Where the EPA IG chooses to look often tells you where the risks are growing

Nicole Murley We looked at three things, and it’s where is the most money, where can we see the least, and what has changed the most? And what I mean by that is when we talk about money and resources, the EPA has received more than $60 billion in supplemental funding over the last couple of years, and all of that money goes out to states and subrecipients. But we also look at budget and resourcing. Where is the budget going? Where are resources shifted? We talk about visibility or we look at visibility. The farther the money gets down the chain, the farther it is from the agency to the sub-recipient. We look to see where the risks are there as well as data quality. Where can we see good data? Where is bad data? Where do we need to look at those gaps? And then also just as importantly, we look at our own oversight work and we compare that when we talk about resources. So when we see where the agency is spending its resources, we look and see what areas and programs have we covered in the last couple of years? And where are the gaps in our own oversight? That helps drive where we focus the coming year. And then we look at change. What has changed? What is different from last year to this year? Or previous years before that? And this year, the agency has reorganized, reduced its workforce. And we also have huge technological changes happening. Information systems are being updated. AI technology is being introduced to the workforce. So we look at the whole picture of the agency, our past work, our management challenges, and we identify where we see risks, opportunities, and vulnerabilities that we need to focus our resources for the coming year.

Terry Gerton Those sound like rules that would apply to just about every IG office across the federal government, but let’s take them kind of one at a time with you. The first one where you said, where you spend the most dollars, EPA is managing a much larger flow of funding than it was a few years ago. So from an oversight perspective, from the IG’s view, what is more challenging when all of that money is moving through programs and recipients?

Nicole Murley It’s two things. It’s distance and volume. Two things get harder. There’s more money and there’s more hands that that money passes through. When the money more than doubles, so does the job of managing that money and our oversight responsibilities increase as well. You have a lot of new recipients, you have unsophisticated recipients who maybe have never received federal dollars before. So, you know, the schemes aren’t new, what we’re looking for in in terms of fraud, waste and abuse are not new. It’s just the volume and the distance becomes more complex for everyone involved.

Terry Gerton And you mentioned the challenge of experienced grant recipients and how that is changing. So how are you thinking about preventing the misuse of funds on the front end? Are you looking at training for these recipients? Are you look at more flags in the system? What preventive measures can you put out there?

Nicole Murley So I will say, you’ve hit on one of my favorite topics, prevention. And prevention is the unglamorous work of oversight. You know, when we do preventative work, it often doesn’t make headlines. It’s not quantifiable. How do you count money or fraud that hasn’t happened? Right? But it is so important. It is the bread and butter of what we do. We talk about recovering dollars, but a dollar that’s recovered has already been lost once. A check that is in place that works protects the dollars before it goes out. So you asked, what are we doing about that? Our work itself is preventative. It’s the internal controls that we find that we work with the agency through our recommendations to strengthen that put those guardrails in place for the federal dollars before they go out. So is the guidance in place, is the oversight happening? Are the processes being carried out? Are we getting complete documentation when we do the oversight work or when the agency’s checking grant recipients? But then in addition to that, we have really upped our game when we talk about distance, right? We talk about, okay, the money going all the way down. The IG Act says that we are responsible, we follow the money all the down to the last person that touches it. It’s a pretty big task when we talk about 50 different states and an entire agency to oversee. So how do we prevent that? We do fraud awareness briefings to the subrecipients and the recipients level. We go out, we look at the terms and conditions. We make sure the terms and conditions have the requirements in there. And then we educate them on what to do if they suspect waste, fraud, and abuse, and mismanagement. Where do they report it? We give them the line straight to us. We tell them what to look for. And I will say that is really paid off for us. We can see a direct result of, if we go out and do a briefing, a fraud awareness briefing, oftentimes we then see the hotline come in that’s actionable when we educate people on what to look for and where to report. I’m really proud of that work because that is prevention in essence. That’s protecting the dollar before it is spent.

Terry Gerton Nicole Murley is the senior official performing the duties of the inspector general at the Environmental Protection Agency Office of the Inspector General. Nicole, that is so helpful and it relates directly to what you said was your second objective, looking at areas where you can see the least. As you said, EPA sends so much of its funding outside the agency through cooperative agreements, through grants, you go through all 50 states all the way down to who knows how many diverse recipients. Once the federal dollars start getting down below the state level, what are the biggest challenges in tracking those and in tracking the impact of those funds?

Nicole Murley So it’s line of sight. Most of EPA’s budget doesn’t stay with the EPA, as you said. It goes out as grants and contracts. And so the farther it gets away from the EPA the harder it is to track. And with that is also data quality. The way the money goes out, we’re talking about 50 states. Each state keeps its data in a different way. That becomes harder for us. It’s also when you get down to the recipient, we talked about the terms and conditions and the requirements being in the agreements that people are held to and a point to the fact that what sits with the states is the data. And so we did a management implication report a number of years ago that found that six states kept their data in paper format. It becomes really difficult to conduct oversight when you have to go to a file cabinet or you’re getting things in paper format. And so when the information sits with the states, getting that data in searchable format, a way that you can run data analytics on is difficult. And it’s an area that we’re focused on.

Terry Gerton I was going to ask you if AI is helping you here, but AI is not going to help you with paper records.

Nicole Murley That is correct.

Terry Gerton Nonetheless, one of the big use cases for AI is, in fact, disparate sets of data and using it to make sense of them. Are you finding that as an application opportunity in EPA?

Nicole Murley Yes, we are. You know, it’s an area I’m really excited about is the bringing in leveraging new technology in our oversight work. The ways that we can get unstructured data, turn it to structured data, and then run machine learning and advanced artificial intelligence on that data to look for risk areas to see patterns, you know, we’re not there 100%, but we’re getting there and we’re putting the infrastructure in place that is going to allow us to do that. And with that, I expect our oversight to have an even bigger impact.

Terry Gerton The third category that you talked about was where change is happening the most. There’s certainly changes in regulations, there’s changes in technology, but I wanna talk about two you’ve already mentioned. One, the significant increase in funding flow through EPA combined with the significant decrease in staffing. So you’ve got bigger programs, more money, and fewer people to watch over them. How are you mitigating that impact?

Nicole Murley We do that through our oversight work. And a lot of our oversight that is done is not the audits or the evaluations that you see. We are in constant communication with the agency. We monitor and look at what change is happening and we keep abreast of all things so that it helps us plan our oversight.

Terry Gerton What lessons did your team learn from putting this oversight strategy together that you think would benefit other agency offices of the Inspector General or other oversight functions more generally?

Nicole Murley I’m really proud of the oversight plan that we put in place this year. It covers themes. In years past, we had done more, say, prescriptive where we had laid out all of the projects we were planning for the year. The two buzzwords that I like to say are innovation and agility. We have a large area to cover. Our responsibilities are great. And we talk about impact. How do we make the most impact with our work? And one of the ways we do that is by being agile and innovative in the way we do our work. And that is, you can see that in this oversight plan. We talk about large themes, it maps to our management, or the management challenges from last year. And so really, we came together and said, what are the areas that we wanna look at? But what allows us to be adaptable as an organization to shifting risks, priorities in any emerging areas that come to be this year? So that we’re not. Rigid in our approach. And so I think you can really benefit from any organization can benefit from learning to be more agile and more adaptable to emerging risks and being able to meet that Challenge.