Grants Management: EPA Actions Taken Against Nonprofit Grant Recipients in 2002

The Environmental Protection Agency (EPA) awards over one-half if its budget, or about $4 billion, annually in grants. At the end of fiscal year 2002, EPA was providing funding to 4,100 grant recipients, with $245.4 million, or nearly 6 percent of its awarded grant dollars, going to nonprofit grant recipients. Congressional hearings in 1996 and 1999 cited concerns with the grants management capabilities of nonprofit grantees. Specifically, the 1996 hearing raised questions about nonprofit grant recipients' use of federal funds for lobbying. The 1999 hearing cited concerns with the ability of nonprofit grantees to manage their grants, because, for example, many nonprofit organizations do not have staff with accounting backgrounds. Often, their grants are too small to be covered under the requirements of the Single Audit Act. In response to such concerns, EPA has included lobbying restrictions in grant agreements, issued guidance and policies on grantee oversight, and has attempted to improve nonprofit grantees' grants management with a 1-day training course and follow-up instructional videotape specifically designed for nonprofit grant recipients. However, as we reported in August 2003, nonprofit grant recipients continue to have problems managing their grants. These problems have led EPA to recommend actions to correct specific problems, such as maintaining records to track staff time, obtaining a required audit, and improving a financial management system. In some cases, these problems led EPA to take more significant actions against nonprofit grant recipients, such as issuing suspension orders, holding payments, and designating grantees as high-risk. As a result of continuing concerns about the problems that nonprofit grant recipients have had in managing their grants, Congress asked us to provide supplementary information on the grants management performance of nonprofit grantees. Specifically, this report discusses (1) grants management problems EPA identified with nonprofit recipients in 2002, (2) corrective actions EPA recommended to address these problems, and (3) EPA's more significant actions taken against specific nonprofit grant recipients.