[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]


 
   THE ENVIRONMENTAL PROTECTION AGENCY'S GRANTS MANAGEMENT 2003-2006: 
                         PROGRESS AND CHALLENGE

=======================================================================

                                (109-73)

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                    WATER RESOURCES AND ENVIRONMENT

                                 OF THE

                              COMMITTEE ON
                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 18, 2006

                               __________

                       Printed for the use of the
             Committee on Transportation and Infrastructure

                    U.S. GOVERNMENT PRINTING OFFICE
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             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                      DON YOUNG, Alaska, Chairman

THOMAS E. PETRI, Wisconsin, Vice-    JAMES L. OBERSTAR, Minnesota
Chair                                NICK J. RAHALL, II, West Virginia
SHERWOOD L. BOEHLERT, New York       PETER A. DeFAZIO, Oregon
HOWARD COBLE, North Carolina         JERRY F. COSTELLO, Illinois
JOHN J. DUNCAN, Jr., Tennessee       ELEANOR HOLMES NORTON, District of 
WAYNE T. GILCHREST, Maryland         Columbia
JOHN L. MICA, Florida                JERROLD NADLER, New York
PETER HOEKSTRA, Michigan             CORRINE BROWN, Florida
VERNON J. EHLERS, Michigan           BOB FILNER, California
SPENCER BACHUS, Alabama              EDDIE BERNICE JOHNSON, Texas
STEVEN C. LaTOURETTE, Ohio           GENE TAYLOR, Mississippi
SUE W. KELLY, New York               JUANITA MILLENDER-McDONALD, 
RICHARD H. BAKER, Louisiana          California
ROBERT W. NEY, Ohio                  ELIJAH E. CUMMINGS, Maryland
FRANK A. LoBIONDO, New Jersey        EARL BLUMENAUER, Oregon
JERRY MORAN, Kansas                  ELLEN O. TAUSCHER, California
GARY G. MILLER, California           BILL PASCRELL, Jr., New Jersey
ROBIN HAYES, North Carolina          LEONARD L. BOSWELL, Iowa
ROB SIMMONS, Connecticut             TIM HOLDEN, Pennsylvania
HENRY E. BROWN, Jr., South Carolina  BRIAN BAIRD, Washington
TIMOTHY V. JOHNSON, Illinois         SHELLEY BERKLEY, Nevada
TODD RUSSELL PLATTS, Pennsylvania    JIM MATHESON, Utah
SAM GRAVES, Missouri                 MICHAEL M. HONDA, California
MARK R. KENNEDY, Minnesota           RICK LARSEN, Washington
BILL SHUSTER, Pennsylvania           MICHAEL E. CAPUANO, Massachusetts
JOHN BOOZMAN, Arkansas               ANTHONY D. WEINER, New York
JIM GERLACH, Pennsylvania            JULIA CARSON, Indiana
MARIO DIAZ-BALART, Florida           TIMOTHY H. BISHOP, New York
JON C. PORTER, Nevada                MICHAEL H. MICHAUD, Maine
TOM OSBORNE, Nebraska                LINCOLN DAVIS, Tennessee
KENNY MARCHANT, Texas                BEN CHANDLER, Kentucky
MICHAEL E. SODREL, Indiana           BRIAN HIGGINS, New York
CHARLES W. DENT, Pennsylvania        RUSS CARNAHAN, Missouri
TED POE, Texas                       ALLYSON Y. SCHWARTZ, Pennsylvania
DAVID G. REICHERT, Washington        JOHN T. SALAZAR, Colorado
CONNIE MACK, Florida                 JOHN BARROW, Georgia
JOHN R. `RANDY' KUHL, Jr., New York
LUIS G. FORTUNO, Puerto Rico
LYNN A. WESTMORELAND, Georgia
CHARLES W. BOUSTANY, Jr., Louisiana
JEAN SCHMIDT, Ohio

                                  (ii)

  


            Subcommittee on Water Resources and Environment

                JOHN J. DUNCAN, Jr., Tennessee, Chairman

SHERWOOD L. BOEHLERT, New York       EDDIE BERNICE JOHNSON, Texas
WAYNE T. GILCHREST, Maryland         JOHN T. SALAZAR, Colorado
VERNON J. EHLERS, Michigan           JERRY F. COSTELLO, Illinois
STEVEN C. LaTOURETTE, Ohio           GENE TAYLOR, Mississippi
SUE W. KELLY, New York               BRIAN BAIRD, Washington
RICHARD H. BAKER, Louisiana          TIMOTHY H. BISHOP, New York
ROBERT W. NEY, Ohio                  BRIAN HIGGINS, New York
GARY G. MILLER, California           ALLYSON Y. SCHWARTZ, Pennsylvania
HENRY E. BROWN, Jr., South Carolina  EARL BLUMENAUER, Oregon
BILL SHUSTER, Pennsylvania           ELLEN O. TAUSCHER, California
JOHN BOOZMAN, Arkansas               BILL PASCRELL, Jr., New Jersey
JIM GERLACH, Pennsylvania            RUSS CARNAHAN, Missouri
TOM OSBORNE, Nebraska                NICK J. RAHALL, II, West Virginia
TED POE, Texas                       ELEANOR HOLMES NORTON, District of 
CONNIE MACK, Florida                 Columbia
LUIS G. FORTUNO, Puerto Rico         JOHN BARROW, Georgia
CHARLES W. BOUSTANY, Jr.,            JAMES L. OBERSTAR, Minnesota
Louisiana, Vice-Chair                  (Ex Officio)
JEAN SCHMIDT, Ohio
DON YOUNG, Alaska
  (Ex Officio)

                                 (iii)

                                CONTENTS

                               TESTIMONY

                                                                   Page
 Luna, Hon. Luis A., Assistant Administrator for the Office of 
  Administration and Resources Management, U.S. Environmental 
  Protection Agency..............................................     4
 Roderick, Bill A., Acting Inspector General, U.S. Environmental 
  Protection Agency..............................................     4
 Stephenson, John B., Director, National Resources and 
  Environment, U.S. Government Accountability Office.............     4
 Welsh, Donald S., Administrator, Region III, U.S. Environmental 
  Protection Agency..............................................     4

          PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS

Carnahan, Hon. Russ, of Missouri.................................    25
Johnson, Hon. Eddie Bernice, of Texas............................    26
Oberstar, Hon. James L., of Minnesota............................    41

               PREPARED STATEMENTS SUBMITTED BY WITNESSES

 Luna, Hon. Luis A...............................................    31
 Roderick, Bill A................................................    45
 Stephenson, John B..............................................    53
 Welsh, Donald S.................................................    31


