Grants Management: EPA Continues to Have Problems Linking Grants to Environmental Results
Published: 2004-07-20T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Environmental Protection Agency (EPA) has faced persistent challenges in managing its grants, which constitute over one-half of the agency's budget, or about $4 billion annually. These challenges include achieving and measuring environmental results from grant funding. It is easier to measure grant activities (outputs) than the environmental results of those activities (outcomes), which may occur years after the grant was completed. In 2003, EPA issued a 5-year strategic plan for managing grants that set out goals, including identifying and achieving environmental outcomes. This testimony describes persistent problems EPA has faced in addressing grants' environmental results and the extent to which EPA has made progress in addressing problems in achieving environmental results from its grants. It summarizes and updates two reports GAO issued on EPA's grant management in August 2003 and March 2004.
section_title: What GAO Found
paragraphs: EPA's problems in identifying and achieving environmental results from its grants persist. The agency is still not consistently ensuring that grants awarded are clearly linked to environmental outcomes in grant workplans, according to GAO's analysis and EPA's internal reviews. For example, EPA's 2003 internal reviews found that less than one-third of grant workplans reviewed--the document that lays out how the grantee will use the funding--identified anticipated environmental outcomes. Not surprisingly, given the lack of outcomes in grant workplans, the Office of Management and Budget's recent review of 10 EPA grant programs found that 8 of the grant programs reviewed were not demonstrating results. Furthermore, not every EPA program office has yet developed environmental measures for their grant programs. EPA's progress in addressing problems in achieving environmental results from grants to this point has been slower and more limited than planned. While EPA had planned to issue an outcome policy--a critical ingredient to progress on this front--in 2003, the policy's issuance has been delayed to the fall of 2004, and will not become effective until January 2005. In the meantime, EPA has issued a limited, interim policy that requires program offices to link grants to EPA's strategic goals, but does not link grants to environmental outcomes. Furthermore, as a result of the delay in issuing an outcome policy, EPA officials do not expect to meet the 5-year plan's first-year target for the goal's performance measure. The forthcoming draft policy we reviewed appears to be moving EPA in the right direction for addressing environmental outcomes from its grants. For example, the draft policy emphasizes environmental results throughout the grant life cycle--awards, monitoring, and reporting. Consistent and effective implementation of the policy will, however, be a major challenge. Successful implementation will require extensive training of agency personnel and broad based education of literally thousands of grantees.

section_title: Letter
paragraphs: We are pleased to be here today to discuss how the Environmental  Protection Agency (EPA) manages its grants to achieve a better  environment and improved public health. My testimony is based primarily  on our recent reports on EPA grants management issued in 2003 and 2004,  as well as additional work we conducted for this testimony.
As you know, EPA has faced persistent challenges for many years in  managing its grants, which constitute over one-half of the agency’s budget,  or about $4 billion annually. To support its mission of protecting human  health and the environment, EPA awards grants to a variety of recipients,  including state and local governments, tribes, universities, and nonprofit  organizations. As of June 2004, EPA had about 3,700 grant recipients.  Given the size and diversity of EPA’s programs, its ability to efficiently and  effectively accomplish its mission largely depends on how well it manages  its grants resources and builds accountability for results into its efforts.
Planning for grants to achieve environmental results—and measuring  results—is an important but difficult challenge. It is far easier to measure  environmental activities (outputs) than the results (outcomes) of those  activities. However, as we pointed out in an earlier report, it is important  to measure outcomes of environmental activities rather than just the  activities themselves. It is critical that EPA be able to demonstrate the  results achieved through its $4 billion annual investment in grant  programs, particularly their impact on protecting the nation’s human  health and environment.
In April 2003, EPA issued a comprehensive 5-year grants management plan  to address its long-standing grants management problems. In the plan,  EPA identifies five major goals to address major challenges, which are  similar to those we identified in our 2003 report, including the goal of  “identifying and achieving environmental outcomes.”
Our testimony today describes (1) persistent problems EPA has faced in  addressing grants’ environmental results, and (2) the extent to which EPA  has made progress in addressing problems in achieving environmental  results from its grants.
