oversight

Grants Management: EPA Needs to Strengthen Oversight and Enhance Accountability to Address Persistent Challenges

Published by the Government Accountability Office on 2003-10-01.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                             United States General Accounting Office

GAO                          Testimony
                             Before the Subcommittee on Water
                             Resources and Environment, Committee
                             on Transportation and Infrastructure,
                             House of Representatives
For Release on Delivery
Expected at 2:00 p.m. EDT
Wednesday, October 1, 2003   GRANTS MANAGEMENT
                             EPA Needs to Strengthen
                             Oversight and Enhance
                             Accountability to Address
                             Persistent Challenges
                             Statement of John B. Stephenson, Director,
                             Natural Resources and Environment




GAO-04-122T 

                                                October 1, 2003


                                                GRANTS MANAGEMENT

                                                EPA Needs to Strengthen Oversight and
Highlights of GAO-04-122T, testimony            Enhance Accountability to Address
before the Subcommittee on Water
Resources and Environment, Committee            Persistent Challenges
on Transportation and Infrastructure,
House of Representatives




The Environmental Protection                    Late in 2002, EPA launched new efforts to address some of its long-standing
Agency (EPA) has faced persistent               grants management problems. It issued two policies—one to promote
challenges in managing its grants,              competition in awarding grants and one to improve its oversight of grants.
which, at about $4 billion annually             Furthermore, in April 2003, EPA issued a 5-year grants management plan to
constitute over one-half of the                 address its long-standing grants management problems. These policies and plan
agency’s total budget. EPA awards               focus on the major grants management challenges we identified but will require
grants to thousands of recipients to            strengthening, enhanced accountability, and sustained commitment to succeed.
implement its programs to protect
human health and the environment.               EPA’s September 2002 competition policy should improve EPA’s ability to select
Given the size and diversity of                 the most qualified applicants by requiring competition for more grants.
EPA’s programs, its ability to                  However, effective implementation of the policy will require a major cultural
efficiently and effectively                     shift for EPA managers and staff because the competitive process will require
accomplish its mission largely                  significant planning and take more time than awarding grants noncompetitively.
depends on how well it manages its
grant resources and builds
                                                EPA’s December 2002 oversight policy makes important improvements in
accountability into its efforts.
                                                monitoring grantees, but it does not build in a process for effectively and
In our comprehensive report on                  efficiently analyzing the results of its monitoring efforts to address systemic
EPA’s management of its grants,                 grantee problems. Specifically, EPA does not (1) use a statistical approach to
released last week, we found that               selecting grantees for review, (2) collect standard information from the reviews,
EPA continues to face four key                  and (3) analyze the results to identify and resolve systemic problems with
grants management challenges                    grantees. As a result, EPA may not be using its oversight resources as efficiently
despite past efforts to address                 as it could. With improved analysis, EPA could better identify problem areas
them—(1) selecting the most                     and assess the effectiveness of its corrective actions to more efficiently target its
qualified grant applicants, (2)                 oversight efforts.
effectively overseeing grantees, (3)
measuring the results of grants, and            EPA’s 5-year grants management plan recognizes the importance of
(4) effectively managing its grant              accountability, but it does not completely address how the agency will hold all
staff and resources. The report                 managers and staff accountable for successfully fulfilling their grants
also discusses EPA’s latest                     management responsibilities. For example, the plan calls for developing
competition and oversight policies              performance standards for staff overseeing grantee performance, but it does not
and its new 5-year plan to improve              call for including grants management performance standards in their managers’
the management of its grants.                   and supervisors’ performance agreements. Unless all managers and staff are
                                                held accountable for grants management, EPA cannot ensure the sustained
This testimony, based on our                    commitment required for the plan’s success.
report, focuses on the extent to
which EPA’s latest policies and                 Our report, Grants Management: EPA Needs to Strengthen Efforts to Address
plan address (1) awarding grants                Persistent Challenges, GAO-03-846, details EPA’s historically uneven
competitively, (2) improving                    performance in addressing its grants management challenges. Over the years,
oversight of grantees, and (3)                  EPA’s past actions to improve grants management have had mixed results
holding staff and managers                      because of the complexity of the problems, weaknesses in policy design and
accountable for fulfilling their                implementation, and insufficient management attention to overseeing grants.
grants management                               While EPA’s latest policies and new 5-year grants management plan show
responsibilities.
                                                promise, it is too early to tell if these will succeed more than past actions. If
                                                EPA is to better achieve its environmental mission, it must more effectively
www.gao.gov/cgi-bin/getrpt?GAO-04-122T.         manage its grants. Our report contains specific recommendations to address
                                                critical weaknesses in EPA’s new oversight policy and plan. EPA stated that it
To view the full product, including the scope
And methodology, click on the link above.
                                                agreed with GAO’s recommendations and it will implement them as part of its 5-
For more information, contact John B.           year grants management plan.
Stephenson at (202) 512-3841 or
stephensonj@gao.gov.
Mr. Chairman and Members of the Subcommittee:

