MANAGING ORGANIZATIONS IN UNUSUAL AND UNCERTAIN
CONDITIONS: THE ENVIRONMENTAL PROTECTION AGENCY’S
RECOVERY ACT STEWARDSHIP PLAN
Introduction
At the time the American Recovery and Reinvestment Act (Recovery Act) was enacted,
Stefan Silzer was well into the second month of an assignment as part of the U.S.
Environmental Protection Agency’s (EPA) Senior Executive Service Candidate
Development Program (1). He was serving as Acting Director of the Office of Financial
Management (OFM) in the Office of the Chief Financial Officer. Silzer felt good about
his assignment. His vision was to transform OFM from a financial reporting organization
to a high performing, Agency-wide driver of financial performance. He immediately
recognized that the Recovery Act could be the catalyst to make his vision a reality.
As required by the Recovery Act, EPA leadership had already established an executivelevel workgroup, the Recovery Act Steering Committee (Steering Committee), to provide
oversight to the administration of Recovery Act funds. But EPA also needed a clear and
comprehensive plan to assess and mitigate its financial and operational risk for the funds
(2). If the Steering Committee actively supported OFM’s leadership in developing an
Agency-wide risk assessment and mitigation plan, OFM would, in fact, be acknowledged
as the office responsible for ensuring that administrative and program offices assess and
mitigate financial risks, thereby driving Agency financial performance.
In a crisis, leaders are focused on emergency management, not internal controls,
which can seem bureaucratic. The Recovery Act provided the chance to make
sure that internal controls were not only covered, but also engineered for the long
term.
- Stefan Silzer, Acting Director, OFM
Background Information
EPA is an independent regulatory agency whose mission is to protect human health and
safeguard the natural environment. The Agency employs over 17,000 staff and
contractors housed at headquarters offices in the metropolitan Washington, D.C. area and
This case was written by Constance Gillam, U.S. Environmental Protection Agency, as part of the
Recovery Act Case Program. The case is intended solely as a vehicle for classroom discussion,
and is not intended to illustrate either effective or ineffective handling of the described situation.
The Electronic Hallway is administered by the University of Washington's Daniel J. Evans School
of Public Affairs. This material may not be altered or copied without written permission from The
Electronic Hallway. For permission, email [email protected], or phone (206) 221-3676.
Electronic Hallway members are granted copy permission for educational purposes per Member’s
Agreement (hallway.evans.washington.edu).
Copyright 2011 Electronic Hallway
The Environmental Protection Agency’s Recovery Act Stewardship Plan
laboratories, satellite offices, and 10 regional offices around the country (3). Grants and
contracts are key factors in accomplishing the Agency’s mission; in fact, grant programs
comprise more than half of EPA’s total costs.
EPA is a highly decentralized agency. Headquarters’ offices coordinate program strategy
across the country; EPA’s 10 regional offices individually execute its mission. Regional
leadership structures and relative independence have, on occasion, challenged EPA’s
ability to function as a cohesive whole and deliver consistent programming.
In addition to communication challenges between headquarters and regional offices, EPA
faces communication challenges across headquarters’ offices. Each tends to focus on its
own specific programmatic mission without regard to the needs of other EPA offices,
which has led to inconsistencies in approach to Agency problem-solving. Senior
leadership at EPA, in exhorting the staff to remove communication barriers that fragment
the Agency and dilute its effectiveness, described this state of affairs as follows:
We all know what One EPA is not: operating in stovepipe fashion,
according to distinct organizational or statutory mandates at the expense
of seeing the bigger picture or according to rote processes in which
interaction with other parts of EPA is done formally and at arm’s length.
One EPA includes our recognition that genuine collaboration across the
Agency is often essential to effective and durable answers. It entails our
persistent questioning whether a more integrated way of reaching
solutions would better protect the environment.
- Bob Perciasepe, Deputy Administrator, EPA
EPA’s Office of the Chief Financial Officer (OCFO) is the policy support office responsible
for the Agency’s strategic planning, resource management and reporting, management
integrity, performance evaluation and reporting, and technology planning and deployment of
the its financial and resource management systems. The Chief Financial Officer, appointed
by the President to lead OCFO, has ultimate responsibility for risk assessment and risk
mitigation of Recovery Act funds. Within the OCFO, OFM is responsible for oversight of the
financial management aspects of Agency operations.
