In fiscal year 2002, EPA awarded about $3.5 billion in  nondiscretionary grants. EPA’s Competition Policy Shows Promise but Requires a Major Cultural Shift

EPA’s September 2002 competition policy requires that most discretionary  grants be competed. These grants totaled about $719 million of the $4.2  billion in grants awarded in fiscal year 2002. EPA’s competition policy faces implementation barriers because it  represents a major cultural shift for EPA staff and managers, who  historically awarded most grants noncompetitively and thereby have had  limited experience with competition, according to the Office of Grants and  Debarment. These activities will require significant planning and  take more time than awarding grants noncompetitively. While the policy and subsequent implementing  guidance have been in effect for a number of months, it is too early to tell  if the policy has resulted in increased competition over the entire fiscal  year. EPA Needs A More Systematic Approach to Strengthen Oversight

EPA’s December 2002 oversight policy makes important improvements in  monitoring grantees, but it does not enable the agency to identify and  address systemic problems with grant recipients. Consequently, EPA is  not able to effectively and efficiently analyze these data to determine  systemic grantee problems. The full results of our analysis are presented in our report. A Systematic Approach to Collection and Analysis of Compliance Information Would Enhance Oversight

With a statistical approach to selecting grantees for review, standard  reporting format, and a plan for using information from in-depth and other  reviews, EPA could identify problem areas and develop trends to assess  the effectiveness of corrective actions to better target its oversight efforts. EPA Faces Challenges to Enhancing Accountability

Successful implementation of EPA’s 5-year grants management plan  requires all staff—senior management, project officers, and grant  specialists—to be fully committed to, and accountable for, grants  management. First, although the plan calls for ensuring that project  officers’ performance standards adequately address their grants  management responsibilities, agencywide implementation may be difficult. Furthermore, it is difficult to implement performance standards that will  hold project officers accountable for grants management because (1)  grants management is often a small part of a wide range of project officers’  responsibilities, (2) some project officers manage few grants, and (3)  project officers’ grants management responsibilities often fall into the  category of “other duties as assigned.” To address this issue, EPA officials  are considering, among other options, whether the agency needs to  develop a smaller cadre of well-trained project officers to oversee  grantees, rather than rely on the approximately 1,800 project officers with  different levels of grants management responsibilities and skills. Second, EPA will have difficulty achieving the plan’s goals unless, not only  project officers, but all managers and staff are held accountable for grants  management. The plan does not call for including grants management  standards in all managers’ and supervisors’ agreements. The division of responsibilities  between the Office of Grants and Debarment and program and regional  offices will continue to present a challenge to holding staff accountable  and improving grants management, and will require the sustained  commitment of EPA’s senior managers. Conclusions

If EPA is to better achieve its environmental mission, it must more  effectively manage its grants programs—which account for more than half  of its annual budget. EPA’s new policies and 5-year grants management  plan show promise, but they are missing several critical elements  necessary for the agency to address past grants management weaknesses. Specifically to improve EPA’s oversight of grantees, our report  recommends that EPA’ (1) incorporate appropriate statistical methods to  identify grantees for review; (2) require EPA staff to use a standard  reporting format for in-depth review so that the results can be entered into  the grantee compliance database and analyzed agency wide; and (3)  develop a plan, including modifications to the grantee compliance  database, to integrate and analyze compliance information from multiple  sources. These actions would help EPA identify systemic problems with  its grantees and better target its oversight resources. Until EPA does so, it cannot be assured that is fulfilling its grants  management responsibilities. While EPA’s 5-year grants management plan shows promise, we believe  that, given EPA’s historically uneven performance in addressing its grants  management challenges, congressional oversight is important to ensure  that EPA’s Administrator, managers, and staff implement the plan in a  sustained, coordinated fashion to meet the plan’s ambitious targets and  time frames. To help facilitate this oversight, our report recommends that  EPA annually report to Congress on its progress in improving grants  management.
Why GAO Did This Study

The Environmental Protection Agency (EPA) has faced persistent challenges in managing its grants, which, at about $4 billion annually constitute over one-half of the agency's total budget. EPA awards grants to thousands of recipients to implement its programs to protect human health and the environment. Given the size and diversity of EPA's programs, its ability to efficiently and effectively accomplish its mission largely depends on how well it manages its grant resources and builds accountability into its efforts. In our comprehensive report on EPA's management of its grants, released last week, we found that EPA continues to face four key grants management challenges despite past efforts to address them--(1) selecting the most qualified grant applicants, (2) effectively overseeing grantees, (3) measuring the results of grants, and (4) effectively managing its grant staff and resources. The report also discusses EPA's latest competition and oversight policies and its new 5-year plan to improve the management of its grants. This testimony, based on our report, focuses on the extent to which EPA's latest policies and plan address (1) awarding grants competitively, (2) improving oversight of grantees, and (3) holding staff and managers accountable for fulfilling their grants management responsibilities.

What GAO Found

Late in 2002, EPA launched new efforts to address some of its long-standing grants management problems. It issued two policies--one to promote competition in awarding grants and one to improve its oversight of grants. Furthermore, in April 2003, EPA issued a 5-year grants management plan to address its long-standing grants management problems. These policies and plan focus on the major grants management challenges we identified but will require strengthening, enhanced accountability, and sustained commitment to succeed. EPA's September 2002 competition policy should improve EPA's ability to select the most qualified applicants by requiring competition for more grants. However, effective implementation of the policy will require a major cultural shift for EPA managers and staff because the competitive process will require significant planning and take more time than awarding grants noncompetitively. EPA's December 2002 oversight policy makes important improvements in monitoring grantees, but it does not build in a process for effectively and efficiently analyzing the results of its monitoring efforts to address systemic grantee problems. Specifically, EPA does not (1) use a statistical approach to selecting grantees for review, (2) collect standard information from the reviews, and (3) analyze the results to identify and resolve systemic problems with grantees. As a result, EPA may not be using its oversight resources as efficiently as it could. With improved analysis, EPA could better identify problem areas and assess the effectiveness of its corrective actions to more efficiently target its oversight efforts. EPA's 5-year grants management plan recognizes the importance of accountability, but it does not completely address how the agency will hold all managers and staff accountable for successfully fulfilling their grants management responsibilities. For example, the plan calls for developing performance standards for staff overseeing grantee performance, but it does not call for including grants management performance standards in their managers' and supervisors' performance agreements. Unless all managers and staff are held accountable for grants management, EPA cannot ensure the sustained commitment required for the plan's success. Our report, Grants Management: EPA Needs to Strengthen Efforts to Address Persistent Challenges, GAO-03-846 , details EPA's historically uneven performance in addressing its grants management challenges. Over the years, EPA's past actions to improve grants management have had mixed results because of the complexity of the problems, weaknesses in policy design and implementation, and insufficient management attention to overseeing grants. While EPA's latest policies and new 5-year grants management plan show promise, it is too early to tell if these will succeed more than past actions. If EPA is to better achieve its environmental mission, it must more effectively manage its grants. Our report contains specific recommendations to address critical weaknesses in EPA's new oversight policy and plan. EPA stated that it agreed with GAO's recommendations and it will implement them as part of its 5- year grants management plan.