Environmental Protection Agency
Progress Has Been Made in Grant Reforms, but Weaknesses Remain in Implementation and Accountability
Gao ID: GAO-06-774T May 18, 2006
The Environmental Protection Agency (EPA) has faced challenges for many years in managing its grants, which constitute over one-half of the agency's budget, or about $4 billion annually. EPA awards grants through 93 programs to such recipients as state and local governments, tribes, universities, and nonprofit organizations. In response to concerns about its ability to manage grants effectively, EPA issued its 5-year Grants Management Plan in 2003, with performance measures and targets. This testimony is based on GAO's May 2006 report, Grants Management: EPA Has Made Progress in Grant Reforms but Needs to Address Weaknesses in Implementation and Accountability (GAO-06-625). GAO examined EPA's progress in implementing its grant reforms in four key areas: (1) awarding grants, (2) monitoring grantees, (3) obtaining results from grants, and (4) managing grant staff and resources.
EPA has made important strides in achieving the grant reforms laid out in its 2003 Grants Management Plan, but weaknesses in implementation and accountability continue to hamper effective grants management in four areas. First, EPA has strengthened its award process by, among other things, (1) expanding the use of competition to select the most qualified applicants and (2) issuing new policies and guidance to improve the awarding of grants. However, EPA's reviews found that staff do not always fully document their assessments of grantees' cost proposals; GAO also identified this problem in one region. Lack of documentation may hinder EPA's ability to be accountable for the reasonableness of a grantee's proposed costs. EPA is reexamining its cost review policy to address this problem. Second, EPA has made progress in reviewing its in-depth monitoring results to identify systemic problems, but long-standing issues remain in documenting ongoing monitoring and closing out grants. EPA and GAO found that staff do not always document ongoing monitoring, which is critical for determining if a grantee is on track in meeting its agreement. Without documentation, questions arise about the adequacy of EPA's monitoring of grantee performance. In addition, grant closeouts are needed to ensure that grantees have met all financial requirements, provided their final reports, and returned any unexpended balances. For fiscal year 2005, EPA closed out only 37 percent of its grants within 180 days after the grant project ended, as required by its policy. EPA also did not always close out grants properly in the regional files GAO reviewed. Third, EPA has initiated actions to obtain environmental results from its grants, but these efforts are not complete. For example, EPA's 2005 environmental results policy establishes criteria that grants should meet to obtain results. However, EPA has not established a performance measure that addresses these criteria. Furthermore, EPA has not yet identified better ways to integrate its grant reporting systems. The Office of Management and Budget's 2006 assessment also indicates that EPA needs to continue its concerted efforts to achieve results from grants. Finally, EPA has taken steps to manage grant staff and resources more effectively by analyzing workload, providing training, assessing the reliability of its grants management computer database, and holding managers and staff accountable for successfully fulfilling their grant responsibilities. Management attention is still needed because, among other things, EPA has just begun to implement its performance appraisal system for holding managers and staff accountable for grants management.
GAO-06-774T, Environmental Protection Agency: Progress Has Been Made in Grant Reforms, but Weaknesses Remain in Implementation and Accountability
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United States Government Accountability Office:
GAO:
Testimony:
Before the Subcommittee on Water Resources and Environment, Committee
on Transportation and Infrastructure, House of Representatives:
Environmental Protection Agency:
Progress Has Been Made in Grant Reforms, but Weaknesses Remain in
Implementation and Accountability:
Statement of John B. Stephenson:
Director:
Natural Resources and the Environment:
GAO-06-774T:
GAO Highlights:
Highlights of GAO-06-774T, a testimony before the Chairman,
Subcommittee on Water Resources and Environment, Committee on
Transportation and Infrastructure, House of Representatives.
Why GAO Did This Study:
The Environmental Protection Agency (EPA) has faced challenges for many
years in managing its grants, which constitute over one-half of the
agency‘s budget, or about $4 billion annually. EPA awards grants
through 93 programs to such recipients as state and local governments,
tribes, universities, and nonprofit organizations. In response to
concerns about its ability to manage grants effectively, EPA issued its
5-year Grants Management Plan in 2003, with performance measures and
targets.
This testimony is based on GAO‘s May 2006 report, Grants Management:
EPA Has Made Progress in Grant Reforms but Needs to Address Weaknesses
in Implementation and Accountability (GAO-06-625). GAO examined EPA‘s
progress in implementing its grant reforms in four key areas: (1)
awarding grants, (2) monitoring grantees, (3) obtaining results from
grants, and (4) managing grant staff and resources.
