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Surveys, Studies, Investigations,
and Special Purpose Grants
Report No. 2002-P-00005
March 21, 2002

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Inspector General Divisions	Mid-Atlantic Division
Conducting the Audit:	Philadelphia, PA
Regions Covered:
EPA Offices Covered:
Eastern Division
Boston, MA
Central Division
Dallas, TX Office
Northern Division
Chicago, IL
Regions 1, 3, 4, 5, 6, 8, 9 and 10
Administration and Resources
Management
Air and Radiation
Enforcement and Compliance
Assurance
International Affairs
Policy
Prevention, Pesticides and
Toxic Substances
Research and Development
Solid Waste and Emergency Response
Water

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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
MID-ATLANTIC DIVISION
1650 Arch Street
Philadelphia, Pennsylvania 19103-2029
(215) 814-5800
March 21, 2002
MEMORANDUM
SUBJECT: Audit Report:
Surveys, Studies, Investigations, and Special Purpose Grants
Report No. 2002-P-00005
FROM: Lisa White /s/ Lisa White
Project Manager
Mid-Atlantic Division (3AI00)
TO:	Morris X. Winn, Assistant Administrator
for Administration and Resources Management (3101)
Attached is our final audit report on the use of assistance agreements by the
Environmental Protection Agency (EPA) awarded under Catalog of Federal
Domestic Assistance (CFDA) number 66.606, "Surveys, Studies, Investigations, and
Special Purpose Grants." This is one of a series of audits that shows the need for
improved EPA management of assistance agreements. The objectives of the audit
were to determine whether: (1) the results of the assistance agreements awarded
under CFDA 66.606 are useful and contribute to protecting human health and the
environment; (2) the same CFDA 66.606 assistance recipients were funded year
after year; and (3) CFDA 66.606 assistance agreements could have been awarded
under a program-specific CFDA number.
This audit report contains issues that describe problems the Office of Inspector
General (OIG) has identified and corrective actions the OIG recommends. This
audit report represents the opinion of the OIG. Final determinations on matters in
this report will be made by EPA managers in accordance with established EPA
audit resolution procedures. Accordingly, the issues contained in this report do not
necessarily represent the final EPA position, and are not binding upon EPA in any
enforcement proceeding brought by EPA or the Department of Justice.

a
PRO"*6

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ACTION REQUIRED
In accordance with EPA Order 2750, you are requested to provide a written
response within 90 days of the date of this report. A corrective actions plan for
agreed upon actions, including milestone dates, should be included. We have no
objections to the further release of this report to the public. If you or your staff
have any questions, please contact me or Carl Jannetti at (215) 814-5800. This
report will be available at http://www.eDa.sov/oisearth/eroom.htm.

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Executive Summary
Purpose
During a prior audit, we found that more than $617 million of the
Environmental Protection Agency's (EPA's) $1.3 billion in
discretionary assistance agreements was not awarded under a
program-specific Catalog of Federal Domestic Assistance (CFDA)
number. Instead, these agreements were awarded under CFDA
number 66.606 - "Surveys, Studies, Investigations, and Special
Purpose Grants." This is a non-specific CFDA number used by all
program offices for miscellaneous projects. The purpose of this audit
was to determine whether:
! The results of the assistance agreements awarded under CFDA
66.606 are useful and contribute to protecting human health and
the environment.
! The same CFDA 66.606 assistance recipients were funded year
after year.
! CFDA 66.606 assistance agreements could have been awarded
under a program-specific CFDA number.
Results in Brief
EPA did not measure whether the CFDA 66.606 assistance agreements
it awarded achieved results that contribute to protecting human
health and the environment. Further, EPA frequently funded the
same assistance agreement recipients year after year. Also, EPA could
have awarded many of the agreements under a program-specific CFDA
number. One reason these deficiencies occurred is because program
offices generally focused on outputs - not the actual results achieved.
Individual assistance agreement results must be planned and
measured to determine the usefulness and success of the assistance
agreement. Consequently, EPA had no assurance that money used for
assistance agreements was awarded for projects that were useful in
achieving EPA's mission of protecting human health and the
environment.
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During our review, we also noted several instances of apparent
conflicts of interest. These involved a nonprofit organization awarding
a contract to the company that created it, and another organization
using agreement funds to pay one of its own employees as a
consultant.
Recommendations
We made recommendations to EPA to require its personnel to award
assistance agreements with measurable results that contribute to
protecting human health and the environment, develop clear policy on
the use and purpose of assistance agreement amendments, and
provide EPA personnel with sufficient training on negotiating
assistance agreement work plans. We also recommended that EPA
take action on the noted instances of apparent conflicts of interest.
Agency Response and OIG Comment
EPA agreed to attempt to award assistance agreements with
measurable results, develop clear policy on the use and purpose of
amendments, and provide EPA personnel with sufficient training on
negotiating work plans. EPA also agreed to act on the noted instances
of apparent conflicts of interest.
