Testimony 

Before the Subcommittee on Water 

Resources and Environment, Committee 

on Transportation and Infrastructure, 

House of Representatives 

United States General Accounting Office 

GAO

For Release on Delivery 

Expected at 10:00 a.m. EDT 

Wednesday, June 11, 2003 ENVIRONMENTAL 

PROTECTION AGENCY 

Problems Persist in 

Effectively Managing Grants 

Statement of John B. Stephenson, Director, 

Natural Resources and the Environment 

GAO-03-628T 
EPA faces four key problems in managing its grants: (1) selecting the most 

qualified grant recipients from a large applicant pool, (2) effectively 

overseeing grantees throughout the life of the grant, (3) measuring the 

results of the grantees’ work, and (4) effectively managing its grants staff 

and resources. EPA must resolve these problems in order to improve its 

management of grants. 

In recent years, EPA has taken a series of actions to address two of its key 

problem areas: grantee oversight and resource management. EPA actions 

include issuing several oversight policies, conducting training, and 

developing a new data system for grants management. However, these past 

actions were not consistently successful in resolving grants management 

problems because of weaknesses in implementation and insufficient 

management emphasis. For example, between 1998 and 2002, EPA issued 

three policies designed to improve oversight of grantees, but EPA staff did 

not consistently carry them out. 

Late in 2002, EPA launched new efforts to address some of its grants 

management problems. In September 2002, EPA, for the first time, issued a 

policy to promote competition in awarding grants. In December 2002, it 

issued a new policy designed to better ensure effective grant oversight. 

Finally, in April 2003, EPA issued a 5-year grants management plan to 

address its long-standing grants management problems. GAO is still 

reviewing these new efforts. 

Although EPA’s recent actions seem promising, the agency has a long history 

of undertaking initiatives to improve grants management that have not 

solved its problems. If the future is to be different from the past, EPA must 

work to aggressively implement its new policies and its ambitious 5-year 

plan through a sustained, coordinated effort. It will be particularly 

important for all agency officials involved in managing grants to be 

committed to and held accountable for achieving the plan’s goals and 

objectives. 

Over the years, EPA has had 

persistent problems in managing its 

grants. Grants constituted one-half 

of the agency’s annual budget, or 

about $4.2 billion in fiscal year 

2002. EPA uses grants to 

implement its programs to protect 

human health and the environment 

and awards them to over 3,300 

recipients, including state and local 

governments, tribes, universities, 

and nonprofit organizations. EPA’s 

ability to efficiently and effectively 

accomplish its mission largely 

depends on how well it manages its 

grant resources and builds in 

accountability. 

Since 1996, GAO and EPA’s Office 

of Inspector General have 

repeatedly reported on EPA’s 

problems in managing its grants. 

Because these problems have 

persisted, in January 2003, GAO 

cited grants management as a 

major management challenge for 

EPA. GAO is currently reviewing 

EPA’s efforts to improve grants 

management at the request of the 

Chairman of the House Committee 

on Transportation and 

Infrastructure and Representative 

Anne Northup. For this testimony 

GAO is reporting on results of its 

previously issued reports and on 

the grants problems EPA faces, 

past actions to address these 

problems, and recently issued EPA 

policies and a 5-year grants 

management plan to address its 

long-standing grants management 

problems. 

www.gao.gov/cgi-bin/getrpt?GAO-03-628T 

To view the full testimony, click on the link 

above. 

For more information, contact John B. 

Stephenson at (202) 512-3841 or 

stephensonj@gao.gov. 

Highlights of GAO-03-628T, testimony to 

the Subcommittee on Water Resources 

and Environment, Committee on 

Transportation and Infrastructure, House 

of Representatives 

June 2003 

ENVIRONMENTAL PROTECTION AGENCY 

Problems Persist in Effectively Managing 

Grants 
Page 1 GAO-03-628T EPA's Grants Management 

Mr. Chairman and Members of the Subcommittee: 

We are pleased to be here today to discuss the Environmental Protection 

Agency’s (EPA) management of its grants. My testimony is based on issued 

GAO reports and ongoing work we are conducting at the request of the 

Chairman of the House Committee on Transportation and Infrastructure 

and Representative Anne Northup. We plan to issue our report this 

summer. 

As you know, over the years, EPA has had persistent problems in 

managing its grants. Grants constituted one-half of the agency’s annual 

budget or about $4.2 billion, in fiscal year 2002. EPA uses grants to 

implement its ongoing programs to protect human health and the 

environment and awards grants to over 3,300 recipients, including state 

and local governments, tribes, universities, and nonprofit organizations. 

With about half of its budget devoted to grants, EPA’s ability to efficiently 

and effectively accomplish its mission largely depends on how well it 

manages its grant resources and builds accountability into its efforts. 

