OFFICE OF INSPECTOR GENERAL
REPORT OF REVIEW
SPECIAL REVIEW OF LESSONS LEARNED
FROM the NEW HAMPSHIRE GRANT
FLEXIBILITY DEMONSTRATION
PROGRAM
SEPTEMBER 30,1996
E1FMG6-01-0031- 6400102
EPA
350/
1996.2
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Inspector General Division
Conducting the Audit:
Region Covered:
Offices Involved:
Eastern Audit Division
Boston, Massachusetts
Region 1
Office of Ecosystem
Protection
Office of Administration
& Resource Management
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF THE INSPECTOR GENERAL
EASTERN AUDIT DIVISION
JOHN F. KENNEDY FEDERAL BUILDING
BOSTON, MASSACHUSETTS 02203-0001
NEW YORK OFFICE:
290 BROADWAY
NEW YORK, NY 10007-1866
September 30, 1996
MEMORANDUM
SUBJECT: Special Review of the Lessons Learned From the New Hampshire Grant
Flexibility Demonstration Program Report No. E1FMG6-01-0031-6400102
FROM: Paul D. McKechnje-^w/^
Divisional Inspector General
Eastern Audit Division
TO: John DeVillars
Regional Administrator
New England Region
The Eastern Audit Division (EAD) has conducted the attached review entiltled "Special
Review of Lessons Learned from the New Hampshire Grant Flexibility Demonstration
Program". The New Hampshire demonstration grant illustrated barriers do exist to the
straightforward implementation of the block grant or consolidated Federal funding
concept. However, with the elimination of these barriers, we believe the state will be
afforded greater flexibility, reduce micro-management, and reduce wasteful paperwork.
The special review was performed at both the New England Region, Boston,
Massachusetts (hereafter referred to as Region 1) and at the New Hampshire
Department of Environmental Services, {NHDES), Concord, New Hampshire.
My staff have discussed these issues with Region 1 and NHDES program managers
and we are pleased with the cooperation we have received from them.
Action Required
In accordance with EPA Order 2750, we ask that you provide us with a written
response to the review within 90 days of the final report date. The report contains
issues and recommendations regarding the administration of the demonstration
program. For corrective action planned but not completed by your response date,
reference to specific milestone dates will assist this office in deciding whether to close
this report.
R«eycled/R«cyclabla • Printed with Vegetable Oil Based Inks on 100% Recycled Paper (40% Postconsumer)
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We have no objections to the further release of this report to the public. This report
does not contain confidential or proprietary information that cannot be released to the public.
This report contains matters that describe the issues the Office of Inspector General
(OIG) has identified and corrective action the OIG recommends. This report represents
the opinion of the OIG. Final determination on matters in this report will be made by
EPA managers in accordance with the established EPA audit resolution procedures.
Accordingly, the matters in this report do not necessarily represent the final EPA
position.
Should you or your staff have any questions about this report, please contact Wilfredo
Vazquez-Pol, Principal Team Leader, at (617) 565-3160.
Attachment
CC: Robert W. Varney, Commissioner, New
Hampshire Department of Environmental Services
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SPECIAL REVIEW OF NEW HAMPSHIRE DEMONSTRATION GRANT FLEXIBILITY PROGRAM
EXECUTIVE SUMMARY
RESULTS-IN-BRIEF The Environmental Protection Agency (EPA) and the State
of New Hampshire, Department of Environmental Services
(NHDES) need to implement specific actions to eliminate
barriers that currently prevent realization of increased state
flexibility, and achievement of improved environmental
outcomes. Elimination of the barriers will help ensure that
the future Performance Partnership Grant (PPG) Programs
with NHDES and other states will be successful.
The New Hampshire demonstration grant illustrated that
barriers do exist that hinder the straightforward
implementation of the block grant or consolidated Federal
funding concept. However, with the elimination of these
barriers, we believe the State will be afforded greater
flexibility, reduce micro-management, and wasteful
paperwork. As a result, administrative efficiencies should
occur, and increased State-targeted environmental
accomplishments should be realized, resulting in
administrative savings and improved environmental
performance for New Hampshire.
The demonstration grant did provide a more streamlined
grant process for the State of New Hampshire which
included:
Grant applications reduced from five to two.
Work plans reduced from five to one.
Financial Status Reports reduced from five to two.
Status report submissions reduced from five to two.
Drawdowns of grant funds was simplified.
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SPECIAL REVIEW OF NEW HAMPSHIRE DEMONSTRATION GRANT FLEXIBILITY PROGRAM
The Pilot Demonstration grant did result in administrative
efficiencies, however the success of the pilot was limited
because of two major obstacles that were not addressed
when the demonstration program for New Hampshire was
formulated:
The pilot used current statutory authority which
prohibited the reprogramming of funds for the Water
Infrastructure Fund (WIF) appropriation. This
required the removal of Clean Water Act § 106 funds
from the WIF components of the proposal because
EPA could not reprogram across appropriations.
