
that have been processed by ADOT since the initiation of the NEPA 
Assignment Program.
    The PAIR submitted to ADOT contained 25 questions covering all 6 
NEPA Assignment Program elements. The audit team developed specific 
follow-up questions for the interviews with ADOT staff and others based 
on ADOT's responses to the PAIR. The audit team conducted a total of 23 
interviews. Interview participants included staff from ADOT, Tribal 
THPOs, Arizona AGO, as well as the Arizona SHPO.
    The audit team compared ADOT manuals and procedures to the 
information obtained during interviews and project file reviews to 
determine if ADOT's performance of its MOU responsibilities is in 
accordance with ADOT procedures and Federal requirements. The audit 
team documented individual observations and successful practices during 
the interviews and reviews, and combined these under the six NEPA 
Assignment Program elements. The audit results are described below by 
program element.

Overall Audit Opinion

    The audit team found ADOT has carried out the responsibilities it 
has assumed consistent with the intent of the MOU and ADOT's 
application. The FHWA is notifying ADOT of five non-compliance 
observations identified in this audit that require ADOT to take 
corrective action. The ADOT must address these non-compliance 
observations and continue making progress on non-compliance 
observations in the previous audits prior to the next audit. By 
addressing the observations cited in this report, ADOT will continue to 
ensure a successful program.

Successful Practices and Observations

    Successful practices are practices that the team believes are 
positive and encourages ADOT to consider continuing or expanding the 
use of those practices in the future. The audit team identified 
successful practices in this report.
    Observations are items the audit team would like to draw ADOT's 
attention to, and for which ADOT may consider improving processes, 
procedures, and/or outcomes. The team identified 10 general 
observations in this report.
    Non-compliance observations are instances where the audit team 
finds the State is not in compliance or is deficient with regard to a 
Federal regulation, statute, guidance, policy, State procedure, or the 
MOU. Non-compliance may also include instances where the State has 
failed to secure or maintain adequate personnel and/or financial 
resources to carry out the responsibilities they have assumed. The FHWA 
expects the State to develop and implement corrective actions to 
address all non-compliance observations. The audit team identified five 
non-compliance observations in this report.

Program Management

Successful Practice #1
    The ADOT's PAIR response indicated, and interviews confirmed, that 
ADOT EP is working with the ADOT Civil Rights Office (CRO) to develop 
an environmental justice standard work process. This will establish the 
roles and responsibilities between the two ADOT offices and ensure the 
CRO's technical review of the environmental justice analysis is 
completed.
Observations
    Non-compliance Observation #1: Incomplete Reporting to the Federal 
Infrastructure Permitting Dashboard.
    The ADOT is responsible for inputting project information for 
assigned projects into the Federal Infrastructure Permitting Dashboard 
(Dashboard), per MOU Section 8.5.1. During the audit, the audit team 
reviewed the Dashboard and found that it did not include Federal permit 
and authorization information for any of the applicable projects 
assigned to ADOT beyond NHPA Section 106 consultation. The audit team 
confirmed during interviews that ADOT had identified the need for 
additional permits and authorizations for these projects but had not 
uploaded the permit information in the Dashboard because those 
activities were planned far in the future. Per the Office of the 
Secretary of Transportation Dashboard reporting standards, ADOT is 
required to identify all Federal permits and authorizations that are 
anticipated to be needed for the project to complete construction, and 
to input target and actual milestone completion dates for those permits 
and authorizations. Target dates for milestones shall be based on the 
best available information. The ADOT must take corrective action to 
address this issue by the next audit.
    Observation #1: Deficiencies and gaps in ADOT's manuals and 
procedures.
    The audit team reviewed ADOT's manuals and procedures. Section 
4.2.4 of the MOU specifies that ADOT must implement procedures to 
support appropriate environmental analysis and decisionmaking under 
NEPA and associated laws and regulations. The audit team identified the 
following deficiencies in ADOT's manuals and procedures which may 
result in incomplete project documentation or analysis and increase the 
risk for non-compliance:
     In Audit #2, the audit team identified an observation that 
the ADOT EA/EIS Manual does not contain

