Office of Inspector General

Audit Report

ASSISTANCE AGREEMENTS

Pre-Award Management of EPA Assistance Agreements

E1FMB8-11-0001-8100256

September 30, 1998 
Inspector General Division(s)

 Conducting the Audit

Headquarters Audit Division

 Washington, D.C.

Region(s) covered EPA Headquarters

Program Office(s) Involved Office of the Administrator

Office of Administration and Resources Management

Office of Air and Radiation

Office of Enforcement and Compliance Assurance

Office of the Chief Financial Officer

Office of International Activities

Office of Prevention, Pesticides and Toxic Substances

Office of Research and Development

Office of Solid Waste and Emergency Response

Office of Water
MEMORANDUM

SUBJECT: Pre-Award Management of EPA Assistance Agreements

Audit Report No. E1FMB8-11-0001-8100256

FROM: Elissa R. Karpf

Deputy Assistant Inspector General

 for External Audits (2421)

TO: Assistant Administrators

Chief Financial Officer

Our final audit report on Pre-Award Management of EPA Assistance Agreements

is attached. The purpose of this audit was to review the steps the Agency takes to

award assistance agreements, and identify opportunities for improvement. Our report

recommends improvements in training for project officers and managers, and enhanced

oversight by the Grants Administration Division and Senior Resource Officials.

We received detailed and thoughtful responses to our draft report from many

program offices. These responses not only commented on our recommendations, but

offered suggestions to clarify and promote the issues, along with alternate solutions

when appropriate. The exit conference was attended by representatives from the

Offices of Administration and Resources Management (OARM); Air and Radiation;

Prevention, Pesticides and Toxic Substances; Research and Development; Solid

Waste and Emergency Response; and the Office of Water. We saw a uniform desire

to strengthen the Agency’s assistance management. We have modified several of our

recommendations to reflect the consensus which we believe was achieved at the exit

conference.

The widespread desire to improve assistance management is encouraging. We

strongly urge OARM to both head and channel the enthusiasm and commitment of the

program offices in a direction which will result in consistent, sound Agency-wide

assistance management.

We received responses to our draft report from each office represented at the

exit conference and the Office of the Chief Financial Officer. These responses have
2

been included in their entirety as Appendix B of this final report. While the responses

helped to educate us in the complexity of some of the issues as well as the diversity of

opinions, preparation of a single Agency-wide response will facilitate resolution of the

final report.

This audit report describes findings and corrective actions the Office of the

Inspector General (OIG) recommends to strengthen assistance agreement

management. It represents the opinion of the OIG. Final determination on matters in

this audit report will be made by EPA managers in accordance with established EPA

audit resolution procedures. 

Action Required

We have designated the Acting Assistant Administrator for Administration and

Resources Management as the primary Action Official. We ask that he take all steps

necessary to provide us with one response which represents an Agency-wide position.

In accordance with EPA Order 2750, the Action Official is required to provide this office

a written response to the audit report within 90 days of the final audit report date. The

response to the final report should identify any completed or planned actions related to

the report’s recommendations. For corrective actions planned but not completed by the

response date, reference to specific milestone dates will assist in deciding whether to

close this report.

We have no objection to the further release of this report to the public. Should

you or your staff have any questions, please contact Norman E. Roth, Divisional

Inspector General, Headquarters Audit Division, on (202) 260-5113.

Attachment
i Report No. 8100256

EXECUTIVE SUMMARY

INTRODUCTION

Assistance is the transfer of anything of value for a public purpose of support or

stimulation authorized by law. EPA program offices provide funding and are

responsible for programmatic and technical oversight of the assistance process. The

Grants Administration Division (GAD) assures assistance application completeness by

performing an administrative review of the assistance application.

OBJECTIVES

EPA’s FY 1996 Integrity Act Report to the President and Congress declared post-award

oversight of assistance agreements and grants closeouts material weaknesses. The

purpose of our audit was to review the Agency’s pre-award process (steps the Agency

takes to award assistance agreements) to identify opportunities for improvement.

RESULTS IN BRIEF

Project Officers (POs) did not always negotiate workplans with well-defined

commitments, adequately determine and document that costs submitted with

assistance applications were reasonable, or prepare decision memoranda which

contained all information required to support recommendations for award. Neither POs,

nor those program officials reviewing and signing assistance approval documents, were

following established guidance in these areas. Senior Resource Officials (SROs),

supervisors of POs and other assistance approval officials are not usually required to

attend training. Therefore, they may not have recognized that additional information

was needed or have seen the need to hold POs accountable. Expanded training for

those involved in assistance management and enhanced oversight are needed. EPA

can use the pre-award approval process to improve post-award oversight capabilities. 

Complete funding packages assist program officials, including the SRO, in holding

recipients accountable for expected outputs, determining whether expenditures are
ii Report No. 8100256

reasonable for the work performed, and ensuring that funded activities are

accomplished.

Of 55 Environmental Justice Through Pollution Prevention (EJP2) assistance

agreements awarded by the Office of Prevention, Pesticides, and Toxic Substances

(OPPTS) during FY 1997, 28 were improperly funded using resources intended for

other purposes. Improper use of funds happened because of poor funds controls within

OPPTS, because OPPTS division directors acted to avoid carrying over excess funds,

and because the Grants Administration Division’s “check and balance” process did not

identify the improper funding. This resulted in the reprogramming of $1.9 million

without required Congressional approval.

RECOMMENDATIONS 

We recommend that the Acting Assistant Administrator for Administration and

Resources Management direct GAD to take the lead in the development of PO

refresher training courses; develop guidance explaining the types of omissions which

will result in GAD returning incomplete assistance funding packages to the program

offices; and work with program offices to develop a coordinated post-award

management strategy.

We recommend that the Acting Assistant Administrator for OARM raise the need for

additional grants training to the Resource Management Council, including an estimate

of the minimum resources required to deliver training Agency-wide, and options for

delivering the training. 

We recommend that the Acting Assistant Administrator for OARM and the Chief

Financial Officer, as co-chairs of the Resource Management Committee, inform

program offices of the Committee’s decision(s) regarding resources for grants

administration training and the method(s) of delivery.

We recommend that Assistant Administrators require SROs to train all levels of staff

involved in assistance awards.

We recommend that GAD rewrite EPA Order 5730.1 to assign responsibility for

ensuring the use of correct program elements or program results codes exclusively to

program offices.

Agency Response
iii Report No. 8100256

Written responses to the draft audit report and a subsequent meeting with OARM and

program office representatives indicated support for PO refresher training and manager

training, but disagreement over who should provide the training. There was support for

returning incomplete assistance packages to the program offices, although not, in all

cases, to the SROs. There was also support for developing post-award monitoring

plans, but program offices wanted to consider options other than post-award plans for

each assistance award. The program offices agreed that EPA Order 5730.1 should be

revised as we recommended. See Appendix B for the full text of the responses.

OIG Evaluation

We agree with the need for integrated manager training and flexibility in planning postaward oversight. We also agree that not all incomplete assistance funding packages

should be returned to the SRO. Accordingly, we have revised our recommendations in

these areas.
iv Report No. 8100256

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v Report No. 8100256

TABLE OF CONTENTS

Page

EXECUTIVE SUMMARY ................................................ i

ABBREVIATIONS .................................................... vii

CHAPTERS

1 - Introduction ....................................................... 1

Objective ...................................................... 1

Background .................................................... 1

Scope and Methodology .......................................... 2

Prior Audit Coverage ............................................. 3

2 - Important Information Is Needed Before Assistance Is Approved .............. 4

Workplans Should Be Well-Defined ................................ 4

Cost Reasonableness Should be Determined and Documented ............ 6

The Decision Memorandum Should Be Complete . . . . . . . . . . . . . . . . . . . . . . . 7

Additional Training and Oversight Are Needed ........................ 10

Management Plans Can Improve Post-Award Oversight . . . . . . . . . . . . . . . . . 11

Recommendations .............................................. 13

3 - Assistance Agreements In One Office Cited Inappropriate Program Elements . . 18

OPPTS Utilized Funds for Unintended Purposes ...................... 18

Grants Administration Division Controls Need Improvement .............. 21

Corrective Actions Taken ......................................... 23

Recommendation .............................................. 24

Agency Response .............................................. 24

APPENDIX A

Other Matters ....................................................... 25

Screening Recipients Can Prevent Fraud, Waste and Abuse ............. 25

Benefits Derived From Credit and Receivables Checks ................. 25

Reviewing Accounts Receivable ................................... 26

Potential Benefits From Other Pre-award Checks ...................... 27

APPENDIX B

Agency Responses To The Draft Report .................................. 28
vi Report No. 8100256

TABLE OF CONTENTS, cont.

APPENDIX C

Distribution ......................................................... 54
vii Report No. 8100256

ABBREVIATIONS

EPCRA Emergency Planning and Community Right To Know Act of 1986

GAD Grants Administration Division, Office of Grants and Debarment

GICS Grants Information and Control System

OARM Office of Administration and Resources Management

OIG Office of the Inspector General

OPPTS Office of Prevention, Pesticides and Toxic Substances

PE Program Element (identifies sources of funds) 

PCIE President’s Council on Integrity and Efficiency

PO Project Officer

PRC Program Results Code (replaces PE, above)

SRO Senior Resource Official
viii Report No. 8100256

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1 Report No. 8100256

CHAPTER 1

INTRODUCTION

Objective EPA’s FY 1996 Federal Managers’ Financial Integrity

Act Report to the President and Congress declared

post-award oversight of assistance agreements and

grants closeout material weaknesses. The objective

of our audit was to review the Agency’s pre-award

process (steps the Agency takes to award assistance

agreements) to identify opportunities for

improvement.

Background Assistance is the transfer of anything of value for a

public purpose of support or stimulation authorized by

law.1 EPA program offices prepare assistance

funding packages. Each package includes a funding

order which identifies approved funding amounts and

the project officer, a commitment notice which

reserves funds, and a decision memorandum which

recommends the award. Program offices are also

responsible for programmatic and technical review of

assistance award proposals.

Within the Office of Administration and Resources

Management (OARM), Office of Grants and

Debarment, the Grants Administration Division (GAD)

assures assistance application completeness by

performing and documenting an administrative review

of the assistance application. GAD senior managers

are award officials for grants and cooperative

agreements approved by EPA Headquarters program

offices. Signature by the award official constitutes an

offer from EPA to the applicant and obligates

committed funds. The offer becomes an agreement 

1

31 U.S.C. 6101.
2 Report No. 8100256

Scope and Methodology

when it is signed and returned by the applicant and

accepted by EPA.

Within EPA program offices, Senior Resource

Officials (SROs) are accountable for effective

resource management, including management

integrity, budget, financial management, acquisition

and assistance.2 The SRO is responsible for

ensuring adequate review of assistance funding

packages with emphasis on, among other things, use

of appropriate statutory authority, selection of the

proper funding instrument, the justification for

assistance agreements awarded noncompetitively,

content of the decision memorandum, and

qualifications of project officers (POs).3

Effective October 1, 1996, EPA required that to be a

PO for a grant, cooperative agreement or interagency

agreement, individuals must first successfully

complete the course, “Managing Your Financial

Assistance Agreement – Project Officer

Responsibilities.” 

This review was conducted from July 1997, to July

1998. The July 1997 universe of 1,118 EPA

Headquarters assistance agreements, taken from

EPA’s Grants Information and Control System

(GICS), consisted of all active assistance agreements

with nonprofit organizations and all active “X”-grants.4

Our judgmental sample of 30 assistance agreements

included at least one award from all EPA offices

headed by an Assistant Administrator, and two from

the Administrator’s Office. As part of our initial

fieldwork, we compared the grant-making language in

 the cited statutes to the description of work to be

2EPA Order 1130.2A, Senior Resource Officials and

Resource Management Committee, November 6, 1995,

paragraph 7(d).