Because of its grants management problems, which we and the EPA 

Inspector General have repeatedly reported on, we designated EPA’s 

grants management as a major management challenge in January 2003.1

Our testimony today describes the (1) major problems EPA faces in 

managing its grants, (2) actions EPA has taken in the past to address these 

problems, and (3) recently issued EPA policies and a 5-year plan to resolve 

these problems. In addition to our own reports, we examined EPA’s Office 

of Inspector General reports, EPA’s internal management reviews,2

 and 

other documents to identify EPA’s key grants management problems. 

In summary: 

• EPA faces four key problems in managing its grants: (1) selecting the most 

qualified grant recipients from a large applicant pool, (2) effectively 

overseeing grantees throughout the life of the grant, (3) measuring the 

results of its grantees’ work, and (4) effectively managing its grants staff 

 1

See U.S. General Accounting Office, Major Management Challenges and Program Risks: 

Environmental Protection Agency, GAO-03-112 (Washington, D.C.: Jan. 2003). 

2

EPA conducts three types of internal management reviews designed to assess the 

effectiveness of grants management: Management Oversight Reviews, Management 

Effectiveness Reviews, and Post-Award Validation Reviews. 
Page 2 GAO-03-628T EPA's Grants Management 

and resources. EPA must resolve these problems in order to improve its 

grants management. 

• EPA has taken a series of actions in the past to correct these problems, 

but several of these actions were not consistently successful because of 

weaknesses in implementation and insufficient management emphasis. 

For example, EPA issued three policies designed to improve grantee 

oversight, but EPA staff did not consistently carry them out. 

• Late in 2002, EPA launched new efforts to address some of its grants 

management problems. In September 2002, EPA, for the first time, issued a 

policy to promote competition in awarding grants. In December 2002, it 

issued a new policy designed to better ensure effective grant oversight. 

Finally, in April 2003, EPA issued a 5-year grant management plan to 

address its long-standing grants management problems. While these 

actions show promise, we are still early in our review of EPA’s new 

efforts. 

EPA offers two types of grants—nondiscretionary and discretionary: 

• Nondiscretionary grants support water infrastructure projects, such as 

renovating municipal drinking water facilities, and continuing 

environmental programs, such as the Clean Air Program for monitoring 

and enforcing Clean Air Act regulations. For these grants, Congress directs 

awards to one or more classes of prospective recipients who meet specific 

criteria for eligibility. These continuing environmental grants are often 

awarded on the basis of formulas prescribed by law or agency regulation. 

In fiscal year 2002, EPA awarded about $3.5 billion in nondiscretionary 

grants. EPA has primarily awarded these grants to states or other 

governmental entities. 

• Discretionary grants fund a variety of activities, such as environmental 

research and training. EPA has the discretion to independently determine 

the recipients and funding levels for these grants. In fiscal year 2002, EPA 

awarded about $719 million in discretionary grants. EPA has awarded 

these grants to nonprofit organizations and universities in addition to 

governmental entities. 

EPA administers and oversees grants through the Grants Administration 

Division within the Office of Grants and Debarment, 12 program offices in 

headquarters, and EPA’s 10 regional offices. The Grants Administration 

Division develops overall grants policy. About 102 grant specialists in 

headquarters and the regions are responsible for overseeing the 

administration of grants. EPA also has approximately 3,000 project 

Background 
Page 3 GAO-03-628T EPA's Grants Management 

officers within headquarter program offices and the regions. These officers 

are responsible for overseeing the technical or programmatic aspects of 

the grants. While grant specialists are dedicated to grants management, 

EPA staff members who serve as project officers have other primary 

responsibilities. 

The grant process has four phases: 

• Pre-award. EPA reviews the application paperwork and makes an award 

decision. 

• Award. EPA prepares the grant documents and instructs the grantee on 

technical requirements, and the grantee signs an agreement to comply 

with all requirements. 

• Post-award. EPA provides technical assistance and oversight; the grantee 

completes the work, and the project ends. 

• Closeout of the award. The project officer ensures that the project is 

completed; the grants management office prepares closeout documents 

and notifies the grantee that the grant is completed. 

EPA has had persistent problems in managing its grants. In 1996, EPA’s 

Inspector General testified before Congress that EPA did not fulfill its 

obligation to properly monitor grants.3

 Acknowledging these problems, 

EPA identified oversight, including grant closeouts, as a material 

weakness—a management control weakness that the EPA Administrator 

determines is significant enough to report to the President and Congress. 

EPA’s fiscal year 1999 Integrity Act report indicated that this oversight 

material weakness had been corrected, but the Inspector General testified 

that the weakness continued. In 2002, the Inspector General and the Office 

of Management and Budget recommended that EPA, once again, designate 

grants management as a material weakness. EPA ultimately decided to 

maintain this issue as an agency-level weakness, which is a lower level of 

risk than a material weakness. EPA made this decision because it believes 

its ongoing corrective action efforts will help to resolve outstanding grants 

management problems. However, in adding EPA’s grants management to 

GAO’s list of EPA’s major performance and accountability challenges in 

 3

Testimony of John Martin, Inspector General, U.S. Environmental Protection Agency, 

before the House Subcommittee on National Economic Growth, Natural Resources and 

Regulatory Affairs of the Committee on Government Reform and Oversight, July 30, 1996. 
Page 4 GAO-03-628T EPA's Grants Management 

January 2003, we signaled our concern that EPA has not yet taken action 

to ensure that it can manage its grants effectively. 

