DEPARTMENT OF  HEALTH & HUMAN  SERVICES  
Centers for Medicare &  Medicaid  Services  
7500 Security Boulevard,  Mail Stop S2-26-12  
Baltimore, Maryland  21244-1850  
CENTERS FOR MEDICARE & MEDICAID SERVICES 
  CENTER FOR MEDICAID & CHIP SERVICES 
CMCS Informational Bulletin  
 
 
DATE:   October 19, 2023   
 
FROM:   Daniel Tsai, Deputy Administrator and Director   
 
SUBJECT:   Clarification of Medicaid and Childrens  Health Insurance Program  (CHIP)   
    Grants Closeout Process  
 
Purpose  
 
The Centers for Medicare & Medicaid Services (CMS), based on  recommendations from the  
Department of Health and Human Services, Office of  Inspector General  (OIG)1, is providing 
clarification  on the grant closeout process and requesting each states/territorys  assistance in  
making improvements to the Medicaid and Childrens Health Insurance Program  (CHIP)  grant  
administration process. One of the most critical pieces of the life cycle of a grant award is the  
final review and closeout  of an open grant award  in the Payment Management System  (PMS).  
For Medicaid and CHIP,  this occurs  annually  once the state/territory  (the  grant  award  recipient)  
conducts a final review  to ensure that  the amount  that CMS  authorized for the grant award(s)  
matches  the amount drawn and the amount reported as spent by the grant  award  recipient  to the  
appropriate subaccount  in PMS.  
 
The grant  award  recipients  PMS subaccount must  be reconciled for both negative and positive  
balances.  If the recipients subaccount has a negative amount, the state or territory should 
determine the cause  of  the overdrawn amount  and must return the overdrawn federal  funds to the  
appropriate subaccount. If the recipients subaccount has a positive amount, the state or territory  
should determine the cause of the underdrawn amount  and must determine if a drawdown  is 
required for the underdrawn federal funds  or  if the  state needs to  make any corrections to move  
draws  between  subaccounts  as needed. If the amounts are not in agreement, the grant award  
cannot be closed.   
 
Closeout  is the final step in  the grant process.  To  complete a grant  closeout, the  grant  award  
recipient must ensure that  the grant awards and associated drawdown amount  (federal funds  
requested and received by the state or territory), as reported by the  state/territory,  agree. The 
following describes the process for addressing the  closeout of  state/territory  Medicaid and CHIP  
grant awards and the  reconciliation of PMS subaccount balances in accordance with the Office of  
Management Circular A-136, Section II.4.9, Grants Programs (August 10, 2021).   
 
1  https://oig.hhs.gov/oas/reports/region6/61400068.asp  
  CMCS Informational Bulletin  - 2  
 
 
Background  
 
Enacted on January 28, 2016, the  Grants Oversight and New Efficiency (GONE)  Act  included 
requirements related to  the closeout of grants and cooperative agreements that are  in manual  
closeout with zero dollars and  undisbursed balances,  and which have a  period of performance  
that have  exceeded two years. Although the GONE Act  requirements have expired, the Office of  
Management Circular A-136, Section II.4.9, Grants Programs (August 10, 2021)  requires similar  
information to be reported.   
 
CMS is issuing this informational bulletin to  clarify  existing  guidance  regarding  the requirements  
for the Medicaid and CHIP  grant  closeout  process. Closeout  occurs once all expenditures have  
been  certified by the  state or territory  on the appropriate expenditure  and disbursement  reports.  
Medicaid and CHIP expenditures are  reported in  the  Medicaid and CHIP Budget and 
Expenditure System  (MBES/CBES)  through the quarterly expenditure Forms  CMS-64 and 
CMS-21, respectively.  These expenditures,  once finalized,  are reported  by CMS  to HHS  
Program  Support Center (PSC)  as the  final grant award authority.   
 
No later than 30 calendar days after each finalized  grant award is issued  for a quarter, the 
state/territory  should  ensure  its actual draws for the finalized  quarter  are reported  in  PMS  to the  
appropriate PMS subaccount.  Effective  April 1, 2022, HHS grant  award  recipients are no longer  
required to  report the legacy  Federal Cash Transaction Report  (FCTR)  data elements through the  
quarterly cash report in PMS using the Federal Financial Report (FFR) data elements lines 10a  
through10c. To assist with  the  financial closeout of the grant, HHS authorized PMS to adjust the  
reported disbursements to equal the drawdown  associated with the  subaccount. The awarding  
agency  is only able to close out these grant awards once the grant award authority  (expenditures  
reported by the state/territory  on the Form CMS-64 and Form CMS-21) and the  associated  
drawdown  are  equal.  If the amounts are not  equal, the awarding agency cannot process a  
financial closeout action in PMS.   
 