3Senior Resource Official Responsibility Statement, May

31, 1994, Attachment C.

4

The “X” in X-grants, is a GICS code for surveys,

studies, investigations and special purpose grants.
3 Report No. 8100256

Prior Audit Coverage

performed, and concluded that eight awards lacked

statutory authority. To address this issue, we issued

a separate audit report, Statutory Authority for EPA

Assistance Agreements, on September 18, 1998. 

To identify opportunities to improve the pre-award

process, we interviewed personnel in GAD

responsible for overseeing the assistance process,

and the POs for 27 assistance agreements awarded

between 1992 and 1997. We reviewed PO files to

determine whether they were conducting pre-award

reviews specified by Agency policy and project officer

training. Finally, we benchmarked EPA pre-award

practices against those used by other federal

agencies to identify problem recipients and issues

before new or additional assistance awards are

made.

We conducted our work in accordance with the

Government Auditing Standards (1994 Revision)

issued by the Comptroller General of the United

States. We reviewed Federal Managers’ Financial

Integrity Act controls related to the audit objective. 

We did not evaluate controls over GICS, or the

quality or integrity of GICS data, because we only

relied on GICS data for sample selection.

Over the years the OIG has issued numerous audit

reports of assistance agreements, but no previous

OIG reports focused exclusively on the assistance

pre-award process.
4 Report No. 8100256

CHAPTER 2

Important Information Is Needed Before Assistance Is Approved

POs did not always negotiate workplans with welldefined commitments, adequately determine and

document that costs submitted with assistance

applications were reasonable, or prepare decision

memoranda which contained all information required

to support recommendations for award. Neither POs,

nor those program officials reviewing and signing

assistance approval documents, were following

established guidance in these areas. 

SROs, supervisors of POs and other assistance

approval officials are not usually required to attend

training. Therefore, they may not have recognized

that additional information was needed or have seen

the need to hold POs accountable. Expanded

training for those involved in assistance management

and enhanced oversight are needed. 

EPA can use the pre-award approval process to

improve post-award oversight capabilities. A

complete funding package assists program officials,

including the SRO, in holding recipients accountable

for expected outputs, determining whether

expenditures are reasonable for the work performed,

and ensuring that funded activities are accomplished.

Workplans Should Be

Well-Defined 

When EPA receives an assistance application, GAD

performs an administrative review, and then forwards

the application to the designated program official for

technical/programmatic review.5 The narrative

workplan serves as the applicant’s performance 

5Assistance Administration Manual, EPA Directive 5700,

1984 Edition, Chapter 12, paragraph 5(a).
5 Report No. 8100256

commitment and should describe, as accurately as

possible, what will be done, when it will be

accomplished, the applicant’s performance capability,

and the estimated costs.6 Agency guidance states

that an effective workplan will list expected outputs;

link outputs to funding; identify target dates and

milestones; require periodic reporting; and explain

how the activities will be accomplished.7 The PO’s

goal when negotiating a workplan should be to

negotiate a workable document containing well

defined commitments that foster accountability on

behalf of the recipient.8 

We reviewed GAD files for 30 assistance awards. 

Three workplans did not list expected outputs. None

of the five awards funded from more than one

appropriation linked outputs to funding. Thirteen

workplans did not include target dates and

milestones. Twenty-five did not require periodic

reporting, and two did not explain how activities

would be accomplished. Of the 30 workplans, 28

were missing one or more of these elements.

Because program offices were not adequately

evaluating workplans, the Agency’s ability to hold

recipients accountable for poor performance could be

limited. We spoke with an Agency official who

recalled a past struggle with an awarded grant having

a workplan which contained no expected outputs. 

This individual stated it was hard to determine what

the grantee was supposed to be doing, and it would

have been equally difficult for the OIG to audit the

grant to see if the grantee produced what EPA paid

for. The Agency official believed that there was little

public benefit derived from this award. One

agreement in our sample included a special condition

allowing the recipient to submit a workplan 90 days 

6

Ibid., paragraph 5(d)(4).

7Managing Your Financial Assistance Agreements -

Project Officer Responsibilities, Third Edition, EPA 202-B-96-

002, October 1996, page 3.33.

8

Ibid., page 3.34.
6 Report No. 8100256

after the date of award. The initial workplan was

issued at least one month late, and the final revised

workplan was received six months after the date of

award. For a period of time during which there was

no enforceable instrument with which to hold the

recipient accountable, the recipient spent $171,288. 

The recipient’s first quarterly progress report showed

costs incurred under one task even though no

activities were performed. 

POs are accepting workplans that limit the Agency’s

ability to perform effective post-award monitoring. 

Approval officials and SROs should hold POs

accountable for negotiating workplans that are timely

and meet the requirements outlined in the PO training

manual. Workplans meeting these requirements will

provide useful information to enable the Agency to

more effectively manage assistance agreements

subsequent to award, and hold recipients

accountable for accomplishing funded activities. 

Cost Reasonableness

Should be Determined

and Documented

POs are required and trained to determine cost

reasonableness. According to the Assistance

Administration Manual, the “reviewer must determine

whether all proposed project tasks are included in the

budget and must review each budget item for

reasonableness.”9 The Project Officer Training

Manual explains this requirement:

The PO is responsible for reviewing the

proposed budget against the

Narrative/Workplan to determine whether the

budget is reasonable from a programmatic

perspective. In making this determination, the

PO should consider the technical necessity for

and price reasonableness of proposed

personnel, travel, equipment, supplies,

procurements, and other items in the budget. 

There is no one way to determine the

reasonableness of any particular item. If the

PO questions whether a particular item is 

9Assistance Administration Manual, EPA Directive 5700,

1984 Edition, Chapter 12, paragraph 5(b)(6)(b).
7 Report No. 8100256

The Decision

Memorandum Should Be

Complete

“reasonably” priced, they should ask other

POs, call various suppliers, ask the [Grant

Management Office] for advice, or ask the

applicant how they arrived at the cost. 

We found that POs did not adequately determine and

document that proposed costs were reasonable. 

Sixteen of the 27 POs we interviewed indicated they

did no assessments of whether budgeted costs were

reasonable, and none of the project files that we

reviewed contained evidence that proposed costs

were reviewed against the narrative/workplan. The

most common reasons given for making no

assessments of cost reasonableness were POs: (1)

did not know it was their responsibility to do so, or 

(2) thought it was the responsibility of the grant

specialists to make these determinations. EPA

employees who had been POs for a long time told us

that they relied on past experience as a PO or past

experience with similar types of grants. 

SROs are charged with the efficient and effective use

of fiscal resources. Without adequate cost

reasonableness determinations prior to award, SROs

lack assurance that the level of funding is appropriate

for the work to be performed. The Office of Inspector

General (OIG) issued a report earlier this year that

addressed a similar concern.10 We found that under

a training assistance agreement, EPA did not always

know how many students were being trained, or how

much it was costing to train each student. We

reported that because POs did not compare cost

estimates to the number of students being trained,

the Agency was unaware of the wide disparities

among the agreements in the cost to train students

for similar work. 

The Decision Memorandum, forwarded by the

program office to GAD with the other components of

the assistance funding package (the funding order

and commitment notice), contains the program 

10Audit Report No. E1XMF6-03-0224-8100070, “EPA’s

Training Assistance Agreements,” March 4, 1998, Chapter 3.
8 Report No. 8100256

office’s decision and justification for funding or

rejecting an assistance proposal.11 Various policies

and guidance either require or suggest decision

memorandum content. Required elements include:

• a brief description of the project objectives;12

• a summary of all reviews received on the

 project, and reconciliation of contrary views;

 justification for assistance agreements awarded

 noncompetitively; 13

• why the award should be assistance (rather

 than procurement);14

• the statutory authority, delegation of authority,

 and program element;15

• foreign activities approval, if applicable;16

• quality assurance/quality control, if

applicable;17

• approval for human or animal subjects, if

 applicable,18 and

• SRO approval, for project costs totaling $1

 million or more.19

11EPA Order 5700.1, Policy for Distinguishing Between

Assistance and Acquisition, March 22, 1994, paragraph 4(c).

12Assistance Administration Manual, Figure 15-3.

13Ibid.

14EPA Order 5700.1, Policy for Distinguishing Between

Assistance and Acquisition, March 22, 1994, paragraph 5(a)(2).

15EPA Order 5730.1, paragraph 4(b)(1)(f).

16Assistance Administration Manual, Chapter 7,

paragraph 1(c).

1740 CFR Part 30.54 requires that grantees, whose

projects involve environmentally related measurements or data

generation, develop and implement quality assurance practices.

18Research and Demonstration Grants, 40 CFR Part

40.135-2.

19EPA Order 1130.2A, Senior Resource Officials and

Resource Management Committee, November 6, 1995,

paragraph 7(d)(7)(c).
9 Report No. 8100256

Decision memorandum elements suggested by

Agency guidance20 include:

• a statement that the award does not duplicate

 other EPA funded efforts, or, if it does, why it

 should be funded;

• the substantial federal involvement if the award

 is to be a cooperative effort;

• justification of mixing appropriations, if

 applicable;

• approval of pre-award costs, if applicable; and

• explanation for workshops, conferences and

 symposia.

On July 19, 1996, the Acting Assistant Administrator,

OARM, issued to Assistant Administrators, Regional

Administrators, the Inspector General and the

General Counsel, a collection of nine Grants

Management Fact Sheets for Agency Leaders. Fact

Sheet Number 3, Improper Expenditure of Grant

Funds, pointed out that program leaders should

“assure that grant applications, including the

proposed budget and workplan are carefully reviewed

to prevent unnecessary and unreasonable costs.” 

Fact Sheet Number 6, Acquisition vs. Assistance,

citing guidance dating back as far as December

1992, reminded Agency managers of the need to

distinguish between assistance and procurement. 

Fact Sheet Number 9, Competition for Assistance

Agreements, advised program leaders to develop

justifications for assistance agreements awarded

noncompetitively. Despite these periodic reminders

from GAD, we find that program offices still submit

funding packages lacking the elements described in

this chapter.

Not all applicable elements were addressed in the

decision memoranda that we reviewed. Twelve did

not include the required statement that assistance,

not acquisition, was the appropriate funding

instrument. Seventeen did not indicate the 

20Managing Your Financial Assistance Agreement –

Project Officer Responsibilities, Third Edition, EPA 202-B-96-

002, October 1996, page 4.7.
10 Report No. 8100256

substantial federal involvement which would be the

basis for awarding a cooperative agreement rather

than a grant. Twenty-one of 26 noncompetitive

awards we reviewed did not include the required

justification for noncompetitive award in the funding

package. Of the five assistance agreements funded

by multiple appropriations, two lacked the justification

for mixed funding.

In response to the FY 1996 declaration of grants

closeout and oversight of assistance agreements as

material weaknesses, the Administrator asked each

SRO to perform a management effectiveness review

and report the results in their Federal Managers’

Financial Integrity Act assurance letters. The results

confirm our findings. On February 25,1998, the GAD

Director issued a memorandum to SROs discussing

the reviews and areas needing improvement,

including the content of decision memoranda. For

example, GAD noted that decision memoranda did

not contain the required determination to use

assistance rather than acquisition, and that

justifications for noncompetitive awards are

sometimes absent from grant funding packages. The

Director asked that SROs remind approval officials

and POs of the need to include this information in the

decision memorandum.