EPA faces four major, persistent problems in managing its grants. It must 

resolve these problems in order to improve its grants management. 

Specifically, EPA has not always 

• awarded its discretionary grants competitively or ensured that it solicits 

these grants proposals from a large pool of applicants; 

• effectively overseen its grantees’ progress and compliance with the terms 

of the grant; 

• managed its grants so that they are effectively used to achieve 

environmental results; and 

• effectively managed its grants management resources by holding its staff 

accountable for performing their duties, ensuring that the staff are 

adequately trained and appropriately allocated, and providing them with 

adequate management information. 

Until September 2002, EPA did not have a policy for competing the 

discretionary grants that might be eligible for competition—about $719 

million of its total $4.2 billion in grant funding in fiscal year 2002. 

Consequently, EPA was not promoting competition. According to EPA’s 

own internal management reviews and an Inspector General report, EPA 

did not always compete its discretionary grants when competition might 

have been warranted. By competitively soliciting grants, EPA would be 

able to choose the best project at the least cost to the government and is 

encouraged by the Federal Grant and Cooperative Agreement Act of 1977. 

EPA can award its discretionary grants noncompetitively; however, it is 

required by agency guidance to document the reasons for these decisions 

in a “decision memorandum.” It has not consistently done so, according to 

EPA’s internal management reviews. Lack of documentation raises 

questions about the award process and ultimately about whether EPA is 

providing its grant funds to the best-qualified applicants. 

Furthermore, EPA has not always engaged in widespread solicitation 

when it could be beneficial to do so. This type of solicitation would 

provide greater assurance that EPA receives proposals from a variety of 

EPA Continues to 

Face Problems in 

Managing Its Grants 

in Four Key Areas 

EPA Has Not Always 

Awarded Grants 

Competitively and Ensured 

Widespread Solicitations 
Page 5 GAO-03-628T EPA's Grants Management 

eligible and highly qualified applicants who otherwise may not have 

known about grant opportunities. According to a 2001 EPA Inspector 

General report,4

 program officials indicated that widespread solicitation 

was not necessary because “word gets out” to eligible applicants. 

Applicants often sent their proposals directly to these program officials 

who funded them using “uniquely qualified” as the justification for a 

noncompetitive award. This procedure creates the appearance of 

preferential treatment by not offering the same opportunities to all 

potential applicants. In addition, the agency provided incomplete or 

inconsistent public information on its grant programs in the Catalog of 

Federal Domestic Assistance and therefore the public and potential 

applicants may not have been adequately informed of funding 

opportunities. 

EPA has faced five persistent problems in overseeing its grants. First, 

EPA’s internal reviews found that grantees’ progress reports, one of the 

best sources of information for monitoring recipients, did not include 

required financial information, and grantees had not always submitted 

progress reports in a timely fashion. EPA generally requires recipients to 

submit progress reports to the project officer within a specified time 

frame. These reports are to include progress to date, any difficulties 

encountered, a discussion of expenditures compared to work completed, 

and an explanation of significant discrepancies. Although the recipient is 

responsible for submitting timely progress reports that discuss the 

project’s financial status, the project officer is responsible for ensuring 

that the recipient has done so. 

Second, project officers and grant specialists did not always document 

their monitoring activities, which raises questions about the extent of the 

monitoring they did conduct. According to an EPA internal review, for 

example, one grants management office developed a form to ensure 

monitoring activities were completed, but the form was missing from 50 

percent of the grant files reviewed, and when the monitoring form was 

used, it was not always completed. Furthermore, project officers did not 

 4

EPA Office of Inspector General, EPA’s Competitive Practices for Assistance Awards, 

Report No. 2001-P-00008 (May 21, 2001). 

EPA Has Not Always 

Effectively Overseen Grant 

Recipients 
Page 6 GAO-03-628T EPA's Grants Management 

always document that they had monitored required key areas, such as 

ensuring compliance with the terms and conditions of the grant award.5

Third, EPA has not always ensured that different types of grantees have 

adequate financial and internal controls to ensure that they use federal 

funds properly. For example, in 2001,6

 we reported that EPA’s oversight of 

nonprofit grantees’ costs did not ensure that grant funds were used for 

costs allowed under guidance published by the Office of Management and 

Budget.7 In particular, EPA’s on-site reviews were flawed. The reviews did 

not include transaction testing to identify expenditures that are not 

allowed, such as lobbying. We also found that EPA had conducted on-site 

reviews at only 4 percent of nonprofit grantees who might have had 

inexperienced staff and inadequate financial and internal controls. In 2000 

and 2002, the EPA Inspector General reported that one state’s department 

of environmental management and two tribes, respectively, lacked 

adequate financial and internal controls.8

 These problems could have been 

identified through EPA oversight of grantees. 

