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Needs to Address Weaknesses in Implementation and Accountability' which 
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Report to the Chairman, Subcommittee on Water Resources and 
Environment, Committee on Transportation and Infrastructure, House of 
Representatives: 

United States Government Accountability Office: 

GAO: 

May 2006: 

Grants Management: 

EPA Has Made Progress in Grant Reforms but Needs to Address Weaknesses 
in Implementation and Accountability: 

Grant Reforms: 

GAO-06-625: 

GAO Highlights: 

Highlights of GAO-06-625, a report to the Chairman, Subcommittee on 
Water Resources and Environment, Committee on Transportation and 
Infrastructure, House of Representatives. 

Why GAO Did This Study: 

The Environmental Protection Agency (EPA) has faced challenges for many 
years in managing its grants, which constitute over one-half of the 
agency’s budget, or about $4 billion annually. EPA awards grants 
through 93 programs to such recipients as state and local governments, 
tribes, universities, and nonprofit organizations. In response to 
concerns about its ability to manage grants effectively, EPA issued its 
5-year Grants Management Plan in 2003, with performance measures and 
targets. 

GAO was asked to assess EPA’s progress in implementing its grant 
reforms in four key areas: (1) awarding grants, (2) monitoring 
grantees, (3) obtaining results from grants, and (4) managing grant 
staff and resources. To conduct this work, GAO, among other things, 
examined the implementation of the reforms at the regional level for 
two Clean Water Act programs in 3 of EPA’s 10 regional offices. 

What GAO Found: 

EPA has made important strides in achieving the grant reforms laid out 
in its 2003 Grants Management Plan, but weaknesses in implementation 
and accountability continue to hamper effective grants management in 
four areas. First, EPA has strengthened its award process by, among 
other things, (1) expanding the use of competition to select the most 
qualified applicants and (2) issuing new policies and guidance to 
improve the awarding of grants. Despite this progress, EPA’s reviews 
found that staff do not always fully document their assessments of 
grantees’ cost proposals; GAO also identified this problem in one 
region. Lack of documentation may hinder EPA’s ability to be 
accountable for the reasonableness of the grantee’s proposed costs. EPA 
is reexamining its cost review policy to address this problem. 

Second, EPA has made progress in reviewing its in-depth monitoring 
results to identify systemic problems, but long-standing issues remain 
in documenting ongoing monitoring and closing out grants. EPA and GAO 
found that staff do not always document ongoing monitoring, which is 
critical for determining if a grantee is on track in meeting its 
agreement. Without documentation, questions arise about the adequacy of 
EPA’s monitoring of grantee performance. This lack of documentation 
occurred, in part, because managers have not fulfilled their commitment 
to improve monitoring documentation. In addition, grant closeouts are 
needed to ensure that grantees have met all financial requirements, 
provided their final reports, and returned any unexpended balances. For 
fiscal year 2005, EPA closed out only 37 percent of grants within 180 
days after the grant project ended, as required by its policy. EPA also 
did not always close out grants properly in the regional files GAO 
reviewed. 

Third, EPA has initiated actions to obtain environmental results from 
its grants, but these efforts are not complete. For example, EPA’s 2005 
environmental results policy establishes criteria grants should meet to 
obtain results. However, EPA has not established a performance measure 
that addresses these criteria. Furthermore, EPA has not yet identified 
better ways to integrate its grant reporting systems. Finally, the 
Office of Management and Budget’s 2006 assessment indicates that EPA 
needs to continue its concerted efforts to achieve results from grants. 

Finally, EPA has taken steps to manage grant staff and resources more 
effectively by analyzing workload, providing training, assessing the 
reliability of its grants management computer database, and holding 
managers and staff accountable for successfully fulfilling their grant 
responsibilities. Management attention is still needed because, among 
other things, EPA has just begun to implement its performance appraisal 
system for holding managers and staff accountable for grants 
management. 

What GAO Recommends: 

GAO’s recommendations are primarily directed toward establishing new 
performance measures and targets for ongoing monitoring, closeouts, and 
environmental results. 

In commenting on a draft of this report, EPA stated that it generally 
agreed with GAO’s recommendations and will incorporate them into its 
Grants Management Plan, policies, and procedures. 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-625]. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact John B. Stephenson at 
(202) 512-3841 or stephensonj@gao.gov. 

[End of Section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

EPA Has Strengthened the Award Process, but Lack of Key Documentation 
Raises Accountability Concerns: 

EPA Has Improved In-depth Monitoring to Identify Agencywide Problems, 
but Weaknesses Remain in Ongoing Monitoring and in Closing Out Grants: 

EPA Has Initiated Actions to Obtain Results from Grants, but Its 
Efforts Are Not Complete: 

EPA Has Taken Steps to Manage Grants Staff and Resources More 
Effectively but Still Faces Major Management Problems: 

Conclusions: 

Recommendations: 

Agency Comments and Our Response: 

Appendix I: Scope and Methodology: 

Appendix II: GAO Contact and Staff Acknowledgments: 

Related GAO Products: 

Tables: 

Table 1: EPA's Performance Targets and Measures for Promoting Grants 
Competition, All New Grants and Nonprofit Grants, Fiscal Years 2002- 
2005: 

Table 2: Use of Ongoing Monitoring Checklist in Region 1 and 9 Grant 
Files for Two Programs: 

Table 3: EPA's Current Closeout Performance Target Compared with 
Percent EPA Reported as Meeting That Target, Reporting Fiscal Years 
2003-2005: 

Table 4: Minimum and Maximum Times Allowed under EPA's Current Closeout 
Performance Measure: 

Table 5: Percent of Grants Closed Out Agencywide and for Program and 
Regional Offices, by Length of Time to Closeout, Fiscal 2005 Reporting 
Year: 

Table 6: Comparison of EPA's Performance against the Current Closeout 
Measure and the 180-Day Standard, Fiscal 2005 Reporting Year: 

Table 7: Length of Time It Took Grantees to Deliver Final Financial and 
Technical Reports for Two Grant Programs in Regions 1, 5, and 9: 

Table 8: Length of Time Elapsed for Grants Management Offices to Close 
Out Grants after Grantee Provides Final Reports for Two Grant Programs, 
Regions 1, 5, and 9: 

Table 9: Extent to Which EPA Met Its Target for the Percent of Grant 
Workplans with Environmental Outcomes, 2003-2005: 

Table 10: Combined OMB PART Ratings of EPA Grant Programs, 2004-2006: 

Table 11: OMB PART Scores for All Components of the Combined Rating, 
Fiscal Year 2006: 

Table 12: Number of Active and Closed Wetland and Nonpoint Source 
Grants from January 1, 2004, through June 30, 2005, in the Universe and 
the Number of Grants GAO Reviewed in Three Regions: 

Figures: 

Figure 1: EPA's Key Offices Involved in Grant Activities: 

Figure 2: States Covered by EPA's 10 Regional Offices: 

Figure 3: Percentage of EPA Grant Dollars Awarded by Recipient Type, 
Fiscal Year 2005: 

Abbreviations: 

EPA: Environmental Protection Agency: 
OMB: Office of Management and Budget: 
PART: Program Assessment Rating Tool: 

[End of section] 

United States Government Accountability Office: 

Washington, DC 20548: 

May 12, 2006: 

The Honorable John J. Duncan, Jr. 
Chairman: 
Subcommittee on Water Resources and Environment: 
Committee on Transportation and Infrastructure: 
House of Representatives:

Dear Mr. Chairman: 

The Environmental Protection Agency (EPA) has faced 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 
through 93 programs to a variety of recipients, including state and 
local governments, tribes, universities, and nonprofit organizations. 
As of September 30, 2005, EPA was administering grants through 
headquarters and regional offices to 4,075 grant recipients. Given the 
size and diversity of EPA's grant programs, its ability to efficiently 
and effectively accomplish its mission depends to a large extent on how 
well it manages its grant resources and builds accountability for 
results into its efforts. 

In response to concerns about its ability to manage grants effectively, 
EPA issued its Grants Management Plan.[Footnote 1] In this plan, EPA 
for the first time presented goals, objectives, milestones, and 
performance measures with targets for tackling the agency's long- 
standing grants management problems. The 5-year plan was comprehensive 
in that it set forth five major goals that the agency sought to 
achieve. These goals addressed major concerns we had identified in our 
2003 report on grants management.[Footnote 2] EPA has also issued a 
series of policies to implement the plan and other grant 
reforms.[Footnote 3] The plan's goals are to (1) strengthen the award 
of grants by using competition to select grantees for certain awards to 
ensure that the best applicants are chosen; (2) monitor grants to 
ensure that grantees are making progress toward their objectives and, 
at the end of the project period, to ensure that recipients have 
provided all financial and technical reports before closing out the 
grants; (3) obtain results from grants by identifying and measuring 
their environmental and public health outcomes; (4) enhance the skills 
of EPA personnel involved in grants management; and (5) leverage 
technology to improve program performance. Each of these goals is 
challenging, especially measuring the outcomes of environmental 
activities, but EPA needs to demonstrate the results achieved through 
its $4 billion annual investment in grant programs. EPA is currently 
revising this plan to reflect accomplishments achieved and to address 
remaining issues. 

You asked us to assess EPA's progress in implementing its grant reforms 
for (1) awarding grants, (2) monitoring grantees, (3) obtaining results 
from grants, and (4) managing grant staff and resources. 

To address these issues, we conducted our work at EPA's headquarters 
and regional offices. EPA conducts its grant activities through its 
Office of Grants and Debarment--the office primarily responsible for 
grant policies--and program offices, located in both headquarters and 
10 regional offices--offices primarily responsible for implementing the 
grant policies. At EPA headquarters, we reviewed EPA documents, 
including the Grants Management Plan, policies and guidance, internal 
reviews of management operations,[Footnote 4] and annual post-award 
monitoring plans.[Footnote 5] We also interviewed Office of Grants and 
Debarment officials. In addition, we interviewed officials and obtained 
information from EPA's Office of Water, one of the program offices 
involved with grants. We reviewed EPA's Office of Inspector General 
reports as well as the Office of Management and Budget's (OMB) Program 
Assessment Rating Tool (PART).[Footnote 6] We also reviewed prior GAO 
reports. 

In conducting our work, you asked us to address the implementation of 
EPA's grant reforms at the regional level for two Clean Water Act 
programs. We selected the Wetland Program Development Grant Program 
(wetland grants) because it is a discretionary grant program--that is, 
EPA decides who receives the award and its amount, and the program is 
subject to competition. We selected the Nonpoint Source Pollution 
Control Grant Program (nonpoint source grants) because it is a type of 
formula-based grant program--grants that are often awarded on the basis 
of formulas prescribed by law or agency regulation.[Footnote 7] We 
reviewed EPA's progress at the regional level by selecting grants in 3 
of EPA's 10 regional offices: Region 1 (Boston), Region 5 (Chicago), 
and Region 9 (San Francisco). We selected these regions, in part, 
because, collectively, they represent a significant share of regional 
grant funding for the two programs we reviewed and geographic 
dispersion. At the regional offices, for these two grant programs, we 
reviewed grant files, and interviewed EPA grant specialists--who are 
responsible for overseeing the grantees' administrative and financial 
activities--and EPA project officers--who are responsible for 
overseeing the grantees' programmatic and technical activities. Our 
regional work provides insights into regional grant activities in the 
two Clean Water Act programs in the three regions we visited, but it is 
not generalizable to all grants in all regions because we (1) selected 
only two of the programs conducted in these offices and (2) 
incorporated nonprobability sampling into our grant selection process. 
In conducting our review, we did not assess the implementation of some 
of EPA's policies because they had been issued too recently. Finally, 
we obtained EPA data used in this report from the agency's grants 
computer databases (Grants Information Control System and the 
Integrated Grants Management System), which have not had a complete 
data reliability review. However, we determined that the data elements 
we used in this report were sufficiently reliable for our purposes in 
this report. (App. I provides a more detailed description of our scope 
and methodology.) We performed our work between February 2005 and April 
2006, in accordance with generally accepted government auditing 
standards. 

Results in Brief: 

EPA has made progress in achieving the grant reforms laid out in its 
Grants Management Plan, but weaknesses in implementation and 
accountability continue to hamper effective grants management in four 
areas. First, EPA has strengthened its award process by, among other 
things, expanding the use of competition to select the most qualified 
applicants. EPA also issued new policies and guidance to improve the 
awarding of grants. For example, EPA now requires that certain 
nonprofit organizations document that they have administrative and 
financial systems to manage grants. While EPA has made notable 
progress, its internal reviews in program and regional offices have 
found that staff do not always fully document their reviews of 
grantees' cost proposals. We also found this problem in one of the 
three regions we visited. This documentation problem may hinder EPA's 
ability to be accountable for the reasonableness of the grantee's 
estimated costs for performing the proposed work. Because of the 
continuing problems with documenting cost reviews, EPA is reexamining 
its cost review policy for grants. 

Second, EPA has improved some aspects of monitoring, but long-standing 
problems in documentation and grant closeouts remain. Specifically, EPA 
has begun to review the results of its in-depth monitoring to identify 
systemic grantee problems, but staff do not always document whether 
grantees have taken corrective actions. Similarly, EPA and we found 
that grant specialists and project officers do not always document 
ongoing monitoring. Ongoing monitoring is critical because, at a 
minimum, EPA conducts it on every grant at least once a year throughout 
the life of the grant and uses the results to determine whether the 
grantee is on track in meeting the terms and conditions of the grant. A 
lack of documentation raises questions about the adequacy of the 
project officers' and grant specialists' ongoing monitoring of grantee 
performance. This lack of documentation occurred, in part, because 
managers have not fulfilled their commitment to ensure adequate 
documentation. Concerning grant closeouts, EPA uses closeouts to ensure 
that (1) grant recipients have met all financial requirements and have 
provided final reports and (2) any unexpended balances are returned to 
the agency. EPA's policy states that closeouts should occur within 180 
days after the grant's project end date. However, agency officials do 
not always comply with this policy. Specifically, for fiscal year 2005, 
EPA (1) closed out only 37 percent of the grants within the 180 days 
and (2) did not always properly close out grants in the regional files 
we reviewed. EPA has formed a work group to review its monitoring and 
closeout polices and plans to revise these policies in 2006. 

Third, EPA has initiated actions to obtain environmental results from 
its grants, but its efforts are not complete. EPA has included a 
performance measure in its Grants Management Plan for identifying 
expected environmental results from grants. In addition, EPA issued an 
environmental results policy, effective in January 2005. This policy, 
for the first time, requires EPA staff to ensure that grant workplans 
specify well-defined environmental results, which enables EPA to hold 
grantees accountable for achieving them. To assess the agency's 
effectiveness in implementing its environmental results policy, EPA 
identified seven criteria that grant agreements should meet. However, 
EPA's current performance measure does not take into account the new 
criteria for identifying and measuring results from grants established 
by the policy. Furthermore, EPA acknowledges that it has not identified 
better ways to integrate its systems for reporting on the results of 
grants. While EPA has taken positive steps, OMB's evaluation of EPA 
grant programs in 2006 indicate that EPA must continue its concerted 
efforts to achieve results from its grants. 