Additional Training and

Oversight Are Needed

POs were not preparing complete funding packages. 

In reviewing these documents, SROs and approval

officials were not consistently requiring that POs: (1)

develop (if the assistance award is to be competed)

or negotiate (if the award is noncompetitive)

workplans containing milestones and outputs; (2)

determine cost reasonableness; or (3) prepare

decision memoranda which contain all the elements

enumerated above. Additional training could improve

the quality of funding packages. 

The SRO is charged with specific training

responsibilities:

Designs and implements a resource management

training program aimed not only at staff with

direct contracts or assistance 
11 Report No. 8100256

Management Plans Can

Enhance Post-Award

Oversight

management responsibilities, but also [at]

managers of such staff by:

- conducting ad hoc training sessions for Project

Officers and Work Assignment Managers on new

policies and procedures affecting grants [and]

contracts management; [and]

- conducting training sessions aimed at the

management level.21

While most POs have received the required training

in assistance management, we know of no program

office that provides refresher training for POs, and

only two program offices22 that have developed and

presented a grants management course for

supervisors. 

There is also no Agency requirement for SROs to

receive training in assistance-related responsibilities. 

The Chief of GAD’s Grants Policy, Information and

Training Branch told us that several years ago he

participated in training EPA’s Senior Executive

Service (SES) members in management of extramural

resources (SROs are members of the SES). He said

that senior executives were given the opportunity to

receive this training at one of three sessions, but the

training was not required and it was poorly attended. 

While training may improve the ability of managers

and supervisors to perform effective oversight, it is

the SRO’s responsibility to see that the oversight

itself improves. The SRO Responsibility Statement

specifically addresses pertinent responsibilities as

follows:

21SRO Responsibility Statement, May 31, 1994,

Attachment C.

22The Office of Solid Waste and Emergency Response

(OSWER), and the Office of Research and Development

(ORD).
12 Report No. 8100256

Contracts and Assistance Placement: Ensuring

the quality of pre-award paperwork associated

with assistance agreements, contracts and interagency agreements. This includes establishing

systems for contract and assistance awards,

overseeing those systems, and establishing

office priorities for procurements and assistance

agreements.

Contracts and Assistance Management: 

Ensuring the soundness of contracts and

assistance administration. This includes

ensuring the availability of trained and

experienced officials to manage and oversee

contracts and assistance agreements; approving

procedures to protect fiscal integrity; and

ensuring proper control measures are used.

The Office of Water’s management effectiveness

review recommended that POs prepare, for any grant,

cooperative agreement or interagency agreement, a

post-award management plan. The plan, which

should be attached to the decision memorandum,

should state the actions the program will take to

effectively manage the assistance award, including

activities the PO will undertake on a regular basis to

monitor the recipient’s technical performance and the

rate of expenditure of funds. We believe that

developing such technical monitoring plans could

significantly improve post-award management.

Effective post-award management requires a

resource investment--time from the PO and money if

site visits are necessary. Increasingly, program

offices have acknowledged this and made

adjustments. One PO told us that in the past, while

working only two days per week, she was responsible

for 17 grants. Now, however, this same PO (still

working two days a week) is responsible for

monitoring five grants and interagency agreements. 

We asked some POs to estimate the amount of time

spent on PO-related duties per grant. Estimates

ranged between 3 and 20 percent.
13 Report No. 8100256

There is no requirement that PO files contain

estimates of time and dollars necessary for effective

assistance management. We believe, however, that

assistance management would improve if, prior to

award, the PO and supervisor formally agree on an

estimate of time and money required to execute

oversight responsibility. This estimate, signed by the

PO and his/her supervisor, could be a part of the

assistance management plan. By identifying

oversight activities, the plan can provide the basis to

hold recipients accountable for expected outputs, and

for accomplishing funded activities. 

Training for and oversight by managers and

supervisors, especially SROs and approval officials,

is critical to effective assistance management. Only

by understanding PO responsibilities and the reasons

for building specificity in workplans, assessing cost

reasonableness, and preparing complete decision

memoranda, can program managers provide effective

oversight. Without milestones and outputs, the

Agency limits its ability to hold grantees accountable. 

Without justifications for noncompetitive award, the

Agency could give the appearance that it is giving

preferential treatment to a single assistance applicant

or that it is not encouraging competition to the

maximum extent practicable. Without determinations

of cost reasonableness, the Agency cannot

demonstrate that the level of funding is appropriate

for the work to be performed. Without post-award

monitoring plans, SROs cannot be assured that POs

will have the time and money available to adequately

execute oversight responsibilities. Without all of

these things, the Agency, and specifically the SRO, is

not providing effective management of extramural

resources.

Recommendations The Acting Assistant Adminstrator for OARM, the

OCFO, and the Offices of Air and Radiation; Water;

Solid Waste and Emergency Response; Research

and Development; and Prevention, Pesticides and

Toxic Substances provided written comments on the

draft recommendations, which appear as Appendix B. 

We also discussed our draft recommendations at the

September 23, 1998, exit conference. Based on the 
14 Report No. 8100256

written comments, discussions at the exit conference,

and our further analysis, we have revised most of our

draft recommendations, as described below.

Draft Report

Recommendation 2-1: 

Agency Response

OIG Evaluation

We recommend that the Acting Assistant

Administrator for Administration and Resources

Management direct GAD to take the lead in the

development of refresher and manager training

courses, and assist SROs in training all levels of staff

involved in assistance award and management.

GAD is currently preparing a One-Day Refresher

course for project officers with implementation

targeted for January 1999. Both Regional Grants

Management Offices and Program Offices are being

offered the opportunity to provide input, ensuring that

GAD is creating a comprehensive refresher course. 

The course is designed to present new policies and

regulations, reinforce proper grants management

practices, and set the groundwork for continued

project officer certification. It will be updated annually

if warranted.

EPA manager training is a resource management

issue which has broad implications. The Resource

Management Committee is considering developing a

comprehensive and integrated training course for

Agency managers. OARM will actively participate

with OIG and OCFO to develop resource

management training for managers.

The Agency response for PO training is acceptable. 

The exit conference included additional discussion of

manager training. Representatives from all program

offices agreed that manager training was necessary. 

Providing this training under the broader heading of

resource management (contracts, assistance and

fiscal) training as OARM suggests is a reasonable

approach. The OIG is assisting the Agency in

developing “Core Competencies.” This effort should

better define manager needs. GAD, as National

Program Manager, needs to aggressively promote (or

lead, in the case of stand-alone training) this effort.

Regardless of the instrument–grant specific training

or resource management training–managers need to 
15 Report No. 8100256

Final Recommendation

2-1

be trained in order to monitor the completeness and

correctness of grants funding packages. Since this

training has yet to be developed, the Agency, and in

particular the SRO, will continue to be vulnerable. 

Grants may be funded that should not, or would not,

be funded given adequate oversight. In the interim,

some SROs have lowered the dollar threshold for

SRO review below the $1 million threshold

established by EPA policy, and some SROs have

designated knowledgeable staff to review assistance

packages. We also note that GAD will develop

guidance (see recommendation 2-2) explaining the

types of omissions which warrant returning funding

packages to program offices. This action should help

encourage funding package completeness.

We recommend that the Acting Assistant

Administrator for OARM direct GAD to take the lead

in the development of PO refresher training courses. 

The Agency’s response to the final report should

provide milestones for when the course will be

completed and the instructors trained.

Draft Report

Recommendation 2-2

Agency Response

OIG Evaluation

Final Recommendation

2-2

We recommend that the Acting Assistant

Administrator for OARM direct GAD to ensure the

completeness of funding packages and return

incomplete assistance funding packages to the

program offices via the SRO.

Program offices agreed that assistance funding

packages with significant omissions should be

returned for correction, but did not agree that all

returned packages should go to the SRO. GAD

agreed to develop guidance on which types of errors

or omissions will cause packages to be returned to

the program offices.

A revised recommendation follows.

We recommend that the Acting Assistant

Administrator for OARM direct GAD to develop

guidance explaining the types of omissions which will

result in GAD returning incomplete assistance

funding packages to the program offices. Incomplete

packages valued below $1 million should be returned 
16 Report No. 8100256

Draft Report

Recommendation 2-3

Agency Response

to the approval official. Assistance funding packages

of $1 million or more should be returned to the SRO.

We recommend that Assistant Administrators require

SROs to train all levels of staff involved in assistance

awards. Until supervisor, manager and refresher

training courses are developed, require managers,

supervisors and POs to attend the PO training course

every three years.

There was universal consensus that those involved in

awarding assistance should be trained, but

disagreement over who should provide that training. 

Some program offices believe this is a GAD

responsibility. Others believe that their requirements

are such that only they can adequately teach them. 

GAD and program offices agree that the need for

more (refresher and manager) training will strain their

existing resources, and more resources have not

been made available.

OIG Evaluation

Final Recommendation

2-3

The findings in this report demonstrate the need for

an effective training program. It may be that the

Agency will be forced to identify some or all of this

training as appropriate for contractor support. (The

basic project officer course for contracts is taught by

a contractor.) Whatever method the Agency deems

most desirable, sufficient resources must be directed

to this effort.

We recommend that the Acting Assistant

Administrator for OARM raise the need for additional

grants training to the Resource Management

Committee, including an estimate of the minimum

resources required to deliver training Agency-wide,

and options for delivering the training. 

We recommend that the Acting Assistant

Administrator for OARM and the Chief Financial

Officer, as co-chairs of the Resource Management

Committee, inform program offices of the Committee’s

decision(s) regarding resources for grants

administration training and the method(s) of delivery.
17 Report No. 8100256

Draft Report

Recommendation 2-4

Agency Response

OIG Evaluation

Draft Report

Recommendation 2-5

Agency Response

OIG Evaluation

Final Recommendation

2-5

We recommend that Assistant Administrators require

SROs to hold POs and approval officials accountable

for workplan specificity, adequacy of determinations

of cost reasonableness, and the completeness of

decision memoranda.

Program offices indicated that they already hold POs

and approval officials accountable, or that they didn’t

understand OIG’s expectations.

The process improvements outlined in other

recommendations make this recommendation

unnecessary.

We recommend that Assistant Administrators require

SROs to require the program offices to develop an

assistance management plan prior to approval of an

award. At a minimum, management plans should

identify planned oversight activities, estimated PO

monitoring time and other funds (e.g. travel) required.

Program offices either disagreed with this

recommendation or found it confusing. 

At the exit conference, we discussed alternatives to

creating plans for each assistance award, including

management plans for groups of awards, or plans for

awards over a certain dollar threshold. While not all

program offices believe that post award management

plans are necessary for each award, there was

consensus that whatever is done post award, should

be coordinated with the Grants Management Offices’

monitoring efforts.

We recommend that the Acting Assistant

Administrator for OARM direct GAD to work with the

program offices to develop a coordinated post-award

management strategy.
18 Report No. 8100256

CHAPTER 3

Assistance Agreements In One Office 

Cited Inappropriate Program Elements

Of 55 Environmental Justice Through Pollution

Prevention (EJP2) assistance agreements awarded

by the Office of Prevention, Pesticides, and Toxic

Substances (OPPTS) during FY 1997, 28 were

improperly funded using resources intended for other

purposes. Improper use of funds occurred because

of poor funds controls within OPPTS, because

OPPTS division directors acted to avoid carrying over

excess funds, and because the Grants Administration

Division’s “check and balance” process did not

identify the improper funding. This resulted in the

reprogramming of $1.9 million from authorized

purposes without required Congressional approval.

