Surface Transportation Project Delivery Program; Arizona Department of Transportation Draft FHWA Audit Four Report, 85578-85584 [2024-24981]

Agencies

• Federal Highway Administration
• DEPARTMENT OF TRANSPORTATION

[Federal Register Volume 89, Number 208 (Monday, October 28, 2024)]
[Notices]
[Pages 85578-85584]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-24981]


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DEPARTMENT OF TRANSPORTATION

Federal Highway Administration

[FHWA Docket No. FHWA-2024-0017]


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

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

ACTION: Notice; request for comment.

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SUMMARY: The Moving Ahead for Progress in the 21st Century Act (MAP-21) 
established the Surface Transportation Project Delivery Program that 
allows a State to assume FHWA's environmental responsibilities for 
environmental review, consultation, and compliance under the National 
Environmental Policy Act (NEPA) for Federal highway projects. 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 fourth audit of the 
responsibilities assigned to the Arizona Department of Transportation 
(ADOT) under the Surface Transportation Project Delivery Program (NEPA 
Assignment Program). This notice announces and solicits comments on the 
fourth audit report for ADOT.

DATES: Comments must be received on or before November 27, 2024.

ADDRESSES: To ensure that you do not duplicate your docket submissions, 
please submit all comments by only one of the following means:
     Federal eRulemaking Portal: Go to www.regulations.gov and 
follow the online instructions for submitting comments.
     Mail: Docket Management Facility, U.S. Department of 
Transportation, 1200 New Jersey Avenue SE, W12-140, Washington, DC 
20590.
     Hand Delivery: West Building Ground Floor, Room W12-140, 
1200 New Jersey Avenue SE, between 9:00 a.m. and 5:00 p.m., Monday 
through Friday, except Federal holidays. The telephone number is (202) 
366-9329.
     Instructions: You must include the agency name and docket 
number at the beginning of your comments. All comments received will be 
posted without change to www.regulations.gov, including any personal 
information provided.

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FOR FURTHER INFORMATION CONTACT: Owen Lindauer, Ph.D., RPA, 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 
Mr. Silvio J. Morales, Office of the Chief Counsel, (202) 366-1345, 
[email protected], Federal Highway Administration, U.S. Department 
of Transportation, 1200 New Jersey Avenue SE., Washington, DC 20590. 
Office hours are from 8:00 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 23 
United States Code (U.S.C.) 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. The audit report reflects the findings at 
the time of the review and does not capture specific actions taken 
after the review. This notice announces and solicits comments on the 
fourth 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.

Kristin R. White,
Acting Administrator, Federal Highway Administration.

Surface Transportation Project Delivery Program Draft FHWA Audit #4 of 
the Arizona Department of Transportation

Executive Summary

    This is Audit #4 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 23 U.S.C. 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 the fourth audit of ADOT's performance 
according to the terms of the MOU from March 27 to March 31, 2023. 
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 fourth audit, the 
audit team conducted interviews with staff from ADOT's Office of 
Environmental Planning (EP), Civil Rights Office (CRO), Construction 
Districts, Right-of-Way, Alternative Delivery Group, and the Deputy 
Director, as well as the Salt River Pima-Maricopa Indian Community 
Tribal Historic Preservation Office (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 EP leadership 
on March 30, 2023, and to ADOT leadership on April 7, 2023.
    The audit team found that ADOT has carried out the 
responsibilities it assumed consistent with the terms 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 
pursuant to MOU Part 13.2.2. This report concludes with the status 
of FHWA's observations from the third audit review. After the fourth 
year of ADOT's participation in the program, FHWA will continue to 
monitor ADOT's compliance with the terms of this MOU, in accordance 
with 23 U.S.C. 327(h).