Accordingly, the state was unable to consolidate their
water program under one grant.
• State officials who in the past were responsible for
individual grants were reluctant to change to a
consolidated system because of their concern that
their programwould not be adequately funded. As a
result, the tracking, reporting, and control of federal
grant funds for internal purposes continued as they
had been accounted for under a categorical grant
system.
Additionally, the pilot did disclose barriers to increasing
flexibility and improving environmental results. These
included:
• development of performance measures that were not
based on time-specific outcomes, were not
quantifiable and did not provide adequate
accountability.
• lack of a timely formal evaluation of the pilot by
Region 1 to ensure lessons learned were
incorporated into PPG guidance.
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SPECIAL REVIEW OF NEW HAMPSHIRE DEMONSTRATION GRANT FLEXIBILITY PROGRAM
• lack of a mechanism that would measure
administrative savings.
While NHDES's Pilot encountered the obstacles previously
mentioned, we feel that the December 1995 guidance
developed for the PPG program wiil help address many of
the barriers that limited the success of the pilot in New
Hampshire.
PURPOSE The demonstration grant is a prelude to the future
Performance Partnership Grant (PPG) Program1, which is a
part of EPA's continuing effort to increase State flexibility,
improve inter-governmental partnership, and to help
improve state and tribal environmental protection capacity.
Lessons learned from the administration of the
demonstration grant can be used to foster the success of
future PPGs.
Part of the OIG's Mission Statement is to review and make
recommendations not only to existing but proposed
legislation and regulations relating to Agency programs and
operations. Therefore, we offer this advisory report for the
Agency's use in building a strong PPG program.
The Office of Inspector General (OIG) has completed an
assessment to determine the lessons learned from the New
Hampshire Demonstration Grant Flexibility Program. The
purpose of our review was to evaluate EPA's management
and oversight of the demonstration grant awarded to the
NHDES. We also determined NHDES concerns in the
effective implementation and management of the
demonstration grant at the state level. Specific objectives
were to:
1 President Clinton announced the Performance Partnership Grants Program on
March 16, 1995, as part of the "Reinvent Environmental Regulation" program.
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SPECIAL REVIEW OF NEW HAMPSHIRE DEMONSTRATION GRANT FLEXIBILITY PROGRAM
• determine if the pilot accomplished its intended
purpose;
• ascertain if grant performance measures were
established that were measurable, and contained
time specific outcomes;
determine if the Region developed oversight
procedures that allow the State the flexibility the
Agency has promised while, ensuring the
appropriation requirements were being met; and
report the lessons learned to the Agency.
SCOPE AND
METHODOLOGY
We conducted our review during the period December 1995
through June 1996. We evaluated the New Hampshire
grant to determine what lessons could be learned from the
pilot program that could be applied to PPGs. Our work was
conducted in the Region 1 program offices, Boston,
Massachusetts and the New Hampshire Department of
Environmental Services offices in Concord, New Hampshire.
To ascertain if the pilot program attained its proposed
objectives, we reviewed; Regional Project Officer's files and
obtained a list of the grants included in the demonstration,
decision memos pertaining to the demonstration grant and
grant evaluation plans. We also reviewed EPA draft and
approved PPG guidance. To obtain clarification and
explanation about the matters found during our file reviews
we interviewed Region 1 management officials and State of
New Hampshire NHDES officials who administered the
demonstration grant. We held discussions with the Director,
State of New Hampshire Office of Legislative Budget
Assistant, Audit Division, and members of his staff.
We interviewed the Regional Project Officer and other
Region 1 officials and determined if; visits had been made to
the state to assist in the administration and oversight of the
demonstration grant, required written evaluations had been
IV
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made, lessons learned from the demonstration grant had
been documented and reasons why the program was
considered to be successful or not.
Through discussions with NHDES officials we determined; if
the pilot program provided the State with more flexibility in
the use of grant funds, resulted in cost savings as planned,
and whether or not the State was ready to enter into a PPG
with EPA at the current time. We ascertained State officials
concerns and areas they believed needed improvement
before entering a PPG. We determined through interviews
whether State officials believed the demonstration grant was
successful and their specific reasons for their beliefs.
We reviewed FY95 and FY96 demonstration grant work
plans and determined if the performance measures and time
specific milestones contained in the work plans were
measurable and realistic. We reviewed State progress
reports to determine if required reporting requirements were
met and we determined if the State's financial federal fund
matching and reporting requirements were effectively
managed.
Our review was performed in accordance with OIG Manual
Chapter 150 for Special Reviews. Special reviews are short-
term studies of EPA activities. They are not designed to be
statistical research studies or detailed audits. Rather, they
are information gathering studies that seek to identify issue
areas for top management attention. The goal of a special
review is to produce timely, constructive change, while
minimizing the resources invested in studying and
documenting the issue areas.
