Office of Inspector General
Audit Report
GRANTS
REGION 4's IMPLEMENTATION AND
OVERSIGHT OF PERFORMANCE
PARTNERSHIP GRANTS
Report No. 1999-P00216
September 27,1999
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Inspector General Division
Conducting the Audit: Southern Audit Division
Atlanta, Georgia
Region Covered: Region 4
Program Office Involved: Performance Partnership
Grants
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September 27, 1999
MEMORANDUM
SUBJECT: Region 4's Implementation and Oversight of Performance Partnership Grants
Audit Report No. 1999-P00216
FROM: Mary M. Boyer
Divisional Inspector General for Audit
Southern Division
TO: John H. Hankinson, Jr.
Regional Administrator
Region 4
Attached is our final report on Region 4's implementation and oversight of performance
partnership grants. We discussed our findings with your staff and issued a draft report on August
3, 1999 for your review and comments. We extended the standard 30-day response period by an
additional two weeks, but still did not receive any written comments. Therefore, we issued the
final report without your comments.
This audit report contains findings that the Office of Inspector General (OIG) has identified and
corrective actions the OIG recommends. This audit report represents the opinion of OIG, and the
findings in this audit report do not necessarily represent the final EPA position. Final
determinations on matters in this audit report will be made by EPA managers in accordance with
established EPA audit resolution procedures.
ACTION REQUIRED
In accordance with Environmental Protection Agency (EPA) Order 2750, you, as the action
official, are required to provide this office a written response to the audit report within 90 days of
the final audit report date. Your response to the final report should identify any completed or
planned actions related to the report's recommendations. For corrective actions planned but not
completed by the response date, specific milestone dates are necessary to decide whether to close
this report.
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We have no objections to the release of this report to the public. If you have any questions,
please call me or Ken Craiger, Team Leader at (404) 562-9830.
Attachment
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Region 4's Performance Partnership Grants
EXECUTIVE SUMMARY
INTRODUCTION
OBJECTIVES
President Clinton announced the performance partnership
grant (PPG) program on March 16, 1995, as part of his
Administration's effort to "Reinvent Environmental
Regulation." A PPG is a multi-program grant awarded to a
state from funds otherwise available for categorical grant
programs.
PPG advocates envisioned a new type of grant which
provided: (a) greater flexibility; (b) improved environmental
performance; (c) administrative savings; and (d) strengthened
federal-state partnerships. The key principle underpinning
these expected benefits was that funds from different
programs or media were combined and lost their identity. A
PPG had a single, integrated budget and recipients did not
need to account for grants funds in accordance with the
original environmental program sources. Guidance issued by
Region 4 in September 1997 also stated that a PPG recipient
could move funds to benefit selected projects or programs if
it had met negotiated commitments. This flexibility in using
grant funds was expected to make PPGs more attractive to
grant recipients.
This audit is one in a series of PPG audits conducted by the
OIG to provide an overall assessment of EPA's PPG
program.
Our audit objectives were to determine if Region 4:
P Had effectively implemented the PPG program to
ensure that recipients accomplished overall PPG
objectives;
P Negotiated PPG work plans that included adequate
financial and programmatic accountability;
P Maintained appropriate oversight to ensure that
recipients met work plan commitments and used PPG
funds efficiently and effectively.
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RESULTS IN BRIEF Although Region 4's oversight of PPGs ensured that
recipients met work plan commitments, it had opportunities
to implement a more effective program that realized the
flexibility and benefits that PPGs offered. The Revised
Interim Guidance (Guidance) published by EPA in the
October 6, 1998 Federal Register envisioned a new type of
grant which provided the recipient greater flexibility,
improved environmental performance, generated
administrative savings, and strengthened federal-state
partnerships. By fiscal year 1998, three of the eight
delegated states responsible for carrying out major
environmental programs in Region 4 had applied for and
received PPGs. In addition, all eight state agencies
responsible for carrying out Pesticides programs in Region 4
had applied for, and received relatively small agricultural
PPGs.
However, we identified several factors that may have
reduced participation in Region 4's PPG program and
prevented grant recipients from taking full advantage of the
benefits and flexibility that PPGs offered. For its part,
Region 4 disseminated information about PPG benefits and
flexibility that enabled grant recipients to determine if they
wanted to participate in the PPG program or retain their
separate categorical grants. Our audit disclosed
circumstances that led us to believe that improved
communications between Region 4 and its grant recipients
would have a positive impact on Region 4's overall PPG
program. At least two state agencies had misconceptions
about PPG benefits and requirements that discouraged their
participation in the program. Another state agency reported
that its PPG actually increased administrative costs and
delayed receipt of EPA funds. The same state agency
adhered to the more rigid requirements of categorical grants
and was reluctant to undertake multi-media planning and
prioritization of work because existing funds were generally
needed to meet commitments in the specific media areas that
provided the funds and state reporting requirements required
that state funds be tracked by media. Collectively, these
factors made PPGs less attractive to some of the potential
recipients and caused other recipients to restrict their use of
grant funds to the specific media that provided the funds.
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Although Region 4 officials assured us that negotiating Core
Performance Measures (CPMs) with PPG recipients that
focused on the measurement of environmental results was a
high priority, the goal had not been realized for fiscal year
1998. Two factors that contributed to the delay in
negotiating CPMs were the absence of specific controls at
Region 4 for confirming that CPMs were included in work
plans and multi-year work plans that were negotiated before
CPMs were fully developed. These delays in negotiating
CPMs made it more difficult to measure progress in meeting
environmental goals.
RECOMMENDATIONS We recommend that the Regional Administrator:
P Develop a plan for discussing the PPG concept with
grant recipients to ensure that they fully understand
the benefits and flexibility offered by this type grant.
We further recommend that the Regional
Administrator consider designating a specific Region
4 representative that is responsible for maintaining
ongoing communications with current and potential
PPG recipients.
