EPA Urged To Limit Risks, Plan for IIJA Workload

After evaluating past audits of the Environmental Protection Agency’s (EPA) grant program oversight, the EPA Office of Inspector General (OIG) is calling for the agency to implement better controls to identify and limit program risks, and to plan for adequate resources needed to handle expected workload increases resulting from awards issued under the Infrastructure Investment and Jobs Act (IIJA) (Pub. L. 117-58).

While EPA typically manages about 6,000 active grants totaling some $21 billion annually, the agency expects to receive about $55 billion in additional funding under IIJA for state and tribal grants over a five-year period through federal fiscal year (FY) 2026.

Office of Management and Budget (OMB) Memorandum M-22-12, Advancing Effective Stewardship of Taxpayer Resources and Outcomes in the Implementation of the Infrastructure Investment and Jobs Act, requires federal agencies to implement IIJA-funded programs efficiently and effectively by developing program implementation plans that, among other things, confirm a program-level approach to financial management controls and risk mitigation strategies. It also states that agencies should work with their respective OIGs to identify risks so that agencies can reduce the need for costly after-the-fact enforcement by adopting a risk-based approach, which should include procedures to mitigate risks to achieve program goals and objectives. Therefore, OIG evaluated its own prior audits, as well as reports issued by the Government Accountability Office (GAO), pertaining to EPA’s grant programs from FY 2017-2021 to identify the agency’s outstanding key administrative challenges as it proceeds to issue IIJA awards.

Enhance Oversight Responsibilities

OIG determined that the agency had specific oversight deficiencies in three particular areas that it should address to enable it to better administer IIJA funds. First, it called on the agency to enhance its grants oversight workforce and strengthen monitoring and reporting, citing findings within nine previous OIG/GAO audit reports.

For example, a June 2020 OIG report (20-P-0204) noted that project officers did not always enforce recipient compliance with progress reporting requirements, and the program office did not always document the review of these reports. “With late or missing progress reports, recipients may not have informed EPA project officers in a timely manner of any potential delays or obstacles in completing grant objectives or work,” the OIG stated. “Further, although EPA policy and award agreements required recipient reporting and review of progress reports, the agency did not have adequate controls to verify that those steps had taken place.”

A January 2017 GAO report (GAO-17-144) assessed how staffing levels and workloads changed over a 10-year period for EPA grants management personnel, as well as the extent to which the agency followed leading practices for strategic workforce planning in managing its grants staff. GAO found that EPA’s regional and national program offices had not consistently tracked key aspects of the grants management workload over time because the agency did not have a documented process that it could apply consistently to obtain workload data. EPA also had not identified skill and competency gaps for project officers, or monitor and evaluate recruitment and retention efforts for its grant specialists, the GAO report added.

Sufficient Guidance, Work Plans Lacking

Another area of concern, according to OIG, was the agency’s weaknesses in establishing and implementing comprehensive guidance and detailed work plans, as well as improving communications. Again, OIG cited nine previous OIG/GAO reports that found that EPA needed to establish clear guidance to monitor grants or cooperative agreements appropriately, and that the agency must develop detailed work plans to identify how and when the recipient will use program funds to produce specific outputs.

For example, an August 2017 OIG report (17-P-0368) found that some $10.9 million in program income funds went unused in about half of the Brownfields Revolving Loan Fund cooperative agreements it reviewed. EPA did not issue policy guidance that stated its intended use of the program funds, which was for award recipients to reloan the funds for additional brownfields remediation and cleanup after the recipient paid back the initial loan. Further, cooperative agreement terms and conditions regarding how to handle program income were inconsistent depending on when EPA issued the agreements, resulting in some recipients not following measures for appropriately treating program funding.

An October 2020 GAO report (GAO-21-150) concluded that EPA and tribal grant recipients had communication issues that affected grant deadlines. While communication challenges stemmed from a tribe’s lack of sufficient internet and phone access due to its remoteness, the agency itself had outdated and unclear guidance that created inconsistent grant requirements and eligibility determinations. “Because grants to tribal communities will increase with IIJA appropriations, EPA needs to ensure that it establishes effective communication methods and is able to address tribal-specific issues, such as providing sufficient detail within project work plans,” OIG added.

Adequate Documentation

A third area of concern, according to five previous OIG/GAO reports, is the challenge of enforcing the requirement for grant recipients to submit adequate documentation to support costs incurred under their grants. OIG cited three of its prior reports — 19-P-0163, 20-P-0167 and 21-P-0135 — that identified that EPA did not have sufficient documentation to fully support grant transactions. Therefore, OIG could not determine whether these payments were properly made.

From FY 2017-2020, EPA reported about $52.3 million in improper payments related to grants and cooperative agreements. OIG reviews identified about $2.51 million in additional improper payments for the FY 2018-2020 reporting periods. OIG noted the reason for identifying these additional transactions as improper was the lack of or insufficient documentation to support these grant payment transactions.

Such improper payment concerns have continued. In its FY 2021 agency financial report, EPA concluded that none of its payment streams were susceptible to significant improper payments. However, a June 2022 OIG report (22-P-0050), which was released following the OIG audit report’s review scope, concluded that EPA potentially failed to report about $10.3 million in improper grant payments for the FY 2021 reporting period.

OIG urged EPA’s Office of Grants and Debarment to consider additional safeguards for monitoring grant payments. It “should consider implementing additional or clarified controls for regions and program offices to enforce grant administration requirements, to request support for incurred costs on grants, and to instruct recipients regarding the importance of proper documentation and recordkeeping,” OIG added. “This may mitigate EPA’s risk of increased improper payments in its IIJA grant awards.”

For More Information

The OIG audit is available at https://www.epa.gov/system/files/documents/2022-08/_epaoig_20220811-22-N-0055.pdf.