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THE ENVIRONMENTAL PROTECTION

AGENCY’S GRANTS MANAGEMENT

2003-2006: PROGRESS AND CHALLENGE

(109–73)

HEARING

BEFORE THE

SUBCOMMITTEE ON

WATER RESOURCES AND ENVIRONMENT

OF THE

COMMITTEE ON

TRANSPORTATION AND

INFRASTRUCTURE

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

MAY 18, 2006

Printed for the use of the

Committee on Transportation and Infrastructure

(
COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

DON YOUNG, Alaska, Chairman

THOMAS E. PETRI, Wisconsin, Vice-Chair

SHERWOOD L. BOEHLERT, New York

HOWARD COBLE, North Carolina

JOHN J. DUNCAN, JR., Tennessee

WAYNE T. GILCHREST, Maryland

JOHN L. MICA, Florida

PETER HOEKSTRA, Michigan

VERNON J. EHLERS, Michigan

SPENCER BACHUS, Alabama

STEVEN C. LATOURETTE, Ohio

SUE W. KELLY, New York

RICHARD H. BAKER, Louisiana

ROBERT W. NEY, Ohio

FRANK A. LOBIONDO, New Jersey

JERRY MORAN, Kansas

GARY G. MILLER, California

ROBIN HAYES, North Carolina

ROB SIMMONS, Connecticut

HENRY E. BROWN, JR., South Carolina

TIMOTHY V. JOHNSON, Illinois

TODD RUSSELL PLATTS, Pennsylvania

SAM GRAVES, Missouri

MARK R. KENNEDY, Minnesota

BILL SHUSTER, Pennsylvania

JOHN BOOZMAN, Arkansas

JIM GERLACH, Pennsylvania

MARIO DIAZ-BALART, Florida

JON C. PORTER, Nevada

TOM OSBORNE, Nebraska

KENNY MARCHANT, Texas

MICHAEL E. SODREL, Indiana

CHARLES W. DENT, Pennsylvania

TED POE, Texas

DAVID G. REICHERT, Washington

CONNIE MACK, Florida

JOHN R. ‘RANDY’ KUHL, JR., New York

LUIS G. FORTUN ̃ O, Puerto Rico

LYNN A. WESTMORELAND, Georgia

CHARLES W. BOUSTANY, JR., Louisiana

JEAN SCHMIDT, Ohio

JAMES L. OBERSTAR, Minnesota

NICK J. RAHALL, II, West Virginia

PETER A. DEFAZIO, Oregon

JERRY F. COSTELLO, Illinois

ELEANOR HOLMES NORTON, District of

Columbia

JERROLD NADLER, New York

CORRINE BROWN, Florida

BOB FILNER, California

EDDIE BERNICE JOHNSON, Texas

GENE TAYLOR, Mississippi

JUANITA MILLENDER-MCDONALD,

California

ELIJAH E. CUMMINGS, Maryland

EARL BLUMENAUER, Oregon

ELLEN O. TAUSCHER, California

BILL PASCRELL, JR., New Jersey

LEONARD L. BOSWELL, Iowa

TIM HOLDEN, Pennsylvania

BRIAN BAIRD, Washington

SHELLEY BERKLEY, Nevada

JIM MATHESON, Utah

MICHAEL M. HONDA, California

RICK LARSEN, Washington

MICHAEL E. CAPUANO, Massachusetts

ANTHONY D. WEINER, New York

JULIA CARSON, Indiana

TIMOTHY H. BISHOP, New York

MICHAEL H. MICHAUD, Maine

LINCOLN DAVIS, Tennessee

BEN CHANDLER, Kentucky

BRIAN HIGGINS, New York

RUSS CARNAHAN, Missouri

ALLYSON Y. SCHWARTZ, Pennsylvania

JOHN T. SALAZAR, Colorado

JOHN BARROW, Georgia

(II)
SUBCOMMITTEE ON WATER RESOURCES AND ENVIRONMENT

JOHN J. DUNCAN, JR., Tennessee, Chairman

SHERWOOD L. BOEHLERT, New York

WAYNE T. GILCHREST, Maryland

VERNON J. EHLERS, Michigan

STEVEN C. LATOURETTE, Ohio

SUE W. KELLY, New York

RICHARD H. BAKER, Louisiana

ROBERT W. NEY, Ohio

GARY G. MILLER, California

HENRY E. BROWN, JR., South Carolina

BILL SHUSTER, Pennsylvania

JOHN BOOZMAN, Arkansas

JIM GERLACH, Pennsylvania

TOM OSBORNE, Nebraska

TED POE, Texas

CONNIE MACK, Florida

LUIS G. FORTUN ̃ O, Puerto Rico

CHARLES W. BOUSTANY, JR., Louisiana,

Vice-Chair

JEAN SCHMIDT, Ohio

DON YOUNG, Alaska

(Ex Officio)

EDDIE BERNICE JOHNSON, Texas

JOHN T. SALAZAR, Colorado

JERRY F. COSTELLO, Illinois

GENE TAYLOR, Mississippi

BRIAN BAIRD, Washington

TIMOTHY H. BISHOP, New York

BRIAN HIGGINS, New York

ALLYSON Y. SCHWARTZ, Pennsylvania

EARL BLUMENAUER, Oregon

ELLEN O. TAUSCHER, California

BILL PASCRELL, JR., New Jersey

RUSS CARNAHAN, Missouri

NICK J. RAHALL, II, West Virginia

ELEANOR HOLMES NORTON, District of

Columbia

JOHN BARROW, Georgia

JAMES L. OBERSTAR, Minnesota

(Ex Officio)

(III)

(V)

CONTENTS

TESTIMONY

Page

Luna, Hon. Luis A., Assistant Administrator for the Office of Administration

and Resources Management, U.S. Environmental Protection Agency ............ 4

Roderick, Bill A., Acting Inspector General, U.S. Environmental Protection

Agency ................................................................................................................... 4

Stephenson, John B., Director, National Resources and Environment, U.S.

Government Accountability Office ...................................................................... 4

Welsh, Donald S., Administrator, Region III, U.S. Environmental Protection

Agency ................................................................................................................... 4

PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS

Carnahan, Hon. Russ, of Missouri ......................................................................... 25

Johnson, Hon. Eddie Bernice, of Texas .................................................................. 26

Oberstar, Hon. James L., of Minnesota ................................................................. 41

PREPARED STATEMENTS SUBMITTED BY WITNESSES

Luna, Hon. Luis A. .................................................................................................. 31

Roderick, Bill A. ....................................................................................................... 45

Stephenson, John B. ................................................................................................ 53

Welsh, Donald S. ...................................................................................................... 31

(1)

THE ENVIRONMENTAL PROTECTION AGENCY’S GRANTS MANAGEMENT 2003-2006:

PROGRESS AND CHALLENGE

Thursday, May 18, 2006

HOUSE OF REPRESENTATIVES, COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, SUBCOMMITTEE ON

WATER RESOURCES AND ENVIRONMENT, WASHINGTON,

D.C.

The subcommittee met, pursuant to call, at 10:02 a.m., in Room

2167, Rayburn House Office Building, Hon. John J. Duncan, Jr.

[Chairman of the committee] presiding.

Mr. DUNCAN. I am going to go ahead and call this hearing to

order. I understand that Ranking Member Eddie Bernice Johnson

is on her way.

I want to first welcome everyone to our fourth hearing on EPA

grants management. Today, we are reviewing where the EPA

stands since this series of hearings began three years ago. There

was a history of troubling, sometimes even scandalous, EPA grants

that runs well back into the early 1990s. There had been an ongoing cycle of poor performance, new critiques, promised reforms,

and, unfortunately, repeated poor performance.

It has been this Subcommittee’s goal to ensure that improvements take place and become a permanent way of doing business

at the EPA. Areas in need of reform included, first of all, greater

competition in awarding grants; then other things such as a serious

follow-through in managing grants to ensure that grantees actually

spent grant dollars for the intended purposes. There had been some

instances where that had not been done.

