<DOC>
[108 Senate Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:92394.wais]
S. Hrg. 108-366
GRANTS MANAGEMENT AT THE ENVIRONMENTAL PROTECTION AGENCY
=======================================================================
HEARING
before the
COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS
UNITED STATES SENATE
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
MARCH 3, 2004
__________
Printed for the use of the Committee on Environment and Public Works
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COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS
one hundred eighth congress
second session
JAMES M. INHOFE, Oklahoma, Chairman
JOHN W. WARNER, Virginia JAMES M. JEFFORDS, Vermont
CHRISTOPHER S. BOND, Missouri MAX BAUCUS, Montana
GEORGE V. VOINOVICH, Ohio HARRY REID, Nevada
MICHAEL D. CRAPO, Idaho BOB GRAHAM, Florida
LINCOLN CHAFEE, Rhode Island JOSEPH I. LIEBERMAN, Connecticut
JOHN CORNYN, Texas BARBARA BOXER, California
LISA MURKOWSKI, Alaska RON WYDEN, Oregon
CRAIG THOMAS, Wyoming THOMAS R. CARPER, Delaware
WAYNE ALLARD, Colorado HILLARY RODHAM CLINTON, New York
Andrew Wheeler, Majority Staff Director
Ken Connolly, Minority Staff Director
C O N T E N T S
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Page
MARCH 3, 2004
OPENING STATEMENTS
Crapo, Hon. Michael D., U.S. Senator from the State of Idaho,
prepared statement............................................. 26
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma... 1
Jeffords, Hon. James M., U.S. Senator from the State of Vermont.. 3
WITNESSES
Ellis, Steve, vice president for programs, Taxpayers for Common
Sense.......................................................... 10
Prepared statement........................................... 66
Heist, Melissa, Assistant Inspector General for Audit,
Environmental Protection Agency................................ 5
Prepared statement........................................... 27
Responses by Inspector General Nikki Tinsley to additional
questions from Senator Inhofe.............................. 32
O'Connor, David, Acting Assistant Administrator for the Office of
Administration and Resources Management, Environmental
Protection Agency.............................................. 8
Prepared statement........................................... 51
Responses to additional questions from:
Senator Crapo............................................ 65
Senator Inhofe........................................... 56
Senator Jeffords......................................... 64
Stephenson, John B., Director, Natural Resources and Environment,
General Accounting Office...................................... 6
Prepared statement........................................... 33-50
ADDITIONAL MATERIAL
Audit Report, March 1, 2004, Consumer Federation of America
Foundation-Costs Claimed Under EPA Cooperative Agreements
CX825612-01, CX825837-01, X828814-01, CX824939-01, and X829178-
01, Office of the Inspector General, Environmental Protection
Agency.........................................................69-153
Chart, Percentage of Key Pre-Award Steps Not Completed........... 31
Letters from Consumer Federation of America...................... 17-18
GRANTS MANAGEMENT AT THE ENVIRONMENTAL PROTECTION AGENCY
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WEDNESDAY, MARCH 3, 2004
U.S. Senate,
Committee on Environment and Public Works,
Washington, DC.
The committee met, pursuant to notice, at 9:30 a.m., in
room 406, Senate Dirksen Building, Hon. James M. Inhofe
(chairman of the committee) presiding.
Present: Senators Inhofe and Jeffords.
OPENING STATEMENT OF HON. JAMES M. INHOFE, U.S. SENATOR FROM
THE STATE OF OKLAHOMA
Senator Inhofe. The hearing will come to order.
I want to thank our witnesses for their testimony. The
committee will receive testimony this morning regarding the
grants management at the Environmental Protection Agency. Each
year the EPA awards over half its annual budget in grants to
various recipients, including State, local, tribal government
entities, educational institutions, nonprofit organizations,
and others.
Historically, the EPA has awarded over $4 billion in grants
each year for the past several fiscal years. The majority of
the grants are awarded to governmental agencies. As a former
mayor, I can tell you that the greatest problem that we faced
was not crime and was not poverty, but it was unfunded
mandates. These grants are well placed to take care of that. It
is something that is very meaningful.
The mission of the EPA is to protect human health and the
environment. I believe that grants to locate recipients can be
one of the best tools to accomplish that mission. However, the
EPA Inspector General, the General Accounting Office, and the
Office of Management and Budget have consistently criticized
the EPA for persistent problems in grants management.
The OMB, the EPA, and the IG recommend as recently as 2002,
that the Agency designate grants management as a material
weakness which is the most severe category of weakness under
the Federal Management Financial Integrity Act. For nearly the
last 10 years, the EPA has even acknowledged that grants
management has been a weakness which, to me, proves that this
should be a nonpartisan issue. These problems have persisted
regardless of change in Administration. We have had the same
problems when Carol Browner was here, as we do currently, and
certainly during the Clinton administration, the Bush
administration, or going on back into the past years.
The committee has an obligation to ensure that the EPA
budget is consistent with its mission to protecting human
health and the environment. One week from today we will have
the EPA Administrator, Mike Leavitt, in for a budget hearing.
He will testify before this committee. Most importantly,
however, the EPA has an obligation to ensure taxpayers that it
is accomplishing its mission with the funds it awards each
year.
However, for the last 10 years, the story of grants
management is seemingly a revolving door of the EPA, IG audits,
the GAO reports, congressional hearings, and new EPA policies
and response. Even with this constant cycle of criticism,
hearings, and new policies, the GAO reported late last year
that the EPA continues to demonstrate the same persistent
problems in grants management. These problems include a general
lack of oversight of the grantees, a lack of oversight of the
Agency personnel, a lack of any measurement of environmental
results, and a lack of competition in awarding grants. It is
imperative that Agency personnel are accountable for monitoring
grants. The measurable environmental results are clearly
demonstrated.
Interestingly, the GAO characterized changing part of the
deficiencies in the last 10 years of grants management as
required a major cultural shift at the EPA. I realize GAO was
specifically referring to implementing a new competition policy
in awarding grants. However, it appears that a major cultural
shift is only the beginning of a number of reforms needed to
create the culture of accountable to which you, Mr. O'Connor,
refer in your testimony that is necessary within the Agency for
new and effective grants.
I want to announce to all of you today that this committee
is going to take this oversight responsibility seriously in
regards to grants management. I can remember back when the
Nuclear Regulatory Commission had not an oversight hearing in
something like 5 years. We started having very serious
oversight hearings. It totally changed things. I think we are
going to stay on top on this.
I am going to make a personal commitment that is going to
change this time. They have always said that it is going to,
but this time, Senator Jeffords, we are going to change it. We
are going to have accountability and the revolving door will
stop, with your help.
With that, I will recognize the Ranking Member, Senator Jim
Jeffords.
[The prepared statement of Senator Inhofe follows:]
Statement of Hon. James M. Inhofe, U.S. Senator from
the State of Oklahoma
Good morning. I want to open this hearing thanking our witnesses in
advance for their testimony. The committee will receive testimony this
morning regarding grants management at the Environmental Protection
Agency. Each year the EPA awards over half its annual budget in grants
to various recipients including State, local, and tribal governmental
entities, education institutions, non-profit organizations, and others.
Historically, the EPA has awarded over $4 billion in grants each year
for the past several fiscal years. The majority of grants are awarded
to governmental entities for implementation of environmental programs.
As a former mayor I can appreciate the availability of funds to local
governments to pay for local implementation of Federal programs
designed to ensure such benefits as water pollution control and
maintaining air quality. Last year my hometown, the city of Tulsa,
Oklahoma received about $3 million from the EPA for such projects as
implementation of air quality standards and city water supply security.
The mission of the EPA is to protect human health and the
environment. I believe that grants to local recipients can be one of
the best tools to accomplish that mission. However, the EPA Inspector
General, the General Accounting Office, and the Office of Management
and Budget have consistently criticized the EPA for persistent problems
in grants management. The OMB and EPA IG recommended as recently as
2002 that the agency designate grants managements as a material
weakness, which is the most severe category of weakness under the
Federal Managers Financial Integrity Act. For nearly the last 10 years,
the EPA has even acknowledged that grants management has been a
weakness which to me proves that his should be a non-partisan issue.
These problems have persisted regardless of changes in Administration.
This committee has an obligation to ensure that the EPA budget is
consistent with its mission of protecting human health and the
environment. One week from today, EPA Administrator Mike Leavitt will
testify before this committee concerning the fiscal year 2005 EPA
budget. Most importantly, however, the EPA has an obligation to ensure
taxpayers that it is accomplishing its mission with the funds it awards
each year. However, for at least the last 10 years, the story of grants
management is seemingly a revolving door of EPA IG audits and GAO
reports, congressional hearings, and new EPA policies in response. Even
with this constant cycle of criticism, hearings, and new policies; the
GAO reported late last year that the EPA continues to demonstrate the
same persistent problems in grants management. These problems include a
general lack of oversight of grantees, a lack of oversight of agency
personnel, a lack of any measurement of environmental results, and a
lack of competition in awarding grants. It is imperative that agency
personnel are accountable for monitoring grants and that measurable
environmental results are clearly demonstrated. Interestingly, the GAO
characterized changing part of the deficiencies in the last 10 years of
grants management as requiring a ``major cultural shift'' at the EPA. I
realize GAO was specifically referring to implementing a new
competition policy in awarding grants. However, it appears that a major
cultural shift is only the beginning of a number of reforms needed to
create the culture of accountability to which you, Mr. O'Connor, refer
in your testimony that is necessary within the agency for new and
effective grants management.
I want to announce to all of you today that this committee is going
to take its oversight responsibilities seriously in regards to grants
management. We are going to stay on top of this issue until real
changes are made.
Senator Inhofe. Senator Jeffords.
OPENING STATEMENT OF HON. JAMES M. JEFFORDS, U.S. SENATOR FROM
THE STATE OF VERMONT
Senator Jeffords. Thank you, Mr. Chairman.
The Environmental Protection Agency is charged with a very
important mission: to protect human health and safeguard the
natural environment. I am pleased that the committee is engaged
in oversight of the EPA. However, I hope that in the near
future this committee will also hold hearings on important
health issues, such as lead levels in the water supply of the
District of Columbia, and mercury pollution from power plants,
as well as hearings on new source review, climate change, and
water pollution.
Today we are looking at the ways EPA can improve its use of
resources to protect the environment. These resources include a
substantial amount of funding for grants. Last year, EPA grants
funding amounted to over $4 billion. Much of this grant money
has been put in very good use. Notable examples include the
highly successful Clean Water and Drinking Water State
Revolving Fund Program.
EPA grant money is also used to support continuing
programs, such as the Clean Air Program for monitoring and
enforcing clean air regulations, and to fund environmental
research and training. In short, grants funding is a central
means by which EPA can accomplish important environmental
goals.
Unfortunately, for some time now, studies by the General
Accounting Office and the EPA Office of Inspector General have
documented persistent shortcomings in EPA's grants management.
EPA continues to face several challenges in managing its
grants. These challenges include selecting the most qualified
applicants, effectively overseeing grantees, measuring the
results of grants, and effectively managing staff and
resources.
Addressing these challenges should be a priority for EPA. I
am pleased to see that EPA recently has taken noteworthy steps
to improve the grants management. EPA is moving in the right
direction by instituting competition and oversight policies,
and by developing a comprehensive 5-year grants management plan
that is designed to address many of the shortcomings that we
have seen in the past.
EPA now must successfully carry out these plans for
improvement. At the same time, there is still more that EPA can
do to enhance the effectiveness and efficiency of the grants
programs. I am concerned about the Inspector General's recent
report that alleges a group of illegally accepted Agency grant
funds. However, I would like to know whether EPA knowingly
awarded funds to an ineligible organization and whether any
funds were actually misused.
I look forward to hearing more about EPA's progress and
implementing the new policies and comprehensive plan, and also
about how EPA is responding to further suggestions for
improvement.
Thank you, Mr. Chairman.
[The prepared statement of Senator Jeffords follows:]
Statement of Hon. James M. Jeffords, U.S. Senator from
the State of Vermont
Thank you Senator Inhofe.
The Environmental Protection Agency is charged with a very
important mission--to protect human health and safeguard the natural
environment.
I am pleased that this committee is engaged in oversight of the
EPA. However, I hope that in the near future this committee will also
hold hearings on important health issues such as lead levels in the
water supply of the District of Columbia and mercury pollution from
power plants, as well as hearings on New Source Review, Climate Change,
and water pollution.
Today we are looking at ways EPA can improve its use of resources
to protect the environment. These resources include a substantial
amount of funding for grants. Last year EPA grants funding amounted to
over four billion dollars.
Much of this grant money has been put to very good use. Notable
examples include the highly successful clean water and drinking water
state revolving fund programs. EPA grants money is also used to support
continuing programs, such as the Clean Air Program for monitoring and
enforcing clean air regulations, and to fund environmental research and
training. In short, grants funding is a central means by which EPA can
accomplish its important environmental goals.
Unfortunately, for some time now, studies by the General Accounting
Office and the EPA Office of the Inspector General have documented
persistent shortcomings in EPA's grants management. EPA continues to
face several challenges in managing its grants. These challenges
include selecting the most qualified applicants, effectively overseeing
grantees, measuring the results of grants, and effectively managing
staff and resources.
Addressing these challenges should be a priority for EPA, and I am
pleased to see that EPA recently has taken noteworthy steps to improve
its grants management.
EPA is moving in the right direction by instituting competition and
oversight policies and by developing a comprehensive 5-year grants
management plan that is designed to address many of the shortcomings
that have been identified.
EPA now must successfully carry out these plans for improvement.
At the same time, there is still more that EPA can do to enhance
the effectiveness and efficiency of its grants programs. I am concerned
about the Inspector General's recent report that alleges a group
illegally accepted agency grant funds. However, I would like to know
whether EPA knowingly awarded funds to an ineligible organization and
whether any funds were actually mis-used.
I look forward to hearing more about EPA's progress in implementing
its new policies and comprehensive plan, and also about how EPA is
responding to further suggestions for improvement.
Senator Inhofe. Thank you, Senator Jeffords.
We are going to go from left to right. We will first hear
from Melissa Heist who is the Assistant Inspector General for
Audits. Second, we will hear from Mr. John Stephenson, Director
of Natural Resources and Environment at the General Accounting
Office. Third will be David O'Connor, the Acting Assistant
Administrator for the Office of Administration and Resources
Management, Environmental Protection Agency. Last, we will hear
from Steve Ellis, vice president for Programs, Taxpayers for
Common Sense.
Without objection, your entire statements will be made a
part of the record. You may go ahead and abbreviate as you so
desire.
Ms. Heist, would you begin?
STATEMENT OF MELISSA HEIST, ASSISTANT INSPECTOR GENERAL FOR
AUDIT, ENVIRONMENTAL PROTECTION AGENCY
Ms. Heist. Thank you. Good morning, Mr. Chairman, and
members of the committee. I am Melissa Heist, the Assistant
Inspector General for Audit, at the Environmental Protection
Agency. I am pleased to be here today representing Nikki
Tinsley, the Inspector General.
Thank you for the invitation to inform you about the work
we have done reviewing EPA's management of assistance
agreements, also known as grants. Our recent audit work has
focused on crosscutting national issues and has included grants
made to States, local and tribal governments, and not-for-
profit organizations. Our audits have identified systemic
problems in awarding and overseeing grants. These problems
prevent EPA from achieving the maximum results from the more
than $4 billion awarded in assistance agreements every year.
Inadequate review and oversight has both financial and
environmental consequences. I am going to talk briefly about
our findings in three areas: pre-award reviews, post-reward
oversight, and staff accountability.
Pre-award review ensure that grants are planned to deliver
results at an acceptable cost. We reported on pre-awards in
1998, 2002, and most recently in March of last year. For this
audit, we selected a statistical sample of agreements awarded
so that our findings would address EPA-wide issues. The chart I
have brought along today summarizes what we have found. I will
highlight a few of these findings.
In 79 percent of grants over $100,000, project officers did
not document cost reviews or proposed budgets. Statistically
this equates to over $500 million spent without a cost
analysis. In 42 percent of the grants, EPA did not negotiate
environmental outcomes. We saw a $200,000 grant proposal to
regulate costs charged by power companies that said specific
projects would be established later. The project officer wrote
on the application, ``Why this? Why now?'', yet still approved
the work plan. We even found one agreement where EPA awarded
$700,000 without knowing specific objectives, milestones,
deliverables, or outcomes.
Post-award reviews ensure that grants stay on track to
deliver environmental results at a reasonable cost. We have
reported on EPA shortcomings in overseeing assistance
agreements for over 10 years. A particularly relevant example
is a recent report in which we questioned $4.7 million because
the work was performed by an ineligible lobbying organization.
EPA awarded the cooperative agreements to an associated
organization that did not have any employees, space, or
overhead expenses.
In addition, the ineligible organization's financial
management practices did not comply with Federal regulations.
The recipient did not adequately identify and separate lobbying
expenses in its accounting records. As a result, lobbying costs
may have been charged to the Federal projects. The ineligible
organization also claimed that it had not always followed
Federal regulations because EPA employees directed the
recipient to use a particular contractor.
The deficiencies I have discussed were not due to the lack
of policies or training. They were due to staff not following
existing policies, and to staff not being held accountable. If
EPA is to improve its management of assistance agreements, it
needs to ensure that adequate resources are devoted to the
function, and that management and staff are held accountable
for adhering to Agency policies that promote good management.
Let me conclude by saying that I believe that EPA takes its
assistance agreement challenges seriously. However, after years
of policy and staff training, the problems remain. EPA recently
issued guidance requiring all employees involved with managing
grants to have performance standards that address these
responsibilities. EPA managers now need to carry through and
hold staff accountable for managing EPA's grant programs in a
way that maximizes results.
Thank you, Mr. Chairman and members of the committee, for
the opportunity to participate in the discussion of such an
important topic. We are committed to working with Congress and
EPA to ensure that the money awarded through assistance
agreements every year is producing the intended environmental
and public health benefits.
This concludes my prepared remarks. I will be happy to
respond to questions. I would ask that my written statement be
placed in the record in its entirety.
Senator Inhofe. Thank you, Ms. Heist. You might instruct
your staff to leave that chart up. There are some things that I
do not understand about it. In the question and answer time,
perhaps you could elaborate on that.
Mr. Stephenson.
STATEMENT OF JOHN B. STEPHENSON, DIRECTOR, NATURAL RESOURCES
AND ENVIRONMENT, GENERAL ACCOUNTING OFFICE
Mr. Stephenson. Thank you, Mr. Chairman, and Senator
Jeffords.
We are also pleased to be here today to discuss the
Environmental Protection Agency's management of its grants. My
testimony today is based primarily on our August report from
last year.
As you have already stated, grants account for over half of
EPA's annual budget, or about $4.2 billion annually. EPA's
ability to accomplish its primary mission of protecting human
health and the environment depends largely on how well it
selects, manages, and optimizes the benefits of these grants.
EPA has over 4,000 grant recipients, including State and local
governments, tribes, universities, and nonprofit organizations.
So, effective management of this broad portfolio is a daunting
task.
Congressional hearings in 1996, 1999, and last year have
highlighted EPA's long-standing grants management problems. GAO
and EPA IG have chronicled them in numerous reports.