  THE ENVIRONMENTAL PROTECTION AGENCY'S GRANTS MANAGEMENT 2003-2006: 
                         PROGRESS AND CHALLENGE

                              ----------                              


                         Thursday, May 18, 2006

        House of Representatives, Committee on 
            Transportation and Infrastructure, Subcommittee 
            on Water Resources and Environment, Washington, 
            D.C.
    The subcommittee met, pursuant to call, at 10:02 a.m., in 
Room 2167, Rayburn House Office Building, Hon. John J. Duncan, 
Jr. [Chairman of the committee] presiding.
    Mr. Duncan. I am going to go ahead and call this hearing to 
order. I understand that Ranking Member Eddie Bernice Johnson 
is on her way.
    I want to first welcome everyone to our fourth hearing on 
EPA grants management. Today, we are reviewing where the EPA 
stands since this series of hearings began three years ago. 
There was a history of troubling, sometimes even scandalous, 
EPA grants that runs well back into the early 1990s. There had 
been an ongoing cycle of poor performance, new critiques, 
promised reforms, and, unfortunately, repeated poor 
performance.
    It has been this Subcommittee's goal to ensure that 
improvements take place and become a permanent way of doing 
business at the EPA. Areas in need of reform included, first of 
all, greater competition in awarding grants; then other things 
such as a serious follow-through in managing grants to ensure 
that grantees actually spent grant dollars for the intended 
purposes. There had been some instances where that had not been 
done.
    Also, proper documentation of grant performance to make 
sure that future awards were based on reality and not just 
promises; and ensuring that EPA was awarding grants that were 
designed to actually improve the environment, and not just 
buddy-buddy type grants or awardings of money, and even 
instances where people refused to tell what had actually been 
accomplished or what the grant was actually spent on.
    I am encouraged to see that significant progress has been 
made on a number of these initiatives. The EPA Office of 
Administration and Resources Management has worked nonstop 
developing new policies and guidelines, upgrading information 
technology programs, and providing agency-wide training. Some 
of the EPA regions have embraced these changes; they realize 
that grants issued pursuant to the new guidelines will make 
sure that American taxpayers get a better value for the dollars 
spent. Many can also see how important it is for actual 
environmental enhancement to become a consistent foundation of 
EPA grants.
    The bad news is that some within the EPA still resist 
changing their earlier practices, which requires less oversight 
and favored a select group of grantees. The reports before us 
today from the Government Accountability Office and the EPA 
Inspector General show there is still work to be done before 
the reforms are fully implemented on the ground. Fundamental 
lapses that still exist within the system include a failure by 
managers and supervisors at EPA to make grant management a 
regular part of an employee's annual performance review. 
Holding employees accountable for doing their jobs properly is 
a key to the success of this program.
    We understand that EPA has a new electronic system for 
project officers to track their grants. It structures their 
awards and reviews of grants to improve the quality of their 
management. Unfortunately, the system is not being used by EPA 
managers to keep track of the number of grants that are not 
awarded or managed according to the new guidelines. The EPA 
Office of Administration and Resources Management has also 
developed new training materials and procedures to make sure 
the project officers are aware of how they are to carry out the 
grants. There are even requirements to participate in the 
training. However, GAO found that, in at least one case they 
reviewed, only about 25 out of 200 project managers in Region I 
attended a 90-minute course, even though it was offered three 
times.
    For today's hearing we have asked GAO and the EPA Inspector 
General to present the results of their studies and for the two 
EPA administrators to discuss how far we have come and what 
must still be done to make EPA grants efficient and 
environmentally effective. I hope our witnesses will bring 
forward ideas on how we can change the grant culture within EPA 
and ensure effective implementation of the reforms.
    My objective in holding these hearings is to make sure that 
American taxpayers are getting their money's worth in the EPA 
grants program. At the same time, grants should be designed to 
produce an environmental benefit.
    Let me now turn to my good friend, the Ranking Member, Ms. 
Johnson, for any opening statement she would like to make.
    Ms. Johnson. Thank you very much, Mr. Chairman. This is our 
fourth hearing in an important series that addresses the 
deficiencies and proposed improvements in grants management at 
the Environmental Protection Agency over the last three years. 
Today we will have the opportunity to review the successes EPA 
has had in achieving its goal through grant program reforms. We 
will also hear about challenges EPA still faces with regard to 
project officer accountability.
    For more than a decade, EPA's Inspector General and 
Government Accountability Office have catalogued EPA's specific 
deficiencies in the area of grants management. EPA has 
repeatedly acknowledged these problems and its need to take 
corrective action by developing and implementing an effective 
grants management plan. However, some challenge remain. The EPA 
needs improvement in the areas of consistently funding grants 
that result in measurable environmental benefits and in project 
officer accountability for poor grants management.
    The EPA is our Nation's primary protector of the 
environment and natural resources. It is our duty to ensure 
that the funds we spend to protect our environment produces the 
outcomes and benefits that we expect. Has the Nation's water 
quality improved? Is the air we breathe safe? It is imperative 
that we continue to provide ongoing oversight to ensure that 
effective and efficient management of grants produce positive 
outcomes.
    We acknowledge that it is a real challenge to achieve and 
measure environmental results for grants funding. It is often 
simpler to measure grants activities than to measure the 
environmental results of those activities, which may occur 
years after the grant was completed. Also, the EPA continues to 
struggle with project officer accountability. Grant specialists 
and project officers do not consistently document whether the 
grantee filing is fulfilling the terms and conditions of its 
grant.
    Although EPA has made significant progress with the 
longstanding issue of grant closeouts, the lack of consistent 
documentation during the grant agreements make closing out in a 
timely manner even more difficult. Good record-keeping helps to 
ensure that we are getting the environmental benefit from the 
grant and helps determine whether a grantee should receive EPA 
grants in the future.
    EPA is still not holding staff accountable for poor grant 
documentation or supervision. Although EPA has begun to 
establish accountability procedures, it still lacks a front-
line personnel review process to measure grants management 
activity. Generally, EPA management does not measure project 
officer performance, nor routinely provide performance results 
of these activities to project officers.
    I look forward to hearing the recommendations on how EPA 
can continue to move forward to correct these systemic 
weaknesses. We do not want the EPA to fall into an old familiar 
pattern: good intentions with no follow-through. We know that 
no policy will be successful without consistent and effective 
agency-wide implementation, which will require extensive 
training of agency personnel and a massive education campaign 
to reach thousands of grantees. I welcome the witnesses here 
today and I look forward to their testimony.
    I yield back.
    Mr. Duncan. Well, thank you very much, Ms. Johnson.
    We have a very distinguished group of witnesses here today. 
This panel will consist of Mr. John B. Stephenson, who has been 
with us before, from the GAO, the U.S. Government 
Accountability Office, and he is the Director of the National 
Resources and Environment Section. We have from the U.S. 
Environmental Protection Agency three witnesses: Mr. Bill A. 
Roderick, who is the Acting Inspector General; the Honorable 
Luis A. Luna, who is Assistant Administrator for the Office of 
Administration and Resources Management; and Mr. Donald S. 
Welsh, who is the Administrator of Region III in Philadelphia, 
Pennsylvania.
    We are very pleased and honored to have each of you here 
with us. We do proceed in the order in which the witnesses are 
listed in the call of the hearing. That means, Mr. Stephenson, 
we will go with you first. We ask that all witnesses try to 
keep their opening testimony to five minutes. We give you six 
minutes because we know that is difficult to do, but once you 
see me start to wave this in consideration of other witnesses, 
that means stop. Your full statements will be placed in the 
record.
    So, Mr. Stephenson, you may begin your testimony.

 TESTIMONY OF JOHN B. STEPHENSON, DIRECTOR, NATIONAL RESOURCES 
AND ENVIRONMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE; BILL A. 
    RODERICK, ACTING INSPECTOR GENERAL, U.S. ENVIRONMENTAL 
     PROTECTION AGENCY; HONORABLE LUIS A. LUNA, ASSISTANT 
 ADMINISTRATOR FOR THE OFFICE OF ADMINISTRATION AND RESOURCES 
MANAGEMENT, U.S. ENVIRONMENTAL PROTECTION AGENCY; AND DONALD S. 
WELSH, ADMINISTRATOR, REGION III, U.S. ENVIRONMENTAL PROTECTION 
                             AGENCY