BACKGROUND
As part of EPA's reinvention and state capacity building
efforts Region 1 awarded a demonstration pilot grant to New
Hampshire in fiscal year 1995. The pilot program responded
to the recommendations from the National Performance
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Review2 regarding the Agency's need to develop State and
Tribal environmental protection capacity, increase flexibility,
improve intergovernmental partnerships, help States and
Tribes improve environmental performance, and increase
ability to achieve administrative savings by reducing and
streamlining the grants process.
The pilot grant focused on pooling of separate categorical
water grants into a consolidated watershed grant focusing
on program performance and environmental results. The
watershed protection approach refocuses existing programs
to operate in a comprehensive and interested manner. This
approach was based on the implementation of the full range
of water programs, participation by stakeholders in the
decision-making process, and targeting priority problems
within the watersheds.
From a grant demonstration prospective, the purpose of the
pilot was to test the pooling of several water program grants
in a unified work plan to fund an alternative coordinated
approach to achieving program objectives. Currently this
approach was not possible because of the requirements that
funds for these categorical programs be spent on specified
activities, the widely differing matching and maintenance
requirements, the separate record keeping, reporting
requirements, and the requirement for the accounting
systems which provide the accurate audit trails back to the
specific authorized statues. The demonstration grant was
based on an agreed upon work plan and an evaluation plan
negotiated with the State by EPA-Region 1 staff. The
Demonstratfon Grant was implemented for a two year
period, October 1, 1994 through September 30, 1996.
The consolidated water grant was awarded to NHDES
covering the programs under the CWA to give the State
greater flexibility in the use of the environmental grant funds
2The National Performance Review: "Creating a Government That Works Better
and Costs Less"; September, 1992.
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to achieve improved environmental outcomes. The pilot
tested the effectiveness of a consolidated water grant that
would provide the State with the opportunity to streamline
the process of applying for and receiving federal financial
assistance under the CWA and enable the State to
implement water quality programs based upon strategic
plans which address the highest environmental risks on a
watershed basis.
The pilot consolidated grant covered the entire range of the
state's water pollution prevention and control and water
quality management planning efforts for both surface and
ground waters (i.e., permitting, enforcement, pollution control
studies, water quality planning, sampling and monitoring,
waste allocation, water quality standards, nonpoint source
planning and implementation, ground water protection,
assistance to localities, training, public information, etc.).
The New Hampshire pilot reduced the water program to two
components: 1) a combined Water Infrastructure Funding
(WIF) appropriation grant {604 (b), 319 (h) and 104 (b)(3)>;
and 2) an Abatement, Compliance and Control (AC&C)
appropriation grant (106). It should be noted that the State
used grant appropriation 106 (b), which segregates surface
and ground water fund accountability. The consolidated
grant demonstration pilot was based on a NHDES Unified
Water Program Work Plan - FY95. The work plan was
updated for FY96, Although EPA intended to work with
Congress early in the budget process to reprogram WIF
funds to allow for a single demonstration grant in FY96 no
changes were made by Congress to allow this change in
FY96. The total amount of federal funds provided to
NHDES under the demonstration grant as of April 4, 1996,
was $2,787,495.
AUDITEE COMMENTS On September 9, 1996, Region 1, Office of Ecosystem
Protection- Strategic Planning Office, provided a written
response to the draft report. They generally agreed with our
findings and recommendations. An exit conference was
held with staff members from the Strategic Planning Office
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SPECIAL REVIEW OF NEW HAMPSHIRE DEMONSTRATION GRANT FLEXIBILITY PROGRAM
on September 23, 1996. The Strategic Planning Office
comments were fully considered in the preparation of the
final report and are included as Appendix 1, in its entirety.
viii
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SPECIAL REVIEW OF NEW HAMPSHIRE DEMONSTRATION GRANT FLEXIBILITY PROGRAM
TABLE OF CONTENTS
EXECUTIVE SUMMARY i
RESULTS IN BRIEF i
PURPOSE iii
SCOPE AND METHODOLOGY iv
BACKGROUND v
ISSUES AND RECOMMENDATIONS 1
GRANT PROCESS STREAMLINED 1
APPROPRIATION LAW PREVENTED
PILOT SUCCESS 2
STATE MANAGERS CONTINUED TO ADMINISTER
PILOT AS CATEGORICAL 3
WORK PLAN MILESTONES AND ENVIRONMENTAL
INDICATORS LACKED MEASURABILITY 4
COST SAVINGS COULD NOT BE DETERMINED
UNDER THE PILOT 6
REGION 1 DID NOT FOLLOW EVALUATION PLAN 7
STATE CONCERNS , 9
RECOMMENDATIONS 11
AUDITEE COMMENTS AND OIG EVALUATION 12
APPENDICES
APPENDIX!: REGION 1 COMMENTS 13
APPENDIX II: DISTRIBUTION 16
IX
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SPECIAL REVIEW OF NEW HAMPSHIRE DEMONSTRATION GRANT FLEXIBILITY PROGRAM
ISSUES AND RECOMMENDATIONS
GRANT PROCESS
STREAMLINED
The demonstration program successfully illustrated
that administrative efficiencies can occur, with a reduction in
Federal paperwork requirements for application, work plan,
drawdown of funds, and reporting requirements. New
Hampshire staff prepared two grant applications rather than
five separate applications, and oniy two financial status
reports, rather than five which would have been required
under the traditional categorical grant process. Further, New
Hampshire developed one unified work plan that
encompassed both of the grants awarded under the
demonstration program. Drawdowns were simplified from
five accounts to two. As a result of these events, Federal
paperwork and process requirements were significantly
reduced for NHDES.