OPPTS Utilized Funds

for Unintended Purposes

A program element (PE) is a classification within

EPA’s program/budget structure that represents a

distinct program activity and identifies the source of

funds. The PE is supported by one or more

authorizing sections of law and must be associated

with the grant statutory authority.23 To identify the

PE’s distinct program activity, we reviewed the PE’s

authorizing sections of law and the PE description

submitted with the President’s budget. To decide

whether a grant was properly funded, we determined

whether the activities described in the recipient’s

workplan fell within the PE’s distinct program

activities.

Reprogramming is any movement of funds into or out

of a program element. EPA is required to inform

Congress of any reprogramming between $500,000

and $1 million, and is required to obtain

Congressional approval for any reprogramming in

23EPA Order 5730.1, Policy and Procedures for Funding

Assistance Agreements, January 21, 1994, paragraph 3(l).
19 Report No. 8100256

excess of $1 million. These limitations apply to any

individual reprogramming or a series of

reprogrammings for the same purpose.24

Figure 1 on the next page shows 55 fiscal year 1997

EJP2 assistance agreements awarded by OPPTS. 

We reviewed grant X826031 to the Council on the

Environment, Inc., one of nine grants funded from

program element BPS, OPPTS-EPCRA-HQ25. The

workplan involved intermediate and high school

students working with local industries to reduce lead

emissions; monitoring, letter writing, public education

and promoting energy conservation; using non-toxic

products; and identifying industrial polluters.

The EPCRA program element was established to

provide funds to maintain the Toxic Release

Inventory (TRI) and the chemical use inventory. 

Activities funded in the Council on the Environment

grant do not fall within the scope of this PE. 

Therefore, the EPCRA PE was not an appropriate

source of grant funds. 

We reviewed the PE description (but not the grants)

for program element BV6, National Program

Chemicals (NPC), which indicates that the program

activities for this PE include risk management

activities with respect to lead, asbestos (helping

states with asbestos accreditation programs), PCBs

(permitting facilities for the storage and disposal of

PCB wastes), and other toxic chemicals of national

concern and impact; and characterizing human

exposure to, and sources of, dioxin. The only public

outreach mentioned is work to "improve the public's

understanding of the risks posed by lead." 

24FY 1997 Advice of Allowance Letter, April 13, 1997,

Attachment C.

25“EPCRA” refers to the Emergency Planning and

Community Right to Know Act of 1986, which established

programs to provide the public with information on hazardous

and toxic chemicals in their communities.
20 Report No. 8100256

Figure 1: FY 1997 ENVIRONMENTAL JUSTICE THROUGH POLLUTION

PREVENTION ASSISTANCE AGREEMENTS

Program Elements (Sources of Funds)

No. of

Awards Total Awarded

BV6: National Program Chemicals 19 $ 1,301,762

BPS/PSX: OPPTS EPCRA-HQ 9 626,789

V7X: Pollution Prevention 26 1,924,198

D9X: Pollution Prevention State Grants 1 99,998

The FY 1997 PE budget requests $2.2 million for

"Lead state assistance/environmental justice

initiative." However, there is no discussion of

environmental justice activities in the PE narrative.

We advised OPPTS of our opinion that, because the

Council on the Environment work plan does not fit

with the EPCRA program element distinct program

activities, the award should not have been funded

from EPCRA resources, and of our concern that

funding EJP2 activities from NPC resources also

appears questionable. EPA’s Office of General

Counsel advised OPPTS that unless the EJP2 grants

funded with NPC funds were for lead-related

purposes, the use of NPC funds for those grants was

not justified. OPPTS agreed that no EJP2 awards

should have been funded from EPCRA resources. 

OPPTS will review whether EJP2 grants were for

lead-related activities, but expects to find few, if any,

that qualify for NPC funds.

Poor funds control contributed to the use of EPCRA

and NPC program elements to fund EJP2 awards. 

First, OPPTS explained that prior to FY 1998 both the

NPC and Pollution Prevention divisions were

allocated environmental justice funds. Extramural

coordinators (who are responsible for ensuring that

funds from the proper PE are applied to extramural

funding instruments) had to read the PE descriptions

and the assistance work plans, and then decide

among several PEs to fund awards. There was little 
21 Report No. 8100256

reference material and inadequate training for the

task. Second, one OPPTS representative explained

the desire to obligate year-end funds:

The previous fiscal year the Pollution Prevention

Division [which awarded the Council on the

Environment grant] had potential carryover funds

that the office (OPPT) decided would be best

spent on another immediate need, (rather than

rolling forward into the next fiscal year as

carryover). The pollution prevention folks agreed

to 'lend' this money to a sister division to be

applied to an instant need of that fiscal year with

the understanding the sister division would

reimburse PPD with a like amount the following

fiscal year. 

The money used to reimburse PPD was from a

program element associated with

EPCRA-related activities and it was used by PPD

to fund a number of EJ/P2 grants (of which the

subject grant is one). Thus, the PE description

for the funds attached to this grant do not

correspond to the activities it supports.

EJP2 funding from the EPCRA and NPC PEs totals

$1,928,551. This clearly exceeds the $1 million

Congressional approval limit on reprogramming. In

effect, then, funds intended for maintaining the toxic

release and chemical use inventories, and funds for

NPC activities, were reprogrammed to the EJP2

program without the required Congressional

approval.

Grants Administration

Division Controls Need

Improvement

The Grants Administration Division’s “check and

balance” function does not stop erroneously funded

assistance agreements because GAD’s grants

specialists are not checking all necessary

information.

Using the Council on the Environment grant

discussed on page 13, we asked two GAD grants

specialists to walk us through their “check and

balance” function. They confirmed that:

• the OPPTS division director was delegated

 authority to approve our test grant;
22 Report No. 8100256

• the grant scope of work is consistent with the

 grant statutory authority, the Toxic Substances

 Control Act (TSCA);

• object code 41.83 is the correct object code for

 this grant; and

• media code “L,” representing Toxic

 Substances, is consistent with an award from 

 OPPTS.26

The specialists explained that since the grant

package passed all these tests, GAD would approve

the award. But, as explained above, even OPPTS,

which issued the grant, does not believe that the

grant is properly funded.

GAD’s process leads to incorrect conclusions

because it doesn’t check whether the assistance work

plan fits within the program element’s “distinct

program activity.” This allows program elements to

fund activities other than those for which the program

element was established. While checking the

delegation of authority, grant statutory authority, and

object codes all contribute to ensuring that awards

are properly executed, checking media codes does

not, because there is no way to identify errors. GAD

has no policies or procedures that define improper

program element/media code combinations. When

we asked the grants specialists how they knew that

media code “L” was consistent with an award from

OPPTS, they said that it was just common sense.

As noted above, Order 5730.1 states that program

elements are supported by authorizing sections of

law. The grants specialists told us that they do not

check the section of law. They, therefore, cannot

determine whether a proposed work plan fits within

the PE’s distinct program activity.

26All EPA activities and resources fall into “media”

categories, e.g., air, water quality, hazardous waste, pesticides,

toxic substances and radiation. EPA’s planning and budget

structure sorts resources by authorizing legislation,

appropriation, media, functions, subactivities, budget elements,

and program elements.
23 Report No. 8100256

Effective October 1, 1998, the Agency plans to

implement a revised budget structure which will

replace PEs with Program Results Codes (PRCs). 

PRCs tie the Agency’s operating plan to Agency

goals and objectives, and tie spending to Agency

subobjectives. GAD suggests that because of this

change, all references to PEs are outdated. 

The reprogramming issue described in this report is

not resolved by the new structure. FY 1999 accounts

will use a crosswalk of the existing PE codes to new

PRC codes, and the use of PEs to track funds

appropriated prior to FY 1999 may continue for some

time. Whether funds are tracked by PEs, PRCs, or a

combination of both, it will be necessary to ensure

that funds are spent only for intended purposes.

Both OPPTS and GAD point out that program offices

are responsible for certifying funds. Both believe that

the responsibility to ensure the correctness of PEs (or

PRCs) should be assigned to program offices. Our

recommendation reflects this position. 

Corrective Actions

Taken

In response to our review, the OPPTS SRO initiated

an internal review of its EJP2 awards. OPPTS told us

(we did not review their study) that since its

environmental justice program began in 1995,

Congress authorized, and OPPTS spent, $10.2

million. So although spending has not always come

from the correct source, overall spending on the

environmental justice program, and such other

programs as the TRI, has been at authorized levels. 

For FY 1998, OPPTS created a computerized project

table. Each extramural project is assigned a project

code, which maps to program elements. OPPTS staff

can enter a project code at their computers, which will

call up a one page description of the project and

identify the proper program element. Extramural

coordinators no longer have discretion on funding;

the project description identifies the appropriate

program element. In addition, OPPTS provided

training for extramural coordinators. If this process is

applied as intended, it should prevent any future

misapplication of funds.
24 Report No. 8100256

Finally, OPPTS has alerted EPA’s Budget Division of

the improper reprogramming noted in this report. The

Budget Division will advise OPPTS on whether to

inform Congress of “de facto” reprogramming. 

Recommendation We recommend that the Acting Assistant

Administrator for Administration and Resources

Management:

3-1 Require the Grants Administration

Division to rewrite EPA Order 5730.1 to

assign responsibility for ensuring the

use of correct program elements or

program results codes exclusively to

program offices.

Agency Response The Agency agreed with this recommendation.
25 Report No. 8100256

APPENDIX A

Other Matters

Screening Recipients

Can Prevent Fraud,

Waste and Abuse

EPA’s pre-award screening includes checking the

General Services Administration’s Suspension and

Debarment Listing, and coordinating awards with

other federal agencies where appropriate. A review

by EPA’s Office of General Counsel (OGC) is

provided when requested. In general, OGC reviews

awards when there are issues involving using a grant

versus a contract, conflict of interest or allowable

costs. Neither GAD nor the program offices review

Dun & Bradstreet or similar credit checks, or check

internal accounts receivable, before awarding

assistance agreements, except in cases where the

Suspension and Debarment Office believes such

information would be helpful in the course of their

work (generally post award).

The President’s Council on Integrity and Efficiency

(PCIE) reported in January 1998 that prior to

awarding assistance agreements, of 22 agencies

surveyed, 11 ran credit checks on potential

recipients, and 10 performed checks of internal

accounts receivable listings. Other significant preaward checks reported involved Office of General

Counsel reviews, financial capability reviews and

financial cost analysis. The PCIE point of contact

told us that the combination of credit checks,

accounts receivable checks, and OIG/OGC checks

helps agencies combat fraud, waste and abuse in

awarding discretionary grants, loans, loan guarantees

and cooperative agreements.

Benefits Derived From

Credit and Receivables

Checks

The Department of Commerce has identified potential

applicants who have unresolved audit problems, owe

money to Commerce, have a criminal history, or have

internal management or performance problems which

could negatively impact grant projects. Commerce

OIG’s March 1997 semiannual report highlighted that
26 Report No. 8100256

of 552 proposed awards, 19 had “major deficiencies”

affecting the ability of the proposed recipients to

maintain proper control over federal funds. Of these:

 Award Amount

• 14 recipients were placed on

 a cost-reimbursement basis $9,475,342

• 4 awards were delayed 648,141

• 1 inserted special award conditions 500,000

EPA might identify similar problems if the Agency

conducted credit checks on at least a selected

sample of potential recipients. 