The bottom line is that EPA continues to face key grants
management challenges despite its efforts to address them.
These challenges, as you have mentioned, Senator Jeffords are,
No. 1, selecting the most qualified grant applicants; No. 2,
effectively overseeing grants; No. 3, measuring the results of
grants; and No. 4, effectively managing its own grants staff
and resources.
EPA has and is taking a series of actions to address these
challenges by, among other things, issuing policies on
competition and oversight, conducting training for project
officers and nonprofit organizations, and developing a new data
system for grants managements. However, these actions have had
mixed results because of the complexity of the problems,
weaknesses in design and implementation, and insufficient
management attention.
EPA's new policies, and its 5-year grants management plan,
requires strengthening, enhanced accountability, and sustained
commitment to succeed. For example, EPA's September 2002 policy
on competition should improve EPA's ability to select the most
qualified applicants by requiring competition for more grants.
However, effective implementation of the policy will require a
major cultural shift for EPA managers and staff because the
competitive process will require significant planning and take
more time than awarding grants noncompetitively. Right now less
than 15 percent of the grants are awarded competitively.
Similarly, EPA's December 2002 oversight policymakes
important improvements in oversight, but it does not enable EPA
to identify systemic problems in grants management. For
example, the policy does not incorporate a statistical approach
to selecting grantees for review. As a result, EPA cannot
effectively use the reviews to better target corrective
actions, or to ensure expenditure of its oversight resources.
Finally, while EPA's 5-year grants management plan does
offer for the first time a comprehensive road map with
objectives, goals, and milestones for addressing grants
management challenges, it does not provide a mechanism for
holding all managers and staff accountable for successfully
fulfilling their grants management responsibilities. For
example, EPA relies on about 1,800 project officers to oversee
grants. These project officers are spread over headquarters and
the ten field regions for EPA.
But their grant responsibilities often fall into the
category of other duties as assigned. Without increased
accountability for these project officers, as well as other
staff and managers, EPA cannot ensure the sustained commitment
needed for the planned success. While EPA has begun
implementation actions in the plan, GAO believes that given
EPA's historically uneven performance in addressing its grants
challenges, continued congressional oversight will indeed be
needed to ensure that EPA's administrator, managers, and staff
remain firmly committed to implementing the 5-year plan's
ambitious targets and timeframes.
In our report, we make specific recommendations to the EPA
Administrator for addressing these weaknesses and strengthening
grants management. The EPA has agreed to implement most of
these recommendations as part of its 5-year plan. However, EPA
is just entering the second year of the 5-year plan, and it is
really too soon to tell whether its corrective actions will
effectively address the problems.
Mr. Chairman, that concludes my statement. I will be happy
to take questions as well. I would ask that my written
statement be placed in the record in its entirety.
Senator Inhofe. Thank you, Mr. Stephenson.
Mr. O'Connor.
STATEMENT OF DAVID O'CONNOR, ACTING ASSISTANT ADMINISTRATOR FOR
THE OFFICE OF ADMINISTRATION AND RESOURCES MANAGEMENT,
ENVIRONMENTAL PROTECTION AGENCY
Mr. O'Connor. Good morning, Mr. Chairman, and Senator
Jeffords. It is a pleasure to be here this morning. As has been
noted, EPA awards some $4 billion in grants, representing about
half of the Agency's budget each year. This is the key
mechanism by which EPA and its grant recipients deliver
important environmental protection to the public.
Most of these grant funds, about 89 percent, go to States,
tribes, and local governments, with the remainder going
primarily to nonprofit organizations and educational
institutions. Some of this funding is the result, as you know,
of congressional earmarks. In 2003, about 13 percent of our
grant dollars were earmarked and about 51 percent of our total
grant dollars to nonprofit organizations.
We at the EPA have an obligation to manage these grant
dollars effectively and to ensure that they are used to further
the Agency's mission. However, for a number of years, our grant
management practices have been criticized by the General
Accounting Office and the Inspector General, and our
credibility has suffered. Grants to nonprofit organizations
have been especially criticized for inadequate management and
oversight.
Over the period of 1995 to 2001, EPA did take steps to
respond to grant management concerns. For example, we virtually
eliminated a backlog of 20,000 grants awaiting grant closeout.
We trained over 4,000 project officers, and we issued a number
of post-award monitoring policies.
While these steps resulted in some progress, it has been
clear that we continue to face significant challenges in grants
management, especially in the area of grantee selection,
oversight, accountability, and environmental results. In 2001,
we recognized the need to address grants management concerns in
a much more comprehensive and strategic manner. In April 2003,
as GAO just noted, we did issue for the first time a long-term
5-year grants management plan with associated performance
measures.
The plan commits EPA to accomplishing five goals: No. 1,
enhancing the skills of EPA personnel involved in grants
management; No. 2, promoting competition in the awarding of
grants; No. 3, leveraging technology to improve performance;
No. 4, strengthening our oversight of grants; and No. 5,
identifying and documenting environmental results.
I would like to touch on some of these very briefly. In
goal one, a key component of our strategy is ensuring that all
of our project officers are certified to manage grants. Project
officers now must complete a basic 3-day grants management
training program and take periodic refresher courses to
maintain their certification. We are improving our training
program through the development of a long-term training plan
linked to EPA's human capital strategy. This long-term plan
will establish an Agency-wide process for ensuring that grants
managers are timely trained on new policies and regulations and
that we have measures for determining how our training
activities contribute to improved grants management.
In goal two, EPA is firmly committed to increasing
competition for grant awards. As was noted, our grants
competition policy went into effect in October 2002. In its
first year of implementation, EPA competed 75 percent of new
awards that are covered under the policy. This means that over
900 grants were competed in 2003. This accounted for 85 percent
of the dollars awarded subject to the policy.
In goal three, we recently deployed an enhanced Integrated
Grants Management System which we consider essential to
strengthening grants management. This is a paperless system
that fully automates the grants process from cradle to grave.
It provides electronic tracking of milestones, products, post-
award activities, and other information vital to our project
officers' ability to manage grants. We have now deployed this
system across all 10 of our regions and are beginning to deploy
it across our headquarters offices.
In goal four, in December 2002, we issued a comprehensive
post-award monitoring policy that significantly expands our
program for monitoring grants after they have been awarded. It
requires baseline monitoring of all active grants and advance
monitoring on at least 10 percent of active grantees. We
focused our early attention on nonprofit organizations where we
know there have been poor performing grant recipients. In 2003,
we conducted 408 events monitoring reviews. Where we found
problems, we were largely successful in having them corrected,
or we placed controls on grantee expenditure pending
resolution.
Mr. Chairman, in conclusion I would like to say that EPA
has set in motion a comprehensive plan to address grants
management weaknesses. It is a serious plan, and one that will
require our full effort and attention to implement, but we are
determined to do it. It will not be easy, and it will not
happen overnight, but we have the full support of EPA's
leadership as we implement this plan. I am very encouraged by
the genuine commitment of our regional and program offices to
work with us to make this plan a successful one.
Last, let me say that I am very proud to have a grant
office under me that has the right leaders to make this plan
successful and a staff that is very committed to the task. They
are determined, and they are working very hard to make this
plan a success.
Thank you very much, Mr. Chairman. I would ask that my
written statement be placed in the record in its entirety.
Senator Inhofe. Thank you, Mr. O'Connor.
Mr. Ellis.
STATEMENT OF STEVE ELLIS, VICE PRESIDENT FOR PROGRAMS,
TAXPAYERS FOR COMMON SENSE
Mr. Ellis. Thank you very much, Chairman Inhofe. Good
morning, Senator Jeffords. Thank you for inviting me to
testify. Thank you for holding this hearing. I am Steve Ellis,
vice president for programs at Taxpayers for Common Sense, a
national nonpartisan budget watchdog organization.
Rather than revisiting the comments that have already been
made, which we agree with, I would like to put some of this
into context and provide a few additional recommendations.
The EPA must clearly define missions and goals expected
from its grants program so that the taxpayer can be sure that
every dollar is being spent wisely. After several false starts
and criticism from virtually everyone, EPA appears to have
instituted reforms that could lead the Agency toward
responsible management of its grants portfolio. But time will
tell whether they have truly turned the corner.
TCS recommends additional measures to help buttress EPA's
reform efforts, including development and implementation of
grants management, evaluation criteria for program officers,
and other grant management personnel, annual progress reporting
to Congress, and rapid deployment in the centralizing of the
proposed grant database systems, which I understand is ongoing.
As has already been said, roughly half of the EPA budget is
awarded in the form of assistance agreements or grants, but
breaking it down would be instructive. In fiscal year 2002,
$3.5 billion of this grant money was allocated in non-
discretionary programs such as drinking and clean water State
resolving funds, and a few other programs that are typically
formula grants and earmarks.
The remaining amount, $719 million, was awarded in
discretionary grants to State and local governments, tribes,
non-profits, and universities. We applaud the committee for its
role in reviewing these programs, and urge the committee to
look more closely at the non-discretionary programs to ensure
that they are properly structured and meeting the Nation's
goals at appropriate costs.
The four key areas the EPA has to improve--and these
parallel the GAO's--are competitive grant awards, effective
grantee oversight, ensuring grants help achieve Agency goals,
and supporting and holding staff accountable for performance.
EPA seems to be responding. In September 2002, EPA issued
the first policy to govern the competitive awarded grants. In
2002, a new grant oversight policy was issued. Finally, in
April 2003, the Agency issued its grants management plan for
2003 to 2008. This plan touched on all four of our key areas
for improvement.
However, any EPA plan must be evaluated based on both the
fine print and the follow through. The grants management plan
outlines several objectives for training grants personnel. One
of these is to increase the percentage of grants managed by
certified project officers from the 2003 baseline of 85 percent
to 100 percent in 2004. But considering that, as Ms. Heist
indicated earlier, the IG identified glaring shortcomings in a
large number of randomly sampled EPA assistance agreements
shortly before the grants management plan was released. The
certification process itself may be flawed.
Promoting competition for grant awards clearly comes down
to Agency commitment. Plain and simple, if EPA cracks down on
allowing sole source and similar type grants, competition will
flourish. If the Integrated Grants Management System, IGMS, is
fully deployed, it could significantly help in grant tracking.
Strengthening oversight on achieving outcomes requires a
commitment by EPA at both the national and regional level to
look over grantee shoulders and demand basic information
grantees are supposed to supply.
While we support the reforms that EPA has proposed, there
are some additional improvements that must be made. To inject
responsible grant management throughout the Agency, the EPA
must develop performance standards for EPA grant management
staff at all levels. Reform will only be effective if program
officers and all staff charged with grant management embrace
these efforts. If personnel are not evaluated on grant
management performance, it will be perceived as a lower
priority and we will be back discussing grant management
failures at EPA every few years.
Similarly, EPA officials have to commit to making reforms
stick. To concentrate their attention, we believe it is vital
that EPA report to Congress annually on its progress and that
this committee, the GAO, and the EPA IG exercise the vigorous
oversight that has gotten us this far in the reform process.
Finally, we strongly believe that centrally and publicly
available grant and tracking data will make reform efforts more
enforceable and efficient. We urge the EPA to deploy the IGMS
system as quickly as possible, but again, any system will only
be as effective as the people inputting the data. To that end,
we urge the EPA to investigate centralizing and streamlining
grant management to fewer, more highly trained, individuals.
Although it is apparent that there has been much done to
increase accountability in the EPA grants system, there is much
more to do. However, we believe that with vigilant oversight,
EPA has turned the corner on reforms. We are in difficult
budget times, as you well know. With a $521 billion deficit, we
have to be sure that every dollar we spend is being spent cost
effectively to further our Nation's goals.
Thank you for the opportunity to testify. I would be happy
to answer any questions you might have. I would ask that my
written statement be placed in the record in its entirety.
Senator Inhofe. Thank you, Mr. Ellis, for an excellent
opening statement. I thank all of you.
We are going to go ahead, if it is all right, Senator
Jeffords, and do ours in a series of 5-minute questions. Other
Senators will come and I would like to have them fall in line
as they come in, if that is acceptable with you.
I would start off by saying in your one, two, three, four,
you might add a fifth one and that is that those who are
involved, obey both the intent and the letter of the law. It
appears to me that there are many of them that are just being
very nonchalant about the work that they are doing. That is
what we anticipate should change.
Ms. Heist, you have your chart up there. I do not
understand it.
Ms. Heist. Let me explain. On mission relevance, this would
be looking at whether or not the project officer, in reviewing
the grant application, documented that there was some
connection between the work that was to be performed and the
Agency's strategic goals. We found in the end that there were
19 percent of the cases that we looked at, where that was not
the case.
In 19 percent of the cases, we found that there was not a
link between the work that was to be performed and a strategic
goal of the Agency. On probable success, we found that there
was 31 percent of the cases where the project officer did not
look at whether or not the grantee was technically competent,
and what their past performance was like for the Agency.
Senator Inhofe. On those two, how does that relate to $42
million and $88 million?
Ms. Heist. We projected the results to the $1 billion
universe we looked at. So, of the $1 billion, there would be
$42 million where there was not a link to mission relevance,
and there would be $88 million where there would not be a link
or there was not an indicator that the grantee would be
successful.
Senator Inhofe. Now, reasonable costs?
Ms. Heist. Reasonable costs would be about half the dollars
that we looked at in the universe. The person reviewing the
grant application did not document that they had reviewed the
costs and the costs seemed reasonable for the work that was
being proposed.
Senator Inhofe. That is pretty shocking. Do all the costs
on your chart from deficiencies in the pre-award process only
relate to discretionary grant recipients?
Ms. Heist. No, it goes beyond discretionary grants. We also
looked at some continuing environmental programs which would be
grants to States. These are air and water grants that we looked
at as a part of this sample.
Senator Inhofe. Is the major problem in the discretionary
grants?
Ms. Heist. We found that there were problems with
discretionary grants. We also found some instances where in the
grants to States there was not a clear link, and there was not
a clear statement of what environmental results should be
happening.
Senator Inhofe. On your grants to States, and your grants
to cities, having been a mayor, I am familiar with that. Is not
part of that that they are given to the States to, say, upgrade
a water purification system or something, and they make those
determinations as to how that is being spent at the State
level? Is that correct?
Ms. Heist. That is correct. Although what we would like to
see is some mutual agreement about what is going to happen.
Now, the actual water project that you are talking about, we
did exclude those from our samples.
Senator Inhofe. I see. You are testifying that the EPA
mismanagement of only discretionary grants costs the taxpayers
hundreds of millions of dollars each year?
Ms. Heist. Of predominately discretionary funds; yes.
Senator Inhofe. Why do you focus on discretionary
recipients in particular?
Ms. Heist. In the past we found the most problems was with
discretionary grants. We found problems with, as has been
mentioned here today, competition. We found Agency managers
continued to use the same grantees year-after-year and there
has not been a lot of competition. Predominantly, that is where
we found the problems, so we continue to focus in that area.
Senator Inhofe. Mr. Stephenson, the EPA largely awards
either discretionary grants or non-discretionary grants. What
is the average amount awarded in each category? Can you break
that down in percentages?
Mr. Stephenson. Of the $4.2 billion--I do not know if I can
do the percentages in my head--but there is about $719 million
that are, in fact, discretionary. The majority, $1.2 billion,
is like clean water revolving that goes primarily to the States
on the basis of a formula. There is $0.8 billion in drinking
water revolving funds. Then there is about another $1 billion
in what is called continuing environmental programs. All those
are what we would call formula grants or non-discretionary
grants that go to the States primarily.
Senator Inhofe. OK; that is fine. Where does that leave
discretionary grants?
Mr. Stephenson. $719 million of the $4 billion. So whatever
percentage that is.
Senator Inhofe. Your testimony references grant recipients
sometimes being subject to the Single Audit Act. But with the
comparatively low average of a discretionary grant, would not
recipients rarely be subject to a $500,000 a year expenditure
threshold of the Act?
Mr. Stephenson. Yes, the Single Audit Act, of course, looks
from a grantee perspective on how many total Federal grants
they have, regardless of the Agency that it comes from.
Therefore, EPA awards many small grants that fall below the
threshold for audit. So it would not be picked up in that form
of oversight. EPA, of course, does its own oversight. That is
just another Federal requirement for grantees.
Senator Inhofe. All right.
Senator Jeffords.
Senator Jeffords. Ms. Heist, in your written testimony you
report that senior resource officials at EPA cited the limited
availability of resources for staffing, travel, and training as
a factor that contributes to EPA's difficulties with oversight.
Would you elaborate on that?
Ms. Heist. We did a review. This is based on interviews of
these officials. That is what they told us, that they did lack
funding to do some of the oversight that they were being asked
to do.
Senator Jeffords. Did the senior resource officials
consider this a very serious problem, a limiting factor?
Ms. Heist. I cannot really comment on that. They did
believe that it was necessary to do this work, so they did
consider it to be serious work. This is the reason they gave us
for not doing it.
Senator Jeffords. What kinds of projects were supposed to
be carried out using the grant money awarded to the Consumer
Federation of American Foundation? Is there any evidence that
the grant money was not used for these projects, or that the
goals of the projects were not accomplished?
Ms. Heist. The projects were for various indoor air
projects. They were for educating the public about various
indoor air issues. The work that we did was a financial audit.
We focused on how the money was spent. We have been told by the
recipient in responding to the report that EPA was satisfied
with the work that was performed.
Senator Jeffords. Did you find that any of the EPA funding
awarded to the Foundation was spent on lobbying?
Ms. Heist. We were not able to determine that because of
the way the accounting records were maintained by the
recipients. So we could not determine that.
Senator Jeffords. Mr. O'Connor's written testimony
indicates that 51 percent of the nonprofit grant dollars in
fiscal year 2003 came from earmarks. Nonprofit organizations
have been a focus of the concern about the use of EPA grants
funding. Have you found that problem with nonprofit grant
recipients are equally pervasive among earmarked and non-
earmarked?
Ms. Heist. We have not done a study that would specially
address that. I cannot comment on that.
Senator Jeffords. Are there other groups besides non-
profits that have been found to have problems managing their
EPA grants funding?
Ms. Heist. A few years ago we did a series of studies on
tribal grants. We also found issues in that area. Many of these
issues dealt with the need to have better accounting records.
Senator Jeffords. What kinds of problems are common and
what kinds are most worrying?
Ms. Heist. When we go out and do financial audits of
grantees, the problems we typically find are inadequate support
for labor costs, or the grantee is not competitively acquiring
contracts. Those would be the predominant areas that we focus
on or see when we go out and audit the actual grantees.
Senator Jeffords. Thank you.
Mr. Stephenson, EPA has a history of issuing policies to
help remedy to grants management shortcomings. But problems
have nevertheless persisted. Do you think that EPA's latest
policies and plan are likely to change that pattern?
Mr. Stephenson. They have potential, but again it is
important how effectively they are implemented. That is why we
put so much stock in individual staff accountability. The 1,800
project officers are key in effectively overseeing grants, but
it is not their primary function. They work in the Office of
Water, the Office of Air, and the like. We think that
individual accountability and even reducing the number of total
project officers that are involved in grants oversight needs to
happen to effect that cultural change that we talk about. So
no, I do not think it will be effective unless there is that
cultural change.