However, we were advised by the NHDES officials that even
though their Federal reporting requirement had been
reduced by the pilot program that State officials continued to
request reports that broke out the funds on a fund by fund
basis, thus defeating the intent to reduce reporting
requirements. Additionally, for the purpose of documenting
level of effort and match requirements, NHDES felt it was
necessary to break out expenditures on a fund by fund basis
to demonstrate adherence to Federal matching
requirements. NHDES staff did not believe it prudent to
change their system for a pilot program which may or may
not result in significant changes in accounting for match and
level of effort mandates. NHDES did not feel they had been
given adequate guidance in this area.
Concerns with how to account for share requirements was
an example of a barrier that prevented State buy-in to the
demonstration approach.
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APPROPRIATION LAW
PREVENTED
PILOT SUCCESS
Region 1 was unable to consolidate targeted water
programs in New Hampshire because appropriation
laws prohibited the reprogramming of certain grant funds.
The Agency was not aware of this important factor when the
demonstration program was formulated, as a result, the
flexibility and reduction in administrative burden was not
reduced to the degree promised during negotiations.
The purpose of the demonstration grant was to give the
state greater flexibility by pooling categorical grant funds.
The pilot program was less successful because it used
current statutory authority which prohibited the
reprogramming of funds for the Water Infrastructure Fund
(WIF) appropriation. This required the removal of Clean
Water Act § 106 funds from the WIF components of the
proposal because EPA could not reprogram across
appropriations. Lack of fund flexibility prevented the State
from consolidating their water program under one grant,
which defeated the major purpose of the demonstration
grant.
The Region 1 Project officer for the pilot advised he didn't
believe EPA was aware of these appropriation requirements
and EPA didn't do enough up-front planning to ensure the
program would work before the demonstration grant was
awarded.
In a memo dated March
20, 1996 the Reg ion 1
Project Officer stated,
"Although the concept
of the flex demo was
excellent, in the end we
were not granted any of
the flexibility issues
requested, namely, HQ
did not realize until almost NOV. that they could not
unilaterally reprogram funds across appropriations.
"Although the concept of the
flex demo was excellent, in
the end we were not granted
any of the flexibility issues
requested..."
-Region 1
Project Officer
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STATE MANAGERS
CONTINUED TO
ADMINISTER PILOT
AS CATEGORICAL
Therefore, this demo project did not lump, or combine any
funding sources as originally planned."
The EPA Region 1 Project Officer also said that a request
had not been made to allow the reprogramming of grant
funds. This requires a waiver from Congressional
appropriation laws. EPA officials felt it was too late in the
process to seek congressional approval as required for
reprogramming funds.
Additionally, NHDES officials advised that even if the funds
had been consolidated as planned by the pilot program,
the State would continue to administer, track, and report
the funds as individual grants because of state appropriation
requirements and program managers preference. Further,
when NHDES developed their budget for the New
Hampshire State Legislature for FY 95 and 96 NHDES
stated their request detailed 8 appropriation codes for the
Consolidated grant, this in turn mandated NHDES to
account for each fund separately. We were advised that
NHDES could have requested a change in state
appropriation law, however, with the uncertainty of the pilot
program and EPA's inability to reprogram funds, NHDES
decided to stay with the status quo.
The NHDES infrastructure has been
designed to mirror the major
environmental medias; water, air, and
waste management. Within these
divisions, the state has fashioned a
system of bureaus based oh funding
received from the Federal Government
for the environment. With a
categorically-designed infrastructure,
State managers are responsible for a
small segment of a particular division and
funding for that section has been
earmarked via a categorical grant from
EPA. Even though the grants awarded
were reduced to two, we were advised
"...the grants
administrator
must track and
reports
accounts which
defeats the
purpose of
consolidating
grants into only
two..."
-NHDES Senior
Planner
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that the NHDES grants administrator was required to
account for the funds via 8 account numbers at the request
of state managers.
With concerns over funding, workload and potential loss of
staff that a block grant
concept could bring,
"...the plan hasn't
significantly improved the
way we do work..."