P Strongly encourage PPG recipients to initiate cross-
media planning and prioritization of work in order to
take full advantage of opportunities to use funds
more effectively.
P Work with South Carolina Department of Health and
Environmental Control (DHEC) to determine if the
specific barriers related to limited funding and state
reporting requirements can be resolved or mitigated.
P Work with DHEC to determine if there are options
for reducing administrative costs.
P Consider partial funding of PPGs at the beginning of
the fiscal year if it is not practical to fully fund all
media programs included in the PPG at that time.
P Assign responsibility for monitoring progress in
getting applicable CPMs in PPG recipients' work
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plans to a specific individual or office. This
individual or office should make periodic reports to
the Regional Administrator on the progress that is
being made and any obstacles that need to be
overcome.
P Determine if it is feasible to renegotiate multi-year
work plans with PPG recipients in order to
incorporate CPMs that are better indicators of
environmental performance.
REGION 4's We discussed the proposed draft report with Region 4
COMMENTS AND officials and made some changes based on their input. On
OIG EVALUATION August 3, 1999, we issued a draft report to the Regional
Administrator for review and comment. We extended the
standard 30-day response period by an additional two weeks,
but still did not receive any written comments. Therefore,
we issued the final report without a response from the
Regional Administrator.
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TABLE OF CONTENTS
Page
EXECUTIVE SUMMARY i
CHAPTERS
1 INTRODUCTION 1
Purpose 1
Background 2
Scope and Methodology 5
Prior Audit Experience 6
2 REGION 4 COULD IMPROVE THE OVERALL EFFECTIVENESS OF ITS PPG
PROGRAM 7
Recipients did not Fully Understand PPG Benefits and Requirements 8
PPG Flexibility and Benefits not Fully Utilized by Recipients 10
Funding Problems and Barriers made PPG less Attractive to Recipients 12
Administrative Savings not Consistently Realized 14
Conclusion 15
Recommendations 15
Region 4's Comments and OIG Evaluation 16
3 REGION 4 COULD IMPROVE PROGRAMMATIC ACCOUNTABILITY BY
INCREASING THE USE OF CORE PERFORMANCE MEASURES 17
Shared Responsibility for Negotiation of CPMs Slowed Progress 17
Region 4 was Reluctant to Renegotiate Multi-Year Work Plans that Excluded
CPMs 20
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Conclusion 21
Recommendations 21
Region 4's Comments and OIG Evaluation 21
APPENDICES
I ABBREVIATIONS AND DEFINITIONS 23
II DISTRIBUTION 27
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CHAPTER 1
INTRODUCTION
PURPOSE President Clinton announced the performance partnership
grant (PPG) program on March 16, 1995, as part of his
Administration's effort to "Reinvent Environmental
Regulation." A PPG is a multi-program grant awarded to a
state from funds otherwise available for categorical grant
programs.
PPG advocates envisioned a new type of grant which
provided: (a) greater flexibility; (b) improved environmental
performance; (c) administrative savings; and (d)
strengthened federal-state partnerships. The key principle
underpinning these expected benefits was that funds from
different media were combined and lost their identity. A
PPG had a single, integrated budget and recipients did not
need to account for grants funds in accordance with the
original environmental program sources. Guidance issued
by Region 4 in September 1997 also stated that a PPG
recipient could move funds to benefit selected projects or
programs if it had met negotiated commitments. This
flexibility in using grant funds was expected to make PPGs
more attractive to grant recipients.
This audit is one in a series of PPG audits conducted by the
OIG to provide an overall assessment of EPA's PPG
program.
Our audit objectives were to determine if Region 4:
P Had effectively implemented the PPG program to
ensure that recipients accomplished overall PPG
objectives;
P Negotiated PPG work plans that included adequate
financial and programmatic accountability; and
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P Maintained appropriate oversight to ensure that
recipients met work plan commitments and used
PPG funds efficiently and effectively.
BACKGROUND Congress authorized the award of PPGs in the Omnibus
Consolidated Rescissions and Appropriations Act of 1996
and EPA's fiscal year 1998 Appropriations Act. As detailed
in EPA's Guidance, a PPG was a multi-program grant
awarded to a state or tribe from funds otherwise available
for categorical grant programs. A state or tribe could apply
for a PPG that combined funds from two or more of the 17
eligible grant programs into one or more PPGs. PPG
recipients could then use the combined funds to carry out
any of the program activities covered by the PPG. Each
PPG had a single, integrated budget and recipients did not
need to account for grant funds by the specific program or
media that provided the funds.
The Guidance identified four specific types of benefits that
were expected to be realized from PPGs: (a) greater
flexibility; (b) improved environmental performance; (c)
administrative savings; and (d) strengthened partnerships.
PPGs were intended to provide states and tribes with the
flexibility needed to address their most pressing
environmental priorities across all media and establish
resource allocations based on those priorities. PPG
recipients were also expected to develop innovative multi-
media programs and activities that would be difficult to fund
with separate categorical grants. Finally, PPG recipients
had the option of negotiating work plans with EPA that
covered more than one year.
PPG recipients were expected to improve environmental
performance because they were able to establish priorities
across all environmental programs, and integrate strategic
goals such as pollution prevention and community-based
environmental protection into their program planning. The
Guidance made specific reference to the expectation that
PPG recipients would be able to coordinate and integrate
activities which were fragmented under many statutes,
regulations and programs.
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Region 4's Performance Partnership Grants
PPG recipients were also expected to lower their
administrative costs by reducing the overall number of grant
applications, work plans, reports and certifications
associated with traditional, single media grants. Finally, a
PPG was expected to strengthen partnerships between EPA
and the PPG recipient because they were able to share the
same environmental and program goals and jointly deploy
their unique resources and abilities to accomplish those
goals.