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 
entails the need 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 fourth 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 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 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 93 
for project-level conformity; the procedures for environmental 
justice evaluations (Environmental Justice per Executive Order 
(E.O.) 12898, Federal Actions to Address Environmental Justice in 
Minority Populations and Low-Income Populations); the Section 106 
consultation procedures contained in the National Historic 
Preservation Act of 1966, 36 CFR 800 et seq.; and ADOT's 
environmental commitment tracking and implementation process. This 
report concludes with a status update for FHWA's observations from 
the second and third audit reports.
    The audit team conducted a careful examination of ADOT policies, 
guidance, and manuals pertaining to NEPA responsibilities,

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as well as a representative sample of the ADOT 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, the Arizona AGO and Tribal THPO staff, as well as 
the Arizona SHPO in person and via videoconference.
    The timeframe defined for this fourth audit includes highway 
project environmental approvals completed between January 1 and 
December 31, 2022. During this timeframe, ADOT completed NEPA 
approvals and documented NEPA decision points for seven projects. 
Due to the small sample size, the audit team reviewed all seven 
projects. This consisted of three EA re-evaluations, one EA with a 
Finding of No Significant Impact, one draft EA that completed the 
public hearing and review process, and two 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 responses to the PAIR. The audit team conducted a 
total of 18 interviews. Interview participants included staff from 
ADOT, a Tribal THPO and the 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 that ADOT has carried out the 
responsibilities it has assumed consistent with the terms of the 
MOU. The FHWA is notifying ADOT of three non-compliance observations 
identified in this audit that require ADOT to take corrective 
action. The ADOT must address these non-compliance observations per 
MOU Part 13.2.2 and continue making progress on non-compliance 
observations in the previous audits as a section of the 327 MOU 
renewal process. Future monitoring reviews will continue to report 
on ADOT's corrective actions. 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. While not accounting for all 
the successful practices used by ADOT in implementing the NEPA 
Assignment Program, the audit team identified four successful 
practices in this report.
    Observations are items the audit team would like to draw ADOT's 
attention to, which may improve processes, procedures, and/or 
outcomes. The audit team identified 13 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 three non-compliance observations in this report.

Program Management

Successful Practice #1

    The ADOT EP meets monthly with the Arizona (AZ) Division. This 
has resulted in improved communication and contributes to the 
tracking and ultimate resolution of issues.

Successful Practice #2

    The audit team acknowledges the efforts to address lessons 
learned on alternative delivery projects through the development of 
NEPA and Public Private Partnership Guidance. These include 
improving communication with ADOT EP and advancing environmental 
commitment activities earlier for more successful projects.

Successful Practice #3

    The ADOT has taken steps over the past year to improve Tribal 
engagement. The ADOT EP sent letters to Tribes introducing the EP 
Tribal Liaison and offered to meet. The ADOT created and filled a 
Native Nations Ambassador for Infrastructure position in the State 
Engineer's Office to improve communication with the Tribes and be a 
point of contact for them regarding any issues. And finally, ADOT EP 
developed the first project-specific Tribal Environmental Engagement 
Plan which outlines communication protocols, outreach practices and 
points of contact for a project that crosses into Tribal land.

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 Part 8.5.1. During the time period 
covered by this audit, the audit team reviewed the Dashboard and 
found that it did not include all Federal permit and authorization 
information for the applicable projects assigned to ADOT. In 
addition, the audit team found that not all active projects were 
included, updates appeared in draft form or were not published. The 
audit team also found that milestone dependencies, which are 
milestone dates on the Permitting Dashboard that are contingent on 
the completion of another milestone found in the permitting 
timetable, were not identified and there were misidentifications of 
Major Infrastructure Projects which no longer applied due to the 
recission of E.O. 13807, Establishing Discipline and Accountability 
in the Environmental Review and Permitting Process for 
Infrastructure Projects. 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. In accordance with the Office of the Secretary of 
Transportation Dashboard reporting standards, ADOT must take 
corrective action to address this issue.

Observation #1: Deficiencies and Gaps in ADOT's Manuals and Procedures

    The audit team reviewed ADOT's manuals and procedures. Part 
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:
     The EA/EIS Manual and the CE Manual do not identify 
what the minimum requirements or procedures are for public 
involvement when there is a low-income or minority population in the 
project area, or when these populations have expressed an interest 
in the project.
     The ADOT manuals and procedures do not make a clear 
statement that the 23 U.S.C. 327 MOU disclosure language is required 
in the consultation that is completed as part of the NEPA process 
for Local Public Agency (LPA)/Certified Acceptance Agency (CAA) 
projects per MOU Parts 3.1.2 and 3.2.6.
     The ADOT EA/EIS Manual should be updated to clearly 
indicate that a purpose and need statement should not include 
discussion of the build alternative nor use the build alternative as 
justification for the need to construct a transportation facility.
    The FHWA recommends an update to the ADOT EA/EIS Manual related 
to the public involvement process for re-evaluations. While public 
circulation is not required for re-evaluations, FHWA recommends ADOT 
institute a review process for ADOT to determine if controversial or 
projects of public concern require public outreach or at a minimum, 
post the NEPA document for public and stakeholder review.