NHDES Official
State officials advised
that NHDES program
managers would be
reluctant to provide
funds for another
program and "turf
battles" for program funds which currently exist would be a
barrier to the implementation of future Performance
Partnership Grants. A NHDES official stated, "the plan
hasn't significantly improved the way we do work...and
without additional funds there would not be flexibility".
WORK PLAN
MILESTONES
AND ENVIRONMENTAL
INDICATORS LACKED
MEASURABILITY
The Demonstration Grant performance measures and
environmental indicators were not measurable, verifiable,
and could not be matched to the time-specific pilot because
there was no system of fiscal and program
accountability in place to ensure compliance with
appropriation and programmatic requirements. As a result,
the ability of the Region to evaluate the successes of the
demonstration program to help structure future PPGs was
limited.
In the first year, FY95, of the demonstration program, EPA
and NHDES utilized traditional outputs, commonly called
"bean counts", to demonstrate compliance with applicable
regulations. For example, the number of inspections,
permits issued, investigations initiated etc.
NHDES's FY96 work plan moved to a system that focused
on environmental indicators, and environmental program
results. Environmental indicators are measurable features
which provide evidence of environmental and ecosystem
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progress (quality) or evidence of trends in quality. To
measure progress made, and determine effectiveness of
programs, NHDES used a percentage factor in the FY96
work plan. For example, percentage of waters meeting their
legislative classification. That is the percentage of waters
suitable for swimming or recreational activities such as
boating and fishing.
Based on our review of the performance measures included
within the FY96 work plan we found that it would be nearly
impossible to track, verify, collect data, and determine
progress under the FY96 plan. For example, the FY96 work
plan contained interim and long term milestone dates
ranging from 1998 through 2008. The milestone for the
Sacco/Androscoggin Basin is that 95% of the water will
meet designated uses by the year 2000 and the long term
goal is 100% by the year 2008.
A NHDES official advised the FY96 work plan was a change
of direction for them. Region 1 requested a plan with
milestones, milestone dates and environmental indicators
however, since there was no data base, these outputs were
based on the experience and knowledge of EPA and State
officials.
In our opinion, Region 1 and NHDES need to work to
develop program measures that are time-specific, verifiable,
quantifiable, and can be tracked to expenditures. This area
needs to be addressed to ensure compliance with
appropriation laws and grant requirements. And should be
addressed before the Region and the State of New
Hampshire enter into a PPG. We believe the Region and
NHDES has made a first step and has the opportunity under
the PPG program to develop program measures that will
meet the joint goal of accountability and environmental
results.
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AUDITEE COMMENTS
AND OIG EVALUATION
Officials stated that although EPA and the States are moving
toward the increased utilization of environmental
performance measures based on environmental indicators it
is a very difficult process. Officials further stated there are
good reasons to pursue the use of environmental results
measures in spite of the difficulties and uncertainties
associated with their use. They stated, "In the longer term,
they provide the only means of assessing whether the
deliverables and actions produced as part of the strategy
pursued are producing beneficial results. For this reason,
their use should be nurtured and encouraged. We fear that
treating them as elements of grant specific accountability
(similar to performing inspections, writing permits, controlling
expenditures to allowable costs) is infeasible and has the
potential to discourage their use."
We agree that the area of performance measures and their
relationship to performance accountability is a significant
"lesson learned" from the demonstration grant and an area
that requires clarification. We also believe that the Region
and NHDES have made a first step by developing
performance measures in the NHDES FY96 Work plan and
has the opportunity, under the PPG program, to develop
program measures that will meet the joint goal of
accountability and environmental results. We encourage the
Region and NHDES to continue to develop and improve this
process.
COST SAVINGS
COULD NOT BE
DETERMINED
UNDER THE PILOT
Pilot grant administrative cost savings could not
be determined. The Region Project Officer advised from the
federal perspective savings can not be quantitatively
measured. He stated we might be able to determine how
much time has been saved, if any, through discussions with
State officials however, it would be impossible to determine
the dollar amount of cost savings.
State officials said there have been no documented
administrative cost savings under the demonstration grant.
The NHDES Grants Administrator stated that although EPA
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only requires one Financial Status Report for each of the two
grants under the demonstration program, the State of New
Hampshire Budget Legislature still requires that the
demonstration grant funds be reported by eight separate
budget appropriated accounts. As we stated previously, this
is because the State has not pooled grant funds but
maintains fund accountability by individual grant
appropriation. Additionally, financial budget appropriation
reports are prepared and submitted monthly to NHDES
program managers.
State officials advised that extensive negotiations with the
Region over the content of work plans, and programmatic
requirements eliminated cost savings generated from the
reduction of the grant application process. They do feel
confident that in the future cost savings will materialize.
REGION 1 DID NOT Region 1 has not effectively overseen the implementation
FOLLOW EVALUATION of the demonstration grant administered by NHDES as
PLAN required by the evaluation plan developed to report the
successes and failures of the grant.