Finally, EPA has taken steps to manage grants staff and resources more 
effectively by analyzing workload, providing training, assessing the 
reliability of data from the agency's grants management computer 
database, and holding managers and staff accountable for successfully 
fulfilling their grant responsibilities. Nevertheless, management 
attention to these issues is still needed because, among other things, 
EPA has not completed its data reliability assessment of the database 
and has just begun to implement its performance appraisal system for 
holding managers, supervisors, and staff accountable for grants 
management. 

EPA is currently revising its Grants Management Plan. In doing so, the 
agency now has an opportunity to address the problems in documentation, 
grants closeout, and environmental results presented in this report. We 
are making recommendations in these areas. 

Background: 

EPA administers and oversees grants primarily through the Office of 
Grants and Debarment in the Office of Administration and Resources 
Management, 10 program offices in headquarters, and program offices and 
grants management offices in EPA's 10 regional offices.[Footnote 8] 
Figure 1 shows the key EPA offices involved in grants activities for 
headquarters and regions, and figure 2 shows the states covered by the 
10 regional offices. 

Figure 1: EPA's Key Offices Involved in Grant Activities: 

[See PDF for image] 

[End of figure] 

Figure 2: States Covered by EPA's 10 Regional Offices: 

[See PDF for image] 

[End of figure] 

The Office of Grants and Debarment develops national grant policy and 
guidance. This office also carries out certain types of administrative 
and financial functions for the grants approved by program offices, 
such as awarding headquarter grants and overseeing the financial 
management of program office and regional grants. On the programmatic 
side, national program managers are responsible for establishing and 
implementing national policies for their grant programs, for setting 
funding priorities, and for identifying specific environmental results 
from grant programs. They are also responsible for technical and 
programmatic oversight of headquarter grants. Regional grants 
management offices provide administrative management for regional 
grants, while regional program offices provide technical and 
programmatic oversight. Both headquarters and regional program offices 
conduct grant competitions. EPA has designated officials--referred to 
as senior resource officials--who are typically deputy assistant 
administrators in program offices and assistant regional 
administrators. These senior resource officials are in charge of 
strengthening agencywide fiscal resource management while also ensuring 
compliance with laws and regulations and are responsible for effective 
grants management within their units. 

As of September 30, 2005, 119 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, 2,064 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 also have nongrant 
responsibilities, such as using the scientific and technical expertise 
for which they were hired. 

In fiscal year 2005, EPA took 6,728 grant actions involving funds 
totaling about $4 billion.[Footnote 9] These awards were made to six 
main categories of recipients, as shown in figure 3. 

Figure 3: Percentage of EPA Grant Dollars Awarded by Recipient Type, 
Fiscal Year 2005: 

[See PDF for image] 

Note: Percentages may not add up to 100 due to rounding.

[End of figure] 

EPA offers three types of grants--discretionary, nondiscretionary, and 
continuing environmental grants: 

* 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. EPA has awarded these grants primarily to state and local 
governments, nonprofit organizations, universities, and Native American 
tribes. In fiscal year 2005, EPA awarded about $644 million in 
discretionary grants. 

* Nondiscretionary grants are awarded primarily to state and local 
governments and support water infrastructure projects, such as the 
drinking water and clean water state revolving fund programs. For these 
grants, Congress directs awards to one or more classes of prospective 
recipients who meet specific eligibility criteria, or the grants are 
often awarded on the basis of formulas prescribed by law or agency 
regulation. In fiscal year 2005, EPA awarded about $2.4 billion in 
nondiscretionary grants. 

* Continuing environmental program grants contain both nondiscretionary 
(formula) and discretionary features. These grants are nondiscretionary 
in the sense that (1) they are awarded noncompetitively to the same 
government units to support ongoing state, tribal, and local programs 
that do not change substantially over time, and (2) allotments of funds 
are initially made on the basis of factors contained in statute, 
regulation, or agency guidance. These grants are also discretionary in 
the sense that allotments are not entitlements, and EPA exercises 
judgment in determining what the final award amount should be. In 
fiscal year 2005, EPA awarded about $1 billion in grants for continuing 
environmental programs. 

In this report, we focused on two EPA programs under the Clean Water 
Act: 

* Wetland Program Development Grants (Wetland grants) Wetlands are 
areas where water covers the soil, or is present either at or near the 
surface of the soil throughout the year or for various portions of the 
year, including during the growing season. Wetlands, such as bogs, 
swamps, and marshes, support a number of valuable functions-- 
controlling floods, improving water quality, and providing wildlife 
habitat, among other things. The wetland grants provide applicants with 
an opportunity to carry out projects to develop and refine 
comprehensive wetland programs. The authority for the program is under 
section 104(b) (3) of the Clean Water Act.[Footnote 10] Grant funding 
must be used to improve the wetlands program by conducting or promoting 
the acceleration of research and studies relating to the causes, 
effects, and other aspects of water pollution. Wetland grants provide 
states, tribes, local governments, interstate agencies, intertribal 
consortia, nonprofits, and nongovernmental organizations an opportunity 
to carry out wetland projects and programs. Wetland grants are 
discretionary grants. 

* Nonpoint Source Management Program (Nonpoint source grants). Nonpoint 
source pollution is pollution that does not have a well-defined source 
but instead originates from a number of sources, such as acid mine 
drainage, agricultural runoff, and roads and highways. Under section 
319(h) of the Clean Water Act, EPA makes grants to states, territories, 
and Indian tribes to support a wide variety of activities, including 
technical and financial assistance, education, training, technology 
transfer, demonstration projects, and monitoring.[Footnote 11] Nonpoint 
source grants are continuing environmental program grants. 

Grants from these two programs can be incorporated into the National 
Environmental Performance Partnership System, which was established in 
response to state needs for greater flexibility in using and managing 
their continuing grant funds.[Footnote 12] Under this system, states 
may enter Performance Partnership Agreements with EPA and into 
Performance Partnership Grants. The agreements set out jointly 
developed priorities and protection strategies, including innovative 
solutions for addressing water, air, and waste problems. The 
partnership grants allow states to combine continuing environmental 
program grant funds to implement those solutions. States can also enter 
into Performance Partnership Grants without a Performance Partnership 
Agreement. Under traditional continuing environmental program grants, 
states received funds to implement particular waste, air, water or 
other program--such funding can only be spent on activities that fall 
within the statutory and regulatory parameters of that program. Under 
Performance Partnership Grants, states can combine up to 21 separate 
grant programs into one award, and move funds from one media, such as 
air, to another. 

Both the wetland and nonpoint source grants are under the auspices of 
EPA's Office of Water in headquarters, but grants under these programs 
are carried out by water program staff in regional offices. Moreover, 
in its national guidance, the Office of Water states that it is 
committed to accomplishing the goals that the Office of Grants and 
Debarment has identified in its Grants Management Plan. To do this, for 
example, the Office of Water provided regions with information on 
revised competition and environmental results policies. 

EPA Has Strengthened the Award Process, but Lack of Key Documentation 
Raises Accountability Concerns: 

EPA has strengthened its award process by, among other things, (1) 
expanding the use of competition to select the most qualified 
applicants and (2) issuing new policies and guidance to improve the 
awarding of grants. However, EPA's internal reviews of program and 
regional offices have found weaknesses in documenting the review of 
grantees' cost proposals. We also found this weakness in one of the 
three regions we visited. This documentation weakness may hinder EPA's 
ability to be accountable for the reasonableness of its expenditure of 
federal funds. Because of the continuing problems with documenting cost 
reviews, EPA is reexamining its cost review policy for grants. 

EPA Has Expanded the Use of Competition to Select the Most Qualified 
Applicants: 

To promote widespread competition for grants, in September 2002, EPA 
issued a policy that for the first time required competition for many 
discretionary grants.[Footnote 13] Before 2002, even though EPA had a 
competition policy, it did not compete grants extensively or provide 
widespread notification of upcoming grant opportunities. 

EPA's 2002 policy was designed to promote competition in awarding 
grants to the "maximum extent practicable" and to ensure that the 
competitive process was "fair and open." This policy represented a 
major cultural shift for EPA managers and staff, requiring EPA staff to 
take a more planned, rigorous approach to awarding grants. 
Specifically, the policy: 

* was binding on managers and staff throughout the agency; 

* required EPA staff to determine evaluation criteria for grant 
solicitations and publish a grant announcement at least 60 days before 
the application deadline; and: 

* created the position of a senior-level competition advocate for 
grants. The advocate oversees the policy's implementation and 
compliance and evaluates its effectiveness. 

According to EPA's Inspector General, the 2002 policy was a "positive 
step" toward promoting competition, and competitions under the policy 
were generally fair and open.[Footnote 14] 

Specifically, for the 38 grants that the Inspector General reviewed, 
EPA had (1) published an announcement soliciting proposals, (2) written 
procedures to ensure an objective and unbiased process for reviewing 
and evaluating applications, and (3) selected recipients according to 
reviewers' recommendations. 

In 2004, EPA's grants competition advocate reviewed the policy, as 
required, and reported, among other things, that steps should be taken 
to improve justifications for not competing certain grants by (1) 
increasing review and approval requirements for exceptions to 
competition and (2) clarifying the language in the policy to ensure 
appropriate use of exceptions. The advocate also found that the 
threshold for requiring competition for grants of $75,000 or more in 
the 2002 policy was too high. 

In response, EPA issued a revised competition policy, effective January 
2005.[Footnote 15] It enhanced competition by, among other things, 

* increasing review and approval requirements for justifying exceptions 
and clarifying the language to ensure appropriate use of these 
justifications; 

* reducing the threshold for competition from $75,000 to $15,000; and: 

* Strengthening requirements for documenting the competition process 
and results. 

In addition, EPA added (1) conflict-of-interest provisions to increase 
awareness of situations that could arise for applicants, reviewers, and 
others involved in competition matters; and (2) dispute procedures. 

In commenting on both the 2002 and 2005 policies, the Inspector General 
stated that the policies did not fully promote competition and 
recommended that EPA could further expand competition in the 2005 
policy by eliminating certain remaining exemptions and exceptions for 
which the Inspector General believed competition is practicable. EPA 
responded, however, that further expansion was not practicable for 
reasons of congressional intent, regulatory limitations, and program 
effectiveness. 

EPA's Grants Management Plan lays out goals, objectives, milestones, 
and performance measures with targets for promoting competition. For 
one of these objectives, EPA planned to improve the accuracy and 
specificity of information available to the public on the agency's 
grant opportunities in the federal government's Catalog of Federal 
Domestic Assistance--a listing of available grants and other federal 
funding opportunities (available at www.CFDA.gov).[Footnote 16] 
However, as we reported in 2005, EPA was not consistently providing 
this information.[Footnote 17] Without such information, potential 
applicants might not apply, and EPA would not have the broadest 
applicant pool from which to select grantees. EPA officials were 
unaware of continuing problems with funding priorities and funding 
levels in the Catalog of Federal Domestic Assistance until we brought 
them to their attention during our review. In response to our 
recommendations, in April 2005, EPA implemented revised guidance for 
providing complete and accurate information in the Catalog of Federal 
Domestic Assistance. For example, EPA now strongly encourages its 
offices to provide information on the funding priorities on an ongoing 
basis, instead of annually, so that the public has up-to-date 
information in the Catalog of Federal Domestic Assistance. 

For the competition goal, the agency developed a performance measure 
for increasing the percentage of new grants subject to the competition 
policy that are actually competed and set increasing targets for 
achieving this measure. According to EPA, about $249 million of the 
approximately $3.1 billion it awarded in new grants in fiscal year 2005 
were eligible for competition. EPA exempts certain grant categories 
from competition, including all nondiscretionary grants, certain 
discretionary grants, and most continuing environmental programs 
grants. EPA also established a separate measure for nonprofit grantees. 
The first performance measure is for all new eligible grants, including 
new grants to nonprofit recipients, and the second is only for new 
eligible grants to nonprofit recipients, as table 1 shows. EPA 
established a separate measure for competing grants to nonprofit 
organizations because it believes that selecting the most qualified 
nonprofit applicants through a competitive process could address 
concerns about the effectiveness of nonprofit grantees in managing 
grants. 

Table 1: Table 1: EPA's Performance Targets and Measures for Promoting 
Grants Competition, All New Grants and Nonprofit Grants, Fiscal Years 
2002-2005: 

Fiscal year: 2002 baseline; 
All new grants: Performance target: Percent of new grants competed: Not 
applicable; 
All new grants: Performance measure: Reported percent of new grants 
competed: 27;  
New grants to nonprofit grantees: Performance target: Percent of new 
grants competed: Not applicable; 
New grants to nonprofit grantees: Performance measure: Reported percent 
of new grants competed: 24. 

Fiscal year: 2003; 
All new grants: Performance target: Percent of new grants competed: 30; 
All new grants: Performance measure: Reported percent of new grants 
competed: 86; 
New grants to nonprofit grantees: Performance target: Percent of new 
grants competed: 30; 
New grants to nonprofit grantees: Performance measure: Reported percent 
of new grants competed: 76. 

Fiscal year: 2004; 
All new grants: Performance target: Percent of new grants competed: 60; 
All new grants: Performance measure: Reported percent of new grants 
competed: 91; 
New grants to nonprofit grantees: Performance target: Percent of new 
grants competed: 55; 
New grants to nonprofit grantees: Performance measure: Reported percent 
of new grants competed: 85. 

Fiscal year: 2005; 
All new grants: Performance target: Percent of new grants competed: 85; 
All new grants: Performance measure: Reported percent of new grants 
competed: 93;  
New grants to nonprofit grantees: Performance target: Percent of new 
grants competed: 75; 
New grants to nonprofit grantees: Performance measure: Reported percent 
of new grants competed: 88. 

Source: EPA documents. 

[End of table] 

As the table shows, EPA reports it now competes a higher percentage of 
eligible grants, up from 27 percent in fiscal year 2002 to 93 percent 
in fiscal year 2005, exceeding its targets for fiscal years 2003 
through 2005.[Footnote 18] The 7 percent of new grants that EPA 
reported it did not compete--which totaled about $10 million of the 
$249 million eligible for competition in fiscal year 2005--resulted 
from exceptions to the policy. EPA's competition policy provides for 
exceptions that meet criteria specified in the policy, if supported by 
a written justification and approved by an appropriate official. Even 
after taking the exceptions into account, EPA exceeded the 85 percent 
target it set for new grants in 2005. It has also exceeded its target 
for new grants to nonprofit recipients in 2005. 

EPA Has Issued New Policies and Guidance to Improve Grant Awards: 

To improve the award of grants, EPA issued additional policies and 
guidance. Specifically: 

* In January 2005, EPA issued a policy to improve the description of 
the grant in its grants database so that the description would be 
understandable to the public.[Footnote 19] EPA now presents this 
information on the Office of Grants and Debarment's Web site-- 
www.epa.gov/ogd--so that the public has improved access to grant 
information. 