The Guidance described various types of PPGs. The
simplest type of PPG was one in which essentially all of the
recipient's commitments were contained in separate
categorical work plans. This type of PPG is often referred
to as an "administrative PPG" because the purpose in
obtaining this type of PPG was primarily administrative
flexibility. The Guidance indicated that this type of PPG
was appropriate for PPG applicants seeking administrative
flexibility only based on categorical grant work plans.
A non-administrative PPG is one that replaces the different
categorical work plans with a performance partnership
agreement (PPA). The Guidance defined a PPA as a
negotiated agreement signed by the EPA Regional
Administrator and an appropriate state official. These
agreements typically set out: (1) jointly developed goals,
objectives, and priorities; (2) specific work plan
commitments and the strategies to be used in meeting them;
(3) the roles and responsibilities of EPA and the recipient;
and (4) the measures to be used in assessing progress.
The Guidance indicated that this type of PPG was
appropriate for applicants seeking administrative and
program flexibility. However, the revised PPG Guidance
issued in October 1998 no longer mentions the different
types of PPGs.
PPGs could also be categorized according to whether their
function is agricultural or environmental. An agricultural
PPG combines minor grants or cooperative agreements
within a single media such as Pesticides. Region 4 awarded
pesticide agricultural PPGs to each of its eight states that
totaled approximately $5.2 million. An environmental PPG
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Region 4's Performance Partnership Grants
combines major multi-media grants such as Air and Water.
In 1998, Region 4 awarded PPGs in both of these broad
categories. Region 4 awarded environmental PPGs totaling
approximately $18.2 million to the states of Georgia,
Mississippi and South Carolina. Grant recipients that did
not apply for a PPG in fiscal year 1998 received categorical
grants that totaled approximately $50 million.
According to a General Accounting Office (GAO) report
published in June 1999 participation in PPGs and PPAs at
the national level grew from six pilot states in 1996 to 45
states by the end of fiscal year 1998. GAO included a state
in its statistics if it had an agricultural PPG, environmental
PPG or both. Of the 45 states, 31 states had both PPAs and
PPGs, 12 states had PPGs only, 2 states had PPAs only and
5 states did not participate at all. The GAO report also
noted that on a national scale $217 million of the $745
million in state environmental program grants for fiscal year
1998 were consolidated in PPGs.
One of EPA's fundamental goals was to design and
incorporate accountability provisions in PPGs that began
the process of moving federal, state, and tribal programs
toward the use of results-oriented measures of
environmental and program performance that were
understandable and meaningful to the public. This goal was
to be achieved by negotiating work plan commitments that
focused on the measurement of program and environmental
outcomes and outputs.
On August 20, 1997, EPA's Deputy Administrator and the
President of the Environmental Council of the States
(ECOS) signed a memorandum detailing their efforts to
develop a revised set of CPMs for use in measuring
environmental progress. Although the memorandum stated
that states were expected to use the CPMs in their PPAs,
EPA and the state had the flexibility to modify, substitute,
or eliminate a particular measure in order to meet specific
needs of the parties involved.
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SCOPE AND The audit was conducted in accordance with Government
METHODOLOGY Auditing Standards issued by the Comptroller of the United
States. The audit scope was limited to the specific
objectives cited above and the management controls related
to these objectives. We did not extend the audit to include
verification of the specific outputs and outcomes reported
by the PPG recipients. Findings in the report discuss the
control weaknesses identified during the audit. Actions
recommended to address these and other weaknesses are
included in the recommendation section of this report.
To accomplish the audit objectives, we reviewed EPA
regulations applicable to the PPG program and the related
policies and procedures. We interviewed the Deputy
Regional Administrator, the Regional Project Officers
(RPOs), Program Project Officers (PPOs) for the respective
media areas and representatives from the Grants
Administration Branch. We visited the two South Carolina
entities (South Carolina Department of Health and
Environmental Control and Clemson University's
Department of Pesticide Regulation) that received PPGs
and discussed the PPG program with their representatives.
For these two entities, we also obtained the CPMs
applicable to each PPG media area and determined if they
had been incorporated in the PPG recipient's work plans for
fiscal years 1998. Finally, we interviewed officials from the
states of Alabama and Kentucky to determine why they
elected to continue receiving categorical grants in lieu of
converting to PPGs which offered recipients more flexibility
in addressing environmental issues.
The audit fieldwork was conducted from February 1999 to
July 1999. The audit focused primarily on PPG activities
that occurred during fiscal year 1998. We incorporated
certain information from a joint management assistance
review of the fiscal year 1997 PPG awarded to the Georgia
Environmental Protection Division (EPD). At the request
of Region 4 representatives, we also extended the audit
period to include a selective review of fiscal year 1999 PPG
work plans to determine progress with respect to the
inclusion of applicable CPMs.
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Region 4's Performance Partnership Grants
PRIOR AUDIT The Office of Inspector General (OIG) has not issued any
EXPERIENCE audit reports related to Region 4's PPG program. However,
the OIG and Region 4 program officials performed a joint
management assistance review of the fiscal year 1997 PPG
awarded to EPD. The joint memorandum, issued in April
1999, concluded that the PPG reduced administrative
burden, provided needed flexibility for moving funds
between media programs and fostered improved attitudes of
working together. However, the memorandum pointed out
that Region 4 and EPD needed to place additional emphasis
on negotiating CPMs that focused on program outcomes
and environmental results rather than outputs. The
memorandum also concluded that Region 4's expectations
concerning the content of EPD's annual reports and the
roles and responsibilities of participants involved in mid-
year and end-of-year program reviews needed to be
clarified. EPD concurred with all suggestions for
improvement made by the review team.
The GAO issued an audit report on the National
Environmental Performance Partnership System (NEPPS)
in June 1999. GAO reported that participation in PPAs and
PPGs at the national level grew from six pilot states in 1996
to 45 states by 1998. GAO acknowledged that EPA and
the states had made progress in developing results oriented
performance measures, but pointed out that obstacles still
needed to be overcome. The majority of state officials that
GAO interviewed felt that participation in NEPPS provided
worthwhile benefits even though it had not brought about
any significant reduction in reporting requirements or EPA
oversight.
