Environmental Protection Agency
Problems Persist in Effectively Managing Grants Gao ID: GAO-03-628T June 11, 2003Over the years, EPA has had persistent problems in managing its grants. Grants constituted one-half of the agency's annual budget, or about $4.2 billion in fiscal year 2002. EPA uses grants to implement its programs to protect human health and the environment and awards them to over 3,300 recipients, including state and local governments, tribes, universities, and nonprofit organizations. EPA's ability to efficiently and effectively accomplish its mission largely depends on how well it manages its grant resources and builds in accountability. Since 1996, GAO and EPA's Office of Inspector General have repeatedly reported on EPA's problems in managing its grants. Because these problems have persisted, in January 2003, GAO cited grants management as a major management challenge for EPA. GAO is currently reviewing EPA's efforts to improve grants management at the request of the Chairman of the House Committee on Transportation and Infrastructure and Representative Anne Northup. For this testimony GAO is reporting on results of its previously issued reports and on the grants problems EPA faces, past actions to address these problems, and recently issued EPA policies and a 5-year grants management plan to address its long-standing grants management problems.
EPA faces four key problems in managing its grants: (1) selecting the most qualified grant recipients from a large applicant pool, (2) effectively overseeing grantees throughout the life of the grant, (3) measuring the results of the grantees' work, and (4) effectively managing its grants staff and resources. EPA must resolve these problems in order to improve its management of grants. In recent years, EPA has taken a series of actions to address two of its key problem areas: grantee oversight and resource management. EPA actions include issuing several oversight policies, conducting training, and developing a new data system for grants management. However, these past actions were not consistently successful in resolving grants management problems because of weaknesses in implementation and insufficient management emphasis. For example, between 1998 and 2002, EPA issued three policies designed to improve oversight of grantees, but EPA staff did not consistently carry them out. Late in 2002, EPA launched new efforts to address some of its grants management problems. In September 2002, EPA, for the first time, issued a policy to promote competition in awarding grants. In December 2002, it issued a new policy designed to better ensure effective grant oversight. Finally, in April 2003, EPA issued a 5-year grants management plan to address its long-standing grants management problems. GAO is still reviewing these new efforts. Although EPA's recent actions seem promising, the agency has a long history of undertaking initiatives to improve grants management that have not solved its problems. If the future is to be different from the past, EPA must work to aggressively implement its new policies and its ambitious 5-year plan through a sustained, coordinated effort. It will be particularly important for all agency officials involved in managing grants to be committed to and held accountable for achieving the plan's goals and objectives.
GAO-03-628T, Environmental Protection Agency: Problems Persist in Effectively Managing Grants
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Testimony:
Before the Subcommittee on Water Resources and Environment, Committee
on Transportation and Infrastructure, House of Representatives:
United States General Accounting Office:
GAO:
For Release on Delivery Expected at 10:00 a.m. EDT:
Wednesday, June 11, 2003:
Environmental Protection Agency:
Problems Persist in Effectively Managing Grants:
Statement of John B. Stephenson, Director, Natural Resources and the
Environment:
GAO-03-628T:
GAO Highlights:
Highlights of GAO-03-628T, testimony to the Subcommittee on Water
Resources and Environment, Committee on Transportation and
Infrastructure, House of Representatives
Why GAO Did This Study:
Over the years, EPA has had persistent problems in managing its
grants. Grants constituted one-half of the agency‘s annual budget, or
about $4.2 billion in fiscal year 2002. EPA uses grants to implement
its programs to protect human health and the environment and awards
them to over 3,300 recipients, including state and local governments,
tribes, universities, and nonprofit organizations. EPA‘s ability to
efficiently and effectively accomplish its mission largely depends on
how well it manages its grant resources and builds in accountability.
Since 1996, GAO and EPA‘s Office of Inspector General have repeatedly
reported on EPA‘s problems in managing its grants. Because these
problems have persisted, in January 2003, GAO cited grants management
as a major management challenge for EPA. GAO is currently reviewing
EPA‘s efforts to improve grants management at the request of the
Chairman of the House Committee on Transportation and Infrastructure
and Representative Anne Northup. For this testimony GAO is reporting
on results of its previously issued reports and on the grants problems
EPA faces, past actions to address these problems, and recently issued
EPA policies and a 5-year grants management plan to address its long-
standing grants management problems.
What GAO Found:
EPA faces four key problems in managing its grants: (1) selecting the
most qualified grant recipients from a large applicant pool, (2)
effectively overseeing grantees throughout the life of the grant, (3)
measuring the results of the grantees‘ work, and (4) effectively
managing its grants staff and resources. EPA must resolve these
problems in order to improve its management of grants.