* In March 2005, EPA issued a policy establishing additional internal 
controls for awarding grants to nonprofit organizations.[Footnote 20] 
The policy addresses both the programmatic capability of a nonprofit 
applicant to carry out a project and its administrative capability to 
properly manage EPA grant funds--problems EPA and the Inspector General 
have identified. Under the policy, EPA assesses programmatic capability 
for both competitive and noncompetitive grants. The policy also 
requires the agency to conduct different types of administrative 
capability reviews based on the amount of the grant to the nonprofit 
organization. For grants of $200,000 or more, applicants must complete 
a questionnaire and provide documents to show that they have 
administrative and financial systems to manage grants. For grants below 
the $200,000 threshold, EPA staff must query the agency's grants 
management database for any findings of problems in the applicant's 
administrative capability. If problems are identified in any of these 
reviews, the applicant must take corrective actions before receiving 
the grant. In 2005, EPA approved 75 of the 87 nonprofit organizations 
it reviewed; the remaining 12 nonprofit organizations are taking steps 
to address problems identified. 

* Also in March 2005, EPA issued a memorandum clarifying the criteria 
that must be documented to justify the use of a grant or a contract as 
the award mechanism.[Footnote 21] EPA issued this guidance in response 
to a recommendation in our 2004 report to better document the 
justification for using grants rather than contracts.[Footnote 22] 

* In April 2005, EPA issued a policy memorandum and interim guidance 
establishing a certification process that applies to certain 
discretionary grant programs (currently 58).[Footnote 23] The new 
policy and guidance instruct senior EPA officials--assistant 
administrators and regional administrators--to certify, among other 
things, that (1) certain grant awards and amendments identify 
environmental outcomes that further the goals and objectives in the 
agency's strategic plan and (2) there is no questionable pattern of 
repeat awards to the same grantee. For competitive announcements, these 
officials must certify that the (1) expected outcomes from the awards 
under the proposed competitive announcement are appropriate and in 
support of program goals and (2) proposed competitive announcement is 
written in a manner to promote competition to the maximum extent 
practicable.[Footnote 24] The Office of Grants and Debarment has 
assigned a grant specialist to conduct random spot checks of these 
certifications and provide assistance to program offices in 
implementing this new policy. 

Lack of Cost Review Documentation Could Compromise Accountability: 

While EPA has improved its award process, both EPA and we found 
weaknesses in the agency's documentation of its cost reviews before 
awarding grants. EPA policy requires both the grants management and 
program offices to conduct a cost review for every grant before 
awarding it to ensure that the grantee's proposed costs are necessary, 
reasonable, allowable, allocable, and adequately supported. These 
reviews are central to ensuring that EPA carries out its fiduciary 
responsibilities. However, in 2004 and 2005, in six of the seven 
program and regional offices it reviewed, the Office of Grants and 
Debarment either found no documentation of cost reviews or found that 
documentation was not sufficient.[Footnote 25] As a result of these 
continuing documentation problems, EPA is reexamining its cost review 
policy for grants. 

We also found problems with cost review documentation in one of the 
three regions we visited--Region 5. This region has a checklist to 
ensure that staff members who are responsible for each aspect of the 
cost review had completed and documented their review before awarding a 
grant. The checklist requires approval from both the grant specialist 
and the project officer on certain items and requires supervisors to 
review the checklist to ensure that any concerns raised by the project 
officer or grant specialist were addressed.[Footnote 26] While a 
project officer and grant specialist could initially disagree on some 
aspects of the checklist, the regional office expects them to resolve 
their differences and document the final resolution on the checklist. 
However, for most of the 12 approved award files we reviewed, we found 
instances in which the resolution of the issues was not documented. 
Specifically, 

* the grant specialist and the project officer had both neglected to 
answer the same two questions on the cost review checklist, or: 

* the grant specialist and the project officer did not agree on the 
answers to multiple questions on the checklist and did not document any 
resolution of their disagreements. 

According to regional staff, these problems occurred because of 
workload and errors. Nevertheless, the lack of documentation for 
awarded grants raises concerns about the appropriateness of the award. 
More effective supervisory review might have resulted in a documented 
resolution of these differences. 

EPA Has Improved In-depth Monitoring to Identify Agencywide Problems, 
but Weaknesses Remain in Ongoing Monitoring and in Closing Out Grants: 

EPA has improved some aspects of monitoring, but long-standing problems 
in documentation and grant closeouts continue. EPA has made progress in 
using in-depth monitoring to identify grantee problems agencywide, but 
it does not always document whether corrective actions have been 
taken.[Footnote 27] Furthermore, for ongoing monitoring, the agency 
found, as we did in the regional offices, that in some cases agency 
staff do not consistently document their monitoring of grantees, which 
hinders accountability for effective grants management.[Footnote 28] 
Finally, we found that grant closeouts were often delayed and sometimes 
improperly carried out, which diminishes EPA's ability to ensure that 
grantees met the terms and conditions of their award and that grant 
funds were spent appropriately. EPA has formed a work group to review 
its monitoring and closeout polices and plans to revise these policies 
in 2006. 

In-depth Monitoring Results Can Be Analyzed Nationwide to Identify 
Problems, but Staff Do Not Always Document Whether Corrective Actions 
Have Been Taken: 

EPA has made progress in conducting in-depth monitoring since it issued 
a new monitoring policy in December 2002, which it revised in 2004 and 
2005.[Footnote 29] Under its monitoring policy, grants management 
offices and program offices in headquarters and the regions conduct in- 
depth monitoring either (1) at the grantee's location (on-site) or (2) 
at an EPA office or at another location (off-site)--referred to as desk 
reviews. EPA's policy for these reviews requires the following, among 
other things: 

* Grants management offices must conduct in-depth administrative 
reviews, on a minimum of 10 percent of grantees annually, to evaluate 
the grantee's administrative and financial capacity. For on-site 
administrative reviews, EPA conducts "transaction testing"--that is, 
reviewing a grantee's accounting ledgers and underlying documentation 
for unallowable costs, such as lobbying and entertainment expenditures. 

* Program offices must conduct programmatic reviews on a minimum of 10 
percent of grantees annually to assess the grantees' activities in key 
areas, such as the progress the grantees are making in conducting the 
work and in meeting the grant's terms and conditions. 

In 2003, we reported that although the in-depth review is a useful tool 
for monitoring a grantee's progress, the agency lacked a way to 
systematically identify grantee problems agencywide because the 
information from its in-depth monitoring was gathered in a form that 
could not be readily analyzed.[Footnote 30] We also found that the 
policy did not incorporate a statistical approach to selecting grantees 
for review. Without a statistical approach, EPA could not evaluate 
whether 10 percent was appropriate, nor could it project the results of 
the reviews to all EPA grantees. 

We recommended that EPA take action to address these issues. EPA has 
since incorporated the data from its in-depth monitoring into a 
database, analyzed the information to identify key problems, and taken 
corrective actions to address systemic problems. By taking these 
actions, EPA has found, among other things, that grantees have not had 
documented policies and procedures for managing grants. Without these 
policies and procedures, grantees may not be able to operate their 
financial and administrative systems appropriately. As a result of this 
finding, EPA is conducting the preaward reviews discussed earlier to 
ensure that nonprofit grantees have required financial and 
administrative systems in place. EPA has also increased training to 
grantees. 

Since issuing its most recent revision to the monitoring policy in 
2005, EPA has initiated several practices that should further 
strengthen in-depth monitoring. In 2006, it began incorporating a 
statistical approach for selecting grantees for administrative in-depth 
reviews. In 2007, EPA plans to use a statistical approach to select 
grants for programmatic in-depth reviews. When the statistical approach 
is fully implemented, it should significantly reduce the percent of 
grantees reviewed, according to an agency official. Furthermore, the 
statistical approach will enable the agency to project results among 
various types of grantees. EPA also began incorporating transaction 
testing into administrative desk reviews in 2006 because it found that 
administrative desk reviews were not otherwise yielding adequate 
financial information about grantees. 

While EPA has improved its in-depth monitoring, the Office of Grants 
and Debarment has found that staff do not always take corrective 
actions, or document actions taken, to address findings identified 
during this monitoring. The office found that corrective actions were 
documented for only 55 percent of the 269 problems identified through 
administrative and programmatic reviews. We reported similar results in 
August 2003. According to an Office of Grants and Debarment official, 
while some EPA staff took corrective actions, they did not document 
those actions in EPA's grantee computer database. Until this problem is 
addressed, the Office of Grants and Debarment will not be able to fully 
assess the extent to which corrective actions have or have not been 
taken to address identified grantee problems. Without these 
assessments, EPA cannot be assured that grantees are in full compliance 
with the terms and conditions of their grants. 

Inadequate Documentation of Ongoing Monitoring Hinders Accountability: 

Ongoing monitoring is critical because, in contrast to in-depth 
monitoring, it is conducted on every grant at least once a year 
throughout the life of the grant, and the results are used to determine 
whether the grantee is on track to meeting the terms and conditions of 
its grant agreement. EPA's grant specialist and project officer 
manuals--used as training tools for EPA staff involved in grants-- 
emphasize that staff should properly document grant monitoring 
activities to maintain an official agency record. Agency officials 
state that proper documentation of monitoring is necessary to ensure 
that third parties--such as other EPA staff who assume responsibility 
for the grant or a supervisor--can fully understand and review the 
actions that have occurred during the project period. Moreover, a lack 
of documentation raises questions about the adequacy of project 
officers' and grant specialists' ongoing monitoring of grantee 
performance. Despite the importance of documenting ongoing monitoring, 
the absence of documentation in grant files has been a long-standing 
problem that we reported on in 2003. 

To conduct ongoing monitoring, EPA policy requires the following: 

* Grant specialists should ensure that administrative terms and 
conditions of the grants are met and review the financial status of the 
project. The grant specialist is to speak with the project officer and 
the grantee at least annually during the life of the grant. 

* Project officers should ensure that programmatic award terms and 
conditions are being met, including ensuring that they have received 
progress reports from the grantee. Project officers are also to speak 
with the grant specialists and the grantee at least annually during the 
life of the grant. 

According to the monitoring policy, the grant specialists and project 
officers must document the results of their ongoing monitoring in their 
grant files. 

Despite this policy, the lack of documented ongoing monitoring remains 
a problem. EPA's recent internal reviews in program and regional 
offices demonstrate--as did our review in three regional offices--that 
EPA grant specialists and project officers still do not consistently 
document ongoing monitoring. In 2004 and 2005, the Office of Grants and 
Debarment found limited or incomplete documentation of ongoing 
monitoring in internal reviews it conducted in seven program and 
regional offices.[Footnote 31] In addition, self-assessments completed 
by 11 program and regional offices during this period identified the 
same lack of documentation. Our analysis of these reviews indicates 
that several offices experienced recurring problems in 2004 and 2005. 
For example, an August 2004 Office of Grants and Debarment internal 
review cited one regional office as having "very limited" documentation 
of ongoing monitoring; and in the following year, the regional office's 
self-assessment found the same documentation problem with project 
officer files. 

Because of these documentation problems, two of the three regional 
offices we visited have committed to using checklists to document their 
ongoing monitoring. Regions 1 and 9 had implemented such checklists at 
the time of our review. As table 2 shows, however, of the 40 project 
officer and grant specialist files we reviewed in regions 1 and 9, more 
than half of the checklists were either missing, blank, or incomplete. 

Table 2: Table 2: Use of Ongoing Monitoring Checklist in Region 1 and 9 
Grant Files for Two Programs: 

Checklist status: Missing or blank checklist[A]; 
Project officer file: 14; 
Grant specialist file: 3. 

Checklist status: Incomplete checklist; 
Project officer file: 0; 
Grant specialist file: 5. 

Checklist status: Complete checklist or checklist not yet 
applicable[B]; 
Project officer file: 6; 
Grant specialist file: 12. 

Checklist status: Total; 
Project officer file: 20; 
Grant specialist file: 20. 

Source: GAO analysis of EPA documents on selected wetland and nonpoint 
source grants awarded between January 1, 2004, through June 30, 2005. 
See app. I. 

[A] These files should have contained checklists documenting ongoing 
monitoring. 

[B] Checklists may legitimately be left blank until 1 year has elapsed 
assuming no grant activity occurred that would warrant EPA staff to 
conduct monitoring.

[End of table]  

The water program office in Region 5 also developed a checklist for 
documenting ongoing monitoring but had not yet implemented it at the 
time of our review. Consequently, in Region 5, we examined other 
documentation of ongoing monitoring in the grant files and found 
similar omissions. None of the six files requiring annual contact with 
the grantee--three grant specialist files and three project officer 
files--had documentation showing that this contact had occurred. 

In the three regions, we also found that project officers' files did 
not always contain grantees' progress reports, which can be required 
quarterly, semiannually, or annually, as defined by an individual 
grant's terms and conditions. Thirteen of the 32 project officer grant 
files we reviewed in these regions were missing at least one or more 
progress reports required by the grant's terms and conditions. 
According to EPA's project officer manual, progress reports are the 
project officer's primary mechanism for determining if the grantee is 
fulfilling its grant agreement obligations. In general, progress 
reports should contain information that compares grantee progress with 
the stated grant objectives, identify problems with meeting these 
objectives, and state the reasons for those problems. While the 
submission of progress reports is clearly the grantee's responsibility, 
it is also the project officer's responsibility to work with the 
grantees to ensure that they provide their progress reports in 
accordance with the terms of the grant. When EPA staff do not obtain 
progress reports, they cannot monitor effectively, which may hinder 
accountability. 

In the three regions we visited, the lack of documentation for ongoing 
monitoring occurs because of weaknesses at the staff, supervisory, and 
management level. First, grant specialists and project officers do not 
consistently document key monitoring efforts. For example, several 
staff stated that they had not printed out their e-mail correspondence 
with grantees or recorded those contacts in the official grant files. 
Other staff cited their workload as a reason for not documenting 
monitoring. Lack of documentation also occurs because grant specialists 
and project officers rely on other staff with technical expertise, 
known as "technical contacts," to assist with ongoing monitoring, and 
these technical contacts may not provide the documented results of 
their monitoring for inclusion in the grant file. We found this 
situation had occurred in two of the three regions we visited. For 
example, one administrative project officer--a project officer who 
maintains files but is not necessarily knowledgeable about the 
technical aspects of the project--had asked for key monitoring 
documentation from a technical contact, who did not provide it. The 
technical contact had the monitoring documents in his work area and 
said he would routinely provide them to the project officer in the 
future. 

Second, the lack of ongoing monitoring documentation may occur, in 
part, because supervisors do not always effectively review grant files 
for compliance with grant policies. According to staff we interviewed 
in the three regions, to their knowledge, their supervisors had not 
reviewed their files to assess compliance with the agency's monitoring 
policies, which could contribute to the lack of documentation. A 
regional project officer told us that he would have completed the 
ongoing monitoring checklist if his regional program supervisor had 
made it a priority. In another region, officials told us that some 
supervisors do review some files, but they do not have enough time to 
review every file. 