We are pleased to be here to discuss the Environmental Protection
Agency’s (EPA) management of its grants. My testimony is based on our
report released in September 2003, which was requested by the Chairman
of the House Committee on Transportation and Infrastructure and
Representative Anne Northup.1

To support its mission of protecting human health and the environment, in
fiscal year 2002, EPA awarded grants to a variety of recipients, including
state and local governments, tribes, universities, and nonprofit
organizations. 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 grant resources and builds accountability into its
efforts. As of September 30, 2002, EPA had 4,100 grant recipients.

As you know, over the years, EPA has faced persistent challenges in
managing its grants, which at about $4 billion annually, constitute over
one-half of its total budget. In our June 2003 testimony before this
Subcommittee and in our report, we identified four key management
challenges EPA continues to face, despite past efforts to address them.2
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. We also reported that
EPA’s past efforts to improve its management had mixed results because
of the complexity of the problems, weaknesses in design and
implementation, and insufficient management attention. EPA must resolve
these problems in order to improve its management of grants.

Late in 2002, EPA launched new efforts to address some of its long-
standing grants management problems. Specifically, it issued two new
policies—one in September 2002 to promote competition in awarding
grants and one in December 2002 to improve its oversight of grants.
Furthermore, in April 2003, EPA issued a 5-year grants management plan



1
 U.S. General Accounting Office, Grants Management: EPA Needs to Strengthen Efforts to
Address Persistent Challenges, GAO-03-846 (Washington, D.C.: Aug. 29, 2003). This report
is available at no charge on the GAO Web site at htpp://www.gao.gov.
2
 U.S. General Accounting Office, Environmental Protection Agency: Problems Persist in
Effectively Managing Grants, GAO-03-628T (Washington, D.C: June 11, 2003). This report
is available at no charge on the GAO Web site at htpp://www.gao.gov.



Page 1                                           GAO-04-122T EPA Grants Management
to address its long-standing grants management problems. We found that
these policies and plan focus on the major grants management challenges
we identified but will require strengthening, enhanced accountability, and
sustained commitment to succeed.

For our testimony today, you asked us to comment on the extent to which
EPA’s new policies and plan address the challenges concerning (1)
awarding grants competitively, (2) improving oversight of grantees, and
(3) holding staff and managers accountable for fulfilling their grants
management responsibilities. For our report, we, among other things,
obtained and analyzed EPA’s 1,232 in-depth reviews of grantee
performance conducted in calendar year 2002 to identify the challenges
EPA faces in managing its grants. We also examined EPA’s new policies
and plan and interviewed EPA officials responsible for key aspects of the
plan.

In summary, we found the following:

•	   EPA’s September 2002 competition policy should improve EPA’s ability
     to select the most qualified applicants by requiring competition for
     more grants. However, effective implementation of the policy will
     require a major cultural shift for EPA managers and staff because the
     competitive process will require significant planning and take more
     time than awarding grants noncompetitively.

•	   EPA’s December 2002 oversight policy makes important improvements
     in monitoring grantees, but it does not build in a process for effectively
     and efficiently analyzing the results of its monitoring efforts to address
     systemic grantee problems. Specifically, EPA does not (1) use a
     statistical approach to selecting grantees for review, (2) collect
     standard information from the reviews, and (3) analyze the results to
     identify and resolve systemic problems with grantees. As a result, EPA
     may not be using its oversight resources as efficiently as it could. With
     improved analysis, EPA could better identify problem areas and assess
     the effectiveness of its corrective actions to more efficiently target its
     oversight efforts.