As noted earlier, the work for this testimony is based primarily on two  previously issued GAO reports on grants management. To identify  persistent problems EPA has faced in addressing environmental results  from grants, we also reviewed EPA’s Office of Inspector General reports,  EPA’s internal reviews, and Office of Management and Budget’s (OMB)  reviews using its Program Assessment Rating Tool. To determine the  extent to which EPA has made progress in addressing problems in  achieving environmental results from its grants, we interviewed officials at  EPA’s Office of Grants and Debarment, reviewed EPA’s policy, guidance,  and Strategic Plan. The additional work for this testimony was based on  work performed in April through June 2004 in accordance with generally  accepted government auditing standards.
In summary, we found the following:    EPA’s problems in identifying and achieving environmental results from its  grants persist. EPA is not consistently ensuring that environmental  outcomes are identified in the grant workplan—the document that lays out  how the grantee will use the funding—according to our analysis and EPA’s  internal reviews. For example, EPA’s 2003 internal reviews found that less  than one-third of grant workplans reviewed identified anticipated  environmental outcomes. Not surprisingly, given the lack of outcomes in  grant workplans, OMB’s recent reviews of 10 EPA grant programs found  that 8 of the grant programs examined were not demonstrating results.  According to program and regional officials, it is difficult to measure  outcomes, in part, because of the time lapse between grant activities and a  cleaner environment. These concerns demonstrate the need for guidance  that addresses the complexities of measuring and achieving environmental  results. Furthermore, not every EPA program office has yet developed  environmental measures for their grant programs.
EPA’s progress in addressing problems in achieving environmental results  from grants has been slower and more limited than planned. While EPA  had planned to issue an outcome policy—a critical ingredient to progress  on this front—in 2003, the policy’s issuance has been delayed to the fall of  2004 and will not become effective until January 2005. In the meantime,  EPA has issued a limited, interim policy that requires program offices to  link grants to EPA’s strategic goals, but does not link grants to  environmental outcomes. Furthermore, as a result of the delay in issuing  an outcome policy, EPA officials do not expect to meet the 5-year plan’s  first-year target for the goal’s performance measure—increasing the  percentage of grant workplans with environmental outcomes from about  31 percent in 2003 to 70 percent in 2004. According to our review of a draft  of the forthcoming outcome policy, EPA is making progress at the policy  level in addressing outcomes. The major challenge EPA faces will be in  successfully implementing the policy throughout the agency. Realistically,  EPA has a long road ahead in educating its managers, supervisors and  staff, as well as thousands of potential grantees, about the complexities of  identifying and achieving environmental outcomes.
subsections: section_title: Background
paragraphs: EPA administers and oversees grants primarily through the Office of  Grants and Debarment, 10 program offices in headquarters, and program  offices and grants management offices in EPA’s 10 regional offices. Figure  1 shows the key EPA offices involved in grants activities for headquarters  and regions.
The management of EPA’s grants program is a cooperative effort involving  the Office of Administration and Resources Management’s Office of Grants  and Debarment, program offices in headquarters, and grants management  offices in the regions. The Office of Grants and Debarment develops grant  policy and guidance. It also carries out certain types of administrative and  financial functions for the grants approved by headquarters program  offices, such as awarding grants and overseeing the financial management  of grants. On the programmatic side, headquarters program offices  establish and implement national policies for their grants programs and set  funding priorities. They are also responsible for the technical and  programmatic oversight of their grants. In the regions, grants management  offices carry out certain administrative and financial functions for the  grants, such as awarding grants approved by the regional program offices,  while the regional program staff provide technical and programmatic  oversight of their grantees.
As of June 2004, 134 grants specialists in the Office of Grants and  Debarment and the regional grants management offices were largely  responsible for administrative and financial grant functions. Furthermore,  2,089 project officers were actively managing grants in headquarters and  regional program offices. These project officers are responsible for the  technical and programmatic management of grants. Unlike grant  specialists, however, project officers generally have other responsibilities,  such as using the scientific and technical expertise for which they were  hired.