Senator Jeffords. In your written testimony you suggest
that the decentralization of grants management staff--some
working at EPA headquarters and others working at regional
offices--presented a challenge to holding staff accountable and
improvement of grant management. Do you think that this
decentralization contributes significantly to EPA's grants
management problem? How do you think the challenge can be best
overcome?
Mr. Stephenson. Yes, that is the 1,800 project officers
that I just mentioned. I think as a first step you need to
build into their own performance statements and their job
descriptions grants management as one of their key functions.
Unless you do that, they are going to accept these as other
duties as assigned and not as important as their primary
duties. It seems like a simple step, but we think that would go
a long way toward changing their behavior.
Senator Jeffords. In their new comprehensive grants
management plan, EPA sets a number of goals for improving
grants management. Which one of these goals, if achieved, would
bring about the biggest improvement? Do you think the plan
adequately outlines a path for achieving that goal?
Mr. Stephenson. I do. As I mentioned they are in the first
year of the 5-year plan right now. What is missing is that
individual accountability that we were looking for and how it
is going to be built into performance evaluations of the
individual staff responsible for grants oversight.
Senator Jeffords. Thank you. Thank you, Mr. Chairman.
Senator Inhofe. Mr. Stephenson, if we are relying solely on
the EPA for monitoring to ensure proper use of grant funding,
would not the discretionary grant recipients be the most
difficult? It is my understanding that they would average
around $150,000 of the discretionary grants; is that a ballpark
figure?
Mr. Stephenson. I am not sure. They range all over the
place.
Senator Inhofe. OK. Let us assume it is because I think it
is. Would they be the most difficult to monitor?
Mr. Stephenson. I would think so. The non-discretionary
grants go by formula to the States based on the need. There is
a little more specificity in place as to how you oversee that
category of grants. So I would agree that the non-discretionary
grants are probably more problematic.
Senator Inhofe. Ms. Heist, you responded to a question from
Senator Jeffords concerning money that might be going for
illegal uses, such as lobbying. In your audit you said, ``I am
especially interested in your March 1, 2004 audit of the
Consumer Federation of America Foundation.''
How often does the IG review audit grantees?
Ms. Heist. Often we will do these types of audits when the
Agency has, in fact, gone out and done a review and believes
that there are problems that need further audit work on
investigation.
Senator Inhofe. Fifty percent?
Ms. Heist. We do not know. Since they are covered by Single
Audit, we will typically focus on ones perhaps were there is a
problem in a Single Audit report, or one that the Agency brings
to our attention. We probably do 20 of these a year ourselves.
Senator Inhofe. What type of recipient was the Consumer
Federation of America Foundation?
Ms. Heist. By type do you mean competitive, noncompetitive,
discretionary?
Senator Inhofe. No, I mean, what do they do for a living?
Ms. Heist. As far as I know they are an advocacy group.
Senator Inhofe. It is a lobbying group; is it not?
Ms. Heist. I do not know that.
Senator Inhofe. You do not know?
Ms. Heist. I know they do some lobbying because they are
registered that way.
Senator Inhofe. OK. Then they are a lobbying group.
How much has this Foundation received from the EPA in
grants?
Ms. Heist. We looked at $5 million which I understand were
the costs from 1996 to 2002.
Senator Inhofe. Yes, I think that is consistent with my
information. I have $4.6 million since July 1997 to September
2003; do you think that is accurate?
Ms. Heist. It should be fairly accurate.
Senator Inhofe. Your audit revealed that EPA was providing
millions to nonprofit recipients that was simply a front for a
lobbying organization. I understand that there is a subsidiary
and they are a chain to someone else who receives grants.
Ms. Heist. The grant was made to a foundation.
Senator Inhofe. Consumer Federation of America Foundation?
Ms. Heist. Yes; that is correct.
Senator Inhofe. But then you said in answer to my question
that the Foundation received this amount of money. However, the
Consumer Federation of America is a lobbying group. Let me just
ask you the question this way. Do you have any reason to
believe that they are not recipients of grants; this lobbying
group?
Ms. Heist. Directly recipients?
Senator Inhofe. Either directly or indirectly. It makes no
difference to me.
Ms. Heist. We know that they indirectly receive money
because the money went to the Foundation and the Foundation did
not----
Senator Inhofe. Is this legal?
Ms. Heist. It will be the Agency's final determination, but
we do not believe it was legal.
Senator Inhofe. The EPA referred this group to the IG for
an audit. At what point did this happen?
Ms. Heist. In 2002.
Senator Inhofe. I would assume, then, that this recipient
has been disbarred from receiving grant funding?
Ms. Heist. That would not be correct. The group continues
to receive funding. However, they have reorganized so that they
are now an eligible recipient.
Senator Inhofe. Who has reorganized? Consumer Federation of
America?
Ms. Heist. Consumer Federation of America.
Senator Inhofe. And you are saying to this committee here
that they are a lobbying group anymore; is that right?
Ms. Heist. No, I am not saying that.
Senator Inhofe. Well, if you are trying to get over an act
that is illegal, and you say that you are pinning your case on
the fact that they have reorganized, you know, they can
reorganize and still use Federal funds for lobbying; is that
not correct?
Ms. Heist. I believe that is correct.
Senator Inhofe. Senator Jeffords.
Senator Jeffords. To followup on that, is there any
evidence that the CFA or CFA Foundation did not follow the law
on EPA's instructions at any time regarding the separation
between the organizations that was necessary for the Foundation
to receive cooperative agreement funds?
Ms. Heist. I do not know that we specifically looked at
that. We looked at what happened when they received the grant
and how the application was made. We looked at how the money
was spent. I really cannot comment on that.
Senator Jeffords. Mr. Chairman, I would ask unanimous
consent that a letter that I have here from the Consumer
Federation of America be submitted for the record.
Senator Inhofe. Without objection, so ordered.
[The referenced document follows:]
Consumer Federation of America,
March 2, 2004.
Hon. James M. Inhofe,
Chair, Senate Environment and Public Works Committee,
Washington, DC.
Hon. James M. Jeffords,
Ranking Member, Senate Environment and Public Works Committee,
Washington, DC.
Dear Chairman Inhofe and Ranking Member Jeffords: We understand
that you will hear testimony tomorrow at your hearing on grants
management by the U.S. Environmental Protection Agency (EPA) about a
series of cooperative agreements the Consumer Federation of America
Foundation (CFAF) has received from EPA since 1996. A representative of
the EPA Office of Inspector General apparently will discuss an audit
report they just issued, which contends that $4.7 million in
cooperative agreements received by CFAF should be disallowed.
The Office of Inspector General (OIG) bases its conclusion on the
allegation that CFAF is an ``ineligible lobbying organization'' that
was not entitled to receive funds under Section 18 of the Lobbying
Disclosure Act (LDA). The OIG contends that there was no discernible
separation between CFA and its Foundation, ensuring that EPA funds
received by the Foundation actually went to CFA, which was a lobbying
501(c)(4) organization ineligible to receive Federal funds. (CFA has
since been approved by the IRS to be a 501(c)(3) organization.)
The OIG's conclusions are entirely without legal justification, not
to mention unfair and unreasonable. The OIG report also completely
ignores the high-quality, award winning work completed by CFAF for the
EPA on important public health issues, like radon awareness and indoor
air quality. (For more information on our concerns, please see the
attached letter and CFA's complete rebuttal to the OIG, which is listed
as Appendix B in the Audit Report the Committee has received.)
We urge you to question the OIG's conclusions for several reasons:
1. OIG's interpretation of Section 18 has no basis in the statutory
text of legislative history, nor any support in case law. On the
contrary, the legislative history, including a floor statement by
Senator Simpson, clearly demonstrates that a close affiliation between
a non-lobbying organization (such as the CFA Foundation) and a lobbying
501 (c)(4) (such as CFA) does not make the non-lobbying organization
ineligible to receive Federal funds, directly contradicting the OIG
interpretation. The OIG interpretation is also inconsistent with the
purposes of Lobbying Disclosure Act Section 18, and raises serious
First Amendment issues--issues that Congress recognized and tried to
avoid. Finally, the OIG interpretation would reverse EPA's apparently
established interpretation of Section 18, on which the CFA Foundation
relied when it accepted EPA cooperative agreements between 1997 and
2002. Thus, OIG's interpretation, even if permissible, cannot be
applied to the CFA Foundation retroactively.
2. CFAF's work for EPA was of high-quality and widely praised--even
by the OIG. In 1991, EPA solicited CFA to manage a program on indoor
air quality; 2 years later, EPA asked CFA to manage a national public
service campaign to educate consumers about the health risks of radon.
Both awards were initiated by EPA. As a result of EPA awards received
by the CFA Foundation just since 1996, over $100 million dollars in
media was donated to air five public service advertising campaigns on
radon dangers, as well as three environmental tobacco public service
advertising campaigns. These advertisements reached millions of
consumers who tested their homes for radon or who pledged to make their
homes smoke-free. More than 40,000 consumers were counseled on how to
rid their homes of high levels of radon. One of CFAF's radon campaigns
received the 2000 National PSA Emmy Award from the National Academy of
Television Arts and Sciences. The OIG has praised CFAF's work with EPA
as well. Its website highlights EPA's work with CFAF on radon public
services announcements as an example of good EPA management practices.
3. CFAF's cooperative agreements were initiated, encouraged and
closely supervised by EPA, which was well aware of the relationship
between the CFA Foundation and CFA. The CFA Foundation closely
cooperated with EPA and followed its directions explicitly. In 1996 and
1997, when CFA--at that time a 501(c)(4) organization--became
ineligible to receive Federal funds, EPA arranged for CFA's programs to
be transferred from CFA to the CFA Foundation. In fact, EPA relied on
the CFA/Foundation relationship to assure that the transferred programs
would continue to be managed by the same personnel. On each program
undertaken at EPA's request, the Foundation worked closely with EPA on
a weekly and often daily basis. In fact, EPA was involved in all
important program decisions, including the selection of sub-recipients
and contractors. EPA, was, without question, extremely satisfied with
the Foundation's work, and made two additional sole source awards to
the Foundation in 2001.
4. The OIG conclusions focus on technical defects in documentation
and lack of sophistication of CFAF's financial management system,
ignoring the fact that the underlying transactions were sound and
adequately documented. The issues raised by the OIG relate almost
exclusively to compliance with documentation requirements (such as
procurement procedures, cost/price analysis, written procedures, and
standard contract clauses) rather than with violation of substantive
rules and regulations. These documentation issues were first called to
CFAF's attention in March 2002 by EPA and were immediately corrected.
We appreciate your attention to these concerns.
Sincerely,
Travis B. Plunkett,
Legislative Director.
______
Consumer Federation of America,
January 20, 2004
Michael A. Rickey, Director,
Assistance Agreement Audits,
Office of Inspector General,
Environment and Public Works Committee,
Washington, DC.
Subject: Draft Audit Report of ``Costs Claimed under EPA Cooperative
Agreements CX825612-01, CX825837-01, X-828814-01, CX 824939-01 and X
829178-01''; Comments of Consumer Federation of America
Dear Mr. Rickey: This letter, and the Response and legal memorandum
attached hereto, set forth the written comments of the Consumer
Federation of America (``CFA'') on the draft audit report (``DAR'') on
costs claimed by the Consumer Federation of America Foundation (the
``Foundation'') under the above-referenced EPA cooperative agreements
(``CAs''). The Response proceeds through the DAR point-by-point,
presenting CFA's detailed response to questions in the report regarding
the Foundation's compliance with EPA regulations and OMB Circulars. The
legal memorandum analyzes OIG's claim that the Foundation was not
eligible to receive Federal funds under Section 18 of the Lobbying
Disclosure Act of 1995, that each CA awarded to the Foundation was
therefore illegal, and that the Foundation must therefore refund every
penny of the $4.7 million it received under the CAs. This letter sets
forth a brief overview of CFA's comments.
The DAR's analysis and recommendations are neither fair nor
reasonable, for three reasons: First, the DAR is based on a fundamental
misunderstanding of the circumstances under which the CAs were awarded
and implemented. Second, it focuses on technical defects in
documentation and lack of sophistication of CFA's financial management
system, ignoring the fact that the underlying transactions were sound
and adequately documented. Third, it proposes a $4.7 million
disallowance based on a legal interpretation of LDA Section 18 that is
untenable on its face, and whose retroactive application to the
Foundation is prohibited by law.
[1] In 1991, EPA asked CFA to manage a program on indoor air
quality; 2 years later, EPA asked CFA to manage a national public
service campaign to educate consumers about the health risks of radon.
Both awards were initiated by EPA--that is, EPA determined the need for
Federal action, defined the scope of the program, established the
amount of available funding, and only then approached CFA to implement
the program on its behalf. Each CA was awarded to CFA without
competition. In 1996 and 1997, when CFA, a 501(c)(4) organization,
became ineligible to receive Federal funds, EPA arranged for CFA's
programs to be transferred from CFA to the Foundation under new CAs. At
the time, EPA was well aware of the CFA/Foundation relationship--and,
in fact, relied on that relationship to assure that the transferred
programs would continue to be managed by the same CFA personnel. In
1997, EPA asked the Foundation to undertake a public service campaign
to alert consumers to the health effects of secondary smoke on
children. This third CA was also awarded without competition.
On each program undertaken at EPA's request, the Foundation worked
closely with EPA on a weekly and often daily basis. Indeed, EPA was
involved in all important program decisions, including the selection of
sub-recipients and contractors. EPA was, without question, extremely
satisfied with the Foundation's stewardship of the CA programs. It
expressed that satisfaction by repeatedly praising the programs to the
Foundation's staff, consultants, and contractors; by providing
substantial additional funding to the programs each year; and by making
two additional sole-source awards to the Foundation in 2001.
[2] For each of its CAs, the Foundation kept detailed and accurate
financial records, including job cost activity reports for each CA,
that show the receipt and expenditure of the EPA funds disbursed under
the CAs, and support the costs claimed under those awards.\1\ Its
employees prepared personal activity reports and other timekeeping
records sufficient to support all (or substantially all) of the labor
hours charged to the CAs.\2\ Each of its procurement contracts was
awarded on the basis of a competitive solicitation or, if awarded with
less than ``open and free competition,'' on the basis of specific
instructions from EPA (``directed contract'') or another well-
recognized sole-source justification.\3\ For each of those contract
awards, it conducted a detailed price analysis, as required by EPA
regulations.\4\ Finally, it complied with its contractual obligations
regarding submission of indirect cost proposals.\5\ Moreover, final
cost data for 1997 to 2002 show that the Foundation recovered
significantly less in indirect costs than it was entitled to recover:
the Foundation has under-recovered approximately $600,000 in indirect
costs from EPA.
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\1\ Response, Parts 1, 3[A] and 3[B], and 4.
\2\ Response, Part 2.
\3\ Response, Parts 7[A], 7[C] and 7[D].
\4\ Response, Parts 7[B], 7[C] and 7[E].
\5\ Response, Part 6.
---------------------------------------------------------------------------
The issues raised in the DAR relate almost exclusively to
compliance with documentation requirements (e.g., procurement
procedures, cost/price analysis, written procedures, standard contract
clauses) rather than compliance with substantive rules and regulations.
These documentation issues were first called to our attention in March
2002 by the EPA Grants and Management Office. At that time, we took
immediate steps to address EPA's concerns; by May 2002, EPA had
approved our proposed plan of action, which we then implemented.
Consequently, we do not believe that any of these documentation issues
can reasonably support a disallowance of costs.
[3] Finally, with respect to the Foundation's eligibility to
receive Federal funds: According to the DAR, the Foundation, a
501(c)(3) organization, was not sufficiently separated from CFA, then a
501(c)(4) organization, to be treated as a separate organization for
purposes of LDA Section 18. In addition, at the time CFA engaged in a
small amount of lobbying. On that basis, the DAR concludes that the
Foundation was not a 501(c)(3) organization, but was instead a
501(c)(4) organization that engaged in lobbying, and it was therefore
not eligible to receive Federal funds. Accordingly, every penny of the
$4.7 million received by the Foundation must be refunded.
As explained in detail in the legal memorandum, the DAR's
interpretation of Section 18 is based on factual misrepresentations and
flawed legal analysis.
<bullet> The DAR misrepresents the Foundation's history and
corporate purpose. The Foundation was not, as the DAR suggests,
established ``to receive the Federal funds'' that CFA, a 501(c)(4)
organization that engaged in lobbying, was no longer eligible to
receive. In fact, the Foundation was established in 1972, more than 20
years before the enactment of the LDA, and in 1996, was a fully
functioning 501(c)(3) organization. It was not a sham designed to
mislead EPA
<bullet> The DAR understates the degree of separation between the
Foundation and CFA. The organizations had separate Boards of Directors
(including, in the Foundation's case, outside directors unconnected to
CFA), separate financial accounts and separate funding.
<bullet> The DAR misreads the text of the LDA Section 18, where
eligibility for Federal funds turns on the IRS classifications alone,
and its legislative history, which suggests that separate incorporation
and IRS recognition is sufficient to avoid the Section prohibition.
<bullet> EPA has no authority to adopt an expansive interpretation
of Section 18. It is not the agency charged with enforcement of the
statute, and it has no particular expertise in the issues arising
thereunder, Furthermore, an expansive interpretation would raise
difficult First Amendment issues, a situation that Congress anticipated
when it passed Section 18, and attempted to avoid by making the statute
clear and unambiguous.
<bullet> Even if the OIG interpretation were plausible, and EPA had
the authority to adopt that interpretation and apply it to recipients,
EPA could not apply that interpretation retroactively to the
Foundation.
In fact, it appears that EPA already considered and rejected the
OIG interpretation of LDA Section 18 [i] in 1996 and 1997, when it
transferred CFA's radon programs to the Foundation under new CAs even
though EPA officials were aware of the very facts and circumstances
which, according to OIG, made the Foundation ineligible to receive
Federal funds, and [ii] in May 2002, when, after considering, once
again, the relationship between the Foundation and CFA, it continued
disbursing Federal funds to the Foundation under five separate
cooperative agreements through the end of 2002.
In light of the foregoing, OIG's proposed $4.7 million disallowance
is entirely without legal justification. It is based on an
interpretation of LDA Section 18 that is untenable and, indeed, has
already been considered and rejected by EPA; and retroactive
application of that interpretation to the Foundation would be
arbitrary, capricious and a denial of due process of law.
The proposed disallowance is also patently unfair and reasonable.
It ignores the fact that the programs were undertaken by CFA at EPA's
specific request, and were later transferred intact from CFA to the
Foundation at EPA's specific request. It ignores 5 years of successful
program performance by the Foundation, and the considerable benefits
for public health and education that flowed from those programs.
Finally, it ignores the fact that Foundation acted, at all times and in
all matters, in the utmost good faith.
Sincerely,
Stephen Brobeck,
Executive Director.
Senator Jeffords. Mr. O'Connor, does EPA have adequate
resources, including staff, to successfully implement its new
grants management plan? If not, what further resources does EPA
need for this purpose?