In contrast, supervisory review can contribute to complete 
documentation of ongoing monitoring. For example, Region 5 was cited as 
having "excellent" documentation for ongoing monitoring in an Office of 
Grants and Debarment 2003 internal review. According to the EPA 
supervisor in Region 5 at the time of the 2003 review, she had notified 
staff that she would review their grant files to assess compliance with 
EPA policy for ongoing monitoring, among other things. She believes 
that her review contributed to the region's excellent rating. 

Third, senior EPA managers in the regions do not always ensure that 
their commitments to improve monitoring documentation are being met. 
For example, in the post-award monitoring plans submitted to the Office 
of Grants and Debarment for two of the EPA regions we visited, the 
plans stated that the regions would place a checklist in the grant 
specialist and project officer files documenting ongoing monitoring 
activities. Although the two regions developed the checklists, more 
than half of the checklists we reviewed were missing, blank, or 
incomplete. This occurred, in part, because senior managers did not 
ensure that commitments were met in their post-award monitoring plans. 

Despite the importance of ongoing monitoring, EPA has not created a 
performance measure for documenting ongoing monitoring that would 
underscore its importance to managers and staff. Furthermore, EPA's 
Integrated Grants Management System has a field for recording 
information about ongoing monitoring that could enable the agency to 
systematically identify whether this monitoring is documented 
agencywide, but recording this information is optional. Establishing a 
performance measure and/or requiring the entry of information could 
enhance accountability for implementing the monitoring policy. 

EPA Has Reduced Its Closeout Backlog, but Grant Closures Are Often 
Delayed and Sometimes Improperly Carried Out: 

As part of its grant reforms, EPA incorporated grant closeout into its 
monitoring policy and its Grants Management Plan.[Footnote 32] During 
closeout, EPA ensures that the grant recipient has met all financial 
requirements and provided final technical reports, and ensures that any 
unexpended balances are "deobligated" and returned to the agency. 
Delays in closing out the grant can unnecessarily tie up obligated but 
unexpended funds that could be used for other purposes. Furthermore, 
according to EPA's closeout policy, closeout becomes more difficult 
with the passage of time because persons responsible for managing 
various aspects of the project may resign, retire, or transfer; and 
memories of events are less clear. 

The monitoring policy states that the agency is committed to closing 
out grants within 180 days after the end of the grant's project period. 
Under its monitoring policy, EPA provides 180 days for closeout because 
(1) grantees--by regulation and policy--have up to 90 days after the 
grant project period to provide all financial and technical reports; 
[Footnote 33] and (2) by policy, agency staff--grant specialists and 
project officers--have 90 days to review grantee information and 
certify that financial and technical requirements have been met. 
Following certification, the grant specialist closes out the grant with 
a letter to the grantee stating that the agency closed out the grant. 
EPA's Grants Management Plan identified measures with targets that were 
developed to assess EPA's closeout performance. 

In reviewing EPA's management of grant closeouts, we found that EPA (1) 
has effectively reduced its historic backlog of grants due for 
closeout; (2) does not always close out grants in a timely way--within 
180 days after the project period ends, as required by agency policy; 
and (3) does not always close out grants properly based on the regional 
files we reviewed. 

EPA Has Effectively Reduced Its Historic Closeout Backlog: 

In the past, EPA had a substantial backlog of grants that it had not 
closed out. EPA reported that by 1995, the agency had amassed a backlog 
of over 18,000 completed grants that had not been closed out from the 
past 2 decades. In fact, EPA had identified closeout, among other 
things, as a material weakness--an accounting and internal control 
weakness that the EPA Administrator must report to the President and 
Congress.[Footnote 34] As we reported in 2003, however, EPA improved 
its closeout of backlogged grants, eliminating backlog as a material 
weakness. Specifically, for fiscal year 2005, using its historic 
closeout performance measure, EPA reported that it had closed 97.8 
percent of the 23,162 grants with project end dates between the 
beginning of fiscal year 1999 and the end of fiscal year 2003. EPA came 
close to its 99-percent target of closing out this backlog. 

EPA Does Not Always Close Out Grants in a Timely Manner: 

EPA developed a second closeout performance measure--which we call the 
current closeout performance measure--to calculate the percent of 
grants with project end dates in the prior fiscal year that were closed 
out by the end of the current fiscal year (September 30). For example, 
as table 3 shows, EPA closed out 79 percent of the grants with project 
end dates in fiscal year 2004 by the end of reporting fiscal year 2005 
(September 30, 2005) but did not meet its performance target of 90 
percent. 

Table 3: Table 3: EPA's Current Closeout Performance Target Compared 
with Percent EPA Reported as Meeting That Target, Reporting Fiscal 
Years 2003-2005: 

Reporting fiscal year: 2003 (baseline). 
Project end dates: 10/01/2001 through 9/ 30/2002; 
Current closeout performance target (percent): 90%; 
Percent of grants meeting the current closeout performance target: 83%; 

Reporting fiscal year: 2004; 
Project end dates: 10/01/2002 through 9/30/2003; 
Current closeout performance target (percent): 90%; 
Percent of grants meeting the current closeout performance target: 85%; 

Reporting fiscal year: 2005; 
Project end dates: 10/01/2003 through 9/30/2004; 
Current closeout performance target (percent): 90%; 
Percent of grants meeting the current closeout performance target: 79%; 

Reporting fiscal year: 2006; 
Project end dates: 10/01/2004 through 9/30/2005; 
Current closeout performance target (percent): 90%; 
Percent of grants meeting the current closeout performance target: Data 
will be available in October 2006. 


Source: EPA documents. 

Note: The reporting fiscal year reflects grants that had project period 
end dates from the prior year. 

[End of table] 

EPA's current closeout performance measure does not calculate whether 
EPA closed the grant within 180 days. Rather, this measure only reports 
whether EPA closed the grant by the end of the following fiscal year 
(the fiscal year in which it reports on closeouts--the reporting year). 
The measure, in fact, can allow for a much more generous closeout time, 
from 183 days beyond the 180 days to as much as 547 days (18 months) 
beyond the 180 days--because EPA does not report the performance 
measure until September 30, the end of the current fiscal year, as 
shown by hypothetical examples in table 4. 

Table 4: Table 4: Minimum and Maximum Times Allowed under EPA's Current 
Closeout Performance Measure: 

Time allowed under policy beyond 180 days for grant closeouts: Minimum 
time; 
Project period end date: Sept. 30, 2004; 
Closeout due date (180 days allowed after project ends): Mar. 31, 2005; 
Reporting date for performance measure: Sept. 30, 2005; 
Number of days elapsed between the closeout due date and the reporting 
date: 183 (6 months). 

Time allowed under policy beyond 180 days for grant closeouts: Maximum 
time; 
Project period end date: Oct. 1, 2003; 
Closeout due date (180 days allowed after project ends): Apr. 1, 2004; 
Reporting date for performance measure: Sept. 30, 2005; 
Number of days elapsed between the closeout due date and the reporting 
date: 547 (18 months). 

Source: GAO. 

Note: EPA routinely waits about 1 month after the end of the fiscal 
year--in this case, until October 2005--to allow sufficient time for 
end-of-fiscal year data to be entered into its system. 

[End of table] 

EPA's current performance measure for closing out grants is a valuable 
tool for determining if grants were ultimately closed out. However, we 
believe that this performance measure--taken alone--is not a sufficient 
way to measure closeout because it does not reflect the 180-day 
standard specified in EPA policy. 

To determine the percentage of grants that were closed within 180 days, 
we examined EPA's analysis of closeout time frames for regional 
offices, headquarter offices, and agencywide. As table 5 shows, EPA is 
having significant difficulty in meeting the 180-day standard. 

Table 5: Table 5: Percent of Grants Closed Out Agencywide and for 
Program and Regional Offices, by Length of Time to Closeout, Fiscal 
2005 Reporting Year: 

Percent of grants closed out: Length of time to closeout for projects 
ending in fiscal year 2004: On time (0-180 days); 
Percent of grants closed out: Agencywide: 37; 
Percent of grants closed out: Program offices: 35; 
Percent of grants closed out: Regional offices: 1: 30; 
Percent of grants closed out: Regional offices: 2: 26; 
Percent of grants closed out: Regional offices: 3: 51; 
Percent of grants closed out: Regional offices: 4: 43; 
Percent of grants closed out: Regional offices: 5: 16; 
Percent of grants closed out: Regional offices: 6: 49; 
Percent of grants closed out: Regional offices: 7: 44; 
Percent of grants closed out: Regional offices: 8: 45; 
Percent of grants closed out: Regional offices: 9: 32; 
Percent of grants closed out: Regional offices: 10: 52. 

Percent of grants closed out: Length of time to closeout for projects 
ending in fiscal year 2004: Late (181-270 days); 
Percent of grants closed out: Agencywide: 19; 
Percent of grants closed out: Program offices: 15; 
Percent of grants closed out: Regional offices: 1: 26; 
Percent of grants closed out: Regional offices: 2: 9; 
Percent of grants closed out: Regional offices: 3: 26; 
Percent of grants closed out: Regional offices: 4: 31; 
Percent of grants closed out: Regional offices: 5: 9; 
Percent of grants closed out: Regional offices: 6: 15; 
Percent of grants closed out: Regional offices: 7: 29; 
Percent of grants closed out: Regional offices: 8: 28; 
Percent of grants closed out: Regional offices: 9: 21; 
Percent of grants closed out: Regional offices: 10: 18. 

Percent of grants closed out: Length of time to closeout for projects 
ending in fiscal year 2004: Significantly late (271+ days); 
Percent of grants closed out: Agencywide: 25; 
Percent of grants closed out: Program offices: 34; 
Percent of grants closed out: Regional offices: 1: 40; 
Percent of grants closed out: Regional offices: 2: 14; 
Percent of grants closed out: Regional offices: 3: 21; 
Percent of grants closed out: Regional offices: 4: 17; 
Percent of grants closed out: Regional offices: 5: 14; 
Percent of grants closed out: Regional offices: 6: 21; 
Percent of grants closed out: Regional offices: 7: 18; 
Percent of grants closed out: Regional offices: 8: 27; 
Percent of grants closed out: Regional offices: 9: 26; 
Percent of grants closed out: Regional offices: 10: 20. 

Percent of grants closed out: Length of time to closeout for projects 
ending in fiscal year 2004: Not closed; 
Percent of grants closed out: Agencywide: 19; 
Percent of grants closed out: Program offices: 16; 
Percent of grants closed out: Regional offices: 1: 4; 
Percent of grants closed out: Regional offices: 2: 51; 
Percent of grants closed out: Regional offices: 3: 2; 
Percent of grants closed out: Regional offices: 4: 9; 
Percent of grants closed out: Regional offices: 5: 61; 
Percent of grants closed out: Regional offices: 6: 14; 
Percent of grants closed out: Regional offices: 7: 9; 
Percent of grants closed out: Regional offices: 8: 1; 
Percent of grants closed out: Regional offices: 9: 21; 
Percent of grants closed out: Regional offices: 10: 10. 

Percent of grants closed out: Length of time to closeout for projects 
ending in fiscal year 2004: Total; 
Percent of grants closed out: Agencywide: 100; 
Percent of grants closed out: Program offices: 100; 
Percent of grants closed out: Regional offices: 1: 100; 
Percent of grants closed out: Regional offices: 2: 100; 
Percent of grants closed out: Regional offices: 3: 100; 
Percent of grants closed out: Regional offices: 4: 100; 
Percent of grants closed out: Regional offices: 5: 100; 
Percent of grants closed out: Regional offices: 6: 100; 
Percent of grants closed out: Regional offices: 7: 100; 
Percent of grants closed out: Regional offices: 8: 100; 
Percent of grants closed out: Regional offices: 9: 100; 
Percent of grants closed out: Regional offices: 10: 100. 

Source: GAO analysis of EPA information from EPA's Grant Information 
and Control System database, as of December 31, 2005. 

Note: Totals may not add up to 100 due to rounding.

[End of table]  

As the table shows, agencywide, only 37 percent of grants with project 
end dates in fiscal year 2004 were closed out within 180 days, 25 
percent were significantly late--at least 3 months beyond the 180-day 
standard, and 19 percent were not closed. 

Table 6 shows that EPA's current performance measure is masking the 
fact that the agency is having significant difficulty in closing out 
grants within 180 days. 

Table 6: Table 6: Comparison of EPA's Performance against the Current 
Closeout Measure and the 180-Day Standard, Fiscal 2005 Reporting Year: 

Unit: Agencywide; 
Percent of grants meeting the current measure and 180-day standard: 
Current closeout performance measure: 79%; 
Percent of grants meeting the current measure and 180-day standard: 180-
day standard: 37%. 

Unit: Program offices; 
Percent of grants meeting the current measure and 180-day standard: 
Current closeout performance measure: 81%; 
Percent of grants meeting the current measure and 180-day standard: 180-
day standard: 35%. 

Unit: Region 1; 
Percent of grants meeting the current measure and 180- day standard: 
Current closeout performance measure: 96%; 
Percent of grants meeting the current measure and 180-day standard: 180-
day standard: 30%. 

Unit: Region 2; 
Percent of grants meeting the current measure and 180- day standard: 
Current closeout performance measure: 49%; 
Percent of grants meeting the current measure and 180-day standard: 180-
day standard: 26%. 

Unit: Region 3; 
Percent of grants meeting the current measure and 180- day standard: 
Current closeout performance measure: 97%; 
Percent of grants meeting the current measure and 180-day standard: 180-
day standard: 51%. 

Unit: Region 4; 
Percent of grants meeting the current measure and 180- day standard: 
Current closeout performance measure: 91%; 
Percent of grants meeting the current measure and 180-day standard: 180-
day standard: 43%. 

Unit: Region 5; 
Percent of grants meeting the current measure and 180- day standard: 
Current closeout performance measure: 37%; 
Percent of grants meeting the current measure and 180-day standard: 180-
day standard: 16%. 

Unit: Region 6; 
Percent of grants meeting the current measure and 180- day standard: 
Current closeout performance measure: 85%; 
Percent of grants meeting the current measure and 180-day standard: 180-
day standard: 49%. 

Unit: Region 7; 
Percent of grants meeting the current measure and 180- day standard: 
Current closeout performance measure: 90%; 
Percent of grants meeting the current measure and 180-day standard: 180-
day standard: 44%. 

Unit: Region 8; 
Percent of grants meeting the current measure and 180- day standard: 
Current closeout performance measure: 99%; 
Percent of grants meeting the current measure and 180-day standard: 180-
day standard: 45%. 

Unit: Region 9; 
Percent of grants meeting the current measure and 180- day standard: 
Current closeout performance measure: 76%; 
Percent of grants meeting the current measure and 180-day standard: 180-
day standard: 32%. 

Unit: Region 10; 
Percent of grants meeting the current measure and 180- day standard: 
Current closeout performance measure: 89%; 
Percent of grants meeting the current measure and 180-day standard: 180-
day standard: 52%. 

