^tDsr%
* A \
I	g U.S. ENVIRONMENTAL PROTECTION AGENCY
\ ^ fafr / OFFICE OF INSPECTOR GENERAL
%. s?
4L pro"*4-
Catalyst for Improving the Environment
Audit Report
EPA Needs to Better Document
Project Delays for Recovery Act
Diesel Emission Reduction Act
Grants
Report No. 11-R-0179
March 28, 2011

-------
Report Contributors:	Andres Calderon
Janet Kasper
Les Partridge
Nicole Pilate
Matthew Simber
Wendy Swan
Abbreviations
ARRA
DERA
EPA
OAR
OARM
OGD
OIG
OMB
ORBIT
American Recovery and Reinvestment Act
Diesel Emission Reduction Act; also refers to the U.S. Environmental Protection
Agency Diesel Emissions Reduction Program
U.S. Environmental Protection Agency
Office of Air and Radiation
Office of Administration and Resources Management
Office of Grants and Debarment
Office of Inspector General
Office of Management and Budget
Office of the Chief Financial Officer Reporting and Business Intelligence Tool
Cover photo: School buses, which are often a source of diesel emissions. (EPA photo)

-------
*. U.S. Environmental Protection Agency	11-R-0179
$ %ML. \ Office of Inspector General	March 28,2011
/ ri
lW/
At a Glance
Catalyst for Improving the Environment
Why We Did This Review
The Office of Inspector
General (OIG) conducted this
audit to determine whether the
U.S. Environmental Protection
Agency (EPA) successfully
used its grants management
tools to identify and mitigate
project delays in American
Recovery and Reinvestment
Act of 2009 (Recovery Act)
Diesel Emission Reduction
Act (DERA) grants.
Background
The Recovery Act provided
the EPA Diesel Emissions
Reduction Program (known as
DERA) with $300 million to
maximize job preservation and
create economic recovery
through a variety of diesel
emission reduction strategies.
To accomplish its objective,
EPA awarded $244 million via
grants under the State and
National Clean Diesel
Funding Assistance Programs.
For further information,
contact our Office of
Congressional, Public Affairs
and Management at
(202) 566-2391.
The full report is at:
www.epa.qov/oiq/reports/2011/
20110328-11 -R-0179.pdf
EPA Needs to Better Document Project Delays for
Recovery Act Diesel Emission Reduction Act Grants
What We Found
While DERA project officers were aware of Recovery Act grant project delays,
they did not always document delays in EPA's grants management system or, in
some cases, take action to reduce the impact of project delays. To prompt quicker
action from recipients on Recovery Act grants, EPA had stated to the Office of
Management and Budget in March 2009 that all grants would have an initial project
period through September 30, 2010. EPA's goal was to have 40 percent of the
Recovery Act grant funds expended by September 30, 2010, which was met.
However, as of June 30, 2010, 49 grants, with a value of $101,437,442, had less
than 10 percent of the funds expended. Eighty-five percent of the grantees did not
finish projects by the completion date, and EPA granted no-cost time extensions for
all those grantees. In granting the extensions, 3 of 15 grants we reviewed did not
contain new timeframes for completing the projects. EPA guidance requires
timeframes to be established, and timeframes can be used to assess progress and
reduce the impact of project delays.
Even though grant recipients reported project delays to EPA in progress reports, in
10 of 15 cases reviewed, project officers did not document these delays in
programmatic baseline monitoring reports. DERA staff believed the delays were
outside the control of the recipients and that no-cost time extensions were the
appropriate corrective action. However, EPA did not take sufficient action in some
cases by establishing new milestone dates and instituting corrective actions when
approving grant extensions. Delayed projects may result in recipients not
completing projects within specified timeframes and delayed achievement of
Recovery Act objectives.
What We Recommend
We recommend that the Assistant Administrator for Administration and Resources
Management revise the baseline and advanced monitoring report questions and
corresponding guidance. We recommend that the Assistant Administrator for Air
and Radiation verify that project officers document delays in baseline and advanced
monitoring reports, and institute corrective actions when delays occur. We also
recommend that the Assistant Administrator for Air and Radiation require project
officers to regularly report to management on the progress of projects and status of
corrective actions. EPA agreed with the OIG's recommendations. The Office of Air
and Radiation, the Office of Administration and Resources Management, and the
regions have worked together to improve guidance and oversight.