•	   EPA’s April 2003 grants management plan recognizes the importance of
     accountability but it does not completely address how the agency will
     hold all managers and staff accountable for successfully fulfilling all
     their grants management responsibilities. For example, the plan does
     not call for including grants management performance standards in
     managers’ and supervisors’ performance agreements. Unless all
     managers and staff are held accountable for grants management, EPA

Page 2                                       GAO-04-122T EPA Grants Management
                   cannot ensure the sustained commitment required for the plan’s
                   success.

               We made recommendations in our report to the EPA Administrator to
               strengthen grants management by more systematically overseeing
               grantees and by holding all managers and staff in headquarters and the
               regions accountable for fulfilling their grants management responsibilities.
               We also recommended that EPA report on the progress of its efforts in its
               annual report to Congress. EPA agreed with our recommendations and
               stated it will implement them as part of its 5-year grants management plan.


               EPA administers and oversees grants primarily through the Office of
Background 	   Grants and Debarment, 10 program offices in headquarters,3 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.




               3
                According to EPA officials, two headquarters’ offices, EPA’s Office of General Counsel,
               and the Office of the Chief Financial Officer, conduct limited grant activity.



               Page 3                                             GAO-04-122T EPA Grants Management
Figure 1: EPA’s Key Offices Involved in Grant Activities




                                          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


                                          Page 4                                   GAO-04-122T EPA Grants Management
by the regional program offices,4 while the regional program staff provide
technical and programmatic oversight of their grantees.

As of June 2003, 109 grant 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 actions5 totaling about $4.2
billion.6 These awards were made to six main categories of recipients as
shown in figure 2.




4
Program offices in Regions 4, 5, 6, 9, and 10 award grants directly.
5
 Grant actions include new awards and increase and decrease amendments. The 8,070
grant actions involving funding were composed of 4,374 new grants, 2,772 increase
amendments, and 924 decrease amendments. In addition, EPA awarded 1,620 no cost
extensions, which did not involve funding, in fiscal 2002.
6
GAO did not verify EPA’s budget data.



Page 5                                              GAO-04-122T EPA Grants Management
Figure 2: Percentage of EPA Grant Dollars Awarded by Recipient Type, Fiscal Year
2002




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.




Page 6                                       GAO-04-122T EPA Grants Management
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.

As part of its oversight of grantee performance, EPA conducts in-depth
reviews to analyze grantees’ compliance with grant regulations and
specific grant requirements.7 EPA conducts two types of in-depth reviews.
Administrative reviews, conducted by the grants management offices, are
designed to evaluate grantees’ financial and administrative capacity. In
contrast, programmatic reviews, conducted by the program offices, are
designed to assess the grantees’ activities in five key areas: (1) assessing
progress of work, (2) reviewing financial expenditures, (3) meeting the
grant’s terms and conditions, (4) meeting all programmatic, statutory, and
regulatory requirements, and (5) verifying that equipment purchased under
the award is managed and accounted for. Both administrative and
programmatic reviews are conducted either at the grantee’s location (on-
site) or at EPA’s office or another location (off-site). Furthermore, to
determine how well offices and regions oversee grantees, EPA conducts
internal management reviews of headquarters and regional offices.




7
EPA refers to these in-depth reviews as advance monitoring.



Page 7                                           GAO-04-122T EPA Grants Management
                       EPA’s September 2002 competition policy requires that most discretionary
EPA’s Competition      grants be competed. These grants totaled about $719 million of the $4.2
Policy Shows Promise   billion in grants awarded in fiscal year 2002. The policy applies to most
                       discretionary grant programs or individual grants of more than $75,000.8
but Requires a Major   The policy also promotes widespread solicitation for competed grants by
Cultural Shift         establishing specific requirements for announcing funding opportunities
                       in, for example, the Federal Register and on Web sites. EPA has also
                       appointed a grant competition advocate to coordinate this effort.

                       EPA’s competition policy faces implementation barriers because it
                       represents a major cultural shift for EPA staff and managers, who
                       historically awarded most grants noncompetitively and thereby have had
                       limited experience with competition, according to the 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. Office of Grants
                       and Debarment officials anticipate a learning curve as staff implement the
                       policy and will evaluate the policy’s effectiveness in 2005, including the
                       $75,000 threshold level. While the policy and subsequent implementing
                       guidance have been in effect for a number of months, it is too early to tell
                       if the policy has resulted in increased competition over the entire fiscal
                       year. EPA officials believe that preliminary results indicate that the policy
                       is increasing the use of competition.