What GAO Found:
EPA has made important strides in achieving the grant reforms laid out
in its 2003 Grants Management Plan, but weaknesses in implementation
and accountability continue to hamper effective grants management in
four areas. First, EPA has strengthened its award process by, among
other things, (1) expanding the use of competition to select the most
qualified applicants and (2) issuing new policies and guidance to
improve the awarding of grants. However, EPA‘s reviews found that staff
do not always fully document their assessments of grantees‘ cost
proposals; GAO also identified this problem in one region. Lack of
documentation may hinder EPA‘s ability to be accountable for the
reasonableness of a grantee‘s proposed costs. EPA is reexamining its
cost review policy to address this problem.
Second, EPA has made progress in reviewing its in-depth monitoring
results to identify systemic problems, but long-standing issues remain
in documenting ongoing monitoring and closing out grants. EPA and GAO
found that staff do not always document ongoing monitoring, which is
critical for determining if a grantee is on track in meeting its
agreement. Without documentation, questions arise about the adequacy of
EPA‘s monitoring of grantee performance. In addition, grant closeouts
are needed to ensure that grantees have met all financial requirements,
provided their final reports, and returned any unexpended balances. For
fiscal year 2005, EPA closed out only 37 percent of its grants within
180 days after the grant project ended, as required by its policy. EPA
also did not always close out grants properly in the regional files GAO
reviewed.
Third, EPA has initiated actions to obtain environmental results from
its grants, but these efforts are not complete. For example, EPA‘s 2005
environmental results policy establishes criteria that grants should
meet to obtain results. However, EPA has not established a performance
measure that addresses these criteria. Furthermore, EPA has not yet
identified better ways to integrate its grant reporting systems. The
Office of Management and Budget‘s 2006 assessment also indicates that
EPA needs to continue its concerted efforts to achieve results from
grants.
Finally, EPA has taken steps to manage grant staff and resources more
effectively by analyzing workload, providing training, assessing the
reliability of its grants management computer database, and holding
managers and staff accountable for successfully fulfilling their grant
responsibilities. Management attention is still needed because, among
other things, EPA has just begun to implement its performance appraisal
system for holding managers and staff accountable for grants management.
What GAO Recommends:
GAO‘s recommendations in its May 2006 report were directed toward
strengthening ongoing monitoring, grant closeouts, and obtaining
results from grants. EPA has agreed to implement these
recommendations.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-774T].
To view the full product, including the scope and methodology, 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 work you requested on
the Environmental Protection Agency's (EPA) grant management reforms.
My testimony today focuses on the progress EPA has made in implementing
its grant management reforms and the problems that remain. This
testimony is based on the report being released today.[Footnote 1]
As you know, EPA has faced challenges for many years in managing its
grants, which constitute over one-half of the agency's budget, or about
$4 billion annually. In fiscal year 2005, EPA took 6,728 grant actions
involving funds totaling about $4 billion.[Footnote 2] These awards
were made through 93 programs to various types of recipients, with
states receiving the largest portion (about 75 percent) of the grant
funds.[Footnote 3] As of September 30, 2005, EPA was administering
grants through headquarters and regional offices to 4,075 grant
recipients. Given the size and diversity of EPA's grant programs, its
ability to efficiently and effectively accomplish its mission depends
to a large extent on how well it manages its grant resources and builds
accountability for results into its efforts.
In response to concerns about its ability to manage grants effectively,
in 2003, EPA issued its Grants Management Plan.[Footnote 4] In this
plan, EPA for the first time presented goals, objectives, milestones,
and performance measures with targets for tackling the agency's long-
standing grants management problems. The 5-year plan had five goals
that addressed major concerns we had identified in our 2003 report on
grants management.[Footnote 5] EPA has also issued policies to
implement the plan and other grant reforms.[Footnote 6] EPA is
currently revising this plan to reflect accomplishments achieved and to
address remaining issues.
Our testimony today assesses EPA's progress in implementing its grant
reforms for (1) awarding grants, (2) monitoring grantees, (3) obtaining
results from grants, and (4) managing grant staff and resources. To
address these issues, we conducted our work at EPA's headquarters and
regional offices. At EPA headquarters, we reviewed EPA documents from,
and interviewed officials of, the Office of Grants and Debarment and
the Office of Water, one of the program offices involved with grants.