Reviewing Accounts

Receivable

The Debt Collection Improvement Act of 1996

enhances administrative offset authority and bars

delinquent debtors from obtaining federal credit. It

defines administrative offset as the withholding of

money payable by the United States to, or held by the

United States for, a person to satisfy a claim. Claims

listed in the Act include payments disallowed by

audits performed by the Office Inspector General of

the agency administering the program.27

Reviewing accounts receivable reports can help to

identify grant recipients who may be delinquent in

their payments to EPA and therefore be subject to

administrative offset. For example, EPA reported for

the Period April 1, 1997, through September 30,

1997, 23 audits disallowing $7,911,158 from

construction grants, Superfund grants and other

program grants.28

An argument for checking accounts receivable prior

to assistance award is:

• Grants closeout has been declared a material 

 weakness. One reason for slow closeout is 

27Public Law 104-134, §31001(z)(1).

28Management’s Semiannual Report to Congress on

Audits for the Period April 1, 1997 Through September 30, 1997.
27 Report No. 8100256

the grantees' failure to submit final performance

and financial reports.

• The Debt Collection Improvement Act of 1996

requires agencies to refer delinquent receivables

to Treasury for collection.

• Administrative offset (or the threat of it) can be

a tool to force grantees to clear up outstanding

reports on old grants. Clearing up these reports

will contribute to resolving the grants closeout

material weakness, and to Agency compliance

with the 1996 debt collection requirements.

Potential Benefits From

Other Pre-award Checks

The PCIE report points out that the Department of

Labor (DOL) and Social Security Administration

perform some type of financial capability review on

potential recipients. DOL pre-screening has resulted

in termination of current awards, imposing special

conditions on grantees, opting to not renew option

years, and the use of advance agreements. The

report also points out that the Department of Defense

withholds new awards until all delinquent financial

performance reports on prior awards have been

received.

We believe that EPA should consider adopting some

or all of these pre-screening techniques to prevent

problems.
28 Report No. 8100256

APPENDIX B

Agency Responses To The Draft Report

September 15, 1998

MEMORANDUM

SUBJECT: Response to OIG’s Draft Audit Report on Pre-Award Management of EPA

Assistance Agreements Draft Audit Report No. E1FMB8-11-0001

FROM: Alvin M. Pesachowitz

Acting Assistant Administrator

TO: Elissa R. Karpf

Deputy Assistant Inspector General

 for External Audits (2421)

Thank you for the opportunity to provide comments on the Draft Audit Report on Pre-Award

Management of EPA Assistance Agreements E1FMB8-11-0001. We are eager to work with the

Office of Inspector General (OIG) to improve the grants management function. We have

compiled the following comments from the National Program Offices for Air and Radiation

(OAR), Research and Development (ORD), Solid Waste and Emergency Response (OSWER),

and Water (OW).

RESPONSE TO RECOMMENDATIONS 

Recommendation 2-1 (to Acting Assistant Administrator for OARM):

CDirect GAD to take the lead in the development of refresher and manager training courses, and

assist SROs in training all levels of staff involved in assistance award and management.

OARM Response:

GAD is currently preparing a One-Day Refresher course for project officers with implementation

targeted for January 1999. Both Regional Grants Management Offices and Program Offices are

being offered the opportunity to provide input, ensuring that GAD is creating a comprehensive

refresher course. The course is designed to present new policies and regulations, reinforce proper
29 Report No. 8100256

grants management practices, and set the groundwork for continued project officer certification. 

It will be updated annually if warranted. 

EPA manager training is a resource management issue which has broad implications. The

Resource Management Council is considering developing a comprehensive and integrated training

course for Agency managers. OARM will actively participate with OIG and OCFO to develop

resource management training for managers. 

AA Responses:

OAR agrees that GAD should take the lead in the development of management training through

the creation of a workgroup, comprised of program and regional office representatives. Program

offices who wished to do so could then expand the training beyond the basics outlined by the

workgroup. OAR additionally agrees that GAD should provide assistance to SRO staff in training

all of its employees. ORD has developed it’s own training for managers, but agrees that GAD

should be assigned responsibility for developing a refresher course. OW concurs with this

recommendation. 

Recommendation 2-2 (to Acting Assistant Administrator for OARM):

• Direct GAD to ensure the completeness of funding packages and return incomplete

assistance funding packages to the program offices via the SRO.

OARM Response:

OARM disagrees with this recommendation in part. In most cases, the omissions are minor, such

as the field of science code or a signature on a document. GAD maintains that in these cases it is

more productive for the grants office to contact the program office to obtain the code, or the form

with the signature. On the rare occasion when there is a substantive problem, such as when the

scope of work is clearly not authorized by statute, or when the use of an assistance agreement

versus a contract is in question, GAD agrees that packages should be returned to the SRO or their

designee. Before this process begins, GAD will identify the possible situations and practices, and

will communicate this with the grants offices and program offices to ensure consistency and

clarity. 

As a result of the Management Effectiveness Reviews (MERs) conducted by the program offices

and GAD in FY 1997, it was determined that funding packages were often not complete. On

February 25, 1998, Gary Katz, Director of the Grants Administration Division, sent a

memorandum to the SROs on the matter of assistance agreements and funding packages. This

memorandum addressed the two most common errors - missing justification of awarding an

assistance agreement vs. a contract, and missing justification for not competing a grant in the

decision memorandum. The memorandum also included a request that SROs remind Approval

Officials and POs to ensure a complete funding package with a comprehensive decision
30 Report No. 8100256

memorandum. As a result of this memorandum, the quality of decision memoranda submitted to

GAD has improved. 

AA Responses:

OAR agrees that packages should be returned to the programs; however, not through the SRO

except for serious problems. ORD concurs as well, but believes that packages should be returned

to a delegated official other than the SRO. 

Recommendation 2-3 (to Assistant Administrators):

• Train all levels of staff involved in assistance awards. Until supervisor and manager and

refresher training courses are developed, require managers, supervisors, and POs to attend

the PO training course every three years.

AA Responses:

ORD, OAR and OSWER and OW disagree with this recommendation. The program offices

support the need to train managers and for project officer refresher training. However, as ORD

notes that it would be redundant for project officers to sit through the 3-day course until the

refresher course is developed. Program offices are aware that GAD plans to complete the oneday refresher course (see recommendation 2-1), and intend to offer the course as soon as the

materials are available. The course is designed for project officers and contains more detail than

what is needed for supervisors and managers. OAR and OW agree with the recommendation in

2-1 that GAD develop a shorter course to meet the needs of managers. OSWER and ORD have

developed their own manager training. OSWER has provided this training to its managers as well

as the Senior Resource Official. ORD has scheduled its training for managers for this year. 

OW makes an additional recommendation that OARM support GAD in building a permanent

training staff to serve the Agency’s assistance training needs.

 Recommendation 2-4 (to Assistant Administrators):

• Hold POs and approval officials accountable for workplan specificity, adequacy of

determinations of cost reasonableness, and the completeness of decision memoranda.

AA Responses:

OAR and OSWER noted that the Agency already holds POs and Approval Officials accountable

for their actions regarding assistance agreements. OSWER added that training for POs and

managers outlines their responsibilities and accountability. OW concurs with this

recommendation with comment. OW notes that neither the Assistance Administration Manual
31 Report No. 8100256

nor the Project Officer Training Manual constitute training for project officers on determining

cost reasonableness. It therefore recommends that training directed at determining cost

reasonableness be incorporated into the Project Officer’s training. (Note: OARM is currently

drafting a policy on cost analysis that will address in part the issue of cost reasonableness.)

ORD notes that the report states that costs were not being evaluated adequately and were not

being documented. ORD addresses the concern that contracts rely on competition or negotiation

to ensure that the government gets value for its money. However, in assistance agreements, the

recipients are doing the work for their own benefit, not for the government, and as such there is a

strong incentive for good management. ORD files may not have the same level of cost analysis

seen in contract files; however, review does take place. For example, during peer review,

evaluation criteria may include a note on reasonableness of the cost, and is documented in peer

review comments, along with project officer review and comments.

Recommendation 2-5 (to Assistant Administrators):

• Require the program offices to develop an assistance management plan prior to approval of

an award. At a minimum, management plans should identify planned oversight activities,

estimated PO monitoring time and other funds (e.g. travel) required.

AA Responses:

OAR and ORD strongly disagree with this recommendation, and ORD suggests that it be deleted. 

OAR feels that the agency should not commit to the development of a management plan at this

time. SROs should be given adequate time to develop a strategy for management improvement. 

The MERs conducted by program offices in FY 1997 provided them the opportunity to discover

their own weaknesses and work to improve their assistance agreement management. OAR

believes that program offices should have the opportunity to determine if this work has resulted in

improvement, before they have to develop management plans. 

ORD points out decision memoranda and funding orders cover their plans for EPA’s involvement

in an agreement, including technical and financial monitoring, and includes a grant condition to

address the progress report requirements. ORD is concerned that a management plan for

assistance agreements could be confused with a similar plan now required for contracts. Unlike

contracts management, the focus in management of assistance agreements is to aid the recipient to

reach its own goals in a non-intrusive manner. 

OSWER and OW note that the recommendation is somewhat confusing. The report states that

the IG recommends that POs develop a management plan for each grant and cooperative

agreement, and references OW’s current practice of requiring post award management plans for

each assistance project. However, the recommendation itself specifies that program offices

develop a plan without being specific as to whether the “plan” refers to a plan on a grant-by-grant

basis or to a broader plan for each program office. OSWER would support assistance
32 Report No. 8100256

management plans for each award as long as there would be a general form for POs to use as a

tool to ensure standardization. OW suggests that this recommendation needs to be clarified.

OARM has circulated a draft policy for review by the program offices. It suggests the

development of officewide management plans for assistance agreements. Therefore, OARM

would support a requirement for program-wide post award management plans.

Recommendation 3-1 (to Acting Assistant Administrator for OARM):

• Require Grants Administration Division to rewrite EPA Order 5730.1 to assign responsibility

for ensuring the use of correct program elements or program results codes exclusively to

program offices.

OARM Response:

GAD concurs with this recommendation and will make the necessary changes to EPA Order

5730.1 by November 15, 1998.

AA Response:

OW concurs with this recommendation; however, notes that it seems to be inconsistent with

current practice that the Grants Administration Division serves as a “check and balance” for

ensuring that assistance is awarded with appropriate funding and the proper statutory authority.

GENERAL COMMENTS

In addition to comments on the recommendations, ORD and OW had additional comments

regarding the report. What follows is a summary, the full text of their comments can be found in

the attachments. ORD notes that it would be helpful to have a listing of the actual grants that

were reviewed for this report. They also indicate that some Agency guidance is not current, and

the report fails to mention the requirements of 40 CFR Part 30 which provides many of the

standards followed by the program offices for payment and monitoring. ORD voices a concern

that the report needs more clarity on the relationship that EPA has with an assistance agreement

recipient, as opposed to a contract. This concern carries over to the comments made in the report

regarding workplans. ORD believes the report expects workplans for assistance agreements

should be held to the same standards as contracts, which is inaccurate.

OW noted that the audit report could be strengthened by an additional recommendation. This

would be to recommend that the Assistance Administration Manual (AA manual) be updated. 

The AA manual was cited several times in the report; however, the PO training manual has

evolved into the resource for project officers in implementing EPA’s assistance policies and

procedures because it is the most current source of information. 
33 Report No. 8100256

We have attached for your information all of the comments sent to OARM from the Assistant

Administrators. Thank you again for providing us with the opportunity to comment on the Draft

Report. If you or your staff have any questions or need additional information, please contact

Bruce Feldman at 202-564-5308.