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Table of Contents
Executive Summary 	 i
Introduction	 1
Purpose	 1
Background	 1
Scope and Methodology 	 3
EPA Not Measuring CFDA 66.606 Agreement Results 	 5
Measures Needed to Achieve Desired Results 	 5
Results Not Being Measured	 7
EPA Made Awards Year After Year to Same Recipients	 9
More Program-Specific Awards Can Be Made 	 10
Conclusion	 11
Recommendations	 11
Agency Response and OIG Comment 	 12
Apparent Conflicts of Interest Noted 	 15
Recommendations	 16
Agency Response and OIG Comment 	 16
Appendices	 17
A: Details on Scope and Methodology	 17
B: Agency Response 	 19
C: Distribution List 	 23
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iv	Report No. 2002-P-00005

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Introduction
Purpose
As a result of a prior audit, EPA's Competitive Practices for Assistance
Awards, issued in May 2001, we found that EPA did not have written
policy requiring program offices to award their discretionary
assistance funding competitively. Further, we
found that more than $617 million of EPA's
$1.3 billion in discretionary assistance
agreements was not awarded under a program-
specific Catalog of Federal Domestic Assistance
(CFDA) number. Instead, these agreements
were awarded under CFDA number 66.606 -
"Surveys, Studies, Investigations, and Special
Purpose Grants." This is a non-specific CFDA
number used by all program offices for
miscellaneous projects.
The purpose of this audit was to determine whether:
! The results of the assistance agreements awarded under CFDA
66.606 are useful and contribute to protecting human health
and the environment.
! The same CFDA 66.606 assistance recipients were funded year
after year.
! CFDA 66.606 assistance agreements could have been awarded
under a program-specific CFDA number.
Background
The Government Performance and Results Act (GPRA) was passed in
1993 to focus on the outcomes of government performance. The intent
was to improve government performance and hold Federal agencies
accountable for achieving program results.
According to the General Accounting Office's (GAO's) 1998 GPRA
Guide, program managers need to prepare performance plans with
detailed strategies that identify the links between outputs and
The Catalog of Federal
Domestic Assistance is a
government-wide
compilation of Federal
programs, projects,
services, and activities
that provide assistance
or benefits to the
American public.
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outcomes. Outputs are the direct products and services delivered by a
program, while outcomes are the results of those products and services.
The Guide also explains the importance of the link between budget
requests and performance planning efforts to improve federal program
effectiveness and public accountability.
An assistance agreement is used to transfer money that supports or
stimulates an activity to accomplish a public purpose authorized by
Federal statute. During fiscal year 1999, EPA awarded more than
$4 billion in assistance agreements to state and local governments,
tribes, universities, non-profit recipients, and other entities. These
awards are administered under EPA's CFDA programs, which are
comprised of 10 continuing environmental and 37 discretionary
assistance programs. Continuing programs make awards in
accordance with formulas prescribed by law or an agency regulation.
Discretionary programs have the legislative authority to
independently determine the recipients and funding levels of financial
assistance awards. During fiscal year 1999, EPA awarded $2.7 billion
in continuing environmental assistance program agreements and
$1.3 billion in discretionary program agreements.
In 1997, EPA created CFDA 66.606 to provide program offices a place
for miscellaneous discretionary assistance awards. Program offices
fund these awards with discretionary money received in their budget
through the Environmental Programs and Management Account. The
narrative of this CFDA includes the following objectives:
! To support Surveys, Studies, Investigations, and Special
Purpose assistance associated with Air, Water Quality,
Hazardous Waste, Toxic Substances, and Pesticides.
! To identify, develop, and demonstrate necessary pollution
control techniques to prevent, reduce, and eliminate
pollution.
! To evaluate the economic and social consequences of
alternative strategies and mechanisms for use by those in
economic, social, governmental, and environmental
management positions.
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Scope and Methodology
During fiscal year 1999, EPA awarded 1,749 assistance agreements
under CFDA 66.606, totaling more than $617 million. Of that amount,
we determined that almost $300 million was earmarked funds and
$155 million was for construction grants. Both earmarked and
construction grant funds were excluded from our sample. For our
review, we used a nationwide statistical sample of 42 CFDA 66.606
assistance agreements, awarded by Headquarters and 8 EPA Regions.
Our approach was designed to determine whether systemic problems
existed so that, if needed, a correction could be made through an
Agency-wide initiative. Details on our scope and methodology are in
Appendix A.
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EPA Not Measuring
CFDA 66.606 Agreement Results
EPA did not measure whether the CFDA 66.606 assistance agreements
it awarded achieved results that contribute to protecting human
health and the environment. Further, EPA frequently funded the
same assistance agreement recipients year after year. Also, EPA could
have awarded many of the agreements under a program-specific CFDA
number. One reason these deficiencies occurred is because program
offices generally focused on outputs - not the actual results achieved.
