Testimony to the Senate Committee on Environment and Public Works
June 22, 2005
by: Tom Schatz

Testimony

Mr. Chairman, members of the committee, thank you for the opportunity to testify today on behalf of the more than one million members and supporters of Citizens Against Government Waste (CAGW).  We hope that this hearing will shed light on long-standing questions concerning grants that are awarded to nonprofit organizations by the Environmental Protection Agency (EPA). 

CAGW was created 21 years ago after Peter Grace presented to President Ronald Reagan 2,478 findings and recommendations of the Grace Commission (formally known as the President’s Private Sector Survey on Cost Control). These recommendations provided a blueprint for a more efficient, effective, and smaller government.

Since 1984, the implementation of Grace Commission recommendations has helped save taxpayers more than $758.7 billion. CAGW is the nation's largest nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government

CAGW is classified as a Section 501(c)(3) organization under the Internal Revenue Code of 1954 and has not received any federal money and does not plan to receive any federal funds in the future.

Mr. Chairman, you aptly described the current EPA grants management system over the past ten years as a “revolving door” of audits from the EPA Inspector General (IG), Government Accountability Office (GAO) reports, Congressional hearings, and new EPA policies.  Despite the great lengths a number of people have gone through to create a more accountable, competitive, and flexible system, there are still non-competitive practices and questionable award processes at the EPA. 

In 1998, CAGW released a special report entitled “Phony Philanthropy:  How Government Grants are Subverting Missions of Nonprofit Organizations,” which examined EPA grants awarded to nonprofits between January 1, 1995 and January 1, 1997. The report analyzed 105 organizations which received 839 EPA grants.  The report detailed the location, IRS status, net assets, total revenue, total amount of government funding and the percentage of total revenue such funding represents, cumulative EPA grants within this two year time period, information about nonprofit goals and lobbying affiliation.

 The report, and our testimony today, is not intended to criticize nonprofits but to review the grant process and offer solutions to improve the system.

 Nonprofits contribute to society by providing assistance, innovation, advocacy, and education through an independent voice.  Nonprofits are truly an American institution and should be encouraged to foster and grow.

However, in our Phony Philanthropy Report, we found that several nonprofit groups, who advocate for specific partisan agendas, were receiving substantial government grants that could assist them in their efforts.  For example, the Environmental Defense Fund had received $1.3 million in cumulative EPA grants.  Earth Share had received $998,000.  The Consumer Federation of American had received $380,000.  After the report was released, these organizations continued to receive government grants.  The Environmental Defense Fund, now Environmental Defense, received over $3 million additional dollars.  Earth Share received an additional $33,000.  The Consumer Federation and the Consumer Federation of America Foundation received over $6.5 million combined.

Taxpayers need to become concerned when a politically active group receives grant money from government sources.  While CAGW would certainly be troubled that there may be no formidable barrier to prevent government grant money flowing directly into the lobbying side, this is just part of the problem.  Even educational efforts are suspect.  For example, while educating the public on the so-called benefits found in Kyoto may please some citizens, it will not please others.  All funds are fungible.  Government-funded grant money that is used to pay the rent, turn on the lights or promote a fairly innocuous theme such as educating consumers on buying energy efficient appliances or solid waste management is money the organization does not have to privately raise to lobby elected officials on a particular point of view.  When government dollars become involved to help advocate a particular agenda, either from the right or the left perspective, all taxpayers should be concerned.  The EPA’s needs a better approach to grantee oversight and whether organizations such as those mentioned are spending taxpayer funds efficiently and properly.  Frankly, we believe organizations that do any kind of lobbying should not receive government grants.