                       EPA’s December 2002 oversight policy makes important improvements in
EPA Needs A More       monitoring grantees, but it does not enable the agency to identify and
Systematic Approach    address systemic problems with grant recipients. Specifically, EPA cannot
                       develop systemic information because the policy does not (1) incorporate
to Strengthen          a statistical approach to selecting grantees for review; (2) require a
Oversight              standard reporting format for in-depth reviews to ensure consistency and
                       clarity in reporting review results; and (3) identify needed data elements
                       or develop a plan for analyzing data in its grantee compliance database to



                       8
                        The policy exempts individual grants only if they meet certain criteria, such as national
                       security interests. Exemptions require detailed, written justification, and approval.



                       Page 8                                              GAO-04-122T EPA Grants Management
                            identify and act on systemic grantee problems. Therefore, EPA cannot use
                            data from these reviews to determine the overall compliance of grantees
                            or be assured that it is using its resources to effectively target its oversight
                            efforts. With a more rigorous statistical approach to selecting grantees,
                            standard reporting format, and a plan for using information from in-depth
                            and other reviews, EPA could identify problem areas and develop trends
                            to assess the effectiveness of corrective actions in order to better target its
                            oversight efforts.


EPA Needs to Incorporate    EPA’s new policy allows each office to determine what criteria it will use
a Statistical Approach to   to select at least 10 percent of its grant recipients for in-depth review.
Selecting Grantees for      However, because this policy does not employ a statistical method to
                            selecting grantees for review, it limits the usefulness of these reviews as a
Review                      tool to determine the overall compliance of grant recipients. Furthermore,
                            EPA cannot determine whether 10 percent or any other percentage is the
                            appropriate number of reviews. With a statistical approach, EPA could
                            increase the efficiency and effectiveness of its oversight of grantees by (1)
                            adjusting the number and allocation of its in-depth reviews to match the
                            level of risk associated with each type of grant recipient and (2) projecting
                            the results of its reviews to all EPA grantees.


EPA Needs to Require a      EPA’s in-depth reviews can provide valuable information that the agency
Standard Reporting          can use to identify problems and implement corrective actions. However,
Format for In-depth         EPA does not have a standard reporting format to ensure consistency,
                            clarity, and usefulness in reporting review results. Consequently, EPA is
Reviews                     not able to effectively and efficiently analyze these data to determine
                            systemic grantee problems.

                            Although EPA was requiring offices to conduct in-depth review of grantees
                            in 2002, it did not systematically collect and analyze information from
                            these reviews as part of its oversight efforts. We requested that EPA
                            provide us with its in-depth reviews conducted in 2002 so we could do the
                            analysis. Many of the documents EPA provided were, not in fact, in-depth
                            reviews, but various types of other oversight documents. We sorted
                            through these documents to identify the in-depth reviews using a data
                            collection instrument. Through this approach, we identified 1,232 in-depth
                            reviews. Using a data collection instrument, we collected and analyzed
                            information from each of these in-depth reviews on, among other things,
                            problems with grantees, and significant actions taken against grantees.
                            The full results of our analysis are presented in our report.



                            Page 9                                      GAO-04-122T EPA Grants Management
According to our analysis of EPA’s 1,232 in-depth reviews in 2002, EPA
grant specialists and project officers identified 1,250 problems in 21 areas.
Tables 1 and 2 show the most frequently identified problems for the 189
administrative and 1,017 programmatic reviews we examined. For
example, 73 of 189 administrative reviews found problems with grantees’
written procedures, while 308 of the 1,017 programmatic reviews
identified technical issues.

Table 1: Most Frequently Identified Problems, by Problem Area for Administrative
Reviews, 2002

 Type of problem                                  Number of reviews with reported problem
 Written procedures                                                                   73
 Procurement                                                                          70
 Personnel/payroll                                                                    51
 Accounting                                                                           37
Source: GAO analysis of EPA’s in-depth reviews.



Table 2: Most Frequently Identified Problems, by Problem Area for Programmatic
Reviews, 2002

 Type of problem                                  Number of reviews with reported problem
 Technical issues                                                                    308
 Progress reports                                                                    167
 Personnel/payroll                                                                    92
 Quality assurance                                                                    71
Source: GAO analysis of EPA’s in-depth reviews.


