Grants Management: EPA Needs to Strengthen Efforts to Address Management Challenges
Released: 2004-03-03T00:00:00

Letter

Background

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 EPA’s key offices involved in grants activities for headquarters and the 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 and program 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 the headquarters program offices, such as awarding grants and overseeing the financial management of these grants. On the programmatic side, headquarters program offices establish and implement national policies for their grant 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 2003, 109 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, 1,835 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 primary responsibilities, such as using the scientific and technical expertise for which they were hired.

In fiscal year 2002, EPA took 8,070 grant actions 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 2002, EPA awarded about $3.5 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 grants. In fiscal year 2002, EPA awarded about $719 million in discretionary grants. EPA has awarded these grants primarily to nonprofit organizations, universities, and government entities.

The grant process has the following four phases: Preaward. EPA reviews the application paperwork and makes an award decision.

Award. EPA prepares the grant documents and instructs the grantee on technical requirements, and the grantee signs an agreement to comply with all requirements.

Postaward. After awarding the grant, EPA provides technical assistance, oversees the work, and provides payments to the grantee; the grantee completes the work, and the project ends.

Closeout of the award. EPA ensures that all technical work and administrative requirements have been completed; EPA prepares closeout documents and notifies the grantee that the grant is completed.

EPA’s grantees are subject to the same type of financial management oversight as the recipients of other federal assistance. Specifically, the Single Audit Act requires grantees to have an audit of their financial statements and federal awards or program-specific audit if they spend $300,000 or more in federal awards in a fiscal year., Grantees submit these audits to a central clearinghouse operated by the Bureau of the Census, which then forwards the audit findings to the appropriate agency for any necessary action. However, the act does not cover all grants and all aspects of grants management and, therefore, agencies must take additional steps to ensure that federal funds are spent appropriately. In addition, EPA conducts in-depth reviews to analyze grantees’ compliance with grant regulations and specific grant requirements. Furthermore, to determine how well offices and regions oversee grantees, EPA conducts internal management reviews that address grants management.

The Office of Management and Budget, as authorized by the act, increased this amount to $500,000 in federal awards as of June 23, 2003. closeouts, as a material weakness—an accounting and internal control system weakness that the EPA Administrator must report to the President and Congress. EPA’s fiscal year 1999 Federal Managers’ Financial Integrity Act report indicated that this oversight material weakness had been corrected, but the Inspector General testified that the weakness continued. In 2002, the Inspector General again recommended that EPA designate grants management as a material weakness. The Office of Management and Budget (OMB) also recommended in 2002 that EPA designate grants management as a material weakness. In its fiscal year 2002 Annual Report, EPA ultimately decided to maintain this issue as an agency-level weakness, which is a lower level of risk than a material weakness. EPA reached this decision because it believes its ongoing corrective action efforts will help to resolve outstanding grants management challenges. However, in adding EPA’s grants management to our list of EPA’s major management challenges in January 2003, we signaled our concern that EPA has not yet taken sufficient action to ensure that it can manage its grants effectively.

EPA Faces Four Key Grants Management Challenges, Despite Past Efforts to Address Them

We identified four key challenges that EPA continues to face in managing its grants. These challenges are (1) selecting the most qualified grant applicants, (2) effectively overseeing grantees, (3) measuring the results of grants, and (4) effectively managing grant staff and resources. In the past, EPA has taken a series of actions to address these challenges by, among other things, issuing policies on competition and oversight, conducting training for project officers and nonprofit organizations, and developing a new data system for grants management. However, these actions had mixed results because of the complexity of the problems, weaknesses in design and implementation, and insufficient management attention.

EPA has not selected the most qualified applicants despite issuing a competition policy. The Federal Grant and Cooperative Agreement Act of 1977 encourages agencies to use competition in awarding grants. To encourage competition, EPA issued a grants competition policy in 1995. However, EPA’s policy did not result in meaningful competition throughout the agency, according to EPA officials. Furthermore, EPA’s own internal management reviews and a 2001 Inspector General report found that EPA has not always encouraged competition. Finally, EPA has not always engaged in widespread solicitation of its grants, which would provide greater assurance that EPA receives proposals from a variety of eligible and highly qualified applicants who otherwise may not have known about grant opportunities.