In accordance with 42 C.F.R.  430.30(c), the  Form CMS-64 is the accounting statement that the  
state agency submits each quarter under  Title XIX  (Medicaid)  of the  Social Security  Act  (the 
Act).  The Form CMS-64 is a summary of actual expenditures derived from source documents  
including invoices, payment vouchers, governmental funds transfers, expenditure certifications,  
cost reports and settlements, and eligibility  records.  In accordance with 42 C.F.R.  457.630(c), the 
Form CMS-21 is the accounting statement that the  state agency submits  each quarter under  Title 
XXI  (CHIP)  of the Act.  The amounts reported on the Form CMS-64 and Form CMS-21 and 
attachments must represent actual expenditures for which all supporting documentation, in  
readily reviewable form, has been compiled and which is available at the time the claim is  filed.  
CMS must  review  that state/territory expenditures claimed for  federal matching under  Medicaid  
and CHIP, to include  collections,  are programmatically reasonable, allowable, and allocable in  
accordance with  existing federal laws, regulations, and policy guidance.   
It is the  states  or  territorys  responsibility,  as a Grantee,  to reconcile its  draws  to the final grant  
award authority, once the grant award authority  has  been reconciled  by CMS  to  actual  
expenditures  that  the state/territory  has certified on the  Form  CMS-64 and/or  Form  CMS-21  for 
the applicable expenditure reporting period. Drawdown amounts  will be  the Charges  Advanced   CMCS Informational Bulletin  - 3  
 
 
(draws) and Disbursements  as reported in PMS. To reconcile the draws,  a state or territory may  
need to make  correcting adjustments  in PMS to the  drawdown amounts  (i.e., Charges  Advanced  
and Disbursements)  to ensure it  is equal  to the grant award authority  once the grant award  
authority has been reconciled to the actual expenditures  certified by the state or territory for the  
applicable reporting period.  The state/territory  agency that  performs the  Charges  Advanced  
(draws)  should coordinate with the agency or department that  reports  the expenditures to CMS to  
ensure the drawdown amounts  reported  to PMS  agree with  the final CMS grant awards  that have 
been reconciled to actual expenditures  certified on  the Form CMS-64 and/or Form CMS-21.   
 
Federal Requirements  
 
Section  1903 of the Act  provides that the Secretary shall pay to each  state, which  has an  
approved state plan,  an amount equal  to the  federal medical assistance percentage (FMAP) of the  
total amount expended during the quarter as medical assistance under the State plan.   
 
Section  2105 of the Act provides that the Secretary shall pay to each state with a plan approved 
under title XXI, from  its allotment under section  2104  of the Act, an amount  for each quarter  
equal to the enhanced FMAP  (or, in the case of expenditures described in subparagraph 
2105(a)(1)(D)(iv), the higher of 75 percent or the sum of  the enhanced FMAP plus 5 percentage  
points) of expenditures in the quarter.  
 
Federal regulations at 42 C.F.R.  430.30(c)  and 42  C.F.R. 457.630(c),  provide that with respect to  
each quarter of the fiscal year, a state must submit  the Forms  CMS-64/CMS-21 not later  than 30  
days after the end of  the quarter.  Federal regulations at  2 CFR 200.344 provide that the  HHS  
awarding agency or pass-through entity will close  out  the federal award when  it determines that  
all applicable administrative actions and all required work of the federal award have been  
completed by the non-federal entity.  The regulation  at  2 C.F.R.  200.344(a)  provides  that the  non-
federal entity  must submit, no later than 120  calendar days after  the end date of the period of  
performance, all financial, performance, and other  reports as required by the terms and  
conditions of the  federal award.  Federal regulations at  2 C.F.R. 200.1 define the period of  
performances to mean  the total estimated time interval between the start of an initial Federal 
award and the planned end date, which may include one or  more  funded portions, or budget  
periods.  The period of performance is indicated on each grant award letter.  
Federal regulations at 31 C.F.R.  Part 205  implement the requirements of  the  Cash Management  
Improvement Act of 1990 (CMIA) and provide  the rules and procedures for efficient  transfer of 
federal financial assistance between the federal agencies and the state/territory. Generally, the 
CMIAt requires, in part, that  federal agencies must make timely fund transfers and grant awards  
to state agencies and state agencies must minimize the time between the deposit of federal funds  
in the states account and the  disbursement of  funds for program purposes.  
This informational bulletin  is designed to clarify existing guidance and to assist states  and 
territories  in drawing  and reporting of Title XIX  (Medicaid)  and Title XXI  (CHIP) federal  funds  
from the  appropriate  PSCs  PMS subaccounts.   
  CMCS Informational Bulletin  - 4  
 
 
Grant Award Authority, Charges  Advanced  (Draws),  and Reporting of Disbursements 
(Expenditures)  
 
Under current policy, for a financial closeout to occur, the final  FFR must be reviewed against  
the Authorized (AUTH)(that  is, the amount authorized for the grant), the Charges Advanced 
(CHG ADV) (that is, the amount drawn by the grant recipient in the  PMS) and the  
Disbursement (DISB) (that is, the amount  reported by the grant recipient in the PMS as spent),  
to ensure   all three  amounts reconcile.  The grant award authority in PMS is reconciled based on 
state and territory  reported expenditures.  CMS will finalize the grant award authority once the 
expenditures are certified in MBES/CBES.   
 