Fourth, EPA has sometimes not ensured that grantees are complying with 

certain grant regulations, such as those pertaining to grantee procurement 

and conflict-of-interest. In 2002, the EPA Inspector General reported that 

EPA did not monitor grantees’ procurements to determine if the grantees 

were using a competitive process to obtain the best products, at the best 

price, from the most qualified firms.9

 In 1999 and 2002, the EPA Inspector 

General reported conflict-of-interest problems because grant recipients 

had awarded contracts to parties who had assisted them in preparing their 

 5

The monitoring of key areas is required under EPA Order 5700.4, Interim Grantee 

Compliance Assistance Initiative Policy, (Feb. 2002).

6

U.S. General Accounting Office, Environmental Protection: EPA’s Oversight of Nonprofit 

Grantees’ Costs Is Limited, GAO-01-366 (Washington, D.C.: Apr. 6, 2001). 

7

The Office of Management and Budget has issued three circulars defining what are 

allowable costs for different types of grantees: A-21, A-87, and A-122. 

8

EPA Office of Inspector General, Grant Management Practices of Rhode Island 

Department of Environmental Management, Audit No. 2000-1-00416 (Sep. 21, 2000); EPA 

Office of Inspector General, EPA Grants Awarded to the Lower Brule Sioux Tribe, Report 

No. 100370-2002-1-000099 (Mar. 29, 2002); EPA Office of Inspector General, EPA Grants 

Awarded to the Crow Tribe, Report No. 100370-2002-1-000098 (Mar. 27, 2002). 

9

EPA Office of Inspector General, Procurements Made by Assistance Agreement 

Recipients Should Be Competitive, Report No. 2002-P-00009 (Mar. 28, 2002). 
Page 7 GAO-03-628T EPA's Grants Management 

grants and therefore had advance knowledge about grantees’ plans to 

award contracts.10

Finally, EPA has not fully ensured that recipients are submitting final 

reports in a timely manner and meeting grant objectives. For example, in 

2000, we reported that EPA had not adequately tracked its Science To 

Achieve Results research grants to ensure their on-time completion.11 We 

found that 144 of the nearly 200 grants we reviewed had missed their 

deadline for submitting final reports, even after some extensions had been 

given. Also, in 1998, EPA’s Inspector General reported that EPA had not 

monitored training assistance grants to nonprofit grantees to determine 

how many students were being trained or how much the training cost.12

EPA awarded some grants before considering how the results of the 

grantees’ work would contribute to achieving environmental results. In 

2001, we reported that EPA program officials treated EPA’s strategic goals 

and objectives not as a tool to guide the selection of grants, but rather as a 

clerical tool for categorizing grants after the funds were already awarded.13

By assessing the relevance of these grants to EPA’s strategic plan after 

selecting the grantees, EPA cannot ensure that it is selecting the projects 

that will best help it accomplish its mission. 

EPA has also not developed environmental measures and outcomes for all 

of its grant programs. In 2000, we reported that EPA did not have program 

criteria to measure the effectiveness of its Science To Achieve Results 

program.14 Instead, EPA’s management of the program focused on the 

procedures and processes of awarding grants. As a result, EPA was 

 10EPA Office of Inspector General, Assistance Agreement X993795-01 Awarded by EPA to 

the Lake Wallenpaupack Watershed Management District, Report No. 2002-M-00007 (Jan. 

18, 2002); and EPA Office of Inspector General, Report of Audit on the Center for 

Chesapeake Communities, Report No. E6DEP8-03-0014-9100117 (Mar. 31, 1999). 

11U.S. General Accounting Office, Environmental Research: STAR Grants Focus on 

Agency Priorities, but Management Enhancements Are Possible, GAO/RCED-00-170

(Washington, D.C.: Sep. 11, 2000). 

12EPA Office of Inspector General, EPA’s Training Assistance Agreements, Report No. 

E1XMF6-03-0224-8100070 (Mar. 4, 1998). 

13U.S. General Accounting Office, Environmental Protection: Information on EPA Project 

Grants and Use of Waiver Authority, GAO-01-359 (Washington, D.C.: Mar. 9, 2001). 

14GAO/RCED-00-170. 

EPA Has Not Always 

Managed Its Grants to 

Achieve Environmental 

Results 
Page 8 GAO-03-628T EPA's Grants Management 

uncertain what the program was achieving. Similarly, the Office of 

Management and Budget recently evaluated four EPA grant programs to 

assess the programs’ effectiveness at achieving and measuring results.15

The office found that these four EPA grant programs lacked outcomebased measures—measures that demonstrated the impact of the programs 

on improving human health and the environment. The office concluded 

that one of EPA’s major challenges was demonstrating program 

effectiveness in achieving public health and environmental results. 