In recent years, EPA has taken a series of actions to address two of
its key problem areas: grantee oversight and resource management. EPA
actions include issuing several oversight policies, conducting
training, and developing a new data system for grants management.
However, these past actions were not consistently successful in
resolving grants management problems because of weaknesses in
implementation and insufficient management emphasis. For example,
between 1998 and 2002, EPA issued three policies designed to improve
oversight of grantees, but EPA staff did not consistently carry them
out.
Late in 2002, EPA launched new efforts to address some of its grants
management problems. In September 2002, EPA, for the first time,
issued a policy to promote competition in awarding grants. In
December 2002, it issued a new policy designed to better ensure
effective grant oversight. Finally, in April 2003, EPA issued a 5-
year grants management plan to address its long-standing grants
management problems. GAO is still reviewing these new efforts.
Although EPA‘s recent actions seem promising, the agency has a long
history of undertaking initiatives to improve grants management that
have not solved its problems. If the future is to be different from
the past, EPA must work to aggressively implement its new policies and
its ambitious 5-year plan through a sustained, coordinated effort. It
will be particularly important for all agency officials involved in
managing grants to be committed to and held accountable for achieving
the plan‘s goals and objectives.
www.gao.gov/cgi-bin/getrpt?GAO-03-628T
To view the full testimony, click on the link above.
For more information, contact John B. Stephenson at (202) 512-3841 or
stephensonj@gao.gov.
[End of section]
Mr. Chairman and Members of the Subcommittee:
We are pleased to be here today to discuss the Environmental Protection
Agency's (EPA) management of its grants. My testimony is based on
issued GAO reports and ongoing work we are conducting at the request of
the Chairman of the House Committee on Transportation and
Infrastructure and Representative Anne Northup. We plan to issue our
report this summer.
As you know, over the years, EPA has had persistent problems in
managing its grants. Grants constituted one-half of the agency's annual
budget or about $4.2 billion, in fiscal year 2002. EPA uses grants to
implement its ongoing programs to protect human health and the
environment and awards grants to over 3,300 recipients, including state
and local governments, tribes, universities, and nonprofit
organizations. With about half of its budget devoted to grants, EPA's
ability to efficiently and effectively accomplish its mission largely
depends on how well it manages its grant resources and builds
accountability into its efforts. Because of its grants management
problems, which we and the EPA Inspector General have repeatedly
reported on, we designated EPA's grants management as a major
management challenge in January 2003.[Footnote 1]
Our testimony today describes the (1) major problems EPA faces in
managing its grants, (2) actions EPA has taken in the past to address
these problems, and (3) recently issued EPA policies and a 5-year plan
to resolve these problems. In addition to our own reports, we examined
EPA's Office of Inspector General reports, EPA's internal management
reviews,[Footnote 2] and other documents to identify EPA's key grants
management problems.
In summary:
* EPA faces four key problems in managing its grants: (1) selecting the
most qualified grant recipients from a large applicant pool, (2)
effectively overseeing grantees throughout the life of the grant, (3)
measuring the results of its grantees' work, and (4) effectively
managing its grants staff and resources. EPA must resolve these
problems in order to improve its grants management.
* EPA has taken a series of actions in the past to correct these
problems, but several of these actions were not consistently successful
because of weaknesses in implementation and insufficient management
emphasis. For example, EPA issued three policies designed to improve
grantee oversight, but EPA staff did not consistently carry them out.
* Late in 2002, EPA launched new efforts to address some of its grants
management problems. In September 2002, EPA, for the first time, issued
a policy to promote competition in awarding grants. In December 2002,
it issued a new policy designed to better ensure effective grant
oversight. Finally, in April 2003, EPA issued a 5-year grant management
plan to address its long-standing grants management problems. While
these actions show promise, we are still early in our review of EPA's
new efforts.
Background:
EPA offers two types of grants--nondiscretionary and discretionary:
* Nondiscretionary grants support water infrastructure projects, such
as renovating municipal drinking water facilities, and continuing
environmental programs, such as the Clean Air Program for monitoring
and enforcing Clean Air Act regulations. For these grants, Congress
directs awards to one or more classes of prospective recipients who
meet specific criteria for eligibility. These continuing environmental
grants are often awarded on the basis of formulas prescribed by law or
agency regulation. In fiscal year 2002, EPA awarded about $3.5 billion
in nondiscretionary grants. EPA has primarily awarded these grants to
states or other governmental entities.
* Discretionary grants fund a variety of activities, such as
environmental research and training. EPA has the discretion to
independently determine the recipients and funding levels for these
grants. In fiscal year 2002, EPA awarded about $719 million in
discretionary grants. EPA has awarded these grants to nonprofit
organizations and universities in addition to governmental entities.