Attachments

cc: Senior Resource Officials and Audit Liaisons:

Office of the Administrator

Office of Administration and Resources Management

Office of Air and Radiation

Office of Enforcement and Compliance Assurance

Office of International Activities

Office of Policy, Planning and Evaluation

Office of Prevention, Pesticides and Toxic Substances

Office of Research and Development

Office of Solid Waste and Emergency Response

Office of Water

 Chief Financial Officer

 Comptroller

 Associate General Counsel, Finance and Operations Law Office

 Director, Office of Grants and Debarment
34 Report No. 8100256

September 8, 1998

MEMORANDUM

SUBJECTS: OAR Comments on Draft Audit Report, “Pre-Award Management of EPA

Assistance Agreements

FROM: Jerry Kurtzweg, Director

Office of Program Management Operations

TO: Gary Katz, Director

Grants Administration Division

OAR has reviewed the draft audit report and offers the following comments on behalf of

OAR’s Senior Resource Official. 

Recommendation 2-1. Refresher and Management Training: OAR agrees that both Project

Officer refresher and management training is needed and GAD should take the lead in its

development. While GAD has already taken the lead in development of the refresher training,

OAR also recommends GAD Chair a workgroup, comprised of program office and regional

representatives, to develop uniform agency-wide training for managers. If program offices wish

to expand management training beyond the basics outlined by this workgroup, they could do so. 

However, without this workgroup, there is no way to ensure consistency in management training.

We also agree that GAD should assist SRO staff in training its employees. At present, no OAR

employees are being accepted for GAD-sponsored courses. We are at a point where we do not

have sufficient number of employees requiring training to warrant a separate class. These should

be allowed to sign up for GAD’s course so SRO staff can focus on the many other demands being

placed on them by OARM. Because of these many demands, OAR cautions GAD to be careful in

answering this recommendation not to set an overly ambitious schedule for this training. 

Recommendation 2-2. Completeness of Funding Packages: We agree that incomplete packages

should be returned to the programs. However, unless there are serious problems with the

packages, they should not routinely be sent to the SRO. 
35 Report No. 8100256

Recommendation 2-3. Train all levels of staff: We do not agree with the IG’s recommendation

that managers take the three-day course until such time as the managers training course is

completed.

Recommendation 2-4. Hold POs and Approval Officials Accountable: OAR believes the Agency

already holds its POs and Approval Officials accountable for their actions in both the contracting

and grants arena. It is unclear what specifically the IG is looking for with this recommendation.

Recommendation 2-5. Develop an Assistance Management Plan: OAR does not agree with this

recommendation and has serious reservations with GAD’s proposed post-award management

draft policy. While the Agency does need to improve its post-award management, OAR does not

feel the agency should commit to the development of a management plan at this time. We agree

that managers may not understand the time demands placed on grants project officers and feel this

should be a significant part of the management training. OAR would recommend that OARM

agree in principle with the IG recommendation, but give the SROs adequate time to develop an

overall strategy for management improvement. OAR is not comfortable agreeing with the

requirement of management improvement plans, especially in light of the strong comments we are

developing in response to GAD’s post-award management policy.

cc: Beth Craig

Dick Wilson

(File:f:paaudit.jk)
36 Report No. 8100256

September 9, 1998

MEMORANDUM

SUBJECT: Comments on Draft Audit Report No. E1FMB8-11-0001 - Pre-Award

Management of EPA Assistance Agreements

FROM: Dana M. Minerva, Deputy Assistant Administrator for Office of Water 

And Senior Resource Official

TO: Alvin M. Pesachowitz, Acting Assistant Administrator

Office of Administration and Resources Management

I am forwarding the following comments from the Office of Water (OW) on the draft audit

report on the pre-award management of EPA assistance agreements. OW strongly supports any

efforts to strengthen the management of the Agency’s extramural assistance resources. The audit

report notes that we have already implemented internal management policies and training

requiring all OW project officers to prepare post award management plans for all assistance

agreements and Interagency agreements awarded from Headquarters.

My comments focus on recommendations 2-3, 2-4, 2-5, and 3-1 - recommendations directly

impacting the responsibilities of the Senior Resource Officials. 

Training

Recommendation 2-1 directs GAD to take the lead in the development of refresher and

manager training courses, and to assist SROs in training all levels of staff involved in assistance

award and management. The OW concurs with this recommendation. Having staff that are welltrained in the rules, policies, and practices of managing these assistance agreements is key to

carrying out our responsibility to the American taxpayer to fund the best projects possible with 

Federal assistance dollars. 

Recommendation 2-3 is directly related to recommendation 2-1. It places the responsibility

for delivering assistance training directly on the Program Office. It recommends that the Assistant

Administrators require SROs to train all levels of staff involved in assistance awards and it

recommends that until the manager’s training and the refresher courses are developed, that

managers and supervisors attend the PO training course every three years. As I stated, the OW

strongly supports training managers and believes project officer refresher courses are necessary. 

However, I believe the primary responsibility for delivery of this training belongs in OARM,

specifically the Grants Administration Division (GAD). When the Agency first introduced the
37 Report No. 8100256

assistance project officer training requirement in 1995, there was a tremendous backlog of

assistance project officers in the Agency needing training. At that time, the Program Offices

agreed to OARM’s approach to team-teach these courses to reduce the backlog (March 13, 1995

Memorandum from Sallyanne Harper to Senior Resource Officials). That agreement has resulted

in the OW conducting 11 two-day project officer training sessions in two years without any

additional resources. Those of us who agreed to this approach have found that we also have to

purchase the training manuals. (GAD supplies these manuals when they teach the course.) The

additional refresher and manager training courses added to the basic project officer training course

will expand OW’s training responsibilities beyond its abilility to deliver. I believe it is time to

revisit the March 13, 1995 agreement, and I recommend that OARM support GAD in building a

permanent training staff, similar to that of OARM’s Office of Acquisition Management, to service

the Agency’s assistance training needs. Creating a central training unit within the Grants

Administration Division would appear to be a more efficient use of resources than creating one

within each Agency Program Office. In addition, under the current system only some of the

Program Offices (OAR, OPPTS, OW, and OSWER) do their own training, while GAD provides

training for the remainder of the Agency’s project officers.

 The second part of recommendation 2-3 suggests managers and supervisors attend the

project officer training course every three years until the Agency has developed supervisor and

manager training courses. OW nonconcurs with this segment of the recommendation. First, the

Basic Project Officer training course is designed for assistance project officers. The level of detail

on assistance processes and procedures is far more comprehensive than what is needed for direct

supervisors and managers. Secondly, the length of the basic project officer training course (2 1⁄2

days) will be problematic for managers particularly when so little of the material is necessary for

them to carry out their responsibilities. I would support a recommendation requiring OARM to

immediately develop a shorter course tailored to the needs of managers and supervisors. OW

would be willing, in concert with others, to provide contract dollars to support developing the

course.

Cost Reasonableness

Recommendation 2-4 holds project officers and approval officials accountable for workplan

specificity, adequacy of determinations of cost reasonableness, and the completeness of the

decision memoranda. The OW concurs with this recommendation with the following comment: 

On Page 4, the audit report states “POs are required and trained to determine cost

reasonableness.” The report then references the Assistance Administration Manual and quotes

the Project Officer Training Manual’s explanation of the “reasonableness” requirement. We do

not believe that either the Assistance Administration Manual reference nor the paragraph in the

Project Officer Training Manual constitute training for project officers on determining cost

reasonableness. I recommend that the Inspector General’s Office strengthen the recommendation

by requiring that more comprehensive training directed at determining cost reasonableness be

incorporated into the Project Officer’s training course.
38 Report No. 8100256

Assistance Management Plans

Recommendation 2-5 recommends that Assistant Administrators require SROs to require the

program offices to develop an assistance management plan prior to approval of an award. This

recommendation, as stated, is confusing. Page 9 of the report references the Office of Water’s

practice of requiring post award management plans for each individual assistance project. Are

individual post-award management plans being recommended in 2-5? If so, I suggest the

recommendation be amended as follows: “Require the individual project officers to develop an

assistance management plan...........” If the assistance management plan recommended is intended

to be broader than individual project officer plans, then the recommendation should be clarified.

Responsibility for Correct Program Results Codes

Recommendation 3-1 recommends that EPA Order 5730.1 be rewritten to assign

responsibility for ensuring the use of correct program elements or program results codes

exclusively to program offices. The Office of Water concurs with this recommendation. 

However, the recommendation seems to be inconsistent with the current practice that the Grants

Administration Division serves as a “check and balance” for ensuring that assistance is awarded

with the appropriate funding and with the proper authority. 

Other

Finally, I would like to note that I believe the audit report could be strengthened by adding

one final recommendation. In several places, the report references the Agency’s official policy

directive on assistance management - the Assistance Administration Manual. I am concerned that

this reference is often made by the Inspector General to a manual that is very outdated for lack of

maintenance. The reality is that the Project Officers Training Manual has evolved into the

resource of preference by project officers and others because it contains the most current

information regarding implementing EPA’s assistance policies and procedures. Following the

1997 Management Effectiveness Review, the OW recommended that OARM develop a

Handbook of Procedures that could be used as a desk reference for all assistance project officers

and managers to “bridge the gap” between a formal assistance administration manual and a

training manual. I am resolute in my belief that the Agency could improve the overall

management of its extramural assistance funds if such a tool existed. I also believe that updating

the Assistance Administration Manual should be a priority for OARM/GAD rather than leaving

the Agency vulnerable to error by forcing reliance on a training manual for guidance. I suggest

that GAD follow the model OARM’s Office of Acquisition Management uses in developing and

maintaining their Contracts Management Manual. 

Thank you for the opportunity to comment on the report. If you have any questions

regarding our comments, please contact me directly at 260-5700 or Ellen Haffa on my staff at

260-3617.

cc: Gary Katz

Beth Craig
39 Report No. 8100256

September 4, 1998

MEMORANDUM

SUBJECT: Comments on OIG Draft Audit Report: Pre-Award Management of EPA

Assistance Agreements (No. E1FMB8-11-0001)

FROM: Timothy Fields, Jr.

Acting Assistant Administrator

TO:Alvin M. Pesachowitz

Acting Assistant Administrator

Office of Administration and Resources Management

My staff has reviewed the Inspector General’s Draft Audit Report: Pre-Award Management

of EPA’s Assistance Agreements. We have the following comments.

< Recommendation 2-3. This recommendation would require all managers to take the

project officer assistance agreement training course until GAD develops a course specifically

designed for managers. OSWER has already developed and provided training for its

managers including the Senior Resource Official. We do not believe that it is a good use of

resources to require managers to take the PO training course since we have already provided

training. We plan to offer additional management training once the new course materials are

available.

< Recommendation 2-3. This recommendation would require project officers (POs) to

retake the assistance agreement training course every three years until the one-day refresher

course is developed. It is our understanding that GAD has nearly completed the

development of the PO refresher course, therefore, we don’t believe it makes sense to require

POs to retake a three day course when the new course will soon be available. OSWER plans

to offer the refresher course once materials are available.

< Recommendation 2-4. OSWER will continue to hold POs and Approval Officials

accountable for work plans, costs, and decision memorandums. OSWER has provided

training to POs and managers which outline their responsibilities and accountability.
40 Report No. 8100256

< Recommendation 2-5. The wording in this recommendation is confusing. Based on the

verbiage in the report, it would appear that the IG is recommending that POs develop

assistance management plans for each grant and cooperative agreement awarded. The

recommendation specifies that the “program office” develop an assistance management plan

which is not discussed in the body of the report. If the Agency requires the use of assistance

management plans for each award, as an internal control mechanism, we would support an

Agency wide tool that all POs can use. Specifically, a general form would be helpful to the

POs and provide the standardization needed to be an adequate internal control mechanism. 