We reviewed EPA's Office of Inspector General reports as well as the
Office of Management and Budget's (OMB) Program Assessment Rating Tool
(PART). [Footnote 7] In conducting our work, you asked us to address
the implementation of EPA's grant reforms at the regional level for
Clean Water Act programs. We selected Wetland Program Development
Grants because it is a discretionary grant program and Nonpoint Source
Management Program grants because it is a type of formula-based grant
program. We reviewed EPA's progress at the regional level by selecting
grants in 3 of EPA's 10 regional offices: Region 1 (Boston), Region 5
(Chicago), and Region 9 (San Francisco). We selected these regions, in
part, because, collectively, they represent a significant share of
regional grant funding for the two programs we reviewed and provide
geographic dispersion. Our regional work offers insights into regional
grant activities in the two programs in the three regions we visited,
but it is not generalizable to all grants in all regions because we (1)
selected only two of the programs conducted in these offices and (2)
incorporated nonprobability sampling into our grant selection process.
This testimony is based on GAO's report for which audit work was
conducted from February 2005 through April 2006, in accordance with
generally accepted government auditing standards.
In summary, EPA has made important strides in achieving the grant
reforms laid out in its 2003 Grants Management Plan, but weaknesses in
implementation and accountability continue to hamper effective grants
management in four areas. Specifically:
* Awarding grants. EPA has strengthened its award process by, among
other things, expanding the use of competition to select the most
qualified applicants and issuing new policies and guidance to improve
the awarding of grants. Nevertheless, EPA has found that staff do not
always fully document their assessments of grantees' cost proposals,
and we also identified this problem in one region. Without
documentation, EPA may be limited in its ability to be accountable for
the reasonableness of a grantee's proposed costs. EPA is reexamining
its cost review policy to address this problem.
* Monitoring grantees. EPA has made progress in reviewing the results
of its in-depth monitoring to identify systemic problems, but long-
standing issues remain in documenting ongoing monitoring and closing
out grants. EPA and we found that staff do not always document ongoing
monitoring, which is critical for determining if a grantee is on track
in meeting its agreement. Without documentation, questions arise about
the adequacy of EPA's monitoring of grantee performance. Lack of
documentation occurred, in part, because managers did not fulfill their
commitment to improve monitoring documentation. Grant closeouts are
needed to ensure that grantees have met all financial requirements,
provided their final reports, and returned any unexpended balances. For
fiscal year 2005, however, EPA closed out only 37 percent of its grants
within 180 days after the grant project ended, as required by its
policy. EPA also did not always close out grants properly in the
regional files we reviewed.
* Obtaining results from grants. EPA has initiated actions to obtain
environmental results from its grants, but these efforts are not
complete. For example, EPA's 2005 environmental results policy
establishes the criteria that grants should meet to obtain results.
However, EPA has not established a performance measure that addresses
these criteria. Furthermore, EPA has not yet identified better ways to
integrate its grant reporting systems. Finally, OMB's 2006 assessment
indicates that EPA needs to continue its concerted efforts to achieve
results from grants.
* Managing grants staff and resources. EPA has taken steps to manage
grant staff and resources more effectively by analyzing workload,
providing training, assessing the reliability of its grants management
computer database, and holding managers and staff accountable for
successfully fulfilling their grant responsibilities. Management
attention is still needed because, among other things, EPA has just
begun to implement its performance appraisal system for holding
managers and staff accountable for grants management.
Background:
EPA offers three types of grants. First, discretionary grants fund
activities such as environmental research and training, and EPA has the
discretion to independently determine the recipients and funding levels
for these grants. In fiscal year 2005, EPA awarded about $644 million
in discretionary grants. Second, nondiscretionary grants are awarded
primarily to state and local governments and support projects often on
the basis of formulas prescribed by law or agency regulation. In fiscal
year 2005, EPA awarded about $2.4 billion in nondiscretionary grants.
Finally, continuing environmental program grants contain both
nondiscretionary and discretionary features. In fiscal year 2005, EPA
awarded about $1 billion in grants for continuing environmental
programs.