EPA often does not require grantees to submit work plans that explain 

how a project would achieve measurable environmental results. The 

grantee work plan describes the project, its objectives, and the method the 

grantee will use to accomplish the objectives. An effective work plan 

should, among other things, list the grant’s expected outcomes. The 

project officer uses the work plan to evaluate performance under the 

agreement. In 2002, EPA’s Inspector General reported that EPA approved 

some grantees’ work plans without determining the projects’ long-term 

human health and environmental outcomes.16 In fact, for almost half of the 

42 grants reviewed, EPA did not even attempt to measure the projects’ 

outcomes. Instead, EPA funded grants on the basis of work plans that 

focused on short-term procedural results, such as meetings or 

conferences. In some cases, it was unclear what the grant funding had 

accomplished. 

Both EPA’s internal management reviews and its Inspector General 

reports have noted several problems in how effectively and efficiently EPA 

manages its grants staff and other resources. In terms of staff, the agency 

has not always held accountable its staff responsible for grants 

management, such as project officers and grant specialists. EPA’s internal 

management reviews have found that, in some cases, job descriptions or 

performance standards were inadequate. The Inspector General recently 

 15The four EPA programs assessed were the Drinking Water State Revolving Fund, Leaking 

Underground Storage Tanks, Nonpoint Source Grants, and Tribal General Assistance 

programs. The Office of Management and Budget evaluated these programs using its 

Program Assessment Rating Tool, a questionnaire that evaluated four critical areas of 

performance: purpose and design, strategic planning, management, results and 

accountability. These assessments were included in the President’s 2004 budget 

submission. 

16EPA Office of Inspector General, Surveys, Studies, Investigations, and Special Purpose 

Grants, Report No. 2002-P-00005 (Mar. 21, 2002). 

EPA Has Not Effectively 

Managed Its Grant 

Resources 
Page 9 GAO-03-628T EPA's Grants Management 

reported similar findings.17 According to the Inspector General, agency 

leadership had not always emphasized the importance of project officer 

duties, nor held project officers accountable for performing certain duties. 

More specifically, project officer responsibilities were not clearly defined 

in their performance agreements and position descriptions, and there were 

no consequences when required duties were not performed. 

EPA has also not provided all grant staff with the training necessary to 

properly manage all aspects of grants. EPA’s internal management reviews 

have noted that some staff who were managing grants had not completed 

the basic project officer training. Other staff may have completed the basic 

training but needed additional training to refresh their skills or to become 

familiar with all of their grants management responsibilities and 

requirements. For example, in some instances, project officers were not 

familiar with the five key areas they were to review when monitoring 

grantees, such as the financial aspects of a grantee’s performance. 

Internal management reviews also identified other staff-related problems. 

For example, some internal reviews stated that EPA did not have enough 

staff to adequately manage the number of grants it awards. Furthermore, 

other reviews noted that uneven distribution of workload among staff 

resulted in poor grants management. 

EPA has also not adequately managed its resources for supporting grant 

staff. Some EPA internal management reviews noted a lack of resource 

commitment—time and money—to conduct grant management activities 

and develop staff. This lack of resources has hampered staff in performing 

their duties, according to these reviews. For example, some of these 

reviews noted that grantee oversight, particularly the on-site reviews, was 

limited by the scarcity of such resources as travel funds. 

Finally, staff did not always have the information they needed to 

effectively manage grants. According to several EPA internal management 

reviews, staff lacked accessible or useable reference material—such as 

policy and guidance documents, and other information resources, such as 

reports of grantee expenditures. Additionally, we and others have reported 

that EPA does not use information from performance evaluations or 

information systems to better manage its grants. For example, one EPA 

 17EPA Office of Inspector General, EPA Must Emphasize Importance of Pre-Award 

Reviews for Assistance Agreements, Report No. 2003-P-00007 (Mar. 31, 2003). 
Page 10 GAO-03-628T EPA's Grants Management 

region did not analyze the results of its own internal surveys, which were 

designed to assess the effectiveness of its internal grants management 

operations. 

In recent years, EPA has taken a series of actions to address two of its key 

problem areas: grantee oversight and resource management. It has issued 

several oversight policies, conducted training, and developed a new data 

system for grants management. However, EPA’s corrective actions have 

not been consistently successful because of weaknesses in their 

implementation and insufficient management emphasis. 

Between 1998 and 2002, EPA issued three policies to improve its oversight 

of its grant recipients. These policies have tried to improve oversight by 

establishing, expanding, and refining the activities of EPA staff involved in 

managing grants. EPA took additional actions to reduce the backlog of 

grants needing closeout. 

• EPA’s first policy, issued in May 1998, required grants management office 

staff to monitor the financial progress and administrative compliance of 

grant recipients’ activities. The policy also required the staff to conduct 

site visits or desk reviews to review the adequacy of some grantees’ 

administrative and financial systems for managing their grants. 

Furthermore, the grants management offices had to submit biennial 

monitoring plans, which included their proposed monitoring activities. 

Finally, the policy included suggested criteria for selecting grantees to be 

reviewed and guidelines for how to conduct the oversight activities. 