Also, proper documentation of grant performance to make sure

that future awards were based on reality and not just promises;

and ensuring that EPA was awarding grants that were designed to

actually improve the environment, and not just buddy-buddy type

grants or awardings of money, and even instances where people refused to tell what had actually been accomplished or what the

grant was actually spent on.

I am encouraged to see that significant progress has been made

on a number of these initiatives. The EPA Office of Administration

and Resources Management has worked nonstop developing new

policies and guidelines, upgrading information technology programs, and providing agency-wide training. Some of the EPA regions have embraced these changes; they realize that grants issued

pursuant to the new guidelines will make sure that American taxpayers get a better value for the dollars spent. Many can also see
2

how important it is for actual environmental enhancement to become a consistent foundation of EPA grants.

The bad news is that some within the EPA still resist changing

their earlier practices, which requires less oversight and favored a

select group of grantees. The reports before us today from the Government Accountability Office and the EPA Inspector General show

there is still work to be done before the reforms are fully implemented on the ground. Fundamental lapses that still exist within

the system include a failure by managers and supervisors at EPA

to make grant management a regular part of an employee’s annual

performance review. Holding employees accountable for doing their

jobs properly is a key to the success of this program.

We understand that EPA has a new electronic system for project

officers to track their grants. It structures their awards and reviews of grants to improve the quality of their management. Unfortunately, the system is not being used by EPA managers to keep

track of the number of grants that are not awarded or managed according to the new guidelines. The EPA Office of Administration

and Resources Management has also developed new training materials and procedures to make sure the project officers are aware of

how they are to carry out the grants. There are even requirements

to participate in the training. However, GAO found that, in at least

one case they reviewed, only about 25 out of 200 project managers

in Region I attended a 90-minute course, even though it was offered three times.

For today’s hearing we have asked GAO and the EPA Inspector

General to present the results of their studies and for the two EPA

administrators to discuss how far we have come and what must

still be done to make EPA grants efficient and environmentally effective. I hope our witnesses will bring forward ideas on how we

can change the grant culture within EPA and ensure effective implementation of the reforms.

My objective in holding these hearings is to make sure that

American taxpayers are getting their money’s worth in the EPA

grants program. At the same time, grants should be designed to

produce an environmental benefit.

Let me now turn to my good friend, the Ranking Member, Ms.

Johnson, for any opening statement she would like to make.

Ms. JOHNSON. Thank you very much, Mr. Chairman. This is our

fourth hearing in an important series that addresses the deficiencies and proposed improvements in grants management at the

Environmental Protection Agency over the last three years. Today

we will have the opportunity to review the successes EPA has had

in achieving its goal through grant program reforms. We will also

hear about challenges EPA still faces with regard to project officer

accountability.

For more than a decade, EPA’s Inspector General and Government Accountability Office have catalogued EPA’s specific deficiencies in the area of grants management. EPA has repeatedly acknowledged these problems and its need to take corrective action

by developing and implementing an effective grants management

plan. However, some challenge remain. The EPA needs improvement in the areas of consistently funding grants that result in
3

measurable environmental benefits and in project officer accountability for poor grants management.

The EPA is our Nation’s primary protector of the environment

and natural resources. It is our duty to ensure that the funds we

spend to protect our environment produces the outcomes and benefits that we expect. Has the Nation’s water quality improved? Is

the air we breathe safe? It is imperative that we continue to provide ongoing oversight to ensure that effective and efficient management of grants produce positive outcomes.

We acknowledge that it is a real challenge to achieve and measure environmental results for grants funding. It is often simpler to

measure grants activities than to measure the environmental results of those activities, which may occur years after the grant was

completed. Also, the EPA continues to struggle with project officer

accountability. Grant specialists and project officers do not consistently document whether the grantee filing is fulfilling the terms

and conditions of its grant.

Although EPA has made significant progress with the longstanding issue of grant closeouts, the lack of consistent documentation

during the grant agreements make closing out in a timely manner

even more difficult. Good record-keeping helps to ensure that we

are getting the environmental benefit from the grant and helps determine whether a grantee should receive EPA grants in the future.

EPA is still not holding staff accountable for poor grant documentation or supervision. Although EPA has begun to establish accountability procedures, it still lacks a front-line personnel review

process to measure grants management activity. Generally, EPA

management does not measure project officer performance, nor routinely provide performance results of these activities to project officers.

I look forward to hearing the recommendations on how EPA can

continue to move forward to correct these systemic weaknesses. We

do not want the EPA to fall into an old familiar pattern: good intentions with no follow-through. We know that no policy will be

successful without consistent and effective agency-wide implementation, which will require extensive training of agency personnel

and a massive education campaign to reach thousands of grantees.

I welcome the witnesses here today and I look forward to their testimony.

I yield back.

Mr. DUNCAN. Well, thank you very much, Ms. Johnson.

We have a very distinguished group of witnesses here today. This

panel will consist of Mr. John B. Stephenson, who has been with

us before, from the GAO, the U.S. Government Accountability Office, and he is the Director of the National Resources and Environment Section. We have from the U.S. Environmental Protection

Agency three witnesses: Mr. Bill A. Roderick, who is the Acting Inspector General; the Honorable Luis A. Luna, who is Assistant Administrator for the Office of Administration and Resources Management; and Mr. Donald S. Welsh, who is the Administrator of Region III in Philadelphia, Pennsylvania.

We are very pleased and honored to have each of you here with

us. We do proceed in the order in which the witnesses are listed
4

in the call of the hearing. That means, Mr. Stephenson, we will go

with you first. We ask that all witnesses try to keep their opening

testimony to five minutes. We give you six minutes because we

know that is difficult to do, but once you see me start to wave this

in consideration of other witnesses, that means stop. Your full

statements will be placed in the record.

So, Mr. Stephenson, you may begin your testimony.

TESTIMONY OF JOHN B. STEPHENSON, DIRECTOR, NATIONAL

RESOURCES AND ENVIRONMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE; BILL A. RODERICK, ACTING INSPECTOR GENERAL, U.S. ENVIRONMENTAL PROTECTION AGENCY; HONORABLE LUIS A. LUNA, ASSISTANT ADMINISTRATOR

FOR THE OFFICE OF ADMINISTRATION AND RESOURCES

MANAGEMENT, U.S. ENVIRONMENTAL PROTECTION AGENCY; AND DONALD S. WELSH, ADMINISTRATOR, REGION III,

U.S. ENVIRONMENTAL PROTECTION AGENCY

Mr. STEPHENSON. Thank you very much, Mr. Chairman and Ms.

Johnson. Thank you for inviting GAO to testify today. My testimony today is based on the report that we issued to this Subcommittee, which we are releasing today, and there are copies out

on the front table.

EPA annually administers grants valued at nearly $4 billion dollars, we all know, to over 4,000 grant recipients, so it is no understatement to say that EPA’s success in accomplishing its mission

depends to a large extent on how well it manages these grants.

EPA has 119 grant specialists within its Office of Grants and Debarment who are largely responsible for setting grant policy and for

administrative and financial grant functions.

But it also has over 2,000 project offices within its program offices, both in headquarters and the regions, that are responsible for

monitoring progress and evaluating the results of these grants.

While grants management is not their primary responsible, they

are absolutely essential for ensuring that EPA’s grant policies and

procedures are effectively implemented.

In preparing our report, we conducted work at EPA headquarters, but more importantly at EPA’s regional offices, where

most of the grants are managed. We reviewed EPA’s progress in

implementing grant management reforms by, among other things,

examining grant files. We looked in three of the EPA’s ten regional

offices: Region I (Boston), Region V (Chicago), and Region IX (San

Francisco).

In summary, we believe that 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:

awarding grants; monitoring grants, including grants closeout; obtaining results from grants; and managing grant staff and resources.

Our in-depth review of grant files within the regional offices

showed that grant specialists and project officers do not always

document ongoing monitoring, nor do they always document corrective actions. In fact, corrective actions were recorded for only 55

percent of the 269 problems identified through EPA’s own adminis-
5

trative and programmatic reviews. This lack of documentation not

only raises questions about the adequacy of EPA’s oversight and

controls, but it hinders EPA’s ability to collect important data that

could be used in the future to better manage grants.