EPA administers and oversees grants primarily through the Office of
Grants and Debarment in the Office of Administration and Resources
Management, 10 program offices in headquarters, and program offices and
grants management offices in EPA's 10 regional offices. As of September
30, 2005, 119 grant specialists in the Office of Grants and Debarment
and the regional grants management offices were largely responsible for
administrative and financial grant functions. Furthermore, 2,064
project officers were actively managing technical and programmatic
aspects of grants in headquarters and regional program offices. Unlike
grant specialists, however, project officers also have nongrant
responsibilities, such as using their scientific and technical
expertise.
EPA Has Strengthened the Award Process, but Lack of Key Documentation
Raises Accountability Concerns:
EPA has strengthened its award process by, among other things,
expanding competition to select the most qualified applicants. In
September 2002, EPA issued a policy that for the first time required
competition for many discretionary grants.[Footnote 8] EPA issued a
revised competition policy, effective January 2005.[Footnote 9] It
enhanced competition by, among other things, reducing the threshold for
competition from $75,000 to $15,000. EPA also issued a policy to
require certain nonprofit organizations to document that they have
administrative and financial systems to manage grants.
As part of its Grants Management Plan, the agency developed a
performance measure for increasing the percentage of new grants subject
to the competition policy that are actually competed and set increasing
targets for achieving this measure. According to EPA, about $249
million of the approximately $3.1 billion it awarded in new grants in
fiscal year 2005 were eligible for competition. EPA reports it now
competes a higher percentage of eligible grants, up from 27 percent in
fiscal year 2002 to 93 percent in fiscal year 2005, exceeding its
targets for fiscal years 2003 through 2005.[Footnote 10] The 7 percent
of eligible new grants that EPA reported it did not compete--which
totaled about $10 million of the $249 million eligible for competition
in fiscal year 2005--resulted from exceptions to the policy.
While EPA has improved its award process, its internal reviews in
program and regional offices have found that staff do not always fully
document their reviews of grantees' cost proposals. For example, in
2004 and 2005, in six of the seven program and regional offices it
reviewed, the Office of Grants and Debarment found either no
documentation of cost reviews or insufficient documentation.[Footnote
11] Furthermore, we also found this problem in one of the three regions
we visited. Region 5 has a checklist to ensure that staff members who
are responsible for each aspect of the cost review have completed and
documented their review before awarding a grant. For most of the 12
approved award files we reviewed, we found instances in which the
resolution of the issues between the project officer and grant
specialist was not documented. This documentation problem may hinder
EPA's ability to ensure the reasonableness of its grantees' estimated
costs for performing the proposed work. Because of the continuing
problems with documenting cost reviews, EPA is reexamining its cost
review policy for grants.
EPA Has Improved In-depth Monitoring to Identify Agencywide Problems,
but Weaknesses Remain in Ongoing Monitoring and in Closing Out Grants:
EPA has improved some aspects of monitoring, but long-standing problems
in documentation and grant closeouts continue. Specifically, (1) in-
depth monitoring results can be analyzed nationwide, but staff do not
always document corrective actions; (2) inadequate documentation of
ongoing monitoring hinders accountability; and (3) EPA has reduced its
closeout backlog, but grant closures are often delayed and sometimes
improperly executed.
In-depth Monitoring Results Can Be Analyzed Nationwide to Identify
Problems, but Staff Do Not Always Document Whether Corrective Actions
Have Been Taken:
EPA has begun to review the results of its in-depth monitoring to
identify systemic grantee problems, but staff do not always document
whether grantees have taken corrective actions. In fact, the Office of
Grants and Debarment found that corrective actions were documented for
only 55 percent of the 269 problems identified through administrative
and programmatic reviews. We reported similar results in August 2003.
According to an Office of Grants and Debarment official, while some EPA
staff took corrective actions, they did not document those actions in
EPA's grantee computer database.
Inadequate Documentation of Ongoing Monitoring Hinders Accountability:
EPA and we found that grant specialists and project officers do not
always document ongoing monitoring. Ongoing monitoring is critical
because, at a minimum, EPA conducts it on every grant at least once a
year throughout the life of the grant and uses the results to determine
whether the grantee is on track in meeting the terms and conditions of
the grant. However, our analysis of EPA's internal reviews indicates
that several offices experienced recurring problems in 2004 and 2005.
For example, an August 2004 Office of Grants and Debarment internal
review cited one regional office as having "very limited" documentation
of ongoing monitoring; and in the following year, the regional office's
self-assessment found the same documentation problem with project
officer files. A lack of documentation raises questions about the
adequacy of the project officers' and grant specialists' ongoing
monitoring of grantee performance.