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Region 4's Performance Partnership Grants
CHAPTER 2
REGION 4 COULD IMPROVE THE OVERALL
EFFECTIVENESS OF ITS PPG PROGRAM
Region 4 management had opportunities to implement a
more effective PPG program that offered the flexibility and
benefits envisioned by the Revised Interim Guidance
published in the Federal Register on October 6, 1998. For
fiscal year 1998, three of the eight delegated state agencies
responsible for carrying out major environmental programs
applied for and were awarded PPGs. Although the eight
state agencies responsible for carrying out Pesticides
programs applied for and were awarded agricultural PPGs
in 1998, these grants had a relatively low dollar value and
did not offer the recipient flexibility for using funds to
address environmental problems in other media areas.
Progress in implementing an effective PPG program in
Region 4 was affected by several factors. Specifically,
delegated state agencies: (1) did not fully understand the
PPG benefits and requirements; (2) did not fully utilize the
flexibility offered by PPGs for cross-media planning or
prioritization of work; (3) encountered funding problems
and other barriers at the state level that made PPGs less
attractive; and (4) did not consistently realize the
administrative savings expected from PPGs. As a result,
Region 4 and its delegated state agencies had not taken full
advantage of PPG opportunities to effectively address
environmental problems outside the specific media area that
provided the grant funds or consistently realized the
administrative savings that were expected.
Participation in the PPG program was voluntarily. Grant
recipients had the option of keeping their categorical grants
or applying for a PPG. However, the Guidance indicated
that EPA officials should encourage states to take
advantage of PPGs and Regional officials should work in
partnership with states that were interested in pursuing
PPGs that funded solutions to the highest environmental
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RECIPIENTS DID NOT
FULLY UNDERSTAND
PPG BENEFITS AND
REQUIREMENTS
priorities and ensured that EPA statutory and program
requirements were met.
In 1998, Region 4 awarded both agricultural and
environmental PPGs. The agricultural PPGs related to a
single media and combined separate cooperative agreements
for various activities such as Pesticides enforcement and
certification. In 1998, all eight of Region 4's grantees
applied for and received agricultural PPGs that totaled
approximately $5.2 million. The environmental PPGs
combined major multi-media programs such as Air and
Water and offered recipients opportunities for multi-media
planning and prioritization of work. In 1998, three of
Region 4's delegated states applied for and received
environmental PPGs that totaled approximately $18.2
million. Region 4 also awarded approximately $50 million
in categorical grants to recipients that did not apply for a
PPG during fiscal year 1998.
The specific barriers that slowed participation in Region 4's
environmental PPG program and reduced its overall
effectiveness are discussed in the following sections of our
report.
Certain delegated state agencies in Region 4 had
misconceptions about PPG benefits and requirements that
may have discouraged them from participating in the
program or limited their ability to use grant funds more
effectively. Because the PPG concept combined various
media funds and made them indistinguishable, a grantee was
not required to account for funds by the specific program or
media that originally provided the funds. Guidance issued
by Region 4 in September 1997 further stated that a PPG
recipient could move funds to benefit selected projects or
programs if it had met negotiated commitments. However,
South Carolina, Alabama and Kentucky officials expressed
uncertainty about Region 4's expectations concerning their
use and accountability of PPG funds.
A South Carolina official, who played a key role in deciding
whether DHEC applied for a PPG, indicated he was not
sure whether Region 4 representatives expected the state to
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Region 4's Performance Partnership Grants
maintain records which would enable a federal auditor to
verify that funds from a specific media were used to meet a
commitment in the work plan for that same media. He
initially stated "his perception" was the state was expected
to maintain such records. He then amended his statement
and said his "fear" was the state was expected to maintain
this information.
Several other South Carolina officials who were involved
with PPGs also indicated they were not certain whether
their offices should maintain these types of detailed records.
An Assistant Bureau Chief told us about an inquiry made by
Region 4 officials concerning how the state used EPA
funds. EPA Headquarters needed the information to satisfy
Government Performance Results Act (GPRA)
requirements. Region 4 officials made it clear that the state
was not required to report this information and they were
prepared to use a formula to estimate how the funds were
spent. However, if the state had more accurate information
readily available and was willing to provide it voluntarily,
Region 4 would use the state's data. We were told about
the inquiry in the context of our questions concerning the
type of records which the Assistant Bureau Chief thought
the state needed to maintain. This inquiry may have
influenced the state's perception of what records it needed
to maintain in order to promote goodwill with Regional
counterparts.
Aside from officials in South Carolina, officials in Alabama
and Kentucky also had misconceptions about basic PPG
principles. The Director of the Alabama Department of
Environmental Management (ADEM), who was a key
figure in deciding whether ADEM applied for a PPG,
thought the state still needed to maintain records which
would enable a federal auditor to verify that federal dollars
provided by a specific media were spent on commitments in
the work plan of the same media even if a PPG was
awarded. The Director also thought the state would need
to get EPA's approval to shift PPG money from the work
plan of one media to the work plan of a different media even
if the commitments in both media work plans had already
been met.
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PPG BENEFITS AND
FLEXIBILITY NOT
FULLY UTILIZED
BY RECIPIENTS
Similar views were expressed by the Manager of
Kentucky's Planning and Program Coordination Branch, the
entity which was responsible for evaluating the merits of
applying for a PPG. The Branch Manager also indicated
that the same views were held by other Kentucky officials
involved in deciding whether the state should apply for a
PPG.
