Through the National Pollutant Discharge Elimination System program, the Clean Water Act established the basic structure for regulating discharges of pollutants into the waters of the United States, including rivers, lakes, and streams. Under this program, EPA and EPA-authorized states issue and enforce permits to regulate pollution from specific entities, including, for example, industrial dischargers and municipal wastewater treatment facilities, known as “point sources.” In support of the permitting program, EPA and the states perform a number of important activities, such as monitoring water quality and setting limits on the amounts of specific pollutants that can be discharged into water bodies. The act also requires states to implement management programs for controlling pollution from diffuse or “nonpoint” sources, such as agricultural runoff. To carry out its responsibilities for controlling point and nonpoint source pollution, EPA relies on the Office of Water, the Office of Enforcement and Compliance Assurance, and 10 regional offices, as well as states’ water pollution control agencies. As table 1 shows, since the Clean Water Act was amended in 1972, the scope of EPA and state responsibilities and the associated workload, has increased significantly. Even as the overall workload has increased as a result of these changes, the states have been playing a greater role in carrying out required tasks. As shown in figure 1, since 1972, EPA has authorized 45 states to perform at least some of the permitting activities associated with controlling pollution from wastewater treatment and industrial facilities. As EPA authorizes states to take on more responsibilities, the agency’s workload shifts from direct implementation to oversight. EPA budgets and allocates resources incrementally, largely based on historical precedents, and thus its process does not reflect a bottom-up review of the nature or distribution of the current workload—either for specific environmental laws or the broader goals and objectives in the agency’s strategic plan. These historical precedents are drawn from workload models EPA had developed in the 1980s, but the distribution of EPA’s workload has changed over time as EPA has taken on new responsibilities under the Clean Water Act and other laws and the states gradually assumed a greater role in the day-to-day implementation of key aspects of this workload. Other factors, such as the introduction of new technologies and shifts in regional population, have also affected the amount, type, and distribution of EPA’s resource needs. Nonetheless, in developing the amounts of its budget request and subsequent resource allocations, EPA officials use prior years’ allocations as a baseline and make adjustments to reflect (1) direction from the Office of Management and Budget and the Congress and (2) spending caps imposed by EPA’s Chief Financial Officer, such as ceilings on staff years and payroll. For example, guidance from the Office of Management and Budget sets overall parameters for the agency’s budget—generally a given percentage of the previous year’s budget. Once EPA receives its appropriation from the Congress, the agency’s operating plan—which is also based on historical precedent—guides the allocation of funding and staff years to the organizational units. While acknowledging that their budgeting and resource allocation is not based on a bottom-up review, EPA officials said that the process is linked to the agency’s strategic goals and objectives. They told us that the annual budgeting and resource allocation process reflects changes in program and budget priorities, as determined by senior EPA managers, across the agency and within specific program offices. In particular, officials from both the Office of Water and Office of Enforcement and Compliance Assurance told us that they make strategic decisions in developing the agency’s budget—within and across agency goals and objectives—to reflect shifting priorities. For example, for fiscal year 2005, EPA asked for an additional $22 million for grants to state water pollution control agencies, including $17 million to address a need for more water quality monitoring. However, EPA officials acknowledged that shifts in funding and staff years, as a result of changing priorities, are generally marginal and that increases in priority areas are usually offset by decreases in areas of lower priority. Within the existing system, EPA and state officials have some flexibility to realign resources based on actual workload but have not taken full advantage of such opportunities. For example: During each budget cycle, EPA’s regional offices have an opportunity to influence how the program offices allocate any increases or decreases in resources, as reflected in the agency’s operating plan. While, in theory, such changes could be directed to the regions based on their relative need, regional officials report that most changes are allocated based on historical precedent. Under section 106 of the Clean Water Act, EPA must distribute grants to state water pollution control agencies based on the extent of the pollution problem in the respective states. In 1997 and 1998, an EPA- state work group developed a weighted distribution formula that considers various workload indicators, such as a state’s surface water area, groundwater use, water quality impairment, point and nonpoint pollution sources, and population of urbanized areas. The formula, currently in regulations, includes a funding “floor,” which stipulates that states must receive at least as much as they received in fiscal year 2000, unless funding goes down, with an annual adjustment for inflation