-------
^tDsrx
* O \
Ksbs
March 28, 2011
MEMORANDUM
SUBJECT: EPA Needs to Better Document Proj ect Delays for Recovery Act
Diesel Emission Reduction Act Grants
Report No. ll-R-0179
FROM: Arthur A. Elkins, Jr.
Inspector General
TO:	Gina McCarthy
Assistant Administrator for Air and Radiation
Craig Hooks
Assistant Administrator for Administration and Resources Management
This is our report on the subject audit conducted by the Office of Inspector General (OIG) of the
U.S. Environmental Protection Agency (EPA). This report contains findings that describe the
problems the OIG has identified and corrective actions the OIG recommends. This report
represents the opinion of the OIG and does not necessarily represent the final EPA position.
Final determinations on matters in this report will be made by EPA managers in accordance with
established audit resolution procedures.
The estimated direct labor and travel costs for this report are $219,112.
Action Required
In responding to the discussion draft report, the Agency provided a corrective action plan for
addressing the recommendations. Therefore, a response to the final report is not required. We
have no objections to the further release of this report to the public. The report will be available
at http://www.ega.gov/oig.
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
THE INSPECTOR GENERAL
If you or your staff have any questions regarding this report, please contact Melissa Heist,
Assistant Inspector General for Audit, at (202) 566-0899 or heist.melissa@epa.gov; or Janet
Kasper, Product Line Director, at (312) 886-3059 or kasper.ianet@epa.gov.

-------
EPA Needs to Better Document Project Delays for
Recovery Act Diesel Emission Reduction Act Grants
11-R-0179
Table of C
Purpose		1
Background		1
Scope and Methodology		2
Results of Review		2
Recovery Act and Monitoring of DERA Grants		3
EPA Did Not Always Identify and Take Action to Reduce the Impact
of Project Delays		4
DERA Viewed Extensions as Appropriate Corrective Actions		5
Delayed Grants Diminish Effectiveness of Recovery Act		5
Recommendations		6
Agency Response and OIG Comment		6
Status of Recommendations and Potential Monetary Benefits		8
Appendices
A Details on Scope and Methodology	 9
B Agency Response to Draft Report	 11
C Distribution	 15

-------
Purpose
The Diesel Emissions Reduction Program (known as DERA) was one of six U.S.
Environmental Protection Agency (EPA) programs that received funding under
the American Recovery and Reinvestment Act of 2009 (Recovery Act). The act
provided $300 million for the DERA grants, of which $6 million could be used to
manage and oversee the grants. Our objective was to determine whether EPA
successfully used its grants management tools to identify and mitigate project
delays in Recovery Act DERA grants.
Background
The Recovery Act was signed into law on February 17, 2009, as a direct response
to the economic crisis. The Recovery Act was to:
•	Preserve and create jobs and promote economic recovery
•	Provide investments needed to increase economic efficiency by spurring
technological advances in science and health
•	Invest in transportation, environmental protection, and other infrastructure
that will provide long-term economic benefits
Regarding use of the funds, the Recovery Act stated that expenditures and
activities were to commence as quickly as possible, consistent with prudent
management.
Congress appropriated funding for DERA under the Energy Policy Act of 2005 to
reduce emissions from heavy-duty diesel engines in the existing fleet. The act
provided EPA grant authority to promote diesel emission reductions. Under the
Recovery Act, the National Clean Diesel Funding Assistance Program
competitively awarded a total of $156 million to 90 grant recipients to support
implementation of diesel reduction programs. The State Clean Diesel Program
awarded a total of $88 million to the 50 states plus the District of Columbia.1 The
states can use the funds to award additional grants.
As required by the Office of Management and Budget (OMB), EPA developed a
program plan that describes how funds would be used and managed. The DERA
plan stated that its goal was to expend all of the State and National Clean Diesel
money by September 30, 2010. In support of the goal, EPA established DERA
grant agreements with recipients containing a project end date of September 30,
2010.
1 The awards were made via a formula and averaged about $1.73 million each.
11-R-0179
1