Consequently, EPA had no assurance that money used for assistance
agreements was awarded for projects that were useful and contributed
to achieving EPA's mission of protecting human health and the
environment.
Measures Needed to Achieve Desired Results
Measures are often expressed as outputs, intermediate outcomes, and
end outcomes. Outputs are typically activities or products used to
attain an ultimate outcome, and do not directly measure results. End
outcomes are the program results that lead to improved protection of
human health and the environment, such as achieving safe drinking
water. Intermediate outcomes show progress toward achieving end
outcomes, and are often used when end outcomes are not immediately
clear, easily delivered, or quickly achieved.
According to the EPA Project Officers' Manual, a recipient is required
to include a work plan as part of the award application. A good work
plan is essential to receive a useful product and ensure recipient
success. Without one, assistance agreement outputs usually will be
vague and difficult to measure. It will also be difficult for project
officers to appropriately manage and monitor their assistance
agreements. According to EPA guidance, an effective narrative work
plan will:
~	list expected outcomes of the grant,
~	quantify outputs,
~	link outputs to funding,
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~	identify target dates and milestones,
~	require periodic reporting, and
~	explain how the activities will be accomplished.
In the planning phase of assistance agreements, it is important to
anticipate the expected outcomes so that activities are planned to
achieve behavioral changes that lead to desired programmatic or
environmental results. We recognize that outcome measurement is
difficult, especially for this type of miscellaneous award. However,
whenever possible, the short-term outcomes should be quantitatively
or qualitatively measured to demonstrate that the award contributed
to the long-term outcomes. This is accomplished by beginning with the
end in mind, as shown in the following chart:
Inputs
Begin With the End in Mind
Outputs
Short-term
Outcomes
)
Short-term
Outcome Actions
l)
Long-term
Outcomes
J
Work plans

•	Workshops
•	Studies
•	Reports



Public Awareness
Increased Knowledge
Improved Skills
Changes in Attitude
Policy changes
Public adherence to
pollution control
programs
Behavioral changes
Environmental
and Human Health
Improvement
For example, the Office of Air and Radiation awarded an assistance
agreement to a nonprofit organization in 1996 to provide an outreach
program to building code officials on indoor air quality features and to
develop building codes for homes, emphasizing radon-resistant
techniques. This agreement had planned outputs, such as a new code
manual and training for code officials on the benefits and
implementation of radon-resistant construction for their communities.
The project officer demonstrated that the results of these outputs led to
the construction of radon-resistant homes in various communities,
which represented the assistance agreement outcomes.
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Results Not Being Measured
The majority of assistance agreements we reviewed that were awarded
under CFDA 66.606 were for miscellaneous projects, such as outreach,
workshops, and conferences.
These activities should have
been linked to measurable
assistance agreement
outcomes. The results
should be quantitatively or
qualitatively measured to
demonstrate that the award
was useful. However, almost half of the 42 assistance agreements
reviewed did not measure the project outcomes. Several examples
follow.
~	The Office of Prevention, Pesticides and Toxic Substances awarded
$34,000 to a nonprofit organization for a conference in Oxford,
England, related to the development of safer chemicals. According
to the decision memorandum, the chemical industry would benefit
due to the shared knowledge of the participants. However, due to
the confidentiality of the discussions, no information from the
conference was published. Thus, the benefits of this conference
were unknown. By funding activities that cannot be shared, it is
impossible to determine whether the results contributed to the
protection of human health and the environment. EPA had funded
two additional assistance agreements on the same topic to the same
recipient totaling $110,000 combined.
~	The Office of Water awarded two assistance agreements totaling
$80,000 to a nonprofit organization to support a public outreach
campaign on the importance of
clean beaches. The grantee
charged public beach
communities a $1,995
membership fee and awarded
the community a flag to fly at
its beach entrance to
symbolize, among other things,
clean water. This award did
not generate assistance
agreement outcomes that could
be measured to determine its
Did we accomplish what we planned? Did we
achieve the environmental results we desired?
To answer these questions, we believe
assistance agreements need to be clear,
measurable and outcome-oriented.
Examples of Criteria
for a Flag:
r
/ Water Quality - beaches meet
EPA's water quality standards.
/ Safety - lifeguards on duty, record
of emergency incidents.
/ Services - easy and safe access,
working public telephones, public
parking.
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contribution to protecting human health and the environment.
Further, it was not clear how the program's activities contributed to
the public taking additional steps to keep beaches clean. Also, EPA
has been using Water Quality Standards to conduct beach survey
activities, including beach closings and exposure to contaminated
recreational waters,
which have been publicized on its web site since 1997.