The lack of ongoing communications between Region 4 and
its delegated states may have contributed to misconceptions
about the PPG program. For example, the Director of
ADEM indicated that he has not had a significant discussion
about PPG or PPA concepts with any federal official during
the preceding year. Moreover, he did not recall having such
a discussion in the prior year. According to the Director, he
and his staff had waited to hear how other states' felt about
their PPGs and PPAs before evaluating the concepts to
determine potential benefits to ADEM. At the time of our
discussion, his understanding was that PPG benefits had not
met expectations and were not worth the extra effort. The
Director could not estimate the likelihood that ADEM
would apply for a PPG, or request the opportunity to
negotiate a PPA in the future.
In our opinion, grant recipients were less likely to apply for
a PPG when they did not fully understand the benefits and
flexibility such a grant offered. Also, recipients that had
PPGs may have been less likely to employ innovative
concepts such as cross-media planning and prioritization of
work if they did not fully understand the flexibility that a
PPG offered.
Although the PPG concept offered grant recipients great
flexibility in addressing multi-media environmental
problems, delegated states were reluctant to use the
flexibility and generally adhered to the same rigid
constraints imposed by categorical grants. When a PPG
replaces two or more categorical grants, funds from
different media are combined in a common pool and become
indistinguishable. Some Region 4 officials described this as
a process of converting Air or Water dollars to "vanilla
dollars." When conceptualized this way, PPG advocates
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expected recipients to conduct planning across media lines
in order to direct funds to the most critical environmental
problems regardless of the specific media involved.
Aside from the impact of multi-media planning, PPG
recipients had opportunities for prioritizing the effective use
of "excess funds." Under the categorical grant process, any
media funds that remained after all media work plan
commitments were met, had to be spent on a commitment
for the same media. Once all commitments in media work
plans had been met, Region 4 guidance permitted PPG
recipients to move funds to benefit selected projects or
programs. Despite these opportunities, we did not see any
evidence that DHEC officials did anything different under
their fiscal year 1998 PPG than under their fiscal year 1997
categorical grants, except for the administrative activity that
combined six categorical grants into a single PPG. For
example, DHEC media officials negotiated separate work
plans exactly as they did when they received categorical
grants, and they monitored the execution of these work
plans exactly as they did when they received categorical
grants. At the end of the PPG period, DHEC retained all
carryover (unspent) funds in the same media that originally
provided the funds, exactly as it did under the previous
categorical grants.
We recognize that DHEC chose the simplest type of PPG,
an "administrative PPG," which contemplated the continued
use of separate categorical media work plans. We further
recognize that the major reason for obtaining the PPG was
to obtain administrative savings. However, this did not
preclude DHEC officials from conducting cross-media
planning and prioritization of work. For fiscal year 1998,
DHEC basically followed the more rigid categorical grant
requirements even though the Assistant Deputy Director
told us that part of his intent in applying for a PPG was to
position the state to take advantage of the flexibility and
benefits the program offered.
In a joint management assistance review of the PPG
awarded to the Georgia EPD, grantee officials told us that
they liked the flexibility that the grant offered, but had not
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FUNDING PROBLEMS
AND BARRIERS MADE
PPGs LESS
ATTRACTIVE TO
RECIPIENTS
yet used any funds outside the specific media that provided
the funds.
To the extent that PPG grant recipients continue to operate
the same way they operated under categorical grants, they
are not participating in the opportunity to redefine and
improve the state/federal partnership. If a recipient is not
examining opportunities for multi-media planning or shifting
funds across media to address higher priorities, it may be
missing an opportunity to use grant funds more effectively
in protecting human health and the environment.
Region 4 officials pointed out that grant recipients had the
discretion of using innovative techniques such as multi-
media planning and prioritization of work, but it was not a
program requirement. Region 4 officials also pointed out
that a PPG recipient (Mississippi) that we did not review
during our audit was moving forward with multi-media
planning initiatives.
One PPG recipient encountered specific barriers that limited
its opportunity for prioritizing work and cross-media
planning. Another PPG recipient, that was pleased with the
flexibility and benefits the grant offered, reverted back to
separate categorical grants in order to avoid payment of
indirect costs. Correspondingly, these same barriers limited
Region 4' s ability to bring about positive change through
their efforts to implement the PPG concept.
DHEC officials indicated that over the last four or five
years, the amount of EPA grant money declined, existing
work commitments were retained, and new commitments
were added. As a result, all funds provided for each media
were needed to meet the media-specific commitments in the
categorical work plans, many of which were required by
law, regulation, or policy. Region 4 officials acknowledged
DHEC's concerns, but pointed out that reduced funding
was an Agency-wide problem. Accordingly, funds were not
generally available during the planning phase for application
to new cross-media initiatives. Further, there were no
excess funds at year end, or discretionary funds during the
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Region 4's Performance Partnership Grants
year which could theoretically be targeted to meet
prioritized needs of different media.
The second flexibility barrier reported by DHEC related to
state reporting requirements that obligated officials to keep
track of state funds by specific media. DHEC officials
maintained records which enabled them to tell the State
Legislature exactly how funds were spent and the source of
the funds. DHEC traced expenditures to activities for
specific media. The source of funds was traced back to the
state appropriation or, in the case of EPA funding, to the
media which provided the funds through the PPG. Tracing
funds from "cradle-to-grave" discouraged DHEC officials
from engaging in cross-media activity or shifting funds from
one media to another. DHEC was also reluctant to report
to the South Carolina Legislature that funds provided under
an appropriation for one media were used to fund an
activity in a different media. This reluctance also carried
over to EPA funds.
Clemson University's Department of Pesticides Regulation
(DPR) reported that it was well pleased with the flexibility,
benefits and administrative savings provided by its PPG
during fiscal year 1998, but reverted back to three separate
cooperative agreements for fiscal year 1999 for reasons
beyond the control of Region 4 or itself. State and Clemson
University policy required that large grants and cooperative
agreements ($200,000 or more) absorb a portion of the
University's indirect costs. In 1998, the indirect cost rate
was approximately 15.5 percent. Combining the three
cooperative agreements in a single PPG placed DPR in the
large grant category and obligated it to pay indirect costs.