-------
Scope and Methodology
We conducted this audit in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform the audit to
obtain sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that the
evidence obtained provides a reasonable basis for our conclusions based on our
audit objectives.
We selected 15 DERA Recovery Act grants in which substantial progress had not
been made using funds expended as of June 30, 2010, as an indicator of project
progress. We identified all grants with 90 percent of funds remaining and a
project and budget period end date of September 30, 2010. Forty-nine Recovery
Act grants in DERA's State and National Funding Assistance Programs totaling
$101.4 million (or 42 percent of $244 million awarded to those programs) met
these criteria. To select our audit samples, we sorted the 49 grants and calculated
the number of grants in each region. We selected the two regions with the largest
number of grants that contained less than 10 percent of funds expended. Our
sample included seven grants in Region 3 and eight grants in Region 4. We
interviewed EPA DERA staff in headquarters and Regions 3 and 4; and we
reviewed project officer files, recipient progress reports, and quarterly reports
obtained from Recovery.gov. We also interviewed the DERA grant recipients
during site visits. We performed the audit from July 2010 to February 2011.
Appendix A contains additional scope and methodology details.
Results of Review
While DERA project officers were knowledgeable about project status and one
region developed a local system to track progress, DERA project officers did not
use the monitoring reports housed in the national grants management database to
identify and take action to reduce the impact of delays for EPA Recovery Act
DERA grants. To prompt quicker action from recipients on Recovery Act grants,
EPA stated to OMB in March 2009 that all grants would have an initial
completion date of September 30, 2010.2 As of June 30, 2010, 49 grants, with a
value of $101,437,442, had less than 10 percent of the funds expended.
Consequently, 85 percent of the grants did not meet the completion date, and EPA
granted no-cost time extensions for all those grantees. Further, in granting the
extensions, 3 of 15 grants we reviewed did not contain new timeframes for
completing the project. The Recovery Act required funds be put to use quickly,
and EPA's Recovery Act plan for DERA required grant monitoring to be a key
component for monitoring project progress.
2 The 49 grants that fell into our sample were from the State and National Clean Diesel Programs. Since no grants
from the other two programs (Emerging Technologies and SmartWay) fell into our sample, we did not evaluate
those programs.
11-R-0179
2

-------
Even though grant recipients reported project delays to EPA in progress reports,
in 10 of 15 cases reviewed, project officers did not document these delays in
programmatic baseline monitoring reports. DERA personnel did not view the
delays as significant or requiring action because delays were outside the grant
recipients' control and the project period end date in the grant agreements was
only intended to spur action. However, delays result in recipients not completing
projects within specified timeframes and diminishing Recovery Act objectives.
Recovery Act and Monitoring of DERA Grants
EPA issued several documents to provide staff with guidance on what level of
monitoring was needed for Recovery Act grants. EPA developed an Agency-level
risk mitigation plan known as the Recovery Act Stewardship Plan, which details
the Agency's Recovery Act risk assessment, internal controls, and monitoring
activities. The Recovery Act Assistance Agreement Post-Award Monitoring
Strategy provides guidance for funding and monitoring Recovery Act grants.
Baseline and advanced monitoring are important grants management tools for
these grants. EPA Order 5700.6 A2 explains that baseline monitoring is the
periodic review of a recipient's progress in, and compliance with, a specific
award's scope of work, terms and conditions, and regulatory requirements.
Baseline monitoring reports specifically ask whether recipients are meeting
milestones and whether project officers believe the grant should be amended.
Advanced monitoring is an in-depth assessment of a recipient's (administrative
and financial) or project's (programmatic and technical) progress, management,
and expectations. The relevant monitoring duties of the EPA offices and staff are
listed in table 1.
Table 1: Monitoring requirements
Type of required monitoring
Responsible office/staff
Frequency
Baseline administrative monitoring
Grants Management Office
Quarterly
Advanced administrative monitoring
Office of Grants and Debarment
Annually
Baseline programmatic monitoring
Project officer
Quarterly
Advanced programmatic monitoring
Project officer
Annually
Source: EPA's Recovery Act Assistance Agreement Post-Award Monitoring Strategy.
The Project Officer Manual emphasizes the importance of the project officer
negotiating a project workplan. One component of the workplan is schedules and
milestones for accomplishing the grant objectives. Section 8 of the post-award
monitoring strategy calls on project officers to document issues identified during
monthly drawdown or post-award monitoring reviews. When issues are identified,
project officers are to "develop appropriate corrective action plans [and] ensure
that recipients take necessary corrective actions in a timely manner."
11-R-0179
3