Source: EPA data. 

Notes: For the current closeout performance measure, GAO's analysis of 
information from EPA's Grant Information and Control System database, 
as of November 30, 2005; for the 180-day standard, GAO's analysis of 
information from EPA's Grant Information and Control System database, 
as of December 31, 2005.

[End of table] 

In guidance on preparing the annual post-award monitoring plans, the 
Office of Grants and Debarment has indicated that agency offices should 
use the agency's current closeout performance measure--90 percent of 
the grants with project end dates in the prior fiscal year--as the 
closeout goal.[Footnote 35] In effect, as a regional grants management 
office manager stated, the performance measure, not the 180-day 
standard, is the target EPA is working toward for closing out grants. 

At the regional level, our analysis of closeout data for the wetland 
and nonpoint source grant programs indicates that grants were closed 
out late because of (1) grantee delays and/or (2) internal delays 
within the agency. We reviewed 34 closed grants in three regions. 
First, as table 7 shows, grantees often submit their final financial 
and technical reports after the 90 days that they are allowed.[Footnote 
36] 

Table 7: Table 7: Length of Time It Took Grantees to Deliver Final 
Financial and Technical Reports for Two Grant Programs in Regions 1, 5, 
and 9: 

Days for grantees to deliver final reports: 1-90 days (on time); 
Number of grants: 9. 

Days for grantees to deliver final reports: 91-180 days; 
Number of grants: 10. 

Days for grantees to deliver final reports: 181-270 days; 
Number of grants: 6. 

Days for grantees to deliver final reports: 271-450 days; 
Number of grants: 4. 

Days for grantees to deliver final reports: 451 + days; 
Number of grants: 1. 

Days for grantees to deliver final reports: Report missing from file or 
date of receipt could not be determined; 
Number of grants: 4. 

Days for grantees to deliver final reports: Total; 
Number of grants: 34. 

Source: GAO analysis of EPA documents on selected wetland and nonpoint 
source grants for grants closed out between January 1, 2004, and June 
30, 2005. 

Note: Technical reports and financial reports are submitted separately. 
Our analysis is based on the date of the last report submitted.

[End of table] 

According to regional staff, different types of grantees may be 
submitting their reports late for different reasons. Specifically: 

* States do not always provide their final technical and financial 
closeout reports on time. The states may not be on time because, for 
example, they (1) are understaffed; (2) are awaiting the completion of 
work conducted by sub-grantees or subcontractors--which can be 
legitimately delayed because of weather conditions that affect the 
project's progress; or (3) consider closeout a lower priority than 
applying for new grants. Furthermore, states do not believe there will 
be any consequences if they submit final reports late because their 
grants are for continuing environmental programs. 

* Tribes may submit their final reports late because of high turnover 
among tribal staff and limited organizational capacity, and because 
tribal councils, which meet intermittently, must approve the reports. 

While grantees are responsible for providing final reports within 90 
days, EPA staff are responsible for working with the grantees to ensure 
that the reports are received on time. Under EPA's 1992 closeout 
policy, grant specialists must notify grantees 90 days before the 
project end date that final reports will be due 90 days thereafter. 
However, we found that regional staff do not always send out these 
letters. For example, Region 5 adopted the practice of reminding 
grantees 45 days before the project end date because the grants 
management office believes that the 90 days is too long in advance to 
be effective. However, several Region 5 grant specialists stated that 
their workload is also preventing them from sending out the 45-day 
letter to grantees. 

According to EPA's closeout policy, if a grantee is late with the final 
financial or technical report, the region should send reminder letters 
that escalate in tone as time progresses. In Region 1, for example, if 
the grantee does not submit its materials within 90 days, the grants 
management office sends a letter asking that the grantee contact its 
grant specialist to discuss the reasons for the overdue reports; if the 
region does not receive the reports within 120 days after the project 
has ended, the grants management office sends a certified letter that 
more strongly calls for the submission of these required reports. 

When these letters do not result in grantee compliance, regional staff 
and managers told us that they have no realistic option for taking 
strong action against states that are late--such as withholding money-
-because these grantees have continuing grants for environmental 
programs. 

Second, late closeouts result from a variety of internal agency delays. 
As shown in table 8, of those files that had information that we could 
use to determine the dates the reports were submitted, regional staff 
closed out about half within the 90 days provided for in EPA guidance. 
For 9 of the 30 files that had this report information, it took the 
project officers or the grant specialists over 180 days to close out 
the grant after receiving the final reports from the grantees. 

Table 8: Table 8: Length of Time Elapsed for Grants Management Offices 
to Close Out Grants after Grantee Provides Final Reports for Two Grant 
Programs, Regions 1, 5, and 9: 

Days from receipt of final report from grantee to closeout: 1-90 days; 
Number of grants: 14. 

Days from receipt of final report from grantee to closeout: 91-180 
days; 
Number of grants: 7. 

Days from receipt of final report from grantee to closeout: 181-270 
days; 
Number of grants: 3. 

Days from receipt of final report from grantee to closeout: 271-450 
days; 
Number of grants: 2. 

Days from receipt of final report from grantee to closeout: 451 + days; 
Number of grants: 4. 

Days from receipt of final report from grantee to closeout: Report 
missing from file or date of receipt could not be determined; 
Number of grants: 4. 

Days from receipt of final report from grantee to closeout: Total; 
Number of grants: 34. 

Source: GAO analysis of EPA documents on selected wetland and nonpoint 
source grants for grants closed out between January 1, 2004, and June 
30, 2005.

[End of table] 

For grant closeouts, generally, regional staff often cited workload as 
a factor contributing to delays in agency closeout. Delays also 
occurred because of peak workload periods during the year, such as the 
fourth quarter of the fiscal year, when regions generally give priority 
to awarding new grants. Officials in the three regions we visited also 
told us that they have transferred or will transfer the administrative 
and financial functions of grants closeout to EPA's Las Vegas Finance 
Center, which should reduce the grant specialists' workload, allowing 
them to focus on other aspects of grants management. 

Regional practices also may have contributed to delays in two of the 
three regions we reviewed. Region 5 had two practices that contributed 
to delays in closing out grants. First, the region uses technical 
contacts to assist with monitoring the wetland and nonpoint source 
grant programs, including closeouts. The project officer first reviews 
the grantee's final reports to ensure they are complete and then asks 
the technical contact to comment on specific points and certify in 
writing that technical requirements have been met. The project officer 
then certifies in writing to the grant specialist that the grantee has 
met programmatic terms and conditions and, from that perspective, the 
grant can be closed out. Regional staff stated that in certain cases 
the added step of getting signoff by the technical contact resulted in 
closeout delays because the technical contact did not always review the 
grantee's final reports in a timely way. 

Second, to address its closeout problem, the region's grants management 
office attempted an administrative change to expedite closeout--having 
a single grant specialist manage closeout. When this approach did not 
prove effective, the region returned to its practice of having the 
original grant specialists responsible for closing out grants. 
According to regional staff, the transition to and from this process 
exacerbated delays in grant closeouts. The original grant specialists 
had other grant work and waited until that work was completed before 
closing out the grants that were returned to them. Region 5 had the 
lowest percentage of grants closing out within 180 days for all its 
programs among EPA's 10 regions (16 percent for fiscal year 2005 as 
shown in table 5). 

Region 9 had delayed closures for continuing nondiscretionary grants, 
in part, because of a practice, discontinued in November 2004, of 
routinely carrying over unspent funds from these grants. That is, the 
region would not close out a grant until it had awarded a new grant. 
The unspent funds from the old grant would then be processed as an 
amendment to the new grant, in order to allow grantees to keep their 
unspent funds. For example, one state nonpoint source grant was closed 
278 days beyond the 180 days because the project officer had asked the 
grant specialist to carry over $426,000 in unspent funds to the 
following year's grant. 

Overall, a combination of grantee lateness and internal inefficiencies 
contributed to late closeouts. For example: 

* In Region 5, it took 795 days--615 days beyond the 180-day standard-
-to close out a 2-year wetland grant for $56,778. The grantee submitted 
the final financial status report 114 days late because a key grant 
contact had died. However, it took the region an additional 591 days 
after the grantee provided the final reports to close out the grant. 
According to the grant specialist, closeout was delayed, in part, 
because of internal administrative delays and because the grant was 
"lost" under a stack of other closeout files. 

* In Region 1, closure of a nonpoint source grant that provided 
$796,532 over 10 years was delayed primarily because of a lack of 
documentation. According to the project officer who inherited the file 
from a retiring employee, the file had unusually poor documentation, 
with no assurance that the grant's terms and conditions had been met. 
Moreover, the state employee who assumed responsibility for the grant 
could not locate all the reports detailing how the grant money had been 
used. Consequently, it took the project officer nearly 5 months beyond 
the allotted 180 days to review available information, ascertain that 
grant activities had been completed, and close out the grant. 

According to some of the project officers and grant specialists staff 
with whom we spoke, the 180 days allowed for closeout in EPA's policy 
is a reasonable amount of time. Moreover, some staff said that if more 
days were allowed, EPA might take longer. As noted in the closeout 
policy, as more time passes and the original grant specialists and 
project officers move on, it becomes more difficult to close out a 
grant. Finally, one regional official pointed out that if the deadline 
for closeout were extended, then unexpended funds would go unused for 
longer periods of time, which would tie up funds that could have been 
used for other purposes. 

We note, however, that EPA still has a 1992 closeout policy that is not 
consistent with its current monitoring policy. Specifically, although 
both the 1992 closeout policy and the monitoring policy state that 
closeout should occur within 180 days after the end of the project 
period, the 1992 policy also states that closeout should occur within 
180 days after receipt of all required reports and other deliverables. 
This aspect of the 1992 policy could be construed to mean that EPA has 
up to 270 days to close out grants since grantees have up to 90 days to 
submit their reports. Office of Grants and Debarment officials stated 
that EPA has formed a work group to review its monitoring and closeout 
polices. As part of its review, the office plans to examine this 
inconsistency and the reasonableness of the 180-day closeout 
requirement. It expects to revise these policies in 2006. 

Grants Were Not Always Closed Out Properly: 

Adding to the agency's closeout problems, 8 of the 34 closed grants we 
reviewed in the regions were not closed out properly. Specifically: 

* Region 1 grant specialists had not adequately reviewed the indirect 
cost rate grantees submitted as part of their final financial status 
report which, in turn, led to improper closeout in 5 of the 10 files we 
reviewed. Reviewing the files' final financial report checklist, we 
found instances in which the question on the checklist that addresses 
indirect cost rates had been left blank or had been answered 
incorrectly. This problem occurred, in part, because the grant 
specialists did not adequately review the work of student interns who 
initially reviewed the financial status reports and completed the 
checklists. These "noncore" employees were used to help reduce the 
grant specialists' workload and the grant specialists were expected to 
review their work before they signed off on the checklist. 

* In Region 5, one grant specialist's file was missing the final 
financial status report, which is a key report that describes how the 
grantee spent the grant funds and whether any unspent funds remain that 
need to be deobligated. 

* In Region 9, Lobbying and Litigation Certification Forms--whose 
purpose is to ensure that federal dollars are not spent for lobbying or 
litigation activities--were missing from two grant files. After waiting 
some time, the grant specialist decided to close out the grants without 
the forms. The grant specialist manual states that grant specialists 
are responsible for notifying the grants management office if the 
grantee has not complied with this certification requirement. 

EPA's guidance states that inadequate file documentation, among other 
things, (1) violates the file management requirement that all 
significant actions must be documented, (2) provides an incomplete 
historical record of a grant project, (3) prevents staff from 
substantiating facts if a dispute arises, and (4) creates the 
appearance of poor grant administration and oversight.[Footnote 37] 
Furthermore, the guidance specifically states that the file should 
include evidence of closeout, including the final report or product. 

In Region 1, we also identified an accountability concern when grants 
were closed out by administrative project officers. An administrative 
project officer for a Performance Partnership Grant had not always 
received written approval from the technical contacts, who evaluated 
grantee documents before the administrative project officer certified 
that the grantee had met all the terms and conditions of the grant. 
According to a regional official, technical contacts at times tell the 
project officer that they have reviewed technical documents but do not 
provide written approval. Although the administrative project officer 
certified that grantees met their programmatic obligations, the 
administrative project officer was "uncomfortable" doing so without 
written approval from technical contacts that they had reviewed final 
documents. 

As with monitoring, without effective supervisory review of the grant 
and project officer files, grants may be improperly closed out. With 
more effective supervision, grants would be more likely to be properly 
closed out. 

EPA Has Initiated Actions to Obtain Results from Grants, but Its 
Efforts Are Not Complete: 

EPA has taken steps to obtain environmental results from its grants, 
but its efforts are not complete. First, EPA included a performance 
measure in its Grants Management Plan for identifying expected 
environmental results in grant workplans. In 2004, EPA was far from 
meeting its performance target. Although EPA does not yet have final 
data for 2005, EPA officials told us that their preliminary data 
indicate they are closer to meeting this performance target. Second, 
EPA issued an environmental results policy, effective in January 2005 
that for the first time requires EPA staff to ensure that grants 
specify well-defined environmental outcomes.[Footnote 38] However, 
EPA's current performance measure does not take into account the new 
criteria for identifying and measuring results from grants established 
by the policy. EPA acknowledges that it has not yet fully identified 
better ways to integrate the agency systems for reporting on the 
results of grants. While EPA has taken these positive steps, OMB's 
evaluations of EPA grant programs in 2006 indicate that EPA must 
continue its concerted efforts to achieve results from its grants. 

EPA Has Developed a Performance Measure and Issued a New Policy for 
Specifying Environmental Results: 

The Grants Management Plan established a performance measure for 
identifying environmental outcomes from grants: the percent of grant 
workplans that discusses how grantees plan to measure and report on 
environmental outcomes.[Footnote 39] In 2004, EPA was far from meeting 
its performance target. Although EPA does not yet have final data for 
2005, an EPA official told us that their preliminary data indicate that 
the agency is closer to meeting this performance target of 80 percent 
for 2005.[Footnote 40] 

Table 9: Table 9: Extent to Which EPA Met Its Target for the Percent of 
Grant Workplans with Environmental Outcomes, 2003-2005: 

Calendar year: 2003 (baseline); 
Performance measure: Percent target: Not applicable; 
Performance measure: Percent of grant workplans with environmental 
outcomes: 31. 

Calendar year: 2004; 
Performance measure: Percent target: 70; 
Performance measure: Percent of grant workplans with environmental 
outcomes: 45. 

Calendar year: 2005; 
Performance measure: Percent target: 80; 
Performance measure: Percent of grant workplans with environmental 
outcomes: Not yet available. 

Source: EPA documents. 