We would support flexibility built in for POs.

Thank you for the opportunity to comment. If you have any questions, please contact

Elizabeth Harris, OSWER Audit Liaison, at 260-7323.

cc: Dev Barnes

Elizabeth Harris

Julianne Edmondson

Bernie Davis

Judy Vanderhoef

Gary Katz
41 Report No. 8100256

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

WASHINGTON, D.C. 20460

OFFICE OF 

RESEARCH AND DEVELOPMENT

September 8, 1998

MEMORANDUM

SUBJECT: Response to OIG Draft Report of Audit No.E1FMB8-11-0001

Pre-Award Management of EPA Assistance Agreements 

FROM: Lek Kadeli, Acting Director James O. Morant for

Office of Resources Management and Administration (8102R)

TO: Gary M. Katz, Director

Grants Administration Division (3903R)

Purpose

This memorandum responds to the Office of Inspector General's (OIG’s) request for

comments on Draft Report of Audit No. E1FMB8-11-0001, Pre-Award Management of EPA

Assistance Agreements, dated August 14, 1998.

Discussion

In general, we find the draft report reasonable and agree with the OIG’s objectives of

improving the management of our assistance agreements. However, we have a number of

comments which, if addressed, can improve the quality and accuracy of the report. These detailed

comments are attached and speak to the primary report findings and recommendations. 

We appreciate the opportunity to respond to this draft report. Should your staff have any

questions, or require additional information, please contact Cheryl Varkalis on (202) 564-6686 or

Linda Ross on (202) 564-6683.
42 Report No. 8100256

2

Attachment 

cc: Deborah Dietrich (8101R)

Peter Durant (8102R)

Jim Morant (8102R)

Linda Ross (8102R)

Cheryl Varkalis (8102R)

Chuck Cavanaugh (8102R)
43 Report No. 8100256

ORD Comments on OIG Draft Report

Audit No.E1FMB8-11-0001

Pre-Award Management of EPA Assistance Agreements

1. Identification of Specific Instruments

We had difficulty in ascertaining whether ORD assistance agreements were examined during this

audit. Therefore, we request the report be modified to include the identification of specific

instruments. This will further allow us to remedy any deficiencies.

2. Terminology from Agency Guidance

In response to earlier ORMA comments, the OIG indicated that much of its terminology is taken

from Agency Guidance. However, much of the Agency guidance on assistance dates back to a

time before EPA became sensitive to many of the implications of the Federal Grant and

Cooperative Agreement Act (FGCAA) and other issues bearing on misuse of assistance

agreements. The Assistance Administration Manual dates back to 1984, for example, and is very

much in need of revision or replacement. 

Except for passing reference to discussion of QA, the report does not refer to the Assistance

Regulations at 40 CFR part 30, which is the most current Agency guidance. That regulation is

more current than and of a higher order of precedence than most of the other guidance cited, and

in it the difference in handling of assistance vs. acquisition is strikingly apparent. For example, at

40 CFR 30.22(h), there is a very high standard established for any suspension of payment. At

30.25(d), it is made clear that special prior approvals are to be carefully limited. At 30.25(f)(1),

recipients have a right to be paid for costs incurred up to three months before the agreement is

even awarded; at 30.25(f)(2), they have a right to a one year extension in performance period. 

Much of the Agency terminology in the various relevant manuals dates from long before the

revised regulation and before the Agency began to revisit the intent of the FGCAA during the

early-to-mid 1990's. We believe that it should be possible to use terms in a context that makes it

clear that they are not to be applied in a manner like similar contractual terms. 
44 Report No. 8100256

3. Workplan Definition

a. On page i, paragraph 1 under “Results in Brief”, the draft report states:

...did not always negotiate workplans with well-defined 

commitments...holding recipients accountable for expected outputs...and 

ensuring that funded activities are accomplished.

RESPONSE: ORD requests the following addition to the beginning of

paragraph 1 on page i:

It is understood that EPA must not dictate the terms of an assistance agreement to meet EPA

goals. The laws and regulations associated with assistance emphasize that the objective of

EPA’s oversight and involvement is to assist the recipient to be as successful as possible in

accomplishing its goals. Nevertheless, the assistance agreement and the file documentation

need to present as accurate and complete a picture as possible of the plans and commitments

and both parties, in order to assure a clear mutual understanding of the commitments made

by both sides and to help both parties avoid inappropriate (performance) relationships.

Discussion: The report text currently suggests that there is an obligation on the recipient to

accomplish the project as if it were a contract. This approach would be inappropriate for

scientific research grants. In fact, the narratives required of the applicant do outline the stages of

the research, as well simultaneous/sequential analyses, sampling, etc. and provide a general time

frame. Peer reviewers comment on the validity of the approach and the possibility of

accomplishing the research as proposed. To require more specific output and definitive

milestones is not realistic for research, due to its very nature. Furthermore, requiring the process

to be tightly structured at the onset indicates we are approaching the relationship as more of a

contract for a product than assistance for exploring an idea or testing a hypothesis. Our suggested

language would set the context and reduce the potential for misinterpreting the other comments

that follow.

b. On page 5, paragraph 4 under ‘Workplans Should be Well-Defined’, the draft report states:

...The initial workplan was issued at least one month late, and the final 

revised workplan was received six months after the date of award....

Discussion: This statement suggests that the internal milestones of the agreement are rigid, and

that there should be some significant consequences if the recipient fails to meet the delivery

schedule. ORD believes that setting such rigid milestones or attempting to manage the agreement

in that manner creates one of the cardinal hallmarks of an acquisition - the requirement to meet a

specific schedule. ORD also notes for illustration that the EPA Assistance Regulations, at 40

CFR 30.25(f) provide the recipient with an absolute right to an overall time extension of up to one

year. Since that is a regulatory right, a small slippage on an internal milestone is not evidence of

deficient performance or grounds for EPA intervention. ORD believes that page 5, paragraph 4
45 Report No. 8100256

of the draft report refers to CR826215 with Battelle Memorial Institute (Columbus Labs). 

Assuming we have correctly identified the agreement in question, it serves as a good illustration

of the point. The workplan was about 2 to 3 weeks late, being due just before the Christmas

holiday, and arriving the Monday after the New Years weekend. This is an inconsequential delay

in the overall context of the 3-year agreement and would not be expected to impact the overall

schedule.

The report also notes that it took another 2 to 3 months for EPA comment and revision. This

seems to indicate that the workplan was a critical document that was needed in order to document

the work that was to be done, and that until it was approved there was not an adequate definition

of the work that was covered by the agreement. However, this agreement was based on a very

good program narrative that was submitted with the initial application and favorably evaluated by

a 6-member internal/external peer review panel. That program narrative effectively serves as a

“Statement of Work,” to use a contract analogy. We believe this is typical of most research

cooperative agreements. If the applications do not have such a narrative, they do not pass ORD’s

rigorous peer review and do not receive awards. In this and most such cases, a post award

workplan, if one is required, often serves only to fill in minor gaps or to address recommendations

made by the peers. It would be most unusual for there to be significant issues which would have

to be mutually resolved prior to initiation of the research. In the Battelle case, the initial workplan

only addressed the comments of the peers. The Project Officer (PO) was satisfied with that, but

asked that the workplan be amended to incorporate the details of the original program narrative

too, so that it could be read on its own, without need to refer back to the narrative. This was

deemed to be worth the effort, but it did not in any way indicate a fundamental flaw in the plans

for the research.

c. On page 5, paragraph 3, the draft report states:

Because program offices were not adequately evaluating workplans....

Discussion: ORD believes that it is already in substantial compliance. In the majority of ORD

awards, we use peer review procedures which assure that the program narrative or “workplan” is

thoroughly evaluated.

d. On page 5, paragraph 4, the draft report asserts that without workplan approval:

...there was no enforceable agreement with which to hold the recipient accountable...the

recipient spent $171,288...Entering into an assistance agreement when there was no

discernable public purpose (which would be described in the workplan) would appear to

contravene the requirements of the Federal Grant and Cooperative Agreement Act...we are

not clear why the Agency would allow funds to be spent without an approved workplan. 

RESPONSE: We request that this paragraph be re-evaluated and modified to revise the

inference that assistance workplans should operate like contract workplans. 
46 Report No. 8100256

Discussion: Again, we believe that this inadvertently conveys the impression that an assistance

agreement would be treated like a contract. In a contract, it is important to be certain that the

Government is fully satisfied that the plans will meet its needs, and to avoid “wasting funds on

approaches that we do not accept.” It is common for the boilerplate of the contract to limit initial

costs to those needed to prepare the workplan. It would be most unusual for an assistance

agreement to be awarded with such a limitation, and if it were done, it would only be because of

severe problems with the program narrative or with the performance history of the recipient. 

There would need to be so-called “special conditions.” These are normally reserved for recipients

with major performance concerns, such as potential bankruptcy, etc. While definition of the

workplan is not usually a pacing item in cooperative research, other items often are (such as OMB

Clearance or Human Subject Approval), and in those cases we agree that it is clearly appropriate

to limit activity pending approval.

Finally, the report asserts, without explanation, that the effect of not having the workplan

approved was that EPA was “entering into an assistance agreement when there was no

discernable public purpose....” However, the Decision Memo contained a detailed explanation of

the public purpose, and as noted, the program narrative went into considerable detail regarding

the purposes and benefits to the public, as evidenced by the strong support of both the internal

and external peer reviewers. We believe that the OIG may have overlooked the incorporation of

the program narrative into the cooperative agreement. 

4. Return of Incomplete Assistance Funding Packages

a. On page ii, paragraph 1 and on page 11, Recommendation 2-2 the draft report states:

GAD should return incomplete assistance funding packages to program offices via SRO.

RESPONSE: ORD requests the following change:

GAD should return incomplete assistance funding packages to program offices via

the delegated official.

Discussion: Returning an incomplete package to the program office via the SRO seems quite

impractical to us, and an added burden on the SRO’s staff. However, we believe it would be

more effective to return the incomplete package to the delegated official. Also, the SRO only

reviews packages in excess of $1 million. To return less than $1 million packages to the SRO is

unnecessary.

5. Assistance Management Plan

a. On page ii, paragraph 3, and on page 11, recommendation 2-5, the draft report states:
47 Report No. 8100256

...require the development of an assistance management plan prior to approving an award. 

At a minimum, management plans should identify planned oversight activities, estimated

PO monitoring time and other funds (e.g. travel) required.

RESPONSE: We suggest that the recommendation be deleted.

Discussion: Much of what the OIG recommends for inclusion in the Plan is already routinely

addressed, albeit not in a separate “Plan.” ORD’s Decision Memoranda and Funding Order cover

plans for EPA’s involvement in the agreement, including technical and financial monitoring, and

we call for a condition to address the progress reporting requirements. We also require an

indication that the Approval Official has considered the qualifications and availability of the

proposed EPA PO. 

We are concerned about the possibility of confusing the nature of a Management Plan for

assistance with the Management Plan required for contracts. The Contracts Management Plan is

addressed in the Contracts Management Manual, and is quite extensive. So much so that one is

not called for unless the award is to exceed $15 Million (or $25 Million for some offices). In

responding to the draft report, we believe that such plans will be developed only to a degree that

is appropriate to an assistance relationship. In addition, the contract plan is aimed at assuring

contractor accountability. While accountability is relevant, the principal focus of management in

assistance is to aid the recipient in reaching its goals, and that monitoring is to be supportive, not

intrusive. To require a plan for each potential agreement would substantially detract from the

oversight of existing grants and would be redundant when groups of grants may be handled

similarly.