-------
EPA Did Not Always Identify and Take Action to Reduce the Impact
of Project Delays
Project officers did not always identify in EPA's management systems that
projects were delayed, as required by the Office of Air and Radiation's (OAR's)
DERA Grant Monitoring Plan. In some cases, EPA also did not take sufficient
action in response to delays by establishing new milestone dates and instituting
corrective actions when allowing grant extensions. Of the 141 EPA Recovery Act
DERA grants, 120, or 85 percent, received a no-cost time extension beyond the
September 30, 2010, grant end date (figure 1). Each recipient received a no-cost
time extension of up to 1 year.
Figure 1: DERA grant end dates met or extended
Met 9/30/2010
Grant End Date.
15%
Grant End Date
Extended Beyond
9/30/2010,
85%
Source: OIG analysis of EPA data.
Our site visits revealed many reasons for delays. The 15 projects we reviewed
were in varying stages of completion when we visited them in August and
September 2010. Reasons included manufacturing delays, companies ceasing
operations, and deverification of emission reduction technologies.
When allowing grant extensions, EPA did not ensure that new schedules for
completing the projects were put in place. In 3 of 15 instances, EPA approved
grant extensions, although the recipient had not updated the timeline for all
delayed projects. In each of these cases, the recipients also did not obligate
funding to subrecipients, even though the grants were awarded over 1 year prior.
For example, after receiving the grant, one recipient found that it could not
complete the original activities that were intended. Even though EPA approved a
no-cost extension for the recipient in June 2010, as of December 1, 2010, EPA
regional staff were still working with the recipient to develop a workplan for
using the funds. In another grant, the recipient submitted schedules for some of
the projects but, for others, the workplan stated that the milestones were still
being negotiated. While EPA allowed an extension for the grant until September
30, 2011, lack of a specific schedule provides limited assurance that the project
will be completed timely.
11-R-0179
4

-------
One of the internal controls EPA set up to oversee and manage grants did not
accurately convey project status of Recovery Act DERA projects. EPA developed
an electronic Post Award Baseline Tracking Tool to assist in the implementation
of baseline monitoring. In 10 cases, project officers indicated in programmatic
baseline monitoring reports that grants were progressing according to agreed-
upon milestones. However, these 10 recipients communicated delays in their
progress reports. In Region 4, five out of seven administrative baseline
monitoring reports did not recommend amending the grant even though the
recipient had reported delays to the projects. Project officers did not identify
delays in baseline monitoring reports even though recipients reported that projects
were delayed. Project officers did not institute corrective action plans to respond
appropriately to those delays. Project officers considered no-cost time extensions
with new milestone dates to be sufficient corrective action.
DERA Viewed Extensions as Appropriate Corrective Actions
EPA's project officers did not use the Post Award Baseline Tracking Tool to
identify and take action to reduce the impact of project delays because they
interpreted the tracking tool questions as being unconnected to established
milestones. While project officers knew about project delays, DERA personnel
believed that the delays were not within the recipients' control and that no-cost
time extensions on the grants were sufficient corrective actions.
In the DERA strategy submitted to OMB in May 2009, EPA identified September
30, 2010, as the initial project period for the grants. Correspondingly, EPA
identified September 30, 2010, as the project end period in the grants. In a
December 2009 review, ARRA - Financial and Operational Review (FOR)
Report Diesel Emission (DERA) Grants, OAR stated that its expectation was that
only 40 percent of the funds would be expended by that date. DERA personnel at
EPA headquarters told us that since expenditures were on track to reach 40
percent by September 30, 2010, project progress was not a problem.
Delayed Grants Diminish Effectiveness of Recovery Act
The conditions the OIG identified may result in recipients not accomplishing their
projects within the project period specified in the grant agreement. When EPA's
recipient monitoring reports have incorrect information and reports do not
accurately reflect project status, the database does not accurately communicate
information to management. Inaccurate information impedes effective
management and oversight of the grants. The database is the primary way
management can receive information on grant status.
When Recovery Act funds are not spent timely and corrective action plans are not
established, the projected number of jobs created or retained is reduced or
delayed, and environmental outputs and outcomes are delayed. As of June 30,
11-R-0179
5