~ The Office of Water awarded a $60,000 assistance agreement in
1995 to a nonprofit organization to facilitate public participation in
the development of a Lakewide Management Plan. The seven
amendments that followed were essentially to continue the existing
project, and brought the cumulative total of the assistance
agreement to $332,000. The work plan for this agreement was
vague and did not list expected outcomes, quantify outputs, link
outputs to funding, or identify milestones. While this agreement
had outputs, such as forum meetings, its results were never
planned and measured. What benefits were achieved from these
forum meetings? What changed as a result of these funds? These
types of results need to be planned and measured to determine the
usefulness and success of an assistance agreement.
One reason these deficiencies occurred is because program offices
generally focused on outputs - not actual results achieved. Individual
assistance agreement outcomes must be planned and measured to
determine the usefulness and success of the assistance agreement.
However, EPA program offices do not adequately measure the
outcomes generated from such awards. The outcomes that should
result from outputs are often overlooked or not even expected. For a
project to be effective, it is necessary to identify the usefulness of the
service or product and determine what has changed as a result of the
activities funded.
When asked why outcomes are not identified in the planning phase of
assistance agreements, some project officers indicated they had not
been the project officer for the entire duration of the assistance
agreement. Therefore, they said they were unfamiliar with what was
initially negotiated with the agreement recipient. While we
understand staff changes are inevitable, project officers need to take
responsibility for the assistance agreements they are managing by
documenting outputs and outcomes, as well as how the results will be
measured.
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EPA's Grants Administration Division management said the program
offices determine which subobjectives within their accounting
structure the assistance agreement scope of work should benefit.
While Program Result Codes connect the outputs to funding sources,
they do not address potential outcomes. Many subobjectives have
long-term strategies that may take more than 10 years to accomplish.
It is for these assistance agreements, which are directly linked to
achieving the subobjectives, that planning and measuring the
outcomes is most important.
EPA Made Awards Year After Year to Same Recipients
EPA awarded assistance agreement funds to the same recipients year
after year. Objectives
were often broad and
vague, and without clearly
defined expectations for
final results.
Consequently, EPA
continuously amended
awards, sometimes for as
long as 6 years. The
amendments were usually
a combination of no-cost
time extensions or
additional funds for
different projects that
were not necessary to
complete the original
objectives.
During our review, we found that 21 out of the 42 awards in our
sample had multiple amendments. To determine whether this was a
consistent practice, we reviewed a database of all awards made under
CFDA 66.606 for fiscal years 1996 through 2000. We found that
80 percent of the funding for CFDA 66.606 went to repeat recipients.
By providing funding to the same organizations year after year, EPA is
creating the appearance of preferential treatment and limiting other
potential entities from providing similar, if not better, services.
For example, EPA provided a nonprofit organization with an
assistance award for $50,000 to support a recycling forum. The eight
amendments that followed over the next 6 years were for activities -
Funding for CFDA 66.606
Fiscal Years 1996-2000
$336,066,279
20%
$1,385,490,570
80%
D Repeat Recipients D One-Time Recipient
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such as outreach efforts, publications, and workshops - that were not
part of the original proposal or needed to accomplish the objectives of
that same proposal. This brought the cumulative total of the
assistance agreement to $279,000. The fact that EPA amended the
award eight times demonstrates that EPA did not properly plan the
project and the benefits to be realized. In the CFDA 66.606 narrative,
all special projects are to be limited to 5 years, but this limitation is
not always followed.
EPA's Grants Administration Division personnel acknowledged that
many of the awards reviewed had amendments, but said appropriate
reasoning existed for their approval. They also said that, in some
instances, amendments were made due to circumstances that were not
anticipated at the time of the original award. While we agree that
unanticipated circumstances sometimes arise and amendments may be
needed occasionally, we do not believe this was generally the case.
The amendments often were not necessary to complete the objectives of
the initial projects. This demonstrates poor planning in the pre-award
phase of assistance agreements, and makes it more difficult to
measure whether the agreements achieved desired outcomes.
Grants Administration Division personnel have agreed to ensure that
future amendments are adequately justified by the program offices.
They said that, if necessary, they will develop a grants policy to
encourage program offices to submit "renewal" funding packages in
lieu of amending projects when it is evident that the amendment
modifies the intent of the initial project.
More Program-Specific Awards Can Be Made
EPA funded many awards under CFDA 66.606 that could have been
awarded under program-specific CFDA numbers. For example, in
fiscal year 1999, the Office of Air and Radiation (OAR) awarded more
than $21 million under CFDA 66.606 because OAR does not have
program-specific CFDA numbers for discretionary funding. We believe
these awards could have been more appropriately placed under a
newly created CFDA number(s) for OAR because the explanatory
narrative for CFDA 66.606 is too broad. Creation of a new CFDA
number for OAR would clearly advertise OAR's funding priorities to
the public and provide an accurate account of their total assistance
awards. We noted a similar situation in the Office of Water, which has
initiated corrective action.