EPA administers and oversees grants through the Grants Administration
Division within the Office of Grants and Debarment, 12 program offices
in headquarters, and EPA's 10 regional offices. The Grants
Administration Division develops overall grants policy. About 102 grant
specialists in headquarters and the regions are responsible for
overseeing the administration of grants. EPA also has approximately
3,000 project officers within headquarter program offices and the
regions. These officers are responsible for overseeing the technical or
programmatic aspects of the grants. While grant specialists are
dedicated to grants management, EPA staff members who serve as project
officers have other primary responsibilities.
The grant process has four phases:
* Pre-award. EPA reviews the application paperwork and makes an award
decision.
* Award. EPA prepares the grant documents and instructs the grantee on
technical requirements, and the grantee signs an agreement to comply
with all requirements.
* Post-award. EPA provides technical assistance and oversight; the
grantee completes the work, and the project ends.
* Closeout of the award. The project officer ensures that the project
is completed; the grants management office prepares closeout documents
and notifies the grantee that the grant is completed.
EPA has had persistent problems in managing its grants. In 1996, EPA's
Inspector General testified before Congress that EPA did not fulfill
its obligation to properly monitor grants.[Footnote 3] Acknowledging
these problems, EPA identified oversight, including grant closeouts, as
a material weakness--a management control weakness that the EPA
Administrator determines is significant enough to report to the
President and Congress. EPA's fiscal year 1999 Integrity Act report
indicated that this oversight material weakness had been corrected, but
the Inspector General testified that the weakness continued. In 2002,
the Inspector General and the Office of Management and Budget
recommended that EPA, once again, designate grants management as a
material weakness. EPA ultimately decided to maintain this issue as an
agency-level weakness, which is a lower level of risk than a material
weakness. EPA made this decision because it believes its ongoing
corrective action efforts will help to resolve outstanding grants
management problems. However, in adding EPA's grants management to
GAO's list of EPA's major performance and accountability challenges in
January 2003, we signaled our concern that EPA has not yet taken action
to ensure that it can manage its grants effectively.
EPA Continues to Face Problems in Managing Its Grants in Four Key
Areas:
EPA faces four major, persistent problems in managing its grants. It
must resolve these problems in order to improve its grants management.
Specifically, EPA has not always:
* awarded its discretionary grants competitively or ensured that it
solicits these grants proposals from a large pool of applicants;
* effectively overseen its grantees' progress and compliance with the
terms of the grant;
* managed its grants so that they are effectively used to achieve
environmental results; and:
* effectively managed its grants management resources by holding its
staff accountable for performing their duties, ensuring that the staff
are adequately trained and appropriately allocated, and providing them
with adequate management information.
EPA Has Not Always Awarded Grants Competitively and Ensured Widespread
Solicitations:
Until September 2002, EPA did not have a policy for competing the
discretionary grants that might be eligible for competition--about $719
million of its total $4.2 billion in grant funding in fiscal year 2002.
Consequently, EPA was not promoting competition. According to EPA's own
internal management reviews and an Inspector General report, EPA did
not always compete its discretionary grants when competition might have
been warranted. By competitively soliciting grants, EPA would be able
to choose the best project at the least cost to the government and is
encouraged by the Federal Grant and Cooperative Agreement Act of 1977.
EPA can award its discretionary grants noncompetitively; however, it is
required by agency guidance to document the reasons for these decisions
in a "decision memorandum." It has not consistently done so, according
to EPA's internal management reviews. Lack of documentation raises
questions about the award process and ultimately about whether EPA is
providing its grant funds to the best-qualified applicants.
Furthermore, EPA has not always engaged in widespread solicitation when
it could be beneficial to do so. This type of solicitation would
provide greater assurance that EPA receives proposals from a variety of
eligible and highly qualified applicants who otherwise may not have
known about grant opportunities. According to a 2001 EPA Inspector
General report,[Footnote 4] program officials indicated that widespread
solicitation was not necessary because "word gets out" to eligible
applicants. Applicants often sent their proposals directly to these
program officials who funded them using "uniquely qualified" as the
justification for a noncompetitive award. This procedure creates the
appearance of preferential treatment by not offering the same
opportunities to all potential applicants. In addition, the agency
provided incomplete or inconsistent public information on its grant
programs in the Catalog of Federal Domestic Assistance and therefore
the public and potential applicants may not have been adequately
informed of funding opportunities.