Mr. O'Connor. Well, Senator, the plan we have laid out, and
some of the components in particular, such as oversight of the
grants once they are awarded, there is no way around the fact
that they do require resources. The Agency in its budgeting
this year, and I think it was acknowledged earlier, that this
is a tight year, did provide some million dollars for us to use
toward post-award management. Some small number of FTE have
also been provided.
Yes, we could use more and yes, we could do more monitoring
with more resources. But I have to say that resources is pretty
far down the list of things that I would highlight right now.
There are a lot of things that are in our control with the
resources that we have that we need to do before I would use
resources as an excuse.
Senator Jeffords. Cases have been reported of grantees who
mismanage funds but are nevertheless allowed to continue to
apply for, and in some cases receive, further grant money. Why
does not the EPA respond more severely when grantees violate
policies and management funds?
Mr. O'Connor. Well, it is a matter of the nature of the
violations and whether there is a persistent record. I do not
know that we have had a system in the past to really track
those as effectively as we should to know whether we have such
track records. The new system that you heard discussed during
our opening comments will give us that ability. But I think if
we find that there have been willful violations of laws, that
we are prepared to take such actions.
On many of our reviews, as I mentioned earlier, where we
have found problems, we prefer to work those out with the
grantees so that the important work that we are both engaged in
can continue. But in some cases we are not satisfied and we do
put controls on the expenditure of those grant funds until we
are satisfied that they have been corrected.
Senator Jeffords. What kinds of policies does EPA have in
place for responding when EPA staff fail to adequate perform
their oversight duties?
Mr. O'Connor. Well, I think as Mr. Stephenson might have
mentioned, that is probably the million dollar question. We
have taken a number of steps. Perhaps one of the most important
first steps this year is putting language in the performance
agreements of all of the 1,800 project officers who are engaged
in grants management, as well as all of the supervisors and
managers across the Agency. We do require now that in our
annual process that offices and regions certify to how they
have conducted those performance appraisals to assure us that
they are, in fact, assessing performance against the standards.
This is, by the way, an issue that goes far beyond grants
management. The Agency right now is revising the performance
agreement of all of its managers and by April to link our
performance standards much more directly to the Agency's
strategic plan and annual goals and crosscutting strategies.
One of the most important of those crosscutting strategies is
grants management.
So the mechanism to do this is coming in to place right
now. The very difficult question that I think everyone has
acknowledged is how do we make sure that for every one of these
1,800 individuals, it really happens. That is going to be our
challenge. We are putting a lot of management attention on that
issue. But I would not be truthful if I said that it is going
to be easy and it is not going to take much of our attention.
Senator Jeffords. Thank you, Mr. Chairman.
Senator Inhofe. Thank you, Senator Jeffords.
First of all, Ms. Heist, I want to assure that I do not
hold you responsible or certainly the IG responsible for the
Consumer Federation grant. I just want to try to understand the
facts in this case. This is something that we have the
responsibility to do something about and we are going to. Your
report, which could not be more current--it is March 1, 2004--
says:
``The Federation was a 501(c)(4), that, is a lobbying
organization that was prohibited from receiving Federal funds
under the Lobbying Disclosure Act and the arrangement between
the Foundation and the Federation violated the Lobbying
Disclosure Act prohibition.''
To me that sounds like the EPA is giving money to groups
who are lobbying. Again, I do not mean to single out this one
Federation because I regretfully suspect that there are many
others where this has taken place, too.
We do not want to overlook you, Mr. Ellis. We will be right
with you in a minute. But let me finish up something with Mr.
O'Connor. You said these things are not going to happen
overnight. I understand that. But in competition, the EPA's new
competition policy requires that all grants recipients over
$75,000 be competitively bid but references a ``managed
competition.''
How would this be any better than the previous policy that
was supposed to ensure competition in this grants? Maybe you
can define for us what ``managed competition'' is?
Mr. O'Connor. Sir, unlike in the world of direct Federal
procurement where the regulations that govern competition have
been set in stone for a long time and are very clear, there are
not such regulatory provisions for grants competition. So we
provide for the ability to conduct a competitive process in
different ways.
To some extent it is driven by the size of the grant and
the nature of the grant. For example, if it is a $75,000 grant,
I am not so sure I want to spend a half million dollars doing a
formal rigid competition, the type of which would be required
if it were direct procurement. So we allow for there to be
different ways to compete the grant. Of course, that is a
complicating factor in trying to ensure that we are managing
these competitions in a way that we are comfortable with.
Senator Inhofe. The IG reported in 2001 in their report
that the EPA practice on soliciting grant recipients was ``word
gets out.'' What part of your 5-year management plan even
addresses soliciting recipients?
Mr. O'Connor. ``Word gets out,'' I am assuming meaning that
people have their favorites. Obviously a principle way of
addressing that is to the competition policy. As I mentioned, I
think we have a pretty successful percentage of competitions in
our first year under the policy. We are not necessary satisfied
with how well those were done or documented, but nonetheless we
did move significantly to competing grants. I think that first
step is the most important step.
Senator Inhofe. What would be wrong with putting all of
these on a website where the public and anyone interested would
have access to them?
Mr. O'Connor. Well, we are actually moving toward that with
our automated system--to be able to put all grant actions and
announcements out electronically. That is something that we are
participating in with much of the rest of the Government under
an E-Government initiative.
Senator Inhofe. Good. All right.
Mr. Ellis, I appreciate very much your mission and what you
are doing. I think you are trying to do the same thing that we
are trying to do up here. Being a group that describes itself
as environmentally conscious, has your organization done any
publications documenting wasteful spending with EPA financial
assistance?
Mr. Ellis. I am not sure. You said something about
environmentally conscious. I am not aware of that description
of our organization.
Senator Inhofe. That is fine. I appreciate that
clarification.
Mr. Ellis. Right. But your question, Senator, was have we
done work looking into this before?
Senator Inhofe. Has your organization done any publications
documenting wasteful spending with reference to EPA financial
assistance or grants?
Mr. Ellis. Not prior to this actual hearing when we were
publishing this information. This is something that we have
followed. I know that we have talked with the Heritage
Foundation on some of their analysis on grants governmentwide.
They have documented $325 billion worth of Government grants
that go out there and concerns about competition. I think this
falls within that category. It is something that is of concern
to us.
Senator Inhofe. Then you would say that working then with
groups like the Heritage Foundation, you both would have that
common goal in disclosure, openness, and so forth?
Mr. Ellis. Absolutely. I think the real goal in any kind of
grants is that they actually further the mission and the goals
of both the Agency, the Government, and the Nation.
Senator Inhofe. All right. One last question. You
identified discretionary grants as receiving ``well-earned
criticism.'' Have you found any particular problematic grant
recipients?
Mr. Ellis. We have not really looked particularly at the
grant recipients. We have looked more at the process. We think
that if you have a bad process, you are going to have a bad
result, regardless of who the recipient is. If people have
laudable goals, if we are not really making sure that we are
spending the money wisely, then we are not really doing them a
favor and we are certainly not doing the taxpayer or the EPA a
favor.
Senator Inhofe. I would certainly agree with that. I might
suggest that you consider expanding your realm into identifying
some of these problematic areas. It makes it easier for others
to go in to try to correct the problems.
Senator Jeffords.
Senator Jeffords. Mr. O'Connor, the August 2003 GAO report
stated that effective implementation of EPA's competition
policy would require a major cultural shift at EPA. In your
written testimony you suggest that a cultural shift is now
occurring at the EPA. What leads you to say this? What has
changed EPA to bring about a cultural shift toward
accountability in grants management?
Mr. O'Connor. Senator Jeffords, with respect to the
competition as was noted, for years and years, our project
officers were accustomed to just selecting their grantee which
led to at least the appearance that we had favorites and that
we were not necessarily going out there sure that we were
getting the best value for the Government.
That policy, quite frankly, did not go over very well
initially, with our 1,800 project officers because it does
require quite a bit of additional work. This was something that
they had to adjust to. Frankly, we set a goal of competing, I
believe it was 30 percent of the covered grants in our first
year. I was very pleased with achieving the 75 percent.
But that is one of a number of major mindsets that we are
trying to change, and will change, over the next couple of
years in how we manage our grants.
Senator Jeffords. In GAO's August 2003 report, the data
seems to show that during 2002, no incidences of lobbying
problems were found among over 1,200 in-depth reviews of
grantees, including over 200 reviews of nonprofit
organizations. Can you confirm that this is correct?
Mr. O'Connor. To the best of my knowledge, that is correct,
sir.
Senator Jeffords. Mr. Ellis, in your written testimony, you
recommended EPA investigate centralizing and streamlining grant
management to fewer, more highly trained individuals. Can you
elaborate on that recommendation?
Mr. Ellis. Certainly. Much has been talked about with the
1,800 project officers. There is going to be a balancing act,
as I think was mentioned. These project officers are in other
areas of EPA such as the Office of Water, or Office of Air. So
you want to have some of the subject matter expertise still
housed with these people, but you also want them to feel that
they are properly trained and are being watched also for their
grant management expertise.
I think when you start looking at an Agency with a $8
billion budget, and they have 1,800 different project officers
that are managing all these different grants, I think you need
to start looking at ways to consolidate the functions in some
respects. Also, if you can consolidate, then you can make
training and grant management more of that person's job. In my
mind, that also professionalizes that particular part of that
person's activities to a greater extent. Then you are going to
get a better performance and better product.
Senator Jeffords. The EPA Inspector General has found that
EPA's problems with grants oversight can, in part, be
attributed to its failure to sufficiently prioritize the
activity. Do you think that the EPA's new grant management plan
goes far enough in prioritizing oversight? What further steps,
if any, do you think ought to be taken?
Mr. Ellis. Well, before I got into this line of work, I was
an officer in the military. I was an officer in the Coast
Guard. I have to say that I did my job very well, thank you,
but what I paid most attention to was what I was evaluated on
and what I was going to have to respond to. I think that
whatever you put together as far as words on paper and rules
and guidelines are only going to be effective as the people who
are implementing them, stick to them, and really require people
to adopt those measures.
Part of that, as has been mentioned by Mr. Stephenson, is
making people recognize that they are going to be evaluated on
these particular areas. They are going to be evaluated on their
grants management. So, to me, that is going to be the key of
really making any of these reforms, whether it be competitive
grants, oversight, or any of these other areas stick. The fact
is that EPA, from the bottom to the top, demands that people
perform and manage these contracts efficiently and effectively.
Senator Jeffords. Are you indicating that is not being
done?
Mr. Ellis. Well, I think that in the end it has not been
done to date because that is why we are all sitting here. I
think if this had been going on in the years past, then we
would not have to be here. I am not going to pre-suppose a plan
that just came out in April of last year, but I think the proof
will be in the pudding as far as how we go forward from that
date.
Senator Jeffords. Thank you.
That is all I have, Mr. Chairman.
Senator Inhofe. Thank you, Senator Jeffords.
Mr. Stephenson, there has been talk about the EPA needs
more resources when they testified only a few months ago, that
the EPA had too many working in grants. The GAO reports that 35
percent of project officers oversee only one grant. Would you
not draw the conclusion here that they do not need more
resources for that?
Mr. Stephenson. Our first step always is to spend the
resources you get more efficiently. There are several ways we
think they can more efficiently oversee grants. That is the
statistical approach I mentioned that they are not doing a job
with the resources that they have in targeting grants and
finding where the systemic problems are. That is one step.
One project officer per grant is probably not an efficient
way to oversee grants, but again there has to be this balance
between technical expertise and air programs and water
programs, and what the grantee and the grant are trying to
accomplish. It just seems to me that 1,800 is too many.
Senator Inhofe. If 35 percent are only overseeing one
project, what types of projects would those be that would
require 100 percent of a person's time?
Mr. Stephenson. Remember, there is a grants management
staff whose only function is to set policy and to provide
guidance to the staff who are overseeing grants.
Senator Inhofe. That is much smaller than your project
officers?
Mr. Stephenson. Right, much smaller.
Senator Inhofe. It is 1,800 versus 100?
Mr. Stephenson. Yes, the 1,800 are the ones with the
technical expertise that are needed to effectively oversee
grants. We have not done a specific analysis in that area, but
one-per-one does not seem to be a good ratio.
Senator Inhofe. All right; fine.
Mr. O'Connor, it appears that you have a big job ahead of
you. It concerns me that GAO identified a lack of management
accountability and environmental results in competition and
grant awards in its most recent report. More concerning is that
GAO in that report identified a lack of methodology to identify
systemic problems, lack of environmental results, and lack of
accountability in grants management, even after reviewing the
new EPA policies.
I understand your testimony today addresses some of the
GAO's conclusions. However, audits such as the one of the
Consumer Federation of America cannot go unnoticed. We cannot
simply trust in the promise of new policies to remedy this type
of a problem. The witnesses have testified that particularly
problematic are discretionary grants which compromise about
one-quarter of grant awards each year. I would like to see who
are receiving these grants and what they are producing.
Accordingly, I have an information request of the Agency
for fiscal year 2002. I would like a listing of the
discretionary grants awarded. My staff will provide you with
office correspondence immediately following the hearing
detailing the information I would like to have included. I
would like to have this prior to our budget hearing where we
will have the Administrator before this committee a week from
today.
I like the idea of doing something, of opening the doors,
and not just having a website where you show the various
competitions coming up, but also where you show the grants that
are issued. I think you will get a lot of help, Mr. Ellis, from
the public if the questions are answered concerning the grants
that go to various organizations.
I look forward to that.
I would say that I know that we have had initial hearings
on this problem before, but the revolving door, as I said in my
opening statement, just keeps revolving. I would like to tell
you and look you in the eyes that the revolving door is going
to stop.
Senator Jeffords, do you have any concluding remarks?
Senator Jeffords. I think you did a good job.
Senator Inhofe. Thank you very much.
We are adjourned.
[Whereupon, at 10:37 a.m., the committee was adjourned, to
reconvene at the call of the chair.]
[Additional statements submitted for the record follow:]
Statement of Hon. Michael D. Crapo, U.S. Senator from the State of
Idaho
Thank you, Chairman Inhofe, Senator Jeffords. Let me begin by
saying that I appreciate your hard work and the work of the committee
in addressing the issue of grants management within the U.S.
Environmental Protection Agency (EPA).
Given the considerable amount of taxpayer dollars appropriated
every year for EPA grants and the breadth of the agency's
responsibility for assisting with environmental efforts, oversight of
how this money is being spent is important.
As a member of the Senate Budget Committee, we have been working to
produce a budget resolution, and as we all know it will be an extremely
tough budget year.
With the current economic climate and our need to use the utmost
discretion to ensure that hardworking Americans' dollars are wisely
spent, it is now more timely than ever to address this issue.
One of the issues I would like to raise today is the distribution
of Brownfields program grants. Let me begin by saying, I support the
Brownfields Program.
Assistance through this program can go a long way toward assisting
communities that contain property that is unavailable for development
due to environmental contamination.
Many communities that are dealing with the rehabilitation of
Brownfield properties lack the funding necessary to revitalize the
properties. These grants are vital sources of assistance, and are good
for local economies, local communities, and the environment.
However, it is essential that the EPA give all communities access
to the program and make it truly a national program.
I was alarmed to discover that Brownfields funds are not
distributed equitably between the eastern and western United States and
among urban and rural communities. Furthermore, only 10 of these grants
were awarded in the intermountain West.
This is an issue I have raised in the past with EPA. I have asked
EPA to consider developing a specific ``rural'' component to the
Brownfields program.
Unemployment rates are often as high in many small rural
communities as they are in inner cities, and rural communities are no
less impacted by contamination, or the possibility of contamination
which has hindered the re-development of these properties in rural
towns--a key objective of the Brownfields program.
I plan to ask the panel some questions regarding this important
issue, but I will defer further discussion of this issue until later.
Again, I thank the committee and the witnesses here with us today
for your hard work in addressing the oversight of EPA grants. I look
forward to continuing to work to ensure our limited resources are well
spent. Thank you, Mr. Chairman.
__________
Statement of Melissa Heist, Assistant Inspector General for Audit,
U.S. Environmental Protection Agency
Good morning, Mr. Chairman and members of the committee. I am
Melissa Heist, Assistant Inspector General for Audit for the United
States Environmental Protection Agency. I am pleased to be here today
representing Nikki Tinsley, the Inspector General. Thank you for the
invitation to inform you about the work we have done reviewing EPA's
administration of assistance agreements, also known as grants.
Assistance agreements are a primary means EPA uses to carry out its
mission of protecting human health and the environment. More than half
of EPA's fiscal 2003 budget was awarded to organizations outside the
Agency through assistance agreements. EPA primarily awards assistance
agreements to State, local, and tribal governments; universities; and
nonprofit organizations. Because the amount is large, approximately
$4.4 billion dollars, and it is the primary mechanism EPA uses to
fulfill its mission, it is imperative that the Agency use good
management practices in awarding and overseeing these agreements to
ensure that they effectively contribute to attaining environmental
goals.
EPA's management of assistance agreements has been an area of
emphasis for the Inspector General's office for many years. In fact, we
have been issuing audit reports and raising concerns about EPA's
management of assistance agreements for over 10 years. In addition to
our audit work, we have also conducted a number of investigations
related to the improper and illegal activities of some EPA grantees.
Our grants management work has focused on cross-cutting national
issues and has included grants made to States, local and tribal
governments, and nonprofit organizations. We have looked at major
program areas in EPA headquarters and regions. We designed our work to
identify systemic problems preventing the Agency from achieving the
maximum results from the billions of dollars awarded in assistance
agreements every year. In my testimony I will include examples from our
work that illustrate the types of problems we have found in EPA's
grants management activities. The entire reports for these examples can
be found on the OIG web page at www.epa.gov/oig.
On Monday, March 1, 2004, we issued an audit report on an EPA
grantee that we initiated at the Agency's request. We found an
ineligible lobbying organization was performing work under cooperative
agreements and the procurement process was circumvented. We questioned
$4.7 million because the work was performed by an ineligible lobbying
organization. EPA awarded the cooperative agreements to an associated
organization that did not have any employees, space or overhead
expenses. In addition, the ineligible organization's financial
management practices did not comply with Federal regulations. For
example, the ineligible organization did not adequately identify and
separate lobbying expenses in its accounting records. As a result,
lobbying costs may have been charged to the Federal projects. The
ineligible organization also claimed that it had not always followed
Federal regulations because EPA directed the recipient to use a
particular contractor.
PRE-AWARD ACTIVITIES
In May 2001, the OIG reported that EPA did not have a policy
requiring program officials to competitively award discretionary
assistance funds. EPA had done little to promote competition, and often
did not provide adequate justification for not using competition to
award grants. Assistance agreements were awarded without competition
based on the project officer's opinion that the recipient was uniquely
qualified. There was no documented evidence that no other organizations
existed that could perform the desired work. We also found that EPA was
not performing a widespread solicitation for assistance agreements.
Without widespread solicitation, EPA limited the potential applicants
and created the appearance of preferential treatment. Without
competition, EPA cannot be sure that it is funding the best projects
based on merit and cost-effectiveness to achieve environmental
objectives, and accomplishing its mission with a reasonable return on
the taxpayer's investment.
