EPA Actions Taken Against Nonprofit Grant Recipients in 2002
GAO-04-383R: Published: Jan 30, 2004. Publicly Released: Mar 4, 2004.
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The Environmental Protection Agency (EPA) awards over one-half if its budget, or about $4 billion, annually in grants. At the end of fiscal year 2002, EPA was providing funding to 4,100 grant recipients, with $245.4 million, or nearly 6 percent of its awarded grant dollars, going to nonprofit grant recipients. Congressional hearings in 1996 and 1999 cited concerns with the grants management capabilities of nonprofit grantees. Specifically, the 1996 hearing raised questions about nonprofit grant recipients' use of federal funds for lobbying. The 1999 hearing cited concerns with the ability of nonprofit grantees to manage their grants, because, for example, many nonprofit organizations do not have staff with accounting backgrounds. Often, their grants are too small to be covered under the requirements of the Single Audit Act. In response to such concerns, EPA has included lobbying restrictions in grant agreements, issued guidance and policies on grantee oversight, and has attempted to improve nonprofit grantees' grants management with a 1-day training course and follow-up instructional videotape specifically designed for nonprofit grant recipients. However, as we reported in August 2003, nonprofit grant recipients continue to have problems managing their grants. These problems have led EPA to recommend actions to correct specific problems, such as maintaining records to track staff time, obtaining a required audit, and improving a financial management system. In some cases, these problems led EPA to take more significant actions against nonprofit grant recipients, such as issuing suspension orders, holding payments, and designating grantees as high-risk. As a result of continuing concerns about the problems that nonprofit grant recipients have had in managing their grants, Congress asked us to provide supplementary information on the grants management performance of nonprofit grantees. Specifically, this report discusses (1) grants management problems EPA identified with nonprofit recipients in 2002, (2) corrective actions EPA recommended to address these problems, and (3) EPA's more significant actions taken against specific nonprofit grant recipients.
According to our analysis of EPA's calendar year 2002 in-depth reviews, EPA identified 276 problems with nonprofit grantees. EPA identified these problems in the 245 reviews it conducted of nonprofit grant recipients. These reviews represented 20 percent of EPA's 1,232 in-depth reviews. The identified problems included inadequate accounting systems, failure to obtain approved indirect cost rates, and insufficient documentation to support sole-source contracts and other expenditures charged to the grants. Overall, EPA recommended that nonprofit grant recipients take corrective action in response to an identified problem in approximately 66 percent of the in-depth reviews we analyzed. For example, EPA found that a nonprofit grant recipient needed to have a Single Audit conducted for 2001 and 2002. EPA recommended that the recipient immediately arrange to have these audits conducted. For another nonprofit grant recipient, EPA found that the recipient received funding from multiple sources but did not maintain records to track the staff time that was allocated to each of these grants. EPA recommended that the recipient develop and use timekeeping records that meet the standards outlined in the Office of Management and Budget's (OMB) circular. We also found that EPA took 32 significant actions against 15 different nonprofit grant recipients. In addition to taking significant actions against nonprofit grant recipients EPA also took actions against state and tribal grant recipients in 2002. Of the 32 significant actions EPA took against nonprofit grant recipients in calendar year 2002, 23 resulted from problems identified during in-depth reviews. EPA took the other nine significant actions as a result of problems identified during grantee oversight other than in-depth reviews and investigations by the EPA Office of Inspector General (OIG). Our analysis found that of the 36 nonprofit grant recipients that had three or more problems identified during in-depth reviews, EPA took at least one significant action in nine cases, or 25 percent of the cases. Nonprofit grant recipients that received significant actions were often cited as having multiple problems related to their accounting systems, internal controls, or financial expenditures. While the problems identified with some of these nonprofit recipients have been resolved through corrective and significant actions, information provided by EPA indicates that many problems remain unresolved. For example, some recipients have improved their financial management systems as a result of recommended actions, while in other instances a number of questionable grant expenditures are still in the audit resolution process.10 We have enclosed detailed information concerning the circumstances surrounding 15 nonprofit grant recipients that had significant actions taken against them in 2002.