EPA Has Not Always Effectively Overseen Grant Recipients:
EPA has faced five persistent problems in overseeing its grants. First,
EPA's internal reviews found that grantees' progress reports, one of
the best sources of information for monitoring recipients, did not
include required financial information, and grantees had not always
submitted progress reports in a timely fashion. EPA generally requires
recipients to submit progress reports to the project officer within a
specified time frame. These reports are to include progress to date,
any difficulties encountered, a discussion of expenditures compared to
work completed, and an explanation of significant discrepancies.
Although the recipient is responsible for submitting timely progress
reports that discuss the project's financial status, the project
officer is responsible for ensuring that the recipient has done so.
Second, project officers and grant specialists did not always document
their monitoring activities, which raises questions about the extent of
the monitoring they did conduct. According to an EPA internal review,
for example, one grants management office developed a form to ensure
monitoring activities were completed, but the form was missing from 50
percent of the grant files reviewed, and when the monitoring form was
used, it was not always completed. Furthermore, project officers did
not always document that they had monitored required key areas, such as
ensuring compliance with the terms and conditions of the grant
award.[Footnote 5]
Third, EPA has not always ensured that different types of grantees have
adequate financial and internal controls to ensure that they use
federal funds properly. For example, in 2001,[Footnote 6] we reported
that EPA's oversight of nonprofit grantees' costs did not ensure that
grant funds were used for costs allowed under guidance published by the
Office of Management and Budget.[Footnote 7] In particular, EPA's on-
site reviews were flawed. The reviews did not include transaction
testing to identify expenditures that are not allowed, such as
lobbying. We also found that EPA had conducted on-site reviews at only
4 percent of nonprofit grantees who might have had inexperienced staff
and inadequate financial and internal controls. In 2000 and 2002, the
EPA Inspector General reported that one state's department of
environmental management and two tribes, respectively, lacked adequate
financial and internal controls.[Footnote 8] These problems could have
been identified through EPA oversight of grantees.
Fourth, EPA has sometimes not ensured that grantees are complying with
certain grant regulations, such as those pertaining to grantee
procurement and conflict-of-interest. In 2002, the EPA Inspector
General reported that EPA did not monitor grantees' procurements to
determine if the grantees were using a competitive process to obtain
the best products, at the best price, from the most qualified
firms.[Footnote 9] In 1999 and 2002, the EPA Inspector General reported
conflict-of-interest problems because grant recipients had awarded
contracts to parties who had assisted them in preparing their grants
and therefore had advance knowledge about grantees' plans to award
contracts.[Footnote 10]
Finally, EPA has not fully ensured that recipients are submitting final
reports in a timely manner and meeting grant objectives. For example,
in 2000, we reported that EPA had not adequately tracked its Science To
Achieve Results research grants to ensure their on-time
completion.[Footnote 11] We found that 144 of the nearly 200 grants we
reviewed had missed their deadline for submitting final reports, even
after some extensions had been given. Also, in 1998, EPA's Inspector
General reported that EPA had not monitored training assistance grants
to nonprofit grantees to determine how many students were being trained
or how much the training cost.[Footnote 12]
EPA Has Not Always Managed Its Grants to Achieve Environmental Results:
EPA awarded some grants before considering how the results of the
grantees' work would contribute to achieving environmental results. In
2001, we reported that EPA program officials treated EPA's strategic
goals and objectives not as a tool to guide the selection of grants,
but rather as a clerical tool for categorizing grants after the funds
were already awarded.[Footnote 13] By assessing the relevance of these
grants to EPA's strategic plan after selecting the grantees, EPA cannot
ensure that it is selecting the projects that will best help it
accomplish its mission.
EPA has also not developed environmental measures and outcomes for all
of its grant programs. In 2000, we reported that EPA did not have
program criteria to measure the effectiveness of its Science To Achieve
Results program.[Footnote 14] Instead, EPA's management of the program
focused on the procedures and processes of awarding grants. As a
result, EPA was uncertain what the program was achieving. Similarly,
the Office of Management and Budget recently evaluated four EPA grant
programs to assess the programs' effectiveness at achieving and
measuring results.[Footnote 15] The office found that these four EPA
grant programs lacked outcome-based measures--measures that
demonstrated the impact of the programs on improving human health and
the environment. The office concluded that one of EPA's major
challenges was demonstrating program effectiveness in achieving public
health and environmental results.
EPA often does not require grantees to submit work plans that explain
how a project would achieve measurable environmental results. The
grantee work plan describes the project, its objectives, and the method
the grantee will use to accomplish the objectives. An effective work
plan should, among other things, list the grant's expected outcomes.
The project officer uses the work plan to evaluate performance under
the agreement. In 2002, EPA's Inspector General reported that EPA
approved some grantees' work plans without determining the projects'
long-term human health and environmental outcomes.[Footnote 16] In
fact, for almost half of the 42 grants reviewed, EPA did not even
attempt to measure the projects' outcomes. Instead, EPA funded grants
on the basis of work plans that focused on short-term procedural
results, such as meetings or conferences. In some cases, it was unclear
what the grant funding had accomplished.