[End of table] 

EPA also issued an environmental results policy in 2004, which was 
effective in January 2005, or about 2 years later than proposed in the 
Grants Management Plan. The policy is promising in that--for the first 
time--it requires EPA staff to ensure that grant workplans specify well-
defined environmental outputs (activities) and environmental outcomes 
(results), which enables EPA to hold grantees accountable for achieving 
them. However, planning for grants to achieve environmental results, 
and measuring results, is a difficult, complex challenge. As we have 
reported, while it is important to measure the results of environmental 
activities rather than just the activities themselves, agencies face 
difficulties in doing this.[Footnote 41] Environmental outputs are 
inherently easier to develop and report on than environmental outcomes. 

The policy is also promising because, among other things, it (1) is 
binding on managers and staff throughout the agency; (2) emphasizes 
environmental results throughout the grant life cycle--awards, 
monitoring, and reporting; and (3) requires that grants be aligned with 
the agency's strategic goals and linked to environmental results. 

To align grants with the agency's strategic goals and link the grants 
to results, the policy requires for the first time that EPA program 
offices ensure that (1) each grant funding package includes a 
description of the EPA strategic goals and objectives the grant is 
intended to address and (2) the offices provide assurance that the 
grant workplan contains well-defined outputs and, to the "maximum 
extent practicable," well-defined outcome measures. Outcomes may be 
environmental, behavioral, health-related, or programmatic in nature, 
and must be quantitative. EPA included the provision to "the maximum 
extent practicable" in the policy 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. In June 2005, the EPA Inspector 
General found that the agency's results policy was generally consistent 
with leading nongovernmental organizations that fund environmental 
projects and that emphasize grants performance measurements.[Footnote 
42] 

Efforts to Obtain Results from Grants Are Not Yet Complete: 

EPA's performance measure and the new results policy are positive 
steps, but the agency's efforts to address results are not yet 
complete. Although EPA has issued an environmental results policy, its 
current performance measure does not take into account the new criteria 
for identifying and measuring results. EPA has identified the following 
seven criteria that grant agreements should meet and is using these 
seven criteria as the basis for assessing the implementation of the 
policy.[Footnote 43] That is, the agreements should: 

* include a description of how the grant is linked to EPA's Strategic 
Plan, 

* specify at least one EPA goal and its related objective that the 
project addresses, 

* identify the appropriate program results code--a code applied to new 
grant awards that aligns the grant with EPA's strategic goals and 
objectives, 

* include an assurance that the program office has reviewed the 
workplan and that the workplan includes well-defined outputs and 
outcomes, 

* include a requirement for performance reports from recipients, 

* include well-defined outputs in the workplans, and: 

* include well-defined outcomes in the workplans. 

According to an Office of Grants and Debarment official, the results 
policy calls for outcomes that are not only well defined but that also 
include quantitative measures. However, recognizing the difficulty and 
complexity posed by applying such measures, the official said, for the 
purposes of assessment, EPA modified its criteria to include well- 
defined outcomes with or without quantitative measures. 

Since EPA has adopted new criteria for assessing environmental results 
from grants based on its environmental results policy, its current 
performance measure--the percentage of grant workplans that discuss how 
grantees plan to measure and report on environmental outcomes--may not 
be sufficient to assess the implementation of the policy. EPA's current 
performance measure does not take into account the new criteria for 
identifying and measuring results from grants established by the 
policy. Establishing a new performance measure and target to reflect 
the new policy would enhance EPA's ability to assess the agency's 
effectiveness in implementing the policy. 

In addition, EPA continues to face difficulties in ensuring that its 
grants are achieving public health and environmental results. 
Specifically, EPA acknowledges that it has not yet fully identified 
better ways to integrate the agency systems for reporting on the 
results of grants. EPA does not have a systematic way of collecting 
information about the results of its grants agencywide. As stated in 
the results policy, the Office of Grants and Debarment convened a 
workgroup to (1) examine existing EPA systems for collecting results 
from grant programs, (2) identify better ways to integrate these 
systems, and (3) potentially amend the policy to reflect its findings. 
The workgroup has begun an inventory of existing EPA systems. Until 
recently, EPA recognized--but had not addressed in its results policy-
-the known complexities of measuring environmental outcomes: (1) 
demonstrating outcomes when there is a long lag time before results 
become apparent and (2) linking program activities with environmental 
results because of multiple conditions that influence environmental 
results. In April 2006, the Office of Grants and Debarment provided an 
online training course for project officers on environmental results 
with guidance on how to address these measurement complexities. 

Furthermore, OMB has found that EPA has problems in demonstrating 
results from its grants. Using its Program Assessment Rating Tool 
(PART), OMB annually evaluates federal programs in four critical areas 
of performance: program purpose and design, planning, management, and 
results, each scored from 0 to 100.[Footnote 44] OMB combines these 
scores to create an overall rating: effective, moderately effective, 
adequate, and ineffective. In addition, programs that do not have 
acceptable performance measures or have not yet collected performance 
data generally receive a rating of "results not demonstrated." As table 
10 shows, the PART ratings have found that some of EPA's programs are 
"ineffective" or "results not demonstrated," although there has been 
some improvement from 2004 through 2006.[Footnote 45] 

Table 10: Table 10: Combined OMB PART Ratings of EPA Grant Programs, 
2004-2006: 

Year: 2004; 
Number of grant programs by combined rating: Moderately effective: 0; 
Number of grant programs by combined rating: Adequate: 2; 
Number of grant programs by combined rating: Ineffective: 0; 
Number of grant programs by combined rating: Results not demonstrated: 
8; 
Total: 10. 

Year: 2005; 
Number of grant programs by combined rating: Moderately effective: 0; 
Number of grant programs by combined rating: Adequate: 9; 
Number of grant programs by combined rating: Ineffective: 2; 
Number of grant programs by combined rating: Results not demonstrated: 
5; 
Total: 16. 

Year: 2006; 
Number of grant programs by combined rating: Moderately effective: 1; 
Number of grant programs by combined rating: Adequate: 12; 
Number of grant programs by combined rating: Ineffective: 3; 
Number of grant programs by combined rating: Results not demonstrated: 
2; 
Total: 18. 

Source: OMB documents.

[End of table] 

Despite this progress, a closer examination of the ratings for 2006 
indicated that, with one exception, the scores for the results 
component were lower than the scores given to other components. (See 
table 11). 

Table 11: Table 11: OMB PART Scores for All Components of the Combined 
Rating, Fiscal Year 2006: 

Grant program: Air Quality Grants and Permitting; 
Component scores (0 to 100): Program purpose and design: 60; 
Component scores (0 to 100): Planning: 44; 
Component scores (0 to 100): Management: 77; 
Component scores (0 to 100): Results: 13. 

Grant program: Alaska Native Villages; 
Component scores (0 to 100): Program purpose and design: 100; 
Component scores (0 to 100): Planning: 50; 
Component scores (0 to 100): Management: 11; 
Component scores (0 to 100): Results: 7. 

Grant program: Brownfields Revitalization; 
Component scores (0 to 100): Program purpose and design: 100; 
Component scores (0 to 100): Planning: 50; 
Component scores (0 to 100): Management: 90; 
Component scores (0 to 100): Results: 17. 

Grant program: Clean Water State Revolving Fund; 
Component scores (0 to 100): Program purpose and design: 100; 
Component scores (0 to 100): Planning: 50; 
Component scores (0 to 100): Management: 78; 
Component scores (0 to 100): Results: 26. 

Grant program: Drinking Water State Revolving Fund; 
Component scores (0 to 100): Program purpose and design: 100; 
Component scores (0 to 100): Planning: 63; 
Component scores (0 to 100): Management: 89; 
Component scores (0 to 100): Results: 33. 

Grant program: Endocrine Disruptors; 
Component scores (0 to 100): Program purpose and design: 80; 
Component scores (0 to 100): Planning: 70; 
Component scores (0 to 100): Management: 91; 
Component scores (0 to 100): Results: 26. 

Grant program: Environmental Education; 
Component scores (0 to 100): Program purpose and design: 60; 
Component scores (0 to 100): Planning: 75; 
Component scores (0 to 100): Management: 90; 
Component scores (0 to 100): Results: 13. 

Grant program: Lead-Based Paint Risk Reduction Program; 
Component scores (0 to 100): Program purpose and design: 100; 
Component scores (0 to 100): Planning: 78; 
Component scores (0 to 100): Management: 77; 
Component scores (0 to 100): Results: 72. 

Grant program: Leaking Underground Storage Tank Cleanup Program; 
Component scores (0 to 100): Program purpose and design: 100; 
Component scores (0 to 100): Planning: 75; 
Component scores (0 to 100): Management: 100; 
Component scores (0 to 100): Results: 42. 

Grant program: Nonpoint Source Pollution Control Grants; 
Component scores (0 to 100): Program purpose and design: 80; 
Component scores (0 to 100): Planning: 88; 
Component scores (0 to 100): Management: 100; 
Component scores (0 to 100): Results: 40. 

Grant program: Ocean, Coastal, and Estuary Protection; 
Component scores (0 to 100): Program purpose and design: 100; 
Component scores (0 to 100): Planning: 44; 
Component scores (0 to 100): Management: 85; 
Component scores (0 to 100): Results: 27. 

Grant program: Pesticide Enforcement Grant Program; 
Component scores (0 to 100): Program purpose and design: 100; 
Component scores (0 to 100): Planning: 63; 
Component scores (0 to 100): Management: 89; 
Component scores (0 to 100): Results: 8. 

Grant program: Pesticide Field Programs; 
Component scores (0 to 100): Program purpose and design: 80; 
Component scores (0 to 100): Planning: 13; 
Component scores (0 to 100): Management: 44; 
Component scores (0 to 100): Results: 13. 

Grant program: Public Water System Supervision Grant Program; 
Component scores (0 to 100): Program purpose and design: 100; 
Component scores (0 to 100): Planning: 75; 
Component scores (0 to 100): Management: 78; 
Component scores (0 to 100): Results: 17. 

Grant program: Tribal General Assistance Program; 
Component scores (0 to 100): Program purpose and design: 100; 
Component scores (0 to 100): Planning: 50; 
Component scores (0 to 100): Management: 78; 
Component scores (0 to 100): Results: 25. 

Grant program: U.S.-Mexico Border Water Infrastructure; 
Component scores (0 to 100): Program purpose and design: 100; 
Component scores (0 to 100): Planning: 63; 
Component scores (0 to 100): Management: 89; 
Component scores (0 to 100): Results: 20. 

Grant program: Underground Injection Control Grant Program; 
Component scores (0 to 100): Program purpose and design: 100; 
Component scores (0 to 100): Planning: 75; 
Component scores (0 to 100): Management: 89; 
Component scores (0 to 100): Results: 17. 

Grant program: Water Pollution Control Grants; 
Component scores (0 to 100): Program purpose and design: 60; 
Component scores (0 to 100): Planning: 75; 
Component scores (0 to 100): Management: 89; 
Component scores (0 to 100): Results: 40. 

Source: OMB document.

[End of table]  

While EPA has taken positive steps, OMB's 2006 assessment indicates 
that EPA must continue its concerted efforts to achieve results from 
its grants. 

EPA Has Taken Steps to Manage Grants Staff and Resources More 
Effectively but Still Faces Major Management Problems: 

EPA has taken steps to manage grants staff and resources more 
effectively in four key areas: (1) analyzing workload; (2) providing 
training on grant policies; (3) assessing the reliability of the 
agency's grants management computer database--the Integrated Grants 
Management System; and (4) holding managers and staff accountable for 
successfully fulfilling their grant responsibilities. Because much 
remains to be accomplished, management attention to these issues is 
still needed. 

EPA Is Examining Grants Staff Workload: 

As we reported in 2003 and found again in this review, regional grants 
managers and staff are concerned that staff do not have sufficient time 
to devote to effective grants management. They pointed out that the new 
policies increased the time needed to implement each step of the grants 
process, such as the more planned, rigorous approach now required for 
competing grants. However, one regional official pointed out that this 
increase workload has not been offset with an increase in resources or 
the elimination of other activities. 

Fulfilling an objective identified in the Grants Management Plan, in 
April 2005, an EPA contractor completed a workload analysis of project 
officers and grant specialists.[Footnote 46] The analysis showed that 
EPA had an overall shortage of project officers and grant specialists, 
expressed in full-time equivalents. However, the contractor recommended 
that before EPA adds staff, it take steps to improve the effectiveness 
and efficiency of its grants management operations. For example, the 
contractor recommended that EPA review its grant activities and assign 
"noncore" activities where possible to auxiliary federal or nonfederal 
staff to improve operations, freeing EPA staff to conduct their core 
work. It defined noncore activities to typically include those that are 
related to grant closeouts. 

The Office of Grants and Debarment asked the grant offices to prepare 
project officer workforce plans--due in 2006--that incorporate the 
workload analysis to promote "accountable" grants management. 

EPA Has Provided Some Training on Grant Policies: 

As outlined in the Grants Management Plan, EPA has developed a long- 
term grants management training plan.[Footnote 47] Under the plan, EPA 
continues to certify project officers for grant activities by requiring 
them to take a 3-day, project officer course before they are allowed to 
conduct grant management activities, and thereafter take a refresher 
course to maintain their certification. 

To address the grant reforms, the agency provided additional training. 
For example, EPA held a grants management conference in 2004, attended 
by 465 EPA staff, which included workshops on new policies. In 2005, 
the Office of Grants and Debarment conducted agencywide training on the 
new competition policy. It also conducted training on the environmental 
results policy. 

However, according to EPA staff, the amount of training has not been 
sufficient to keep pace with the issuance of new grant policies. For 
example: 

* A 2006 self-assessment conducted by one program office found that 
project officers and managers expressed frustration that both the pace 
and complexity of new policy requirements left project officers 
vulnerable because they were not properly trained in the policies. 

* A 2005 Region 9 self-assessment found that the region's project 
officers did not believe that they had received sufficient guidance 
from their programs in headquarters. 

* A Region 1 official stated that the rapid pace of new policies and 
brief lead time between issuance and the effective date made it too 
difficult for the regions to adequately train staff on all the new 
policies related to grants management. Nevertheless, Region 1 developed 
a training course for its project officers on the award process to 
address new grant reform policies issued in 2005. However, only about 
25 of the region's 200 project officers attended the optional 90-minute 
course, although there were three opportunities to do so. 

Regional officials also noted that the grant reforms are changing the 
skill mix required of both project officers and grant specialists. 
According to a Region 5 official, the grant specialist was once a 
clerical position, but additional responsibilities required under the 
new grants policies indicates that a business degree or financial 
background would be helpful. Region 9 officials told us that 
traditionally project officers had technical and scientific skills. 
However, the grant reforms had increased the need for interaction with 
grantees, which required more skills in oral communications, 
organization, and analysis. An Office of Grants and Debarment official 
explained the agency is weighing what should be considered as the right 
skill mix for agency staff involved in grant activities. 