Because of these documentation problems, two of the three regional
offices we visited have committed to using checklists to document their
ongoing monitoring. Regions 1 and 9 had implemented such checklists at
the time of our review. However, of the 40 project officer and grant
specialist files we reviewed in Regions 1 and 9, more than half of the
checklists were either missing, blank, or incomplete. Similarly, in
Region 5, which did not use a checklist, none of the six grant files
requiring annual contact with the grantee had documentation showing
that the contact had occurred.
In the three regions, we also found that project officers' files did
not always contain grantees' progress reports, which, according to
EPA's project officer manual, are the project officer's primary
mechanism for determining if the grantee is fulfilling its grant
agreement obligations. Thirteen of the 32 project officer grant files
we reviewed were missing at least one or more required progress
reports. When EPA staff do not obtain progress reports, they cannot
monitor effectively, which may hinder accountability.
The lack of documentation for ongoing monitoring occurs because of
weaknesses at the staff, supervisory, and management level in the three
regions we visited. Specifically:
* Grant specialists and project officers do not consistently document
key monitoring efforts, or they rely on other staff with technical
expertise to assist with ongoing monitoring who may not provide the
documented results for inclusion in the grant file. This situation
occurred in two of the three regions we visited.
* Supervisors do not always effectively review grant files for
compliance with grant policies in the three regions we visited.
* Senior EPA managers in the regions do not always ensure that their
commitments to improve monitoring documentation are being met. For
example, two regions had committed to using checklists to document
ongoing monitoring. However, more than half of the checklists we
reviewed in these regions were missing, blank, or incomplete.
Despite the importance of ongoing monitoring, EPA has not created a
performance measure for documenting ongoing monitoring that would
underscore its importance to managers and staff. Furthermore, EPA's
grants database has a data field for recording ongoing monitoring, but
recording this information is optional. Establishing a performance
measure and/or requiring the entry of information could enhance
accountability for implementing the monitoring policy.
EPA Has Reduced Its Closeout Backlog, but Grant Closures Are Often
Delayed and Sometimes Improperly Carried Out:
EPA incorporated grant closeout into its monitoring policy and its
Grants Management Plan.[Footnote 12] During closeout, EPA ensures that
the grant recipient has met all financial requirements and provided
final technical reports, and ensures that any unexpended balances are
"deobligated" and returned to the agency. Delays in closing out the
grant can unnecessarily tie up obligated but unexpended funds that
could be used for other purposes. EPA's policy states that closeouts
should occur within 180 days after the grant's project end date.
In the past, EPA had a substantial backlog of grants that it had not
closed out. EPA reported that, by 1995, the agency had amassed a
backlog of over 18,000 completed grants that had not been closed out
from the past two decades. In fact, EPA had identified closeout, among
other things, as a material weakness--an accounting and internal
control weakness that the EPA Administrator must report to the
President and Congress.[Footnote 13] As we reported in 2003, however,
EPA improved its closeout of backlogged grants, eliminating backlog as
a material weakness. Specifically, for fiscal year 2005, using its
historic closeout performance measure, EPA reported that it had closed
97.8 percent of the 23,162 grants with project end dates between the
beginning of fiscal year 1999 and the end of fiscal year 2003. EPA came
close to its 99-percent target of closing out this backlog.
EPA developed a second closeout performance measure--which we call the
current closeout performance measure. As EPA reported, the agency
closed out 79 percent of the grants with project end dates in fiscal
year 2004 by the end of reporting fiscal year 2005 (September 30, 2005)
but did not meet its performance target of 90 percent. However, EPA's
current closeout performance measure does not calculate whether EPA
closed the grant within 180 days. Rather, this measure only reports
whether EPA closed the grant by the end of the following fiscal year
(the fiscal year in which it reports on closeouts--the reporting year).
The measure, in fact, can allow for a much more generous closeout time-
-from 183 days beyond the 180 days to as much as 547 days (18 months)
beyond the 180 days--because EPA does not report the performance
measure until September 30, the end of the current fiscal year. EPA's
current performance measure for closing out grants is a valuable tool
for determining if grants were ultimately closed out. However, we
believe that this performance measure--taken alone--is not a sufficient
way to measure closeout because it does not reflect the 180-day
standard specified in EPA policy.