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During the audit of EPA's Competitive Practices for Assistance Awards,
issued May 2001, we noted that EPA's CFDA process does not
adequately inform the public of potential funding opportunities or
provide the Agency with accurate funding information for particular
programs. In response to this audit, the Office of Grants and
Debarment issued a memorandum in October 2001 to Senior Resource
Officials. This memorandum indicated that during 2002, the Grants
Administration Division will determine whether CFDA 66.606 should
be broken down into several new program descriptions to enhance the
public's awareness of funding opportunities. For this reason, this
current report does not include a recommendation concerning this
issue.
Conclusion
This report indicates that assistance agreements should have
measurable results. However, when it is not feasible to quantitatively
measure results, there should be at a minimum qualitative results
that demonstrate that the award was worthwhile. Without results,
EPA could be subject to accusations of waste in managing assistance
agreement funds.
Recommendations
We recommend that the Assistant Administrator for Administration
and Resources Management:
1.	Require EPA personnel to award assistance agreements with
quantitative or qualitative measurable results that contribute to
protecting human health and the environment.
2.	Develop clear policy on the use and purpose of amendments for
assistance agreements so that personnel more carefully plan the
intended results of the original agreements.
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Agency Response and OIG Comment
Agency Response to Recommendation 1
The Office of Administration and Resources Management (OARM)
generally agreed with this recommendation. OARM suggested that
the OIG change both the recommendation and the wording in the
report to clarify that environmental results may be either quantitative
or qualitative in nature. The response indicated that given the current
state of outcome measurements, this may not be possible for every
project. The response cited a previous OIG review that stresses the
difficulties in obtaining and measuring environmental outcomes.
The response further indicated that in asking project officers to
document outcomes for 66.606 projects, the OIG should recognize that
the requirements of the Paperwork Reduction Act and Office of
Management and Budget regulations may affect the Agency's ability to
request recipients to conduct surveys and other information-collection
activities designed to measure the environmental results of their EPA-
funded activities.
The response also stated that while it is ultimately the responsibility
of the program offices to plan and measure the results of their
assistance agreements, OARM will work with the programs to improve
the Agency's performance in this area. Specifically, they will revise
the work plan guidance in the Project Officers' Manual to cover
environmental outcomes. They will also include the importance of
planning for environmental results in the Project Officer Training
courses and the new training initiative for managers. Finally, the
response indicated they will explore with the program offices the
possibility of having the decision memorandum outline the program's
plan for measuring environmental results.
OIG Comment
While OARM generally agreed with the recommendation, they
suggested that the OIG revise the wording of the report and the
recommendation to indicate that environmental results may be either
quantitative or qualitative in nature to be consistent with the
conclusion. We agree that outcomes cannot be quantitatively
measured for every project, and added this to the report.
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We also agree with OARM that these miscellaneous awards may not
always result in a direct environmental improvement, such as cleaner
air. Nonetheless, for a project to be effective, it is necessary to identify
the usefulness of the service or product and determine what has
changed as a result of the activities funded. As described on page 6 of
our report, the short-term outcomes and outcome actions are what lead
to the long-term outcomes of environmental improvement. If the
Agency cannot measure the short-term results of the assistance
agreements awarded and how the results contribute to protecting
human health and the environment, then the Agency cannot
determine whether taxpayers' dollars are being adequately spent.
Further, regarding potential barriers from the Paperwork Reduction
Act and Office of Management and Budget regulations, we believe the
measurement and monitoring of outcomes, if properly planned for, will
not place a burden on any party.
We agree with the revision to the Project Officers' Manual guidance
and planned additions to the training courses. We strongly urge that
the decision memorandum be used to outline their plan for measuring
environmental results.
Agency Response to Recommendation 2
OARM agreed with the underlying intent of the recommendation.
They agreed to work with the program offices to develop clear guidance
that distinguishes between the types of changes suitable for
amendments and those that should be handled by a funding renewal
package. OARM stated they believe they retain the flexibility to use
amendments, rather than paper-intensive renewal packages, to make
mid-course project adjustments or other appropriate changes.
OIG Comment
We agree that clear guidance on when to use amendments is needed.
The response indicated our report suggests that amendments cannot
be used to make changes to the original objectives of a project, and
that multiple amendments can never be justified absent unanticipated
circumstances. That was not our contention. Our concern was that
many of the assistance agreements reviewed included work plans with
very broad objectives and no clearly defined results. As stated on
page 10, we agree unanticipated circumstances arise requiring the
need for amendments. However, we found that in many cases,
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amendments were not awarded due to unforeseen circumstances but
rather for different activities when the current funds expired. Instead
of awarding a new assistance agreement, program offices simply
funded the project with an amendment.