EPA Has Not Effectively Managed Its Grant Resources:
Both EPA's internal management reviews and its Inspector General
reports have noted several problems in how effectively and efficiently
EPA manages its grants staff and other resources. In terms of staff,
the agency has not always held accountable its staff responsible for
grants management, such as project officers and grant specialists.
EPA's internal management reviews have found that, in some cases, job
descriptions or performance standards were inadequate. The Inspector
General recently reported similar findings.[Footnote 17] According to
the Inspector General, agency leadership had not always emphasized the
importance of project officer duties, nor held project officers
accountable for performing certain duties. More specifically, project
officer responsibilities were not clearly defined in their performance
agreements and position descriptions, and there were no consequences
when required duties were not performed.
EPA has also not provided all grant staff with the training necessary
to properly manage all aspects of grants. EPA's internal management
reviews have noted that some staff who were managing grants had not
completed the basic project officer training. Other staff may have
completed the basic training but needed additional training to refresh
their skills or to become familiar with all of their grants management
responsibilities and requirements. For example, in some instances,
project officers were not familiar with the five key areas they were to
review when monitoring grantees, such as the financial aspects of a
grantee's performance.
Internal management reviews also identified other staff-related
problems. For example, some internal reviews stated that EPA did not
have enough staff to adequately manage the number of grants it awards.
Furthermore, other reviews noted that uneven distribution of workload
among staff resulted in poor grants management.
EPA has also not adequately managed its resources for supporting grant
staff. Some EPA internal management reviews noted a lack of resource
commitment--time and money--to conduct grant management activities and
develop staff. This lack of resources has hampered staff in performing
their duties, according to these reviews. For example, some of these
reviews noted that grantee oversight, particularly the on-site reviews,
was limited by the scarcity of such resources as travel funds.
Finally, staff did not always have the information they needed to
effectively manage grants. According to several EPA internal management
reviews, staff lacked accessible or useable reference material--such as
policy and guidance documents, and other information resources, such as
reports of grantee expenditures. Additionally, we and others have
reported that EPA does not use information from performance evaluations
or information systems to better manage its grants. For example, one
EPA region did not analyze the results of its own internal surveys,
which were designed to assess the effectiveness of its internal grants
management operations.
EPA's Past Actions Have Targeted Some of the Key Problems but Have Not
Been Consistently Successful:
In recent years, EPA has taken a series of actions to address two of
its key problem areas: grantee oversight and resource management. It
has issued several oversight policies, conducted training, and
developed a new data system for grants management. However, EPA's
corrective actions have not been consistently successful because of
weaknesses in their implementation and insufficient management
emphasis.
EPA Has Taken Actions to Improve Oversight of Grantees and Resource
Management:
Between 1998 and 2002, EPA issued three policies to improve its
oversight of its grant recipients. These policies have tried to improve
oversight by establishing, expanding, and refining the activities of
EPA staff involved in managing grants. EPA took additional actions to
reduce the backlog of grants needing closeout.
* EPA's first policy, issued in May 1998, required grants management
office staff to monitor the financial progress and administrative
compliance of grant recipients' activities. The policy also required
the staff to conduct site visits or desk reviews to review the adequacy
of some grantees' administrative and financial systems for managing
their grants. Furthermore, the grants management offices had to submit
biennial monitoring plans, which included their proposed monitoring
activities. Finally, the policy included suggested criteria for
selecting grantees to be reviewed and guidelines for how to conduct the
oversight activities.
* EPA's second policy, issued in April 1999, added oversight
responsibilities for program staff in headquarters and the regions. The
policy required headquarters and regional program offices to submit
annual plans outlining their proposed monitoring activities. The policy
also suggested activities to be included in these plans, such as
monitoring grantees' progress of work, documenting their efforts, and
closing out grants in a timely manner.
* EPA's third policy, issued in February 2002, further refined its
oversight requirements by having grant management and program offices
conduct in-depth monitoring on at least 5 to 10 percent of their grant
recipients.[Footnote 18] The grant management offices had to assess
grantees' financial and administrative capacity, while the program
offices had to assess the grantees' activities in five key areas, such
as progress of work and financial expenditures. Furthermore, the grant
management offices, as well as regional and headquarters program
offices, had to report quarterly on their in-depth monitoring
activities. Additionally, the policy committed the Office of Grants and
Debarment to the development of a database, which, according to an EPA
official, the grants management offices would use to store the results
of their in-depth monitoring activities. Finally, the policy included
suggested guidance for how to conduct program office reviews.
