Grants Management:

Action Needed to Improve the Timeliness of Grant Closeouts by Federal Agencies

GAO-12-360: Published: Apr 16, 2012. Publicly Released: May 17, 2012.

Additional Materials:

Contact:

Stanley J. Czerwinski
(202) 512-6806
czerwinskis@gao.gov

 

Beryl H. Davis
(202) 512-2623
davisbh@gao.gov

 

Office of Public Affairs
(202) 512-4800
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What GAO Found

At the end of fiscal year 2011, GAO identified more than $794 million in funding remaining in expired grant accounts—accounts that were more than 3 months past the grant end date and had no activity for 9 months or more—in the Payment Management System (PMS). GAO found that undisbursed balances remained in some grant accounts several years past their expiration date: $110.9 million in undisbursed funding remained unspent more than 5 years past the grant end date, including $9.5 million that remained unspent for 10 years or more. GAO also found $126 million in grant accounts in the Automated Standard Application for Payments (ASAP) for which there had been no activity for 2 years or more, including $11 million that remained inactive for 5 years or more. However, data from these two systems are not comparable because, unlike PMS, ASAP accounts can include multiple grant agreements between a federal agency and a grantee, only some of which may be eligible for closeout.

GAO and agency inspectors general have raised concerns in audit reports about timely grant closeout. These reports found that some agencies lack adequate systems or policies to properly monitor grant closeout or did not deobligate funds from grants eligible for close out in a timely manner.

OMB issued guidance to certain agencies at the direction of Congress for reporting undisbursed balances in expired grant accounts that instructed agencies to report on expired appropriations accounts rather than grant accounts eligible for closeout. By focusing on grants eligible for closeout, OMB could better direct agency management toward grants in need of more immediate attention. Grant closeout makes funds less susceptible to fraud, waste, and mismanagement; reduces the potential costs in fees related to maintaining grants; and may enable agencies to redirect resources to other projects.

Why GAO Did This Study

In 2008,GAO reported that about $1 billion in undisbursed funding remained in expired grant accounts in the largest civilian payment system for grants, PMS, operated by the Department of Health and Human Services’ Program Support Center. GAO was asked to update its 2008 analysis evaluating: (1) the amount of undisbursed funding remaining in expired grant accounts, including the amounts that have remained unspent for at least 5 years or more and for 10 years or more; (2) issues raised by GAO and federal inspectors general related to timely grant closeout by federal agencies; and (3) actions OMB and agencies have taken to track undisbursed balances in grants eligible for closeout. To do this, GAO analyzed data from two federal payment systems disbursing 79 percent of all civilian federal grant awards—PMS and the ASAP system, which is operated jointly by the Department of the Treasury and the Federal Reserve Bank of Richmond. In addition, GAO also reviewed audit reports that it and federal inspectors general issued; relevant OMB circulars and guidance; and performance reports from federal agencies.

What GAO Recommends

GAO recommends that OMB revise future guidance to better target undisbursed balances in grants eligible for closeout and instruct agencies to take action to close out grants that are several years past their end date or have no undisbursed balances remaining. OMB staff said that they generally agreed with the recommendGAO recommends that OMB revise future guidance to better target undisbursed balances in grants eligible for closeout and instruct agencies to take action to close out grants that are several years past their end date or have no undisbursed balances remaining. OMB staff said that they generally agreed with the recommendations and will consider them as they review and streamline grant policy guidance.ations and will consider them as they review and streamline grant policy guidance.

For more information, contact Stanley J. Czerwinski at (202) 512- 6806 or czerwinskis@gao.gov or Beryl H. Davis at (202) 512-2623 or davisbh@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Comments: While the Controller of OMB, on July 24, 2012, issued the first ever "Controller Alert" to chief financial officers instructing agencies to take appropriate action to closeout expired grant accounts in a timely manner and reduce undisbursed balances, OMB has not yet issued guidance to the affected agencies revising the definition of undisbursed balances in expired grant accounts for the purpose of reporting in their Performance and Accountability Reports.

    Recommendation: The Director, OMB should revise the definition of "undisbursed balances in expired grant accounts" in future guidance issued to agencies, including those required to report under Section 536 of the Commerce, Justice, Science, and Related Agencies Consolidated Appropriations Act, 2012, to focus on undisbursed balances obligated to grant agreements that have reached the grant end date and are eligible for closeout, as described in this report.

    Agency Affected: Executive Office of the President: Office of Management and Budget

  2. Status: Closed - Implemented

    Comments: On July 24, 2012, the Controller of the Office of Management and Budget issued the first ever "Controller Alert" to all federal Chief Financial Officers which cited GAO's findings and instructed agencies to take appropriate action to closeout grants in a timely manner. The Alert stated that agencies should focus first on closing out expired grants that are several years past their end dates or have no remaining funds.

    Recommendation: The Director, OMB, should instruct agencies with undisbursed balances still obligated to grants several years past their grant end date to develop and implement strategies to quickly and efficiently take action to close out these grants and return unspent funds to the Treasury when appropriate.

    Agency Affected: Executive Office of the President: Office of Management and Budget

  3. Status: Closed - Implemented

    Comments: On July 24, 2012, the Controller of the Office of Management and Budget issued the first ever "Controller Alert" to all federal Chief Financial Officers which cited GAO's findings and instructed agencies to take appropriate action to closeout grants in a timely manner. The Alert stated that agencies should focus first on closing out expired grants that are several years past their end dates or have no remaining funds.

    Recommendation: The Director, OMB, should instruct agencies with expired grant accounts in federal payment systems with no undisbursed balances remaining to develop and implement procedures to annually identify and close out these accounts to ensure that all closeout requirements have been met and to minimize any potential fees for accounts with no balances.

    Agency Affected: Executive Office of the President: Office of Management and Budget

 

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