and the current year’s appropriation. Consequently, as EPA regional officials pointed out, the allocations do not fully reflect relative workloads. In 1995, EPA and the states established the National Environmental Performance Partnership System, which gave states greater flexibility to direct resources to their most pressing environmental problems by combining funds from multiple grants. In practice, however, officials in EPA’s regional offices and a state environmental organization report limited use of the funding flexibility. According to EPA officials, states have only used the program to move marginal amounts of money to target cross-cutting initiatives or other similar programs. In terms of overall structure, EPA has organized its budget requests and allocated resources around its strategic plan, rather than specific environmental laws or programs. The strategic plan lays out broad agency goals and objectives, some of which encompass Clean Water Act responsibilities for controlling point and nonpoint source pollution. EPA’s current strategic plan includes these activities primarily under two goals: Clean and Safe Water (Goal 2) and Compliance and Environmental Stewardship (Goal 5). As table 2 indicates, however, the objectives and subobjectives within each goal can include activities under multiple environmental laws. Within the agency’s goal for Clean and Safe Water, for example, objectives for protecting water quality, protecting human health, and enhancing science and research address requirements under the Safe Drinking Water Act and other laws, in addition to those under the Clean Water Act. According to officials from EPA’s Office of the Chief Financial Officer, Office of Enforcement and Compliance Assurance, and Office of Water, isolating the amount of resources dedicated to specific Clean Water Act programs and activities would be extremely difficult. The officials said that the budgeting and allocation structure aligns resources with goals and objectives that encompass multiple laws and programs and is not intended to provide statute-specific or program-specific breakdowns. The Office of Enforcement and Compliance Assurance, in particular, organizes its budget into program projects, such as compliance monitoring and civil enforcement, that cut across all environmental media. Recognizing these difficulties, we asked budget officials within the Office of Enforcement and Compliance Assurance and Office of Water to estimate the funding and staff years allocated to EPA’s regional offices for controlling point and nonpoint source pollution under the Clean Water Act and to provide the amounts allotted to the states under two grant programs that support such activities at the state level. (See app. II for this information.) To plan their resources most effectively, organizations must determine what they need to accomplish their work and develop a plan to meet those needs by obtaining staff and other resources. EPA has developed several initiatives that could improve the agency’s ability to plan its resources more strategically, including some efforts that focus on workforce planning and others that could provide key information needed to support a data-driven approach to budgeting and allocating resources. Beyond these initiatives, however, EPA faces larger challenges in adopting a more systematic process for budgeting and resource allocation: obtaining reliable data on key workload indicators and overcoming internal resistance to adopting such a process. At its most basic level, effective resource planning involves identifying the specific activities and tasks that must be accomplished to achieve an organization’s objectives, determining the type and level of resources needed to carry out the work, and developing a strategy to obtain the needed resources. Realistically, because organizations rarely have access to unconstrained budgets, managers typically have to set priorities so that the most important tasks can be accomplished within available resources. Particularly in an environment of limited resources, the data that inform resource planning are useful in helping decision makers determine how best to absorb budget cuts. Because an organization’s employees often account for a significant share of its resources, workforce planning is a key component of any successful resource management strategy. Studies by GAO and others have shown that successful organizations use strategic workforce planning to identify and fill the gaps between their current and future workforce needs in meeting organizational goals and fulfilling their overall mission. Strategic workforce planning encompasses a broad array of initiatives to attract, retain, develop, and motivate a top- quality workforce with the skills needed to meet performance goals. In 2003, for example, we reported that successful organizations have used strategic workforce planning as a tool to both identify current needs and anticipate and prepare for upcoming human capital issues, such as an aging workforce or changes in mission-critical skills, that could jeopardize the accomplishment of goals. More recently, we found that leading organizations go beyond a succession planning approach that focuses on simply replacing individuals and, instead, engage in broad, integrated efforts that focus on strengthening both current and future organizational capacity. Our 2003 report said that an analysis of gaps in an organization’s workforce should identify how many employees have the skills and competencies needed to meet program goals and the number that are likely to remain with the agency over time, given expected losses due to retirement and other attrition.