To address these problems, Region I and IX implemented a

checklist to improve monitoring. However, of the 40 specific grant

files we reviewed, more than half of the checklists were either

missing, blank, or incomplete. Similarly, in Region V, which did not

use a checklist, none of the 6 grant files we reviewed contained sufficient documentation to determine whether the required annual

contact with the grantee had even occurred.

EPA also has problems in closing out grants. As a result, EPA

is not ensuring that the grant recipient has met all financial requirements and provided final technical reports as required. Also,

delays in closing out grants can unnecessarily tie up obligated, but

unexpended, funds that could be used for other purposes.

A decade ago, EPA had amassed a backlog of over 18,000 completed grants that had not been closed out properly over the past

two decades. It deserves a lot of credit for working down this backlog. However, it is still only closing out only 37 percent of its grants

within its 180-day standard.

Adding to the agency’s closeout problems, 8 of the 34 closed

grants we reviewed in the regions were not closed out properly. For

example, in Region I and V, required financial status reports were

missing, and in Region IX lobbying and litigation forms, whose purpose is to ensure that Federal dollars are not spent for lobbying

and litigation activities, were missing from the grant files. In addition, EPA has not fully implemented its new policy requiring that

grant work plans specify well defined environmental results and,

thus, cannot ensure that grantees will be held accountable for

achieving them.

So, while we compliment EPA for establishing a good framework

of policies and procedures, it now needs to ensure that its supervisors, and project officers in particular, are adhering to them.

Project officers, as you mentioned, complained that training is not

sufficient to keep pace with the issuance of new grant policy. Yet,

as you observed, we think the fact that only 25 of Region I’s 200

project officers attended a 90-minute training course is indicative

of kind of the cultural problems there. This was not a mandatory

course, it was offered as a voluntary course, so something needs to

be more done in that area.

EPA may have the best grant policies and procedures in the Federal Government, but until project officers and their supervisors

see grants management as a priority, continued improvement will

be challenging for EPA.

Mr. Chairman, this concludes my prepared statement. I would be

happy to take questions at the right time.

Mr. DUNCAN. Well, thank you very much, Mr. Stephenson, and

thank you for your work on this topic.

Mr. Roderick.

Mr. RODERICK. Good morning, Mr. Chairman and members of the

Subcommittee. I am Bill Roderick, Acting Inspector General of

EPA. I am pleased to be here today to discuss the work that the

Office of the Inspector General has done to help EPA identify and
6

correct deficiencies in the management of its grant programs. I

have been asked specifically to discuss the issues of accountability

within EPA’s grants management process.

In response to a request from Chairman Young, we reviewed

whether EPA held supervisors and their project officers accountable for grants management. We found that EPA had made

progress in establishing accountability. For example, EPA has

issued policy statements that detail grants management responsibilities for project officers and established the role of the senior

resource officials as EPA’s primary points of accountability.

EPA still needs a process to measure grants management activities. Project officers are responsible for performing about 140

grants management tasks; however, EPA has no methodology to

measure whether the project officer performs these tasks effectively. Effective project officer performance increases the likelihood

that the grant will be successful.

We also found that supervisors generally did not discuss project

officer responsibilities during year-end evaluations. If grant issues

were addressed, the discussion focused on grant recipients’ performance rather than on specific project officer tasks. Out of 26

project officers we interviewed, only 5 said their supervisor had a

discussion with them about their project officer responsibilities during their year-end evaluation.

Supervisors provided various reasons for rating project officers as

successful without discussing grants management responsibilities.

For example, supervisors stated that the year-end evaluation

should focus on problems or issues with grantee performance or

that project officer responsibility should be discussed at staff meetings or at other times during the year. Other supervisors stated the

focus of the performance evaluation should be on EPA program accomplishments and not on project officer duties.

Finally, we found that managers did not discuss grants management during supervisors’ year-end evaluations, nor did they effectively communicate grants management weaknesses to supervisors

when identified. In turn, supervisors who were not aware of the

identified weaknesses could not instruct their project officers to correct them. Examples of some identified weaknesses include grants

without documentation that cost reviews, baseline monitoring, or

technical reviews had been conducted. These weaknesses were

identified through management reviews conducted by the Grants

Administration Division or self-assessments conducted by program

or regional offices.

We made three recommendations to help EPA fully establish a

system of accountability for grants management. Number one, establish a process to measure project officer, supervisor, and manager performance against grants management requirements; number two, ensure managers and supervisors review and discuss

grants management during performance evaluations; and, last, ensure that weaknesses identified in the management review or selfassessment are communicated to the appropriate project officer and

supervisor.

EPA agreed with our recommendations. This past January, EPA

provided us a detailed 12-step action plan to carry out our recommendations. This plan includes taking steps to ensure that
7

EPA’s performance rating system addresses grants management

responsibilities, among others. We believe this action plan, when

fully implemented, will adequately address our recommendations.

For the last few years, the OIG has looked at other grants management issues beyond accountability. We have evaluated EPA’s

progress in opening more discretionary grants to competition and

promoting competition at the maximum extent possible. We found

that EPA’s competition order was a positive step in promoting competition and can be improved in competition to the maximum extent possible. We have also reviewed whether EPA adequately

measures the environmental results of its grants to ensure that

they are having a positive impact on human health and the environment. We found that EPA can do more to measure results and

outcomes to determine whether grants are meeting their intended

purposes.

Mr. Chairman, in conclusion, the EPA has made progress overall

in improving grants management during the last few years. There

is clearly a commitment from EPA’s leadership to address the problems and weaknesses identified by us, GAO, and this Subcommittee. More can and should be done to improve grant accountability,

increase grant competition, and measure environmental results.

Given the billions of dollars EPA awards every year, we will continue to monitor EPA’s progress to ensure that it builds on the improvements made in managing its grants.

This concludes my prepared remarks. I would gladly answer any

questions the Subcommittee may have.

Mr. DUNCAN. Well, thank you very much, Mr. Roderick. And as

you said, I think because of the amount of money involved and the

number of grants we are talking about, you need to try to stay on

top of this as much as you possibly can. I think it is very, very important.

Mr. Luna.

Mr. LUNA. Thank you, Mr. Chairman. Thank you for the opportunity to appear before ths Subcommittee to review EPA grants

management, both the progress we have made and the challenges

that remain for us.

With me today is not only Don Welsh, who is EPA’s Region III

Administrator, but also a number of the agency’s top grants officials. We are paying very close attention to this issue.

This Committee, the Government Accountability Office, and

EPA’s Office of Inspector General, as you have already heard, have

raised legitimate concerns about the agency’s grants management

practices. I am here today to assure you we have heard those concerns, we are acting on them, and we are responding to the issues

that they have raised.

I will be brief because I do want to get to your questions, but let

me quickly review some of the work EPA has done thus far and

then address the issues that remain.

I want to begin at the appropriate place and point you back to

the work that was done by two outstanding EPA career employees:

David O’Connor and Howard Corcoran. Dave O’Connor was the

agency’s Deputy Assistant Administrator for Administration and

Resources Management and, therefore, the number two in the office that I now occupy. And before my confirmation as Assistant
8

Administrator, he was the acting head of that office. Earlier this

month Dave retired, after 31 years of distinguished Federal service.

Howard Corcoran, who is right behind me, was and is the head

of EPA’s Office of Grants and Debarment, and he responds to me.

Together, these two gentlemen were the ones who conceived of

and developed a long-term grants management plan. This was in

response to the challenges the agency faced with the grants management issues we have been talking about this morning. This plan

established the roadmap for our grants management reforms. I

think the plan has put the agency on course to yield sustainable

long-term results, as opposed to just quick hits.

When I was confirmed, I promised to give the plan a fresh look.

I have done so now and I am confident that the plan will indeed

accomplish what it was intended to do.