Observation #2: Improvements to Tribal Engagement Are Warranted

    Interviews with ADOT staff, the SHPO and a THPO identified the 
need for ADOT to continue efforts to improve Tribal consultation 
practices and relationships with Tribes. The SHPO encourages ADOT to 
listen to Tribes, consult earlier and improve trust with Tribes, and 
identifies the need for more training of ADOT staff. The THPO 
expressed continued communication and transparency issues with ADOT, 
such as that ADOT lacked an understanding of what Tribal 
consultation should consist of, frustration with continued

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violations of cultural commitments during construction, and 
continued lack of trust. The audit team acknowledges that ADOT seems 
to be attempting to work on some of these issues, but the actions 
are inconsistent. The FHWA recommends:
     ADOT seek input from THPOs and AZ SHPO on the 
specification developed to address cultural resource commitment non-
compliance by construction contractors and advance the specification 
to implementation.
     ADOT improve transparency regarding project information 
for projects in Tribal land or of Tribal interest.
     ADOT build and maintain relationships with the Tribes.
     ADOT fully implement the FHWA/ADOT Tribal Consultation 
Letter Agreement executed on August 5, 2022.

Observation #3: Incomplete Identification and Reporting of 
Responsibilities Under the 327 MOU Assigned to Additional Divisions 
Independent of ADOT EP

    During Audit #3, the previous audit team identified that ADOT 
divisions outside of EP have NEPA responsibilities and these 
divisions have not been identified or addressed in the ADOT EP 
procedures; nor were they included in the ADOT documentation and 
reporting. Based on interviews of ADOT staff, the PAIR responses and 
review of ADOT's manuals for this audit, ADOT has not taken 
corrective actions to develop or implement procedures to apply the 
327 MOU provisions to all divisions of ADOT in accordance with MOU 
Part 1.1.2. In addition, the audit team identified a lack of 
training and awareness of NEPA assignment and MOU responsibilities 
within the other divisions, in particular at management levels. The 
ADOT should identify methods to ensure future compliance.

Non-Compliance Observation #2: Inadequate or Incomplete Documentation 
and Implementation of Environmental Commitments

    The ADOT is obligated to implement all committed environmental 
impact mitigation measures (23 CFR 771.109(b)(2)) for projects 
funded with Federal-aid. Therefore, it is also responsible for 
environmental commitment tracking. The ADOT does not have a process 
manual or consolidated report which documents the tracking of all 
environmental commitments made during the environmental review 
process. Based on the ADOT interviews, ADOT has taken steps to 
establish some tracking mechanisms to cover environmental 
commitments which are the responsibility of ADOT EP or the 
contractors. This includes official use of the Environmental, 
Permits, Issues, and Commitments (EPIC) Tracking sheet. The ADOT 
Districts are inconsistent in how they describe tracking 
commitments, and reporting whether they prepare documentation 
demonstrating implementation of the remaining types of environmental 
commitments. These gaps include commitment tracking that are the 
responsibility of other divisions of ADOT, LPA/CAA, and those 
covered by a standard specification. Project file reviews indicated 
that environmental commitments were not clearly stated or if they 
were identified in environmental documentation, ADOT's record 
keeping did not demonstrate how, when, and who is responsible for 
environmental commitment documentation. The ADOT will need to take 
corrective actions to address the lack of documentation, 
implementation and tracking of environmental commitments and 
mitigation compliance.

