PODCAST TRANSCRIPT
Associated Report: The EPA Should Improve Monitoring of 2022 Clean School Bus Rebate Recipients’ Use of Funds and Deployment of Buses and Infrastructure

KellyJune: Hello and thank you for joining us today for another podcast by the U.S. Environmental Protection Agency Office of Inspector General. I’m KellyJune, spokesperson for the EPA OIG, and with me today is Nicholas Koons, an auditor in the Recycling, Cleanup, and Pollution Prevention Directorate in the Office of Audit. Nicholas is here to talk about a report he worked on titled The EPA Should Improve Monitoring of 2022 Clean School Bus Rebate Recipients’ Use of Funds and Deployment of Buses and Infrastructure. Welcome, Nicholas.  

Nicholas: Thank you. I’m happy to be here to discuss this report and topic.

KellyJune: The report looks at the fiscal year 2022 Clean School Bus Rebate Program. Can you tell us a little bit about that program?  

Nicholas: Of course. The Clean School Bus program was funded through the Infrastructure Investment and Jobs Act, which gave the EPA $5 billion from fiscal year 2022 through fiscal year 2026 to award grants, rebates, or a combination of both to recipients to replace existing school buses with clean school buses. The EPA chose to provide funding through rebates in fiscal year 2022 because rebate applications are generally quicker and simpler when compared to grant applications. Also, the rebate selection process uses a lottery to select recipients instead of the competitive selection process typically used for grants. However, the Clean School Bus rebates are not rebates in the traditional sense where a customer spends money and subsequently receives a refund. Under the Clean School Bus program, once a recipient provides something called a Payment Request Form with a copy of a purchase order, the EPA will issue the funds to the recipient to subsidize the purchase of zero-emission or clean school buses. 

KellyJune:  Who was eligible to receive the rebates? 

Nicholas: The rebates were available to school districts, bus sales companies, and original equipment manufacturers. Three hundred and sixty-eight schools benefited from the rebate program. 

KellyJune: In terms of dollars, how many rebates were given in fiscal year 2022?

Nicholas: A little over eight hundred and sixty-seven million dollars in rebates were given out to replace 2,333 buses with 2,216 electric buses, 116 propane buses, and one compressed natural gas bus. Rebate applicants could request to replace up to 25 buses, with a maximum rebate amount of three hundred and seventy-five thousand dollars per bus depending on the replacement bus fuel type, the replacement bus size, and the priority status of the school district. Along with the funding for the buses, the EPA allocated up to twenty thousand dollars for charging infrastructure installations for each eligible zero-emission bus. 

KellyJune:  In the report, you assessed whether the EPA ensured that recipients managed rebate funds according to federal requirements. What did you find?

Nicholas: We found that the EPA did not monitor the status of bus deployments or how the recipients used or managed the Clean School Bus Program rebates, which put the funds at an increased risk of fraud, waste, and abuse. We also found that the Agency was not aware of whether all the recipients completed closeouts by the program’s deadline of October 2024.  

KellyJune: Ok, would you explain what you mean by recipient completed closeouts? 

Nicholas: Once they are done with the program, recipients are required to provide documents demonstrating that they have received their new buses and eligible charging infrastructure and have replaced their old buses. The EPA did not monitor deployment status and conduct site visits because it wanted to allow time for the program to mature in the first rebate cycle before starting reviews. Regarding program funds, while the Agency did issue the 2022 Clean School Bus (CSB) Rebates Program Guide in May of 2022, which describes eligibility for applicants, types of buses offered, funding amounts, and the application and closeout processes, the EPA has not issued guidance to recipients on how to manage program funds. 

KellyJune: Why would recipients need guidance to manage program funds? Aren’t the funds being used to purchase new school buses and charging infrastructure?

Nicholas: Yes, but not always right away. We spoke with a bus dealer participating in the Clean School Bus program who explained that it is not standard business practice to ask for 100 percent of the bus cost upfront. Usually, 20 or 30 percent is paid upfront with the balance due upon delivery. If buses are not delivered right away, the remaining funds to pay for those buses are sitting somewhere. The Agency was not aware of this situation, and it thought the whole payment for the buses was required upfront.