We are now halfway through the implementation of that plan,

and as you already have noted, Mr. Chairman, we have made important strides. As Congresswoman Johnson has pointed out correctly, we need to go beyond good intentions and get to accountability. I think we are getting there. These include better grants management training, full automation of the grants process, and policies to focus on both oversight and on outcomes. We have created

a system of internal reviews, which have been cited in the GAO’s

own report, to help us detect grants management weaknesses earlier. And with your permission, I would like to supply for the

record a chart that contains a list of what we have accomplished

thus far.

Mr. DUNCAN. That will be fine.

Mr. LUNA. Thank you.

And, yet, with all we have done, we also recognize we have much

more to do. The GAO, EPA’s own Inspector General, and this Committee have made clear that significant challenges remain. Their

concern, and yours, include accountability, environmental results,

and external peer reviews. And I assure you I share those concerns

and take them very seriously.

We still lack effective processes to measure most grants management activities. Our staff’s year-end evaluations do not generally

include discussions of grants management responsibilities. We have

continuing problems in documenting ongoing monitoring and in

closing out grants. To address these issues, we have set up a number of mechanisms.

One I will point you to is a new employee evaluation tool that

we set up this past year. We are requiring managers to discuss

with employees four key areas: competition, environmental results,

post-award monitoring, and pre-award reviews of nonprofit organizations. We have also provided guidance to program officers on how

to assess compliance with these new policies. Next year we expect

to have in place performance measurements to assess the grants

management performance of project officers, supervisors, and managers. These will be incorporated into their 2007 performance

agreements.

Firmly believing in the power of the carrot as well as the stick,

we are also going to explore new recognition and incentive programs for project officers and supervisors to encourage excellence

in grants management.
9

We think these steps, along with the changes the GAO recommends to our monitoring and closeout procedures, will help

strengthen our internal controls.

Now to the area of environmental results. GAO and the OIG

point out the need for grant work plans with measurable outcomes

and results. They are right. Virtually all of our grant work plans

have qualitative outcomes, but less than a fifth have quantitative

outcomes. We are, therefore, training our project officers how to

better define measures and evaluate the grantee’s performance.

In addition, we are going to be implementing GAO’s recommendation to develop new environmental performance measures

under the grants management plan. We are developing a standardized template for grant agreements with States, particularly for

State continuing environmental program grants and performance

partnership grants. This is a new template that will link to EPA’s

strategic plan and link to long-term and annual goals, and include

regular performance reporting. It will help us compare States’ past

performance and their future plans so we can see progress much

more readily.

This Committee has stressed the importance of external peer reviews to improve grants competition. I agree. The agency’s grants

competition advocate, Bruce Binder, also here with us today, has

come up with a way that I think will help. It will use external peer

reviewers to evaluate funding announcements before they go public

to see whether the proposed announcements have merit.

I think this preemptive, proactive approach can weed out bad

grant ideas early on, without creating costly and time-consuming

system that tries to chase the horse after it is out of the barn. We

will be presenting this idea this month to the agency’s Grants Management Council. After that panel’s review and concurrence, I hope

to have the new external peer review procedures in place next year.

While EPA headquarters is responsible for developing the policies needed for effective grants management, the agency’s regional

offices play a critical role in the implementation of those reforms.

You will hear about those momentarily. The latest GAO report underscores the need for regions to make significant improvements in

grants oversight, accountability, and closeout. We are working

closely with our regional administrators to do that. Our regional

administrators know what they have to do to hold their staffs accountable, and I think they are working to do so.

In summary, I believe EPA’s grants management plan is for real.

We put in place a comprehensive system to address our grants

management weaknesses. We have adjusted it in response to the

recommendations from GAO, the OIG, and this Committee. I hope

the results are beginning to show. Much remains to be done,

though, to create a culture of grants management that produces

transparency, accountability, and results. We are committed to

making that cultural shift. My goal is for EPA to become a best

practices agency, a role model, for grants management.

I will be happy to respond to your questions.

Mr. DUNCAN. Well, thank you very much, Administrator Luna.

Mr. Welsh.

Mr. WELSH. Mr. Chairman and members of the Subcommittee,

my name is Don Welsh. I am the Regional Administrator for EPA’s
10

Region III, the Mid-Atlantic Region. Thank you for the opportunity

to be here today.

I previously had the opportunity to speak before you, in October

2003, on the same question, grants management in EPA. At that

time I appeared as the EPA Regional Administrator having lead region responsibility for management, which included grants. And I

know I can speak for all of the other regional administrators when

I say that we take our grants management responsibilities very seriously, and we implement the policies developed by our headquarters offices, led by Mr. Luna.

With our headquarters, we have taken to heart the recommendations of the Government Accountability Office and the EPA Inspector General. Of the $4 billion awarded last year, fiscal year 2005,

the EPA regions awarded over 90 percent of those funds. In our region alone, we awarded over $320 million.

Since I last appeared before you, there have been marked improvements in the way EPA regions manage grants. Financial assistance programs are vital to EPA; they are a key component for

protecting human health and the environment through partnership

with our States, municipalities, and not-for-profit organizations. In

our region, we now have a comprehensive grants management plan

in place. Our program offices have 100 percent compliance with the

new grants competition policy which went into effect in January of

2005, and we are orienting project work plans to environmental results, and we are placing increased emphasis on ensuring grantee

organizations have the financial and administrative capability to

manage their grants.

However, I do want to acknowledge that there are still challenges. We have to build on what we have put in place and perform

our work more efficiently and effectively. I think the RAs, my

peers, will need to continue to reinforce to our managers and our

staff that we are serious about meeting the requirements and that

we will hold them accountable to the new practices that we are

putting in place. And we need to work with grantee organizations

to improve upon defining meaningful and measurable environmental results.

I want to assure you that all levels of our organization, from our

senior executives to our grant specialists and project officers, understand the necessity for sound grants management and our obligation to the public and Congress to ensure taxpayers’ dollars are

spent wisely.

Thank you, and I would be happy to answer your questions.

Mr. DUNCAN. Well, thank you very much, Mr. Welsh. As two or

three of you have mentioned, this subject involves, in fiscal 2005,

$4 billion in spending. It was 6728 grants offered through 93 different programs. And I mentioned in my opening statement this

was the fourth hearing that we have held on this in the last three

years.

What started this series of hearings, and what caused the staff

to start investigating this several months before our first hearing,

were some newspaper articles and news reports that reported of ridiculous grants being awarded, grants being awarded where there

were no final reports, where people couldn’t find out what the

grant had accomplished, a couple of instances where grantees re-
11

fused to tell the media what their grant was for or what work they

had done. And it appeared in some of these news reports and articles that in some ways some of these grants were becoming part

of a Federal gravy train and being given out to buddies or friends

or cohorts or former colleagues just as a way to give people some

extra money.

Now, it does appear from the testimony that each of you has

given that a lot of progress has been made. As I mentioned,

though, in my opening statement, the GAO found that in at least

one case only about 25 out of 200 project managers in Region I attended a 90 minute course on grants management, even though it

was offered three times. If those types of things are still going on,

then some people are not taking this nearly as seriously as they

should.

And if we think everything is okay after this hearing because

progress has been made, for which people should be commended,

if we don’t stay on top of it, then what is going to happen a year

or two or three years from now, you are going to start reading

these newspaper reports again or these new reports again about

some of these ridiculous or scandalous type things.

But having said that, before I get into any questions, I am going

to go first to Dr. Boozman and let him make any comments or ask

any questions that he might have.

Mr. BOOZMAN. Thank you, Mr. Chairman. And I do appreciate

the fact that you are holding this very, very important hearing.

The GAO has recommended that project officers document their

grant activities in EPA’s grants management database so managers can monitor their performance nationwide from EPA headquarters. What reaction have you gotten from the agency on this

and how will you follow up on this recommendation, if implemented?

Mr. STEPHENSON. We got very good responses. As you heard from

Mr. Luna, you know, they have taken all our recommendations

very seriously and are in the process of implementing them. The

structure is in place at EPA for good grants management. Now we

have to work on the details of implementation. The regions are taking this more seriously, but we are trying to recommend things

that will provide greater documentation, greater evidence that they

are indeed performing their tasks as we would expect them to.