In fiscal year 2003, EPA took 6,753 grant actions involving funding totaling  about $4.2 billion. These awards were made to six main categories of  recipients, as shown in figure 2.
EPA offers two types of grants—nondiscretionary and discretionary:    Nondiscretionary grants support water infrastructure projects, such as the  drinking water and clean water state revolving fund programs, and  continuing environmental programs, such as the Clean Air Program for  monitoring and enforcing Clean Air Act regulations. For these grants,  Congress directs awards to one or more classes of prospective recipients  who meet specific eligibility criteria; the grants are often awarded on the  basis of formulas prescribed by law or agency regulation. In fiscal year  2003, EPA awarded about $3.6 billion in nondiscretionary grants. EPA has  awarded these grants primarily to states or other governmental entities.
Discretionary grants fund a variety of activities, such as environmental  research and training. EPA has the discretion to independently determine  the recipients and funding levels for these grants. In fiscal year 2003, EPA  awarded $656 million in discretionary grants. EPA has awarded these  grants primarily to state and local governments, nonprofit organizations,  universities, and Native American tribes.
To highlight persistent problems and, it is hoped, to focus greater attention  on their resolution, we designated EPA’s grants management, including  achieving environmental results, as a major management challenge in our  January 2003 performance and accountability report. In August 2003, we  further addressed the question of environmental results. We reported that  EPA (1) had awarded some grants before considering how the results of  the grantees’ work would contribute to achieving environment results; (2)  had not developed environmental measures and outcomes for its grants  programs; and (3) often did not require grantees to submit workplans that  explain how a project will achieve measurable environmental results. We  also found that EPA’s monitoring efforts had not called for project officers  to ask grantees about their progress in using measures to achieve  environmental outcomes.
section_title: Problems Persist in Addressing Grants’ Environmental Results
paragraphs: For its grants programs, EPA is still not effectively linking grants to  environmental results. The problems we identified in our previous 2003  report continue. Further, in our recent report, in 2004, we identified an  additional problem. That is, we could not determine from EPA’s databases  the types of goods and services provided by grants. To identify goods and  services obtained from discretionary grants, we surveyed discretionary  grant recipients. On the basis of our survey responses, we identified a  total of eight categories (see table 1). We estimated that of all the goods  and services indicated by grant recipients, 59 percent were in three of  these categories: (1) research and development; (2) training, workshops,  and education; and (3) journals, publications, and reports.
While we were able to identify goods and services from survey responses,  we could not link them to results. We reviewed the files of 67 grantees to  identify if there was any link between goods and services and program  measures or outcomes in grant workplans. We found that none of the 67  grants identified measures and only 9 of the 67 grants identified  anticipated outcomes in their workplans.
EPA has also found that grantee workplans often do not identify  environmental outcomes. In 2003, EPA began conducting internal reviews  that—for the first time—quantified the extent to which its grant-issuing  offices, including program and regional offices, ensured that  environmental outcomes are identified in grant workplans. EPA reported  that, overall, less than one-third of the 93 grant workplans reviewed  identified environmental outcomes. (See table 2.) Among EPA’s offices,  the percent of workplans that identify environmental outcomes ranged  from 0 to 50.
In 2004, EPA plans to review seven other offices. As of July 2004, EPA had  completed reviews of three offices. Among these three offices, EPA found  environmental outcomes in a little less than half of grant workplans. Final  agencywide data will not be available until the end of 2004, when EPA  completes its internal reviews.
Not surprisingly, given the lack of outcomes in the workplans, OMB found  that EPA grant programs are not demonstrating results. In February 2004,  OMB found that 8 of the 10 EPA grant programs it reviewed were “not  demonstrating results.” These programs total about $2.8 billion. (See  table 3.) OMB rated the two remaining grant programs—Brownfields and  Tribal Assistance Programs—totaling $224 million as “adequate” in  demonstrating results.