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Apparent Conflicts of Interest Noted
During our review, we noted several instances of apparent conflicts of
interest that EPA needs to address.
OAR awarded an assistance agreement and five amendments totaling
$210,000 to a nonprofit organization. The purpose of the assistance
agreement was to provide programs and announcements on
environmental health issues through Hispanic radio stations
nationwide. The assistance agreement recipient contracted with a
radio network for air time through sole-source contracts totaling
almost $60,000. However, we determined that the assistance
agreement recipient had been created as a nonprofit organization by
the radio network given the $60,000. A review of the members on the
Board of Directors for the two organizations disclosed that the same
individual serves as the Chairman and Treasurer for the nonprofit and
as the Chairman and Chief Executive Officer for the radio network.
According to 40 Code of Federal Regulations Part 30.42:
No employee, officer, or agent shall participate in the
selection, award, or administration of a contract
supported by Federal funds if a real or apparent conflict of
interest would be involved. Such a conflict would arise
when the employee, officer, or agent, any member of his or
her immediate family, his or her partner, or an
organization which employs or is about to employ any of
the parties indicated herein, has a financial or other
interest in the firm selected for an award.
We also found that EPA awarded $26,000 to a nonprofit organization
for its effort to increase the use of clean energy resources to reduce air
pollution and greenhouse gas emissions. The recipient used $24,650,
or 95 percent of the funds, to pay one of its own employees as a
consultant. Office of Management and Budget Circular A-122,
Attachment B, paragraph 39, prohibits the costs of professional
consultant fees rendered by persons who are employees of the
organization that received the award.
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Recommendation
3. We recommend that the Assistant Administrator for
Administration and Resources Management perform an on-site
review of the recipient awarding contracts to the radio network
that created it to determine whether the recipient complied with
40 Code of Federal Regulations Part 30.
Agency Response and OIG Comment
Agency Response to Recommendation 3
The response indicated that the Office of Grants and Debarment is in
the process of evaluating the findings, in consultation with affected
program officials, and has decided to conduct an on-site review of the
first recipient, which has an ongoing assistance relationship with EPA.
For the second recipient, the Office of Grants and Debarment may
request the OIG to conduct an audit of all costs before instituting a
recovery action.
OIG Comment
We agree with the Agency's response. We determined that the
assistance agreement to the second recipient has been closed.
Therefore, we deleted the portion of the recommendation in the report
that related to recovering those costs.
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Appendix A
Details on Scope and Methodology
This audit included tests of the program records and other auditing
procedures we considered necessary. We performed this audit in
accordance with the Government Auditing Standards, issued by the
Comptroller General of the United States. We also conducted this
audit according to the guidelines and procedures established in the
Office of Inspector General Audit Process Handbook.
We reviewed management controls and procedures specifically related
to our objectives. However, we did not review the internal controls
associated with the input and processing of information in EPA's
Grants Information Control System or any other automated records
system. We also reviewed EPA's fiscal years 2000 and 2001 Assurance
Letters prepared to comply with the Federal Managers' Financial
Integrity Act, and noted no weaknesses that address the issues noted
in this report.
We reviewed the Government Performance and Results Act of 1993.
We obtained and reviewed other audits and reports that addressed
GPRA issues within the Agency. We reviewed the Catalog of Federal
Domestic Assistance, and EPA guidance regarding assistance
agreements.
We interviewed managers from the Grants Administration Division to
learn about the history of CFDA 66.606. We conducted interviews and
teleconferences with key personnel from Headquarters and Regional
program offices to learn how the awards were managed. We reviewed
the project files maintained by the program officials to determine
whether the awards had adequate work plans, useful outputs, and
measurable outcomes. We obtained copies of the program decision
memoranda and other pertinent award information.
We selected a statistical sample of 42 assistance agreements.
Following is a breakdown by program of the agreements reviewed.
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Office
Total Number of Awards
Enforcement and Compliance Assurance
2
Research and Development
1
Solid Waste and Emergency Response
3
Prevention, Pesticides and Toxic Substances
3
International Affairs
2
Policy
2
Air and Radiation
16
Water
13
Total
42
Our fieldwork was conducted from August 1, 2001 to December 7,
2001. On October 25, 2001, we provided a finding outline with
recommendations to personnel in OARM. Generally, they agreed with
our recommendations and we incorporated their response into our
draft report. We issued the draft report on January 28, 2002 and held
an exit conference with OARM on March 15, 2002. O ARM's comments
and our evaluation are summarized at the end of each section, and the
complete response is provided in Appendix B.