To determine the percentage of grants that were closed within 180 days,
we examined EPA's analysis of closeout time frames for regional
offices, headquarter offices, and agencywide. EPA is having significant
difficulty in meeting the 180-day standard. In fact, for fiscal year
2005, EPA closed out only 37 percent of the grants within the 180 days.
Table 1 shows that EPA's current performance measure is masking the
fact that the agency is having significant difficulty in closing out
grants within 180 days.
Table 1: Comparison of EPA's Performance against the Current Closeout
Measure and the 180-Day Standard, Fiscal 2005 Reporting Year:
Unit: Agencywide;
Percent of grants meeting the current measure and 180-day standard:
Current closeout performance measure: 79;
Percent of grants meeting the current measure and 180-day standard: 180-
day standard: 37.
Unit: Program offices;
Percent of grants meeting the current measure and 180-day standard:
Current closeout performance measure: 81;
Percent of grants meeting the current measure and 180-day standard: 180-
day standard: 35.
Unit: Region 1;
Percent of grants meeting the current measure and 180-day standard:
Current closeout performance measure: 96;
Percent of grants meeting the current measure and 180-day standard: 180-
day standard: 30.
Unit: Region 2;
Percent of grants meeting the current measure and 180-day standard:
Current closeout performance measure: 49;
Percent of grants meeting the current measure and 180-day standard: 180-
day standard: 26.
Unit: Region 3;
Percent of grants meeting the current measure and 180-day standard:
Current closeout performance measure: 97;
Percent of grants meeting the current measure and 180-day standard: 180-
day standard: 51.
Unit: Region 4;
Percent of grants meeting the current measure and 180-day standard:
Current closeout performance measure: 91;
Percent of grants meeting the current measure and 180-day standard: 180-
day standard: 43.
Unit: Region 5;
Percent of grants meeting the current measure and 180-day standard:
Current closeout performance measure: 37;
Percent of grants meeting the current measure and 180-day standard: 180-
day standard: 16.
Unit: Region 6;
Percent of grants meeting the current measure and 180-day standard:
Current closeout performance measure: 85;
Percent of grants meeting the current measure and 180-day standard: 180-
day standard: 49.
Unit: Region 7;
Percent of grants meeting the current measure and 180-day standard:
Current closeout performance measure: 90;
Percent of grants meeting the current measure and 180-day standard: 180-
day standard: 44.
Unit: Region 8;
Percent of grants meeting the current measure and 180-day standard:
Current closeout performance measure: 99;
Percent of grants meeting the current measure and 180-day standard: 180-
day standard: 45.
Unit: Region 9;
Percent of grants meeting the current measure and 180-day standard:
Current closeout performance measure: 76;
Percent of grants meeting the current measure and 180-day standard: 180-
day standard: 32.
Unit: Region 10;
Percent of grants meeting the current measure and 180-day standard:
Current closeout performance measure: 89;
Percent of grants meeting the current measure and 180-day standard: 180-
day standard: 52.
Source: GAO analysis of EPA data.
Notes: For the current closeout performance measure, GAO's analysis of
information from EPA's Grant Information and Control System database,
as of November 30, 2005; for the 180-day standard, GAO's analysis of
information from EPA's Grant Information and Control System database,
as of December 31, 2005.
[End of table]
Overall, a combination of grantee lateness and internal inefficiencies
contributed to late closeouts. For example:
* In Region 5, it took 795 days--615 days beyond the 180-day standard-
-to close out a 2-year wetland grant for $56,778. The grantee submitted
the final financial status report 114 days late because a key grant
contact had died. However, it took the region an additional 591 days
after the grantee provided the final reports to close out the grant.
According to the grant specialist, closeout was delayed, in part,
because of internal administrative delays and because the grant was
"lost" under a stack of other closeout files.
* In Region 1, closure of a nonpoint source grant that provided
$796,532 over 10 years was delayed primarily because of a lack of
documentation. According to the project officer who inherited the file
from a retiring employee, the file had unusually poor documentation.
Moreover, the state employee who assumed responsibility for the grant
also did not have a complete file. Consequently, it took the project
officer nearly 5 months beyond the allotted 180 days to complete close
out.
Adding to the agency's closeout problems, 8 of the 34 closed grants we
reviewed in the regions were not closed out properly. Specifically:
* In Region 5, one grant specialist's file was missing the final
financial status report, which is a key report that describes how the
grantee spent the grant funds and whether any unspent funds remain that
need to be deobligated.
