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Grants and contracts constitute over two-thirds of the Environmental Protection Agency's (EPA) budget. In fiscal year 2003, EPA awarded $3.6 billion in grants directed by Congress, $656 million in grants awarded at its own discretion, and $934 million in contracts. Under the Federal Grant and Cooperative Agreement Act of 1977, whether EPA should award a grant or a contract depends upon the principal purpose of the award. In this context, GAO was asked to determine (1) the trends over the last 11 years on EPA's expenditures on discretionary grants and contracts and the types of goods and services obtained by each and (2) the extent to which EPA has and follows procedures for deciding when to use grants or contracts.

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Recommendations for Executive Action

Agency Affected Recommendation Status
Environmental Protection Agency 1. The Administrator of EPA should consider ways to improve project officers' compliance with EPA's requirement to properly document in award decision memorandums the justification for using a grant or a cooperative agreement instead of a contract.
Closed - Implemented
In response to the GAO report, on March 16, 2005, EPA issued new guidance to its offices to help them improve the documentation of the assistance versus acquisition decision. Specifically, the guidance is designed to assist program offices prepare more effective and comprehensive justifications for documenting acquisition versus assistance and grants versus cooperative agreement decisions. Several examples of good justifications are described in the memo. It also reminds them that a justification must be provided for all assistance agreements.

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