Prior Audit Coverage
On May 21, 2001, EPA OIG issued an audit report titled: EPA's
Competitive Practices for Assistance Awards (200 l-P-00008). This
audit disclosed that EPA did not have a policy that requires program
officials to award discretionary assistance funding competitively. The
OIG recommended that EPA issue a policy stating that program offices
compete their assistance agreements to the maximum extent possible,
and ensure there are sufficient written justifications to support non-
competitive awards. The OIG also recommended that EPA develop
and implement CFDA program guidance and training to help ensure
that EPA personnel record correct CFDA program numbers for their
assistance awards and update the Catalog of Federal Domestic
Assistance with current program information.
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Appendix B
Agency Response
March 5, 2002
MEMORANDUM
SUBJECT: Response to Draft Audit Report: Surveys, Studies,
Investigations, and Special Purpose Grants
Assignment No. 2001-000772
FROM: Morris X. Winn /s/
Assistant Administrator
TO:	Carl A. Jannetti
Divisional Inspector General for Audit
Mid-Atlantic Division
Office of Inspector General (3AI00)
This is to provide the response of the Office of Administration and Resources
Management (OARM) to the Office of Inspector General's (OIG) draft audit report (draft report)
on assistance agreements awarded under Catalog of Federal Domestic Assistance (CFDA)
number 66.606. As noted in the draft report, the objectives of the audit were to determine
whether: 1) 66.606 assistance agreements achieved results contributing to the protection of
human health and the environment; 2) the same 66.606 assistance recipients were funded year
after year; and 3) 66.606 agreements could have been awarded under a program-specific CFDA
number. During its review of 66.606 agreements, the OIG also identified instances of apparent
conflicts of interest that the Agency needs to address.
66.606 is a non-program specific CFDA number that includes a broad range of
miscellaneous assistance agreements. OARM understands that the 66.606 audit was prompted in
part by the results of a prior OIG audit on "EPA's Competitive Practices for Assistance Awards."
In the prior audit, the OIG found that a large portion of EPA's discretionary grant funds were
awarded non-competitively under 66.606. In addition, the prior audit found that in many cases,
potential recipients were not adequately informed of funding opportunities due to the Agency's
use of 66.606 as opposed to program-specific CFDA numbers.
I am pleased to note that OARM has taken steps to address competition in assistance
agreements which should help resolve a number of the concerns raised in the draft report.
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Specifically, OARM has initiated the directives clearance process for a proposed EPA Order
entitled "Policy for Competition in Assistance Agreements." The Order will identify categories of
assistance agreements and dollar levels for which competition is required, establish standard
procedures for competitive awards, and require properly supported written justifications for non-
competitive awards.
Additionally, as acknowledged in the draft report, the Office of Grants and Debarment
(OGD), through an October 2001 memorandum to Senior Resource Officials, has instituted a
process to improve the accuracy of the Agency's CFDA program descriptions. Moreover, OGD
is working with the program offices to review the use of 66.606 and generally replace it with
program-specific CFDA numbers. Taken together, these actions should increase the pool of
potential new recipients, expand the public's knowledge of EPA funding opportunities, and
increase the number of awards with program-specific CFDA numbers.
The draft report contains a number of recommendations addressed to the Assistant
Administrator for OARM. We have the following comments on those recommendations.
Recommendation 1:
Require EPA personnel to award assistance agreements with measurable results that
contribute to protecting human health and the environment.
OARM Response:
OARM generally agrees with this recommendation. In carrying out EPA's fiduciary
obligations, it is critically important that 66.606 agreements funded with taxpayers' dollars
contribute to the Agency's mission of protecting human health and the environment. We would
suggest, however, that the wording of the recommendation be revised to indicate that
environmental results may be either quantitative or qualitative in nature. This change will make
the recommendation consistent with the Conclusion paragraph on page 11, which notes that it
may not be feasible in some cases to quantitatively measure results for 66.606 projects.
We would also recommend a similar change to the discussion on pages 5-8 of the draft
report. This discussion implies that for all 66.606 projects, the Agency will be able to
quantitatively measure both short-term outcomes, short-term outcome actions, and long-term
outcomes. Given the current state of outcome measurement, this may not be possible for every
project. See Office of Inspector General Special Review, EPA's Progress in Using the
Government Performance and Results Act to Manage for Results (citing the difficulties in
obtaining and measuring environmental results). Further, in asking project officers to document
outcomes for 66.606 projects, the OIG should recognize that the requirements of the Paperwork
Reduction Act and Office of Management and Budget regulations may affect the Agency's ability
to request recipients to conduct surveys and other information-collection activities designed to
measure the environmental results of their EPA-funded activities.
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While it is ultimately the responsibility of the program offices to plan and measure the
results of their assistance agreements, OARM will work with the programs to improve the
Agency's performance in this area. Specifically, chapter 3 of the Project Officer Training Manual
"Managing Your Financial Assistance Agreement - Project Officers Responsibilities" provides
that an effective narrative/workplan :
! Will list expected outputs
! Quantify outputs;
! Link outputs to funding;
! Identify target dates and milestones;
! Require periodic reporting; and
! Explain how will the activities be accomplished.