    Mr. Stephenson. Thank you very much, Mr. Chairman and Ms. 
Johnson. Thank you for inviting GAO to testify today. My 
testimony today is based on the report that we issued to this 
Subcommittee, which we are releasing today, and there are 
copies out on the front table.
    EPA annually administers grants valued at nearly $4 billion 
dollars, we all know, to over 4,000 grant recipients, so it is 
no understatement to say that EPA's success in accomplishing 
its mission depends to a large extent on how well it manages 
these grants. EPA has 119 grant specialists within its Office 
of Grants and Debarment who are largely responsible for setting 
grant policy and for administrative and financial grant 
functions.
    But it also has over 2,000 project offices within its 
program offices, both in headquarters and the regions, that are 
responsible for monitoring progress and evaluating the results 
of these grants. While grants management is not their primary 
responsible, they are absolutely essential for ensuring that 
EPA's grant policies and procedures are effectively 
implemented.
    In preparing our report, we conducted work at EPA 
headquarters, but more importantly at EPA's regional offices, 
where most of the grants are managed. We reviewed EPA's 
progress in implementing grant management reforms by, among 
other things, examining grant files. We looked in three of the 
EPA's ten regional offices: Region I (Boston), Region V 
(Chicago), and Region IX (San Francisco).
    In summary, we believe that EPA has made important strides 
in achieving the grant reforms laid out in its 2003 Grants 
Management Plan, but weaknesses in implementation and 
accountability continue to hamper effective grants management 
in four areas: awarding grants; monitoring grants, including 
grants closeout; obtaining results from grants; and managing 
grant staff and resources.
    Our in-depth review of grant files within the regional 
offices showed that grant specialists and project officers do 
not always document ongoing monitoring, nor do they always 
document corrective actions. In fact, corrective actions were 
recorded for only 55 percent of the 269 problems identified 
through EPA's own administrative and programmatic reviews. This 
lack of documentation not only raises questions about the 
adequacy of EPA's oversight and controls, but it hinders EPA's 
ability to collect important data that could be used in the 
future to better manage grants.
    To address these problems, Region I and IX implemented a 
checklist to improve monitoring. However, of the 40 specific 
grant files we reviewed, more than half of the checklists were 
either missing, blank, or incomplete. Similarly, in Region V, 
which did not use a checklist, none of the 6 grant files we 
reviewed contained sufficient documentation to determine 
whether the required annual contact with the grantee had even 
occurred.
    EPA also has problems in closing out grants. As a result, 
EPA is not ensuring that the grant recipient has met all 
financial requirements and provided final technical reports as 
required. Also, delays in closing out grants can unnecessarily 
tie up obligated, but unexpended, funds that could be used for 
other purposes.
    A decade ago, EPA had amassed a backlog of over 18,000 
completed grants that had not been closed out properly over the 
past two decades. It deserves a lot of credit for working down 
this backlog. However, it is still only closing out only 37 
percent of its grants within its 180-day standard.
    Adding to the agency's closeout problems, 8 of the 34 
closed grants we reviewed in the regions were not closed out 
properly. For example, in Region I and V, required financial 
status reports were missing, and in Region IX lobbying and 
litigation forms, whose purpose is to ensure that Federal 
dollars are not spent for lobbying and litigation activities, 
were missing from the grant files. In addition, EPA has not 
fully implemented its new policy requiring that grant work 
plans specify well defined environmental results and, thus, 
cannot ensure that grantees will be held accountable for 
achieving them.
    So, while we compliment EPA for establishing a good 
framework of policies and procedures, it now needs to ensure 
that its supervisors, and project officers in particular, are 
adhering to them. Project officers, as you mentioned, 
complained that training is not sufficient to keep pace with 
the issuance of new grant policy. Yet, as you observed, we 
think the fact that only 25 of Region I's 200 project officers 
attended a 90-minute training course is indicative of kind of 
the cultural problems there. This was not a mandatory course, 
it was offered as a voluntary course, so something needs to be 
more done in that area.
    EPA may have the best grant policies and procedures in the 
Federal Government, but until project officers and their 
supervisors see grants management as a priority, continued 
improvement will be challenging for EPA.
    Mr. Chairman, this concludes my prepared statement. I would 
be happy to take questions at the right time.
    Mr. Duncan. Well, thank you very much, Mr. Stephenson, and 
thank you for your work on this topic.
    Mr. Roderick.
    Mr. Roderick. Good morning, Mr. Chairman and members of the 
Subcommittee. I am Bill Roderick, Acting Inspector General of 
EPA. I am pleased to be here today to discuss the work that the 
Office of the Inspector General has done to help EPA identify 
and correct deficiencies in the management of its grant 
programs. I have been asked specifically to discuss the issues 
of accountability within EPA's grants management process.
    In response to a request from Chairman Young, we reviewed 
whether EPA held supervisors and their project officers 
accountable for grants management. We found that EPA had made 
progress in establishing accountability. For example, EPA has 
issued policy statements that detail grants management 
responsibilities for project officers and established the role 
of the senior resource officials as EPA's primary points of 
accountability.
    EPA still needs a process to measure grants management 
activities. Project officers are responsible for performing 
about 140 grants management tasks; however, EPA has no 
methodology to measure whether the project officer performs 
these tasks effectively. Effective project officer performance 
increases the likelihood that the grant will be successful.
    We also found that supervisors generally did not discuss 
project officer responsibilities during year-end evaluations. 
If grant issues were addressed, the discussion focused on grant 
recipients' performance rather than on specific project officer 
tasks. Out of 26 project officers we interviewed, only 5 said 
their supervisor had a discussion with them about their project 
officer responsibilities during their year-end evaluation.
    Supervisors provided various reasons for rating project 
officers as successful without discussing grants management 
responsibilities. For example, supervisors stated that the 
year-end evaluation should focus on problems or issues with 
grantee performance or that project officer responsibility 
should be discussed at staff meetings or at other times during 
the year. Other supervisors stated the focus of the performance 
evaluation should be on EPA program accomplishments and not on 
project officer duties.
    Finally, we found that managers did not discuss grants 
management during supervisors' year-end evaluations, nor did 
they effectively communicate grants management weaknesses to 
supervisors when identified. In turn, supervisors who were not 
aware of the identified weaknesses could not instruct their 
project officers to correct them. Examples of some identified 
weaknesses include grants without documentation that cost 
reviews, baseline monitoring, or technical reviews had been 
conducted. These weaknesses were identified through management 
reviews conducted by the Grants Administration Division or 
self-assessments conducted by program or regional offices.
    We made three recommendations to help EPA fully establish a 
system of accountability for grants management. Number one, 
establish a process to measure project officer, supervisor, and 
manager performance against grants management requirements; 
number two, ensure managers and supervisors review and discuss 
grants management during performance evaluations; and, last, 
ensure that weaknesses identified in the management review or 
self-assessment are communicated to the appropriate project 
officer and supervisor.
    EPA agreed with our recommendations. This past January, EPA 
provided us a detailed 12-step action plan to carry out our 
recommendations. This plan includes taking steps to ensure that 
EPA's performance rating system addresses grants management 
responsibilities, among others. We believe this action plan, 
when fully implemented, will adequately address our 
recommendations.
    For the last few years, the OIG has looked at other grants 
management issues beyond accountability. We have evaluated 
EPA's progress in opening more discretionary grants to 
competition and promoting competition at the maximum extent 
possible. We found that EPA's competition order was a positive 
step in promoting competition and can be improved in 
competition to the maximum extent possible. We have also 
reviewed whether EPA adequately measures the environmental 
results of its grants to ensure that they are having a positive 
impact on human health and the environment. We found that EPA 
can do more to measure results and outcomes to determine 
whether grants are meeting their intended purposes.
    Mr. Chairman, in conclusion, the EPA has made progress 
overall in improving grants management during the last few 
years. There is clearly a commitment from EPA's leadership to 
address the problems and weaknesses identified by us, GAO, and 
this Subcommittee. More can and should be done to improve grant 
accountability, increase grant competition, and measure 
environmental results. Given the billions of dollars EPA awards 
every year, we will continue to monitor EPA's progress to 
ensure that it builds on the improvements made in managing its 
grants.
    This concludes my prepared remarks. I would gladly answer 
any questions the Subcommittee may have.
    Mr. Duncan. Well, thank you very much, Mr. Roderick. And as 
you said, I think because of the amount of money involved and 
the number of grants we are talking about, you need to try to 
stay on top of this as much as you possibly can. I think it is 
very, very important.
    Mr. Luna.
    Mr. Luna. Thank you, Mr. Chairman. Thank you for the 
opportunity to appear before ths Subcommittee to review EPA 
grants management, both the progress we have made and the 
challenges that remain for us.
    With me today is not only Don Welsh, who is EPA's Region 
III Administrator, but also a number of the agency's top grants 
officials. We are paying very close attention to this issue.