One of the final steps in monitoring is "closing out" grants to ensure
that the project was completed and that any remaining funds are
recovered. In 1996, EPA had a backlog of over 19,000 grants needing
closeout. To reduce such backlogs and prevent future backlogs, EPA,
among other things, developed specific procedures for closing out
nonconstruction grants and identified a strategy for closing
construction grants that included assessing impediments to closing out
grants.
In terms of resource management, EPA provided grants management
training for its staff and some grant recipients. It developed and
periodically updated a training manual for project officers. EPA also
required project officers to attend a 3-day training course based on
this manual and periodically take a refresher course. EPA developed a
database to certify that project officers had completed this training.
According to an EPA official, grants specialists have also received
some training. Finally, EPA conducted a 1-day grants management
training course for nonprofit grantees and pilot-tested a standard
training course for grants specialists.
Finally, EPA has taken steps to improve another critical resource--its
primary data system for managing grants. In 1997, it began developing
the Integrated Grants Management System (IGMS), which, according to an
EPA official, will allow electronic management throughout the life of
the grant. EPA believes IGMS could help resolve some of the long-
standing problems in grants management by implementing controls to
prevent certain documents from being submitted without required
elements and providing electronic reminders of when certain activities
or documents are due. Additionally, EPA designed the system to reduce
the potential for data entry errors.
According to an EPA official, IGMS is being developed through modules.
In 2001, EPA began implementing the system to control the application
and award phases of a grant. Using IGMS, EPA will be able to review the
grantee's application, prepare and review EPA's documents, and approve
the award electronically. In April 2003, EPA will begin using the post-
award module of IGMS. This module will allow project officers to enter
project milestones into the system, communicate with other staff
involved in overseeing grants, receive electronic reports from
grantees, and initiate closeout activities electronically. EPA expects
that all staff will be using IGMS to electronically manage grants by
September 2004.
EPA's Past Actions Have Had Mixed Results and Have Not Been
Consistently Successful in Resolving Grants Management Problems:
EPA continues to face grant management problems, despite the corrective
actions it has taken to date. In 2002, EPA's Inspector General reported
that EPA's corrective actions were not effectively implemented and
specifically, for monitoring, found, among other things,[Footnote 19]
* inconsistent performance of monitoring responsibilities,
* inadequate preparation of monitoring plans,
* incomplete submission of quarterly compliance reports, and:
* considerable differences among the programs and the regions in the
number of on-site evaluations they conducted.
As part of our ongoing review, we are assessing EPA's corrective
actions for monitoring and have found mixed results. On the one hand,
we have seen some problems. For example, we identified two weaknesses
in the database EPA created to store the results of its in-depth
reviews. First, only grant management offices--not program offices--had
to enter the results of their reviews into this database, and according
to an EPA official familiar with the database, not all of them did so.
Second, according to the same official, EPA did not design the database
so that it could analyze the results of the in-depth reviews to make
management improvements.
On the other hand, however, we found that EPA's corrective actions
increased the oversight of its grant recipients. In 2002, EPA reported
that it had conducted 578 on-site reviews, and 629 desk reviews, which
is an increase in both the number of on-site reviews and the number of
reviews some offices conducted.[Footnote 20] In addition, EPA's 2002
internal reviews indicated some improvements in oversight compared with
the prior year's performance.
On another positive note, EPA has made improvements in closing out
grants. In 1998, we reported that in some instances EPA's corrective
actions to close out grants were not initially successful. [Footnote
21] For example, we had found that strategies to reduce the closeout
backlog were not always consistently implemented or failed to close out
a considerable number of grants, despite making some progress. However,
EPA had successfully resolved its backlog problem by 2002. As a result,
EPA has been able to eliminate this backlog as a material weakness and
receive better assurance that grant commitments have been met.
With respect to resource management, EPA implemented corrective actions
to improve training, but these actions have not been fully successful.
For training, the EPA Inspector General reported that the agency did
not have adequate internal controls in place to ensure that project
officers were in compliance with the training requirements.
Specifically, one region did not track the names and dates of project
officers who received training, the agencywide database on training for
project officers was inaccurate and had limited functionality, and the
on-line refresher course did not have the controls necessary to prevent
staff from obtaining false certifications.
In addition to the weaknesses in the corrective actions for specific
problem areas, the EPA Inspector General found two other problems.
First, the agency's internal grant management reviews did not
consistently examine issues to identify and address systemic
weaknesses, did not adequately identify the causes of specific
weaknesses or how the proposed corrective actions would remedy the
identified weakness, and were not sufficiently comprehensive.