Before EPA awards an assistance agreement, the EPA project officer
must conduct a programmatic and technical review of the application
package in order to select those applications that will most
effectively contribute to EPA program objectives and priorities. A main
focus of the project officer's review is the work plan, which should
describe what will be done, when it will be accomplished, and the
estimated costs. The pre-award review is critical to ensure that the
results of the assistance agreement will contribute to protecting human
health and the environment.
In 1998, the OIG issued a report stating that project officers were
not always negotiating work plans with well-defined commitments or
adequately determining and documenting that costs for the assistance
agreement were reasonable. In March 2002, the OIG reported that EPA was
awarding assistance agreements without identifying expected outcomes,
quantifying outputs, linking outputs to funding, or identifying
milestone dates for completing work products.
In a report issued in March 2003, we reported that project officers
did not perform all the necessary steps when conducting pre-award
reviews. For this audit, we selected a statistical sample of 116
assistance agreements awarded by the Office of Air and Radiation, the
Office of Water, and related regional offices. We found:
<bullet> EPA awarded $700,000 without knowledge of the work the
recipient was going to perform. The work plan did not have clear
objectives, milestones, deliverables, or outcomes.
The recipient stated in the work plan: ``Because of the exploratory
nature of these activities and the need to bring together various
market players, exact deliverables and schedule will be determined
based on what participants tell us they want from our project.''
<bullet> In 79 percent of the sampled assistance agreements over
$100,000, project officers did not document cost reviews of proposed
budgets. For example, a recipient was awarded $1.3 million to operate
its air pollution control program without determining the
reasonableness of the proposed costs to the expected benefits of the
projects.
<bullet> In 42 percent of the sampled assistance agreements, EPA
did not negotiate environmental outcomes. For example, EPA awarded a
recipient $200,000 to regulate costs charged by power companies. The
work plan contained no environmental outcomes, and stated that specific
projects would be identified at a later date. In fact, the work plan
itself only provided possible activities, and stated specific projects
would be established later. The project officer wrote on the
application, ``why this, why now?'' yet still approved the work plan.
Without complete pre-award reviews of proposed projects, there was
insufficient assurance that the funded projects would accomplish
program objectives or desired environmental results. There was also
insufficient assurance that proposed costs were reasonable, and that
recipients were technically capable of performing the work. EPA may
also have lost the opportunity to fund other projects that would have
better achieved its mission.
POST-AWARD GRANTS MANAGEMENT
OIG reports continue to find that improvements are needed in EPA
oversight of assistance agreements after they are awarded. In 1995, we
found that EPA staff were not (1) making site visits, (2) timely
processing financial status reports, (3) obtaining or reviewing
required audit reports, and (4) ensuring that final reports were
completed. In 2002, we followed up on EPA's progress in improving
oversight and found that weaknesses continued to exist. While EPA had
developed policies and training to improve the oversight of assistance
agreements, it did not ensure that the policies were followed
consistently.
OIG reports continue to identify examples of EPA staff not
adequately overseeing awards to States for environmental programs and
nonprofit organizations for specific projects.
<bullet> A February 2003 report found that EPA Region 6's oversight
of Louisiana was insufficient and could not assure the public that
Louisiana was protecting the environment. We initiated this review
because EPA had received petitions from citizen groups to withdraw
Louisiana's National Pollutant Discharge Elimination System, a water
program; the Resource Conservation and Recovery Act, a hazardous waste
program; and the Title V air permit program.
Region 6 leadership (1) did not develop and clearly communicate a
vision and measurable goals for its oversight of the State or emphasize
the importance of consistently conducting oversight, (2) did not hold
Louisiana accountable for meeting goals and commitments, and (3) did
not ensure that data of poor quality was corrected so that it could be
relied upon to make sound decisions. As a result, EPA was unable to
assure the public that Louisiana was operating programs in a way that
effectively protected human health and the environment. In its
response, EPA's Region 6 said it would implement its new oversight
protocol for use beginning in fiscal year 2005.
<bullet> A March 2002 report found that EPA had no assurance that
as much as $187 million spent on procurements by assistance recipients
was used to obtain the best products, at the best prices, from the most
qualified firms. Recipients were not competing contract awards or
performing cost or price analysis as required by the regulations. For
example, a nonprofit recipient awarded two sole source contracts to its
for-profit subsidiary. The recipient also awarded sole source contracts
to three for-profit companies created by its for-profit subsidiary. The
recipient entered into 23 contracts, 20 of which were awarded sole
source. As a result, we questioned $1.3 million of costs claimed.
INSUFFICIENT EPA REVIEW AND OVERSIGHT CONTRIBUTED TO RECIPIENT'S
PROBLEMS
Recent audits of grant recipients show how EPA's lack of review and
oversight can contribute to problems for the grantee.
<bullet> We questioned $1.7 million in costs claimed because a
recipient did not have an adequate time distribution system and an
indirect cost rate, as required by EPA regulations. The EPA project
officer focused his oversight on the technical performance of the
recipient, with little emphasis on business and administrative aspects
of the recipient's performance. The grants specialist did not respond
to repeated requests from the recipient for assistance in developing
the indirect cost rate. Further, the project officer did not conduct an
onsite review of the recipient until almost 6 years after the first
award.
<bullet> We questioned $1.6 million in costs claimed by another
recipient for, among other things, improper procurement. The recipient
did not competitively procure equipment and services, and did not
perform cost or price analysis for the purchases. Furthermore,
procuring goods and services for State agencies is not an authorized
use of the funds provided under Section 103 of the Clean Air Act. EPA
staff contributed to the problem when it wrote the sole source
justification and scope of work for the contract. The justification for
the sole source procurement was the EPA staff's familiarity with the
contractor and the work that needed to be performed. EPA policy
specifically prohibits employees from directing a recipient to award a
contract to a specific individual or firm or participate in the
negotiation of an award of a contract under an assistance agreement.
IMPROVED ACCOUNTABILITY NEEDED
The deficiencies in EPA's pre-award reviews and post-award
oversight were not due to the lack of policies, but rather existing
policies and guidance were not always followed. EPA policies and
guidance identify the reviews EPA staff are to perform prior to and
after assistance agreements are awarded. However, EPA staff did not
always follow the policies and were not held accountable when they did
not do so.
<bullet> The project officer function is often a collateral duty
for EPA staff. In some instances, the performance agreements and
position descriptions did not identify project officer
responsibilities. Even when the performance agreement identified the
individual as a project officer, the agreement did not reference
specific project officer duties such as determining the programmatic
and technical merit of a project or conducting cost reviews.
<bullet> Senior Resource Officials did not emphasize the importance
of post award monitoring. Senior Resource Officials are charged with
strengthening Agency-wide fiscal resources management. They are
typically Deputy Assistant Administrators or Assistant Regional
Administrators. These officials stated that the level of post award
monitoring was affected by the limited availability of resources for
staffing, travel, and training.
EPA'S ACTIONS TO ADDRESS WEAKNESSES
EPA has taken some corrective actions to address our
recommendations to better manage assistance agreements.
<bullet> During 2002, the Administrator issued two orders to
implement new changes--the Policy on Competition in Assistance
Agreements and the Policy on Compliance, Review, and Monitoring.
Through enhanced monitoring required by the new policy, EPA has
increased the number of requests to the OIG for audit.
<bullet> During 2003, EPA issued its Grants Management Plan, a 5-
year strategy designed to ensure that grant programs meet the highest
management and fiduciary standards.
<bullet> EPA initiated a review of performance standards for all
employees involved with grants management and required new standards to
be in place by January 2004.
<bullet> EPA has drafted a Long-term Grants Management Training
Plan designed to improve the skills of those responsible for grants
management activities.
The challenge for EPA now will be to ensure that staff implement,
and are held accountable for, following the new policies and for
implementing the new grants management and training plans. Many of the
deficiencies we found were due to EPA staff not following existing
policies and not being held accountable.
In issuing its Grants Management Plan, EPA stated its vision was to
ensure that its grants programs meet the highest management and
fiduciary standards and further the Agency's mission of protecting
human health and the environment. The OIG will monitor the Agency's
progress in implementing the Plan, and we will evaluate whether the
actions are effective in improving the accountability of recipients.
We are proud of the efforts the OIG staff have made in bringing
these issues to light, and I thank you, Mr. Chairman and members of the
committee, for the opportunity to participate in a discussion of such
an important topic. We are committed to working with you and EPA to
ensure that the money awarded every year through assistance agreements
is producing the intended environmental and public health benefits.
This concludes my prepared remarks, and I will be happy to respond
to questions.
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Responses by Nikki Tinsley to Additional Questions from Senator Inhofe
Question 1. The Inspector General has compiled numerous reports and
audits concerning EPA grants management over the past several years
identifying many criticisms of grants management. In questioning before
the House Subcommittee on Water Resources and Environment on June 11,
2003, Inspector General Tinsley responded, ``I am afraid hope is our
strategy here,'' in [response] to a question concerning whether
accountability will result from the new EPA policies in grants
management. The General Accounting Office reported in a report titled
Grants Management--EPA Needs to Strengthen Efforts to Address
Persistent Challenges (GAO-03-846) that EPA's new grants policies and
Five Year Grants Management Plan continues to not address issues of
gathering adequate information to evaluate proper grants management,
the need to demonstrate environmental outcomes, and personnel
accountability. What continuing deficiencies does the Inspector General
believe continue to exist in EPA grants management policies?
Answer. At this time, we are not aware of any other deficiencies in
EPA grants management policies. As Ms. Heist stated in her testimony,
the deficiencies in EPA's management of grants were not due to the lack
of policies, but rather existing policies and guidance were not always
followed.
Question 2. Much of the testimony in the hearing focused on the
March 1, 2004, OIG Audit Report concluding, ``The [Consumer Federation
of America] Federation was a 501(c)(4) lobbying organization that was
prohibited from receiving Federal funds under the Lobbying Disclosure
Act, and the arrangement between the [Consumer Federation of America]
Foundation and the Federation violated the Lobbying Disclosure Act
prohibition.'' In part, the OIG recommended recovery of all grants
under each cooperative agreement with the Consumer Federation of
America Foundation. Is the OIG recommendation and particular treatment
of the Consumer Federation of America Foundation a new policy based on
a new reading of the Lobbying Disclosure Act?
Answer. No. Our recommendation as to the recovery of grant funds is
based on Comptroller General decisions holding that grant funds
erroneously awarded to an ineligible grantee must be recovered by the
Government. 51 Comp. Gen. 162 (1971); B-146285/B-164031, April 19,
1972. Further, we do not believe we have adopted a ``new policy'' based
on a ``new reading'' of the Lobbying Disclosure Act. The Lobbying
Disclosure Act, and legislative history, recognize that a 501(c)(4)
lobbying organization, which is ineligible from receiving Federal
funds, can form or be affiliated with, an organization that does not
engage in lobbying, and which, therefore, is eligible to receive
Federal funds. As our report found, however, the arrangement and
operations between the Consumer Federation of America Foundation and
the Federation were, in fact, indistinguishable, and that the
Foundation existed only on paper. Based on this, we believe our
conclusion does not represent a new interpretation of the Lobbying
Disclosure Act, but rather an interpretation that is consistent with
the express language and intent of the Lobbying Disclosure Act.
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Statement of David J. O'Connor, Acting Assistant Administrator for the
Office of Administration and Resources Management, U.S. Environmental
Protection Agency
Mr. Chairman, thank you for the opportunity to appear before the
committee to address the subject of today's hearing--Grants Management
Practices within the Environmental Protection Agency (EPA).
Each fiscal year (FY), EPA awards an average of $4 billion in
grants, approximately half of the Agency's budget. This funding is a
key mechanism by which EPA's national media program managers, in
partnership with grant recipients, deliver environmental protection to
the public. Most of the grant funds--about 89 percent--go to States,
Tribes and local governments. The remaining dollars are divided between
non-profit organizations (6.6 percent), educational institutions (4.2
percent) and individuals, foreign recipients and profit-making
organizations (.2 percent). Some of EPA's funding is the result of
congressional earmarks. For example, in fiscal year 2003, funding for
earmarks comprised approximately 13 percent of EPA's total grant
dollars and 51 percent of the total grant dollars to non-profit
organizations.
EPA has an obligation to the taxpayer to manage its grant dollars
effectively and ensure they further the Agency's mission. However,
since 1995, EPA's grants management practices have been criticized by
Congress, the General Accounting Office (GAO) and EPA's Office of the
Inspector General (OIG). Before discussing in more detail the problems
EPA faces in grants management, and the Agency's progress in solving
those problems, it is important to recognize the contributions that
EPA's grants to our governmental partners have made to environmental
protection over the past three decades. For example, in the 1970's and
1980's, working with this Committee, EPA administered the multi-billion
dollar wastewater treatment works construction grant program under
Title II of the Clean Water Act. This program, the second largest
public works program in the nation's history, resulted in significant
water quality improvements for thousands of municipalities.
Further, the Agency continues to provide critically needed
infrastructure funding through its two State Revolving Fund (SRF)
programs, the Clean Water SRF (CWSRF) and Drinking Water SRF (DWSRF).
These two programs comprise nearly half of the Agency's grant dollars.
Through fiscal year 2003, the CWSRF program has supported over 14,000
projects totaling $43.5 billion for secondary treatment, advanced
treatment, combined sewer overflow correction, stormwater treatment and
nonpoint source needs. Similarly, through fiscal year 2003, the newer
DWSRF program has provided $6.4 billion which has resulted in more than
3,000 loans for drinking infrastructure needs to protect public health
and ensure compliance with the Safe Drinking Water Act.
Moreover, EPA's grants for State and Tribal environmental programs
have been a key factor in allowing States and Tribes to administer
delegated or authorized regulatory programs across all environmental
media. In fiscal year 2003, EPA awarded over $1 billion for these
grants. This included $193.6 million under section 106 of the Clean
Water Act to support water quality planning, water quality monitoring,
the development of water quality standards and Total Maximum Daily
Loads, the issuance of National Pollution Discharge Elimination System
permits, compliance and enforcement activities, and groundwater
protection.
EPA is also a recognized innovator in the State funding area as
evidenced by its highly successful Performance Partnership Grant (PPG)
program. PPGs provide States with the flexibility to combine funds from
various EPA categorical grant programs into one grant. This allows
States to streamline grant paperwork, adopt multi-media approaches, and
better address national and State environmental priorities. In fiscal
year 2003, EPA awarded over $300 million in PPGs to States and Tribes.
Additionally, as part of the fiscal year 2005 budget, the
Administration is proposing a new $23 million State and Tribal
Performance Fund that will award grants on a competitive basis for
environmental programs. These funds will allow States and Tribes that
can link their proposed activities to public health and environmental
outcomes to receive additional assistance. EPA is pleased to be able to
provide States and Tribes with another tool to protect and restore the
environment.
Despite these success stories, EPA's credibility in grants
management has been jeopardized by its inability to resolve
longstanding concerns expressed by Congress, GAO and the OIG. These
concerns have largely centered on non-State grants, particularly grants
to non-profit organizations, with an emphasis on grant competition,
pre-award review, oversight, environmental results and accountability.
Over the period 1995 to 2001, the Agency did take steps to respond to
these concerns. EPA issued formal post-award monitoring policies,
virtually eliminated a grant closeout backlog of some 20,000 grants,
provided grants management training to over 4000 project officers,
encouraged grant competition, and initiated development of an automated
Integrated Grants Management System.
As evidenced by an OIG audit report entitled ``Review of Assistance
Agreements Awarded to Nonprofit Organizations'' (Report No. 2001-P-
00005, dated March 29, 2001), these actions produced improvements in
some areas. In that audit, the OIG examined a sample of grants to
nonprofit organizations awarded by EPA Headquarters and EPA's Atlanta
Regional Office (Region 4). The report noted that EPA Headquarters and
Region 4 had undertaken initiatives to improve the grants
administration process. These included training of grants specialists
and project officers, issuance of new or revised policy guidance,
selective onsite reviews of recipient organizations to assess their
performance, and implementation of an internal review process that
analyzed specific aspects of grant programs on an ongoing basis. The
report found that EPA maintained appropriate relationships with
recipient organizations, avoided conflicts of interest, and that the
specific grants reviewed complied with the Federal Grant and
Cooperative Agreement Act, which prohibits the use of assistance
agreements for acquisition activities. Based on these findings, the
report concluded that a review of additional grant agreements based on
the same objectives was not warranted.
These findings, however, are not representative of the total
universe of EPA grants. As noted in GAO's August 2003 report, the
Agency continues to face key grants management challenges in the areas
of grantee selection, oversight, resources and environmental results.
To address these challenges, EPA issued its first-ever long-term Grants
Management Plan, with associated performance measures, in April 2003.
GAO has described the Plan in positive terms, characterizing it as
coordinated, integrated approach to improving grants management. As
discussed below, the Agency is moving aggressively to implement the
Plan, refining our corrective actions as necessary to incorporate
recommendations for improvement contained in the GAO and OIG reports.
I am pleased to report that EPA has made significant progress in
carrying out our long-term Plan. To date, we have met almost all of our
performance measure targets and have completed more than 60 actions
items in support of the Plan.
The Plan commits EPA to accomplishing five goals, namely: (1)
Enhance the Skills of EPA Personnel Involved in Grants Management; (2)
Promote Competition in the Award of Grants; (3) Leverage Technology to
Improve Program Performance; (4) Strengthen EPA Oversight of Grants;
and (5) Support Identifying and Achieving Environmental Outcomes.
Enhancing EPA Grants Management Skills--Goal 1: A key component of
our strategy to enhance skills is to ensure that all project officers
are certified to manage grants. Project officers must complete the
basic grants management training program and take a refresher course
every 3 years to maintain their certification. As of December 31, 2003,
nearly 100 percent of our grants are being managed by certified project
officers. We expect the mandatory certification program to equip
project officers with the skills needed for proper grants oversight and
will assess the effectiveness of the program in achieving that result.
We are also taking a systematic approach to improving our training
programs through the development of a long-term training plan that is
linked to EPA's Strategy for Human Capital. As suggested by GAO, the
long-term plan will establish an Agency-wide process for ensuring that
grant specialists, project officers and managers are timely trained on
new policies and regulations and contain measures for determining how
our training activities contribute to improved grants management.
Building upon ongoing efforts to emphasize core competencies, the plan
will require expanded training in areas identified in OIG audit
reports, such as application, budget, and procurement review,
conducting competitions, environmental outcomes, and prohibitions on
the use of grant funds for lobbying or suing the Government. EPA
recently updated its Project Officers Training Manual to address these
issues and anticipates issuing a final version of the training plan
later this year.
Promoting Competition--Goal 2: EPA is committed to increasing
competition for grant awards under its new Competition Policy, which
went into effect on October 1, 2002. In concurring in the Policy, the
Office of Management and Budget (OMB) described it as ``. . . a strong
step in the right direction that should increase competition.'' The
Policy is designed to promote fairness in the grant award process and
help ensure that EPA funds high priority projects at the least cost to
the taxpayer.
While the Policy contains a number of exemptions, such as State and
Tribal program grants and congressional earmarks, it covers a wide
range of EPA grant activities, including many grants to non-profit
organizations. It also created a Grants Competition Advocate (GCA)
position within the Office of Grants and Debarment. The GCA has broad
authority to administer the Order, including issuing interpretive
guidance, approving specified exemptions and resolving disagreements
between program and grants management offices.