    This Committee, the Government Accountability Office, and 
EPA's Office of Inspector General, as you have already heard, 
have raised legitimate concerns about the agency's grants 
management practices. I am here today to assure you we have 
heard those concerns, we are acting on them, and we are 
responding to the issues that they have raised.
    I will be brief because I do want to get to your questions, 
but let me quickly review some of the work EPA has done thus 
far and then address the issues that remain.
    I want to begin at the appropriate place and point you back 
to the work that was done by two outstanding EPA career 
employees: David O'Connor and Howard Corcoran. Dave O'Connor 
was the agency's Deputy Assistant Administrator for 
Administration and Resources Management and, therefore, the 
number two in the office that I now occupy. And before my 
confirmation as Assistant Administrator, he was the acting head 
of that office. Earlier this month Dave retired, after 31 years 
of distinguished Federal service.
    Howard Corcoran, who is right behind me, was and is the 
head of EPA's Office of Grants and Debarment, and he responds 
to me.
    Together, these two gentlemen were the ones who conceived 
of and developed a long-term grants management plan. This was 
in response to the challenges the agency faced with the grants 
management issues we have been talking about this morning. This 
plan established the roadmap for our grants management reforms. 
I think the plan has put the agency on course to yield 
sustainable long-term results, as opposed to just quick hits.
    When I was confirmed, I promised to give the plan a fresh 
look. I have done so now and I am confident that the plan will 
indeed accomplish what it was intended to do.
    We are now halfway through the implementation of that plan, 
and as you already have noted, Mr. Chairman, we have made 
important strides. As Congresswoman Johnson has pointed out 
correctly, we need to go beyond good intentions and get to 
accountability. I think we are getting there. These include 
better grants management training, full automation of the 
grants process, and policies to focus on both oversight and on 
outcomes. We have created a system of internal reviews, which 
have been cited in the GAO's own report, to help us detect 
grants management weaknesses earlier. And with your permission, 
I would like to supply for the record a chart that contains a 
list of what we have accomplished thus far.
    Mr. Duncan. That will be fine.
    Mr. Luna. Thank you.
    And, yet, with all we have done, we also recognize we have 
much more to do. The GAO, EPA's own Inspector General, and this 
Committee have made clear that significant challenges remain. 
Their concern, and yours, include accountability, environmental 
results, and external peer reviews. And I assure you I share 
those concerns and take them very seriously.
    We still lack effective processes to measure most grants 
management activities. Our staff's year-end evaluations do not 
generally include discussions of grants management 
responsibilities. We have continuing problems in documenting 
ongoing monitoring and in closing out grants. To address these 
issues, we have set up a number of mechanisms.
    One I will point you to is a new employee evaluation tool 
that we set up this past year. We are requiring managers to 
discuss with employees four key areas: competition, 
environmental results, post-award monitoring, and pre-award 
reviews of nonprofit organizations. We have also provided 
guidance to program officers on how to assess compliance with 
these new policies. Next year we expect to have in place 
performance measurements to assess the grants management 
performance of project officers, supervisors, and managers. 
These will be incorporated into their 2007 performance 
agreements.
    Firmly believing in the power of the carrot as well as the 
stick, we are also going to explore new recognition and 
incentive programs for project officers and supervisors to 
encourage excellence in grants management.
    We think these steps, along with the changes the GAO 
recommends to our monitoring and closeout procedures, will help 
strengthen our internal controls.
    Now to the area of environmental results. GAO and the OIG 
point out the need for grant work plans with measurable 
outcomes and results. They are right. Virtually all of our 
grant work plans have qualitative outcomes, but less than a 
fifth have quantitative outcomes. We are, therefore, training 
our project officers how to better define measures and evaluate 
the grantee's performance.
    In addition, we are going to be implementing GAO's 
recommendation to develop new environmental performance 
measures under the grants management plan. We are developing a 
standardized template for grant agreements with States, 
particularly for State continuing environmental program grants 
and performance partnership grants. This is a new template that 
will link to EPA's strategic plan and link to long-term and 
annual goals, and include regular performance reporting. It 
will help us compare States' past performance and their future 
plans so we can see progress much more readily.
    This Committee has stressed the importance of external peer 
reviews to improve grants competition. I agree. The agency's 
grants competition advocate, Bruce Binder, also here with us 
today, has come up with a way that I think will help. It will 
use external peer reviewers to evaluate funding announcements 
before they go public to see whether the proposed announcements 
have merit.
    I think this preemptive, proactive approach can weed out 
bad grant ideas early on, without creating costly and time-
consuming system that tries to chase the horse after it is out 
of the barn. We will be presenting this idea this month to the 
agency's Grants Management Council. After that panel's review 
and concurrence, I hope to have the new external peer review 
procedures in place next year.
    While EPA headquarters is responsible for developing the 
policies needed for effective grants management, the agency's 
regional offices play a critical role in the implementation of 
those reforms. You will hear about those momentarily. The 
latest GAO report underscores the need for regions to make 
significant improvements in grants oversight, accountability, 
and closeout. We are working closely with our regional 
administrators to do that. Our regional administrators know 
what they have to do to hold their staffs accountable, and I 
think they are working to do so.
    In summary, I believe EPA's grants management plan is for 
real. We put in place a comprehensive system to address our 
grants management weaknesses. We have adjusted it in response 
to the recommendations from GAO, the OIG, and this Committee. I 
hope the results are beginning to show. Much remains to be 
done, though, to create a culture of grants management that 
produces transparency, accountability, and results. We are 
committed to making that cultural shift. My goal is for EPA to 
become a best practices agency, a role model, for grants 
management.
    I will be happy to respond to your questions.
    Mr. Duncan. Well, thank you very much, Administrator Luna.
    Mr. Welsh.
    Mr. Welsh. Mr. Chairman and members of the Subcommittee, my 
name is Don Welsh. I am the Regional Administrator for EPA's 
Region III, the Mid-Atlantic Region. Thank you for the 
opportunity to be here today.
    I previously had the opportunity to speak before you, in 
October 2003, on the same question, grants management in EPA. 
At that time I appeared as the EPA Regional Administrator 
having lead region responsibility for management, which 
included grants. And I know I can speak for all of the other 
regional administrators when I say that we take our grants 
management responsibilities very seriously, and we implement 
the policies developed by our headquarters offices, led by Mr. 
Luna.
    With our headquarters, we have taken to heart the 
recommendations of the Government Accountability Office and the 
EPA Inspector General. Of the $4 billion awarded last year, 
fiscal year 2005, the EPA regions awarded over 90 percent of 
those funds. In our region alone, we awarded over $320 million.
    Since I last appeared before you, there have been marked 
improvements in the way EPA regions manage grants. Financial 
assistance programs are vital to EPA; they are a key component 
for protecting human health and the environment through 
partnership with our States, municipalities, and not-for-profit 
organizations. In our region, we now have a comprehensive 
grants management plan in place. Our program offices have 100 
percent compliance with the new grants competition policy which 
went into effect in January of 2005, and we are orienting 
project work plans to environmental results, and we are placing 
increased emphasis on ensuring grantee organizations have the 
financial and administrative capability to manage their grants.
    However, I do want to acknowledge that there are still 
challenges. We have to build on what we have put in place and 
perform our work more efficiently and effectively. I think the 
RAs, my peers, will need to continue to reinforce to our 
managers and our staff that we are serious about meeting the 
requirements and that we will hold them accountable to the new 
practices that we are putting in place. And we need to work 
with grantee organizations to improve upon defining meaningful 
and measurable environmental results.
    I want to assure you that all levels of our organization, 
from our senior executives to our grant specialists and project 
officers, understand the necessity for sound grants management 
and our obligation to the public and Congress to ensure 
taxpayers' dollars are spent wisely.
    Thank you, and I would be happy to answer your questions.
    Mr. Duncan. Well, thank you very much, Mr. Welsh. As two or 
three of you have mentioned, this subject involves, in fiscal 
2005, $4 billion in spending. It was 6728 grants offered 
through 93 different programs. And I mentioned in my opening 
statement this was the fourth hearing that we have held on this 
in the last three years.
    What started this series of hearings, and what caused the 
staff to start investigating this several months before our 
first hearing, were some newspaper articles and news reports 
that reported of ridiculous grants being awarded, grants being 
awarded where there were no final reports, where people 
couldn't find out what the grant had accomplished, a couple of 
instances where grantees refused to tell the media what their 
grant was for or what work they had done. And it appeared in 
some of these news reports and articles that in some ways some 
of these grants were becoming part of a Federal gravy train and 
being given out to buddies or friends or cohorts or former 
colleagues just as a way to give people some extra money.