Furthermore, the Grants Administration Division did not assess the
results of these reviews to make management improvements. Second, EPA's
senior resource officials did not ensure compliance with EPA policies
or sufficiently emphasize grantee oversight.[Footnote 22] The Inspector
General concluded that the lack of emphasis contributed to the
identified implementation weaknesses. In response to this assertion,
senior resource officials stated that monitoring is affected by the
limited availability of resources, and that they lack control over how
regional program offices set priorities. The Inspector General pointed
out that these officials are responsible for providing adequate
resources; however, none of the officials interviewed had conducted
assessments to determine whether they had adequate resources.
EPA Has Recently Issued New Policies and Developed a Plan to Address
Its Grants Management Problems:
EPA has recently issued new policies to address two of the key problems
we have identified--competition and oversight--and developed a 5-year
plan to address its long-standing grants management problems. In
September 2002, EPA issued a policy to promote competition in awarding
grants by requiring that certain grants be competed. These grants may
be awarded noncompetitively only if certain criteria are met, in which
case, a detailed justification must be provided. The new policy also
created a senior-level advocate for grants competition to oversee the
implementation of the policy. In December 2002, EPA also issued a new
oversight policy that increases the amount of in-depth monitoring--desk
reviews and on-site reviews--that EPA conducts of grantees; mandating
that all EPA units enter compliance activities into a database; and
requiring transaction testing for unallowable expenditures, such as
lobbying, during on-site evaluations reviews.
In April 2003, EPA issued a 5-year Grants Management Plan. EPA's
Assistant Administrator for Administration and Resources Management has
called implementation of this plan the most critical part of EPA's
grants management oversight efforts. The grants management plan has
five goals and accompanying objectives:
* Promote competition in the award of grants by identifying funding
priorities, encouraging a large and diverse group of applicants,
promoting the importance of competition within the agency, and
providing adequate support for the grant competition advocate.
* Strengthen EPA's oversight of grants by improving internal reviews of
EPA offices, improving and expanding reviews of EPA grant recipients,
developing approaches to prevent or limit grants management weaknesses,
establishing clear lines of accountability for grants oversight, and
providing high-level coordination, planning, and priority setting.
* Support identifying and achieving environmental outcomes by including
expected environmental outcomes and performance measures in grant
workplans, and improving the reporting on progress made in achieving
environmental outcomes.
* Enhance the skills of EPA personnel involved in grants management by
updating training materials and courses and improving delivery of
training to project officers and grants specialists.
* Leverage technology to improve program performance by, for example,
enhancing and expanding information systems that support grants
management and oversight.
Although we have not fully assessed EPA's new policies and grants
management plan, I would like to make a few preliminary observations on
these recent actions based on our ongoing work. Specifically, EPA's
plan:
* Recognizes the need for greater involvement of senior officials in
ensuring effective grants management throughout the agency. The plan
calls for a senior-level grants management council to provide high-
level coordination, planning, and priority-setting for grants
management.
* Appears to be comprehensive in that it addresses the four major
management problems--competitive grantee selection, oversight,
environmental results, and resources--that we identified in our ongoing
work. Previous EPA efforts did not address all these problems, nor did
they coordinate corrective actions, as this plan proposes. EPA's plan
ties together recent efforts, such as the new policies and ongoing
efforts in staff and resource management, and proposes additional
efforts to resolve its major grants management problems.
* Identifies the objectives, milestones, and resources needed to help
ensure that the plan's goals are achieved. Furthermore, EPA is
developing an annual companion plan that will outline specific tasks
for each goal and objective, identify the person responsible for
completing the task, and set an expected completion date.
* Begins to build accountability into grants management by establishing
performance measures for each of the plan's five goals. Each
performance measure establishes a baseline from which to measure
progress and target dates for achieving results. For example, as of
September 2002, 24 percent of new grants to nonprofit recipients that
are subject to the competition policy were competed--EPA's target is to
increase the percentage of these competed grants to 30 percent in 2003,
55 percent in 2004, and 75 percent in 2005. The plan further builds
accountability by identifying the need for performance standards for
project officers and grants specialists that address grant management
responsibilities.
Although these actions appear promising, EPA has a long history of
undertaking initiatives to improve grants management that have not
solved its problems. If the future is to be different from the past,
EPA must work aggressively to implement its new policies and its
ambitious plan through a sustained, coordinated effort. It will be
particularly important for all agency officials involved in managing
grants to be committed to and held accountable for achieving the plan's
goals and objectives.
Mr. Chairman, this concludes my testimony. I would be happy to answer
any questions that you or Members of the Subcommittee may have.