EPA has not always effectively overseen grant recipients despite past actions to improve oversight. To address oversight problems, EPA issued a series of policies starting in 1998. However, these oversight policies have had mixed results in addressing this challenge. For example, EPA’s efforts to improve oversight included in-depth reviews of grantees but did not include a statistical approach to identifying grantees for reviews, collecting standard information from the reviews, and a plan for analyzing the results to identify and act on systemic grants management problems. EPA, therefore, could not be assured that it was identifying and resolving grantee problems and using its resources more effectively to target its oversight efforts.

EPA’s efforts to measure environmental results have not consistently ensured that grantees achieve them. Planning for grants to achieve environmental results—and measuring results—is a difficult, complex challenge. However, as we pointed out in an earlier report, it is important to measure outcomes of environmental activities rather than just the activities themselves. Identifying and measuring the outcomes of EPA’s grants will help EPA better manage for results. EPA has awarded some discretionary grants before considering how the results of the grantees’ work would contribute to achieving environmental results. EPA has also not developed environmental measures and outcomes for all of its grant programs. OMB found that four EPA grant programs lacked outcome-based measures—measures that demonstrated the impact of the programs on improving human health and the environment—and concluded that one of EPA’s major challenges was demonstrating program effectiveness in achieving public health and environmental results. Finally, EPA has not always required grantees to submit work plans that explain how a project will achieve measurable environmental results. In 2002, EPA’s Inspector General reported that EPA approved some grantees’ work plans without determining the projects’ human health and environmental outcomes. In fact, for almost half of the 42 discretionary grants the Inspector General reviewed, EPA did not even attempt to measure the projects’ outcomes. Instead, EPA funded grants on the basis of work plans that focused on short-term procedural results, such as meetings or conferences. In some cases, it was unclear what the grant had accomplished. In 2003, the Inspector General again found the project officers had not negotiated environmental outcomes in work plans. The Inspector General found that 42 percent of the grant work plans reviewed—both discretionary and nondiscretionary grants—lacked negotiated environmental outcomes.

EPA has not always effectively managed its grants staff and resources despite some past efforts. EPA has not always appropriately allocated the workload for staff managing grants, provided them with adequate training, or held them accountable. Additionally, EPA has not always provided staff with the resources, support, and information necessary to manage the agency’s grants. To address these problems, EPA has taken a number of actions, such as conducting additional training and developing a new electronic grants management system. However, implementation weaknesses have precluded EPA from fully resolving its resource management problems. For example, EPA has not always held its staff— such as project officers—accountable for fulfilling their grants management responsibilities. According to the Inspector General and internal management reviews, EPA has not clearly defined project officers’ grants management responsibilities in their position descriptions and performance agreements. Without specific standards for grants management in performance agreements, it is difficult for EPA to hold staff accountable. It is therefore not surprising that, according to the Inspector General, project officers faced no consequences for failing to effectively perform grants management duties. Compounding the accountability problem, agency leadership has not always emphasized the importance of project officers’ grants management duties.

New Policies and Plan Show Promise but Require Strengthening, Enhanced Accountability, and Sustained Commitment to Succeed

EPA’s recently issued policies on competition and oversight and a 5-year grants management plan to address its long-standing grants management problems are promising and focus on the major management challenges, but these policies and plan require strengthening, enhanced accountability, and sustained commitment to succeed.

EPA’s competition policy shows promise but requires a major cultural shift. In September 2002, EPA issued a policy to promote competition in grant awards by requiring that most discretionary grants be competed. The policy also promotes widespread solicitation for competed grants by establishing specific requirements for announcing funding opportunities in, for example, the Federal Register and on Web sites.