I think you have good commitment at top management both in

headquarters and the regions. I still think there is some work to

do with the project officers level. There are so many project officers

that are so critical to overseeing grants that we have to do things

in their performance ratings and so forth to make sure that they

are doing that part of their job, albeit it is not their primary job.

So things like the little training course that we keep mentioning

should be mandatory, they shouldn’t be voluntarily. I mean, this is

a serious part of a project officer’s responsibility. So we follow up,

generally, all of our recommendations and reports. We don’t have

any planned ongoing grants work, per se, in this area, but we certainly will try to keep on top of this situation as we proceed.

Mr. BOOZMAN. Have you ever had to discipline any of the officers

for some of the things that have been very inappropriate? Has anybody gotten into any trouble or demoted for messing up?
12

Mr. WELSH. We don’t have a specific instance.

Mr. BOOZMAN. Fired?

Mr. WELSH. I don’t have a specific instance of anyone in Region

III that was fired for failing to carry out the responsibilities of a

grants manager. We do pay very close attention to it and we do

make certain that the managers are living up to their responsibility to hold the people who report to them to the requirements that

are part of our system for managing the grants. So it is certainly

taken into consideration in performance reviews and it is part of

the overall picture of rating someone’s performance, but I don’t

have an instance of an individual that was removed for any of

those reasons.

Mr. BOOZMAN. Okay. I am curious, though. Perhaps you can, at

some point, provide the Committee with instances where people

were, in any shape or form or fashion, disciplined for not following

the protocol. And then, too, I would be curious to know if these

were people that actually participated in the training seminars

later on. I mean, discipline and training is just basic stuff, and I

think that is really what the Committee is about--just following

just basic good business practices that all of us would follow in private business.

Mr. LUNA. Congressman?

Mr. BOOZMAN. Yes.

Mr. LUNA. If I might address that. There are two issues that you

are touching on. One is the fact that our performance appraisals

for our employees needs to be detailed and robust enough, with the

conversation, the dialog, and the expectations laid out clearly

enough, that our employees know what is expected of them. That

had been lacking until we instituted, this past year, a new performance appraisal system.

That system is designed to differentiate between the performance

among our employees to a greater degree than the agency had been

doing before. I referenced that very quickly in my testimony so as

not to get bogged down. But the idea here is to create accountability and then to have consequences, and those consequences are: not

getting as high a rating; not getting paid as much; not having the

rewards, the recognition, et cetera; and, ultimately, if people are

not doing their job well, then transfer or removal.

But there is a second issue here, and both Mr. Stephenson and

Mr. Roderick have touched on it in their testimony. We have, according to Mr. Roderick’s testimony, 2383 active project officers

managing grants. A lot of them are doing it as a collateral duty.

Most manage five or fewer grants; 29 percent manage only one.

About one-third of the project officers spend less than 10 percent

of their time on project officer responsibilities.

We can certainly make sure that the floggings continue until morale improves. At some point though, we need to understand that

some of these project officers are not doing enough of this work to

justify their focusing all the attention they should on it. That is one

of the challenges we have as an agency. We need to balance whether we should have as many project officers versus a centralized operation, whether to have people in the field who are actually closer

to the grantees and closer to the problems and understand what

the needs are. We need to consider the balance between a head-
13

quarters-centric approach and a regional office approach. Those are

the challenges that we have as managers trying to make this system work.

So, yes, we could fire somebody and we could do the public flogging. At the end of the day, however, I think this path of training,

reinforcing, holding people accountable, giving them reasons to do

this job well because it will improve environmental protection--

which is the reason why they are in Federal Government to begin

with--is going to bring us closer to a sustainable result, and that

is what we all want.

Mr. BOOZMAN. Good. Thank you very much. And don’t misunderstand. You know, the experiences I have had with the agency have

been very positive. I think the vast majority of you do an excellent

job, and I know that you and your staffs are working really hard

to solve these problems, but they are problems that we have got

to get solved. So thank you.

Mr. DUNCAN. Well, thank you very much, Dr. Boozman.

And Dr. Boozman is right, the key here—I mean, in these other

hearings we have held, I don’t think anybody has ever contended

that some of these abuses that we have talked about had not occurred in the past. But the key to improving these types of things

is accountability. And I think that things have improved because

they know that the GAO and the Inspector General and the media

and, to some extent, this Subcommittee have been trying to look

over their shoulder to see where these grants are going and what

they are accomplishing. And, unfortunately, we hadn’t been doing

enough of that, I guess, in years past, but I think maybe it has

helped some now.

Mr. Salazar.

Mr. SALAZAR. Thank you, Mr. Chairman.

This question is for Mr. Luna. I know that you mentioned in your

testimony that EPA was planning for a fully automated system for

your grants process. Could you expound on that a little bit and

could you also tell me how transparent that will be for review as

far as anything that we might see that may not be up to par?

Mr. LUNA. One of the things that I wanted to do from the moment I started in this job was to make sure all of the grants were

transparent, that the accountability be not only an internal one,

but also an external one; that people could see what we were doing,

what grants were being issued, to whom, in what amounts, what

the expected outcomes were, and whether the outcomes were indeed going to be achieved. We have made significant strides in

doing that.

The whole Federal Government is in the process of doing a number of E-Gov initiatives to create ready access for the public on how

to apply for grants and then how to track what happens with those

grants. This is a piece of that initiative. Internally, we are trying

to make sure everything is as automated as possible. Our internal

grants management system and our face to the public are both

things that allow managers to quickly, on their desktop, see information that they can use to manage grants. Our systems also allow

members of the public, members of this Committee, the media,

anybody, to access the information we have so we are not hiding

anything.
14

That transparency, that magnifying glass helps keep us focused

on the outcome we seek, which is to make the grants process clear,

so everybody understands what we are trying to achieve.

If you want additional information on the mechanics of how that

system works, I will be happy to submit something for the record.

Mr. SALAZAR. I would certainly appreciate that, sir, if you could

submit whatever information you have on that.

Mr. LUNA. Sure.

Mr. SALAZAR. Mr. Chairman, I yield back.

Mr. DUNCAN. All right, thank you very much.

Dr. Boustany.

Mr. BOUSTANY. Thank you, Mr. Chairman. First of all, let me

just say thank you to the EPA for the hard work that you did down

in Louisiana, my home State, in the aftermath of both hurricanes.

I appreciate the work.

Mr. Stephenson, I have a question. In your report you found that

the EPA staff complained on one side that they didn’t have enough

training in the area of new grants policies; at the same time, many

project officers did not show up when the training was provided.

Can you talk a little bit about that dichotomy?

Mr. STEPHENSON. Well, we did some detail—it was just an observation. We were there to look specifically into grant files and look

at the documentation in those files and see if in fact the policies

and procedures that were set forth at the headquarters were indeed followed, and it was sort of an aside. In Region I we noticed

that the training was voluntarily, admittedly.

I don’t know the specifics of why the attendance was so poor, but

in fact it was offered three times. And it seems to me that while

it is an ancillary duty for a project officer, it is nonetheless very

important and probably needs to be made more mandatory. If you

are going to be a project officer over even one grant, you need to

have the training so you understand the policies and procedures,

why they are important, and how they are supposed to work.

Mr. BOUSTANY. Thank you.

Mr. Roderick, what is your view of that inconsistency?

Mr. RODERICK. Sir, I wasn’t aware of it until now, and I am certainly not aware of—sir, I wasn’t aware of the details of that, since

I did not work on that job with him, and I can’t really say much

more than that about it.

Mr. BOUSTANY. Okay. Kind of a general question. What progress

is the EPA making in developing a system that will produce measurable environmental results from grant awards? I think this probably relates to the closeout issue, as well, but I would love to hear

your comment on this.

Mr. RODERICK. Sir, the EPA set up a 12-point plan with a schedule and they began to achieve that, and they are on schedule, as

far as we know, right now. As they get closer to the end, we will

probably do some more audit work to ensure that it was carried out

as planned. But at this point it looks good to us.