Impact of Recovery Act Funds on EPA
The Recovery Act was enacted into law on February 17, 2009. EPA received $7.2 billion,
nearly doubling its recent annual budget. Congress required that Recovery Act funds be
obligated by September 30, 2010 (4).
The vast majority of EPA’s Recovery Act funds was used to award grants, while some
were awarded as contracts or as interagency agreements. The compressed timeframe for
these awards placed extraordinary stress on the ability of EPA’s program delivery, grants
management, procurement, and financial reporting systems to process the additional
2
The Environmental Protection Agency’s Recovery Act Stewardship Plan
funding in compliance with numerous laws and regulations affecting the Agency’s
programs.
In addition to the 19-month time constraint, the Agency was also facing an
unprecedented level of scrutiny from oversight bodies and the public. President Obama
indicated that the Recovery Act would be the launch pad for his administration’s
commitment to accountability and transparency throughout the federal government,
which meant agencies were required to share data in entirely new ways. For example,
OMB required EPA to provide weekly financial information to FederalReporting.gov, a
website created to track government-wide progress on spending and jobs created by the
Recovery Act. This information was tracked, collected, and reported in new, prescribed
formats that created technological challenges for the EPA and required close coordination
among offices to ensure the integrity of reported financial information.
EPA expected OMB to issue detailed guidance on the oversight and use of these funds,
but the timeframe was not clear. Given the extraordinary nature of the Recovery Act
requirements, Silzer recognized that EPA could not wait. The Agency had to determine
quickly the best path to assure that adequate internal controls were in place so that EPA
was not vulnerable to fraud, waste, and mismanagement of Recovery Act funds.
On the Edge of a Knife: Decisions That Led to Success
Although he was serving as Acting Director of OFM, Stefan Silzer was not an accountant
and did not have technical expertise in financial management. He was an attorney, who in
his 17 years in the federal government had spent over ten years combating grant and
contract waste, fraud and abuse, and environmental misconduct by government
contractors and just over one year leading an office responsible for grant and interagency
agreement policy, training, and agency and recipient compliance. Yet, he was prepared to
assert his leadership skills and take advantage of the opportunities afforded by the
Recovery Act to transform how the EPA functioned when faced with a crisis. In addition,
this situation afforded him the opportunity to position his office, OFM, squarely in the
middle of the action.
Silzer carefully considered the leadership and management actions necessary to reach his
goal of transforming OFM into a collaborative agency-wide driver of financial
performance. Recovery Act requirements created a high-risk situation for EPA programs
and funding. The potential for mismanaging funds was great, and the impact would be
devastating if mismanagement were to occur.
Great change for good can happen in a crisis as long as things are well thought
out, are the right thing to do, and meet the immediate needs. These are
transformational opportunities that should be seized. But, it only works if things
are well thought out and are clearly linked to the crisis.
- Stefan Silzer, Acting Director, OFM
3
The Environmental Protection Agency’s Recovery Act Stewardship Plan
It was imperative that the Office of the Chief Financial Officer quickly develop a
proactive strategy for ensuring that all EPA organizations responsible for Recovery Act
funding had policies, procedures, and other guidance on the use of these funds as quickly
as possible. Silzer and his staff led the way by developing a comprehensive strategy for
various offices within OCFO to put the necessary IT systems, budget tracking, and
communications processes in place to accomplish this. Within the overall strategy,
OFM’s role was to determine the guidance and assistance the Agency would need to deal
with the financial management intricacies of the Recovery Act, reconcile internal policy
and procedural guidance with subsequent guidance issued by OMB, and assure that the
right people received the guidance and assistance they needed in a timely manner.
Silzer believed that a comprehensive stewardship plan was essential for administering
EPA’s Recovery Act funds. His idea was to develop a plan that was a well-defined
blueprint for program, regional, and administrative managers on what they must do to
mitigate the risk of fraud, waste, or abuse of Recovery Act funds. As an interim measure
to assist Agency managers, Silzer immediately initiated a review of all existing Agency
financial management policies that might apply to the Recovery Act funds and provided
that information to them.