We understand the new EPA Policy for Post-Award Management of Grants and Cooperative

Agreements will provide the necessary flexibility for the implementation of this recommendation

by permitting an annual monitoring plan to be created which aggregated activities for all an

office’s agreement.

6. Training for Managers

a. On page 2, paragraph 2, and on the draft report states:

...individuals must first successfully complete the course “Managing Your Financial

Assistance Agreement–Project Officer Responsibilities.” 

RESPONSE: We request the following change to this portion of the report: 

...individuals must first successfully complete the course, “Managing Your Financial

Assistance Agreement–Project Officer Responsibilities” or another GAD approved

course.
48 Report No. 8100256

Discussion: We concur that training is advisable for managers, and that recertification/ refresher

training is beneficial. However, we believe readministration of the full 3-day course would be

redundant, unproductive and extremely burdensome. ORD recently developed training for

managers and training is scheduled this year. Consideration should be given to assigning

responsibility for development and administration of such refreshers to GAD, as is done by OAM

for contracts.

7. SRO Training

a. On page 9, under Additional Training and Oversight Are Needed, the draft report indicates

that SRO’s did not take advantage of training that was offered several years ago. 

Discussion: We would like to note that ORD took advantage of the training which resulted in a

lot of the improvement activity that has occurred to date.

8. Cost Reasonableness

a. On page 6, paragraph 3 under “Cost Reasonableness Should Be Determined and

Documented”, the report states:

...none of the project files that we reviewed contained evidence that proposed costs were

reviewed against the narrative/workplan. 

Discussion: There are two issues presented here: (1) whether costs are being evaluated

adequately (or at all), and (2) whether the evaluation is adequately documented. Contracts

traditionally rely on market competition or on well documented head-to-head analysis and

negotiation to assure that the government gets value for its money. The dynamics in assistance

are different. One of the benefits of ORD’s competition policy is that we should be able to

assume that recipients will put forth the best research they can for the available funds, in order to

win the award. In addition, even where there is no competition we may be able to presume strong

incentive for the recipient to make cost-effective use of the funding in order to maximize their

research benefits. They are doing the work for their own benefit, not for the government, and

therefore there is a strong incentive for good management. There is certainly a need for

government review of cost reasonableness, but perhaps not at all on the same plane as for

contracts.

It is true that ORD files do not contain cost analyses on the order of those that are normally seen

in contract files, however there is virtually always some review performed, and it is generally

documented to some degree. For example in CR826215, the reasonableness of the cost, relative

to the management plan portion of the program narrative, was included in the 7th evaluation

criteria, and thus was reviewed by all 6 peer reviewers, as well as by the PO and other reviewers. 

Traditionally, in contracts operations, the equivalent to the Decision Memorandum includes an

extensive summary of the cost analysis, but in assistance the document does not contain such

analyses.
49 Report No. 8100256

ORD agrees that cost reasonableness must be considered for assistance agreements. It is normally

accomplished by the Project Officer and peer reviewers and documented in peer review

comments. Further action should be decided only in consultation with GAD, taking into

consideration the relative roles and skills of Program and GAD employees and proper

relationships with assistance applicants.
50 Report No. 8100256

September 15, 1998

MEMORANDUM

SUBJECT: OPPTS Comments on Draft OIG Report “Pre-Award Management of EPA 

 Assistance Agreements”

FROM: Susan H. Wayland /s/

Deputy Assistant Administrator

TO: Gary Katz, Director

 Grants Administration Division

OPPTS has reviewed the OIG draft audit report entitled “Pre-Award Management of EPA

Assistance Agreements” dated August 14, 1998, and offers the following comments:

Recommendation 2-1. Refresher and Manager Training Courses: OPPTS agrees that GAD

should take the lead in developing refresher and manager training courses. Said training should

allow for maximum input from program offices and subsequently adhere to uniform standards.

The Resource Management Committee has recognized the need to have all relevant staff

thoroughly versed in assistance awards policy and has set up a committee to develop supervisory

training. Until supervisor, manager and refresher training courses are developed, OPPTS will

investigate the feasibility of setting up its own short half-day orientation courses with mandatory

attendance for supervisors. 

Recommendation 2-2. Completeness of Funding Packages: OPPTS agrees that incomplete

packages should be returned to the programs, via the SRO. In addition OPPTS, as a supplement

to Agency guidance, will issue its own internal guidance.

Recommendation 2-3. Train All Levels of Staff involved in Assistance Awards: OPPTS agrees

that all levels of staff involved in assistance awards should be trained, with the caveat that

managers and supervisors attend an abbreviated half-day course, not the full three day course

every three years. Special training should be provided to all approval officials.

Recommendation 2-4 Hold POs and Approval Officials Accountable: OPPTS believes that the

Agency already holds its Project Officers and Approval Officials technically responsible for

workplan specificity, adequacy of determinations of cost reasonableness, and the completeness of

decision memoranda, in both contracting and grants. Further elaboration is required as to HOW

to exercise this accountability. 
51 Report No. 8100256

Recommendation 2-5 Require Program Offices to Develop an Assistance Management Plan:

OPPTS disagrees with this recommendation, at least until program offices have the opportunity to

implement all of their Management Effective Reviews (MERS) and until GAD’s post-award

management policy is finalized. OPPTS identified some Post Award areas for improvement as

part of last year’s MER. These improvements included having OPPTS PO’s negotiate and not

just accept budgets as submitted, recommended quarterly versus annual reporting, encouraged

site visits by staff, and urged staff to shift from grants to cooperative agreements where there is

more involvement by EPA staff. Furthermore, OPPTS has required that all actual or potential

assistance packages valued at over $250K (as compared to $1,000K for the rest of the Agency)

be signed by the SRO. All packages under $250K are reviewed by a single designated

representative from each program office.

Recommendation 3-1 Require Grants Administration Division to Rewrite EPA Order 5730.1: 

OPPTS agrees that ensuring the use of correct program elements or program results codes are the

exclusive responsibility of the program offices. OPPTS has already taken remedial steps (issuance

of guidance, initial training, inclusion of PE Codes within our Program Plan, etc.), with more

efforts forthcoming, to ensure correct usage of program elements and/or program results codes

within OPPTS.

In Chapter 3, Figure 1, page 12, of the draft audit, funding amounts do not match the

figures from our audit of the referenced documents. The differing figures however, do not

materially affect the results or implications of the OIG review. Secondly, the heading on page 11,

“OPPTS Utilized Funds for Unintended Purposes” may give the impression that OPPTS engaged

in a deliberate diversion of funds. While OPPTS admittedly shifted funds temporarily among

program elements, we believe it is important to note that the sum of money appropriated for each

program element matched the actual sum of funds expended on each program.

OPPTS appreciates the opportunity to provide comments upon the draft audit. 

cc: Andy Privée, OPPTS

 Steve Schwartz, OPPTS

 Barbara Cunningham, OPPT

 Jim Kearns, OPP
52 Report No. 8100256

September 10, 1998

MEMORANDUM

SUBJECT: Pre-Award Management of EPA Assistance Agreements

Draft Audit Report No. E1FMB8-11-0001

FROM: Sallyanne Harper /s/

Chief Financial Officer

TO: Al Pesachowitz 

Acting Assistant Administrator

Office of Administration and Resources Management (3101)

In response to your request, following is the Office of the Chief Financial Officer (OCFO)

review of the Office of the Inspector General’s (OIG) draft audit report regarding the Pre-Award

Management of EPA Assistance Agreements. Overall, we agree with the OIGs

recommendations; however, please refer to our suggestions.

2-1 Direct GAD to take the lead in the development of refresher and manager training

courses, and assist SROs in training all levels of staff involved in assistance award and

management.

Suggestion A: It will be more effective to enhance the current Project Officer

training in light of these findings than to develop new training for additional

levels of management. If the current training is enhanced and focused then it

may be suitable for managers and other attendees. The current training should

highlight and provide guidance for those involved in preparing funding packages,

the development of a management plan prior to award, and assignment of

responsibility for ensuring the correct coding of the source of funds. Also see

Suggestion C.

2-2 Direct GAD to ensure the completeness of funding packages and return incomplete

assistance funding packages to the program offices via the SRO.

2-3 Train all levels of staff involved in assistance awards. Until supervisor and manager and

refresher training courses are developed, require managers, supervisors and POs to attend

the PO training course every three years.
53 Report No. 8100256

Suggestion B: Provide each national program manager an annual listing of the

POs that are certified and those that need/will need recertification along with a

schedule of classes for the upcoming fiscal year. 

2-4 Hold POs and approval officials accountable for workplan specificity, adequacy of

determinations of cost reasonableness, and the completeness of decision memoranda.

Suggestion C: Require all EPA POs to review and approve billings from their

respective award recipient prior to payment by EPA. To avoid the potential

conflict with the Prompt Payment Act, perhaps require all EPA POs to review and

approve a draft bill prior to sending a final bill to Finance for payment.

Suggestion D: GAD should develop guidance for “ workplan specificity” that is

appropriate for cooperative agreements. 

2-5 Require the program offices to develop an assistance management plan prior to approval

of an award. At a minimum, management plans should identify planned oversight

activities, estimated PO monitoring time and other funds (e.g. travel) required.

Suggestion D: See 2-5, Suggestion C.

3-1 Require the Grants Administration Division to rewrite EPA Order 5730.1 to assign

responsibility for ensuring the use of correct program elements or program results codes

exclusively to program offices.

Other Matters: -Credit and Receivables Checks 

-Reviewing Accounts Receivable

Overall Suggestion E: We recommend that a checklist be included in the preaward package which identifies all required actions by the project officer,

including actions to screen the past financial performance of the potential

recipient by performing a credit check, reviewing EPA accounts receivable for

outstanding amounts, and checking for delinquent closeouts of previous EPA

awards. Identifying potential problems before granting awards may eliminate

some of the problems currently arising at award closeout.

Overall Suggestion F: Please refer to the new Small Grants Policy to ensure that

requiring any detailed documentation in a project plan or management plan will

not conflict with the new small grants policy. Requirements for the POs and their

approval officials should be made clear in the training. Examples should be

provided on how to document interim or final outputs and/or products in a project

plan.

Thank you for the opportunity to comment and review this draft audit report. If your staff

have any questions, please call Kimberly Dubbs on 260-1291.
54 Report No. 8100256

APPENDIX C

Distribution

Office of Inspector General

Acting Inspector General

Assistant Inspector General for Audit

Deputy Assistant Inspector General for Internal Audits

Divisional Inspectors General

EPA Headquarters Offices

Agency Followup Official (2710)

Agency Followup Coordinator (2724)

Associate Administrator for Communications, Education and Public Affairs (1701)

Associate Administrator for Congressional and Intergovernmental Relations (1301)

Associate General Counsel, Finance and Operations Law Office (2377)

Comptroller (2731)

Director, Office of Grants and Debarment (3901R)

Assistant Administrators, Senior Resource Officials and Audit Liaisons:

Office of the Administrator

Office of Administration and Resources Management

Office of Air and Radiation

Office of Enforcement and Compliance Assurance

Office of International Activities

Office of Policy, Planning and Evaluation

Office of Prevention, Pesticides and Toxic Substances

Office of Research and Development

Office of Solid Waste and Emergency Response

Office of Water