EPA Has Developed a Grants Database but Has Not Completed a Data 
Quality Review: 

In 1997, EPA began developing the Integrated Grants Management System 
to better manage its grants, and EPA now also uses this database to 
inform the public and the Congress about its $4 billion investment in 
grants. Data quality problems in this database could impair the 
agency's ability to effectively manage grants and provide accurate 
information. In 2005, we recommended that EPA conduct a comprehensive 
data quality review of its Integrated Grants Management 
System.[Footnote 48] EPA undertook a review, which it expects to be 
completed in 2006. 

EPA Has Taken Steps to Enhance Staff and Management Accountability, but 
Concerns Remain: 

EPA's Grants Management Plan included an objective of establishing 
clear lines of accountability for grants management, including 
performance standards that address grants management responsibilities 
for project officers. As we reported in 2003, project officers did not 
have uniform performance standards; instead, each supervisor set 
standards for each project officer, and these standards may or may not 
have included grants management responsibilities. 

Later in 2003, EPA's Assistant Administrator for the Office of 
Administration and Resources Management asked all senior resource 
officials to review the current performance standards of all employees 
below the senior executive service who had grants management 
responsibilities.[Footnote 49] This review was to ensure that the 
complexity and extent of these employees' grants management duties were 
reflected in their performance standards and position descriptions. The 
Assistant Administrator asked senior resource officials to ensure that 
such standards were in place. The Office of Grants and Debarment is 
assessing the extent to which the guidance was implemented; the 
assessment is to be completed in May 2006. 

As we reported in 2003, the Office of Grants and Debarment faces some 
difficulties in holding managers and staff accountable for effective 
grants management. The office does not directly oversee many of the 
managers and staff who perform grants management duties, particularly 
the approximately 2,100 project officers in headquarter and regional 
program offices. This division of responsibilities makes it more 
difficult to hold these staff accountable for grants management. 

In 2005, EPA's Inspector General reported that EPA was not holding 
supervisors and project officers accountable for grants 
management.[Footnote 50] Specifically: 

* EPA does not have a process to measure an individual project 
officer's performance in carrying out grants management duties. In 
practice, supervisors relied on project officers to inform them of 
grants management weaknesses. 

* EPA managers and supervisors are not discussing project officer 
grants management responsibilities during end-of-year evaluations. 
Managers were not discussing project officers' grants management 
responsibilities during year-end evaluations; and, if grant issues were 
addressed, the discussion focused on the grant recipient's performance, 
rather than on the project officer's performance. Supervisors provided 
various reasons for rating project officers without discussing grants 
management responsibilities, stating, for example, that the year-end 
evaluation should focus on problems or issues with grantee performance, 
and project officers' responsibilities should be discussed at staff 
meetings or at other times through the year. 

* EPA managers had not conveyed weaknesses from the agency's internal 
reviews and self-assessments to project officers. EPA managers did not 
communicate weaknesses identified in internal reviews, such as a lack 
of documentation of cost reviews and ongoing monitoring, and 
supervisors were not aware of these identified weaknesses. 

Our review is consistent with the Inspector General's findings. As 
previously discussed, EPA grants staff told us that their supervisors 
were not reviewing their grant files to determine compliance with grant 
monitoring policies. It is possible that the awarding, monitoring, and 
closeout problems we found would have been mitigated by effective 
supervisory review. 

In response to the Inspector General's concerns, EPA issued a plan in 
January 2006 to ensure that the agency's new performance appraisal 
system--Performance Appraisal and Recognition System--addresses grants 
management responsibilities. The new system requires that (1) 
appraisals of project officers and supervisors/managers include a 
discussion of grants management performance; (2) performance agreements 
and associated mid-year and end-of-year performance discussions focus 
on key areas of preaward reviews of nonprofit grantees, competition, 
post-award monitoring, and environmental results; and (3) performance 
discussions take into account the results of internal reviews, such as 
those conducted by the Office of Grants and Debarment, self- 
assessments, and performance measure reviews. For the 2007 performance 
appraisal process, EPA plans to establish a workgroup to develop final 
performance measures to assess the grants management performance of 
project officers and supervisors and plans to incorporate these 
measures into 2007 performance agreements. 

More broadly, to address the growing demands of the grant reforms and 
enhance accountability, the Office of Grants and Debarment formed a 
senior-level grants management council that cuts across the 
organization by including representatives from program offices, such as 
the Office of Water, and regional offices. The council is to help 
develop and implement new policies agencywide. Similarly, the regional 
offices we visited have formed grants management councils to coordinate 
and implement grant reforms with the region's grants management office 
and various program offices.[Footnote 51] 

Despite the efforts of these various national-and regional-level 
offices, managers, and councils to identify problems and undertake 
corrective actions, some grants management problems still persist. For 
example, although some of the regions we visited had implemented 
checklists as internal controls to ensure the documentation of ongoing 
monitoring, the regions did not ensure they were actually completed. 
Closeout problems that were identified by EPA's current performance 
measure have not been effectively addressed. 

Conclusions: 

About 3 years into its Grants Management Plan, 2003-2008, EPA has made 
important strides in achieving its grant reforms, particularly in 
competing a higher percentage of grants and trying to identify results 
from its grants. However, EPA has not resolved its long-standing 
problems in documenting ongoing monitoring and closing out grants. As 
it revises its management plan, EPA has an opportunity to tackle these 
continuing problems. 

Without adequate documentation of ongoing monitoring, EPA cannot be 
fully assured that grantees are on track to fulfilling the terms and 
conditions of their grants. Furthermore, the agency's lack of 
documentation indicates weaknesses at all levels: staff do not always 
document their monitoring; supervisors do not always effectively review 
grant files; and managers are not always meeting their commitments to 
address known problems with lack of documentation. Despite the 
importance of ongoing monitoring, EPA has not created a performance 
measure and target for documenting monitoring, which should elevate the 
importance of ongoing monitoring to the agency. EPA is also not taking 
full advantage of its grants management database, which has a data 
field for documenting ongoing monitoring. That is, EPA does not require 
project officers and grant specialists to enter monitoring 
documentation information into its database. With the information in 
the database, EPA would be better able to determine that staff are 
meeting documentation requirements. Use of performance measures and 
targets for ongoing monitoring as well as the database could enhance 
accountability. 

EPA's current performance measure and target for closing out grants is 
a valuable tool for determining if grants were ultimately closed out, 
but it is not a tool for determining whether grants were closed out 
with the 180-days now specified in EPA's monitoring policy. EPA needs 
an accompanying measure that accurately reports whether grants are 
closed out within the 180 days or other standard EPA may establish. 
EPA's current measure and target mask the fact that, agencywide, almost 
two-thirds of grants are not closed out within 180 days. Without a 
specific performance measure and target, EPA will not be able to 
correct its lack of timeliness in closing out grants. We recognize that 
grantees' late submission of required reports is a common problem that 
contributes to the lack of timeliness in closing out grants. Because 
fixing this problem on a case-by-case basis is difficult, the agency 
needs an overarching strategy to address it. 

Furthermore, in the three regions we visited, we found instances in 
which appropriate documentation was missing from the closeout files. 
While we do not know the extent of this problem agencywide, these 
problems could indicate a major weakness that EPA may need to address. 
In responding to a draft of this report, EPA acknowledged that it does 
have a problem in closing out grants properly. Finally, we note that 
inconsistencies in EPA's monitoring and closeout policies may hinder 
EPA's ability to close out grants in a timely fashion. 

While EPA has made strides in trying to identify and obtain results 
from its grants by issuing an environmental results policy, it has not 
yet established a performance measure and target that reflect the 
policy's direction. 

Finally, the lack of effective supervision may have contributed to the 
problems we identified. EPA has issued a plan in January 2006 to ensure 
that the agency's new performance system addresses grants management 
responsibilities. It is too early to tell whether this plan will 
effectively hold managers and staff accountable for grants management. 

Recommendations: 

As EPA revises its Grants Management Plan, the agency has an 
opportunity to strengthen the management of its grants. We recommend 
that the Administrator of EPA direct the Office of Grants and Debarment 
to take action in the following three areas: 

Ongoing monitoring. 

* Develop a performance measure and a performance target for ongoing 
monitoring, and: 

* Consider requiring project officers and grant specialists to document 
ongoing monitoring in the agency's grants database so that the managers 
can monitor compliance agencywide. 

Grant closeout. 

* Establish a standard for the timely closeout of grants and ensure 
that EPA's monitoring and other policies are consistent with that 
standard. 

* Develop a performance measure and target for the grant closeout 
standard. 

* Develop a strategy for addressing grantees' late submission of 
required final documentation. 

* Issue revised policies and procedures to ensure proper closeout of 
grants. 

Environmental results. 

* Develop a performance measure and target that better reflects the new 
environmental results policy. 

Agency Comments and Our Response: 

We provided a draft of this report to EPA for review and comment. We 
received oral comments from EPA officials, including the Director of 
the Office of Grants and Debarment. Overall, EPA officials agreed with 
our recommendations, and they stated that the agency has begun to take 
steps to implement them and will incorporate them into the agency's and 
Grants Management Plan. In addition, EPA officials provided some 
clarifying language for our recommendations, which we incorporated as 
appropriate. Furthermore, EPA officials acknowledged that proper 
closeout of grants is an agencywide problem that needs to be addressed. 
Based on this acknowledgement, we strengthened our recommendation to 
state that EPA needs to issue revised policies and procedures to better 
ensure the proper closeout of grants, rather than determine the extent 
of improper closeouts at the agency. EPA agreed. Finally, EPA provided 
additional information about the agency's efforts to address the 
complexities of measuring environmental results and other clarifying 
comments, which we incorporated into this report, as appropriate. 

As agreed with your office, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 6 days 
from the report date. At that time, we will send copies of this report 
to the congressional committees with jurisdiction over EPA and its 
activities; the Administrator, EPA; and the Director, Office of 
Management and Budget. We will also make copies available to others 
upon request. In addition, the report will be available at no charge on 
the GAO Web site at http://www.gao.gov. 

If you have any questions about this report, please contact me at (202) 
512-3841. Key contributors to this report are listed in appendix II. 
Contact points for our Offices of Congressional Relations and Public 
Affairs may be found on the last page of this report. 

Sincerely yours,

Signed by: 

John B. Stephenson: 
Director, Natural Resources and Environment: 

[End of Section] 

Appendix I: Scope and Methodology: 

This appendix details the methods we used to assess the progress the 
Environmental Protection Agency (EPA) has made in implementing its 
grant reforms. 

To assess EPA's progress, we reviewed information from both 
headquarters and the regions. At headquarters, we reviewed EPA's Grants 
Management Plan, 2003-2008 and EPA policies that address awarding, 
monitoring, and grant results. We also reviewed reports on EPA's grants 
management, including prior GAO reports; EPA's Inspector General 
reports; the Office of Management and Budget's Program Assessment 
Rating Tool; EPA's internal management reviews, including comprehensive 
grants management reviews, post-award monitoring plans, grants 
management self-assessments from 2003 to 2005; an April 2005 workload 
analysis conducted by LMI, a government consultant; and a closeout 
analysis prepared for GAO by the Office of Grants and Debarment. We 
also interviewed officials in the Office of Grants and Debarment and at 
the Office of Water. 

In addition, we reviewed EPA performance metric information. These 
metrics are based on data from the agency's Integrated Grants 
Management System, which is currently undergoing a data quality review, 
and the Grant Information and Control System, which has not undergone a 
data quality review. Given EPA's ongoing data quality review of the 
Integrated Grants Management System--and because we present EPA's 
performance metric data as documentary evidence and do not use it as 
the sole support for findings, conclusions, or recommendations--we did 
a limited reliability review of the two systems. Our assessment 
included (1) information from GAO's prior data reliability assessment 
work on the two systems and (2) interviews with an Office of Grants and 
Debarment official about the data systems and data elements. We 
determined that the performance information we used is sufficiently 
reliable for our purposes. 

To assess the progress and problems EPA has experienced from a regional 
perspective, we selected EPA Office of Water programs under the Clean 
Water Act, at the Subcommittee's request. We selected Wetland Program 
Development Grants (wetland grants) because it is a discretionary grant 
program--that is, EPA decides who receives the award and its amount, 
and the program is subject to competition. We selected Nonpoint Source 
Management Program grants (nonpoint source grants) because it is type 
of formula-based grant program--grants that are often awarded on the 
basis of formulas prescribed by law or agency regulation.[Footnote 52] 
We reviewed EPA's progress at the regional level by selecting grants in 
3 of EPA's 10 regional offices: Region 1 (Boston), Region 5 (Chicago), 
and Region 9 (San Francisco). We selected these regions because 
collectively they represent a significant share of grant funding for 
the two programs we reviewed, geographic dispersion, and a significant 
share of Performance Partnership Grants among the regional offices. 

To ensure coverage of the grant life cycle--from awarding to closing 
out grants, we conducted a case study review of a nonprobability sample 
of these two programs. Specifically, we asked EPA Regions 1, 5, and 9 
to provide lists of wetlands and nonpoint source grants awarded between 
January 1, 2004, and June 30, 2005, and those grants officially closed 
during this period. We targeted recently awarded and recently closed 
grants because the grant reforms began in 2002. To complete the case 
study, we reviewed two files per grant--the project officer file and 
the grant specialist file--using a detailed data collection instrument. 
All data entered in the data collection instrument was verified by a 
second party to ensure the accuracy and validity of each entry. 
Additionally, we conducted semistructured interviews with project 
officers and the grant specialists in order to understand the files. 
Overall, we reviewed the files for 32 active grants and 34 closed 
grants; and we interviewed administrative project officers, project 
officers, and technical contacts, and grant specialists about those 
files. We also interviewed senior resource officials and grants 
management office managers in the three regions we visited. 

We were limited in the number of grants we could review because the 
case study approach required multiple, detailed file reviews and 
interviews for each grant. Consequently, we selected a nonprobability 
sample of active and closed grants in the wetland and nonpoint source 
programs to review in each of the three regions. For active grants in 
our nonprobability sample, we sorted the grants by recipient type, 
project officer, and grant specialist to provide a distribution, and 
then randomly selected grants for review. For closed grants, we sorted 
the grants similarly, but we also selected grants based on the length 
of time it took to close out the grant. Because the case study design 
is nonprobabilistic, the findings are not generalizable to all grants 
in all regions. However, the case study design provides insights into 
regional grant activities for the two Clean Water Act programs in three 
regions, and it offers an in-depth perspective on some of the successes 
and continuing problems EPA faces in implementing its grants management 
reforms. Table 12 shows the population of wetland and nonpoint program 
grants in Regions 1, 5, and 9, and the number of those grants we 
reviewed. 

Table 12: Number of Active and Closed Wetland and Nonpoint Source 
Grants from January 1, 2004 through June 30, 2005, in the Universe and 
the Number of Grants GAO Reviewed in Three Regions: 

Active grants: Number of grants in universe; 
Region 1: 13; 
Region 5: 18; 
Region 9: 33; 
Total: 64. 

Active grants: Number of grants reviewed; 
Region 1: 10[A]; 
Region 5: 12; 
Region 9: 10; 
Total: 32. 

Closed grants: Number of grants in universe; 
Region 1: 26; 
Region 5: 16; 
Region 9: 60; 
Total: 102. 