Silzer understood that the development of an EPA Recovery Act Stewardship Plan
(Stewardship Plan) was a major test of his leadership abilities. Furthermore, he realized
that he faced enormous challenges. This was his first leadership role in the world of
financial management, and he was hugely reliant on others’ technical expertise. Although
Silzer was aware of the enormity of the task, he was not daunted by the challenges it
presented.
I knew so little; I wasn’t as scared as I should have been.”
- Stefan Silzer, Acting Director, OFM
Assuring the Audit Integrity of the Stewardship Plan
There are problems with internal controls in a normal environment. With the
Recovery Act, there were compressed time frames, shortened processes, and
greater scrutiny. The Inspector General had greater resources to challenge what
was done than administrators had to implement the act. Procedures had to be in
place to protect the integrity of the Agency.
- Stefan Silzer, Acting Director, OFM
The Recovery Act gave federal agency’s Inspectors General a significant oversight role
and the resources to ensure that agencies met the act’s goals and requirements.
Consequently, Silzer knew that the proposed Recovery Act Stewardship Plan had to pass
the auditor’s litmus test: be comprehensive in scope, specific in detail, technically sound,
accurate and tailored to meet current audit and accounting standards. Staff researched
Government Accountability Office internal control standards, general internal control
auditing requirements, and internal control requirements under the Federal Managers’
4
The Environmental Protection Agency’s Recovery Act Stewardship Plan
Financial Integrity Act, as well as risk management practices in other federal agencies to
ensure that there was a sound conceptual framework for EPA’s plan.
Knowing that EPA’s Recovery Act Steering Committee would give the utmost deference to
any risk mitigation measures supported by the Agency’s Office of Inspector General (OIG),
Silzer set out to gain the support of OIG’s senior leadership for the approach toward
developing the Stewardship Plan. He discussed the conceptual framework and proposed
content of the Stewardship Plan with managers in OIG and assured them that it would
address all open OIG audit findings. His approach and action plan put the proposed
Stewardship Plan on solid footing with the audit community. Significantly, OIG staff agreed
to play a consulting role in the development of the plan, which laid the groundwork for
persuading the rest of EPA to embrace Silzer’s approach.
In developing the plan, we needed to understand how auditors deal with
risk, and we needed to find a way to involve them in our development
process without compromising their role of independence.
- Christopher Osborne, Project Lead
Building an Agency-wide Consensus
In order to fully realize Silzer’s goal of driving EPA financial performance, the Stewardship
Plan needed to serve other purposes as well. In addition to a risk assessment and risk
mitigation strategy document, the Agency needed a document that could serve as a
communications tool for auditors, program managers, and financial managers yet retain
enough flexibility to evolve to meet changing circumstances. Silzer was well aware that an
emergency—natural disaster or terrorist event—could occur in the future that might render
the Agency’s financial and operational processes vulnerable again. He believed the plan
should be a prototype that could be institutionalized into Agency practice once Recovery Act
requirements were satisfied and sought to build Agency-wide consensus.
To begin building the consensus needed, Silzer assured everyone that the programmatic
workload burden would be minimized by building the plan on existing guidance and key
internal controls to the maximum extent possible. Four years earlier, OFM staff had
developed a Hurricane Katrina Stewardship Plan to cope with the disastrous effects of
Hurricanes Katrina and Rita in the Gulf of Mexico. Although the scope and magnitude of
the Katrina Stewardship Plan was limited in the number of program offices and regional
offices affected, there were lessons learned from the Katrina experience that were useful
in crafting a more comprehensive Recovery Act Stewardship Plan. In addition to the
Katrina Stewardship Plan, OFM staff had three years of experience in assigning risk and
documenting, testing, and evaluating the effectiveness of key internal controls through
implementation of the requirements of OMB Circular A-123, Appendix A on internal
controls over financial reporting. Building on these foundations reduced the workload
burden on the Agency, thereby allowing EPA to avoid a fire drill approach and
promoting development of a plan that was useful and usable.
5
The Environmental Protection Agency’s Recovery Act Stewardship Plan
Initially, some programs exhibited reluctance to be subjected to additional controls. Silzer
allayed their concerns by making it clear that the program offices and regions would have
input into the contents of the plan as Silzer led its development. In addition, the unspoken
influence of the Steering Committee in selection of a cross-functional team to develop a
Stewardship Plan made the committee’s up-front support crucial to the plan’s eventual
full implementation. Because Silzer systematically addressed stakeholder concerns and
laid out a coherent approach for addressing Recovery Act requirements, he was able to
secure the needed Steering Committee support.