• EPA’s second policy, issued in April 1999, added oversight responsibilities 

for program staff in headquarters and the regions. The policy required 

headquarters and regional program offices to submit annual plans 

outlining their proposed monitoring activities. The policy also suggested 

activities to be included in these plans, such as monitoring grantees’ 

progress of work, documenting their efforts, and closing out grants in a 

timely manner. 

• EPA’s third policy, issued in February 2002, further refined its oversight 

requirements by having grant management and program offices conduct 

EPA’s Past Actions 

Have Targeted Some 

of the Key Problems 

but Have Not Been 

Consistently 

Successful 

EPA Has Taken Actions to 

Improve Oversight of 

Grantees and Resource 

Management 
Page 11 GAO-03-628T EPA's Grants Management 

in-depth monitoring on at least 5 to 10 percent of their grant recipients.18

The grant management offices had to assess grantees’ financial and 

administrative capacity, while the program offices had to assess the 

grantees’ activities in five key areas, such as progress of work and 

financial expenditures. Furthermore, the grant management offices, as 

well as regional and headquarters program offices, had to report quarterly 

on their in-depth monitoring activities. Additionally, the policy committed 

the Office of Grants and Debarment to the development of a database, 

which, according to an EPA official, the grants management offices would 

use to store the results of their in-depth monitoring activities. Finally, the 

policy included suggested guidance for how to conduct program office 

reviews. 

One of the final steps in monitoring is “closing out” grants to ensure that 

the project was completed and that any remaining funds are recovered. In 

1996, EPA had a backlog of over 19,000 grants needing closeout. To reduce 

such backlogs and prevent future backlogs, EPA, among other things, 

developed specific procedures for closing out nonconstruction grants and 

identified a strategy for closing construction grants that included assessing 

impediments to closing out grants. 

In terms of resource management, EPA provided grants management 

training for its staff and some grant recipients. It developed and 

periodically updated a training manual for project officers. EPA also 

required project officers to attend a 3-day training course based on this 

manual and periodically take a refresher course. EPA developed a 

database to certify that project officers had completed this training. 

According to an EPA official, grants specialists have also received some 

training. Finally, EPA conducted a 1-day grants management training 

course for nonprofit grantees and pilot-tested a standard training course 

for grants specialists. 

Finally, EPA has taken steps to improve another critical resource—its 

primary data system for managing grants. In 1997, it began developing the 

Integrated Grants Management System (IGMS), which, according to an 

EPA official, will allow electronic management throughout the life of the 

grant. EPA believes IGMS could help resolve some of the long-standing 

problems in grants management by implementing controls to prevent 

certain documents from being submitted without required elements and 

 18EPA calls this in-depth monitoring, “advanced monitoring.” 
Page 12 GAO-03-628T EPA's Grants Management 

providing electronic reminders of when certain activities or documents are 

due. Additionally, EPA designed the system to reduce the potential for 

data entry errors. 

According to an EPA official, IGMS is being developed through modules. 

In 2001, EPA began implementing the system to control the application 

and award phases of a grant. Using IGMS, EPA will be able to review the 

grantee’s application, prepare and review EPA’s documents, and approve 

the award electronically. In April 2003, EPA will begin using the postaward module of IGMS. This module will allow project officers to enter 

project milestones into the system, communicate with other staff involved 

in overseeing grants, receive electronic reports from grantees, and initiate 

closeout activities electronically. EPA expects that all staff will be using 

IGMS to electronically manage grants by September 2004. 

EPA continues to face grant management problems, despite the corrective 

actions it has taken to date. In 2002, EPA’s Inspector General reported that 

EPA’s corrective actions were not effectively implemented and 

specifically, for monitoring, found, among other things,19

• inconsistent performance of monitoring responsibilities, 

• inadequate preparation of monitoring plans, 

• incomplete submission of quarterly compliance reports, and 

• considerable differences among the programs and the regions in the 

number of on-site evaluations they conducted. 

As part of our ongoing review, we are assessing EPA’s corrective actions 

for monitoring and have found mixed results. On the one hand, we have 

seen some problems. For example, we identified two weaknesses in the 

database EPA created to store the results of its in-depth reviews. First, 

only grant management offices—not program offices—had to enter the 

results of their reviews into this database, and according to an EPA official 

familiar with the database, not all of them did so. Second, according to the 

same official, EPA did not design the database so that it could analyze the 

results of the in-depth reviews to make management improvements. 

 19EPA Office of Inspector General, Additional Efforts Needed to Improve EPA’s Oversight 

of Assistance Agreements, Report No. 2002-P-00018 (Sept. 30, 2002). 

EPA’s Past Actions Have 

Had Mixed Results and 

Have Not Been 

Consistently Successful in 

Resolving Grants 

Management Problems 
Page 13 GAO-03-628T EPA's Grants Management 

On the other hand, however, we found that EPA’s corrective actions 

increased the oversight of its grant recipients. In 2002, EPA reported that it 

had conducted 578 on-site reviews, and 629 desk reviews, which is an 

increase in both the number of on-site reviews and the number of reviews 

some offices conducted.20 In addition, EPA’s 2002 internal reviews 

indicated some improvements in oversight compared with the prior year’s 

performance. 

