Environmental Protection

More than 70 percent of the Environmental Protection Agency's (EPA) budget is used to award grants and contracts. Once a grant or contract is completed or terminated and once the applicable budget or project period has expired, the agency must determine if the required work was completed and then close out the project, which includes making any final payments due the recipient. One of the primary purposes of closing out grants and contracts is to ensure that any unliquidated obligated funds are recovered and used for environmental programs. These unliquidated funds represent millions of dollars that EPA could use to fund other environmental programs. The timely closeout of grants and contracts is a long-standing problem for EPA. EPA has developed several initiatives to reduce the number, or backlog, of inactive grants and contracts requiring closeout. This report discusses (1) EPA's efforts to close out inactive grants and contracts; (2) EPA's progress in reducing the number of inactive grants and contracts, including the number of remaining inactive grants and contracts, and the dates by which they are expected to be closed out; and (3) the amount of unliquidated obligations for inactive grants and contracts.

GAO noted that: (1) over the last 8 years, EPA has taken several initiatives to reduce the backlogs of inactive grants and contracts needing closeout; (2) in 1992, EPA developed a policy specifying procedures for closing out nonconstruction grants, and in 1998, the agency developed a strategy for eliminating the existing backlog of inactive nonconstruction grants and preventing a future backlog; (3) however, closeout procedures and strategies for nonconstruction grants were not consistently followed, and strategies at the regional level frequently did not include specific actions for implementation; (4) EPA also developed automated systems to improve the monitoring of the nonconstruction grant closeout process; (5) in 1990 and 1997, EPA developed strategies to reduce the backlog of wastewater treatment construction grants; (6) in fiscal year (FY) 1994, EPA established goals for closing out a specific number of inactive contracts; (7) EPA has made significant progress in closing out inactive grants and contracts, but a considerable number remain to be closed; (8) in 1996, the agency had a backlog of nearly 18,000 nonconstruction grants, but by June 1998, the backlog was reduced to approximately 4,100; (9) EPA estimated in 1996 that the backlog of nonconstruction grants would be eliminated by July 2000; (10) with closeouts progressing at the current rate, it is likely that this goal will be attained; (11) the number of inactive wastewater treatment construction grants needing closeout was about 500 as of March 1998--reduced from about 5,900 at the end of FY 1990; (12) while the construction grant backlog was initially projected to be eliminated by the end of FY 1997, this goal was not attained, and in December 1996, EPA revised its projection to eliminate the backlog by 2002; (13) recent estimates from EPA's offices implementing the closeout strategy for construction grants indicate that this goal is unlikely to be attained; (14) in March 1993, EPA had approximately 2,000 inactive contracts needing closeout, and by August 1998, that number had been reduced to 1,028; (15) significant amounts of unliquidated obligations remain for inactive grants and contracts and could potentially be allocated for other EPA projects and programs; (16) the unliquidated obligations for construction and nonconstruction grants totalled about $612.1 million, and for about $423.8 million of this total amount, there are no statutory time restrictions on the use of funds; and (17) therefore, a large portion of these funds is potentially available for recovery and could be used for other approved projects.