In the first year of implementation, the Agency competed 75 percent
of new awards to non-profit organizations covered by the Policy. This
exceeded the Agency's performance target of 30 percent. The GCA is
currently conducting an independent review of the Policy's
effectiveness, and in June of this year will be making recommendations
for strengthening the Policy to the Assistant Administrator for
Administration and Resources Management (OARM).
Given the Agency's limited experience with grant competition, we
agree with GAO that the Policy represents a ``major cultural shift''
for EPA managers and staff and expect that the GCA's review will
identify areas for improvement. Nevertheless, we are encouraged by the
first year's statistics and are confident that as the Policy is revised
to incorporate the GCA's recommendations, the Agency will achieve even
higher levels of competition.
Leveraging Technology--Goal 3: EPA believes that the deployment and
enhancement of the Integrated Grants Management System (IGMS) is
essential to strengthening grants management. IGMS is a paperless,
programmatic and administrative system which fully automates the grant
process from cradle to grave. It provides a structured format for
reviewing the key factors that must be considered and documented in
awarding a grant, including competition and environmental results. It
also provides electronic tracking of grant milestones, products and
post-award activities, thereby strengthening project officers'
oversight capabilities, and will accept applications and reports from
Grants.gov, the Federal electronic portal for grant application and
reporting. IGMS is now deployed in all ten EPA Regions, which in fiscal
year 2003 submitted 80 percent of grant funding packages
electronically. This exceeded our performance target of 65 percent.
Over the next 2 years, IGMS will be fully deployed at EPA Headquarters.
In addition, EPA continues to participate in the interagency
Grants.gov initiative under Public Law 106-107. This initiative is
designed to streamline and simplify the award and administration of
Federal grants by creating a simple, unified source to electronically
find, apply and report on Federal grants. EPA is posting synopses on
Fedgrants.gov (E-Find) and complying with the OMB mandate to begin
providing electronic applications (E-Apply) through Grants.gov for
selected grant programs. I am pleased to announce that the Office of
Grants and Debarment and the Office of Research and Development
recently posted an electronic application for the Science to Achieve
Results (STAR) program. Other programs will be posted later this year.
The STAR program pilot will provide valuable experience as we prepare
to make all EPA-competitive grant programs available for electronic
application on Grants.gov.
Strengthening Oversight--Goal 4: On December 31, 2002, OARM issued
a comprehensive post-award monitoring policy, EPA Order 5700.6, that
significantly expands the Agency's post-award monitoring program. It
requires baseline monitoring for all active awards on an ongoing basis.
It also provides for advanced monitoring (i.e., onsite reviews and desk
reviews) on a minimum of 10 percent of EPA's active grantees and
mandatory reporting of these activities in a Grantee Compliance Data
base.
The new Order is a substantial improvement over previous post-award
monitoring policies, which required baseline monitoring only once
during the lifetime of an award, established a minimum 5 percent
advanced monitoring goal, and did not mandate uniform compliance
reporting. Program offices have responded positively to the new policy
by submitting to OARM timely and comprehensive post-award monitoring
plans that emphasize advanced monitoring of active grantees.
Under the new policy, the Agency completed over 1000 advanced
monitoring reviews in 2003 or 18 percent of its recipients. This
exceeded our performance target of 10 percent of recipients. Moreover,
we have implemented, or are in the process of implementing, major GAO
recommendations for strengthening post-award monitoring. In this
regard, effective for calendar year 2004, we have required EPA staff to
use a standard reporting format when entering advanced monitoring
reviews in the Grantee Compliance Data base and have included in the
Data base information on OIG and GAO reports, Agency advanced
monitoring reviews, significant compliance actions taken by the Agency
and A-133 audits. This will make it easier for EPA to identify systemic
issues early on and take appropriate corrective action. Moreover, after
consulting with statisticians, the Agency will pilot test in 2005 a
statistical approach to selecting grantees for advanced monitoring.
Based on the results of the pilot, we will implement a statistical
approach Agency-wide.
In implementing its post-award monitoring program, EPA has
increasingly focused on taking actions against non-profit recipients
that are poorly performing from either an administrative or
programmatic standpoint. While non-profit recipients have played a
vital role in disseminating information to communities on EPA's
voluntary programs, it is true that some of these recipients have not
properly managed their grants. In calendar year 2003 alone, EPA
conducted 408 advanced monitoring reviews of non-profit recipients, or
37 percent of the total 1093 advanced monitoring reviews conducted.
Where noncompliance by non-profit recipients is identified, EPA has
successfully, in many cases, required recipients to correct their
financial management systems, or placed controls on recipient
expenditures pending resolution of audit issues.
We have continued to take significant actions against specific non-
profit grant recipients to address grants management performance
problems. In 2003, our advanced monitoring reviews revealed that about
22 percent of our non-profit recipients had one or more grants
management problems. In these cases, under EPA's new post-award
monitoring policy, we require recipients to develop corrective action
plans to address the deficiencies. If the grant management weaknesses
are not addressed in the specified timeframes through corrective action
plans, we take more significant action. This includes placing
recipients on reimbursement payment, issuing stop work orders, imposing
special terms and conditions, terminating awards, and making referrals
to the OIG to initiate comprehensive audits. For example, the Agency
recently placed two large non-profit recipients on reimbursement
payment while we conduct further investigations into apparent financial
irregularities involving commingling of Federal grant funds, statutory
consultant cap violations, and violations of the Federal Cash
Management Act. We are currently in the process of modifying our
Grantee Compliance Data base to track the number of significant actions
that we have taken, so that starting in 2004, we will be able to
provide the Congress with a statistical summary of our actions.
While post-award monitoring is an important objective under Goal 4,
the Plan also commits the Agency to take a variety of ``early warning''
approaches to prevent problems from occurring. This includes revamping
EPA's internal grants management reviews, increasing technical
assistance and training to recipients and developing a pre-award review
program.
EPA is making substantial progress in all of these areas. For
example,
<bullet> In 2003, the Agency instituted a new approach to internal
reviews that provides EPA with an early warning system to detect
emerging grant weaknesses. The approach consists of three types of
reviews: Comprehensive Grants Management Reviews performed by the
Office of Grants and Debarment (OGD); Grants Management Self-
Assessments performed by headquarters and regional offices based on OGD
guidance; and Grants Performance Measure Reviews conducted by OGD,
which use information in Agency data bases to assess progress against
Grants Management Plan performance measures. OGD completed seven
comprehensive reviews in 2003 and is requiring offices with identified
problems to submit and carry out corrective action plans.
<bullet> To educate recipients about their grants management
responsibilities, OGD: (1) conducted several classroom training
sessions for non-profit and Tribal recipients in 2003, (2) in
partnership with the OIG, distributed an instructional video to non-
profit grantees in January of this year, and (3) recently issued
guidance to non-profit recipients on how to purchase supplies,
equipment, and services under EPA grants.
<bullet> The Agency is developing a pre-award policy to help ensure
that grants are not awarded to non-profit organizations that have
weaknesses in their administrative capability to manage grant funds or
the programmatic capability to carry out a project. The policy will
focus on requiring non-profit applicants with identified weaknesses to
correct them before receiving an award. Further, applicants that
repeatedly refuse to take appropriate corrective action will be
referred to EPA's Suspension and Debarment program for consideration.
The Agency expects to have the new policy in place in 2005.
A major objective under Goal 4 is to strengthen accountability for
quality grants management. Historically, the Agency has not always
managed its grants in accordance with sound business principles, which
has contributed to accountability problems. However, as evidenced by
our work in the following areas, EPA is beginning to create a culture
of accountable grants management.
First, in 2002, then Deputy Administrator Linda Fisher issued two
directives requiring senior managers to hold employees accountable for
effective grants management and to include compliance with grants
management policies as part of mid-year performance discussions, which
occurred in July 2003.
Second, as a supplement to these directives, EPA reviewed the
performance standards of employees involved in grants management. The
review found that the performance standards of Senior Executive Service
(SES) employees adequately addressed grants management while the
standards of non-SES employees did not. Based on the results of the
review, the Assistant Administrator for OARM directed EPA's Assistant
Administrators (AAs) and Regional Administrators (RAs) to revise the
performance standards of their non-SES employees to properly reflect
grants management responsibilities. In accordance with this directive,
the Agency is putting revised standards in place and will use them to
evaluate employee performance during calendar year 2004.
Third, in fiscal year 2003, the Agency required the AAs and RAs,
for the first time, to outline in their assurance letters under the
Federal Managers' Financial Integrity Act (FMFIA) the steps they are
taking to address the grants management weakness. In these letters, the
AAs and RAs commit to the Administrator of EPA that they will ensure
effective grants management in their offices. This requirement will be
carried forward into the fiscal year 2004 FMFIA process.
Fourth, the Agency created in April 2003 an Excellence in Grants
Management Program that will recognize and reward EPA offices that
substantially exceed the performance targets in the Grants Management
Plan. The AA for OARM and the Chief Financial Officer will announce the
first winners of this competition in May 2004.
Fifth, EPA's new Strategic Plan includes language emphasizing the
importance of grants management and links the activities in the Grants
Management Plan with the attainment of the Agency's strategic goals.
The need for this linkage is reinforced by the Agency's fiscal year
2003 Annual Report, which, as recommended by GAO, outlines performance
targets and results achieved under the Grants Management Plan.
Sixth, to ensure senior management attention to grants issues, EPA
established in 2003 the Grants Management Council, composed of the
Agency's Senior Resource Officials. The Council has held two meetings
to date, and under its charter, will provide coordination and
leadership as the Agency implements the Grants Management Plan.
Seventh, we have developed a Tactical Action Plan, which outlines
commitments and milestone dates under the Grants Management Plan and
identifies who is responsible for completing these commitments. OGD
reviews this Tactical Plan on a quarterly basis to ensure that actions
are completed on a timely basis.
Finally, the Agency is addressing resource issues for accountable
grants management on two fronts. To determine the most efficient use of
existing resources, EPA initiated in 2003 an analysis of grant
specialist and project officer workloads. The Agency expects to
complete the analysis in 2004 and based on the results, will make
appropriate changes to the structure of its grants work force.
Additionally, as part of the President's fiscal year 2005 budget, we
plan to invest an additional $1 million to further strengthen grants
management. These resources will assist Regional Grants Management
Offices by providing funding for an additional 60 onsite reviews, an
on-line training program for at-risk recipients, and critical indirect
cost rate negotiations for non-profit recipients. This investment will
also enhance accountability by supporting mandatory, Agency-wide
training for managers on their grants management responsibilities.
Achieving Environmental Results--Goal 5: Goal 5 is a recognition
that EPA must improve its ability to plan, measure, and report the
results of its grants and align them with the achievement of goals and
objectives in the Agency's Strategic Plan. This is a subset of the
larger issue faced by EPA under the Government Performance and Results
Act (GPRA) in assessing how its programs contribute to realizing
environmental outcomes. Goal 5 commits the Agency to incorporating
outcome measures in grant work plans and strengthening performance
reporting by grantees.
In support of Goal 5, EPA recently issued an interim policy on
environmental results. The interim policy applies to grant funding
packages submitted by the Agency's program offices to the Grants
Management Offices (GMOs) on or after February 9, 2004. Under the
interim policy, GMOs may not act on proposed funding packages unless
the packages include a description of how a project or program will
further the goals of EPA's Strategic Plan. As a followup to the interim
policy, an Agency-wide work group is developing an EPA Order that will
require program offices to consider environmental results in funding
packages, competitive solicitations, grant work plans, and grant
performance reports. The Agency expects to issue this Order in 2004. As
a part of these efforts, and in response to a recommendation from GAO,
EPA will be working to revise its advanced monitoring protocols to
include questions on measuring and achieving environmental outcomes.
In conclusion, under the long-term Grants Management Plan, EPA has
put in place a comprehensive system of management controls and
initiatives to address the grants management weakness. We have been
careful to make adjustments in the design and implementation of the
system to incorporate GAO and OIG recommendations. Given EPA's past
uneven performance in reforming grants management, it is fair to ask
whether this system will be any more successful than previous efforts.
The answer, I believe, lies in the cultural shift within EPA toward
accountable grants management. While the Agency cannot solve all of the
challenges identified by GAO overnight, this emerging culture of
accountability will allow EPA, over time, to become a ``best
practices'' agency for grants management. As we continue to implement
our long-term Plan, we remain committed to working with Congress, GAO,
the OIG, and our partners, including States, Tribes, local governments,
non-profit organizations and educational institutions, to eliminate the
grants management weakness.
Thank you for providing me the opportunity to discuss these
important issues with you today. I would be happy to respond to any
questions you that may have.
______
Responses by David O'Connor to Additional Questions
from Senator Inhofe
Question 1a. The General Accounting Office has reported and
testified that most EPA discretionary grants have been awarded without
competition. In response to Senator Jeffords' and my request for
information concerning discretionary grants awarded in fiscal year
2003, a number of discretionary grants awarded were designated as
``exempt from competition'' or ``justified non-competitive.'' How can
EPA make a comprehensive analysis of the new competition policy with
continued exemptions?
Answer. EPA's Policy for Competition in Assistance Agreements,
which went into effect on October 1, 2002, created the position of
Grants Competition Advocate (GCA). The GCA is responsible for
overseeing implementation of the policy and is currently conducting a
comprehensive evaluation of the Agency's competition performance during
fiscal year 2003. The evaluation will include an analysis of whether
the current exemptions and exceptions have been properly used. The
GCA's review is also focusing on ways to enhance the policy and foster
more effective competitions. As a result of this review, the GCA will
likely recommend certain revisions to the competition policy, including
a lower dollar value threshold for competition, more stringent
requirements for certain non-competitive exceptions, and additional
documentation requirements. In addition, the GCA intends to provide
additional training to EPA programs on how to conduct effective grants
competitions. The GCA's review will result in a revised policy to
strengthen competition which the Agency expects to issue later this
year.
Question 1b. What criteria is used to determine if a grant will be:
(i) exempt from competition; (ii) justified non-competitive; (iii)
subject to managed competition?
Answer. The grants competition policy includes program exemptions
from competition, exceptions to competition for individual grants, and
circumstances justifying managed competition.
Section 6 of the policy contains a list of programs which EPA
determined should not be subject to the policy, including, for example,
State and Tribal continuing environmental program grants and
Congressional earmarks. Section 8 of the policy contains exceptions
from competition for individual grants. These exceptions (e.g., unusual
and compelling urgency and one responsible source) are largely modeled
on the exceptions from competition that apply to direct Federal
procurement, which are contained in the Federal Acquisition Regulations
and the Competition in Contracting Act. Section 10(d) of the policy
authorizes managed competition (i.e., competition among a subset of
potential applicants) in cases where, with the concurrence of the GCA,
full and open competition is determined to be impracticable. It should
be noted that as part of the GCA's review of the policy, EPA is
considering whether it should retain specific managed competition
procedures.
Question 2. The EPA's competition policy has now been in place for
a little over 1 year. Does the Agency plan to provide a written
evaluation of the new competition policy?
Answer. As stated in the response to question 1, the GCA is
conducting a comprehensive review of the effectiveness of the
competition policy. This review will result in the issuance of a
revised competition policy later this year designed to improve the
Agency's ability to conduct effective grants competitions.
Question 3. How can the EPA ensure that the new competition policy
will not be abused when it contains exceptions for such reasons as
unique or innovative proposals or simply that competition is not in the
public interest?
Answer. EPA does not believe that having appropriate exceptions to
competition will lead to abuse or circumvention of the competition
policy. Such exceptions are necessary, for example, where unusual and
compelling circumstances make a competitive award impracticable. As
mentioned above, the section 8 exceptions to competition, including the
unsolicited proposal and public interest exceptions, are largely based
on exceptions to competition allowed for direct Federal procurement.
Moreover, in fiscal year 2003, the non-competitive exceptions for
unsolicited proposals and public interest were not frequently used to
justify non-competitive grants. However, to address Congressional
concern over the use of the unsolicited proposal exception, EPA is
considering making changes to it, including requiring approval by the
GCA in all cases.
Question 4. Please provide the number of personnel in fiscal year
2003 that had responsibility for awarding and monitoring grants in
headquarters and regional offices.
Answer. In fiscal year 2003, there were 109 grant specialists and
1851 project officers (with active grants) that were responsible for
awarding and monitoring grants in headquarters and regional offices.
Question 5. Please provide a description of all training and/or
certification for grant officers, awarding officers, and any other EPA
personnel responsible for awarding and monitoring grants. Please
identify what training requirements are newly imposed and how the
agency plans to enforce these training requirements.
Answer. As a pre-requisite to managing a grant, cooperative
agreement or interagency agreement, project officers must complete the
basic 3 day classroom training course entitled ``Managing Your
Financial Assistance Agreement--Project Officer Responsibilities.''
This is a national course offered primarily at Headquarters but is also
offered in some Regional offices. Within 3 years of completing the
basic course, project officers are required to complete a 1-day
refresher course to recertify. Project officers have the option of
completing the 1-day refresher via the class room or an on-line self-
certification course. The Office of Grants and Debarment tracks Project
Officer Certification status through the ``National Project Officer
Data base''. This data base has safeguards built in to notify project
officers within 60 days and again within 30 days to alert them that
their certification is about to expire. Project officers that fail to
recertify are prohibited from managing a grant, cooperative agreement
or interagency agreement until they have retaken the basic 3-day
course. If project officers fail to maintain their certification, the
program must replace them on the assistance agreement with a certified
individual.
The Grants Specialist Training program represents a joint effort
between the headquarters Grants Administration Division and the
Regional Grants Management Offices for grant and interagency agreement
specialists. Comprised of three phases, this program focuses on the
``Core Competencies'' specialists need to perform their position. Phase
One addresses key national issues, such as the Federal Grants and
Cooperative Agreement Act, Office of Management and Budget (OMB)
Circulars, EPA's Delegations of Authority, General Grant Regulations,
cost reviews of budgets, and transaction testing for unallowable costs.
Phase Two provides training on the individual implementation procedures
governing each of the eleven national Grants Management Offices
(including headquarters). Phase Three focuses on the specialist's
individual career development plan, which includes taking external
training courses on grants management. In many cases, specialists take
courses from Management Concepts, Incorporated (MCI), which offers a
Certified Grants Management Curriculum. The Curriculum contains the
following recommended courses: (1) Introduction to Grants and
Cooperative Agreements for Federal Personnel, (2) Cost Principles: OMB
Circulars A-21, A-122 and A-87, (3) Grants and GPRA: A Performance-
Based Approach to Federal Assistance, (4) Essential Skills for Grants
Professionals, and (5) Appropriations Law.
EPA Regions also provide supplemental grant-related training to
project officers and grant specialists. Supervisors, managers, and
funds certifiers occasionally participate in this training, which
covers areas such as (1) training on the Integrated Grants Management
System (IGMS), EPA's electronic system for automating the grants
process; (2) grant competition training; (3) post-award management
training; (4) Tribal or State Performance Partnership Grant training;
(5) mentor training for new grant specialists and grant assistants; (6)
Interagency Agreement (IAG) training for project officers; (7) quality
assurance principles and implementation; (8) National Environmental
Policy Act compliance training; (9) Working Effectively with Tribal
Governments; (10) Regulation Development Training; (11) Grantee
Compliance Tracking Data base Training; (12) training to address
Minority Business Enterprise/Women Business Enterprise requirements;
and (13) training on pre-award cost review and procurement.