According to EPA’s Inspector General, EPA’s failure to consistently  identify environmental measures and outcomes can weaken grant  oversight. For example, the Inspector General recently reported that EPA  Region 6 could not determine whether its oversight of water, hazardous  waste, and air programs in Louisiana was effective because, in part,  Region 6 had not linked these programs to environmental outcomes.  Region 6 had focused only on program outputs; it therefore could not  determine whether it was using its resources wisely and achieving  program results.
EPA’s program and regional grants officials have identified difficulties in  measuring and achieving environmental outcomes. For example:  In response to EPA’s internal reviews, Region 9 officials noted that it is  costly and difficult to measure outcomes when there is a substantial time  lag between implementing the grant and achieving environmental  outcomes. Moreover, it is difficult to attribute environmental outcomes to  one specific grant when dealing with complex ecosystems. In addition,  Office of Environmental Information project officers stated that  environmental outcome requirements should not apply to support  functions like information management.
Responding to the recent Inspector General report faulting Region 6 for its  oversight of Louisiana’s environmental programs, Region 6 officials  indicated that they had been unfairly criticized for not implementing  environmental measures since the agency, as a whole, had been unable to  do so.
These concerns demonstrate the need for guidance that addresses the  complexities of measuring and achieving environmental results.
Furthermore, not every EPA program office has yet developed  environmental measures for their grant programs. For example, in June  2004, the Inspector General found that EPA has been working on  developing environmental measures for the Clean Water State Revolving  Fund program since 1998. However, EPA has not yet developed these  measures or a comprehensive plan on how it plans to develop these  measures, although it plans to develop these measures by February 2005.
section_title: EPA’s Plan Focuses on Results, but Initial Implementation Has Been Slow and Limited
paragraphs: In 2003, we reported that EPA’s new 5-year grants management plan was  promising. In the plan, EPA had established the goal of “identifying and  achieving environmental outcomes” with the objectives and associated  milestones shown in table 4. As table 4 shows, EPA’s progress in  implementing the plan’s environmental outcomes objectives is behind  schedule.
EPA plans to issue its environmental outcomes policy—a key objective  originally scheduled for 2003—in fall 2004, but the policy will not become  effective until January 2005. EPA officials stated that the policy was  delayed because of the difficulty in addressing environmental outcomes.  Furthermore, as a result of this delay, EPA has delayed meeting the  objectives of developing a tutorial for grantees, requiring outcomes in  solicitations, and incorporating success on achieving outcomes into the  criteria for awarding grants—objectives that are contingent on the  issuance of the policy. EPA is also delaying the objective of incorporating  grantee’s previous success in identifying outcomes into the criteria for  awarding new grants in order to give grantees a year to understand the  new policy.
In the absence of a final outcomes policy, EPA issued an interim policy in  January 2004. The interim policy is a positive step in that for the first time  EPA is requiring project officers to identify—at the pre-award stage—how  proposed grants contribute to achieving the agency’s strategic goals under  the Government Performance and Results Act of 1993 (GPRA). (See fig. 3,  example 1.)  As we reported, project officers were linking the grant to the  agency’s goal after the award decision, so that the linkage was a  recordkeeping activity rather than a strategic decision.
While the interim policy is a positive first step, it does not require project  officers to link grant funding to environmental outcomes. Instead, it  “encourages” project officers to link grant funding to outputs, outcomes,  and performance goals, as illustrated in figure 3, example 2. EPA officials  explained that the interim policy did not require the full strategic  plan/GPRA “architecture”—goals, objectives, subobjectives,  program/project, outputs, outcomes, and annual performance goals— because not all EPA staff are trained on how to implement the strategic  plan/GPRA architecture. However, when EPA’s outcome policy becomes  effective, it will require every grant workplan to address the full strategic  plan/GPRA architecture, including outcomes.
Finally, EPA will not meet the grant management’s plan first-year (2004)  target for the performance measure of the environmental outcomes goal— the percentage of grant workplans, decision memoranda, and terms of  conditions that discuss how grantees plan to measure and report on  environmental outcomes. For this performance measure, using 2003 as its  baseline year, EPA determined that, as previously discussed, less than one- third of its grant workplans had environmental outcomes. EPA established  targets that progressively increase from this baseline to 70 percent in 2004,  to 80 percent in 2005, to 100 percent in 2006. EPA officials do not expect  that EPA will meet its target for 2004 because its outcome policy is not yet  in place.