-------
2010, the 15 grant recipients we reviewed reported only 22.82 jobs being created
or retained on the Recovery.gov website. In their applications, the recipients
estimated creating or retaining about 554 jobs. (OMB revised its guidance on
calculating jobs after applications were submitted; this revision may account for
some of the difference.) Due to project delays, expected environmental outcomes
such as carbon monoxide and nitrogen oxide reductions (diesel emission
pollutants) are not realized.
Recommendations
We recommend that the Assistant Administrator for Administration and
Resources Management:
1.	Revise the baseline monitoring report questions and corresponding
guidance so that project officers and grants specialists understand what
information is required and how EPA uses the reports to monitor
progress.
We recommend that the Assistant Administrator for Air and Radiation ensure that
project officers:
2.	Review the grants that received no-cost time extensions and verify that
revised project timelines were established. If updated timelines were
not established, have recipients submit the timelines when submitting
their next quarterly reports.
3.	Continuously document delays in baseline and advanced monitoring
reports for Recovery Act DERA grants. Update milestones and
institute corrective action plans when delays occur.
4.	Establish a process to identify programmatic baseline monitoring
reports project officers submit for the quarter ending December 31,
2010, that do not accurately record project status. Where delays are not
accurately reported, require project officers to revise the baseline
monitoring reports.
5.	Using the information in the recipient monitoring database, regularly
provide reports to management on progress of projects and status of
corrective action plans until the Recovery Act grants are completed.
Agency Response and OIG Comment
In its response to recommendation 1 in the draft report, the Office of
Administration and Resources Management (OARM) noted that it had revised the
Administrative Baseline Review Report Questionnaire for grants specialists and
11-R-0179
6

-------
had prepared written guidance for completing the questionnaire. OARM told us it
shared these documents with regional personnel and trained grants specialists in
the Office of Grants and Debarment on the proper use of these documents. In
addition, a Grants Management Plan workgroup is revising the Programmatic
Baseline Review Report Questionnaire and is working to ensure that project
officers understand what information is required and how it will be used. OARM
anticipates that this task will be completed by December 31, 2011.
In its response to recommendations 2-5 in the draft report, OAR stated that it is in
the process of taking a host of measures to improve guidance and oversight. For
example, OAR reviewed the grants identified by the OIG as receiving no-cost
time extensions and confirmed with each project officer of the identified grants
that updated project timelines have been submitted and are in the grant file. OAR
provided documentation showing that it is using a monthly survey to monitor no-
cost time extensions. OAR pledged to document delays in baseline and advanced
monitoring reports, and affirmed that it has established a process to identify
December 31, 2010, baseline monitoring reports that did not accurately reflect
project status. Finally, OAR will regularly collect data on the status of Recovery
Act grants and monitor the status of corrective action plans. EPA's summary of
the corrective actions and milestone dates is shown in appendix B.
The completed and planned actions that OAR and OARM presented will address
the finding and recommendations in the report.
11-R-0179
7

-------
Status of Recommendations and
Potential Monetary Benefits
RECOMMENDATIONS
POTENTIAL MONETARY
BENEFITS (In $000s)
Rec.
No.
Page
No.
Subject
Status1
Planned
Completion
Action Official	Date
Claimed
Amount
Ag reed-To
Amount
Revise the baseline monitoring report questions
and corresponding guidance so that project officers
and grants specialists understand what information
is required and how EPA uses the reports to
monitor progress.
Ensure that project officers review the grants that
received no-cost time extensions and verify that
revised project timelines were established. If
updated timelines were not established, have
recipients submit the timelines when submitting
their next quarterly reports.
Ensure that project officers continuously document
delays in baseline and advanced monitoring
reports for Recovery Act DERA grants. Update
milestones and institute corrective action plans
when delays occur.
Ensure that project officers establish a process to
identify programmatic baseline monitoring reports
project officers submit for the quarter ending
December 31, 2010, that do not accurately record
project status. Where delays are not accurately
reported, require project officers to revise the
baseline monitoring reports.
Ensure that project officers, using the information in
the recipient monitoring database, regularly provide
reports to management on progress of projects and
status of corrective action plans until the Recovery
Act grants are completed.
Assistant Administrator 12/31/2011
for Administration and
Resources Management
Assistant Administrator 03/02/2011
for Air and Radiation
Assistant Administrator 12/31/2011
for Air and Radiation
Assistant Administrator 03/02/2011
for Air and Radiation
Assistant Administrator 12/31/2011
for Air and Radiation
1 O = recommendation is open with agreed-to corrective actions pending
C = recommendation is closed with all agreed-to actions completed
U = recommendation is undecided with resolution efforts in progress
11-R-0179
8