KellyJune: What were recipients doing with the funds before making the final payments?

Nicholas: We found that some recipients are keeping Clean School Bus funds in accounts with other funds or in interest-bearing accounts. The concerns are that co-mingled funds have an increased risk of misuse and accumulating interest on the sitting funds is a disincentive to use the funds for the intended purposes.

KellyJune: The report mentioned that your team did site visits. Where did you go and what did you find?

Nicholas: We visited schools participating in the rebate program. One school we visited in August 2023 was supposed to receive its buses by November 30, 2023, according to the EPA. However, school staff told us that only two of the 25 buses were received in November 2023. Also, the school did not plan on completing the charging infrastructure installation until August of 2024. Another school we visited received funds in April of 2023, and was supposed to receive its buses by August of 2023. However, when we visited in January 2024, the school had not started installing the charging infrastructure and was expecting the buses by July or August of 2024. At the time of our audit, nine of the 17 schools we reviewed, or 53 percent, were still in the process of installing the infrastructure necessary to operate the buses and may not meet the program closeout deadline of October 2024. In fact, as of June 2024, only 22 of 360 schools, or 6.1 percent, have completed the rebate closeout.

KellyJune: Did the EPA say that it would monitor those rebate recipients to determine whether they are complying with the program as well as the status of bus deployment?

Nicholas: It did. The EPA’s 2022 Clean School Bus Rebates Program Guide said that the Agency planned to assess whether rebate recipients have complied with the program as well as deployment status of the buses. The Office of Management and Budget also has guidance stating that programs receiving funds from the Infrastructure Investment and Jobs Act should use data to measure progress and program effectiveness. This includes collecting feedback from program recipients and beneficiary communities and collecting data or using existing data to assess program effectiveness. The U.S. Government Accountability Office provides the overall framework for establishing and maintaining an effective internal control system, including conducting risk assessments of programs and instituting effective monitoring controls to mitigate risks identified. 

KellyJune: What should the EPA do to meet these requirements?

Nicholas: We recommend that the EPA develop and implement guidance for Clean School Bus Program personnel on reviewing Clean School Bus rebate recipients’ use and management of rebate funds. We also recommend that it establish clear guidelines for Clean School Bus rebate recipients to adhere to regarding the management of rebate funds.

KellyJune: Now, this is not the first time the EPA OIG looked at the clean school bus program. How does this report differ? 

Nicholas: Yes, good question. The EPA OIG has had an oversight eye on the Infrastructure, Investment and Jobs Act, or IIJA, Clean School Bus program. In December of 2023, the EPA OIG released two reports looking at the clean school bus program: an audit that looked at potential supply chain or production delays that could impact the deployment of funds and a management implication report that warned the agency they need a better verification process for award recipients. In September of 2024, the EPA OIG evaluation team released a report expanding on the lack of verification and internal controls. And just last month, November 2024, an EPA OIG financial audit noted issues with the way the clean school bus rebate payments were being reported in the EPA financial statements. That brings me to the latest release, the one we are talking about today and the one that I worked on. This audit was conducted to determine the extent to which the EPA ensures that the recipients of the 2022 EPA Clean School Bus Program rebates manage funding in accordance with federal requirements and ultimately, we found the Agency is not aware of whether schools are properly safeguarding the millions of dollars in rebate funds or whether recipients will complete timely program closeouts.

KellyJune: Nicholas, thank you for discussing your report with us today. 

Nicholas: Thank you for having me. 

KellyJune: And to our listeners, thanks for joining us. The full report from today’s podcast, as well as other OIG reports and project notifications, are on our website at www dot epaoig dot gov.  

We urge anyone with information about fraud, waste, abuse, or mismanagement involving an EPA or U.S. Chemical Safety and Hazard Investigation Board operation or program to contact the EPA OIG Hotline by calling 888-546-8740, emailing OIG-DOT-hotline-AT-epa-DOT-gov, or submit a complaint form via our website at www dot epaoig dot gov.