Evaluation of the success or failure of a demonstration
program is an important ingredient in the development of the
future PPG program. The Region was required to develop a
comprehensive evaluation process to report the lessons
learned. Region 1 recognized the importance the evaluation
process played in the approval of the demonstration
program within the decision memorandum dated December
20, 1994. "The Demonstration Grant will include an agreed
upon work plan and an evaluation plan for measuring
success". Additionally, the Region advised within the
decision memorandum"...One important prerequisite of
gaining EPA HQ and Congressional approval of the
Demonstration grants was the development of an Evaluation
Plan..."
The decision memo dated, December 20, 1994, stated:
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"The Region I Water Management Division (WMD) will
continue to utilize the Region I Overview Policy and
Performance Based Assistance Evaluation Plan (dated Jan
1986) to evaluate program progress and assure program
accountability for all water
program grants awarded to
the New England states in
FY95. This overview
strategy requires a formal
written midyear review
process, an end of year
program progress review,
state program progress
reporting to the project
officers on a quarterly
basis, and regular onsite
visits by EPA program
managers."
"...One important
prerequisite of gaining
EPA HQ and
Congressional approval
of the Demonstration
grants was the
development of an
Evaluation Plan..."
EPA Region 1
Decision Memorandum dated
December 20,1994
The Region 1 Project Officer had not prepared the required
written evaluations of program progress to assure program
accountability for all water program grants awarded to the
State of New Hampshire under the demonstration grant.
The Region 1 Project Officer could only provide us with one
of the two state reports that had been submitted.
The Region 1 Grant Administration Chief advised that they
had been unable to make site visits to the State of New
Hampshire to assist the State in the administration of the
demonstration grant because of budget concerns. Further
the Region had not documented the "lessons learned" from
the demonstration grant.
Evaluation of the success or failure of a demonstration
program is an important ingredient in the development of the
future PPG program. Even though the region developed a
comprehensive evaluation process to report the lessons
learned, they did not fully implement the evaluation process
which ultimately defeats the purpose of having a
demonstration program.
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AGENCY COMMENTS
AND OIG EVALUATION
Region officials advised that subsequent to our review an
evaluation report of the Demonstration program for the
period ending 4/1/96 was completed and a draft of the
evaluation was forwarded to the State for their review and
comments. The draft report was prepared in detail and
identifies program strengths and areas requiring additional
attention.
We were advised that the draft has not been finalized or
forwarded to EPA Headquarters. It is in the Agency's best
interest that the evaluation report be finalized and issued as
soon as possible so the "lessons learned" from the
demonstration grant may be used in the management of
future Performance Partnership Grants.
STATE CONCERNS
The Demonstration Grant was designed to provide New
Hampshire with a block grant type approach to their water
program. Further, providing New Hampshire with flexibility
in addressing their environmental needs, reducing overly
detailed grant application processes and reducing Federal
reporting requirements. Overall, NHDES felt that barriers
did exist which prevented total success of the program.
The demonstration program was based upon a work plan
with the State and EPA-Region 1 staff for a two year period.
NHDES officials stated that the cost and time required to
prepare a two year work plan were very high. They stated
that they believed the demonstration grant was for a two
year period but before the first year was completed new
requirements and terms appeared inhibiting their ability to
complete the plan. Changes had to be made to the work
plan to include; environmental factors, milestones and
factors to be used to measure accomplishments. NHDES
officials stated if EPA intends to change the rules during the
first year of a two year plan then it is better for EPA to
establish the requirements for the state to follow.
A NHDES Senior Planner stated that both the Region and
NHDES need to plan better." We need to spend more time
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SPECIAL REVIEW OF NEW HAMPSHIRE DEMONSTRATION GRANT FLEXIBILITY PROGRAM
talking about road blocks down the road. We can't gloss
over problems and say we will handle them when they
occur. The update to the FY95 work plan is an excellent
example. In the update we established goals, milestones
and completion dates. This information could have been
contained in the original FY95 work plan. How can you
evaluate if a new concept is working if you change the
measures halfway through the process.?"
The NHDES Senior Planner also said that all parties should
be realistic about program barriers
before entering future PPGs. He
stated: "...even with unlimited barriers
you won't see changes happen
overnight. We must set up realistic
schedules. A good example is the
state accounting system, we jumped
into the demonstration program but
the state financial reporting system hasn't changed. There
have been no savings in financial administration because
the system wasn't ready to change and it hasn't changed.
Better up-front planning could have prevented this situation.
I don't think we are ready to jump into a PPG at this time."
1 dfcrVt think were
ready to jump into a
PPCSatthistlBSe*.
NH0ES Banner
Additionally, the state officials advised they were promised
flexibility, however, the consolidated grant contained 24
special conditions. A senior planner advised:"... there
wasn't any flexibility when EPA attaches 24 special
conditions..." The Region 1 Project Officer stated that he
was unaware that NHDES staff had expressed any concerns
over the changes made to update FY95 work plan. We
believe that this is an area where better planning and
greater EPA oversight would have been beneficial.