With the Steering Committee’s support, OFM staff worked successfully to solicit
Agency-wide senior program, regional, and administrative subject-matter experts to join
a cross-functional workgroup to develop the Stewardship Plan. OFM organized the
workgroup into seven functional areas that covered all aspects of managing EPA’s
Recovery Act funds: grants, contracts, interagency agreements, human capital, budget,
performance reporting, and financial management. He instructed functional leads to work
with technical staff from across the EPA to develop the content for the Stewardship Plan
and then gave them the freedom to determine the process by which they would work
across the Agency within their functional areas. Silzer set the tone, and OFM staff
presided over workgroup activities.
Ultimately, offices ceded authority as documenter and overseer of internal
controls to OFM that they might not have otherwise done because of the
transparency and accountability requirements of the Recovery Act. Offices
were willing to agree to things even when they didn’t know exactly what
they were agreeing to. They were willing to do this because of the process
used to develop the Stewardship Plan.
- Stefan Silzer, Acting Director, OFM
Silzer reinforced the message of managing EPA’s Recovery Act risk at all levels, which
ensured collaboration and cooperation from all offices with Recovery Act funding. OFM
staff established top-down coordination and clearly defined roles and procedures in the
workgroup and coordinated its activities.
The key was to link plans and decisions at the workgroup level to the
Agency’s Executive Steering Committee to make sure that everything was
vetted from the lowest level to the highest. The Executive Steering
Committee was briefed on activities at least once a month.
- Stefan Silzer, Acting Director, OFM
Ingredients for Success
These elements—audit integrity, inclusiveness, and building on existing processes—were
significant factors in obtaining Steering Committee and eventually Agency-wide support
for the Recovery Act Stewardship Plan. In particular, the fact that OIG had already
agreed to participate in the process gave the plan legitimacy in the eyes of the Agency
6
The Environmental Protection Agency’s Recovery Act Stewardship Plan
and, ultimately, OMB and helped cement OFM’s role as a central broker in achieving the
organizational consensus required to protect the administration of funds from risk.
The requirements of the Recovery Act and the subsequent development of the
Stewardship Plan united EPA offices in a common cause in a way that had not
happened before. This moment of organizational clarity—the recognition of what
could happen if things went wrong in implementing the Recovery Act—created
an environment for organizational consensus to coalesce around Silzer’s
leadership. The big picture came into focus, and each office gained a better
understanding of the role its programs and activities played in conjunction with
those of other offices in accomplishing the Agency’s mission.
The Stewardship Plan was issued by OFM’s July 1, 2009 target completion date (5). The
comprehensive plan assessed and rated risk as high, medium, or low; identified control
activities to ensure proper fiduciary management; identified monitoring activities; and
had contingency triggers that require the Agency to take action in the event problems are
uncovered. It covered six Agency programs, all 10 EPA regions, and over 225 funding
recipients, including states, tribes, local governments, universities, and nonprofit
organizations. The structure and content of the plan made it a model for ensuring
financial and programmatic integrity during periods when the Agency must respond to a
large scale, limited duration crisis, or other significant events without jeopardizing
ongoing Agency programs.
EPA’s Stewardship Plan received recognition and praise in several arenas. It was
highlighted to OMB and Congress as the Agency’s comprehensive plan to ensure the
integrity of Recovery Act funds. Other agencies employed EPA’s approach. The
Recovery Accountability and Transparency Board verbally acknowledged EPA’s
Recovery Act Stewardship Plan as a best practice. And, the Agency was invited to
present the Recovery Act Stewardship Plan as a best practice at the 2010 National Grants
Management Association’s conference.
The Path Forward
The success of the Stewardship Plan propelled Silzer’s office into a new role as the
financial stewardship leader in EPA. For example, EPA has used the Recovery Act
Stewardship Plan as a foundation for developing a risk assessment and risk mitigation
plan for the May 2010 Deep Water Horizon/British Petroleum (BP) Oil Spill. In addition,
the Chief Financial Officer asked Silzer to take on new financial management
responsibilities within his office, including a “green travel” initiative to reduce the
Agency’s carbon footprint and overall travel costs and to reinvest the savings in
teleconference infrastructure. Further, Silzer pushed his office to take the lead role in
developing technology and other tools to institutionalize risk management across the
entire Agency.