In addition to these training efforts, the Office of Grants and
Debarment currently offers grants management training to supervisors
and managers on an as-requested basis. As part of the President's
fiscal year 2005 budget, the Agency is seeking funding to institute a
mandatory grants management online training program for managers and
supervisors.
Question 6a. The most recent edition of the EPA grants training
manual (Project Officer Training Manual, 5th Edition) lists statutory
references detailing the prohibitions of grantees using Federal grants
for lobbying and litigation against the Federal Government. It also
directs a project officer to notify their award official if they
believe that a grant recipient has used or may have used grants for
unallowable expenditures. How will this training assist personnel to
know what to report?
Answer. Using the 5th edition, project officer training instructors
cover in detail all of the statutory and regulatory prohibitions
against using grant funds to lobby or sue the Federal Government.
Project officers then participate in exercises involving budgets that
contain unallowable costs. These exercises require them to identify
those costs and explain why they are unallowable.
Question 6b. How does the EPA plan to train personnel to identify
unallowable costs?
Answer. EPA currently trains both grant specialists and project
officers in how to identify unallowable costs in the Grant Specialist
Core Competency Class and the Basic Project Officer training course.
Additionally, the Office of Grants and Debarment offers individual
instruction to any project officer who needs training on allowable
costs when the project officer has a recipient that has been placed on
reimbursement payments. EPA Grants Management Offices have also offered
basic transaction testing classes to grant specialists and plan to
offer an additional half-day class this spring.
Question 6c. What does the EPA Five Year Grants Management Plan or
other oversight policies do to incorporate transaction testing?
Answer. The Agency issued EPA Order 5700.6, ``Policy on Compliance,
Review and Monitoring,'' in December 2002, to consolidate existing
post-award management policies. One component of the Order requires
Grants Management Offices (GMO) to review the administrative and
financial systems of a grant recipient. These reviews may be conducted
either at the recipient's location (onsite) or through telephone
conference calls (offsite). Both reviews require the use of the
appropriate protocol.
The Order requires that onsite evaluations conducted by the GMO
include transaction testing. Further, the required protocol contains a
series of questions concerning transaction testing and guidance
attached to the Order discusses how to conduct transaction testing. In
addition, the required reporting format for on- or offsite evaluations
includes a specific item for transaction testing results.
In November 2003, the Grants Administration Division (GAD) issued
guidance on preparing Post-Award Management Plans for 2004. In this
guidance, GAD restated the need for transaction testing in GMO on-site
evaluations and noted that the requirement should be addressed in the
2004 Post-Award Management Plans.
Question 7. What indicators or standards are established in the EPA
Five Year Grants Management Plan that will measure specific
environmental outcomes? Please describe the milestones for each year
toward the goal of demonstrating environmental outcomes from grant
funding.
Answer. In the EPA Five Year Grants Management Plan, EPA will track
its progress in supporting grantee identification and realization of
environmental outcomes with the following performance measures:
<bullet> Percentage of grant workplans, decision memoranda, and
terms of condition that include a discussion of how grantees plan to
measure and report on environmental progress.
<bullet> Target for 2004: 70 percent
<bullet> Target for 2005: 80 percent
<bullet> Target for 2006: 100 percent
These performance measures are supplemented by the following
milestones:
FOR 2004
<bullet> Issue an interim policy on environmental results under EPA
grants programs. This policy requires funding packages submitted to
Grants Management Offices by Headquarters or Regional Program Offices
on or after February 9, 2004, to document how proposed EPA assistance
agreements will further the Agency's strategic goals.
FOR 2005
<bullet> Issue EPA Order (anticipated effective date, January 2005)
requiring that all grant workplans, decision memoranda, and/or terms of
condition include outcome measures to the maximum extent practicable.
The goals of the Order are to: (1) link proposed assistance agreements
to the Agency's Strategic Plan/Government Performance And Results Act
architecture; (2) ensure that not only outputs, but also outcomes, are
appropriately addressed in assistance agreement workplans, competitive
solicitations, advanced monitoring and performance reports; and (3)
consider how the results from completed assistance agreement projects
contribute to the Agency's programmatic goals and objectives.
<bullet> As part of the roll-out of the Order, provide training to
project officers and recipients on outcome measures.
<bullet> Include a discussion of expected environmental outcomes
and performance measures in grant solicitations.
<bullet> Require recipient performance reports to address progress
in achieving agreed-upon outcomes.
FOR 2006
<bullet> Beginning January 2006, incorporate past performance in
reporting on environmental outcomes as a significant ranking criteria
in competitive grant solicitations.
Question 8. Please provide a listing of grantees that have been
disbarred over the last 10 years. Please provide the reasoning for that
disbarment, the process used in the disbarment, and time required for
that process. Please provide whether those grantees continued to
receive grant funding during the debarment investigation.
Answer. Over the past 10 years, EPA took twenty-nine actions
involving grantee organizations or their principals. Principals include
officers, directors, managers or key employees. EPA debarred one
grantee organization and fifteen individuals who served as principals
for grantees; suspended two grantee organizations and one principal;
entered into eight settlement agreements; and currently has one grantee
organization and principal proposed for debarment.
The process: Suspension and debarment authority is delegated
directly from the Administrator to the Suspending and Debarring
Official (the Debarring Official). Debarment actions are initiated by
the Suspension and Debarment Division (SDD), Office of Grants and
Debarment (OGD). A suspension action is a temporary action that
prohibits new awards pending the outcome of legal or debarment
proceedings. A debarment action is a final Agency determination after
an investigation is completed which prohibits an entity/individual from
receiving Federal funding (e.g., Federal grants or contracts) for a
specified period of time. SDD makes recommendations to the Debarring
Official that specific grantees or principals be suspended or debarred.
The Debarring Official makes all decisions based on the administrative
record. The Debarring Official's final decisions may be appealed to the
Director, OGD. Material questions of fact are referred to an
independent fact finder. Underlying investigations are conducted by the
Office of Inspector General, the Criminal Investigations Division of
the Office of Enforcement and Compliance Assurance, and SDD.
The procedural requirements for bringing discretionary debarment
actions are set forth at 40 C.F.R. Part 32 (for grants) and Subpart 9.4
of the Federal Acquisition Regulation (for contracts). The elements of
a statutory debarment are described in 33 U.S.C. Section 1368 for the
Clean Water Act and 42 U.S.C Section 7606 for the Clean Air Act.
Debarment and suspension is a prospective remedy. It prohibits a new
grant or contract award after the date of the suspension or debarment
determination.
Each year, EPA initiates over a hundred potential suspension and
debarment cases. Most of these cases involve commercial entities that
could perform work under Federal grants or contracts.
ONE EPA GRANTEE DEBARRED DURING THE LAST 10 YEARS
Liberty Family Learning Center.--Debarred for submitting false
certification on an EPA grant; Processing time 2 months.
two epa grantees and one principal suspended during the last 10 years
Environmental Compliance Organization.--Suspended for submitting
false credentials; Processing time 1 month.
ECO Foundation.--Suspended for submitting false credentials;
Processing time 1 month.
Patricia Ewald, Director.--Suspended for submitting false
credentials; Processing time 1 month.
EPA DEBARRED FIFTEEN INDIVIDUALS WHO SERVED AS PRINCIPALS TO EPA
GRANTEES
Onyundo Amram, Director of Liberty Family Learning Center.--
Debarred for submitting false certification on an EPA Grant; Processing
time 2 months.
Carol Vitales, Payroll Technician.--Debarred for embezzlement of
funds from the Oglala Sioux Tribe; Processing time 4 months.
Estelle Goings, Director.--Debarred for embezzlement of funds from
the Oglala Sioux Tribe; Processing time 4 months.
Vonnie Goings, Payroll Technician.--Debarred for embezzlement of
funds from the Oglala Sioux Tribe; Processing time 4 months.
Wallace Jorgensen, Office Manager.--Debarred for embezzling grant
funds from National Asian Pacific Center for the Aging; Processing time
4 months.
Debra O'Neil, Office Manager.--Debarred for embezzling grant funds
from the Nevada Indian Environmental Coalition; Processing time 4
months.
Anita Collins, Executive Director.--Debarred for embezzling grants
funds from the Nevada Indian Environmental Coalition; Processing time 4
months.
Dennis Arnold.--Facility specific statutory debarment under the
Clean Water Act; Processing time 6 months.
Syed Hug, Environmental Manager.--Proposed for debarment for
embezzlement of funds from the Rosebud Indian Tribe; Resolved through a
compliance agreement; Processing time 2 years and 3 months.
Richard Moffet, President of Peoples Rights to a Clean
Environment.--Debarred for convictions for hashish possession and tax
evasions; Processing time 3 months.
Joseph Frazier, Treasurer of Pfohl Area Homeowners Association.--
Debarred for a burglary conviction; Processing time 1 year and 4
months.
Day Niederhauser, Inspector of The Virginia Department of
Environmental Quality.--Debarred for filing false reports while working
on an EPA grant; Processing time 3 months.
Raymond Sinnamon, Jr., Plant Manager of City of Dalton, Georgia.--
Debarred for civil and administrative violations, water permits and
restrictions; Processing time 1 year and 2 months.
DeForrest Parrott, General Manager & CEO of City of Dalton,
Georgia.--Debarred for civil and administrative violations, water
permits and restrictions; Processing time 1 year and 2 months.
Carleen Murphy Moran, Executive Director of Hancock County Chamber
of Commerce.--Debarred for embezzling EPA grant money; Processing time
1 month.
SETTLEMENTS WITH FIVE LOCAL GOVERNMENTS THAT PREVIOUSLY RECEIVED
EPA GRANTS
City of New Haven, Markings Unit.--Facility debarred by statute
under the Clean Water Act; Resolved through a compliance agreement;
Processing time 10 months.
City of Waldport, Oregon.--Facility debarred by statute under the
Clean Water Act; Resolved through a compliance agreement; Processing
time 2 months.
City of Post Fall, Idaho.--Facility debarred by statute under the
Clean Water Act; Processing time 9 months.
Northeast Public Sewer District.--Facility debarred by statute
under the Clean Water Act; Resolved through a compliance agreement;
Processing time 6 months.
Southwest Florida Water Management District.--Drug-Free Workplace
violation; Recipient of Federal assistance from EPA in support of the
Sarasota Bay Estuary Program; Processing time 9 months.
settlements with one epa grantee and two principals
Global Rivers Environmental Education Network.--Use of grant funds
for personal use; Processing time 8 months.
Mark Patrick, Financial Manager, Global Rivers Environmental
Education Network.--Use of grant funds for personal use; Processing
time 8 months.
David Schmidt, Financial Manager, Global Rivers Environmental
Education Network.--Use of grant funds for personal use; Processing
time 8 months.
one grantee and one principal currently proposed for debarment
Lower Mississippi River Conservation.--Proposed for debarment for
embezzlement of grant funds; Processing time 3 months.
Debra Strickland, Finance Director.--Proposed for debarment for
embezzlement of grant funds; Processing time 3 months.
Question 9. Please provide a listing of grantees that have been
subject to disciplinary action by EPA over the last 10 years. Please
provide the reasoning for that discipline, the process used in the
discipline, and time required for that process. Please provide whether
those grantees continued to receive grant funding during the
disciplinary investigation.
Answer. Based on discussions with your staff, we are providing a
list of EPA grantees that were subject to disciplinary actions during
2002 and 2003:
1.Iowa Rural Water Association
2. Haskell Indian Nations University
3. St. Vincent Home School
4. University of Missouri--Columbia
5. St. Louis Medical Waste Incinerator Group
6. Kickapoo Tribe in Kansas
7. Santee Sioux Tribe of Nebraska
8. Virgin Island Department of Planning and Natural Resources
9. University of the Virgin Islands
10. Puerto Rico Environmental Quality Board
11. New Jersey Department of Environmental Protection
12. New York State Department of Environmental Conservation
13. Rutgers University
14. Passaic Valley Sewerage Commissioners
15. City of Johnstown
16. Systema Universitario Ana G. Mendez
17. City of Schenectady
18. Burlington County
19. Virgin Islands Department of Public Works
20. Cornell University
21. Rockland County
22. City of Syracuse
23. Township of Pennsauken
24. Association of State Wetland Managers Inc
25. City of Newark
26. Universidad Metropolitiana
27. Hudson River--Hudson River Foundation
28. Borough of Carteret
29. Musconetcong Sewerage Authority
30. New Jersey Department of Health and Human Services
31. County Essex--County of Essex
32. Atlantic States Legal Foundation
33. Scenic Hudson Inc.
34. City of Rorchester New York
35. City of Buffalo New York
36. Perth Amboy
37. City of Elmira
38. Puerto Rico Industrial Development Co.
39. City of Ogdensburg New York
40. City of Atlantic City
41. Middlesex County Improvement Authority
42. California Department of Toxic Substances Control
43. Big Sandy Rancheria
44. Bridgeport
45. CA Air Resources Board
46. Cahto Tribe of Laytonville Rancheria
47. Cahuilla
48. Campo Band of Mission Ind
49. City of Pomona
50. Colorado River Indian Tribes
51. Confederated Tribes of Goshute
52. County of Sacto
53. Cuyapaipe Band of Mission Indians
54. C.Y.C.L.E.
55. Del Amo Action Committee--Montrose
56. Dry Creek Rancheria
57. Enterprise Rancheria
58. Ft. McDowell Yavapai Nation
59. Ft. Mojave
60. Grindstone Rancheria
61. HI Dept of Health
62. Hoopa Valley Tribal Council
63. La Jolla Band of Mission Ind
64. La Posta Band of Mission Ind
65. Manchester Pt Arena Band of Pomo Indians
66. Mesa Grande Band of Mission Ind
67. Navajo Nation
68. Pauma Band of Mission Indians
69. Pinoleville Rancheria
70. Pyramid Lake Paiute Tribe
71. Quartz Valley Indian Reservation
72. Ramona Band of Cahuilla Mission Indians
73. Rincon Luiseno Indians
74. Round Valley Indian Tribes
75. Salt River Pima--Maricopa Indian Community
76. San Manuel Band of Mission Indians
77. San Mateo County RCD
78. San Pasqual Band of Mission Indians
79. Santa Rosa Band of Mission Indians
80. South Fork Band Council
81. Te-Moak Tribe of Western Shoshone
82. Tohono O'Odham Nation
83. Washoe Tribe of NV & CA
84. Yomba Shoshone Tribe
85. Shoshone and Arapaho Tribes
86. Crow Tribe
87. Rosebud Sioux Tribe
88. District of Columbia Department of Health
89. Lake Wallenpaupack Watershed Management District
90. Future Harvest, Incorporated
91. Chehalis
92. Chickaloon Native Village
93. Circle Village Council
94. Emmonak Village
95. Healy Lake Village
96. Inupiat Community of the Arctic Slope
97. Mentasta Trad Council
98. Muckleshoot Tribe
99. Native Village of Deering
100. Native Village of Elim
101. Native Village of Nelson Lagoon
102. Nez Perce
103. Nooksack
104. Northway Village Council
105. Quinault Indian Nation
106. Stevens Village Council
107. St. George Traditional Council
108. Village of Iliamna
109. Wrangell Coop Association
110. ADEC
111. Allakaket Traditional Council
112. Asa'carsarmiut Tribal Council
113. Association of Village Council Presidents
114. Beaver Village Council
115. Chilkoot Indian Assoc
116. Chitina Traditional Indian Village
117. Huslia Tribal Council
118. Hughes Village Council
119. Muckleshoot
120. Native Village of Nuiqsut
121. Native Village of Point Hope
122. Native Village of Point Lay
123. Puyallup Tribe
124. AK Dept. of Health & Soc. Serv
125. Concilio for the Spanish Speaking
126. University of Idaho
127. Washington State University
128. Norton Sound Health Corp.
129. City of Blackfoot
130. City of Kake
131. Hoonah
132. Ivanhof
133. Kuigpugmuit
134. The All Indian Pueblo Council, Inc.
135. Central States Air Resource Agencies Association
136. Coordinating Committee for Automotive Repair
137. Haskell Indian Nations University
138. Association of State and Interstate Water Pollution Control
Administrators
139. Michigan Biotechnology Institute International
140. National Council on Aging
141. Climate Neutral Network
142. Self Reliance Foundation
143. Tribal Association for Solid Waste and Emergency Response
144. Geothermal Heat Pump Consortium
145. National Asian Pacific Center on Aging
146. Consumer Federation of America
147. City of Atlanta
148. Hancock County Chamber of Commerce
149. Lower Mississippi River Conservation Commission
150. National Academy of Natural Sciences
The recipients listed above were subject to disciplinary actions
for the one or more of the following reasons:
<bullet> Audits performed by the Office of Inspector General (OIG)
and advanced monitoring performed by EPA staff identified financial
management problems, including embezzlement of grant funds, duplicative
payments, unsupported direct costs, failure to account for program
income, missing documentation, failure to provide an indirect cost rate
proposal and/or agreement, commingling of funds, unallowable costs,
payroll problems, no travel policy, undocumented cost share and
inadequate labor distribution systems.
<bullet> Procurement problems, including failure to perform cost or
price analysis, conflicts of interest violations, and lack of written
procurement procedures.
<bullet> Delinquent, incomplete or incorrect reports and
deliverables.
<bullet> A-133 single audit findings involving unaccounted funds,
incorrect financial status reports, missing Minority Business
Enterprise/Women Business Enterprise (MBE/WBE) reports, noncompliance
with terms and conditions, and property management findings.
The types of disciplinary actions for the above-listed recipients
included: (1) stop work orders; (2) recipients placed on payment
reimbursement; (3) termination of grant(s); (4) high risk designation
which imposed special award terms and conditions; (5) warning/
enforcement action letters; and (6) referral to the OIG for an audit.
The length of time for disciplinary actions varies depending on the
nature of the problem and how quickly the recipient is able to address
the deficiencies. In general, the disciplinary action continues until
the recipient has completed all corrective actions. EPA monitors the
status and if the grantee is not making significant progress without a
justifiable reason, the Agency will initiate additional enforcement
actions.
In general, recipients whose payments are specifically suspended or
limited by a term and condition are not paid until they have satisfied
the condition. With respect to the high risk grantees, some recipients
continue to receive payments in accordance with the high risk condition
for only those costs that: (1) are adequately supported with
appropriate documentation required by the high risk condition; (2) have
been reviewed and certified by its CPA firm prior to submission to EPA,
if necessary; and (3) have been reviewed and approved by the EPA Grant
Specialist and Project Officer.
Question 10a. The March 3, 2004, hearing raised two issues relating
to disclosure: available grants and awarded grants. What steps is the
EPA taking toward providing more public information on available EPA
grants? Will the EPA post such information on the agency website?
Answer. EPA currently provides information to the public on grants
through different websites. We provide general information on EPA
assistance programs and the types of grants we award through
www.cfda.gov. We provide information on active grants through EPA's
Envirofacts warehouse at http://www.epa.gov/enviro/html/gics/gics--
query.html. Some EPA program offices provide information on the
projects they fund on their program web sites.