EPA staff should use the lessons learned from the New
Hampshire Demonstration grant to implement improved
management procedures prior to entering into future PPGs.
Most important, EPA staff should take immediate action to
ensure necessary Congressional appropriation laws are
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SPECIAL REVIEW OF NEW HAMPSHIRE DEMONSTRATION GRANT FLEXIBILITY PROGRAM
changed to permit the pooling of categorical grant funds.
This will provide flexibility in the use of grant funds and
provide an alternative coordinated approach to achieving
program environmental objectives.
RECOMMENDATIONS
We recommend that your staff:
1) Utilize "lessons learned" from the demonstration grant to
work with EPA-Headquarters staff to help formulate a
successful PPG program. Further to ensure elimination of
statutory barriers, such as reprogramming or transferring of
funds, before the implementation of the PPG program.
2) Work with the State of New Hampshire to educate the
state to the benefits of the PPG program in order to obtain
staff buy-in of the program.
•
3) Assist the State of New Hampshire and survey other
states within the Region, to identify whether areas such as
infrastructure and/or State laws may inhibit opportunities to
implement the PPG program.
4) Work with the State of New Hampshire to develop
program measures that are verifiable, quantifiable, and
trackable to time-specific periods. Work to standardize
measures or guidance for developing environmental
indicators.
5} Ensure in the future that demonstration/pilot programs are
evaluated in a timely manner to ensure lessons learned can
be documented and utilized in the Agency's decision-making
process.
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SPECIAL REVIEW OF NEW HAMPSHIRE DEMONSTRATION GRANT FLEXIBILITY PROGRAM
AGENCY COMMENTS
AND OIG EVALUATION
On September 9, 1996, the Region 1 Office of Ecosystem
Protection and Strategic Planning Office, provided a written
response to the draft report. They generally agreed with our
findings and recommendations. An exit conference was
held with staff members from the Strategic Planning Office
on September 23, 1996. Strategic Planning Office
comments were fully considered in the preparation of the
final report. The Strategic Planning Office's response in its
entirety is included as Appendix 1.
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SPECIAL REVIEW OF NEW HAMPSHIRE DEMONSTRATION GRANT FLEXIBILITY PROGRAM
APPENDIX 1
U.S. ENVIRONMENTAL PROTECTION AGENCY
REGION I
J.F.K. FEDERAL BUILDING, BOSTON, MA 02203-2211
MEMORANDUM -
DATS: September 9, 1996
SXJ3J: Draft: Special Review NHDES Grant Flexibility Demonstration.
tscrt No. E1FMFG-01-0031!
FROM: Patricia_.J^Me'aft44^-'4is:3£s;:arit Regional Administrator
TO: Paul D. McKechr.ia, Divisional Inspector General
Eastern Audi. Division
We have reviewed your draft Special Review of the New Hampshire
Grant Flexibility Demonstration Program dated 8/5/35 prepared by
the Office of the Inspector General.
Although we concur with most conclusions and statements included in
the draft report, there were seme statements that should be updated
or corrected.
1. Scoce and Methodology (page 4) . The period of this review was
from 12/35-S/9S. I believe ail interviews with the ?C and Z?A
staff occurred in tha v February-March 193S period.
Consequently, some materials or information may be missing from
this review and should be considered in any final report.
(a'; Evaluation of NH Flex Grant, - An evaluation report of the
Flex Grant Demo for the period ending 4/1/95 was completed
and mailed to the State on 5/15/96. This evaluation report
was based on onsite evaluations by the SPA Project Officer
and staff from EPA's NH State Unit and status reports
submitted by NHDES. (A copy of this 5/15/9S Evaluation
Report is attached for your reference.)
(bi Regional Reorganization - The EPA Region I reorganization
was completed on 971/95 and established a JJK State Unit
within the Region's Office of Ecosystem Protection. At the
time of this Special Review the regional organization was
still in transition due to the delays caused by the
government furloughs of 1995 and 199S. This NH State Unit
is now fully functional and is now providing day-to-day
program participation with NHDES.
(c) FYjJi 3udcet - From October 1995, until the passage of the
C~.nibus Appropriations Act of 1995 in late April 199S, EPA
was funded by a series of partial Continuing Resolutions
(CRs) that forced EPA to provide funding to the States
through a series of piecemeal grant actions. At the time
of the Special Review EPA had only awarded approximately
50% of the FY96 grant funds to New Hampshire.