Documentation and Records Management

Observations

Observation #4: Incomplete Project File Submission Based on a FHWA 
Request for Information and Standard Folder Structure Issues

    For this audit, FHWA requested all project files pertaining to 
the NEPA approvals and documented NEPA decision points completed 
during the audit review period. The audit review team received 
project file information from ADOT, but this information was found 
to be incomplete with attachments or other supporting information 
missing. The FHWA worked with ADOT Information Technology (IT) Group 
to ensure that project file issues were not due to technology 
challenges resulting from the transfer of electronic files between 
ADOT and FHWA. While FHWA had fewer issues when attempting to access 
the files ADOT provided for the audit than in past years, the audit 
team still found several inconsistences between ADOT's procedures 
for maintaining project files and the project file documentation 
provided to FHWA. Examples of missing documentation included: public 
involvement plan (PIP); public involvement summary report; signed 
noise analysis form; Section 404 and 408 documentation; Section 106 
Closeout Memorandum; 327 air quality EA/EIS checklist; authorization 
letters/NEPA certification approval; Statewide Transportation 
Improvement Program/Transportation Improvement Program verification; 
and email communication. In addition, there were instances of 
missing or incomplete QC reviews, and environmental commitments 
resulting from technical analysis or consultation that were not 
included in the NEPA document. In these instances, the 
determinations were not adequately supported by the project file. 
The audit review team could not reconcile information about project 
file completeness and QC provided through interviews with the 
content of project files supplied by ADOT. It may also be the case 
that there is a shortfall in ADOT filing practices performed by an 
individual developing a project file to ensure a project file is 
complete. By this observation the audit review team is making ADOT 
aware that both by (1) implementing sound internal controls related 
to project filing and records retention, and (2) improving QCs, 
fewer ADOT files would contain errors or omissions once the reviews 
are complete.

Observation #5: Deficiencies in Section 4(f) Analyses

    The ADOT has a number of manuals and procedures that describe 
the requirements for Section 4(f) analyses, consultation, and 
documentation. Based on those requirements, the review team found 
some of the project files to be deficient. Observations based on 
project file reviews included: (1) no Section 4(f) form or 
memorandum; (2) lack of documented communication with the official 
with jurisdiction; (3) no research documentation to support the 
determinations; (4) an empty Section 4(f) file folder; (5) a Section 
4(f) resource that was not accounted for in the project 
documentation; and (6) one instance where the consultation letter 
did not determine whether the Section 4(f) archeological resource 
had value for preservation in place. The FHWA recommends that ADOT 
personnel who have Section 4(f) training identified as a requirement 
for their position take the training within a year and that ADOT EP 
updates the Section 4(f) manual to increase reviews and oversight of 
decisions made.

Observation #6: Continuing Issues With Air Quality Conformity Analysis

    While ADOT has made progress regarding the level of 
communication and coordination with FHWA and EPA on project-level 
air quality conformity analysis, the audit team identified areas in 
need of improvement. Per MOU Part 3.2.4, FHWA retained 
responsibilities for conformity determinations. This authority 
includes whether a conformity determination remains valid under 40 
CFR 93.104(d). The ADOT does not include FHWA in the decisionmaking 
process when it determines that project level conformity 
determinations remain valid for re-evaluations, which conflicts with 
FHWA authority under 40 CFR 93.104(d). In addition, no interagency 
consultation is conducted by ADOT for those decisions. Re-
evaluations should be shared with interagency consultation partners 
as early as possible so their input can inform the FHWA 
determination of whether a conformity determination remains valid. 
The FHWA also recommends that for interagency consultation, when a 
consultation period ends, ADOT summarizes who responded, who did 
not, and what follow-up ADOT did with those agencies that did not 
provide a response. The ADOT should continue to build on the 
progress made with the air quality conformity process and maintain 
communication amongst all the interagency consultation partners.

Observation #7: Inconsistent Use and Absence of the 327 MOU Disclosure 
Statement

    Part 3.1.3 of the MOU specifies that ADOT shall include a 
disclosure statement to the public, Tribes and agencies as part of 
agency outreach and public involvement procedures. The audit team 
project file reviews found the absence of the statement in agency 
correspondence and technical reports, and public involvement 
materials, as well as the wrong MOU reference when the statement was 
present. The audit team found no consistent process or procedure for 
inclusion of the 327 MOU disclosure statement in the current ADOT 
manuals or guidance as required by MOU Part 3.1.3. The ADOT should 
strive to achieve consistency in the placement of disclosure 
statements in documents. The audit team acknowledges that the new 
ADOT PIP has updated requirements and details to prevent instances 
in future public involvement materials.

