What lesson can governments and agencies overseeing billion-dollar Infrastructure Investment and Jobs Act (IIJA) infrastructure projects learn from an $8.5 billion dollar expansion of an airport in a major Midwestern city, the refurbishment and expansion of a New York City landmark convention center, and the construction of a municipal wastewater treatment plant? The appointment of an independent integrity monitor helped the agencies overseeing these projects proactively assess risk, prevent fraud, and ensure compliance with stringent funding requirements-and save millions of dollars in the process.

With $550 billion in federal spending for roads and bridges, rail and transit, ports and airports, water infrastructure, resilience, broadband and the electric grid, the IIJA is enabling many states to embark on needed infrastructure projects. For example, more than $2.5 billion was made available for airport improvement projects for fiscal year 2023.1 However, as with any company receiving federal funding, recipients of IIJA funds must ensure they spend those dollars appropriately. Failure to understand the obligations and comply with applicable laws and IIJA regulations can result in funding clawbacks, reputational risk, and increased scrutiny by oversight organizations, including state and federal inspectors general. Mitigating these risks requires careful planning and execution, along with effective oversight controls throughout the project life cycle.

Experienced in government regulations and audit procedures, integrity monitors can help officials understand project eligibility requirements, perform risk assessments, manage federal funding, and put best practices in place to guard against fraud, waste, and abuse. They can also help agencies comply with applicable procurement and documentation requirements, reporting requirements, and relevant security and safety regulations.

Assessing and Mitigating Risk

Integrity monitors can help state agencies identify and address potential issues early in the process-before they become systemic. By conducting risk assessments and developing risk management plans, integrity monitors can help agencies proactively manage potential risks and reduce the likelihood of noncompliance, fraud, or other problems.

Case Study: International Airport Expansion

K2 Integrity is currently conducting a multiyear integrity monitoring assignment as part of an international airport expansion, a $8.5 billion project. As part of this engagement, our construction and real estate team was appointed as one of the integrity monitors to minimize noncompliance with rules and regulations and minimize fraud, waste, and abuse issues.

Our role as an integrity monitor for the project entails reviewing project policies, procedures, and practices to identify gaps and provide recommendations for enhancements to project controls. Reviews of project procedures, controls, and monitoring of controls as they relate to construction procedures, health and safety requirements, site security expectations for airside and landside work at the airport; and audit and monitoring of workforce site access equipment and related policies and procedures.

While this project is ongoing, K2 Integrity's findings and recommendations have resulted in improvements to project processes to enhance compliance, by developing effective controls to minimize residual risk in areas such as health and safety, and site security.

Ensuring Compliance

Integrity monitors can also provide ongoing monitoring and oversight throughout the project life cycle, ensuring that contractors and other parties comply with relevant regulations and contractual obligations. This can include monitoring project costs, tracking progress against milestones, and ensuring that work is performed in a safe and secure manner.

Case Study: Municipal Wastewater Treatment Plant

K2 Integrity was selected as an integrity and safety compliance monitor for the construction of a US $3 billion water filtration plant. We were tasked with independent oversight of integrity and site safety of the entire construction project.

K2 Integrity conducted risk assessments of the security, safety, and financials controls surrounding this project. We noted vulnerabilities, made recommendations to close gaps, and monitored the project from the procurement phase through the final construction closeout.

K2 Integrity staffed this project with auditors, engineers, investigators, and construction experts that monitored the site for health and safety, security vulnerabilities, regulatory compliance, and signs of fraud, waste, and abuse. Additionally, K2 Integrity reviewed procurement practices, invoices, change orders, and performed due diligence on contractors, subcontractors, vendors, and suppliers.

Our findings and recommendations resulted in improvements to project processes and integrity controls, improved physical security procedures, and cost savings of millions of dollars that were identified by our audits, engineers, and investigators as a result of compliance audits and investigations.

Meeting Stringent Documentation Requirements

State agencies disbursing IIJA funds must be prepared to comply with relevant procurement and documentation requirements, along with funding program reporting requirements. In addition, they face audits by state and local oversight agencies. Integrity monitors can assist agencies in maintaining accurate and complete documentation; designing and implementing subcontractor vetting and approval procedures; and managing funding appropriately.

Case Study: Convention Center Expansion Project

K2 Integrity conducted a multiyear construction integrity monitoring assignment as part of a $1.5 billion New York City convention center expansion project. The expansion project comprised the addition of 1.2 million square feet of event-related space, and the addition of a working rooftop farm.

As part of this engagement, our team of construction and real estate professionals created, implemented, and monitored policies and procedures to ensure that entities on the project complied with relevant laws and regulations, including documentation requirements.

Our responsibilities also included the performance of an integrity risk assessment of the project, to identify policies and procedures with residual risk that could be vulnerable to fraud, waste, and abuse. We designed and implemented a corruption prevention program to mitigate these risks.

In addition, we implemented a subcontractor vetting and approval procedure and assisted the client in devising special monitoring procedures, where warranted, for certain subcontractors; implemented an enhanced monitoring program for the onsite crane operations; monitored compliance with health and safety and site security requirements; conducted QA/QC construction integrity reviews of key building elements; and tracked progress of construction work against key milestones.

In conclusion, state agencies face numerous challenges in disbursing IIJA funds, including ensuring regulatory compliance, preventing fraud and abuse, avoiding clawbacks, monitoring safety and security, and being prepared for single audits. By working with construction integrity monitors, state agencies can address these challenges proactively, manage potential risks, and ensure that funding is spent in accordance with applicable laws and regulations-and save money and time in the process.

Footnote

1 Federal Aviation Administration. "Bipartisan Infrastructure Law - Airport Infrastructure." U.S. Department of Transportation. Available at https://www.faa.gov/bil/airport-infrastructure ; accessed on February 22, 2023.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.