On another positive note, EPA has made improvements in closing out 

grants. In 1998, we reported that in some instances EPA’s corrective 

actions to close out grants were not initially successful. 21 For example, we 

had found that strategies to reduce the closeout backlog were not always 

consistently implemented or failed to close out a considerable number of 

grants, despite making some progress. However, EPA had successfully 

resolved its backlog problem by 2002. As a result, EPA has been able to 

eliminate this backlog as a material weakness and receive better assurance 

that grant commitments have been met. 

With respect to resource management, EPA implemented corrective 

actions to improve training, but these actions have not been fully 

successful. For training, the EPA Inspector General reported that the 

agency did not have adequate internal controls in place to ensure that 

project officers were in compliance with the training requirements. 

Specifically, one region did not track the names and dates of project 

officers who received training, the agencywide database on training for 

project officers was inaccurate and had limited functionality, and the online refresher course did not have the controls necessary to prevent staff 

from obtaining false certifications. 

In addition to the weaknesses in the corrective actions for specific 

problem areas, the EPA Inspector General found two other problems. 

First, the agency’s internal grant management reviews did not consistently 

examine issues to identify and address systemic weaknesses, did not 

adequately identify the causes of specific weaknesses or how the proposed 

corrective actions would remedy the identified weakness, and were not 

sufficiently comprehensive. Furthermore, the Grants Administration 

Division did not assess the results of these reviews to make management 

 20EPA’s Inspector General reported that EPA conducted 466 on-site evaluations in 2001. 

21U.S. General Accounting Office, Environmental Protection: EPA’s Progress in Closing 

Completed Grants and Contracts, GAO/RCED-99-27 (Washington, D.C.: Nov. 20, 1998). 
Page 14 GAO-03-628T EPA's Grants Management 

improvements. Second, EPA’s senior resource officials did not ensure 

compliance with EPA policies or sufficiently emphasize grantee 

oversight.22 The Inspector General concluded that the lack of emphasis 

contributed to the identified implementation weaknesses. In response to 

this assertion, senior resource officials stated that monitoring is affected 

by the limited availability of resources, and that they lack control over 

how regional program offices set priorities. The Inspector General pointed 

out that these officials are responsible for providing adequate resources; 

however, none of the officials interviewed had conducted assessments to 

determine whether they had adequate resources. 

EPA has recently issued new policies to address two of the key problems 

we have identified—competition and oversight—and developed a 5-year 

plan to address its long-standing grants management problems. In 

September 2002, EPA issued a policy to promote competition in awarding 

grants by requiring that certain grants be competed. These grants may be 

awarded noncompetitively only if certain criteria are met, in which case, a 

detailed justification must be provided. The new policy also created a 

senior-level advocate for grants competition to oversee the 

implementation of the policy. In December 2002, EPA also issued a new 

oversight policy that increases the amount of in-depth monitoring—desk 

reviews and on-site reviews—that EPA conducts of grantees; mandating 

that all EPA units enter compliance activities into a database; and 

requiring transaction testing for unallowable expenditures, such as 

lobbying, during on-site evaluations reviews. 

In April 2003, EPA issued a 5-year Grants Management Plan. EPA’s 

Assistant Administrator for Administration and Resources Management 

has called implementation of this plan the most critical part of EPA’s 

grants management oversight efforts. The grants management plan has 

five goals and accompanying objectives: 

• Promote competition in the award of grants by identifying funding 

priorities, encouraging a large and diverse group of applicants, promoting 

the importance of competition within the agency, and providing adequate 

 22Senior resource officials are typically deputy assistant administrators in headquarters 

offices and assistant regional administrators, and are in charge of strengthening 

agencywide fiscal resource management while also ensuring compliance with laws and 

regulations. 

EPA Has Recently 

Issued New Policies 

and Developed a Plan 

to Address Its Grants 

Management 

Problems 
Page 15 GAO-03-628T EPA's Grants Management 

support for the grant competition advocate. 

• Strengthen EPA’s oversight of grants by improving internal reviews of EPA 

offices, improving and expanding reviews of EPA grant recipients, 

developing approaches to prevent or limit grants management 

weaknesses, establishing clear lines of accountability for grants oversight, 

and providing high-level coordination, planning, and priority setting. 

• Support identifying and achieving environmental outcomes by including 

expected environmental outcomes and performance measures in grant 

workplans, and improving the reporting on progress made in achieving 

environmental outcomes. 

• Enhance the skills of EPA personnel involved in grants management by 

updating training materials and courses and improving delivery of training 

to project officers and grants specialists. 

• Leverage technology to improve program performance by, for example, 

enhancing and expanding information systems that support grants 

management and oversight. 