[[Page 85582]]

Non-Compliance Observation #3: Inconsistencies and Deficiencies in 
Analysis of Environmental Impacts on Low-Income and Minority 
Populations (Environmental Justice Populations)

    During Audit #3, the audit team identified deficiencies in 
ADOT's procedures and analyses of environmental impacts on low-
income and minority populations. In response, ADOT drafted new 
procedures, a checklist and process flowcharts which were provided 
to FHWA as part of the PAIR response to this audit. In addition, 
FHWA provided a National Highway Institute Environmental Justice 
training course for ADOT in December 2022. The audit team for this 
audit identified inconsistencies in ADOT's new procedures, EA/EIS 
Manual, CE Manual, PAIR response, and interview responses regarding 
how ADOT completes environmental justice analyses. The procedural 
guidance is still not fully compliant with the MOU and the U.S 
Department of Transportation environmental justice responsibilities 
because of incorrect definitions of environmental justice 
populations. The review team could not assess compliance for several 
project files because they lacked supporting documentation for the 
identification, presence/absence of the populations, and meaningful 
public involvement. In addition, ADOT EP's coordination with the 
ADOT CRO was inconsistent with the ADOT procedures according to the 
interviews. Information presented in the CE Manual and ADOT's PAIR 
response, indicates that the CRO is to be consulted on all 
environmental justice analyses. The ADOT must take corrective action 
to ensure that environmental justice analysis and assessments comply 
with E.O. 12898, DOT Order 5610.2C and FHWA policy and guidance in 
advance of or as part of the 327 MOU renewal application. This can 
be done by obtaining FHWA review of the updated environmental 
procedures prior to ADOT approval.

Observation #8: Deficiencies in Re-Evaluation Analyses and 
Documentation

    The ADOT has an EA/EIS Guidance manual that contains EA re-
evaluation procedures. The manual states, ``the re-evaluation should 
consider the entire project analyzed in the original NEPA document. 
All environmental sections require re-evaluation to review whether 
impacts have changed as compared with the previous NEPA document and 
whether any impact changes result in new or significant impacts . . 
. Documentation should be appropriate to the project changes, 
environmental impacts from the changes, potential for controversy, 
and length of time since the last NEPA document was completed.'' 
Observations based on project file reviews included (1) lack of 
supporting documentation in the project files for all analyses 
summarized in EA re-evaluation errata that support the outcome of 
the re-evaluation, and (2) two project files with purpose and need 
statements that changed from the original EA and did not document 
whether that change affected the validity of the re-evaluation 
conclusion. Based on the required procedures, the review team found 
some of the project files to be deficient.

Observation #9: Inappropriate Purpose and Need Statement

    The review team found that a draft EA purpose and need statement 
contained a discussion of the build alternative throughout. The 
purpose and need statement had a figure with the build alternative 
in it, travel demand data that included the build alternative, and 
the connectivity discussion referenced the build alternative. The 
purpose and need statement serves as the basis for the alternatives 
analysis and should not discuss alternatives. The alternatives 
analysis is the section of the document to explain how the 
considered range of alternatives meet the purpose and need. In 
addition, the purpose section of the draft EA used population and 
employment growth as a justification but presented no data.

Quality Assurance/Quality Control

Observations

Observation #10: 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 the completeness of the project 
files, not the accuracy or technical merits of the decisions 
documented by those files. The ADOT does not appear to have an 
adequate process to review and confirm compliance of the 
decisionmaking according to its own procedures and it is therefore 
unclear how the project-level QC reviews inform the program. These 
observations were also found with Audits #1, #2, and #3, and no 
updates were made to the ADOT QA/QC procedures in response. 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 its program, in ways that 
could help ensure improved compliance with MOU requirements.

Performance Measures

Observations

Observation #11: 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. This observation was made in Audits #1, #2, and 
#3. The FHWA recommends the creation of new performance measures in 
the 327 renewal MOU that ADOT would use to evaluate and improve 
their program.