    Now, it does appear from the testimony that each of you has 
given that a lot of progress has been made. As I mentioned, 
though, in my opening statement, the GAO found that in at least 
one case only about 25 out of 200 project managers in Region I 
attended a 90 minute course on grants management, even though 
it was offered three times. If those types of things are still 
going on, then some people are not taking this nearly as 
seriously as they should.
    And if we think everything is okay after this hearing 
because progress has been made, for which people should be 
commended, if we don't stay on top of it, then what is going to 
happen a year or two or three years from now, you are going to 
start reading these newspaper reports again or these new 
reports again about some of these ridiculous or scandalous type 
things.
    But having said that, before I get into any questions, I am 
going to go first to Dr. Boozman and let him make any comments 
or ask any questions that he might have.
    Mr. Boozman. Thank you, Mr. Chairman. And I do appreciate 
the fact that you are holding this very, very important 
hearing.
    The GAO has recommended that project officers document 
their grant activities in EPA's grants management database so 
managers can monitor their performance nationwide from EPA 
headquarters. What reaction have you gotten from the agency on 
this and how will you follow up on this recommendation, if 
implemented?
    Mr. Stephenson. We got very good responses. As you heard 
from Mr. Luna, you know, they have taken all our 
recommendations very seriously and are in the process of 
implementing them. The structure is in place at EPA for good 
grants management. Now we have to work on the details of 
implementation. The regions are taking this more seriously, but 
we are trying to recommend things that will provide greater 
documentation, greater evidence that they are indeed performing 
their tasks as we would expect them to.
    I think you have good commitment at top management both in 
headquarters and the regions. I still think there is some work 
to do with the project officers level. There are so many 
project officers that are so critical to overseeing grants that 
we have to do things in their performance ratings and so forth 
to make sure that they are doing that part of their job, albeit 
it is not their primary job.
    So things like the little training course that we keep 
mentioning should be mandatory, they shouldn't be voluntarily. 
I mean, this is a serious part of a project officer's 
responsibility. So we follow up, generally, all of our 
recommendations and reports. We don't have any planned ongoing 
grants work, per se, in this area, but we certainly will try to 
keep on top of this situation as we proceed.
    Mr. Boozman. Have you ever had to discipline any of the 
officers for some of the things that have been very 
inappropriate? Has anybody gotten into any trouble or demoted 
for messing up?
    Mr. Welsh. We don't have a specific instance.
    Mr. Boozman. Fired?
    Mr. Welsh. I don't have a specific instance of anyone in 
Region III that was fired for failing to carry out the 
responsibilities of a grants manager. We do pay very close 
attention to it and we do make certain that the managers are 
living up to their responsibility to hold the people who report 
to them to the requirements that are part of our system for 
managing the grants. So it is certainly taken into 
consideration in performance reviews and it is part of the 
overall picture of rating someone's performance, but I don't 
have an instance of an individual that was removed for any of 
those reasons.
    Mr. Boozman. Okay. I am curious, though. Perhaps you can, 
at some point, provide the Committee with instances where 
people were, in any shape or form or fashion, disciplined for 
not following the protocol. And then, too, I would be curious 
to know if these were people that actually participated in the 
training seminars later on. I mean, discipline and training is 
just basic stuff, and I think that is really what the Committee 
is about--just following just basic good business practices 
that all of us would follow in private business.
    Mr. Luna. Congressman?
    Mr. Boozman. Yes.
    Mr. Luna. If I might address that. There are two issues 
that you are touching on. One is the fact that our performance 
appraisals for our employees needs to be detailed and robust 
enough, with the conversation, the dialog, and the expectations 
laid out clearly enough, that our employees know what is 
expected of them. That had been lacking until we instituted, 
this past year, a new performance appraisal system.
    That system is designed to differentiate between the 
performance among our employees to a greater degree than the 
agency had been doing before. I referenced that very quickly in 
my testimony so as not to get bogged down. But the idea here is 
to create accountability and then to have consequences, and 
those consequences are: not getting as high a rating; not 
getting paid as much; not having the rewards, the recognition, 
et cetera; and, ultimately, if people are not doing their job 
well, then transfer or removal.
    But there is a second issue here, and both Mr. Stephenson 
and Mr. Roderick have touched on it in their testimony. We 
have, according to Mr. Roderick's testimony, 2383 active 
project officers managing grants. A lot of them are doing it as 
a collateral duty. Most manage five or fewer grants; 29 percent 
manage only one. About one-third of the project officers spend 
less than 10 percent of their time on project officer 
responsibilities.
    We can certainly make sure that the floggings continue 
until morale improves. At some point though, we need to 
understand that some of these project officers are not doing 
enough of this work to justify their focusing all the attention 
they should on it. That is one of the challenges we have as an 
agency. We need to balance whether we should have as many 
project officers versus a centralized operation, whether to 
have people in the field who are actually closer to the 
grantees and closer to the problems and understand what the 
needs are. We need to consider the balance between a 
headquarters-centric approach and a regional office approach. 
Those are the challenges that we have as managers trying to 
make this system work.
    So, yes, we could fire somebody and we could do the public 
flogging. At the end of the day, however, I think this path of 
training, reinforcing, holding people accountable, giving them 
reasons to do this job well because it will improve 
environmental protection--which is the reason why they are in 
Federal Government to begin with--is going to bring us closer 
to a sustainable result, and that is what we all want.
    Mr. Boozman. Good. Thank you very much. And don't 
misunderstand. You know, the experiences I have had with the 
agency have been very positive. I think the vast majority of 
you do an excellent job, and I know that you and your staffs 
are working really hard to solve these problems, but they are 
problems that we have got to get solved. So thank you.
    Mr. Duncan. Well, thank you very much, Dr. Boozman.
    And Dr. Boozman is right, the key here--I mean, in these 
other hearings we have held, I don't think anybody has ever 
contended that some of these abuses that we have talked about 
had not occurred in the past. But the key to improving these 
types of things is accountability. And I think that things have 
improved because they know that the GAO and the Inspector 
General and the media and, to some extent, this Subcommittee 
have been trying to look over their shoulder to see where these 
grants are going and what they are accomplishing. And, 
unfortunately, we hadn't been doing enough of that, I guess, in 
years past, but I think maybe it has helped some now.
    Mr. Salazar.
    Mr. Salazar. Thank you, Mr. Chairman.
    This question is for Mr. Luna. I know that you mentioned in 
your testimony that EPA was planning for a fully automated 
system for your grants process. Could you expound on that a 
little bit and could you also tell me how transparent that will 
be for review as far as anything that we might see that may not 
be up to par?
    Mr. Luna. One of the things that I wanted to do from the 
moment I started in this job was to make sure all of the grants 
were transparent, that the accountability be not only an 
internal one, but also an external one; that people could see 
what we were doing, what grants were being issued, to whom, in 
what amounts, what the expected outcomes were, and whether the 
outcomes were indeed going to be achieved. We have made 
significant strides in doing that.
    The whole Federal Government is in the process of doing a 
number of E-Gov initiatives to create ready access for the 
public on how to apply for grants and then how to track what 
happens with those grants. This is a piece of that initiative. 
Internally, we are trying to make sure everything is as 
automated as possible. Our internal grants management system 
and our face to the public are both things that allow managers 
to quickly, on their desktop, see information that they can use 
to manage grants. Our systems also allow members of the public, 
members of this Committee, the media, anybody, to access the 
information we have so we are not hiding anything.
    That transparency, that magnifying glass helps keep us 
focused on the outcome we seek, which is to make the grants 
process clear, so everybody understands what we are trying to 
achieve.
    If you want additional information on the mechanics of how 
that system works, I will be happy to submit something for the 
record.
    Mr. Salazar. I would certainly appreciate that, sir, if you 
could submit whatever information you have on that.
    Mr. Luna. Sure.
    Mr. Salazar. Mr. Chairman, I yield back.
    Mr. Duncan. All right, thank you very much.
    Dr. Boustany.
    Mr. Boustany. Thank you, Mr. Chairman. First of all, let me 
just say thank you to the EPA for the hard work that you did 
down in Louisiana, my home State, in the aftermath of both 
hurricanes. I appreciate the work.
    Mr. Stephenson, I have a question. In your report you found 
that the EPA staff complained on one side that they didn't have 
enough training in the area of new grants policies; at the same 
time, many project officers did not show up when the training 
was provided. Can you talk a little bit about that dichotomy?
    Mr. Stephenson. Well, we did some detail--it was just an 
observation. We were there to look specifically into grant 
files and look at the documentation in those files and see if 
in fact the policies and procedures that were set forth at the 
headquarters were indeed followed, and it was sort of an aside. 
In Region I we noticed that the training was voluntarily, 
admittedly.
    I don't know the specifics of why the attendance was so 
poor, but in fact it was offered three times. And it seems to 