-------
Appendix A
Details on Scope and Methodology
We obtained the universe of DERA Recovery Act Clean Diesel Funding Assistance Program
grants as of June 30, 2010, from EPA's accounting system using the EPA Office of the Chief
Financial Officer Reporting and Business Intelligence Tool (ORBIT). The universe for DERA
State and National Funding Assistance Program grants comprised 51 state grants totaling
$88 million and 89 national grants totaling $156 million, for a combined total of $244 million in
awards under the two programs. Using the information, we calculated the percent expended for
each grant. We obtained the project period end dates for each grant from EPA's Financial Data
Warehouse and Integrated Grants Management System. Our selection criteria included all grants
with less than 10 percent of funds expended as of June 30, 2010, and a project period end date of
September 30, 2010. We combined the financial data and the project period data for the grants
and excluded all grants that did not meet our selection criteria. The remaining population
consisted of 49 DERA Recovery Act state and national grants totaling $101.4 million.
To select our audit samples, we sorted the 49 grants and calculated the number of grants in each
region. We selected Regions 3 and 4 for review because the two regions had the greatest number
of grants with less than 10 percent expended and a project period end date of September 30,
2010. The 15 grants we reviewed in Regions 3 and 4 totaled $27.8 million with expenditures of
$1.13 million as of June 30, 2010. See table A-l for details.
Table A-1: DERA Recovery Act grants
DERA grants
Number
Grant amount
Expended as of
June 30, 2010
Regions 3 and 4
15
$27,841,587
$1,127,575
Grants with < 10% spent and project end date
of 9/30/2010
49
101,437,442
3,436,332
Source: OIG analysis.
We developed questions and reviewed documentation to determine the status of and
impediments to project progress. We conducted interviews with EPA DERA personnel in
Regions 3 and 4, headquarters, and grant recipients. We examined project officer files, baseline
and advanced monitoring reports, recipient progress reports, and Recovery.gov quarterly reports.
We also performed site visits and conducted interviews with all but 1 of the 15 DERA grant
recipients in Regions 3 and 4. We conducted one interview by telephone due to the grant
recipient's location. We performed the audit from July 2010 to February 2011.
Internal Controls
We assessed EPA's management controls related to project management of DERA Recovery Act
grants. We identified DERA's internal controls pertaining to oversight of Recovery Act grants in
EPA's Recovery Act Stewardship Plan, the DERA Recovery Act Program Plan, and EPA's
Recovery Act Assistance Agreement Post-Award Monitoring Strategy. We examined EPA DERA
11-R-0179
9

-------
internal control reviews and EPA's fiscal year 2010 Federal Managers' Financial Integrity Act
Assurance Letters for the applicable program offices and regions to identify any weaknesses
related to project management of Recovery Act DERA grants. To assess internal controls related
to EPA's Financial Data Warehouse and ORBIT, we relied on reviews conducted during the
audit of EPA's fiscal year 2009 financial statements. The audit work concluded that we could
rely on these systems to produce accurate data.
Prior Reviews
We identified two prior EPA OIG reports related to DERA, one issued by the Office of Audit
and the other issued by the Office of Program Evaluation. The Office of Audit issued Report No.
10-R-0082, EPA Maximized Competition for Recovery Act Grants under the National Clean
Diesel Funding Assistance Program, on March 23, 2010. This report determined that the
competition process DERA used to award Recovery Act grants promoted competition to the
maximum extent possible and met Recovery Act goals and requirements. The Office of Program
Evaluation issued Report No. 1 l-R-0141, EPA Should Improve Guidance and Oversight to
Ensure Effective Recovery Act-Funded Diesel Emissions Reduction Act Activities, on
March 1, 2011. This report determined that EPA did not clearly describe its responsibilities in
the terms and conditions of Recovery Act-funded assistance agreements.
11-R-0179
10

-------
Appendix B
Agency Response to Draft Report
Mar-8 2011
MEMORANDUM
SUBJECT: Office of Air and Radiation's (OAR) Response to OIG Draft Report EPA Needs
to Take Action to Reduce the Impact of Project Delays for Recovery Act Diesel
Emission Reduction Act Grants, Proj ect No. OA-F Y10-0178
FROM: Gina McCarthy
Assistant Administrator
TO:	Melissa Heist
Assistant Inspector General for Audits
Thank you for the opportunity to comment on the Office of Inspector General (OIG) draft
report, EPA Needs to Take Action to Reduce the Impact of Project Delays for Recovery Act
Diesel Emission Reduction Act Grants, Project No. OA-FY10-0178, dated February 1, 2011,
which focused on grants management tools to identify and mitigate project delays in American
Recovery and Reinvestment Act of 2009 Diesel Emission Reduction Act grants. The
recommendations provided in the draft report will help OAR continue to improve its oversight
and guidance for DERA grant activities.
EPA appreciates the effort by the OIG to thoroughly understand the grants management
process and responsibilities of DERA grants project officers, and to identify several areas for
improvements in guidance and oversight. OAR, OARM and the Regions have already begun to
work diligently to implement the recommendations in this report. A summary of the
recommendations, their associated actions and projected completion dates is attached at the end
of this document. Please see the specific recommendations below and their updates.
1. Revise the baseline monitoring report questions and corresponding guidance so that the
project officers and grant specialists understand what information is required and how
EPA uses the reports to monitor progress.
EPA Response: EPA accepts OIG's recommendation to revise the baseline monitoring
report questions and corresponding guidance for the project officers and grants
specialist to ensure that the project officers and grants specialists understand what
information is required and how EPA will use the reports to monitor the progress of the
projects.
11-R-0179
11