EPA has drafted a policy and guidance on environmental outcomes in  grants. As drafted, this policy appears to have EPA moving in the right  direction for addressing environmental outcomes. The policy  Is binding on managers and staff throughout the agency, according to  EPA officials. Previously, the Office of Grants and Debarment targeted  only project officers through brief guidance on outcomes in their training  manual.
Emphasizes environmental results throughout the grant life cycle— awards, monitoring, and reporting. In terms of awards, the draft policy  applies to both competitive and noncompetitive grants. For example,  program offices and their managers must assure that competitive funding  announcements discuss expected outputs and outcomes. In terms of grant  monitoring, the policy requires program offices to assure that grantees  submit interim and final grantee reports that address outcomes.
Requires that grants are both aligned with the agency’s strategic goals  and linked to environmental results. Specifically, the draft policy requires  that EPA program offices (1) ensure that each grant funding package  includes a description of the EPA strategic goals and objectives the grant  is intended to address and (2) provide assurance that the grant workplan  contains well-defined outputs, and to the “maximum extent practicable,”  well-defined outcome measures. According to an EPA official, while the  policy requires that program offices assure that there are well-defined  outputs and outcomes, the grant funding package—an internal EPA  document—will not identify each output and anticipated outcome. EPA is  concerned that certain types of grants have too many outputs and  outcomes to enumerate. Potential grant recipients also will not be required  to submit workplans that mirror the strategic plan/GPRA architecture,  owing to EPA’s concern that such a requirement would cause the grant to  be for EPA’s benefit, and thus, more like a contract. EPA included the  provision to “the maximum extent practicable” because it recognized that  some types of grants do not directly result in environmental outcomes. For  example, EPA might fund a research grant to improve the science of  pollution control, but the grant would not directly result in an  environmental or public health benefit.
EPA’s forthcoming policy and guidance faces implementation challenges.  First, while the guidance recognizes some of the known complexities of  measuring outcomes, it does not yet provide staff with information on how  to address them. For example, it does not address how recipients will  demonstrate outcomes when there is a long time lag before results  become apparent. Second, although the policy is to become effective in  January 2005, all staff will not be trained by that time. EPA has planned  some training before issuing the policy and has issued a long-term training  plan that maps out further enhancements for training grant specialists and  project officers on environmental results. Finally, EPA has not yet  determined how environmental results from its programs will be reported  in the aggregate at the agency level. EPA’s forthcoming order establishes  that program offices must report on “significant results” from completed  grants through existing reporting processes and systems, which each  program has developed. EPA plans to convene an agencywide work group  in fiscal year 2005 to identify ways to better integrate those systems.
In conclusion, we believe that if fully implemented, EPA’s forthcoming  outcome policy should help the agency and the Congress ensure that grant  funding is linked to EPA’s strategic plan and to anticipated environmental  and public health outcomes. We believe that the major challenge to  meeting EPA’s goal of identifying and achieving outcomes continues to be  in implementation throughout the agency. Realistically, EPA has a long  road ahead in ensuring that its workforce is fully trained to implement the  forthcoming policy and in educating thousands of potential grantees about  the complexities of identifying and achieving environmental results.
Given EPA’s uneven performance in addressing its grants management  problems to this point, congressional oversight is important to ensuring  that EPA’s Administrator, managers, and staff implement its grants  management plan, including the critical goal of identifying and achieving  environmental results from the agency’s $4 billion annual investment in  grants.
Mr. Chairman, this concludes my prepared statement. I would be happy to  respond to any questions that you or Members of the Subcommittee may  have.
section_title: Contacts and Acknowledgments
paragraphs: For further information, please contact John B. Stephenson at (202) 512- 3841. Individuals making key contributions to this testimony were Avrum  I. Ashery, Andrea W. Brown, Tim Minelli, Carol Herrnstadt Shulman,  Rebecca Shea, Bruce Skud, and Amy Webbink.
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