[[Page 67427]]

complete procedures for EA or EIS-level re-evaluations. The EA/EIS 
Manual instead points to the ADOT CE Manual for direction, therefore 
the process for EA/EIS re-evaluations continues to be incomplete and 
not well-defined. The FHWA requested the correction of the EA or EIS-
level re-evaluation section of the EA/EIS Manual in Audit #2. To date, 
ADOT has not made the correction as requested by FHWA, therefore, this 
is a continuing observation.
     The ADOT EA/EIS Manual and the current 2017 ADOT Public 
Involvement Plan approved prior to NEPA assignment do not contain 
procedures detailing the criteria ADOT uses to make the determination 
on when to hold public hearings for EA-level projects and what criteria 
will be used to make determinations on whether to hold a public hearing 
when one is requested, as specified in 23 CFR 771.111(h)(2)(iii). The 
ADOT has indicated in its response to the PAIR and in interviews that 
they are in the process of updating the ADOT Public Involvement Plan to 
include more specificity on, and fulfilling the requirements for, 
public involvement under NEPA. The procedures should also be referenced 
in the ADOT EA/EIS Manual.
    The ADOT acknowledged the need for improvement regarding manuals/
guidance and version control. The FHWA recommended that ADOT revisit 
their current procedures for updating manuals/guidance, from use of 
amendment tables to use of document dates to reflect the latest/most 
current version.
    Observation #2: Improvements to Tribal engagement warranted.
    Interviews with ADOT staff and THPOs identified the need for 
improvements to Tribal consultation practices. The THPOs expressed 
frustration that ADOT's approach to engagement with the Tribes was 
lacking outside of Section 106, and engagement completed under Section 
106 did not constitute meaningful engagement.
    The ADOT should develop procedures that identify their 
responsibilities to coordinate and consult with Tribes in all phases of 
project development from planning through construction. The FHWA 
recommends:
     ADOT improve transparency regarding project information;
     ADOT provide the Tribes with any SHPO Section 4(f) 
consultation as part of the Tribal consultation package for individual 
projects; and
     All ADOT personnel with visibility on projects or who 
participate in meetings with Tribes complete sensitivity training as 
well as training regarding the Federal Government's relationship to 
Tribes under Government-to-Government consultation, per MOU Section 
3.2.3.
    The FHWA recommendations listed above are outlined in the FHWA/ADOT 
Tribal Consultation Letter Agreement executed on August 5, 2022. The 
ADOT accepted FHWA's recommendations and added a Tribal Liaison 
position.
    Non-compliance Observation #2: Responsibilities under the 327 MOU 
assigned to additional divisions independent of ADOT EP.
    Based on interviews of ADOT staff, the PAIR responses, and review 
of ADOT's 327 application, it was identified that ADOT divisions 
outside of EP have responsibilities under NEPA Assignment. These 
divisions have not been identified or addressed in the ADOT EP 
procedures, manuals, or plans. These responsibilities include 
environmental commitment tracking, environmental review in the field, 
and completion of the necessary training associated with those 
responsibilities. The ADOT must take corrective actions to develop and 
implement procedures to apply the 327 MOU provisions to all divisions 
of ADOT, per MOU Section 1.1.2 and ADOT Final Application for 
Assumption of FHWA NEPA Responsibilities, by the next audit.
    Non-compliance Observation #3: Deficiencies in environmental 
commitment tracking.
    The ADOT was unable to provide FHWA with a process manual or any 
type of consolidated report which documents the tracking of 
environmental commitments made during the environmental review process. 
The ADOT was unable to identify a meaningful tracking and monitoring 
system for environmental commitments and mitigation compliance. The 
ADOT has stated that this NEPA requirement is the responsibility of the 
ADOT District Offices, which are outside the supervisory authority of 
ADOT's EP Office. Per MOU Section 1.1.2 and the ADOT Final Application 
for Assumption of FHWA NEPA Responsibilities, ADOT is responsible for 
environmental commitment tracking, and all divisions that have 
identified and assumed FHWA NEPA responsibilities must comply with all 
provisions of the 327 MOU and ADOT's NEPA application requesting 
assignment. The ADOT must take corrective actions to address the 
tracking of environmental commitments and mitigation compliance by the 
next audit.
    The ADOT does complete monitoring of environmental commitments 
associated with contractor responsibilities that have funding line 
items. This is completed using their Field Automated System payment 
system, but that is only a small subset of project commitments. The 
ADOT EP has begun taking measures to establish a procedure or mechanism 
for tracking environmental commitments and mitigation compliance, 
including hiring an Environmental Commitments Coordinator and through 
development of the Environmental, Permits, Issues, and Commitments 
Tracking sheet.

