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EPA review finds issues with loan documents; TDEC says it has resolved key concerns for Clean Water SRF
Summary
TDEC told the TLDA audit committee that EPA identified two required actions and 12 recommendations in its SFY2024 review of the Clean Water State Revolving Fund; TDEC updated loan agreements, developed a cross‑cutter authorities guide, and plans process and database changes to speed loan execution and disbursement.
The Tennessee Local Development Authority (TLDA) audit committee heard an EPA program evaluation summary for State Fiscal Year 2024 focused on the Clean Water State Revolving Fund (CWSRF).
Ms. Jones presented the EPA findings and TDEC's responses, saying EPA "identified two findings or required actions" and made 12 recommendations. "EPA is also working to review their vocabulary because when we say findings here in the state of Tennessee, we take that extremely seriously," she said, adding that EPA will distinguish "required actions, recommended actions, and then true findings."
One finding related to the absence of explicit prohibitions on certain telecommunications and video‑surveillance equipment in older loan documents. "We have since updated the loan agreements," Ms. Jones said, and staff had already issued new planning and design loans on the updated agreements. She said an addendum had previously been used to include the telecommunications condition prior to the new forms going into effect.
A second finding concerned TDEC's implementation of a streamlined cross‑cutter review aligned with an EPA memo. Ms. Jones said she disputed EPA's characterization but acknowledged the agency would follow EPA's specified checklist alignment: "You know what? You're right. We're going to do it just as you tell us." TDEC developed a cross‑cutter authorities guide aligned with the EPA 2013 memo to guide staff and borrowers during the state environmental review process.
Ms. Jones summarized several EPA recommendations and TDEC actions to accelerate loan execution and disbursement. She said TDEC is migrating to a new database system and undertaking business process improvements to fast‑track loans, expecting several large projects to reduce uncommitted balances over the next 18 months. To improve timeliness, she said new loan documents require a project start date and regular disbursement requests; projects must start disbursement within 12 months or risk loan cancellation or conversion to repayment.
On documentation, Ms. Jones said TDEC agreed to include full loan packages and amortization schedules in loan files (in partnership with State Government Finance) to address EPA concerns. She also reported that the bulk of SFY2023 recommendations had been resolved but that cash‑flow modeling and other process improvements remain ongoing until the new database is fully operational.
The committee acknowledged receipt of the EPA evaluation and TDEC's responses without objection. The briefing closed with Ms. Jones noting targeted completion of an updated operating agreement by October 2026 to document current practices.
The committee did not take a formal vote on policy changes at the meeting; the discussion was presented as informational and as direction for administrative updates and process improvements.