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SPECIAL REVIEW OF NEW R4a\iPSHiRE DEMONSTRATION GRANT FLEXIBILITY PROGRAM
APPENDIX 1
2. Performance Measures (page 12) . Ever, chough EPA and the States
are moving coward the increased utilization of environmental
performance measures based on. environmental indicators, ic was
understood at ehs cutset that neither EPA nor New Hampshire had
the science or data available to evaluate progress"solely on
this basis. Consequently, the Demo work plan and evaluation
plan alsc included a mix of traditional program commitment
measures. You state that, "NHBES's FY96 work plan moved to a
system chat focused on environmental indicators and
erivironmencal results". You also state that, "3ased on our
review of the performance measures included within the FY96
work plan we fcund that it would be impossible to track,
verify, collect: daca, and determine progress under the FY9S
plan" . The repcr~ acknowledges that the Region and NKDES has
made a first stsp and has the opportunity under the PPG program
to develop program measures that will meec the joint goal of
accountability and environmental results.
We believe that the NK2ES ' s workplan contained a mix of
traditional measures (deliverables and activities) and results
measures (environmental goals and indicators) . As a lasscn
learned we think that the current state of direct environmental
measurement will make results measurement unsuitable as an
element of grant accountability for seme time to come (and
possibly forever) . Therefore, we believe that grant
performance accountability will need to stay in the realm of
performance of deliverables and activities that are part of the
strategies developed to achieve specified environmental
results .
Development of meaningful, usable environmental goals and
measures poses a variety of difficult issues relating to
science, monitoring and data collection, analysis (such as
isolacing the impact on che environment of the actions of the
strategies implemented from other factors affecting the state
of the environment) , and appropriate time frames (annual time
frames will rarely work", and time frames of 10 or more years
may prove most meaningful in some areas) . All of these issues
make environmental measures
performance accouncabilicy .
tenuous grounds for grant
Nevertheless, there are good reasons to pursue the use of
environmental results measures in spite of the difficulties and
uncertainties associated with their use. In the longer cerm,
they provide the only means of assessing whether the
celiverabies and actions produced as part of the strategies
pursued are producing beneficial results. For this reason,
their use should be nurtured and encouraged. We fear that
treating them as elements of grant specific accountability
(similar to performing inspections, writing permits, or
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SPECIAL REVIEW OF NEW HAMPSHIRE DEMONSTRATION GRANT FLEXIBILITY PROGRAM
APPENDIX 1
controlling expenditures to allowable cos's) is ir.feasibie and
has the potential to discourage their develocmer.t and use.
Therefore, we thir.k that grant performance "accountability
should focus or. performance cf deliverabies and activities that
constitute the strategies aimed at achieving results.
ir.viror.mer.tal goals ar.d measures should be encouraged to be
developed to their highest potential as an evaluation tool for
planning the scope and direction of environmental urotection
efforts.
3. Cost Savir.cs (page 12} . We question only the choice of wording
for the "cost savings section." The Regional Project Officer
(PO) could net quantitatively measure cost savings; but from a
qualitative standpoint, the ?C felt there was a cost savings in
reduced administrative paperwork.
4. Recicn Did Not "Qllaw Evaluation Plan (nage 14! . (See la
above.) An Evaluation Plan for period" ekdir.g 4/1/3S was
completed 5/15/9S. Due to delays in funding, delays in the
initiation of work activities, and the government shutdowns, ic
was felt that the period ending April l, 19SS, accurately
represented the first year of parformar.es under the Demo Grant".
= . State Concerns (page 15) . The referenced changes rr.ade to the
work plan in ?Y96 to include environmental measures and
milestones were actually consistent with the original FY95
evaluation plan which indicated EPA and NK2SS would
cooperatively develop environmental indicators and
environmental results measures over the period cf the Demo
Grant. (See page 11.)
S. Lessens Learned
Page 2, second of the three bullets at the bottom of the page.
The Project Officer did have an opportunity to bring his
knowledge and experier.ee gained from "the early stages of the
pilot to development of the PPG Guidance through participation
on the National PPG Guidance Development Workgroup during the
summer of 1995, before formal evaluation was scheduled.
If you have any questions or comments, please contact William Nuzzo
at 555-3435.
Attachment
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SPECIAL REVIEW OF NEW HAMPSHIRE DEMONSTRATION GRANT FLEXIBILITY PROGRAM
APPENDIX 2
DISTRIBUTION
Office of Inspector General
Inspector General (2441)
Deputy Assistant Inspector General for
Internal and Performance Audits (2421)
Deputy Assistance Inspector General for
Acquisition and Assistance Audits (2421)
EPA Headquarters C^ice
Assistant Administrator for Administration
And Resources Management (3101)
Comptroller (3301)
Associate Administrator for Regional Operations and
State/Local Relations (1501)
Agency Audit Followup Coordinator (3304)
Agency Audit Followup Official (3101)
Director for Program and Policy Coordination
Office (3102)
Office of Congressional Liaison (1302)
Office of Public Affairs (1701)
Headquarters Library (3304)
EPA Region 1
Assistant Regional Administrator
Director, Office of Ecosystem Protection
Manager, Strategic Planning Office
Regional Audit Liaison Coordinator
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