Mr. BOUSTANY. Thank you.

Mr. Welsh, do you have—

Mr. WELSH. Yes. We are really struggling with that issue not

only in grants management, but in all of our programs, to try to

develop real environmental measures that show us what is happen-
15

ing outside of our offices when we implement our programs. In

some areas we have made significant progress. We do have some

useful tools to use with programs like a pollution prevention grant.

We can measure the savings in solid waste created or in BTUs that

haven’t been used. In the clean bus program, for instance, we have

metrics that can tell us if you retrofit 10 school buses, what reductions in particulate pollution that brings about.

So in some areas we have been able to institute actual metrics

that show what we are getting for the work done. In other areas

it is a real challenge to come up with effective measures. For instance, in the grants area, a grant that pays for stream monitoring,

that monitoring is information that is very useful, it is going to

help us implement our programs more effectively and we think it

will lead to better environmental outcomes. But the direct environmental benefit from a stream monitoring program is difficult to

come up with measures for.

In Region III we actually reorganized to put together a division

whose primary responsibility is coming up with the new tools we

need using things like GIS and new databases that are available

that weren’t available when the agency was first created to try to

find ways of making better measures not only of what is happening

in the environment, but what impact our programs are having on

that.

And it is frequently a difficult challenge to come up with a measure that is really meaningful and that is meaningful in the kind

of time that is useful to a manager. You can occasionally show that

there has been an environmental benefit from a program over a 15-

year cycle, but that is not really enough information for us to be

able to say whether a particular manager and a particular program

is doing a good job that year.

So we are wrestling with that issue. I think we are—I started at

the agency in the early 1980s, so I can say that we have made significant progress over that time. But there really is—that is one of

the tough challenges that we are facing, in coming up with the

kind of metrics that are meaningful in the environment that will

help our managers decide when a grant has been effective, when

it hasn’t, when a regular program has been effective and when it

hasn’t.

Mr. BOUSTANY. Are you getting outside help in developing those

metrics or is it just an internal process

Mr. WELSH. The folks that I have assigned to it are internal, but

there are many, many people across the Country who are trying to

climb that same tree such as the Environmental Council of the

States. They have been looking at those issues. There are many

other academics around the Country who have been trying to find

those metrics, and I have a shelf in my office full of the literature

from various organizations like the National Academy of Public Administration, about how you get better results, many other reports

like that. So we are trying to avail ourselves of the knowledge that

is out there wider than just at EPA. But I think in all areas this

is a growth industry of people trying to find the effective ways of

measuring those outcomes.

Mr. BOUSTANY. I thank you, Mr. Chairman. I yield back.

Mr. DUNCAN. Thank you very much, Dr. Boustany,
16

Ms. SCHWARTZ. Thank you very much, Mr. Chairman, for the opportunity to engage in a couple questions. And just following up on

the previous questions,, it seems one of the maybe hard to measure, but to the degree you do studies and that information could

and should be useful—just a follow-up—what kind of dissemination

of that information, how do you—again, this may not be a project

manager’s role, but for it to be effective, someone who can then

take action on that report needs to have the information, needs to

know how to use it, and so does the next person in line in your own

shop be able to know that that has been done.

So could you just speak to how do you then take what might be

a very interesting study, might be useful in some way, but they are

internally the EPA or locally make that useful to the next person

who could take that information and really make a difference in

what they are doing next?

Mr. WELSH. There probably isn’t one magic answer to that. We

certainly struggled with it. Having worked in government for a

long time, I know that there is occasionally a tendency for even a

very well prepared and very useful report to end up gathering dust

on that shelf I mentioned in my office. So one of the things that

we did in Region III is reorganized to make sure that we had folks

whose specific mission was to look at all the data tools that we had

available and make sure that we were using them effectively.

So I think it takes reinforcement in individual cases. I don’t

know of a system that will assure that reports are put to effective

use, but I think by giving a senior manager who reports to me the

specific job of making sure that we are making the best use of the

data that we have available, we can make improvements and try

to prevent an expensive and well written report from becoming a

doorstop and, instead, being something that we are using to improve the environment.

Ms. SCHWARTZ. Okay. Just a suggestion there, too, is to the degree to which that then ends up going to—I am from Pennsylvania,

as Mr. Welsh knows, and there are so many municipalities, there

are so many authorities that have a role in this. The questions of

local and, of course, county and State. As you also know, some of

the environmental issues cross the political lines, so that makes it

really very difficult to make sure that even neighboring townships

know about it or the county knows about it or the State knows

about so that when they take action they have resources to do that.

Obviously, the internet is a great way to post what information

is available, but do you do that? Do you actually tell the county all

the studies that have been done in the county and the information

is now available, just as a simple way to make sure it is used?

Mr. WELSH. I think that is a great suggestion. I don’t think we

have a system in place to assure that that happens in every case,

but we have used some very useful tools to put together what we

call story boards, and it is designed to be something that anyone

can understand. I don’t have a technical degree, so when my own

staff has to brief me on some of these things, I need to be able to

understand what that data is telling us, and those story boards are

something that you can effectively take to someone who is not

schooled in the programs or schooled in the science and show them

what information we have available. And I will take your sugges-
17

tion that perhaps we should take that show on the road and offer

that to the local Government Advisory Council or to the Association

of Counties in the different States and maybe make better use of

it that way.

Ms. SCHWARTZ. Which leads me to the question I am prepared

to ask, and that is it seems to me—and I think we may have been

pushing on this—that you need—and this may be for Mr. Luna as

well. We need to make sure—I understand there are checklists of

what project managers have to review, what information they have

to get. That seems to me extremely important to do. Having said

that, there are two potential negative consequences of that, and

that is that for project managers spending time on simple administrative checklists that could be done by someone else, particularly

if they have the technical expertise; and, secondly, that they fill out

the form, they do the whole checklist, but then—to use the expression—they don’t see the forest for the trees, so that a project that

may be doing all that it is supposed to do but missing the big picture or there is a real problem that is not being addressed that he

or she knows but is not on the checklist.

Answer both questions, if you may. To the degree they are spending time on technicalities, the famous bureaucratic technicalities

and wasting time that they could be using in a better way; and,

secondly, that they are not actually overseeing the broader questions that may come up in terms of a project that is not going well,

needs to go in a different direction, but in fact they have checked

off every box that they have had to.

Mr. LUNA. Not to minimize your question, but if this were easy

to do, it would’ve been done a long time ago. This question of how

to find the balance between doing the bureaucratic piece of the puzzle, the paperwork, and having the strategic overview and perspective is one that is affected by time and resources. There are only

so many hours in the day. There are only so many people who can

do the work. Training people to simply go through checklists sometimes makes them miss the obvious for that very reason, as you

have said.

To piggyback on what Don has already said, the question is one

of trying to develop robust, coherent, meaningful performance

measurements that really get to the heart of the matter. It’s the

′′Why are we here?′′ ′′Why are we doing this?′′ We put money out

the door. We are great at measuring money, but so what? What is

the consequence? What is the outcome? To do this involves a partnership between the agency and the grant recipients. We are not

as well versed as somebody in a given community about what their

particular needs are. They have a sense of what needs to be done,

but in order for us to give them the money and then be comfortable

that the money is being spent the way it is intended, we need to

have them help us identify what those outcome measurements are,

as well as apply the more academic exercises and the more esoteric

tools that we have.

It really has to be done by both the agency and the grant recipient. If we simply issue an edict and say, ′′Thou shall produce this

quantity of water cleanup by giving you this amount of money,′′ it

misses the point about how difficult it is, it misses the point of how

many other inputs there are, and it misses the point of how some-
18

times outcomes take a long time to produce. And this year’s million

dollar grant may not produce a result for ten more years.

Ms. SCHWARTZ. I think my time is up, but if I may offer this suggestion. I think some of this—and I think you spoke to some of it

before—is that it also has to come from the culture within the

agency, and some of that has to do with training and the expectations that are put on project managers, as to how much they can

speak up, what kind of interaction they can have, both with the

grantee and, of course, with your higher-ups. So I would suggest

as part of the training—and I think the suggestion that maybe it

needs to be mandatory and not voluntary—has to include the expectations and the culture about what is the intent of the grant,

what are you hoping to achieve, and to provide some appropriate

permission for there to be some narrative as well as administrative

and technical checkoffs.