7
The Environmental Protection Agency’s Recovery Act Stewardship Plan
The Recovery Act Internal Controls workgroup continues to meet regularly to provide
quarterly updates to the Agency on the functional areas’ compliance with the Stewardship
Plan and share any Recovery Act-related concerns. As all of the funds were obligated by
September 30, 2010, the focus of the Recovery Act Steering Committee and its
subcommittees turned to monitoring the progress of the awards, monitoring spending and
payment activities, and closing out awards.
Since issuance of the first iteration of the Stewardship Plan, it has undergone several
minor updates as new guidance has been released. The next significant review and
refinement is scheduled for spring 2011. Despite the substantial collaborative effort that
resulted in creating a comprehensive Stewardship Plan, Silzer’s ongoing challenge is to
ensure the document is both a high-level risk management strategy and an operational
guide that is relatable to front-line program managers and staff on the ground.
Case Study Analysis and Discussion Points
Under Silzer’s leadership, OFM is working to ensure that the Recovery Act Stewardship
Plan is employed throughout the EPA as a guide to mitigate risk and affirm robust
stewardship of the Agency’s resources. This new leadership challenge will rely on the
same skills and nuanced approach that Silzer displayed in developing the document.
1. How does Silzer make sure that the Stewardship Plan is implemented in ways that are
consistent with his design and vision?






What impact did EPA’s decentralized structure or culture have on the
development of the Stewardship Plan? How will it impact the plan’s
implementation?
Silzer was successful in achieving a consensus for developing the Stewardship
Plan. How can he ensure that the consensus does not dissolve during
implementation of the plan?
How does one balance individual leadership vs. collaboration, especially when
one must rely on others’ technical expertise?
How does one balance the changing needs and demands of numerous
stakeholders?
This was a high visibility and high-risk way to change perceptions and culture.
Was the risk worth the reward?
Silzer’s major decisions and actions could have resulted in failure or success.
What are the factors that led to success? What actions avoided failure?
2. Once the Recovery Act crisis has passed, how can Silzer institutionalize the internal
control concepts in the Plan?
8
The Environmental Protection Agency’s Recovery Act Stewardship Plan
1
The Senior Executive Service Candidate Development Program is the federal government’s premier program to identify
and develop future executives and leaders. Participants undergo a developmental assignment of 12 to18 months that may
include classroom training, individual or group projects, and interagency experiences. Upon completion of the program,
participants who are certified by a Senior Executive Service Qualifications Board may be selected for a Senior Executive
Service position anywhere in the federal government without further competition.
2
OMB Circular A-123, Management’s Responsibility for Internal Control, was revised in December 2004 to establish for
the federal government some of the new internal control requirements that the Sarbanes-Oxley Act of 2002 imposed on
publicly traded companies. According to the circular, internal controls are tools (i.e., policies, procedures, and organization
structure) “to help program and financial managers achieve results and safeguard the integrity of their programs (pg. 1)” In
order to use these tools effectively, managers are required to identify, analyze, and mitigate risks that may prevent an
organization from meetings its objectives. Risk assessment and types of risk are discussed in greater detail in OMB
Circular A-123, Appendix A, Internal Control over Financial Reporting. The circular and appendix are available at
http://whitehouse.gov/omb. Scroll down to the “Information for Agencies” section and click on “Circulars.”
3
See http://www.epa.gov/aboutepa/organization.html for an organization chart of EPA.
4
OMB Circular A-11, Preparation, Submission and Execution of the Budget, defines obligation of funds as “a legally
binding agreement that will result in outlays, immediately or in the future. When you place an order, sign a contract, award
a grant, purchase a service, or take other actions that require the Government to make payments to the public or from one
Government account to another, you incur an obligation” (p. 65).
5
EPA’s Stewardship Plan is too long (84 pages) to be appended to this document. Online requests can be made for a
copy under the Freedom of Information Act at http://www.epa.gov/foia by clicking on “Make a FOIA Request.”
9