For fiscal year 1999, DPR concluded the benefits realized
from the PPG did not offset the obligation to pay indirect
costs and reverted back to separate cooperative agreements
because none of the three cooperative agreements
individually exceeded the $200,000 threshold that triggered
payment of indirect costs.
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Region 4's Performance Partnership Grants
ADMINISTRATIVE
SAVINGS NOT
CONSISTENTLY
REALIZED
The Guidance made it clear that PPGs were expected to
reduce administrative costs, in terms of both dollars and
time, by reducing the overall number of grant applications,
work plans, reports and certifications associated with
traditional, single media federal grants. The three PPG
recipients that we reviewed reported mixed results. Grantee
officials from EPD and DPR reported that the PPG reduced
their overall administrative burden. However, grantee
officials from DHEC reported that their PPG actually
increased administrative costs even though their primary
objective in applying for a PPG was administrative savings.
Although grantee officials could not precisely quantify the
administrative time spent on their PPG, they estimated it to
be approximately 11 staff days more than they spent on all
six categorical media grants for the previous year.
DHEC officials also expressed concern that the fiscal year
1998 PPG increased their overall financing costs because
Region 4 did not award the grant timely. Region 4 did not
award DHEC any PPG funds until all six media programs
could be fully funded. This obligated DHEC to spend state
funds to finance the EPA portion of five media programs
that could have been funded sooner if categorical grants had
been awarded. Specifically, the fiscal year 1998 PPG was
awarded 40 days after the average date of award for the six
categorical media grants for fiscal year 1997. Some of the
delay may be attributed to the fact that EPA and state
officials were just learning how to process PPGs in 1998.
Region 4 also encountered special circumstances that
delayed all grants awards at the beginning of fiscal year
1998. However, the funding delay was partially attributed
to Region 4's decision to not award any funds to DHEC
until all necessary paper work had been completed for all six
media that were ultimately included in the PPG. Regardless
of the specific reasons for delaying the PPG award, DHEC
officials felt that it increased their overall financing costs
compared to prior year categorical grants. We recognize
that partially funding a PPG or otherwise advancing PPG
funds before full funding is available for all PPG media may
entail significant effort. However, we believe the issue
needs to be clearly addressed because potential PPG
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Region 4's Performance Partnership Grants
CONCLUSION
RECOMMENDATIONS
recipients contemplating applying for a PPG will likely need
to know when EPA funding will be made available to them.
Misconceptions and uncertainties about PPG benefits and
requirements made some categorical grant recipients less
likely to apply for PPGs. Two delegated states that were
awarded environmental PPGs basically adhered to the more
rigid categorical grant requirements and had not taken
advantage of opportunities to use funds outside the specific
media that provided the funds. Uncertainties about Region
4's expectations concerning the use of PPG funds combined
with state reporting requirements may have discouraged at
least one delegated state from considering the flexibility of
cross-media planning and prioritization of work in order to
use grant funds more effectively. The same delegated state
reported that the process of replacing categorical grants
with a PPG actually increased its administrative and
financing costs because it delayed EPA funding for that
fiscal year. Collectively, these factors adversely affected the
opportunity for Region 4 and its state agencies to take full
advantage of the benefits and flexibility that PPGs offered.
We recommend that the Regional Administrator:
2-1 Develop a plan for discussing the PPG
concept with grant recipients to ensure that
they fully understand the benefits and
flexibility offered by this type grant. We
further recommend that the Regional
Administrator consider designating a specific
Region 4 representative that is responsible
for maintaining ongoing communications
with current and potential PPG recipients.
2-2 Strongly encourage PPG recipients to initiate
cross-media planning and prioritization of
work in order to take full advantage of
opportunities to use funds more effectively.
2-3 Work with DHEC to determine if the
specific barriers related to limited funding
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Region 4's Performance Partnership Grants
and state reporting requirements can be
resolved or mitigated.
2-4 Work with DHEC to determine if there are
options for reducing administrative costs.
2-5 Consider partial funding of PPGs at the
beginning of the fiscal year if it is not
practical to fully fund all media programs
included in the PPG at that time.
REGION 4's COMMENTS We discussed the proposed draft report with Region 4
AND OIG EVALUATION officials and made some changes based on their input. On
August 3, 1999, we issued a draft report to the Regional
Administrator for review and comment. We extended the
standard 30-day response period by an additional two
weeks, but still did not receive any written comments.
Therefore, we issued the final report without a response
from the Regional Administrator.
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Region 4's Performance Partnership Grants
CHAPTER 3
REGION 4 COULD IMPROVE PROGRAMMATIC
ACCOUNTABILITY BY INCREASING THE USE
OF CORE PERFORMANCE MEASURES
SHARED
RESPONSIBILITY FOR
NEGOTIATION OF CPMs
SLOWED PROGRESS
Region 4 needs to emphasize the inclusion of applicable
CPMs in the work plans of PPG recipients consistent with
the EPA/ECOS memorandum dated August 20, 1997. The
fiscal year 1998 work plans for the environmental PPG
awarded to DHEC did not include 29 of the 47 applicable
CPMs. Also, the fiscal year 1998 work plans for the eight
agricultural PPGs awarded to various state agencies did not
specifically include the three CPMs that the RPO
determined were applicable. Although Region 4 made
substantial progress during fiscal year 1999, the negotiated
work plans still did not include all applicable CPMs. There
were two primary reasons for the omission of CPMs from
the work plans of PPG recipients: (1) the responsibility for
negotiation of PPG recipients'work plans was shared by
several PPOs with no single individual or office having
overall responsibility for confirming that all CPMs were
included; and (2) multi-year work plans had been previously
negotiated for several media programs and PPOs were
reluctant to renegotiate existing agreements. When CPMs
were omitted from work plans, PPG recipients generally
measured and reported performance based primarily on the
accomplishment of specific activities rather than
environmental results. This made it more difficult to
measure progress in meeting environmental goals.