me that while it is an ancillary duty for a project officer, it 
is nonetheless very important and probably needs to be made 
more mandatory. If you are going to be a project officer over 
even one grant, you need to have the training so you understand 
the policies and procedures, why they are important, and how 
they are supposed to work.
    Mr. Boustany. Thank you.
    Mr. Roderick, what is your view of that inconsistency?
    Mr. Roderick. Sir, I wasn't aware of it until now, and I am 
certainly not aware of--sir, I wasn't aware of the details of 
that, since I did not work on that job with him, and I can't 
really say much more than that about it.
    Mr. Boustany. Okay. Kind of a general question. What 
progress is the EPA making in developing a system that will 
produce measurable environmental results from grant awards? I 
think this probably relates to the closeout issue, as well, but 
I would love to hear your comment on this.
    Mr. Roderick. Sir, the EPA set up a 12-point plan with a 
schedule and they began to achieve that, and they are on 
schedule, as far as we know, right now. As they get closer to 
the end, we will probably do some more audit work to ensure 
that it was carried out as planned. But at this point it looks 
good to us.
    Mr. Boustany. Thank you.
    Mr. Welsh, do you have--
    Mr. Welsh. Yes. We are really struggling with that issue 
not only in grants management, but in all of our programs, to 
try to develop real environmental measures that show us what is 
happening outside of our offices when we implement our 
programs. In some areas we have made significant progress. We 
do have some useful tools to use with programs like a pollution 
prevention grant. We can measure the savings in solid waste 
created or in BTUs that haven't been used. In the clean bus 
program, for instance, we have metrics that can tell us if you 
retrofit 10 school buses, what reductions in particulate 
pollution that brings about.
    So in some areas we have been able to institute actual 
metrics that show what we are getting for the work done. In 
other areas it is a real challenge to come up with effective 
measures. For instance, in the grants area, a grant that pays 
for stream monitoring, that monitoring is information that is 
very useful, it is going to help us implement our programs more 
effectively and we think it will lead to better environmental 
outcomes. But the direct environmental benefit from a stream 
monitoring program is difficult to come up with measures for.
    In Region III we actually reorganized to put together a 
division whose primary responsibility is coming up with the new 
tools we need using things like GIS and new databases that are 
available that weren't available when the agency was first 
created to try to find ways of making better measures not only 
of what is happening in the environment, but what impact our 
programs are having on that.
    And it is frequently a difficult challenge to come up with 
a measure that is really meaningful and that is meaningful in 
the kind of time that is useful to a manager. You can 
occasionally show that there has been an environmental benefit 
from a program over a 15-year cycle, but that is not really 
enough information for us to be able to say whether a 
particular manager and a particular program is doing a good job 
that year.
    So we are wrestling with that issue. I think we are--I 
started at the agency in the early 1980s, so I can say that we 
have made significant progress over that time. But there really 
is--that is one of the tough challenges that we are facing, in 
coming up with the kind of metrics that are meaningful in the 
environment that will help our managers decide when a grant has 
been effective, when it hasn't, when a regular program has been 
effective and when it hasn't.
    Mr. Boustany. Are you getting outside help in developing 
those metrics or is it just an internal process
    Mr. Welsh. The folks that I have assigned to it are 
internal, but there are many, many people across the Country 
who are trying to climb that same tree such as the 
Environmental Council of the States. They have been looking at 
those issues. There are many other academics around the Country 
who have been trying to find those metrics, and I have a shelf 
in my office full of the literature from various organizations 
like the National Academy of Public Administration, about how 
you get better results, many other reports like that. So we are 
trying to avail ourselves of the knowledge that is out there 
wider than just at EPA. But I think in all areas this is a 
growth industry of people trying to find the effective ways of 
measuring those outcomes.
    Mr. Boustany. I thank you, Mr. Chairman. I yield back.
    Mr. Duncan. Thank you very much, Dr. Boustany,
    Ms. Schwartz. Thank you very much, Mr. Chairman, for the 
opportunity to engage in a couple questions. And just following 
up on the previous questions,, it seems one of the maybe hard 
to measure, but to the degree you do studies and that 
information could and should be useful--just a follow-up--what 
kind of dissemination of that information, how do you--again, 
this may not be a project manager's role, but for it to be 
effective, someone who can then take action on that report 
needs to have the information, needs to know how to use it, and 
so does the next person in line in your own shop be able to 
know that that has been done.
    So could you just speak to how do you then take what might 
be a very interesting study, might be useful in some way, but 
they are internally the EPA or locally make that useful to the 
next person who could take that information and really make a 
difference in what they are doing next?
    Mr. Welsh. There probably isn't one magic answer to that. 
We certainly struggled with it. Having worked in government for 
a long time, I know that there is occasionally a tendency for 
even a very well prepared and very useful report to end up 
gathering dust on that shelf I mentioned in my office. So one 
of the things that we did in Region III is reorganized to make 
sure that we had folks whose specific mission was to look at 
all the data tools that we had available and make sure that we 
were using them effectively.
    So I think it takes reinforcement in individual cases. I 
don't know of a system that will assure that reports are put to 
effective use, but I think by giving a senior manager who 
reports to me the specific job of making sure that we are 
making the best use of the data that we have available, we can 
make improvements and try to prevent an expensive and well 
written report from becoming a doorstop and, instead, being 
something that we are using to improve the environment.
    Ms. Schwartz. Okay. Just a suggestion there, too, is to the 
degree to which that then ends up going to--I am from 
Pennsylvania, as Mr. Welsh knows, and there are so many 
municipalities, there are so many authorities that have a role 
in this. The questions of local and, of course, county and 
State. As you also know, some of the environmental issues cross 
the political lines, so that makes it really very difficult to 
make sure that even neighboring townships know about it or the 
county knows about it or the State knows about so that when 
they take action they have resources to do that.
    Obviously, the internet is a great way to post what 
information is available, but do you do that? Do you actually 
tell the county all the studies that have been done in the 
county and the information is now available, just as a simple 
way to make sure it is used?
    Mr. Welsh. I think that is a great suggestion. I don't 
think we have a system in place to assure that that happens in 
every case, but we have used some very useful tools to put 
together what we call story boards, and it is designed to be 
something that anyone can understand. I don't have a technical 
degree, so when my own staff has to brief me on some of these 
things, I need to be able to understand what that data is 
telling us, and those story boards are something that you can 
effectively take to someone who is not schooled in the programs 
or schooled in the science and show them what information we 
have available. And I will take your suggestion that perhaps we 
should take that show on the road and offer that to the local 
Government Advisory Council or to the Association of Counties 
in the different States and maybe make better use of it that 
way.
    Ms. Schwartz. Which leads me to the question I am prepared 
to ask, and that is it seems to me--and I think we may have 
been pushing on this--that you need--and this may be for Mr. 
Luna as well. We need to make sure--I understand there are 
checklists of what project managers have to review, what 
information they have to get. That seems to me extremely 
important to do. Having said that, there are two potential 
negative consequences of that, and that is that for project 
managers spending time on simple administrative checklists that 
could be done by someone else, particularly if they have the 
technical expertise; and, secondly, that they fill out the 
form, they do the whole checklist, but then--to use the 
expression--they don't see the forest for the trees, so that a 
project that may be doing all that it is supposed to do but 
missing the big picture or there is a real problem that is not 
being addressed that he or she knows but is not on the 
checklist.
    Answer both questions, if you may. To the degree they are 
spending time on technicalities, the famous bureaucratic 
technicalities and wasting time that they could be using in a 
better way; and, secondly, that they are not actually 
overseeing the broader questions that may come up in terms of a 
project that is not going well, needs to go in a different 
direction, but in fact they have checked off every box that 
they have had to.
    Mr. Luna. Not to minimize your question, but if this were 
easy to do, it would've been done a long time ago. This 
question of how to find the balance between doing the 
bureaucratic piece of the puzzle, the paperwork, and having the 
strategic overview and perspective is one that is affected by 
time and resources. There are only so many hours in the day. 
There are only so many people who can do the work. Training 
people to simply go through checklists sometimes makes them 
miss the obvious for that very reason, as you have said.
    To piggyback on what Don has already said, the question is 
one of trying to develop robust, coherent, meaningful 
performance measurements that really get to the heart of the 
matter. It's the "Why are we here?" "Why are we doing this?" We 
put money out the door. We are great at measuring money, but so 
what? What is the consequence? What is the outcome? To do this 
involves a partnership between the agency and the grant 
recipients. We are not as well versed as somebody in a given 
community about what their particular needs are. They have a 
sense of what needs to be done, but in order for us to give 