Closed grants: Number of grants reviewed; 
Region 1: 10; 
Region 5: 13; 
Region 9: 11; 
Total: 34. 

Source: GAO. 

[A] We requested 11 files, but EPA Region 1 was unable to locate one of 
the files. 

[End of table] 

We experienced some limitations in conducting our review. For example, 
we were not able to assess the implementation of some EPA policies at 
the regional level because they had been issued too recently to assess 
during our file review time frame. We also found evidence in two of the 
three regions we visited that grants staff had added materials to their 
files after we had requested the files and before our review, despite 
the fact that we had taken precautions to avoid this situation. That 
is, we had asked the regions to inform staff not to add documents to 
files once they were requested. When we determined that these additions 
had occurred, we took mitigating steps to "restore" the grant files to 
their original state. Specifically, we checked the dates of documents 
to detect any widespread updating of files, asked all project officers 
and grant specialists we interviewed who were assigned to the grants in 
our sample whether they added anything to the file in preparation for 
the GAO visit, asked managers to tell their staff to point out 
materials added to the file, and, in one region, shortened the time 
between file request and our visit. To adjust for the alterations, we 
used a special code in our data collection instrument to denote 
"additions," and later subtracted the information in our analysis. The 
file alteration mitigation strategies and the analysis adjustments 
afford us confidence in the accuracy and validity of our file review 
results. 

We conducted our work between February 2005 and April 2006, in 
accordance with generally accepted government auditing standards. 

[End of Section] 

Appendix II: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

John B. Stephenson, (202) 512-3841: 

Staff Acknowledgments: 

In addition to the contact named above, Andrea Wamstad Brown, Assistant 
Director; Bruce Skud, Analyst-in-charge; Rebecca Shea; Lisa Vojta; 
Carol Herrnstadt Shulman; Omari Norman; David Bobruff; Matthew J. 
Saradjian; and Jessica Nierenberg made key contributions to this 
report. 

Related GAO Products: 

Grants Management: EPA Needs to Strengthen Efforts to Provide the 
Public with Complete and Accurate Information on Grant Opportunities. 
GAO-05-149R. Washington, D.C.: February 3, 2005. 

Grants Management: EPA Continues to Have Problems Linking Grants to 
Environmental Results. GAO-04-983T. Washington, D.C.: July 20, 2004. 

Grants Management: EPA Needs to Better Document Its Decisions for 
Choosing between Grants and Contracts. GAO-04-459. Washington, D.C.: 
March 31, 2004. 

Grants Management: EPA Needs to Strengthen Efforts to Address 
Management Challenges. GAO-04-510T. Washington, D.C.: March 3, 2004. 

Grants Management: EPA Actions Taken against Nonprofit Grant Recipients 
in 2002. GAO-04-383R. Washington, D.C.: January 30, 2004. 

Grants Management: EPA Needs to Strengthen Oversight and Enhance 
Accountability to Address Persistent Challenges. GAO-04-122T. 
Washington, D.C.: October 1, 2003. 

Grants Management: EPA Needs to Strengthen Efforts to Address 
Persistent Challenges. GAO-03-846. Washington, D.C.: August, 29, 2003. 

Environmental Protection Agency: Problems Persist in Effectively 
Managing Grants. GAO-03-628T. Washington, D.C.: June 11, 2003. 

Federal Assistance: Grant System Continues to Be Highly Fragmented. GAO-
03-718T. Washington, D.C.: April 29, 2003. 

Results-Oriented Cultures: Creating a Clear Linkage between Individual 
Performance and Organizational Success. GAO-03-488. Washington, D.C.: 
March 14, 2003. 

Major Management Challenges and Risks: Environmental Protection Agency. 
GAO-03-112. Washington, D.C.: January 2003. 

Results-Oriented Cultures: Using Balanced Expectations to Manage Senior 
Executive Performance. GAO-02-966. Washington, D.C.: September 27, 
2002. 

Environmental Protection: Grants Awarded for Continuing Environmental 
Programs and Projects. GAO-01-860R. Washington, D.C.: June 29, 2001. 

Environmental Protection: EPA's Oversight of Nonprofit Grantees' Costs 
Is Limited. GAO-01-366. Washington, D.C.: April 6, 2001. 

Environmental Protection: Information on EPA Project Grants and Use of 
Waiver Authority. GAO-01-359. Washington, D.C.: March 9, 2001. 

Environmental Research: STAR Grants Focus on Agency Priorities, but 
Management Enhancements Are Possible. GAO/RCED-00-170. Washington, 
D.C.: September 11, 2000. 

Environmental Protection: Grants for International Activities and Smart 
Growth. GAO/RCED-00-145R. Washington, D.C.: May 31, 2000. 

Environmental Protection: Collaborative EPA-State Effort Needed to 
Improve Performance Partnership System. GAO/T-RCED-00-163. Washington, 
D.C.: May 2, 2000. 

Managing for Results: EPA Faces Challenges in Developing Results- 
Oriented Performance Goals and Measures. GAO/RCED-00-77. Washington, 
D.C.: April 28, 2000. 

Environmental Protection: Factors Contributing to Lengthy Award Times 
for EPA Grants. GAO/RCED-99-204. Washington, D.C.: July 14, 1999. 

Environmental Protection: Collaborative EPA-State Effort Needed to 
Improve New Performance Partnership System. GAO/RCED-99-171. 
Washington, D.C.: June 21, 1999. 

Environmental Protection: EPA's Progress in Closing Completed Grants 
and Contracts. GAO/RCED-99-27. Washington, D.C.: November 20, 1998. 

Dollar Amounts of EPA's Grants and Agreements. GAO/RCED-96-178R. 
Washington, D.C.: May 29, 1996. 

FOOTNOTES 

[1] EPA, Grants Management Plan, 2003-2008. EPA-216-R-03-001 
(Washington, D.C.: April 2003). 

[2] GAO, Grants Management: EPA Needs to Strengthen Efforts to Address 
Persistent Challenges, GAO-03-846 (Washington, D.C.: Aug. 29, 2003. 

[3] For this report, grant reforms includes EPA's Grants Management 
Plan, policies issued just prior to and after the issuance of the plan, 
and related efforts. 

[4] EPA's internal grants management reviews consist of (1) 
comprehensive grants management reviews of headquarter and regional 
offices conducted periodically by the Office of Grants and Debarment; 
(2) grants performance measure reviews performed annually by the Office 
of Grants and Debarment, using documentation in the agency's central 
databases; and (3) periodic grants management self-assessments 
conducted by EPA program and regional offices. 

[5] EPA policy requires that offices provide annual post-award 
monitoring plans that address how the offices plan to manage their 
monitoring activities for the upcoming year. 

[6] OMB's PART is a diagnostic tool meant to provide a consistent 
approach to evaluating federal programs. 

[7] EPA has two types of formula-based programs, nondiscretionary and 
continuing environmental programs, which is hybrid of nondiscretionary 
and discretionary grant programs. The nonpoint source grant program is 
a continuing environmental program. 

[8] In addition, EPA's Office of the Chief Financial Officer conducts 
limited grant activity. 

[9] Grant actions involving funding include new awards, and increase 
and decrease amendments. The 6,728 grant actions involving funding were 
composed of 3,583 new grants, 2,628 increase amendments, and 517 
decrease amendments. In addition, in fiscal year 2005, EPA awarded 
3,042 no cost extensions, which did not involve funding. 

[10] 33 U.S.C. § 1254(b)(3). 

[11] 33 U.S.C. § 1329(h). 

[12] Omnibus Consolidated Rescissions and Appropriations Act of 1996, 
Pub. L. No. 104-134, 110 Stat. 1321, 1321-299. 

[13] EPA, EPA Order 5700.5: Policy for Competition in Assistance 
Agreements, (Sept. 12, 2002). 

[14] EPA Office of Inspector General, EPA Needs to Compete More 
Assistance Agreements, Report no. 2005-P-00014 (Washington, D.C.: Mar. 
31, 2005). 

[15] EPA, EPA Order 5700.5A1: Policy for Competition of Assistance 
Agreements, 5700.5A1 (Jan. 11, 2005). 

[16] The General Services Administration and OMB's Catalog of Federal 
Domestic Assistance is a governmentwide compendium of federal programs, 
projects, and activities that provide assistance or benefits to the 
American public. Assistance includes, but is not limited to, financial 
assistance such as grants and cooperative agreements. EPA uses other 
tools for announcing some grant programs, such as the Federal Register, 
and competitive funding opportunities are announced on www.grants.gov. 

[17] GAO, Grants Management: EPA Needs to Strengthen Efforts to Provide 
the Public with Complete and Accurate Information on Grant 
Opportunities, GAO-05-149R (Washington, D.C.: Feb. 3, 2005). 

[18] In fiscal year 2005, EPA competed 1,414 new grants or 93 percent 
of the 1,526 new grants eligible for competition. 

[19] EPA, Data Quality Standard for the Project Description Field in 
the Integrated Grants Management System, GPI-04-05, (Jan. 27, 2005). 

[20] EPA, EPA Order 5700.8: EPA Policy on Assessing Capabilities of Non-
Profit Applicants for Managing Assistance Awards, (Mar. 24, 2005). 

[21] EPA Office of Grants and Debarment, Memorandum: Written 
Justifications for Selecting Assistance Agreements, (Mar. 16, 2005). 
This memorandum was written as a supplement to EPA Order 5700.1 Policy 
for Distinguishing Between Assistance and Acquisition (March 22, 1994). 

[22] GAO, Grants Management: EPA Needs to Better Document Its Decisions 
for Choosing between Grants and Contracts, GAO-04-459 (Washington, 
D.C.: Mar. 31, 2004). 

[23] EPA, Review and Announcement of Discretionary Grants, (Apr. 5, 
2005) and EPA, Interim Guidance for New Policy on the Review and 
Announcement of Discretionary Grants, (Apr. 28, 2005). 

[24] In response to the Government Performance and Results Act of 1993, 
EPA has developed a strategic plan that is built around five goals to 
protect human health and the environment: (1) clean air and global 
climate change, (2) clean and safe water, (3) land preservation and 
restoration, (4) healthy communities and ecosystems, and (5) compliance 
and environmental stewardship. EPA, 2003-2008 Strategic Plan: Direction 
for the Future, EPA-190R-03-003 (Washington D.C.: Sept. 2003). 

[25] The site visits occurred in 2004 and 2005, and reports were issued 
later. 

[26] In Region 5, the supervisors are "team leaders" who are 
responsible for reviewing the cost review checklists, among other award 
documents; the grants management officer also reviews the award 
documentation. 

[27] The agency refers to in-depth monitoring as "advanced monitoring." 

[28] The agency refers to ongoing monitoring as "baseline monitoring." 

[29] In this report, we refer to EPA's policy that addresses monitoring 
as "the monitoring policy." See EPA, EPA Order 5700.6: Policy on 
Compliance, Review and Monitoring (Dec. 31, 2002). In January 2004, EPA 
revised the monitoring policy. See EPA, EPA Order 5700.6 A1 Policy on 
Compliance, Review and Monitoring (Jan. 8, 2004). Subsequently, EPA 
extended the policy through December 31, 2006, so that EPA could 
consider changes. See EPA, EPA Order 5700.6A1 CHG 1 (Sept. 28, 2005). 

[30] GAO-03-846. 

[31] The internal reviews were those based on the dates of the site 
visits which occurred in 2004 and 2005. 

[32] EPA has had a closeout policy in effect since 1992. See EPA, EPA 
Closeout Policy for Grants and Cooperative Agreements, GPI-92-04 (Aug. 
27, 1992). 

[33] 40 C.F.R. § 31.50 (grants to state and local governments); 40 
C.F.R. § 30.71 (grants to nonprofit organizations). Each regulation 
grants EPA authority to extend the deadline upon the grantee's request. 

[34] 31 U.S.C. § 3512. 

[35] EPA, Office of Grants and Debarment, Grants Administration 
Division, Guidance for Preparation of 2005 Post-Award Management Plans 
(Nov. 8, 2004). 

[36] The financial and technical reports are key, but not the only, 
documents required to closeout a grant. Other documents may include the 
(1) Lobbying and Litigation Certification Form and (2) Minority 
Business Enterprise/Women Business Enterprise report. 

[37] EPA, Grants Management Fact Sheet for Agency Leaders: Number 10: 
Assistance Agreement File Documentation and Recordkeeping Requirements 
for Grants Management Records (May 1, 1998). 

[38] EPA, EPA Order 5700.7: Environmental Results under EPA Assistance 
Agreements (Nov. 30, 2004). 

[39] The Grants Management Plan's performance measure sets a target for 
the percentage of grant workplans, decision memorandum, and terms of 
conditions that will include a discussion of how grantees plan to 
measure and report on environmental outcomes. However, an Office of 
Grants and Debarment official told us that, in practice, the grant 
workplan is assessed because it is the primary indicator of compliance 
with the policy. 

[40] EPA's assessment of the implementation of this performance measure 
had not been completed by the end of our review. 

[41] GAO-03-846. 

[42] EPA, Office of Inspector General, EPA's Efforts to Demonstrate 
Grant Results Mirror Nongovernmental Organizations' Practices, Report 
No. 2005-P-00016 (June 2, 2005). 

[43] EPA plans to complete its first review of the implementation of 
the new environmental results policy based on these seven criteria in 
2006. 

[44] Although we are using OMB information, we have identified concerns 
about OMB's PART. See GAO, Performance Budgeting: OMB's Performance 
Rating Tool Presents Opportunities and Challenges for Evaluating 
Program Performance, GAO-04-550T (Washington, D.C.: Mar. 11, 2004). 
OMB's reviews can occur about a year before they are reported as part 
of the President's budget. 

[45] These assessments, which were part of the President's fiscal year 
2005 to 2007 budget submissions, were published in February 2004, 2005, 
and 2006, respectively. 

[46] LMI Government Consulting, Management of Assistance Agreements at 
the Environmental Protection Agency: Workload Analysis and Models, 
April 2005. 

[47] EPA, Office of Grants and Debarment, Long-term Grants Management 
Training Plan, 2004-2008, EPA-216-R-04-001 (Washington, D.C.: Aug. 
2004). 

[48] GAO-05-149R. 

[49] According to the memorandum, the Office of Administration and 
Resources Management had determined that senior executive services 
standards adequately addressed grants management responsibilities. 

[50] EPA Office of Inspector General, EPA Managers Did Not Hold 
Supervisors and Project Officers Accountable for Grants Management, 
Report No. 2005-P-00027 (Washington, D.C.: Sept. 27, 2005). 

[51] To further assist regional grants staff in understanding new 
policies, Regions 1 and 9 appointed a project officer and water program 
manager, respectively, to serve as regional office experts on grant 
policies. 

[52] EPA has two types of formula-based programs, nondiscretionary and 
continuing environmental programs, which is a hybrid of 
nondiscretionary and discretionary grant programs. The nonpoint source 
grant program is a continuing environmental program. 

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