The Guidance for PPGs stated that one of EPA's
fundamental goals was to design and incorporate
accountability provisions in PPGs that began the process of
moving programs toward the use of results-oriented
measures of environmental and program performance that
were understandable and meaningful to the public. On
August 20, 1997, EPA's Deputy Administrator and the
President of ECOS signed a memorandum detailing their
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Region 4's Performance Partnership Grants
efforts to develop a revised set of CPMs for use in
measuring environmental progress of PPG recipients.
We reviewed the fiscal year 1998 work plans for the
environmental PPG awarded to DHEC and agricultural PPG
awarded to DPR to determine what progress Region 4 had
made in negotiating CPMs with PPG recipients. The fiscal
year 1998 environmental PPG awarded to DHEC covered
six different programs. Representatives from DHEC and
Region 4's PPOs negotiated work plans for the six
programs. The following table summarizes the number
CPMs applicable to each program and the number of CPMs
actually included in the negotiated work plans. Region 4's
PPOs assisted us in compiling the statistics presented in the
table below because: (1) CPMs were periodically added,
deleted, combined or modified, (2) the applicability of some
CPMs to specific programs was subject to interpretation,
and (3) not all CPMs were incorporated verbatim in the
work plans of PPG recipients.
Media
Air
RCRA
Surface Water
Ground Water
PWSS
UIC
TOTALS
Number of CPMs
Applicable To
DHEC
19
4
17
1
3
3
47
Number CPMs
That Were In FY
1998 Work Plans
0
2
9
1
3
3
18
Region 4 officials pointed out that negotiation of DHEC's
fiscal year 1998 work plans began in April or May of 1997
and was probably completed by August 20, 1997 when the
EPA/ECOS agreement was finalized. They also felt that
DHEC's fiscal year 1999 work plans would be more
representative of their progress in negotiating CPMs. We
performed a less detailed review of DHEC's fiscal year
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Region 4's Performance Partnership Grants
1999 work plans to confirm progress had been made, but
the CPMs negotiated for each media could not be easily
identified and the overall progress quantified. Although
Region 4's PPO for the Air program successfully
incorporated all applicable CPMs in DHEC's fiscal year
1999 work plan, DHEC gave only "conditional acceptance"
to more than a third of the commitments. DHEC's reasons
for the "conditional acceptance" included inadequate
funding and disagreement with commitment dates. PPOs
for other media areas also voiced concerns that DHEC
would have difficulty meeting CPM commitments. For
example, Region 4's PPO for the Resource Conservation
Recovery Act (RCRA) was concerned that a year 2005
commitment could not be met because the baseline data had
not been developed in 1997.
The fiscal year 1998 agricultural PPG awarded to DPR
replaced three separate Pesticides cooperative agreements
that covered enforcement, certification and a special
Pesticides program. The RPO acknowledged that at least
three CPMs were applicable to the Pesticides program, but
were not specifically included in DPR's negotiated work
plan for fiscal year 1998. According to the RPO, fiscal year
1998 negotiated work plans for the other seven agricultural
PPGs awarded by Region 4 also omitted specific references
to CPMs. The RPO offered two possible explanations for
not specifically addressing CPMs when negotiating work
plans: (1) agricultural PPG recipients were not part of
ECOS and had not been involved in the discussions and
decisions related to CPMs; and (2) national guidance for
agricultural PPGs still had not been updated to address
EPA's expectations related to the negotiation of CPMs even
though the guidance for fiscal year 2000 had been issued.
Although the negotiated work plans did not specifically
include CPMs, the RPO felt that the goals and objectives
described by the CPMs were being met. For example, state
reporting requirements associated with categorical grants
such as certification and training were continued under the
PPG program. The RPO felt that these reporting
requirements captured the philosophy and intent of most
CPMs.
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REGION 4 WAS
RELUCTANT TO
RENEGOTIATE MULTI-
YEAR WORK PLANS
THAT EXCLUDED CPMs
Although Region 4 officials assured us that negotiating
work plans with PPG recipients that included applicable
CPMs was a high priority, Region 4 had not established
specific controls to ensure that this goal was achieved. In
our opinion, a significant factor was that singular
responsibility had not been established for ensuring that all
applicable CPMs were incorporated in the media work
plans. Region 4 had not designated a specific individual or
office that was responsible for determining if applicable
CPMs were incorporated in the work plans of PPG
recipients. To obtain this information, we needed to ask the
PPOs for each media about the CPMs that were in their
specific work plan. As discussed above, the emphasis
placed on negotiating CPMs varied by PPO. When CPMs
were not included in media work plans, we did not see any
reports to upper management concerning the progress that
was being made, or the obstacles that were being
encountered, regarding Region 4's goal of negotiating
CPMs with PPG recipients. This caused us to believe that
making a specific individual or office responsible for
confirming that media work plans contained all applicable
CPMs would help Region 4 meet its goal.
The existence of multi-year work plans that preceded the
award of a PPG was another factor that slowed progress in
negotiating CPMs with PPG recipients. At the time the
fiscal year 1998 CPMs were finalized and the PPG was
awarded to DHEC, several of the media already had
negotiated work plans in place that covered more than one
fiscal year, including 1998. According to the PPOs that
were responsible for negotiating the CPMs, they were
reluctant to attempt to renegotiate the existing agreements.
Instead, they concluded it would be appropriate to wait until
a new work plan was negotiated to include the applicable
CPMs.
The joint management assistance review that the OIG and
Region 4 performed on the PPG awarded to the EPD
disclosed a similar delay in negotiating CPMs. In this case,
a PPA was used to replace the specific media work plans.
However, all program-specific negotiations for fiscal year
1998 PPA had been completed before the EPA/ECOS
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Region 4's Performance Partnership Grants
CONCLUSION
RECOMMENDATIONS
agreement on CPMs was finalized. Although Region 4 and
EPD made a commitment to implement the EPA/ECO S
agreement, neither party chose to reopen negotiations to
include the new CPMs in the fiscal year 1998 PPA.