Legal Sufficiency

    During the audit period, ADOT had no formal legal sufficiency 
reviews of assigned environmental documents. This is based on the 
information provided by ADOT and interviews of the Assistant 
Attorneys General (AAG) assigned to ADOT's NEPA Assignment Program. 
Currently, ADOT retains the services of two AAGs for NEPA Assignment 
reviews and related matters. The assigned AAGs have received formal 
and informal training in environmental law matters and participated 
in a legal sufficiency training conducted by FHWA Office of Chief 
Counsel in May 2023. The ADOT and the AGO 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

    Through the interviews, the audit team learned 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, which 
typically involve a 30-day review period, and the AAGs coordinate 
with ADOT to ensure timely completion of legal sufficiency reviews. 
For this audit period, the AAGs both cited an emphasis on 
environmental justice compliance. In addition, the AAGs regularly 
notify ADOT of relevant changes in Federal law and guidance 
applicable to the NEPA Assignment Program.

Observations

Observation #12: Assertion of Attorney-Client Privilege Limits NEPA 
Assignment Program Assessment

    Since FHWA began auditing ADOT in 2020, the AGO has regularly 
cited attorney-client privilege when answering interview questions 
posed by FHWA Office of Chief Counsel (HCC) staff about the legal 
sufficiency process it employs when reviewing ADOT NEPA documents. 
The ADOT's position is unique as compared to its peer NEPA 
Assignment States in the West. The FHWA's HCC interviewers have 
consistently affirmed that they seek only to understand the role of 
the AGO in implementing ADOT's NEPA Assignment Program and do not 
seek privileged communications or advice. Nevertheless, the AGO has 
maintained that disclosing any specific information about its role 
in advising on legal issues would constitute a waiver of attorney-
client privilege under the State's open records act and could 
present legal risks to their clients. As a result, FHWA interviews 
of the AAG's have produced a somewhat informative, but limited and 
incomplete

[[Page 85583]]

understanding of the AGO's role in NEPA Assignment matters in AZ.

Training

Observation #13: Training Gaps

    The audit team reviewed ADOT's 2023 Training Plan, interview 
responses, and ADOT's PAIR responses pertaining to its training 
program. The ADOT's EP staff training matrix indicates that many 
staff have not taken the required training. In addition, there is no 
data regarding training from the other divisions within ADOT who 
have 327 MOU responsibilities. The ADOT made no changes to the ADOT 
training plan in response to FHWA's previous training gap 
observations.

Status of Previous General Observations and Non-Compliance Observations 
From the Audit #3 Report

    This section describes the actions ADOT has taken or is taking 
in response to observations made during the third audit. The ADOT 
was provided the third audit draft report for review and provided 
comments to FHWA on November 17, 2022.

Non-Compliance Observation #1: Incomplete Reporting to the Federal 
Infrastructure Permitting Dashboard

    During Audit #3, the audit team identified deficiencies in the 
information ADOT is required to post on the Dashboard. The ADOT did 
post some of the additional projects and missing project information 
to the Dashboard but not until the week before audit week. The ADOT 
needs to establish a consistent and ongoing process to maintain the 
project information required to be inputted into the Dashboard.

Observation #1: Deficiencies and Gaps in ADOT's Manuals and Procedures

    During Audit #3, 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. The other was that neither the ADOT EA/EIS Manual nor 
the current 2017 ADOT PIP approved prior to NEPA assignment 
contained 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 EA/EIS Manual was not updated to 
address this deficiency and the updated PIP was not approved at the 
time of the audit. The deficiencies identified in Audit #3 were not 
addressed by ADOT, and additional related issues were identified by 
the audit team in Audit #4.

Observation #2: Improvements to Tribal Engagement Are Warranted

    The audit team observed in Audit #3 the need for improved 
engagement with the Tribes for ADOT to develop procedures that 
identify its responsibilities to coordinate and consult with Tribes 
in all phases of project development, and implementation of the 
FHWA/ADOT Tribal Consultation Letter Agreement executed on August 5, 
2022. The deficiencies identified in Audit #3 were not completely 
addressed by ADOT, as the Letter Agreement was not fully 
implemented, and continued issues were identified by the audit team 
in Audit #4. The ADOT staff participated in the Section 106 and 
Tribal Consultation Training given by the Advisory Council on 
Historic Preservation and FHWA staff on June 13 and June 14, 2023.