Documentation and Records Management

Successful Practice #2
    The ADOT staff identified a Historic Preservation Team tracking 
spreadsheet maintained by ADOT's Cultural Resources Program Manager. 
This spreadsheet is used to track and verify that all cultural resource 
environmental commitments on projects are implemented from 
identification to completion. If ADOT finds this tracking method to be 
effective, they could consider implementing it more widely to other 
environmental commitments throughout their program.
Observations
    Non-compliance Observation #4: Incomplete project file submission 
and standard folder structure issues.
    Pursuant to MOU Sections 8.2.2 and 8.2.3, FHWA requested all 
project files pertaining to the NEPA approvals and documented NEPA 
decision points to be completed during the audit review period. The 
audit team found several inconsistencies between ADOT's procedures for 
maintaining project files and the project file documentation provided 
to FHWA. The FHWA continues to experience issues when attempting to 
access the files ADOT provided for the audit, as they are either not in 
a format that can be opened, or they are inaccessible because they are 
saved as a link to the internal ADOT system and not the actual 
document. The MOU Sections 11.1.2 and 11.1.3 detail ADOT's 
responsibilities to provide FHWA any information FHWA reasonably 
considers necessary to ensure that ADOT is adequately carrying out the 
responsibilities assigned, and ADOT's agreement to cooperate with FHWA 
in conducting audits including providing access to all necessary 
information.
    The ADOT's procedures specify utilizing a standard folder structure 
for all projects and saving all project

[[Page 67428]]

documentation and supporting information in the project files. The 
project files submitted by ADOT were incomplete, did not include all 
supporting documentation, and the files were not organized in 
accordance with the ADOT standard folder structure. It is unclear how 
ADOT is maintaining electronic project files and administrative records 
in compliance with its procedures and the terms of the 23 U.S.C. 327 
MOU as they apply to records retention. The ADOT must take corrective 
action by the time of the next audit to ensure that the complete 
project file is provided to FHWA upon request. The documentation must 
support all determinations made. It is FHWA's expectation that 
documentation to support a project's decision will be included in 
ADOT's project files. The ADOT will also provide complete documentation 
to FHWA upon request.
    Observation #3: Minor edits needed to resolve deficiency in Section 
4(f) evaluation of archaeological resources.
    The ADOT's Section 4(f) Manual (Sections 3.3 and 3.4.2) and FHWA 
regulations, policies, and guidance provide information on determining 
the applicability of Section 4(f) to archaeological resources and 
determining if there is an exception or potential use. The ADOT's 
Section 4(f) Manual (Sections 5.2 and 5.3) specify procedures for 
documenting Section 4(f) uses of archaeological sites, exceptions per 
23 CFR 774.13(b), and ``no use'' determinations.
    During Audit #1, FHWA identified inconsistencies with ADOT's 
Section 4(f) evaluation and documentation of archaeological sites. In 
Audit #2, the audit team observed similar inconsistencies during the 
project file reviews and identified procedural deficiencies relating to 
ADOT's Section 4(f) evaluation and documentation. In response to the 
Audit #2 finding, ADOT updated their Section 106 Federal-aid 
Programmatic Agreement Manual (which also contains the Section 4(f) 
guidance) with new preservation in place language. The FHWA recommends 
the following edits to the new language (identified in italics and 
strikeouts):
[GRAPHIC] [TIFF OMITTED] TN29SE23.011