I think, with that, my time is up.

Mr. WELSH. I would like to offer a particular example,—

Mr. DUNCAN. Go ahead. That is fine.

Mr. WELSH.—if the Chairman will indulge. In the region, on

their first question about their paperwork and tying up the person

in what becomes administrivia [sic], we are implementing a system

of senior project officers so that there is one person whose primary

responsibility is to liaison with our grants folks and make sure that

all of the people who are project officers in that division are kept

up to date on what the rules are and any changes and new policies

and guidance so that we don’t rely on each individual person to

make sure they know what changes are going on. We also will have

assistant project officers who can help. Typically, as a new grant

program is developed, the technical person who understands that

area of water monitoring or whatever it might be will become the

project officer, and we really need their brain to be thinking about

the technical issue about the program. So we think those two wrinkles will help reduce the sort of paperwork burden, but still get the

job done.

On the other question, not in a grants area, but in a program

area, we had exactly what you described happen once, that we had

the folks who were watching paying so much attention to whether

each box was checked and that each step was followed in the process that they missed the fact that it wasn’t being effective. And

what we did there is we want to put another set of eyes so when

someone looks at the list and says is that done, a management set

of eyes says, ′′well, was it effective?′′ Ms. SCHWARTZ. Fair enough. Thank you very much.

Mr. DUNCAN. Well, thank you, Ms. Schwartz. And I certainly appreciate the comments and suggestions and the direction Ms.

Schwartz headed in. You know, obviously, or one obvious goal of

these hearings has been, and one obvious goal of the work of all

four of these witnesses has been to keep these grants from becoming jokes or embarrassments or scandals. But I liked Mr. Welsh’s

comment. Another goal is to make sure that these grants do some

good and actually help some people. And, you know, Mr. Welsh’s

comment hit the nail on the head when he said that we need to

make sure that effective, important, well written reports don’t just

become doorstops. And that is a very good comment.
19

Ms. Johnson.

Ms. JOHNSON. Thank you, Mr. Chairman.

First, let me ask unanimous consent to have the statement of

Democratic Ranking Member Oberstar and my full statement

placed in the record.

Mr. DUNCAN. Without objection, so ordered.

Ms. JOHNSON. Thank you.

I want to ask if there was an evaluation of a project done in Region III and one done in Region VI, could you compare apples to

apples? Is there enough standardization in the evaluation?

Mr. STEPHENSON. Are you asking each of us?

Ms. JOHNSON. Yes.

Mr. STEPHENSON. Yes. I think the policies, the implementation,

checklists, the administrivia [sic], which I hate to all it because it

is more important than that, should be pretty uniform from region

to region. The type of grants that they are might be very different,

but, nevertheless, the oversight responsibilities and the assurances

that you are getting good outcomes from those grants should—the

process for ensuring that should be fairly uniform. So, yes. We

have some statistics in our report across-the-board for closeouts, for

example, and there are slight variations from the regions, but in

general they are all in the same ballpark.

Ms. JOHNSON. When you underscore the need for regions to make

significant improvements, what area the oversight accountability,

where you specifically—

Mr. STEPHENSON. Well, again, the culture at the top is just fine.

That has to translate down to these 2300-plus project officers who

share responsibility for effective grants oversight. It isn’t their primary job, as has been said many times. I am sure many of them

think it is a nuisance to fill out this documentation. Every bureaucracy—in GAO we have procedures that I think are a nuisance.

Nevertheless, that is an important part of their job, and unless you

have good data, you can never improve the overall results that you

are getting for grants; you can never assure that you are performing that effective oversight. It is not that time-consuming to take

a look at a grant one time a year and to check results at the end.

The details of whether we have too many project officers or not

enough, or whether they need administrative assistance or what

are not for me to answer. I just think that it is an important part

of their job that needs to continue to be emphasized.

Ms. JOHNSON. One more question to you before I move on. You

found that regional officers noted that grant reforms are changing

the skill mix required of both project officers and grant specialists.

Could you elaborate on that?

Mr. STEPHENSON. Well, a clean water expert is hired because of

his expertise in that area, be it monitoring or—I mean, these are

basically scientists, so to lay on top of that some grant management responsibility that they think is probably not what they were

hired to do makes it a challenge to get them to do the right thing.

So, as Mr. Luna said, it is a balancing act, you know, between the

overall responsibilities they have on a clean water program, for example, and their responsibilities for making sure that the grants—

which I remind you is one-half of the budget, so should be a large

percentage of how they spend their time. That is a balancing act.
20

That is the challenge that we face here, and continued oversight

has made a big difference.

Ms. JOHNSON. Thank you.

Do you have any comments?

Mr. RODERICK. No, ma’am.

Ms. JOHNSON. Mr. Luna?

Mr. LUNA. You are, again, touching on the fundamental issues

that we need to address as an agency and about the culture of the

agency. I think it is possible to be consistent across the agency. We

are looking for environmental outcomes. We are looking for improvements in the quality of life for the American people. It might

be slightly different in New Mexico than it is in Texas than it is

in New Hampshire than it is in Colorado, but the bottom line is

still: did we make progress? Did we have a positive change in the

environment? And if we didn’t, then we have wasted our time and

our money. That is the question we want to make sure gets answered, first by the announcements that are put out, then by the

responses that come in. The people who apply for grants must understand it. We need to make sure they are prepared to spend that

money wisely. We are trying to make sure that our folks understand that they need to hold those grantees accountable, and we

need to make sure that our folks then do the paperwork, because

without the paperwork the job isn’t done.

So, at the end of the day, I think we can indeed compare apples

to apples to apples and see if there is a change.

Ms. JOHNSON. Thank you very much.

Thank you, Mr. Chairman.

Mr. DUNCAN. Thank you, Ms. Johnson.

Mr. Stephenson, you indicated that the EPA has improved its—

or it is reported that the EPA has improved its competitive award

process from 27 percent to 93 percent of eligible grants. The Inspector General said that the number of eligible grants should be expanded. Do you agree with that? And could you more fully, for the

record, put this number into context? For instance, what I am getting at, there is a large number of these grants that aren’t eligible.

Mr. STEPHENSON. Yes. We didn’t look at this issue specifically,

but of that 4 billion pot that we keep talking about, many of them

go to continuing environmental grants, go to the States under the

Clean Water program, the Safe Drinking Water. There are formulas to the States and the States presumably have their risk system for how they award those in terms of grants.

But there is—I think it is down to less than 700 million now in

discretionary grants. But even many of those are legislatively mandate, so there is not as much flexibility as there might be across

all those discretionary programs. So when you scrub all those out,

you are down to about, I think, 250 million—don’t hold me to these

specific numbers, but they are in the ballpark—that can be competed. So that 97 percent is the amount of that 250 million that

is being competed, which is very good. I think the IG has done a

little bit more work on whether we can expand that universe of

program areas that can be competed without violating any laws or

legislative intent, and I think they are working with EPA on that

issue now.
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So, I mean, we should always be looking to expand that universe

of grants that we can compete. I think you will get better outcomes

if you do that.

Mr. DUNCAN. How much interaction with the States on this formula money is done by EPA, interaction with the State environmental authorities? Or how much reporting is done back by the

States to the EPA on all this formula money that is going to the

States? Should there be—is there a lot of interaction and a lot of

reporting so that EPA pretty much knows exactly what is happening to all this money, or should there be more done in that area?

Mr. STEPHENSON. I don’t know. That is a good subject for review. But of the $1 billion in Clean Water revolving fund grants that go

to the States, we don’t take issue with the formulas used to distribute that across the States, and each State has a very different philosophy in how it expends that money. The lion’s share goes to infrastructure, to wastewater plants; I think it is over 90 percent of

the money. And each State has a priority ranking system for which

projects receive the money, and they are required to annually report, the EPA regions are required to oversee those grants. But we

have never gotten into the details of whether we agree with how

those States are doing it, et cetera. We primarily provided some information to the House Appropriations Committee and have an ongoing project to do that now.

