In fiscal year 2005, EPA awarded about $2.4 billion in nondiscretionary  grants. EPA Has Strengthened the Award Process, but Lack of Key Documentation Raises Accountability Concerns

EPA has strengthened its award process by, among other things, (1)  expanding the use of competition to select the most qualified applicants  and (2) issuing new policies and guidance to improve the awarding of  grants. However, EPA’s internal reviews of program and regional offices  have found weaknesses in documenting the review of grantees’ cost  proposals. This documentation weakness may hinder EPA’s ability to ensure  the reasonableness of its grantees’ expenditure of federal funds. In March 2005, EPA issued a policy establishing additional internal  controls for awarding grants to nonprofit organizations. EPA Has Improved In- depth Monitoring to Identify Agencywide Problems, but Weaknesses Remain in Ongoing Monitoring and in Closing Out Grants

EPA has improved some aspects of monitoring, but long-standing  problems in documentation and grant closeouts continue. Inadequate Documentation of Ongoing Monitoring Hinders Accountability

Ongoing monitoring is critical because, in contrast to in-depth monitoring,  it is conducted on every grant at least once a year throughout the life of  the grant, and the results are used to determine whether the grantee is on  track to meeting the terms and conditions of its grant agreement. During closeout,  EPA ensures that the grant recipient has met all financial requirements  and provided final technical reports, and ensures that any unexpended  balances are “deobligated” and returned to the agency. EPA’s Grants Management Plan identified measures  with targets that were developed to assess EPA’s closeout performance. In reviewing EPA’s management of grant closeouts, we found that EPA (1)  has effectively reduced its historic backlog of grants due for closeout; (2)  does not always close out grants in a timely way—within 180 days after  the project period ends, as required by agency policy; and (3) does not  always close out grants properly based on the regional files we reviewed. EPA Has Initiated Actions to Obtain Results from Grants, but Its Efforts Are Not Complete

EPA has taken steps to obtain environmental results from its grants, but  its efforts are not complete. While EPA has taken these positive steps, OMB’s  evaluations of EPA grant programs in 2006 indicate that EPA must  continue its concerted efforts to achieve results from its grants. EPA Has Taken Steps to Manage Grants Staff and Resources More Effectively but Still Faces Major Management Problems

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

As we reported in 2003 and found again in this review, regional grants  managers and staff are concerned that staff do not have sufficient time to  devote to effective grants management. Furthermore, the agency’s lack of  documentation indicates weaknesses at all levels: staff do not always  document their monitoring; supervisors do not always effectively review  grant files; and managers are not always meeting their commitments to  address known problems with lack of documentation. While EPA has made strides in trying to identify and obtain results from its  grants by issuing an environmental results policy, it has not yet established  a performance measure and target that reflect the policy’s direction. It is too early to tell whether this plan will effectively hold  managers and staff accountable for grants management. Appendix I: Scope and Methodology

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

The Environmental Protection Agency (EPA) has faced challenges for many years in managing its grants, which constitute over one-half of the agency's budget, or about $4 billion annually. EPA awards grants through 93 programs to such recipients as state and local governments, tribes, universities, and nonprofit organizations. In response to concerns about its ability to manage grants effectively, EPA issued its 5-year Grants Management Plan in 2003, with performance measures and targets. GAO was asked to assess EPA's progress in implementing its grant reforms in four key areas: (1) awarding grants, (2) monitoring grantees, (3) obtaining results from grants, and (4) managing grant staff and resources. To conduct this work, GAO, among other things, examined the implementation of the reforms at the regional level for two Clean Water Act programs in 3 of EPA's 10 regional offices.

What GAO Found

EPA has made important strides in achieving the grant reforms laid out in its 2003 Grants Management Plan, but weaknesses in implementation and accountability continue to hamper effective grants management in four areas. First, EPA has strengthened its award process by, among other things, (1) expanding the use of competition to select the most qualified applicants and (2) issuing new policies and guidance to improve the awarding of grants. Despite this progress, EPA's reviews found that staff do not always fully document their assessments of grantees' cost proposals; GAO also identified this problem in one region. Lack of documentation may hinder EPA's ability to be accountable for the reasonableness of the grantee's proposed costs. EPA is reexamining its cost review policy to address this problem. Second, EPA has made progress in reviewing its in-depth monitoring results to identify systemic problems, but long-standing issues remain in documenting ongoing monitoring and closing out grants. EPA and GAO found that staff do not always document ongoing monitoring, which is critical for determining if a grantee is on track in meeting its agreement. Without documentation, questions arise about the adequacy of EPA's monitoring of grantee performance. This lack of documentation occurred, in part, because managers have not fulfilled their commitment to improve monitoring documentation. In addition, grant closeouts are needed to ensure that grantees have met all financial requirements, provided their final reports, and returned any unexpended balances. For fiscal year 2005, EPA closed out only 37 percent of grants within 180 days after the grant project ended, as required by its policy. EPA also did not always close out grants properly in the regional files GAO reviewed. Third, EPA has initiated actions to obtain environmental results from its grants, but these efforts are not complete. For example, EPA's 2005 environmental results policy establishes criteria grants should meet to obtain results. However, EPA has not established a performance measure that addresses these criteria. Furthermore, EPA has not yet identified better ways to integrate its grant reporting systems. Finally, the Office of Management and Budget's 2006 assessment indicates that EPA needs to continue its concerted efforts to achieve results from grants. Finally, EPA has taken steps to manage grant staff and resources more effectively by analyzing workload, providing training, assessing the reliability of its grants management computer database, and holding managers and staff accountable for successfully fulfilling their grant responsibilities. Management attention is still needed because, among other things, EPA has just begun to implement its performance appraisal system for holding managers and staff accountable for grants management.