Region 4 and its PPG recipients had not fully implemented
the agreement that EPA negotiated with ECOS concerning
the use of CPMs that were intended to make work plan
commitments more results-oriented and measure progress in
terms of environmental outputs and outcomes. Although
Region 4 officials assured us that negotiating CPMs with
PPG recipients was a high priority, the fiscal year 1998
work plans that we reviewed did not consistently include all
applicable CPMs. This occurred because several PPOs
shared responsibility for negotiating CPMs and Region 4 did
not have specific controls for confirming that work plans
included all applicable CPMs. Progress in negotiating
CPMs was also slowed by the reluctance of Region 4 and
PPG recipients to renegotiate multi-year work plans. These
delays in negotiating CPMs made it more difficult to
measure progress in meeting environmental goals.
We recommend that the Regional Administrator:
3 -1. Assign responsibility for monitoring progress
in getting applicable CPMs in PPG
recipients'work plans to a specific individual
or office. This individual or office should
make periodic reports to the Regional
Administrator on the progress that is being
made and any obstacles that need to be
overcome.
REGION 4's COMMENTS
AND OIG EVALUATION
3-2. Determine if it is feasible to renegotiate
multi-year work plans with PPG recipients in
order to incorporate CPMs that are better
indicators of environmental performance.
We discussed the proposed draft report with Region 4
officials and made some changes based on their input. On
August 3, 1999, we issued a draft report to the Regional
Administrator for review and comment. We extended the
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Region 4's Performance Partnership Grants
standard 30-day response period by an additional two
weeks, but still did not receive any written comments.
Therefore, we issued the final report without a response
from the Regional Administrator.
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Region 4's Performance Partnership Grants
APPENDIX I
ABBREVIATIONS & DEFINITIONS
ABBREVIATIONS
ADEM Alabama Department of Environmental Management
DHEC Department of Health and Environmental Control, State of South Carolina
DPR Department of Pesticides Regulation, Clemson University
EPA Environmental Protection Agency
EPD Environmental Protection Division, State of Georgia
GAO General Accounting Office
GPRA Government Performance Results Act
OIG Office of Inspector General
PWSS Public Water Supply Supervision
RCRA Resource Conservation Recovery Act
UIC Underground Injection Control
DEFINITIONS
Administrative PPG
An Administrative PPG is the simplest type of PPG where essentially all of the
grantee's commitments are contained in separate categorical media work plans.
The purpose of this type PPG is primarily to obtain administrative flexibility.
Agricultural PPG
A single grant that combines multiple grants or cooperative agreements that were
previously awarded to funds different activities related to a specific media. Region
4 used this type PPG to combine various Pesticides activities such as certification
and enforcement. Agricultural PPGs were sometimes referred to as Pesticides PPGs
by Region 4.
Categorical Grant
Media-specific or multi-media grant for a particular program or narrowly
defined activities.
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Region 4's Performance Partnership Grants
Core Performance Measures (CPMs)
CPMs are environmental indicators, program outcomes and program
outputs used by EPA and states to track environmental and program
progress and to explain accomplishments to the public. Yearly, EPA's
national program offices and ECOS agree to a set of national core
performance measures to be used in developing PPGs and performance
partnership agreements (PPAs).
Environmental PPG
A single grant to a delegated state that combines multi-media funds such as Air or
Water and replaces multiple categorical grants.
Environmental Council of States (ECOS)
ECOS is a national nonpartisan, nonprofit association of state and territorial
environmental commissioners.
National Environmental Performance Partnership System (NEPPS)
A national agreement between EPA and states which focuses joint efforts
on environmental results and accountability. PPAs/PPGs are tools used to
implement NEPPS.
Outcome
The environmental result, effect, or consequence that will occur from
carrying out an environmental program or activity that is related to an
environmental or programmatic goal or objective.
Output
An environmental activity or effort and associated work products related to
an environmental goal or objective that will be produced or provided over a
period of time or by a specified date.
Performance Partnership Agreement (PPA)
A strategic document with negotiated environmental priorities and goals
agreed to by the Regional Administrator and a state which may also be used
as a work plan for a grant.
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Region 4's Performance Partnership Grants
Performance Partnership Grant (PPG)
A single grant made to a state from grant funds allocated and otherwise
available for more than one existing categorical grant program. PPGs are
voluntary and provide states the option to combine funds from two or more
of their categorical grants into one or more PPGs.
Program Project Officer (PPO)
The official designated as EPA's program contact with a grant recipient.
PPOs are responsible for monitoring the program-specific aspects of PPGs.
Regional Project Officer (RPO)
The individual appointed by the Regional Administrator to serve as Project
Officer for a PPG.
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26 Report No. 1999-P00216
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Region 4's Performance Partnership Grants
APPENDIX II
DISTRIBUTION
Office of Inspector General
Inspector General (2410)
Deputy Assistant Inspector General for Internal Audits (2421)
Headquarters Audit Liaison (2421)
Divisional Inspectors General for Audit
EPA Headquarters Office
Assistant Administrator for Air & Radiation (6101)
Assistant Administrator for Water (4101)
Assistant Administrator Office of Solid Waste & Emergency Response (5101)
Assistant Administrator for Administration & Resources Management (3101)
Associate Administrator for Congressional & Intergovernmental Relations (1301)
Deputy Associate Administrator Office of State & Local Relations (1306)
Director Office of Grants & Debarment (3901R)
Director Regional Operations (1108)
Agency Followup Official (2710)
Agency Followup Coordinator (3304)
Audit Liaison Office of Administration & Resources Management (3102)
Region 4
Deputy Regional Administrator
Assistant Regional Administrator for Policy & Management
Regional Project Officer
Audit Followup Coordinator
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