Non-Compliance Observation #2: Responsibilities Under the 327 MOU 
Assigned to Additional Divisions Independent of ADOT EP

    During Audit #3, the team identified ADOT divisions outside of 
EP that have responsibilities under NEPA Assignment. These divisions 
have not been identified by ADOT EP during the past review processes 
or addressed in the ADOT EP procedures, manuals, or plans. The ADOT 
was directed to develop and implement procedures to apply the 327 
MOU provisions to all divisions of ADOT who have responsibilities 
under the 327 MOU. The current audit team did not observe any 
progress on this corrective action.

Non-Compliance Observation #3: Deficiencies in Environmental Commitment 
Tracking

    During Audit #3, ADOT was unable to provide FHWA with a process 
manual or consolidated report documenting 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. Since the last audit, ADOT has developed a spreadsheet 
for EP responsibilities and has rolled out the EPIC Tracking sheet 
process which covers the Contractor responsibilities--non-standard 
specification commitments only. There is still no process manual or 
consolidated reporting of all environmental commitments required for 
each project.

Non-Compliance Observation #4: Incomplete Project File Submission and 
Standard Folder Structure Issues

    As was observed in previous audits, during Audit #3, the audit 
team found several inconsistencies between ADOT's procedures for 
maintaining project files and the project file documentation 
provided to FHWA. Since that audit, ADOT's IT Group worked with the 
AZ Division to resolve the project file issue on the technological 
side. The ADOT IT Group determined that the electronic transfer 
process is working and is therefore not the cause of the incomplete 
project file submissions.

Observation #3: Minor Edits Needed To Resolve Deficiency in Section 
4(f) Evaluation of Archaeological Resources

    During Audit #1 and #2, FHWA identified inconsistencies with 
ADOT's Section 4(f) evaluation and documentation of archaeological 
sites. In response to the Audit #2 finding, ADOT updated their 
Section 106 Federal-aid Programmatic Agreement Manual with new 
preservation in place language and in Audit #3 FHWA recommended 
edits to the new language. The ADOT has made the recommended edits.

Observation #5: Inconsistent Use and Absence of the 327 MOU Disclosure 
Statement

    During Audit #3, the audit team project file reviews found 
inconsistent use of the disclosures 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 and guidance as required by 
MOU Part 3.1.3. The ADOT has drafted a new PIP that contains 
disclosure statement guidance, but no updates were found in the ADOT 
EP manuals.

Non-Compliance Observation #5: Deficiencies in Analysis of 
Environmental Impacts on Low-Income and Minority Populations 
(Environmental Justice)

    The Audit #3 team identified inconsistencies in ADOT's manuals, 
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 and the CE Manual 
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. Since Audit #3, ADOT participated in a FHWA-
led pilot environmental justice training and drafted some new 
environmental justice guidance materials.

Observation #6: QA/QC Procedures Lack Assessment of Compliance and 
Observation #8: QA/QC Procedures Do Not Inform the Performance Measures

    The audit team identified continuing issues with ADOT's QA/QC 
procedures, including the fact that 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, #2, and #3. In addition, 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 and thereby inform the performance 
measures. No updates to the ADOT QA/QC procedures were made.

Observation #8: Incomplete Development and Implementation of 
Performance Measures

    During Audit #2 and #3, 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 #4, FHWA 
continues to identify this

[[Page 85584]]

program objective as an area of concern, described in the 
observations above, and will continue to evaluate this area in 
subsequent audits.

Observation #9: Training Gaps

    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 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. No changes 
in response to this observation were made to the 2023 training plan.

Finalizing This Report

    The FHWA provided a draft of the audit report to ADOT for a 14-
day review and comment period pursuant to Part 11.4.1 of the MOU, 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. This 
includes an action plan defined by ADOT and the AZ Division Office 
to address non-compliance observations identified in the AZ Program 
reviews to date. 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.

[FR Doc. 2024-24981 Filed 10-25-24; 8:45 am]
BILLING CODE 4910-22-P