    Observation #4: Deficiencies in Section 4(f) documentation of de 
minimis impact to historic properties.
    The ADOT's procedures (ADOT Section 4(f) Manual Sections 5.1 and 
5.4.2 and ADOT QA/QC Plan Section 5.1.1) specify obtaining written 
concurrence from the official with jurisdiction when ADOT determines a 
project will involve the de minimis use of a historic property 
protected by Section 4(f), per 23 U.S.C. 303(d) and 23 CFR 774.5. After 
completing the project file review, the audit team identified the 
following procedural deficiency relating to ADOT's procedures: the use 
of a single concurrence signature for both the Section 106 effect 
finding concurrence and the Section 4(f) de minimis application 
concurrence. The ADOT needs to either use separate concurrence 
signature lines for the two decisions being documented or to draft a 
Letter Agreement between the Arizona SHPO and ADOT that applies program 
wide. This agreement would state that when the SHPO concurs with a no 
adverse effect finding that the single SHPO concurrence signature 
confirms that they concur with both decisions if ADOT details in the 
letter their intent to make a de minimis finding as well.
    Observation #5: Continued improvement in Air Quality Conformity 
communication.
    The ADOT has made progress regarding the level of communication and 
coordination with FHWA on project-level air quality conformity 
analysis. The ADOT should continue to build on that progress and keep 
the lines of communication open among all the interagency consultation 
partners. It would be good practice for ADOT to share re-evaluations 
requiring conformity determinations with interagency consultation 
partners for their input before requesting a FHWA conformity 
determination.
    Observation #6: Inconsistent use and absence of the 327 MOU 
disclosure statement.
    Section 3.1.3 of the MOU specifies that ADOT shall disclose the 
disclosure statement to the public, Tribes, and agencies as part of 
agency outreach and public involvement procedures. The audit team 
project file reviews found inconsistent use of the disclosure statement 
on agency correspondence and technical reports, as well as absence of 
the statement in public involvement materials. The audit team found no 
consistent process or procedure for inclusion of the 327 MOU disclosure 
statement in the ADOT manuals/guidance as required by MOU Section 
3.1.3. The ADOT should strive to achieve consistency in the placement 
of disclosure statements in documents.
    Non-compliance Observation #5: Deficiencies in analysis of 
environmental impacts on low-income and minority populations 
(environmental justice).
    The ADOT's EA/EIS Manual, CE Manual, and FHWA E.O., policies, and 
guidance provide information on completing the environmental justice 
analysis required for projects. The FHWA identified inconsistencies in

[[Page 67429]]

ADOT's Section EA/EIS Manual, CE Manual, PAIR response, and interview 
responses regarding how ADOT completes environmental justice analyses. 
The methodology described by ADOT is not in compliance with FHWA policy 
and guidance because ADOT analyzes the effect prior to identifying 
environmental justice populations in the project area. In addition, the 
CE Manual describes evaluating census data, but no additional sources 
for environmental justice population identification. The CE Manual also 
infers a default position that there will be no disproportionately high 
and adverse impacts on low-income or minority populations with CE-level 
projects. The audit team observed similar inconsistencies during the 
project file reviews for this audit and identified the same 
environmental justice analysis procedural deficiencies in the project 
documentation, as well as project files with little or no analysis 
documentation. In addition, there were inconsistent degrees of 
coordination with the ADOT CRO, who, according to the CE Manual and the 
PAIR response, is to be consulted on all environmental justice 
analyses. Based on these findings and a review of the ADOT Training 
Plan, additional environmental justice training is needed, and ADOT's 
manuals and procedures should be brought into compliance with FHWA 
requirements. The ADOT must take corrective action to ensure that 
environmental justice analysis and assessments are in compliance with 
E.O. 12898, DOT Order 5610.2C, and FHWA policy and guidance by the next 
audit.

Quality Assurance/Quality Control

Observations
    Observation #7: QA/QC procedures lack assessment of compliance.
    The ADOT has procedures in place for QA/QC which are described in 
the ADOT QA/QC Plan and the ADOT Project Development Procedures. When 
implemented, ADOT focuses on completeness of the project files, not the 
accuracy or technical merits of the decisions documented by those 
files. The ADOT does not check for compliance of the decisionmaking and 
it is therefore unclear how the project-level QC reviews inform the 
program. These observations were also found with Audits #1 and #2. The 
audit team continues to be unable to fully assess the implementation of 
project-level QC procedures. The ADOT does not appear to have a process 
in place for assessing the effectiveness of its QA/QC procedures to 
identify opportunities to improve the processes and procedures in their 
program, in ways that could help ensure better compliance with MOU 
requirements.
    Observation #8: QA/QC procedures do not inform the performance 
measures.
    It is unclear how the QA/QC procedures, such as the use of QC 
checklists, are informing ADOT about the technical adequacy of the 
environmental analyses conducted for projects (MOU Section 10.2.1.B.c) 
and how the timing of QA/QC reviews influences timeliness and 
efficiency in completion of the NEPA analysis. The QA/QC process as 
documented does not include a review of the adequacy of the technical 
analyses completed. The current performance measures do not provide QA/
QC completion dates to create meaningful datasets that allow assessment 
of the timeliness of QA/QC actions. The FHWA recommends that a column 
be added to the current performance data matrix that measures the 
adequacy of technical documentation, as well as date columns for the 
completion of the draft QC, final QC, and QA checklists.