EPA also posts synopses of competitive grant opportunities on the
grants.gov website as directed by the Office of Federal Financial
Management in the Office of Management and Budget. The purpose of doing
so is to provide potential applicants with information about funding
opportunities so they can decide whether they are interested in
applying for them. In addition, the Agency's Office of Grants and
Debarment website has a Grants Competition section which includes
information on competitive grant opportunities, including a list of
available competitive grants [http://www.epa.gov/ogd/competition/
index.htm].
Question 10b. What steps is the EPA taking toward publicly
disclosing all annual recipients of grants, the amounts of those
grants, and the purpose for which the grant was awarded? Will the EPA
post such information on the agency website?
Answer. EPA currently provides information on active grants through
EPA's Envirofacts warehouse at http://www.epa.gov/enviro/html/gics/
gics--query.html. Beginning April 30, 2004, EPA will be posting
information on new grant awards, including the purpose and amount of
each award, at the following web site: http://www.epa.gov/ogd/grants/
award.htm. The Agency will update this information on a quarterly
basis.
______
Responses by David O'Connor to Additional Questions from
Senator Jeffords
Question 1. Your written testimony indicates that a mandatory
certification program for project officers is in place. You also report
that the Agency will assess whether the program adequately equips
project officers with the skills needed for proper grants oversight.
When and how will this assessment be carried out? Is there an
assessment protocol already in place?
Answer. As addressed in the Agency's ``Long Term Grants Management
Training Plan'' EPA will be issuing the 6th edition of ``Managing Your
Financial Assistance Agreement--Project Officer Responsibilities.'' In
offering training courses based on the 6th edition, we will begin pre-
and post-testing of all trainees. This will allow us to demonstrate the
basic knowledge of the project officers prior to taking the class and
after completing the class. The pre-test will be administered online as
part of the registration process for the class. Post-tests will be
administered at the end of day three. We are in the process of
developing the 6th edition training class and will pilot the pre- and
post-testing concept this fall.
Question 2. According to the grants management plan, EPA set the
following goal for 2003: to award competitively 30 percent of new
grants that are subject to the competition policy. The same 30 percent
target was set for new grants to non-profit organizations. Were those
30 percent targets met? What plans are in place to ensure that the 2004
and 2005 goals, which call for significant increases, are met?
Answer. EPA exceeded the 2003 goals to competitively award 30
percent of new grants subject to the competition policy and 30 percent
of new grants to non-profit organizations that were subject to the
competition policy. In the first year of implementation, the Agency
competed 75 percent of new awards to non-profit organizations covered
by the policy and over 85 percent of all new awards covered by the
policy. The Agency is encouraged by the first year statistics. However,
it also recognizes, given EPA's limited experience with grants
competition, that the competition policy needs to be strengthened to
ensure that the Agency conducts effective grant competitions. To that
end, EPA's Grants Competition Advocate (GCA) is in the process of
performing a comprehensive review of the policy. The results of the
GCA's review will be incorporated in a revised policy, which the Agency
expects to issue later this year. Possible changes to the policy
include a reduction in the competition threshold to open up more grant
opportunities to competition.
EPA believes that a revised, strengthened competition policy,
coupled with continued vigorous oversight by the GCA, should enable the
Agency to achieve the 2004 and 2005 goals. EPA will be reporting on its
success in meeting these goals in its Annual Report to Congress.
Question 3. I understand that in fiscal year 2003 EPA provided a
$55,000 grant to a researcher at the University of Georgia. The purpose
of the grant was to bio-engineer poplar trees to absorb mercury from
contaminated soils and materials and transpire it into the air. This
was done under contract or agreement number 68D02008. Why is EPA
spending money developing or supporting technologies to move mercury
from the soil into the air?
Answer. EPA has been asked about funding research that used
phytoremediation to uptake mercury into the roots of trees and then to
volatilize the mercury into the atmosphere. EPA has opposed the
volatilization of mercury into the atmosphere from the beginning and
EPA National Center for Environmental Research (NCER) has not provided
financial support for research supporting releases of mercury into the
atmosphere.
About 10 years ago, Dr. Richard Meager of the University of Georgia
initiated a research program to investigate the potential for using
biotechnology to detoxify mercury in the environment (research not
funded by EPA). He found that one bacterial gene, MerB, has the
capability to break the environmentally toxic methyl-mercury with the
release of ionic mercury which is subsequently taken up by the
bacteria. He also found that a second bacterial gene, MerA, has the
capability to reduce ionic mercury (potentially toxic to cells) to
elemental mercury, a significantly less toxic chemical form. Elemental
mercury tends to vaporize at the normal atmospheric pressure. Dr.
Meager proceeded to isolate these two bacterial genes and, using
biotechnology, he expressed them in plants. He subsequently proposed to
use these transgenic plants to phytoremediate methyl-mercury via
compound breakdown, ionic mercury uptake into roots, reduction of ionic
mercury to elemental mercury, and subsequent volatilization
(transpiration) of elemental mercury in the atmosphere.
From early beginnings EPA, has opposed this approach with the
objection that elemental mercury transpired into the atmosphere will
precipitate and will be washed down by rain in the very same
geographical proximity. EPA has never endorsed this approach, and NCER
has never provided financial support (in the form of a grant) for this
research. Recently, NCER funded a phase 1 SBIR contract, which is
proposing to use plants transformed with MerB gene but not MerAgene. In
this project Dr. Laura Carreira, Applied PhytoGenetics, Inc., proposes
to select mercury-tolerant cottonwood transformed with MerB. These
trees will have the capability to break down methyl-mercury, absorb
ionic mercury and sequester the ionic form in the above ground plant
tissues without its release in the atmosphere as elemental mercury.
Because of his expertise in biotechnology, Dr. Meager was chosen as a
subcontractor in this research.
In summary: NCER has never provided financial support to Dr.
Meager's work to release elemental mercury in the atmosphere. NCER has
only supported a SBIR phase1 contract to support the removal of toxic
mercury stored in plant tissue.
______
Responses by David O'Connor to Additional Questions from
Senator Crapo
Question 1. The closure of mines and mills and consolidation of
agri-business have been as devastating to rural western economies as
the abandonment of industrial plants has been in the nation's cities.
Contamination, or the possibility of contamination, has hindered the
re-development of these properties in rural towns--an objective of the
Brownfields program. This past fall, EPA informed me that guidelines
for the fiscal year 2004 grant competition were being revised. How have
the guidelines changed to better address the needs of small rural
communities?
Answer. Based on feedback from the fiscal year 2003 competition, in
the fiscal year 2004 guidelines, we took out the specific reference to
``populations under 100,000'' in the applicant information section of
the guidelines. We made the special considerations more prominent in
the fiscal year 2004 guidelines by having a section entitled, ``What
are the statutory and policy considerations that EPA may take into
account?'' and referenced urban and nonurban and other geographic
factors. This change allows us to consider balance between large
populations and smaller rural areas.
The distribution of Brownfields grants selected in fiscal year 2003
closely followed the national distribution of grant requests received.
Out of the 214 grants announced for fiscal year 2003, 116 represented
non-urban areas with populations of 100,000 or less. In fiscal year
2003 we received 465 requests from the Western Regions (6-10) which
represent 35 percent of the total number of requests received. Of those
71 (33 percent of the national total of 214) were selected. This
represents a success award rate of 15 percent of total applications
submitted for Western Regions which is commensurate with the national
success rate of 16 percent. For fiscal year 2004, proposals received
from the Western Regions represent totaled 250 (33 percent of the total
number of proposals received). Seven proposals have been received from
the state of Idaho.
In addition to assessment, revolving loan fund and cleanup grants,
EPA supports small rural communities brownfields efforts through a
cooperative agreement with the National Association of Development
Organizations (NADO). Over the past several years, NADO has issued a
number of reports on improving support for small rural communities
including their Brownfields Resource Guide for Rural and Small
Communities which has gone through several reprintings due to popular
demand. NADO also holds brownfields workshops for small rural
communities, with upcoming workshops scheduled in Idaho on June 17 and
Montana on July 14.
Question 2. The fiscal year 2005 budget proposal would transfer the
Brownfields Economic Development Initiative, currently managed by the
Department of Housing and Urban Development, to EPA. Will EPA provide a
similar program, with a bulk of those funds earmarked for state grants?
Will the program be a revised program to equitably distribute funds
between the eastern and western United Sates and among urban and rural
communities?
What are EPA's plans in this regard?
Answer. No, the fiscal year 2005 budget proposal does not transfer
the HUD Brownfields Economic Development Initiative to EPA and EPA has
no plans to manage the program.
The Department of Housing and Urban Development in fiscal year 2005
will continue to support the redevelopment of brownfields through its
Community Development Block Grant (CDBG) program. EPA will continue to
work collaboratively with HUD on brownfield sites. HUD's program has
funded brownfield redevelopment activities (e.g., acquisition,
demolition, and infrastructure redevelopment) which are not authorized
uses of EPA's brownfield funds.
__________
Statement of Steve Ellis, Vice President for Programs, Taxpayers for
Common Sense
Good morning. Thank you for inviting me to testify and thank you
for holding this hearing on EPA grants management. I am Steve Ellis,
Vice President of Programs at Taxpayers for Common Sense (TCS), a
national, non-partisan budget watchdog organization. Our country is
facing enormous budget deficits, and we must be sure that every dollar
spent is spent wisely and advances the nation's goals.
I would also like to make it clear that TCS does not solicit or
accept Federal grants. Obviously, however, a lot of other organizations
do. According to the Heritage Foundation, in fiscal year 2001, the
Federal Government distributed more than $325 billion in grants.\1\ As
you know, roughly half--$4.2 billion in fiscal year 02--of the
Environmental Protection Agency's (EPA) more than $8 billion budget is
awarded in the form of assistance agreements or grants. The agency
awards grants to more than 3,300 recipients including tribes, non-
profits, State and local governments and universities to implement
programs and projects intended to further EPA's goals. Given the size
of the program, EPA's success depends significantly on how well it
manages these grants. Unfortunately, for the last decade EPA's grants
program has perhaps been best known for mismanagement or simply failure
to manage.
The EPA Inspector General (IG), the General Accounting Office
(GAO), the Office of Management and Budget (OMB), this committee and
it's parallel in the House of Representatives have all pointed out for
years that the grants program was failing the agency and Federal
taxpayers. After several false starts under consecutive
administrations, EPA appears to have instituted reforms that could lead
the agency toward responsible management of its grant portfolio. But,
time will tell whether the agency has truly turned the corner. TCS
recommends that additional measures to help buttress EPA's reform
efforts, including development of grants management evaluation criteria
for program officers, annual progress reporting to Congress, and rapid
deployment and centralizing of proposed grant data base systems.
THE PROGRAM
Of the $4.2 billion in grants the EPA awarded in fiscal year 2002,
$3.5 billion, or 85 percent, was allocated to non-discretionary
programs such as the drinking and wastewater State revolving funds and
a few other programs that are typically formula grants and earmarks.
The remaining amount, $719 million, was awarded in discretionary grants
to State and local governments, tribes, non-profits, and universities.
The Catalog of Federal Domestic Assistance (CFDA), administered by
the General Services Administration, lists more than 70 different EPA
assistance programs both discretionary and non-discretionary. However,
the bulk of these are program grants or discretionary.\2\ Discretionary
grant programs have received a great deal of scrutiny and well-earned
criticism over the past few years. We applaud the committee for its
role in reviewing these programs, and urge the committee to look more
closely at the non-discretionary programs to ensure that they are
meeting the nation's goals at an appropriate cost.
PROGRAM PROBLEMS
In his June 2003 testimony, Mr. John Stephenson of the GAO clearly
articulated four major areas EPA's grants program needs to address.\3\
TCS strongly agrees with these comments. The four key areas EPA has to
improve are:
<bullet> Award discretionary grants competitively and solicit from
a large pool of applicants.--Sole source or directed grants fail to
ensure that the taxpayer is receiving the best available product at the
best price. If EPA deviates from competition, it should be the
exception, not the rule, and the rationale must be fully documented.
According to the GAO, although required, these decision memorandums are
not always completed.\4\ Additionally, if grant opportunities are more
broadly published, we are more likely to receive competitive terms.
<bullet> Effectively oversee grantees' progress and compliance with
terms.--The EPA does not require enough financial and progress
information from grantees and does not consistently ensure that
grantees comply with regulations; the EPA either does not conduct
enough monitoring of contracts, or, if it does, the monitoring is not
documented.
<bullet> Manage grants so they are effective in achieving desired
results.--In some cases, the agency does not have a clear vision of
either the goals of particular programs or how to measure results
against its goals; either case significantly reduces the possibility of
a grant helping the agency meet overall goals.
<bullet> Hold staff accountable for performing duties, ensure staff
are properly trained and have the right information.--It is simple.
EPA's grants program is only going to be as successful as its grant
administrators and program officers. Adequate resources, training and
accountability need to be directed at frontline grant personnel if EPA
grants programs are to be successful.
The EPA IGs' March 2003 analysis of pre-award reviews, summed up
the last point very clearly:
Project officers are responsible for ensuring Federal funds
are protected and prudently awarded. However, Agency leadership
had not always emphasized the importance of project officer
duties, nor held project officers accountable for conducting
complete pre-award reviews. It is crucial that management
create an environment that considers the management of
assistance agreements and the project officer function vital to
the Agency's mission.\5\
A key message from this EPA IG report is that the agency must
clearly define missions and goals expected from its grant program so
that the taxpayer can be sure that every dollar spent is helping EPA
realize its goals and mission.
In the IG's random sample of 116 EPA assistance agreements, it
found that in 19 percent program officers had not determined the link
between the grant work plan and agency objectives. In 31 percent,
program officers had not determined the technical feasibility of the
grant applicant completing the work. In 79 percent of the applicable
agreements, required cost reviews of whether costs are eligible and
reasonable were not completed. In 42 percent, there were no
environmental outcomes negotiated. In 24 percent, milestones or
deliverables were not included.\6\
Rather than simply laying these failures at the feet of program
officers, higher leadership at the EPA must address these training,
incentive, and accountability needs. Staff will only be able to perform
what they are trained to do, is demanded of them and they are evaluated
on. It is incumbent on senior EPA officials to retrain agency norms if
their reform approaches are to succeed.
EPA'S RECENT REFORM EFFORTS
After constant criticism from the EPA IG, GAO, and OMB, EPA issued
the first policy to govern the competitive award of grants in September
2002.\7\ This established several criteria governing competition: a
$75,000 threshold; detailed justification for noncompetitive awards;
standard procedures for steps in the application process; and a new
Grants Competition Advocate to oversee the program.\8\ However, there
are exceptions for unsolicited grants and ``managed competition''.
Clearly, a shift to a competitive grant process represents a
significant change in agency culture. To be effective, active
measurement and oversight of these new objectives will be essential.
In December 2002, EPA issued a new grant oversight policy,\9\
intended to increase in-depth monitoring of grantees, in part by
requiring all compliance activities be entered into a data base; and
requiring all transactions be tested for unallowable expenditures
during onsite reviews.\10\
Finally, the agency issued its Grants Management Plan for 2003-2008
in April 2003. This plan outlined five goals in response to much of the
criticism EPA had received. These goals are:
1. Enhance the Skills of EPA Personnel Involved in Grants
Management
2. Promote Competition in the Award of Grants
3. Leverage Technology to Improve Program Performance
4. Strengthen EPA Oversight of Grants
5. Support Identifying and Achieving Environmental Outcomes.
These reforms appear to be on the mark. However, any EPA plan must
be evaluated based on both the fine print and the follow through. The
Grants Management Plan outlines several objectives for training grants
personnel, and requires that 100 percent of grants be managed by
certified project officers. However, the 2003 baseline is 85 percent.
Considering the problems documented by the EPA IG shortly before this
plan was released, the certification process itself may be flawed.
Promoting competition for grant awards clearly comes down to agency
commitment. If EPA cracks down on allowing sole source and similar
grants, competition will flourish, plain and simple. If the Integrated
Grants Management System (IGMS) is fully deployed it could
significantly help in grant tracking. Strengthening oversight on
achieving outcomes requires a commitment by EPA at both the national
and regional level to look over grantees shoulders and demand the basic
information grantees are supposed to supply.
ADDITIONAL REFORMS AND CONSTANT VIGILANCE
We support the reforms the EPA has proposed, but there are some
additional improvements that can be made. To truly inculcate
responsible grant management throughout the agency, EPA must develop
performance standards for EPA grant management staff. Reform will only
be effective if program officers and grant management personnel embrace
these efforts. If personnel are not evaluated on grant management
performance, it will be perceived as a lower priority and we will be
back discussing grant management failures at EPA every few years.
Similarly, senior EPA officials have to commit to making reforms
stick. To concentrate their attention, we believe it is vital that the
EPA report to Congress annually on its progress and that this
committee, the GAO, and the EPA IG exercise the vigorous oversight that
has gotten us this far in the reform process.
Finally, we strongly believe that centrally and publicly available
grant and tracking data will make reform efforts more enforceable and
efficient. We urge the EPA to deploy the IGMS system as quickly as
possible, but again, any system will only be as effective as the people
inputting the data. To that end, we urge the EPA to investigate
centralizing and streamlining grant management to fewer, more highly
trained individuals.
Although it is apparent that there has been much done to increase
accountability in the EPA grants system, there is much more to do.
However, we do believe that with vigilant oversight, EPA has turned the
corner on reforms. We are in difficult budget times. With a $521
billion deficit, we have to be sure that every dollar we spend is being
spent cost-effectively to further our nation's goals.
Thank you for the opportunity to testify and I would be happy to
answer any questions you might have.
REFERENCES
1. Yablonski, Christopher, Heritage Foundation Backgrounder No.
1615: Expanding Competition for Federal Grants. November 25, 2002.
2. Catalog of Federal Domestic Assistance, available at http://
www.cfda.gov/public/browse--agy.asp?agy--id=66&st=1. Last visited
February 28, 2004.
3. Testimony of John B. Stephenson, Director, Natural Resources and
Environment, General Accounting Office before the Subcommitte on Water
Resources and Environment Committee on Transportation and
Infrastructure. June 11, 2003.
4. Ibid. p. 4.
5. U.S. Environmental Protection Agency Inspector General Audit
Report: EPA Must Emphasize Importance of Pre-Award Reviews for
Assistance Agreements (Report No. 2003-P-00007). March 31, 2003. p. i.
6. Ibid. pp. 4-9.
7. EPA Order on Grants Competition (EPA Order 5700.5).
8. U.S. Environmental Protection Agency Grants Management Plan
2003-2008 (EPA-216-R-03-001). April 2003.
9. EPA Order on Compliance, Review and Monitoring (EPA Order
5700.6).
10. Testimony of John B. Stephenson, Director, Natural Resources
and Environment, General Acounting Office before the Subcommittee on
Water Resources and Environment Committee on Transportation and
Infrastructure, June 11, 2003.
11. U.S. Environmental Protection Agency Grants Management Plan
2003-2008 (EPA-216-R-03-001). April 2003.
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