* Region 1 grant specialists had not adequately reviewed the indirect
cost rate grantees submitted as part of their final financial status
report, which, in turn, led to improper closeout in 5 of the 10 files
we reviewed.
* In Region 9, Lobbying and Litigation Certification Forms--whose
purpose is to ensure that federal dollars are not spent for lobbying or
litigation activities--were missing from two grant files.
As with monitoring, without effective supervisory review of the grant
and project officer files, grants may be improperly closed out. With
more effective supervision, grants would be more likely to be properly
closed out.
EPA has formed a work group to review its monitoring and closeout
policies and plans to revise these policies in 2006.
EPA Has Initiated Actions to Obtain Results from Grants, but Its
Efforts Are Not Complete:
EPA has taken steps to obtain environmental results from its grants,
but its efforts are not complete. EPA included a performance measure in
its Grants Management Plan for identifying expected environmental
results from grants and issued an environmental results policy,
effective in January 2005. This policy, for the first time, requires
EPA staff to ensure that grant workplans specify well-defined
environmental results, which enables EPA to hold grantees accountable
for achieving them.
To assess the agency's effectiveness in implementing its environmental
results policy, EPA identified seven criteria that grant agreements
should meet. However, EPA's current performance measure does not take
into account the new criteria for identifying and measuring results
from grants established by the policy. Furthermore, EPA acknowledges
that it has not identified better ways to integrate its systems for
reporting on the results of grants. Until recently, EPA recognized--but
had not addressed in its results policy--the known complexities of
measuring environmental outcomes, such as demonstrating outcomes when
there is a long lag time before results become apparent. While EPA has
taken positive steps by issuing a results policy, OMB's evaluation of
EPA grant programs in 2006 indicate that EPA must continue its
concerted efforts to achieve results from its grants. Specifically, OMB
found that 5 of 18 EPA grant programs in 2006 are "ineffective" or
"results not demonstrated," although there has been some improvement
from 2004 through 2006.[Footnote 14] Despite this progress, a closer
examination of the ratings for 2006 indicated that, with one exception,
the scores for the results component were lower than the scores for
other components, such as planning and management.
EPA Has Taken Steps to Manage Grants Staff and Resources More
Effectively but Still Faces Major Management Problems:
EPA has taken steps to manage grants staff and resources more
effectively in four key areas: (1) analyzing workload; (2) providing
training on grant policies; (3) assessing the reliability of the
agency's grants management computer database; and (4) holding managers
and staff accountable for successfully fulfilling their grant
responsibilities. Nevertheless, management attention to these four
issues is still needed.
Analyzing workload. Fulfilling an objective identified in the Grants
Management Plan, in April 2005, an EPA contractor's analysis of project
officers and grant specialists showed that EPA had an overall shortage
of project officers and grant specialists, expressed in full-time
equivalents.[Footnote 15] The contractor recommended that before EPA
add staff, it take steps to improve the effectiveness and efficiency of
its grants management operations. As a result, grant offices are
preparing project officer workforce plans--due this year--that
incorporate the workload analysis.
Providing training. EPA has provided some training on grant policies;
however, according to EPA staff, the amount of training has not been
sufficient to keep pace with the issuance of new grant policies. Region
1 provided training for its project officers on the new awards process.
However, only about 25 of the region's 200 project officers attended
the optional 90-minute course, although they had three opportunities to
do so.
Assessing the reliability of the grants computer database. In 1997, EPA
began developing the Integrated Grants Management System to better
manage its grants; EPA now also uses this database to inform the public
and the Congress about its $4 billion investment in grants. Data
quality problems in this database could impair EPA's ability to
effectively manage grants and provide accurate information. In 2005, we
recommended that EPA conduct a comprehensive data quality review of its
Integrated Grants Management System.[Footnote 16] EPA expects to
complete this review in 2006.
Holding managers and staff accountable. In 2005, EPA's Inspector
General reported that EPA was not holding supervisors and project
officers accountable for grants management.[Footnote 17] In response,
EPA issued a plan in January 2006 to ensure that the agency's new
performance appraisal system addresses grants management
responsibilities. For the 2007 performance appraisal process, EPA plans
to establish a workgroup to develop final performance measures to
assess the grants management performance of project officers and
supervisors and to incorporate these measures into 2007 performance
agreements. Our review is consistent with the Inspector General's
findings. As previously discussed, EPA grants staff told us that their
supervisors were not reviewing their grant files to determine
compliance with grant monitoring policies. It is possible that the
awarding, monitoring, and closeout problems we found would have been
mitigated by effective supervisory review.