Performance Measures

Successful Practice #3
    The ADOT Environmental Programs Manager identified team-level 
internal performance measures used by her team to track timelines on 
biological decisions, improve coordination with U.S. Fish and Wildlife 
Service, and inform the prioritization of projects. The ADOT EP has 
made beneficial documentation changes based on these internal leading 
performance measures for the quality and timeliness of biological 
consultation. These could serve as an example of meaningful metrics 
that could be integrated into the performance measures that ADOT is 
currently tracking.
Observations
    Observation #9: Incomplete development and implementation of 
performance measures to evaluate the quality of ADOT's program.
    The audit team reviewed ADOT's development and implementation of 
performance measures to evaluate their program as required in the MOU 
(Part 10.2.1). The ADOT's QA/QC Plan, PAIR response, and self-
assessment report identified several performance measures and reported 
the data for the review period. The ADOT's reporting data primarily 
dealt with increasing efficiencies and reducing project delivery 
schedules rather than measuring the quality of relationships with 
agencies and the general public, and decisions made during the NEPA 
process. The metrics ADOT has developed are not being used to provide a 
meaningful or comprehensive evaluation of the overall program.
    The FHWA was unable to determine how the ADOT QA/QC process is 
informing the improvement of the NEPA procedures used by ADOT, nor how 
it demonstrates meeting their performance measures. One area of concern 
is the lack of dates on key actions and when determinations are made. 
The FHWA recommends that ADOT evaluate the current performance measures 
matrix of other NEPA Assignment States department of transportation 
(such as Utah and Ohio) to assist in making meaningful changes in their 
current performance measures tracking. This observation was also made 
in Audit #1 and Audit #2.

Legal Sufficiency

    The ADOT had completed one formal legal sufficiency review of an 
assigned environmental document during the audit period. The EIS 
received a formal legal sufficiency finding, which was included in the 
project file. Currently, ADOT retains the services of two Assistant 
Attorneys General (AAG) for NEPA Assignment reviews and related 
matters. The assigned AAGs have received formal and informal training 
in environmental law matters. The ADOT and the Attorney General's (AG) 
Office also have the option to procure outside counsel in accordance 
with 23 U.S.C. 327(a)(2)(G), but this was not necessary during the 
audit period.
Successful Practice #4
    The ADOT seeks to involve lawyers early in the environmental review 
phase, with AAGs participating in project coordination team meetings 
and reviews of early drafts of environmental documents. The AAGs will 
provide legal guidance at any time ADOT requests it throughout the 
project development process. For formal legal sufficiency reviews, the 
process includes a submittal package from ADOT's NEPA program manager 
containing a request for legal sufficiency review. Various ADOT manuals 
set forth legal sufficiency review periods, and the AAGs coordinate 
with ADOT to ensure timely completion of legal sufficiency reviews. In 
addition, one of the AAGs has recently taken an active role in Tribal 
matters, including participating in meetings with Tribes and handling 
legal questions related to Tribal issues.

Training

    Observation #10: Training Gaps.

[[Page 67430]]

    The audit team reviewed ADOT's 2021 Training Plan and ADOT's PAIR 
responses pertaining to its training program. The ADOT's EP staff 
training matrix indicates that, while ADOT identifies the availability 
of staff needing training, many staff have not taken advantage of the 
opportunity for training, including other ADOT divisions subject to the 
327 MOU provisions. The ADOT's training plan identifies that the 
training interval for some topics, such as the NEPA Assignment Program, 
is only once per staff member regardless of the period of time since 
the previous round of training. Staff may benefit from regular 
``refresher'' type training, especially as regulatory requirements and 
policy may change over time.

