Federal Manager's Daily Report

EPA often does not document its reasons for choosing a

grant instead of a contract in its award decision

memorandums and it is unclear whether this shortcoming

obscured inappropriate decisions to use grants instead of

contracts, the General Accounting Office has said.

It said that under the Federal Grant and Cooperative

Agreement Act of 1977 the decision to issue a grant or

contract hinges on the purpose of the award.

In 64 percent — 43 of 67 — of the memoranda GAO reviewed,

EPA did not fully justify its reasons for choosing a grant

instead of a contract, even though EPA procedures define

staff roles and responsibilities, provide examples of when

to use a grant or a contract, and require justification in

the award decision memorandum.

However, GAO found about 8 percent of EPA’s discretionary

grantees identified EPA as the primary and direct

beneficiary, suggesting the principal purpose of the grant

award was acquiring property or services for EPA’s direct

benefit, which would call for a contract rather than a grant.

EPA needs to improve the documentation of its justification

for using a grant instead of a contract, both of which

constitute over two-thirds of EPA’s budget — in fiscal year

2003, EPA awarded $3.6 billion in grants directed by

Congress, $656 million in grants awarded at its own

discretion, and $934 million in contracts, said GAO.

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