Contacts and Acknowledgments:
For further information, please contact John B. Stephenson at (202)
512-3841. Individuals making key contributions to this testimony were
Andrea Wamstad Brown, Christopher Murray, Paul Schearf, Rebecca Shea,
Carol Herrnstadt Shulman, Bruce Skud, and Amy Webbink.
FOOTNOTES
[1] See U.S. General Accounting Office, Major Management Challenges and
Program Risks: Environmental Protection Agency, GAO-03-112
(Washington, D.C.: Jan. 2003).
[2] EPA conducts three types of internal management reviews designed to
assess the effectiveness of grants management: Management Oversight
Reviews, Management Effectiveness Reviews, and Post-Award Validation
Reviews.
[3] Testimony of John Martin, Inspector General, U.S. Environmental
Protection Agency, before the House Subcommittee on National Economic
Growth, Natural Resources and Regulatory Affairs of the Committee on
Government Reform and Oversight, July 30, 1996.
[4] EPA Office of Inspector General, EPA's Competitive Practices for
Assistance Awards, Report No. 2001-P-00008 (May 21, 2001).
[5] The monitoring of key areas is required under EPA Order 5700.4,
Interim Grantee Compliance Assistance Initiative Policy, (Feb. 2002).
[6] U.S. General Accounting Office, Environmental Protection: EPA's
Oversight of Nonprofit Grantees' Costs Is Limited, GAO-01-366
(Washington, D.C.: Apr. 6, 2001).
[7] The Office of Management and Budget has issued three circulars
defining what are allowable costs for different types of grantees: A-
21, A-87, and A-122.
[8] EPA Office of Inspector General, Grant Management Practices of
Rhode Island Department of Environmental Management, Audit No. 2000-1-
00416 (Sep. 21, 2000); EPA Office of Inspector General, EPA Grants
Awarded to the Lower Brule Sioux Tribe, Report No. 100370-2002-1-000099
(Mar. 29, 2002); EPA Office of Inspector General, EPA Grants Awarded to
the Crow Tribe, Report No. 100370-2002-1-000098 (Mar. 27, 2002).
[9] EPA Office of Inspector General, Procurements Made by Assistance
Agreement Recipients Should Be Competitive, Report No. 2002-P-00009
(Mar. 28, 2002).
[10] EPA Office of Inspector General, Assistance Agreement X993795-01
Awarded by EPA to the Lake Wallenpaupack Watershed Management District,
Report No. 2002-M-00007 (Jan. 18, 2002); and EPA Office of Inspector
General, Report of Audit on the Center for Chesapeake Communities,
Report No. E6DEP8-03-0014-9100117 (Mar. 31, 1999).
[11] U.S. General Accounting Office, Environmental Research: STAR
Grants Focus on Agency Priorities, but Management Enhancements Are
Possible, GAO/RCED-00-170 (Washington, D.C.: Sep. 11, 2000).
[12] EPA Office of Inspector General, EPA's Training Assistance
Agreements, Report No. E1XMF6-03-0224-8100070 (Mar. 4, 1998).
[13] U.S. General Accounting Office, Environmental Protection:
Information on EPA Project Grants and Use of Waiver Authority,
GAO-01-359 (Washington, D.C.: Mar. 9, 2001).
[14] GAO/RCED-00-170.
[15] The four EPA programs assessed were the Drinking Water State
Revolving Fund, Leaking Underground Storage Tanks, Nonpoint Source
Grants, and Tribal General Assistance programs. The Office of
Management and Budget evaluated these programs using its Program
Assessment Rating Tool, a questionnaire that evaluated four critical
areas of performance: purpose and design, strategic planning,
management, results and accountability. These assessments were included
in the President's 2004 budget submission.
[16] EPA Office of Inspector General, Surveys, Studies, Investigations,
and Special Purpose Grants, Report No. 2002-P-00005 (Mar. 21, 2002).
[17] EPA Office of Inspector General, EPA Must Emphasize Importance of
Pre-Award Reviews for Assistance Agreements, Report No. 2003-P-00007
(Mar. 31, 2003).
[18] EPA calls this in-depth monitoring, "advanced monitoring."
[19] EPA Office of Inspector General, Additional Efforts Needed to
Improve EPA's Oversight of Assistance Agreements, Report No. 2002-P-
00018 (Sept. 30, 2002).
[20] EPA's Inspector General reported that EPA conducted 466 on-site
evaluations in 2001.
[21] U.S. General Accounting Office, Environmental Protection: EPA's
Progress in Closing Completed Grants and Contracts, GAO/RCED-99-27
(Washington, D.C.: Nov. 20, 1998).
[22] Senior resource officials are typically deputy assistant
administrators in headquarters offices and assistant regional
administrators, and are in charge of strengthening agencywide fiscal
resource management while also ensuring compliance with laws and
regulations.