them the money and then be comfortable that the money is being 
spent the way it is intended, we need to have them help us 
identify what those outcome measurements are, as well as apply 
the more academic exercises and the more esoteric tools that we 
have.
    It really has to be done by both the agency and the grant 
recipient. If we simply issue an edict and say, "Thou shall 
produce this quantity of water cleanup by giving you this 
amount of money," it misses the point about how difficult it 
is, it misses the point of how many other inputs there are, and 
it misses the point of how sometimes outcomes take a long time 
to produce. And this year's million dollar grant may not 
produce a result for ten more years.
    Ms. Schwartz. I think my time is up, but if I may offer 
this suggestion. I think some of this--and I think you spoke to 
some of it before--is that it also has to come from the culture 
within the agency, and some of that has to do with training and 
the expectations that are put on project managers, as to how 
much they can speak up, what kind of interaction they can have, 
both with the grantee and, of course, with your higher-ups. So 
I would suggest as part of the training--and I think the 
suggestion that maybe it needs to be mandatory and not 
voluntary--has to include the expectations and the culture 
about what is the intent of the grant, what are you hoping to 
achieve, and to provide some appropriate permission for there 
to be some narrative as well as administrative and technical 
checkoffs.
    I think, with that, my time is up.
    Mr. Welsh. I would like to offer a particular example,--
    Mr. Duncan. Go ahead. That is fine.
    Mr. Welsh.--if the Chairman will indulge. In the region, on 
their first question about their paperwork and tying up the 
person in what becomes administrivia [sic], we are implementing 
a system of senior project officers so that there is one person 
whose primary responsibility is to liaison with our grants 
folks and make sure that all of the people who are project 
officers in that division are kept up to date on what the rules 
are and any changes and new policies and guidance so that we 
don't rely on each individual person to make sure they know 
what changes are going on. We also will have assistant project 
officers who can help. Typically, as a new grant program is 
developed, the technical person who understands that area of 
water monitoring or whatever it might be will become the 
project officer, and we really need their brain to be thinking 
about the technical issue about the program. So we think those 
two wrinkles will help reduce the sort of paperwork burden, but 
still get the job done.
    On the other question, not in a grants area, but in a 
program area, we had exactly what you described happen once, 
that we had the folks who were watching paying so much 
attention to whether each box was checked and that each step 
was followed in the process that they missed the fact that it 
wasn't being effective. And what we did there is we want to put 
another set of eyes so when someone looks at the list and says 
is that done, a management set of eyes says, "well, was it 
effective?"
    Ms. Schwartz. Fair enough. Thank you very much.
    Mr. Duncan. Well, thank you, Ms. Schwartz. And I certainly 
appreciate the comments and suggestions and the direction Ms. 
Schwartz headed in. You know, obviously, or one obvious goal of 
these hearings has been, and one obvious goal of the work of 
all four of these witnesses has been to keep these grants from 
becoming jokes or embarrassments or scandals. But I liked Mr. 
Welsh's comment. Another goal is to make sure that these grants 
do some good and actually help some people. And, you know, Mr. 
Welsh's comment hit the nail on the head when he said that we 
need to make sure that effective, important, well written 
reports don't just become doorstops. And that is a very good 
comment.
    Ms. Johnson.
    Ms. Johnson. Thank you, Mr. Chairman.
    First, let me ask unanimous consent to have the statement 
of Democratic Ranking Member Oberstar and my full statement 
placed in the record.
    Mr. Duncan. Without objection, so ordered.
    Ms. Johnson. Thank you.
    I want to ask if there was an evaluation of a project done 
in Region III and one done in Region VI, could you compare 
apples to apples? Is there enough standardization in the 
evaluation?
    Mr. Stephenson. Are you asking each of us?
    Ms. Johnson. Yes.
    Mr. Stephenson. Yes. I think the policies, the 
implementation, checklists, the administrivia [sic], which I 
hate to all it because it is more important than that, should 
be pretty uniform from region to region. The type of grants 
that they are might be very different, but, nevertheless, the 
oversight responsibilities and the assurances that you are 
getting good outcomes from those grants should--the process for 
ensuring that should be fairly uniform. So, yes. We have some 
statistics in our report across-the-board for closeouts, for 
example, and there are slight variations from the regions, but 
in general they are all in the same ballpark.
    Ms. Johnson. When you underscore the need for regions to 
make significant improvements, what area the oversight 
accountability, where you specifically--
    Mr. Stephenson. Well, again, the culture at the top is just 
fine. That has to translate down to these 2300-plus project 
officers who share responsibility for effective grants 
oversight. It isn't their primary job, as has been said many 
times. I am sure many of them think it is a nuisance to fill 
out this documentation. Every bureaucracy--in GAO we have 
procedures that I think are a nuisance. Nevertheless, that is 
an important part of their job, and unless you have good data, 
you can never improve the overall results that you are getting 
for grants; you can never assure that you are performing that 
effective oversight. It is not that time-consuming to take a 
look at a grant one time a year and to check results at the 
end. The details of whether we have too many project officers 
or not enough, or whether they need administrative assistance 
or what are not for me to answer. I just think that it is an 
important part of their job that needs to continue to be 
emphasized.
    Ms. Johnson. One more question to you before I move on. You 
found that regional officers noted that grant reforms are 
changing the skill mix required of both project officers and 
grant specialists. Could you elaborate on that?
    Mr. Stephenson. Well, a clean water expert is hired because 
of his expertise in that area, be it monitoring or--I mean, 
these are basically scientists, so to lay on top of that some 
grant management responsibility that they think is probably not 
what they were hired to do makes it a challenge to get them to 
do the right thing. So, as Mr. Luna said, it is a balancing 
act, you know, between the overall responsibilities they have 
on a clean water program, for example, and their 
responsibilities for making sure that the grants--which I 
remind you is one-half of the budget, so should be a large 
percentage of how they spend their time. That is a balancing 
act. That is the challenge that we face here, and continued 
oversight has made a big difference.
    Ms. Johnson. Thank you.
    Do you have any comments?
    Mr. Roderick. No, ma'am.
    Ms. Johnson. Mr. Luna?
    Mr. Luna. You are, again, touching on the fundamental 
issues that we need to address as an agency and about the 
culture of the agency. I think it is possible to be consistent 
across the agency. We are looking for environmental outcomes. 
We are looking for improvements in the quality of life for the 
American people. It might be slightly different in New Mexico 
than it is in Texas than it is in New Hampshire than it is in 
Colorado, but the bottom line is still: did we make progress? 
Did we have a positive change in the environment? And if we 
didn't, then we have wasted our time and our money. That is the 
question we want to make sure gets answered, first by the 
announcements that are put out, then by the responses that come 
in. The people who apply for grants must understand it. We need 
to make sure they are prepared to spend that money wisely. We 
are trying to make sure that our folks understand that they 
need to hold those grantees accountable, and we need to make 
sure that our folks then do the paperwork, because without the 
paperwork the job isn't done.
    So, at the end of the day, I think we can indeed compare 
apples to apples to apples and see if there is a change.
    Ms. Johnson. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Duncan. Thank you, Ms. Johnson.
    Mr. Stephenson, you indicated that the EPA has improved 
its--or it is reported that the EPA has improved its 
competitive award process from 27 percent to 93 percent of 
eligible grants. The Inspector General said that the number of 
eligible grants should be expanded. Do you agree with that? And 
could you more fully, for the record, put this number into 
context? For instance, what I am getting at, there is a large 
number of these grants that aren't eligible.
    Mr. Stephenson. Yes. We didn't look at this issue 
specifically, but of that 4 billion pot that we keep talking 
about, many of them go to continuing environmental grants, go 
to the States under the Clean Water program, the Safe Drinking 
Water. There are formulas to the States and the States 
presumably have their risk system for how they award those in 
terms of grants.
    But there is--I think it is down to less than 700 million 
now in discretionary grants. But even many of those are 
legislatively mandate, so there is not as much flexibility as 
there might be across all those discretionary programs. So when 
you scrub all those out, you are down to about, I think, 250 
million--don't hold me to these specific numbers, but they are 
in the ballpark--that can be competed. So that 97 percent is 
the amount of that 250 million that is being competed, which is 
very good. I think the IG has done a little bit more work on 
whether we can expand that universe of program areas that can 
be competed without violating any laws or legislative intent, 
and I think they are working with EPA on that issue now.
    So, I mean, we should always be looking to expand that 
universe of grants that we can compete. I think you will get 
better outcomes if you do that.
    Mr. Duncan. How much interaction with the States on this 
formula money is done by EPA, interaction with the State 
environmental authorities? Or how much reporting is done back 
by the States to the EPA on all this formula money that is 
going to the States? Should there be--is there a lot of 
interaction and a lot of reporting so that EPA pretty much 
knows exactly what is happening to all this money, or should 
there be more done in that area?
    Mr. Stephenson. I don't know. That is a good subject for 
review. But of the $1 billion in Clean Water revolving fund 