Status of Previous General Observations and Non-Compliance Observations 
From the Audit #2 Report

    This section describes the actions ADOT has taken (or is taking) in 
response to observations made during the second audit. The ADOT was 
provided the second audit draft report for review and provided comments 
to FHWA on August 2, 2021.
    Observation #1: Deficiencies and gaps in ADOT's manuals and 
procedures.
    During Audit #2, the audit team identified deficiencies in ADOT's 
manuals and procedures which may result in incomplete project 
documentation or analysis and increase the risk for non-compliance. The 
first was in the ADOT CE Checklist Manual and the EA/EIS Manual, 
specifically the process for re-evaluations for EAs and EISs was not 
well-defined. Although the team observed some improvements to the 
manuals in Audit #3, the deficiency identified in Audit #2 was not 
resolved and is an observation again in Audit #3. The other was the 
ADOT Section 4(f) Manual, documentation forms, and desk reference/
matrix containing information inconsistent with FHWA guidance and 
regulation. The deficiencies identified in Audit #2 were addressed by 
ADOT, but additional issues were identified by the audit team in Audit 
#3.
    Non-compliance Observation #1: Deficiencies in Section 4(f) 
evaluation of archaeological resources.
    The audit team observed similar inconsistencies as were observed in 
Audit #1 during the project file reviews for Audit #2 and identified 
procedural deficiencies relating to ADOT's Section 4(f) evaluation. The 
consultation letter sent to the Arizona SHPO did not state ADOT's 
intent to apply the archaeological exception to sites or include other 
Section 4(f) information regarding the sites identified. In Audit #3, 
the audit team acknowledges changes were made to ADOT's Section 106 
Federal-aid Programmatic Agreement Manual, but FHWA provided 
corrections to the draft language for ADOT to incorporate.
    Non-compliance Observation #2: Deficiencies in analysis of right-
of-way impacts.
    The ADOT's procedures (ADOT EA/EIS Manual) and FHWA's regulations, 
policies, and guidance provide information on how to consider right-of-
way impacts in the NEPA analysis. The FHWA's regulations, policies, and 
guidance provide additional information for how early property 
acquisitions should be considered with the right-of-way impacts 
analysis. In Audit #2 for the 327 MOU, the audit team found one project 
file did not demonstrate that early acquisition of properties and 
previous relocations were adequately addressed in the impact analysis 
in the NEPA document. The ADOT submitted a letter to FHWA on April 28, 
2022, detailing the steps ADOT will take within 60 days as a corrective 
action to address the right-of-way non-compliance observation. On May 
23, 2022, ADOT submitted to FHWA updated procedures regarding right-of-
way impacts in their NEPA analyses and FHWA provided technical 
assistance to ADOT regarding these procedures. This corrective action 
by ADOT resolves the non-compliance observation.
    Observation #3: Inconsistencies in interagency consultation 
documentation.
    After completing the project file review in Audit #2, the audit 
team found several inconsistencies with ADOT's documentation of 
compliance with interagency consultation requirements (per 40 CFR 
93.105). It is unclear if interagency consultation occurred for some 
projects since the project files did not include information on agency 
responses, concurrence, and the comment resolution process. Therefore, 
it is unknown if the interagency consultation agencies had an 
opportunity to participate in consultation or if ADOT provided them an 
opportunity to review and comment on the materials as required by 40 
CFR 93.105 and MOU Section 7.2.1. During Audit #3, the audit team found 
an increased amount of documentation providing evidence of interagency 
consultation efforts by ADOT in the project files reviewed.
    Observation #4: Incomplete development and implementation of 
performance measures.
    During Audit #2, the audit team reviewed ADOT's performance 
measures and reporting data submitted for the review period and 
concluded that ADOT had made progress toward developing and 
implementing its performance measures. For Audit #3, FHWA continues to 
identify this program objective as an area of concern, described in the 
observations above and will continue to evaluate this area in 
subsequent audits.

Finalizing This Report

    The FHWA provided a draft of the audit report to ADOT for a 14-day 
review and comment period, as well as notification of the non-
compliance observations. The ADOT provided comments which the audit 
team considered in finalizing this draft audit report. The audit team 
acknowledges that ADOT has begun to address some of the observations 
identified in this report and recognizes ADOT's efforts toward 
improving their program. The FHWA is publishing this notice in the 
Federal Register for a 30-day comment period in accordance with 23 
U.S.C. 327(g). No later than 60 days after the close of the comment 
period, FHWA will address all comments submitted to finalize this draft 
audit report pursuant to 23 U.S.C. 327(g)(2)(B). Subsequently, FHWA 
will publish the final audit report in the Federal Register. The FHWA 
will consider the results of this audit in preparing the scope of the 
next annual audit. The next audit report will include a summary that 
describes the status of ADOT's corrective and other actions taken in 
response to this audit's conclusions.

[FR Doc. 2023-21316 Filed 9-28-23; 8:45 am]
BILLING CODE 4910-22-P