Although we have not fully assessed EPA’s new policies and grants 

management plan, I would like to make a few preliminary observations on 

these recent actions based on our ongoing work. Specifically, EPA’s plan: 

• Recognizes the need for greater involvement of senior officials in ensuring 

effective grants management throughout the agency. The plan calls for a 

senior-level grants management council to provide high-level coordination, 

planning, and priority-setting for grants management. 

• Appears to be comprehensive in that it addresses the four major 

management problems—competitive grantee selection, oversight, 

environmental results, and resources—that we identified in our ongoing 

work. Previous EPA efforts did not address all these problems, nor did 

they coordinate corrective actions, as this plan proposes. EPA’s plan ties 

together recent efforts, such as the new policies and ongoing efforts in 

staff and resource management, and proposes additional efforts to resolve 

its major grants management problems. 

• Identifies the objectives, milestones, and resources needed to help ensure 

that the plan’s goals are achieved. Furthermore, EPA is developing an 

annual companion plan that will outline specific tasks for each goal and 

objective, identify the person responsible for completing the task, and set 
Page 16 GAO-03-628T EPA's Grants Management 

an expected completion date. 

• Begins to build accountability into grants management by establishing 

performance measures for each of the plan’s five goals. Each performance 

measure establishes a baseline from which to measure progress and target 

dates for achieving results. For example, as of September 2002, 24 percent 

of new grants to nonprofit recipients that are subject to the competition 

policy were competed—EPA’s target is to increase the percentage of these 

competed grants to 30 percent in 2003, 55 percent in 2004, and 75 percent 

in 2005. The plan further builds accountability by identifying the need for 

performance standards for project officers and grants specialists that 

address grant management responsibilities. 

Although these actions appear promising, EPA has a long history of 

undertaking initiatives to improve grants management that have not solved 

its problems. If the future is to be different from the past, EPA must work 

aggressively to implement its new policies and its ambitious plan through 

a sustained, coordinated effort. It will be particularly important for all 

agency officials involved in managing grants to be committed to and held 

accountable for achieving the plan’s goals and objectives. 

Mr. Chairman, this concludes my testimony. I would be happy to answer 

any questions that you or Members of the Subcommittee may have. 

For further information, please contact John B. Stephenson at (202) 512-

3841. Individuals making key contributions to this testimony were Andrea 

Wamstad Brown, Christopher Murray, Paul Schearf, Rebecca Shea, Carol 

Herrnstadt Shulman, Bruce Skud, and Amy Webbink. 

Contacts and 

Acknowledgments 

(360326) 
This is a work of the U.S. government and is not subject to copyright protection in the 

United States. It may be reproduced and distributed in its entirety without further 

permission from GAO. However, because this work may contain copyrighted images or 

other material, permission from the copyright holder may be necessary if you wish to 

reproduce this material separately. 
The General Accounting Office, the audit, evaluation and investigative arm of 

Congress, exists to support Congress in meeting its constitutional responsibilities 

and to help improve the performance and accountability of the federal 

government for the American people. GAO examines the use of public funds; 

evaluates federal programs and policies; and provides analyses, 

recommendations, and other assistance to help Congress make informed 

oversight, policy, and funding decisions. GAO’s commitment to good government 

is reflected in its core values of accountability, integrity, and reliability. 

The fastest and easiest way to obtain copies of GAO documents at no cost is 

through the Internet. GAO’s Web site (www.gao.gov) contains abstracts and fulltext files of current reports and testimony and an expanding archive of older 

products. The Web site features a search engine to help you locate documents 

using key words and phrases. You can print these documents in their entirety, 

including charts and other graphics. 

Each day, GAO issues a list of newly released reports, testimony, and 

correspondence. GAO posts this list, known as “Today’s Reports,” on its Web site 

daily. The list contains links to the full-text document files. To have GAO e-mail 

this list to you every afternoon, go to www.gao.gov and select “Subscribe to daily 

E-mail alert for newly released products” under the GAO Reports heading. 

The first copy of each printed report is free. Additional copies are $2 each. A 

check or money order should be made out to the Superintendent of Documents. 

GAO also accepts VISA and Mastercard. Orders for 100 or more copies mailed to a 

single address are discounted 25 percent. Orders should be sent to: 

U.S. General Accounting Office 

441 G Street NW, Room LM 

Washington, D.C. 20548 

To order by Phone: Voice: (202) 512-6000 

TDD: (202) 512-2537 

Fax: (202) 512-6061 

Contact: 

Web site: www.gao.gov/fraudnet/fraudnet.htm 

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470 

Jeff Nelligan, Managing Director, NelliganJ@gao.gov (202) 512-4800 

U.S. General Accounting Office, 441 G Street NW, Room 7149 

Washington, D.C. 20548 

GAO’s Mission 

Obtaining Copies of 

GAO Reports and 

Testimony 

Order by Mail or Phone 

To Report Fraud, 

Waste, and Abuse in 

Federal Programs 

Public Affairs