The differences in types of problems frequently identified, as shown in
tables 1 and 2, reflect differences in the focus of administrative and
programmatic reviews. Table 3 describes the nature of these problems.




Page 10                                               GAO-04-122T EPA Grants Management
Table 3: Description of Most Frequently Identified Problems in EPA’s In-depth Reviews

 Problem                                     Types of problems included in EPA’s in-depth reviews
 Accounting 	                                Any failure of a grantee’s financial management system or shortcomings in the procedures it used to
                                             ensure the proper accounting of federal funds. For example, EPA found cases in which a grantee:
                                             • could not compare budgeted amounts to actual expenditures,
                                             • did not properly reconcile report balances to the general ledger, or
                                             • did not separately track funds for different grants.

 Personnel/payroll 	                         Problems varied depending on the type of review conducted. Administrative reviews included cases in
                                             which a grantee did not track the amount of time its employees spent on specific grant activities.
                                             Programmatic reviews included cases in which grantees did not have sufficient staff resources to
                                             perform the grant activities.
 Procurement 	                               Grantees lacked documentation to support sole-source contracts, and grantees did not report their
                                             efforts to encourage procurement from minority- and woman-owned businesses.
 Progress reports                            A grantee’s progress report was missing, late, or did not include all the necessary information.
 Quality assurance 	                         A grantee needed to revise its quality assurance plan, which is required to ensure the quality of data
                                             collected during the grant work.
 Technical issues                            A grantee was behind in the progress of his or her work.
 Written procedures                          A grantee’s written policies or procedures were either missing or inadequate.
Source: GAO analysis of EPA’s in-depth reviews.


                                                          Despite the importance of standard information, our analysis of EPA’s
                                                          2002 in-depth reviews shows that EPA officials across the agency report in
                                                          various formats that do not always clearly present the results of the
                                                          review. For example, some EPA officials provided a narrative report on
                                                          the results of their reviews, while others completed a protocol that they
                                                          used in conducting their review. In 349 instances, the project officer or
                                                          grant management specialist did not clearly explain whether he or she had
                                                          discovered a problem.


EPA Needs to Develop a                                    EPA has recognized the importance of the information in its in-depth
Plan for Using Information                                reviews by establishing a grantee compliance database to store the
in Its Grantee Compliance                                 reviews, forming a database work group, and collecting a limited amount
                                                          of data from its in-depth reviews. However, as of August 29, 2003, EPA had
Database                                                  not yet developed data elements or a plan for using data from all its
                                                          oversight efforts—in-depth reviews, corrective actions, and other
                                                          compliance efforts—to fully identify systemic problems and then inform
                                                          grants management officials about oversight areas that need to be
                                                          addressed.



                                                          Page 11                                             GAO-04-122T EPA Grants Management
                             As our analysis of EPA’s 2002 in-depth reviews showed, valuable
                             information could be collected from them for assessing such issues as the
                             (1) types of grantees having problems, (2) types of problem areas needing
                             further attention, (3) types of reviews—on-site or off-site—that provide
                             the best insights into certain problems areas, and (4) corrective actions
                             required or recommended to resolve problems.


A Systematic Approach to     With a statistical approach to selecting grantees for review, standard
Collection and Analysis of   reporting format, and a plan for using information from in-depth and other
Compliance Information       reviews, EPA could identify problem areas and develop trends to assess
                             the effectiveness of corrective actions to better target its oversight efforts.
Would Enhance Oversight      In particular, according to our analysis of EPA’s 2002 in-depth reviews,
                             administrative reviews identify more problems when conducted on site,
                             while the number of problems identified by programmatic reviews does
                             not differ by on-site or off-site reviews. However, nearly half of the
                             programmatic reviews, which constituted more than 80 percent of the
                             2002 reviews, were conducted on-site. Since on-site reviews are resource
                             intensive because of travel costs and staff used, a systematic analysis
                             could enable EPA to better target its resources. Similarly, EPA could
                             incorporate other information into its grantee compliance database, such
                             as Inspector General reports, to identify problem areas, and target
                             oversight resources. In addition, EPA could use the database to track the
                             resolution of problems.