In response to the draft report, OGD will revise this workplan guidance to cover
environmental outcomes. OGD will also include in its Project Officer Training courses and its
new training initiative for managers a discussion on the importance of planning for environmental
results. In addition, OGD will explore with the program offices the possibility of having the
decision-memorandum for awards outline the program's plan for measuring environmental results.
Recommendation 2:
Develop clear policy on the use and purpose of amendments for assistance agreements so
that personnel more carefully plan the intended results of the original agreements.
OARM Response:
OARM agrees with the underlying intent of this recommendation, namely that the Agency
should be careful about using amendments for changes that bear no relationship to the original
project scope of work. Accordingly, OGD will work with the program offices to develop clear
guidance that distinguishes between the types of changes suitable for amendments and those that
should be handled by a funding renewal package. Moreover, the new EPA Order on competition
contains requirements that will prevent amendments from being used to circumvent the
competitive award process.
At the same time, OARM recommends that the OIG revise or clarify the discussion on
amendments on pages 9-10 of the report in two respects.
First, the statement on page 9 that multiple amendments to 66.606 awards create the
appearance that recipients are extensions of the federal government should be deleted in light of
the requirements of the Federal Grant and Cooperative Agreement Act. Under the legal standards
in that statute, 66.606 recipients are carrying out a non-federal public purpose rather than
providing services for the direct use of the federal government. As such, and assuming a proper
assistance relationship, they should not be viewed as agents or representatives of the federal
government, regardless of the number of amendments to their assistance agreements.
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Second, the draft report appears to suggest: (1) that amendments cannot be used to make
changes to the original objectives of a project; and (2) that multiple amendments to an award can
never be justified absent unanticipated circumstances. If that is the OIG's position, we would
like to discuss it with you prior to the issuance of the final audit report. Consistent with the
government-wide grant regulations on project changes, we believe the Agency retains the
flexibility to use amendments, rather than paper-intensive renewal packages, to make mid-course
project adjustments or other appropriate changes. Further, multiple amendments may be justified,
for example, where a recipient conducts a broad range of studies involving numerous program
offices. In that case, it may be more efficient for the Agency to fund the work through
amendments as opposed to awarding a separate assistance agreement for each study.
Recommendation 3:
Take action on all apparent conflicts of interest noted in the report. Specifically,
the OIG suggests that: a. OARM perform an on-site review of the recipient
awarding contracts to the radio network that created it to determine whether the
recipient complied with 40 C.F.R. Part 30; and b. Recover the costs incurred by
the recipient to pay one of its employees, which was prohibited by the Office of
Management and Budget Circular, A-122.
OARM Response:
OGD is in the process of evaluating the OIG's findings, in consultation with affected
program officials. As suggested by the OIG, OGD has decided to conduct an on-site review of
the first recipient, which has an ongoing assistance relationship with the Agency. With regard to
the second recipient, OGD may request the OIG to conduct an audit of all costs before instituting
a recovery action.
Besides our comments on the draft report's recommendations, we note that the OIG did
not distribute the draft report beyond OARM. In the future, we would ask that the OIG also
provide copies of grant-related draft reports addressed to OARM for response to affected
program offices. This will facilitate our coordination with the programs on draft reports as well
our efforts to provide you with a timely response, and help to further highlight the importance of
grants management issues to the Agency.
Thank you for the opportunity to comment on the draft report. If you or your staff have
any questions or need additional information, please contact Howard Corcoran at (202) 564-1903
or Marty Monell at (202) 564-5387.
cc: Dave O'Connor	Senior Resource Officials
Grants Customer Relations Council Sandy Womack-Butler
Jane Moore
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Appendix C
Distribution List
Office of Inspector General
Inspector General (2410)
EPA Headquarters
Assistant Administrator for Policy (1805)
Assistant Administrator for Air and Radiation (6101)
Assistant Administrator for Enforcement and
Compliance Assurance (2201A)
Assistant Administrator for International Activities (2610R)
Assistant Administrator for Prevention, Pesticides, and
Toxic Substances (7101)
Assistant Administrator for Research and Development (8101R)
Assistant Administrator for Solid Waste and Emergency Response (5105)
Assistant Administrator for Water (4101)
Comptroller (2731A)
Agency Followup Official (the CFO)(2710A)
Agency Audit Followup Coordinator (2724A)
Associate Administrator for Congressional and Intergovernmental
Relations (1301A)
Director, Office of Regional Operations (1108A)
Associate Administrator for Communications, Education, and
Media Relations (1101A)
Director, Office of Grants and Debarment (3901R)
Director, Grants Administration Division (3903R)
Director, Office of Executive Support (1104)
Regional Offices
Senior Resource Officials (Regions 1-10)
Regional Audit Follow-up Coordinators (Regions 1-10)
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