Mr. DUNCAN. All right. We have talked about the progress that

has been made, but we talked about this closeout backlog before,

and you said that that problem is returning to some extent. Can

you explain what you are talking about there and why those closeouts, you feel they are important or might be important?

Mr. STEPHENSON. There is a lot of different stories. Every grant

is unique, and EPA is still deciding exactly what its target goal for

closeouts should be. A hundred and eighty days is kind of an old

standard that I believe EPA is looking at now, but we base that

percentage on that number of days. There may be good reasons

why it takes longer, but, in general, we think that more attention

needs to be given to this area to make sure they are being closed

out in a timely manner. Some of these things sit there for years,

and you may have unobligated balances. We assist the Appropriations Committee every year in looking at those unobligated balances, and last year identified over $100 million in funds that could

have been pulled back and used for other purposes.

So we used to have Accounting as our middle name, now it is Accountability. Nevertheless, we still look at the dollars, and we are

concerned that all of those dollars across the agency are being efficiently spent. And closing grants and de-obligation of funds is one

way to ensure that.

Mr. DUNCAN. You said there is $100 million in backup money

that is—

Mr. STEPHENSON. Last year we identified that much in money

that was sitting there for—primarily for grants that had completed

but had not been closed out, and, therefore, the money was still sitting there until we determined if there was any ongoing litigation,

if there was any records that were owed by the grantee, et cetera.

There are lots of reasons why they are not closed out. But we just

think it becomes excessive when some of these are over a year old.
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Mr. DUNCAN. All right, thank you very much.

Mr. Roderick, what key gaps did you find that remained in this

grant management reform process? What are project officers not

yet doing that they should be doing? What about what are supervisors not yet doing? What about senior management, managers?

What can you tell us about all of that?

Mr. RODERICK. Sir, I think the thing that came out of our report,

our study was that what was needed was more specific requirements to measure the performance of the grant work, and that had

to go into people’s appraisals or otherwise be conveyed to them as

their duty, and then that stuff should be also discussed at their

performance appraisal times. That is the main thing that we think

needs to be done in the near term to get people—get those project

officers working on the right things.

Mr. DUNCAN. Do you think enough emphasis is being put on

grant management reforms in these year-end reviews or year-end

performance discussions?

Mr. RODERICK. Sir, our report said that—basically concluded that

there was not enough of that emphasis, and that is why we made

those suggestions that I just spoke about for their—to improve

their performance appraisal process.

Mr. DUNCAN. All right.

Administrator Luna, what challenges have you had to overcome

at EPA to shift the culture towards greater accountability in this

area? Have you met resistance or has this been something that has

been pretty easy to work on?

Mr. LUNA. It has not been easy. It is something that requires

diligence. We need to make sure folks understand attention must

be paid, and so we spend time and energy making sure that message gets through the entire agency. It is very easy for headquarters to issue edicts, and it is very easy for people who are very

busy doing environmental protection to say, okay, yeah, that is another order and we will get to it. What we have tried to do, rather

than, again, using the stick approach, is show our employees how

important it is to have the accountability and show the results, because then that, in turn, produces the environmental outcomes we

all seek. And so it is a culture shift. It is not a matter of lacking

people of good will. We have those. It is not a matter of having bad

instructions. I think we have good instructions. It is a matter of inculcating this approach into the ethos of the organization and to illustrate and demonstrate how important it is.

I think the Committee’s attention has been extremely valuable in

helping focus the agency’s attention on this issue, and as a taxpayer, I thank you for that. You know Federal agencies are big behemoths that take, like a ship, a long time to turn, I think we have

started seeing that turn. The challenge for our folks who are in the

grants management business is to help people understand that this

is not just a part of somebody’s duties, but is really a key part of

the Agency, because these dollars buy the American people a lot of

environmental protection.

Mr. DUNCAN. Well, you mentioned in your testimony that some

managers—a lot of managers manage only one grant and they

spend 10 percent—some of them spend only 10 percent or less of
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their time on this. Do you think that this is something that people

need to spend a little more time on?

Mr. LUNA. Well, if we do that, then we take them away from

other duties.

Mr. DUNCAN. Right.

Mr. LUNA. And finding that balance is the key. A radical suggestion has been made that we look at reducing the number of project

officers so we have a smaller core of more highly specialized, more

highly trained, more proficient individuals doing this work. I am

sure some project officers would welcome that because they don’t

enjoy this being one of their duties. But there are tradeoffs, and

our regional administrators will then suffer the consequences of

that. We need to have a conversation about how environmental

protection would be impacted by having fewer people in the regions, in the field, closest to the issues, touching the grantees and

touching the projects. At the end we might find that the medicine

is worse than the disease.

Mr. DUNCAN. Well, I can understand the problem there, it does

seem like an awful lot of people involved in the management process. You know, I have never been a bureaucrat, but I would imagine that even more bureaucrats hate bureaucratic language or

meetings; they have the ability to write or think in that way,

maybe, but they still probably don’t really like that type of thing

that much. So what I wish you could do is send out something or

have meetings and tell these people in plain, down-to-earth ways

that what we are concerned about is that they not make grants

that result in jokes or embarrassments or scandals in the media;

secondly, that they make grants that are going to do some good,

and that that be one of the main criteria; and, thirdly, that they

not make grants that people can turn into obvious conflicts of interest, that they don’t make grants to their buddies or their friends

or their old pals or their former colleagues. You know, you have got

to be careful about sweetheart deals on some of these things. And

sometimes maybe it is better to put those things in less technical,

less bureaucratic, just put them in more plain, down-to-earth ways.

Mr. Welsh, you testified at our 2003, at our second hearing in

that year on these procedures. Do you think there has been some

significant changes since that time? What changes have you really

seen?

Mr. WELSH. Yes, sir, I believe we have made significant headway

on the culture change of making sure that the folks in the region

understand that that is their responsibility. You mentioned a moment ago that you have never been a bureaucrat. I have to confess

that I have never not been a bureaucrat. And bureaucrats carry a

lot of baggage in our culture, but one thing that they certainly are

is responsive when the boss says the boss wants something. And

I can tell you that the deputy administrator, at a staff meeting,

held all of the regional administrators accountable for our grant

closeout rate, and that immediately went down the line, and before

the meeting was over I think every project officer had heard that

that was being raised by the boss with the regional administrators.

So the progress that we have seen and the challenge—when you

were asking Luis the question, I wrote down in my notes ‘‘full

plate.’’ The challenge we really do have is when we reinforce to
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folks you have to spend more time paying attention to this, we get

the full plate complaint: ′′What don’t you want me to do if I spend

more time on this?′′ And one of the ways we can handle that is

make sure we build it into the system so it is not really a separate

thing to do, but it is just the way you normally do business so it

doesn’t eat up that much more of their time. But I also try to remind them if you get one of these really wrong, then you will find

out how full your plate can be. So the time invested up front in

working with the grantees, making sure they understand the requirements, will save a lot of the problems about the grant backlog

or a grant that hasn’t been closed out for five years because some

big problem arose in the middle and there was an appeal and litigation.

So I think with the administrator and the deputy administrator

and the regional administrators continuing to raise it at staff meetings, the bureaucracy will be responsive to knowing that the bosses

care about this and they will spend the time that they need to

make sure they get it right.

Mr. DUNCAN. That is a very good statement.

We have got a series of votes that are about to start on the floor.

Ms. Johnson, any closing comments?

Ms. JOHNSON. Not really.

Mr. DUNCAN. All right. Well, you know, really, I think this has

been a very good hearing, and you, all four of you have been really

outstanding witnesses, and I appreciate your comments. I understand that the staff on both sides has a few additional questions

they would like to submit to place in the record of this hearing, but

that will conclude the hearing at this time. Thank you very much.

[Whereupon, at 11:20 a.m., the subcommittee was adjourned.]
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