grants that go to the States, we don't take issue with the 
formulas used to distribute that across the States, and each 
State has a very different philosophy in how it expends that 
money. The lion's share goes to infrastructure, to wastewater 
plants; I think it is over 90 percent of the money. And each 
State has a priority ranking system for which projects receive 
the money, and they are required to annually report, the EPA 
regions are required to oversee those grants. But we have never 
gotten into the details of whether we agree with how those 
States are doing it, et cetera. We primarily provided some 
information to the House Appropriations Committee and have an 
ongoing project to do that now.
    Mr. Duncan. All right. We have talked about the progress 
that has been made, but we talked about this closeout backlog 
before, and you said that that problem is returning to some 
extent. Can you explain what you are talking about there and 
why those closeouts, you feel they are important or might be 
important?
    Mr. Stephenson. There is a lot of different stories. Every 
grant is unique, and EPA is still deciding exactly what its 
target goal for closeouts should be. A hundred and eighty days 
is kind of an old standard that I believe EPA is looking at 
now, but we base that percentage on that number of days. There 
may be good reasons why it takes longer, but, in general, we 
think that more attention needs to be given to this area to 
make sure they are being closed out in a timely manner. Some of 
these things sit there for years, and you may have unobligated 
balances. We assist the Appropriations Committee every year in 
looking at those unobligated balances, and last year identified 
over $100 million in funds that could have been pulled back and 
used for other purposes.
    So we used to have Accounting as our middle name, now it is 
Accountability. Nevertheless, we still look at the dollars, and 
we are concerned that all of those dollars across the agency 
are being efficiently spent. And closing grants and de-
obligation of funds is one way to ensure that.
    Mr. Duncan. You said there is $100 million in backup money 
that is--
    Mr. Stephenson. Last year we identified that much in money 
that was sitting there for--primarily for grants that had 
completed but had not been closed out, and, therefore, the 
money was still sitting there until we determined if there was 
any ongoing litigation, if there was any records that were owed 
by the grantee, et cetera. There are lots of reasons why they 
are not closed out. But we just think it becomes excessive when 
some of these are over a year old.
    Mr. Duncan. All right, thank you very much.
    Mr. Roderick, what key gaps did you find that remained in 
this grant management reform process? What are project officers 
not yet doing that they should be doing? What about what are 
supervisors not yet doing? What about senior management, 
managers? What can you tell us about all of that?
    Mr. Roderick. Sir, I think the thing that came out of our 
report, our study was that what was needed was more specific 
requirements to measure the performance of the grant work, and 
that had to go into people's appraisals or otherwise be 
conveyed to them as their duty, and then that stuff should be 
also discussed at their performance appraisal times. That is 
the main thing that we think needs to be done in the near term 
to get people--get those project officers working on the right 
things.
    Mr. Duncan. Do you think enough emphasis is being put on 
grant management reforms in these year-end reviews or year-end 
performance discussions?
    Mr. Roderick. Sir, our report said that--basically 
concluded that there was not enough of that emphasis, and that 
is why we made those suggestions that I just spoke about for 
their--to improve their performance appraisal process.
    Mr. Duncan. All right.
    Administrator Luna, what challenges have you had to 
overcome at EPA to shift the culture towards greater 
accountability in this area? Have you met resistance or has 
this been something that has been pretty easy to work on?
    Mr. Luna. It has not been easy. It is something that 
requires diligence. We need to make sure folks understand 
attention must be paid, and so we spend time and energy making 
sure that message gets through the entire agency. It is very 
easy for headquarters to issue edicts, and it is very easy for 
people who are very busy doing environmental protection to say, 
okay, yeah, that is another order and we will get to it. What 
we have tried to do, rather than, again, using the stick 
approach, is show our employees how important it is to have the 
accountability and show the results, because then that, in 
turn, produces the environmental outcomes we all seek. And so 
it is a culture shift. It is not a matter of lacking people of 
good will. We have those. It is not a matter of having bad 
instructions. I think we have good instructions. It is a matter 
of inculcating this approach into the ethos of the organization 
and to illustrate and demonstrate how important it is.
    I think the Committee's attention has been extremely 
valuable in helping focus the agency's attention on this issue, 
and as a taxpayer, I thank you for that. You know Federal 
agencies are big behemoths that take, like a ship, a long time 
to turn, I think we have started seeing that turn. The 
challenge for our folks who are in the grants management 
business is to help people understand that this is not just a 
part of somebody's duties, but is really a key part of the 
Agency, because these dollars buy the American people a lot of 
environmental protection.
    Mr. Duncan. Well, you mentioned in your testimony that some 
managers--a lot of managers manage only one grant and they 
spend 10 percent--some of them spend only 10 percent or less of 
their time on this. Do you think that this is something that 
people need to spend a little more time on?
    Mr. Luna. Well, if we do that, then we take them away from 
other duties.
    Mr. Duncan. Right.
    Mr. Luna. And finding that balance is the key. A radical 
suggestion has been made that we look at reducing the number of 
project officers so we have a smaller core of more highly 
specialized, more highly trained, more proficient individuals 
doing this work. I am sure some project officers would welcome 
that because they don't enjoy this being one of their duties. 
But there are tradeoffs, and our regional administrators will 
then suffer the consequences of that. We need to have a 
conversation about how environmental protection would be 
impacted by having fewer people in the regions, in the field, 
closest to the issues, touching the grantees and touching the 
projects. At the end we might find that the medicine is worse 
than the disease.
    Mr. Duncan. Well, I can understand the problem there, it 
does seem like an awful lot of people involved in the 
management process. You know, I have never been a bureaucrat, 
but I would imagine that even more bureaucrats hate 
bureaucratic language or meetings; they have the ability to 
write or think in that way, maybe, but they still probably 
don't really like that type of thing that much. So what I wish 
you could do is send out something or have meetings and tell 
these people in plain, down-to-earth ways that what we are 
concerned about is that they not make grants that result in 
jokes or embarrassments or scandals in the media; secondly, 
that they make grants that are going to do some good, and that 
that be one of the main criteria; and, thirdly, that they not 
make grants that people can turn into obvious conflicts of 
interest, that they don't make grants to their buddies or their 
friends or their old pals or their former colleagues. You know, 
you have got to be careful about sweetheart deals on some of 
these things. And sometimes maybe it is better to put those 
things in less technical, less bureaucratic, just put them in 
more plain, down-to-earth ways.
    Mr. Welsh, you testified at our 2003, at our second hearing 
in that year on these procedures. Do you think there has been 
some significant changes since that time? What changes have you 
really seen?
    Mr. Welsh. Yes, sir, I believe we have made significant 
headway on the culture change of making sure that the folks in 
the region understand that that is their responsibility. You 
mentioned a moment ago that you have never been a bureaucrat. I 
have to confess that I have never not been a bureaucrat. And 
bureaucrats carry a lot of baggage in our culture, but one 
thing that they certainly are is responsive when the boss says 
the boss wants something. And I can tell you that the deputy 
administrator, at a staff meeting, held all of the regional 
administrators accountable for our grant closeout rate, and 
that immediately went down the line, and before the meeting was 
over I think every project officer had heard that that was 
being raised by the boss with the regional administrators.
    So the progress that we have seen and the challenge--when 
you were asking Luis the question, I wrote down in my notes 
``full plate.'' The challenge we really do have is when we 
reinforce to folks you have to spend more time paying attention 
to this, we get the full plate complaint: "What don't you want 
me to do if I spend more time on this?" And one of the ways we 
can handle that is make sure we build it into the system so it 
is not really a separate thing to do, but it is just the way 
you normally do business so it doesn't eat up that much more of 
their time. But I also try to remind them if you get one of 
these really wrong, then you will find out how full your plate 
can be. So the time invested up front in working with the 
grantees, making sure they understand the requirements, will 
save a lot of the problems about the grant backlog or a grant 
that hasn't been closed out for five years because some big 
problem arose in the middle and there was an appeal and 
litigation.
    So I think with the administrator and the deputy 
administrator and the regional administrators continuing to 
raise it at staff meetings, the bureaucracy will be responsive 
to knowing that the bosses care about this and they will spend 
the time that they need to make sure they get it right.
    Mr. Duncan. That is a very good statement.
    We have got a series of votes that are about to start on 
the floor.
    Ms. Johnson, any closing comments?
    Ms. Johnson. Not really.
    Mr. Duncan. All right. Well, you know, really, I think this 
has been a very good hearing, and you, all four of you have 
been really outstanding witnesses, and I appreciate your 
comments. I understand that the staff on both sides has a few 
additional questions they would like to submit to place in the 
record of this hearing, but that will conclude the hearing at 
this time. Thank you very much.
    [Whereupon, at 11:20 a.m., the subcommittee was adjourned.]

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