-------
In December 2010, the Office of Grants and Debarment's (OGD) Resource
Management Division, working with staff in Headquarters and the regions, revised the
Administrative Baseline Review Report Questionnaire for the grants specialists. The
revised version modified a few of the original questions for clarity, but also included
additional questions that incorporated the new Office of Management and Budget
(OMB) requirements and questions to determine the viability of projects and to
determine whether unliquidated obligated funds were appropriate and necessary for
project completion or whether these funds should be deobligated. In addition, the
questions ensure the grants specialists understand the information required and how this
information will be used to monitor the progress of the projects.
Additionally in January, 2011, OGD prepared written guidance for completing the
revised "Administrative Baseline Review Report Questionnaire," which was shared
with the Regional grants management officers and their staffs as well. The grants
specialists in OGD were also provided training on the revised baseline monitoring
report questions and guidance.
To address OIG's recommendation pertaining to the project officers, the Grants
Management Plan (GMP) Goal 4 workgroup, which is working on identifying
opportunities for streamlining the grants business process and achieving greater
standardization, has made this recommendation a top priority for this calendar year.
The GMP Goal 4 workgroup will solicit assistance from the grants community to
ensure the revisions and/or additional questions in the Programmatic Baseline Review
Report Questionnaire are appropriate and to make certain the project officers
understand what information is required and how this information will be used to
monitor the progress of their assigned projects. Once the revisions are made and the
written guidance is prepared, training will be provided to the project officers. It is
anticipated that OIG's recommendation will be fully implemented by the end of the
2011 calendar year.
2. Review the grants that received no-cost time extensions and verify that revised project
timelines were established. If updated timelines were not established, have recipients
submit the timelines when submitting their next quarterly reports.
EPA Response: OAR has reviewed the grants identified by the OIG as receiving no-
cost time extensions and has confirmed with each Project Officer of the identified
grants that updated project timelines have been submitted, and are in the grant file. In
addition, OAR will continue to use the Monthly ARRA DERA survey to monitor no-
cost time extensions (see attachment A for an example), and will remind all Project
Officers that updated timelines are required for any project receiving a no-cost time
extension. Please see Attachment B for supporting documentation identifying which
projects did not initially have project timelines in the grant file, and for those projects,
the date that a revised project timeline was submitted by the grantee.
11-R-0179
12

-------
3.	Continuously document delays in baseline and advanced monitoring reports for
Recovery Act DERA grants. Update milestones and institute corrective action plans
when delays occur.
EPA Response: OAR will continuously document delays using the baseline and
advanced monitoring reports. Once the baseline monitoring programmatic report has
been revised by OARM (see Recommendation 1), OAR will train project officers and
grant specialists to use the form correctly to document delays. OAR will work with
Regions to update milestones when delays occur; plans for corrective action will be
used when avoidable delays occur.
4.	Establish a process to identify programmatic baseline monitoring reports project
officers submit for the quarter ending December 31, 2010, that do not accurately record
project status. Where delays are not accurately reported, require project officers to
revise the baseline monitoring reports.
EPA Response: OAR has established a process to identify which baseline monitoring
reports did not accurately reflect project status, as of December 31, 2010. For those
identified projects, OAR has confirmed with each Project Officer that a revised
programmatic baseline monitoring report was completed in the post award monitoring
database. Please see Attachment B for supporting documentation identifying which
baseline monitoring reports were found to be inaccurate, and confirmation that those
reports were revised.
5.	Using the information in the recipient monitoring database, regularly provide reports to
management on progress of projects, and status of corrective action plans, until the
Recovery Act grants are completed.
EPA Response: OAR will oversee the monitoring database and the status of corrective
action plans. OAR will regularly collect information on the status of Recovery Act
grants, including the status of baseline monitoring and progress toward completion of
projects. This information will be provided to management on a regular basis, until the
Recovery Act grants are completed. Please see Attachment C for an example of
information that will be collected.
A summary table of corrective actions and associated projected completion dates is
attached. Also attached are three charts. If you have any questions, please contact me or staff
member Jennifer Keller at (202) 343-9541.
Attachments
11-R-0179
13