This policy should encourage selection of the most qualified applicants. However, the competition policy faces implementation barriers because it represents a major cultural shift for EPA staff and managers, who have had limited experience with competition, according to EPA’s Office of Grants and Debarment. The policy requires EPA officials to take a more planned, rigorous approach to awarding grants. That is, EPA staff must determine the evaluation criteria and ranking of these criteria for a grant, develop the grant announcement, and generally publish it at least 60 days before the application deadline. Staff must also evaluate applications— potentially from a larger number of applicants than in the past—and notify applicants of their decisions. These activities will require significant planning and take more time than awarding grants noncompetitively.

Oversight policy makes important improvements but requires strengthening to identify systemic problems. EPA’s December 2002 policy makes important improvements in oversight, but it still does not enable EPA to identify systemic problems in grants management. Specifically, the policy does not (1) incorporate a statistical approach to selecting grantees for review so EPA can project the results of the reviews to all EPA grantees, (2) require a standard reporting format for in-depth reviews so that EPA can use the information to guide its grants oversight efforts agencywide, and (3) maximize use of information in its grantee compliance database to fully identify systemic problems and then inform grants management officials about oversight areas that need to be addressed.

Grants management plan will require strengthening, sustained commitment, and enhanced accountability. We believe that EPA’s grants management plan is comprehensive in that it focuses on the four major management challenges—grantee selection, oversight, environmental results, and resources—that we identified in our work. For the first time, EPA plans a coordinated, integrated approach to improving grants management. The plan is also a positive step because it (1) identifies goals, objectives, milestones, and resources to achieve the plan’s goals; (2) provides an accompanying annual tactical plan that outlines specific tasks for each goal and objective, identifies the person accountable for completing the task, and sets an expected completion date; (3) attempts to build accountability into grants management by establishing performance measures for each of the plan’s five goals; (4) recognizes the need for greater involvement of high-level officials in coordinating grants management throughout the agency by establishing a high-level grants management council to coordinate, plan, and set priorities for grants management; and (5) establishes best practices for grants management offices. According to EPA’s Assistant Administrator for Administration and Resources Management, the agency’s April 2003 5-year grants management plan is the most critical component of EPA’s efforts to improve its grants management.

In addition to the goals and objectives, the plan establishes performance measures, targets, and action steps with completion dates for 2003 through 2006. EPA has already begun implementing several of the actions in the plan or meant to support the plan; these actions address previously identified problems. For example, EPA now posts its available grants on the federal grants Web site http://www.fedgrants.gov. In January 2004, EPA issued an interim policy to require that grant funding packages describe how the proposed project supports the goals of EPA’s strategic plan.

Successful implementation of the new plan requires all staff—senior management, project officers, and grants specialists—to be fully committed to, and accountable for, grants management. Recognizing the importance of commitment and accountability, EPA’s 5-year grants management plan has as one of its objectives the establishment of clear lines of accountability for grants oversight. The plan, among other things, calls for (1) ensuring that performance standards established for grants specialists and project officers adequately address grants management responsibilities in 2004; (2) clarifying and defining the roles and responsibilities of senior resource officials, grant specialists, project officers, and others in 2003; and (3) analyzing project officers’ and grants specialists’ workload in 2004.

In implementing this plan, however, EPA faces challenges to enhancing accountability. Although the plan calls for ensuring that project officers’ performance standards adequately address their grants management responsibilities, agencywide implementation may be difficult. Currently, project officers do not have uniform performance standards, according to officials in EPA’s Office of Human Resources and Organizational Services. Instead, each supervisor sets standards for each project officer, and these standards may not include grants management responsibilities. Once individual project officers’ performance standards are established for the approximately 1,800 project officers, strong support by managers at all levels, as well as regular communication on performance expectations and feedback, will be key to ensuring that staff with grants management duties successfully meet their responsibilities. Furthermore, it is difficult to implement performance standards that will hold project officers accountable for grants management because these officers have a variety of responsibilities and some project officers manage few grants, and because grants management responsibilities often fall into the category of “other duties as assigned.”