In our 1998 report, we also evaluated organizations that receive substantial amounts of their income in government grants.  Government co-dependency, a situation where a nonprofit organization receives 50 percent or more of its funding from government sources, is another problem in EPA grants.  As a nonprofit becomes more reliant on government support, its mission can shift.  For example, instead of asking for funds to find a solution to a problem, their goal can shift to asking for funds to maintain the status quo.  In other words, they become trapped in their undertaking, dependent mostly on the government for their existence.  In addition, if nonprofits are unable to gain sufficient monetary support from the voluntary, private sector, there is no reason for the government to continue to artificially prop up these groups.

In our 1998 report, we discovered that the Battelle Memorial Institute had received approximately $1 in EPA cumulative grants.  Total government funding was 88 percent of its revenues, according to its 1996 annual report.  Today, Battelle’s cumulative EPA funding amounts to $23 million.  And, according to Battelle’s most recent available IRS Form 990, 100 percent of its funding comes from the government.

In 1998, the Tellus Institute had $372,000 in cumulative EPA grants; today that totals stands at $2.2 million.  Its reliance on government was 60 percent of its total budget, today it amounts to 73 percent.

CAGW remains concerned today that organizations, such as those mentioned, receive such a large amount of their funding from the government.  Although we realize valuable research can and probably is being conducted by organizations such as these, we also believe that in most cases if the research is worth being conducted, the private sector would certainly be doing it.  We think Congress needs to take a closer look at these types of nonprofits to make sure we are not spending tax dollars to simply maintain an organization and that our nation is getting something in return for the investment.

To their benefit, EPA has policies currently in place to ensure fair and open competition so that the most qualified nonprofits be awarded grants. The EPA has improved its efforts to ensure clarity in announcing grant availability, awarding grants, and overseeing successful implementation of grant policies.  In fact, according to Government Accountability Office (GAO), EPA issued oversight policies in 1998, 1999. 2002, and 2005 designed to increase grant monitoring, increase in-depth reviews, and to create annual monitoring plans.  In addition, in 2003 the EPA issue its first five-year grants management plan aimed at improving oversight, competition, and EPA personnel skills.  In January, 2005, the EPA issued Order # 5700.7, known as the “Results Policy.”  This will help the EPA decide whether grantees are actually contributing to the agency’s strategic goals.  And in March, 2005, Order # 5700.8, the “Pre-Award Policy,” was issued.  This order will create internal controls that will help the agency determine if nonprofits organizations have the administrative and programmatic ability to meet the requirements needed for receiving government funding.  However, internal polices, rules and orders are only worth the paper they are written on if they are not followed.  

Your activity has inspired us to take a second look at EPA funding and we will be investigating some of the grants that have been awarded recently.  Already some red flags have been raised.  For example, the Natural Resources Defense Council (NRDC) receives funding from the EPA.  According to its web site, the NRDC opposes drilling in ANWR and it encourages visitors to write their senators to support a cap on carbon dioxide emissions.  It criticizes the Bush administration and states because the administration caters to industries, America's health and natural heritage are at risk and the administration “threatens to do more damage to our environmental protections than any other in U.S. history.”  The NRDC even asks its members to write their senator to oppose John Bolton’s nomination as U.N. Ambassador.

The NRDC has received from the EPA a cumulative total of grants amounting to over $6 million.  According to the group’s 2003 IRS Form 990, it received $608,000 in government grants.  In 2003, they also spent $645,000 to lobby Congress.  As we have noted before, most money is fungible.

Before I close, let me give the EPA a pat on the back.  At least their grants are on their web site for everyone to see and evaluate.  This is better than many agencies.  I would encourage this committee to do whatever it can to get other agencies to provide the transparency demonstrated by the EPA.

In closing, it is important that each EPA dollar is spent wisely to maximize effectiveness.  Awarding grants to nonprofits that have a partisan agenda or who rely entirely on government-funding for their existence present clear conflicts of interest among the government, the private sector, and taxpayers.  CAGW believes the grants, if not properly managed, invites a huge waste of tax dollars.  In order to experience sustained improvement in protecting human health and the environment, the EPA’s grant management system must continue to evolve into an accountable and competitive process.