-------
Status of Recommendations and Potential Monetary Benefits
POTENTIAL MONETARY
RECOMMENDATIONS	BENEFITS (In $000s)
Page	Planned Completion Claimed Agreed-To
Rewo. No.	Subject	Action Official	OAR or OARM Corrective Action	Date	Amount Amount
Revise the baseline monitoring report
questions and corresponding guidance so
that the project officers and grant
specialists understand what information is
required and how EPA uses the reports to
monitor progress.
Review the grants that received no-cost
time extensions and verify that revised
project timelines were established. If
updated timelines were not established,
have recipients submit the timelines when
submitting their next quarterly reports.
Assistant Administrator for
Administration and Resources
Management
Assistant Administrator for Air and
Radiation
EPA accepts OIG's recommendation to revise the baseline	December 31, 2011
monitoring report questions and corresponding guidance for the
project officers and grants specialists to ensure that the project
officers and grants specialists understand what information is
required and how EPA will use the reports to monitor the progress
of the projects.
OAR has reviewed the grants identified by the OIG as receiving	March 2, 2011
no-cost time extensions and has confirmed with each Project
Officer of the identified grants that updated project timelines have
been submitted, and are in the grant file. In addition, OAR will
continue to use the Monthly ARRA DERA survey to monitor no-
cost time extensions, and will remind al Project Officers that
updated timelines are required for any project receiving a no-cost
time extension.
6 Continuously document delays in baseline Assistant Administrator for Air and OAR will continuously document delays using the baseline and
December 31, 2011
and advanced monitoring reports for
Recovery Act DERA grants. Update
milestones and institute corrective action
plans when delays occur.
Establish a process to identify
programmatic baseline monitoring reports
project officers submit for the quarter
ending December 31, 2010, that do not
accurately record project status. Where
delays are not accurately reported, require
project officers to revise the baseline
monitoring reports.
Using the information in the recipient
monitoring database, regularly provide
reports to management on progress of
projects, and status of corrective action
plans, until the Recovery Act grants are
completed.
Radiation
Assistant Administrator for Air and
Radiation
Assistant Administrator for Air and
Radiation
advanced monitoring reports. Once the baseline monitoring
programmatic report has been revised by OARM (see
Recommendation 1), OAR will train project officers and grant
specialists to use the form correctly to document delays. OAR will
work with Regions to update milestones when delays occur; plans
for corrective action will be used when avoidable delays occur.
OAR has established a process to identify which baseline
monitoring reports did not accurately reflect project status, as of
December 31, 2010. For those identified projects, OAR has
confirmed with each Project Officer that a revised programmatic
baseline monitoring report was completed in the post award
monitoring database.
OAR will oversee the monitoring database and the status of
corrective action plans. OAR will regularly collect information on
the status of Recovery Act grants, including the status of baseline
monitoring and progress toward completion of projects. This
information will be provided to management on a regular basis,
until the Recovery Act grants are completed.
March 2, 2011
December 31, 2011
11-R-0179
14

-------
Appendix C
Distribution
Office of the Administrator
Assistant Administrator for Air and Radiation
Assistant Administrator for Administration and Resources Management
Regional Administrator, Region 3
Regional Administrator, Region 4
Agency Followup Official (the CFO)
Audit Followup Coordinator
General Counsel
Associate Administrator for Congressional and Intergovernmental Relations
Associate Administrator for External Affairs and Environmental Education
Director, Office of Transportation and Air Quality, Office of Air and Radiation
Director, Office of Grants and Debarment, Office of Administration and Resources Management
Director, Grants and Interagency Agreement Management Division, Office of Administration
and Resources Management
Director, Office of Regional Operations
DERA Coordinator, Region 3
DERA Coordinator, Region 4
Audit Followup Coordinator, Office of Air and Radiation
Audit Followup Coordinator, Office of Administration and Resources Management
Audit Followup Coordinator, Office of Grants and Debarment, Office of Administration and
Resources Management
Audit Followup Coordinator, Region 3
Audit Followup Coordinator, Region 4
11-R-0179
15

-------