Mr. Chairman, about 3 years into its Grants Management Plan, 2003-2008,
EPA has made important strides in achieving its grant reforms, but it
has not resolved its long-standing problems in documenting ongoing
monitoring and closing out grants. As it revises its management plan,
EPA has an opportunity to tackle these continuing problems. In our
report, we recommended that the Administrator of EPA take actions to
strengthen ongoing monitoring, closing out grants, and obtaining
results from grants, and the agency has agreed to implement our
recommendations. At the same time, we believe that congressional
oversight has contributed to EPA's progress to date and that continuing
oversight is important to ensuring that EPA builds accountability into
the agency's efforts to achieve results from its $4 billion annual
investment in grants.
Mr. Chairman, this concludes my prepared statement. I would be happy to
respond to any questions that you or Members of the Subcommittee may
have.
For further information, please contact John B. Stephenson at (202) 512-
3841. Individuals making key contributions to this testimony were
Andrea Wamstad Brown, Bruce Skud, Rebecca Shea, Lisa Vojta, Carol
Herrnstadt Shulman, Omari Norman, David Bobruff, Matthew J. Saradjian,
and Jessica Nierenberg.
(360713):
[End of section]
FOOTNOTES:
[1] GAO, Grants Management: EPA Has Made Progress in Grant Reforms but
Needs to Address Weaknesses in Implementation and Accountability, GAO-
06-625 (Washington, D.C.: May 12, 2006).
[2] Grant actions involving funding include new awards, and increase
and decrease amendments.
[3] These awards were made to six main categories of recipients: states
(74.9%), local governments (9.8%), nonprofits (7.3%), universities
(4%), Native American tribes (3.5%), and other (0.6%).
[4] EPA, Grants Management Plan, 2003-2008. EPA-216-R-03-001
(Washington, D.C.: April 2003). The plan's goals are to (1) strengthen
the award of grants by using competition to select grantees for certain
awards to ensure that the best applicants are chosen; (2) monitor
grants to ensure that grantees are making progress toward their
objectives and, at the end of the project period, to ensure that
recipients have provided all financial and technical reports before
closing out the grants; (3) obtain results from grants by identifying
and measuring their environmental and public health outcomes; (4)
enhance the skills of EPA personnel involved in grants management; and
(5) leverage technology to improve program performance.
[5] GAO, Grants Management: EPA Needs to Strengthen Efforts to Address
Persistent Challenges, GAO-03-846 (Washington, D.C.: Aug. 29, 2003).
[6] For this testimony, grant reforms include EPA's Grants Management
Plan, policies issued just prior to and after the issuance of the plan,
and related efforts.
[7] OMB's PART is a diagnostic tool meant to provide a consistent
approach to evaluating federal programs.
[8] EPA, EPA Order 5700.5: Policy for Competition in Assistance
Agreements, (Sept. 12, 2002).
[9] EPA, EPA Order 5700.5A1: Policy for Competition of Assistance
Agreements, 5700.5A1 (Jan. 11, 2005).
[10] In fiscal year 2005, EPA competed 1,414 new grants, or 93 percent
of the 1,526 new grants eligible for competition.
[11] The site visits occurred in 2004 and 2005, and reports were issued
later.
[12] EPA has had a closeout policy in effect since 1992. See EPA, EPA
Closeout Policy for Grants and Cooperative Agreements, GPI-92-04 (Aug.
27, 1992).
[13] 31 U.S.C. § 3512.
[14] These assessments, which were part of the President's fiscal year
2005 to 2007 budget submissions, were published in February 2004, 2005,
and 2006, respectively.
[15] LMI Government Consulting, Management of Assistance Agreements at
the Environmental Protection Agency: Workload Analysis and Models,
April 2005.
[16] GAO, Grants Management: EPA Needs to Strengthen Efforts to Provide
the Public with Complete and Accurate Information on Grant
Opportunities, GAO-05-149R (Washington, D.C.: Feb. 3, 2005).
[17] EPA Office of Inspector General, EPA Managers Did Not Hold
Supervisors and Project Officers Accountable for Grants Management,
Report No. 2005-P-00027 (Washington, D.C.: Sept. 27, 2005).
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