Although EPA’s current performance management system can accommodate development of performance standards tailored to each project officer’s specific grants management responsibilities, the current system provides only two choices for measuring performance— satisfactory or unsatisfactory—which may make it difficult to make meaningful distinctions in performance. Such an approach may not provide enough meaningful information and dispersion in ratings to recognize and reward top performers, help everyone attain their maximum potential, and deal with poor performers.

EPA will also have difficulty achieving the plan’s goals if all managers and staff are not held accountable for grants management. The plan does not call for including grants management standards in managers’ and supervisors’ agreements. In contrast, senior grants managers in the Office of Grants and Debarment as well as other Senior Executive Service managers have performance standards that address grants management responsibilities. However, middle-level managers and supervisors also need to be held accountable for grants management because they oversee many of the staff that have important grants management responsibilities. According to Office of Grants and Debarment officials, they are working on developing performance standards for all managers and supervisors with grants responsibilities. In November 2003, EPA asked key grants managers to review all performance standards and job descriptions for employees involved in grants management, including grants specialists, project officers, supervisors, and managers, to ensure that the complexity and extent of their grant management duties are accurately reflected.

Further complicating the establishment of clear lines of accountability, the Office of Grants and Debarment does not have direct control over many of the managers and staff who perform grants management duties— particularly the approximately 1,800 project officers in headquarters and regional program offices. The division of responsibilities between the Office of Grants and Debarment and program and regional offices will continue to present a challenge to holding staff accountable and improving grants management, and will require the sustained commitment of EPA’s senior managers.

If EPA is to better achieve its environmental mission, it must more effectively manage its grants—which account for more than half of its annual budget. While EPA’s new 5-year grants management plan shows promise, given EPA’s historically uneven performance in addressing its grants management challenges, congressional oversight is important to ensure that the Administrator of EPA, managers, and staff implement the plan in a sustained, coordinated fashion to meet the plan’s ambitious targets and time frames.

To ensure that EPA’s recent efforts to address its grants management challenges are successful, in our August 2003 report, we recommended that the Administrator of EPA provide sufficient resources and commitment to meeting the agency’s grants management plan’s goals, objectives, and performance targets within the specified timeframes. Furthermore, to strengthen EPA’s efforts we recommended incorporating appropriate statistical techniques in selecting grantees for in-depth reviews; requiring EPA staff to use a standard reporting format for in-depth reviews so that the results can be entered into the grant databases and analyzed agencywide; developing a plan, including modifications to the grantee compliance database, to use data from its various oversight efforts—in-depth reviews, significant actions, corrective actions taken, and other compliance information—to fully identify systemic problems, inform grants management officials of areas that need to be addressed, and take corrective action as needed; modifying its in-depth review protocols to include questions on the status of grantees’ progress in measuring and achieving environmental outcomes; incorporating accountability for grants management responsibilities through performance standards that address grants management for all managers and staff in headquarters and the regions responsible for grants management and holding managers and staff accountable for meeting these standards; and evaluating the promising practices identified in the report and implementing those that could potentially improve EPA grants management.

To better inform Congress about EPA’s achievements in improving grants management, we recommended that the Administrator of EPA report on the agency’s accomplishments in meeting the goals and objectives developed in the grants management plan and other actions to improve grants management, beginning with its 2003 annual report to Congress.

EPA agreed with our recommendations and is in the process of implementing them as part of its 5-year grants management plan.

Mr. Chairman, this concludes my prepared statement. I would be happy to respond to any questions that you or Members of the Committee may have.

Contacts and Acknowledgments

For further information, please contact John B. Stephenson at (202) 512- 3841. Individuals making key contributions to this testimony were Carl Barden, Andrea W. Brown, Christopher Murray, Paul Schearf, Rebecca Shea, Carol Herrnstadt Shulman, Bruce Skud, and Amy Webbink.

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