                             Successful implementation of EPA’s 5-year grants management plan
EPA Faces Challenges         requires all staff—senior management, project officers, and grant
to Enhancing                 specialists—to be fully committed to, and accountable for, grants
                             management. Recognizing the importance of commitment and
Accountability               accountability, the 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
                             grant 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 grant
                             specialists’ workload in 2004.

                             In implementing this plan, however, EPA faces challenges to enhancing
                             accountability. First, although the plan calls for ensuring that project
                             officers’ performance standards adequately address their grants
                             management responsibilities, agencywide implementation may be difficult.

                             Page 12                                     GAO-04-122T EPA Grants Management
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 or may not include grants
management responsibilities. It could take up to a year to establish and
implement a uniform performance standard, according to these officials.
Instead, the Assistant Administrator for the Office of Administration and
Resources Management is planning to issue guidance this month including
grants management responsibilities in individual performance agreements
for the next performance cycle beginning in January 2004. 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.

Although EPA’s current performance management system can
accommodate the 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 information and dispersion in ratings to recognize and
reward top performers, help everyone attain their maximum potential, and
deal with poor performers. GAO has identified key practices that federal
agencies can use to establish effective performance management systems,
which include making distinctions in performance.9

Furthermore, it is difficult to implement performance standards that will
hold project officers accountable for grants management because (1)
grants management is often a small part of a wide range of project officers’
responsibilities, (2) some project officers manage few grants, and (3)
project officers’ grants management responsibilities often fall into the
category of “other duties as assigned.” To address this issue, EPA officials
are considering, among other options, whether the agency needs to
develop a smaller cadre of well-trained project officers to oversee
grantees, rather than rely on the approximately 1,800 project officers with



9
 See U.S. General Accounting Office, Results-Oriented Cultures: Creating a Clear
Linkage Between Individual Performance and Organizational Success, GAO-03-488
(Washington, D.C.: Mar. 14, 2003).



Page 13                                        GAO-04-122T EPA Grants Management
              different levels of grants management responsibilities and skills. Some
              EPA officials believe that having a cadre may help the agency more
              effectively implement revised grants management performance standards
              because fewer officers with greater expertise would oversee a larger
              percentage of the grants.

              Second, EPA will have difficulty achieving the plan’s goals unless, not only
              project officers, but all managers and staff are held accountable for grants
              management. The plan does not call for including grants management
              standards in all managers’ and supervisors’ agreements. 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,10 but middle-level managers and
              supervisors, who oversee many of the staff that have important grants
              management responsibilities, do not. According to Office of Grants and
              Debarment officials, they are working on developing performance
              standards for all managers and supervisors with grants responsibilities.

              Third, it may be difficult to hold all managers and staff accountable
              because 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
Conclusions   effectively manage its grants programs—which account for more than half
              of its annual budget. EPA’s new policies and 5-year grants management
              plan show promise, but they are missing several critical elements
              necessary for the agency to address past grants management weaknesses.
              Specifically to improve EPA’s oversight of grantees, our report
              recommends that EPA’ (1) incorporate appropriate statistical methods to
              identify grantees for review; (2) require EPA staff to use a standard
              reporting format for in-depth review so that the results can be entered into



              10
               The senior managers include the Director of the Office of Grants and Debarment, the
              Director of the Grants Administration Division, and the Grants Competition Advocate.



              Page 14                                          GAO-04-122T EPA Grants Management
                  the grantee compliance database and analyzed agency wide; and (3)
                  develop a plan, including modifications to the grantee compliance
                  database, to integrate and analyze compliance information from multiple
                  sources. These actions would help EPA identify systemic problems with
                  its grantees and better target its oversight resources.

                  To enhance accountability, our report further recommends establishing
                  performance standards for all managers and staff responsible for grants
                  management and holding them accountable for meeting these standards.
                  Until EPA does so, it cannot be assured that is fulfilling its grants
                  management responsibilities.

                  While EPA’s 5-year grants management plan shows promise, we believe
                  that, given EPA’s historically uneven performance in addressing its grants
                  management challenges, congressional oversight is important to ensure
                  that EPA’s Administrator, managers, and staff implement the plan in a
                  sustained, coordinated fashion to meet the plan’s ambitious targets and
                  time frames. To help facilitate this oversight, our report recommends that
                  EPA annually report to Congress on its progress in improving grants
                  management.


                  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.


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




(360399)
                  Page 15                                   GAO-04-122T EPA Grants Management
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