States and territories are required to ensure that their  Charges  Advanced  (draws) in PMS match  
the grant award authority  (which is  reconciled to reported expenditures  in MBES/CBES). The 
Charges  Advanced  (draws)  should be reconciled so that the subaccount balance does not  result in 
a positive or negative balance.  
 
Historically, states and territories  have been  required to report disbursements on the  Form PSC-
272, (Federal Cash Transactions Report), through  PMS. Because states expenditures  
(Disbursements) are reconciled through the quarterly expenditure reports  (Forms  CMS-64/CMS-
21), states/territories  have not always reported their expenditures (Disbursements)  timely and  
accurately  to PMS.  To assist with the grant closeout, PMS revised the state reporting process to 
have all disbursements automatically populated with the state/territory  draw amounts,  
eliminating state reporting of disbursements to PMS.  This effort should assist states/territories  
with closing out subaccounts  that are a result of inconsistent or incomplete  state reporting  of 
draws and disbursement. CMS  agrees  with this approach  given that the official grant award  
authority is based on state-certified expenditures on the  Forms  CMS-64/CMS-21.  
  
Conclusion  
 
The closeout of a  federal award  is the final step in the grant process. In order to complete a  
closeout  of a federal award, the  grant  award  recipient, must submit all final financial reports to  
the appropriate federal agency.  States  and territories should ensure expenditures  certified on the  
Forms  CMS-64 and CMS-21 are equal to  the draws  in  the PMS subaccounts.  As part of this  
process, states and territories are  required to monitor and correct any discrepancies in the PMS  
subaccount  and  review and take corrective actions  on any  open PMS subaccount. This will allow  
the PMS subaccounts  to be closed timely and properly.   
 
We look forward to continued efforts and commitment from  states and territories  in ensuring the  
timely reconciliation and closeout of the Medicaid and CHIP grant awards as required under  
federal law.  We appreciate your assistance in reconciling any positive or negative balances in the  
PMS system.  If you have any questions regarding Medicaid or CHIP grants, you may contact  
your Division of Financial Operations Branch analyst.  If you need technical assistance regarding  
draws or reporting disbursements, please contact your PSC  representative.  
 
    CMCS Informational Bulletin  - 5  
 
 
Appendix  A:  Medicaid and CHIP Draw Process for Closeout   
 
Medicaid Draws (Title XIX)   
 
Federal regulation authorizes states and territories to withdraw  federal funds as needed to pay the  
federal share of disbursements (42 CFR. 430.30(d)(3)  and 42 C.F.R. 457.630(c)).  For Medicaid  
and CHIP draw down,  CMS  defines  the term   as needed,  based on the criteria provided  in 31  
CFR 205.11(b),  to mean that states and territories  must  limit the amount of  funds  transferred  to 
the minimum amount required to meet a states/territorys actual and immediate cash needs.  
State and territories should follow the requirements for  funding techniques as provided in 31  
CFR 205.11.   
 
Regulations at  2 CFR 200.346  provide that  any funds paid in excess of the amount to which the  
non-federal entity is finally determined to be entitled under the terms of the federal award  
constitutes a debt to the  federal government.  Regulation at  2 CFR 200.346 (b)  provides that  
except where otherwise provided by statutes or  regulations, the HHS  awarding agency  will  
charge interest on an overdue debt  in accordance with the Federal Claims Collection Standards  
(31 C.F.R. parts 900 through 999).   
 
It appears that draws related to the reporting of Medicaid prior period adjustments are often a  
cause for unbalanced subaccounts. We are providing some examples  of how  these prior period 
adjustments need to be associated with the correct  grant award and drawn from the correct  
subaccount. Medicaid expenditures reported on a quarterly expenditure report for a  federal fiscal  
year (FFY), whether for a current or a prior period  (increasing or decreasing adjustment), should 
be drawn from or returned to the PMS subaccount for that FFY.   
 
Example:  Medicaid expenditures (increasing or decreasing adjustments for current or prior  
period FFYs) for medical assistance payments (MAP) or administration  (ADM)  costs that will be  
reported on one of the four quarterly expenditure reports for FFY 2023  should ultimately be  
drawn or  returned from the FFY 2023  PMS subaccount.  The information below reflects the FFY  
2023 accounting data and/or footnote from the grant award that can be used to identify the  
appropriate FFY subaccount.   
 
PMS Subaccount        Document Number  
XIX-MAP23         2305xx5MAP  
XIX-ADM23         2305xx5ADM  
         
Similarly, Medicaid expenditures (increasing or decreasing adjustments for current or prior  
period FFYs)  reported on an FFY 2022  expenditure report should ultimately be drawn or  
returned through the  FFY 2022  PMS subaccount.  The information below reflects the  FFY 2022  
accounting data and/or  footnote from  the grant award that can be used to identify the appropriate  
FFY subaccount.   
  
PMS Subaccount        Document Number  
XIX-MAP22         2205xx5MAP  
XIX-ADM22         2205xx5ADM   CMCS Informational Bulletin  - 6  
 
 
Please note that particularly at the beginning of a  FFY, it is possible that states/territories may  
need to draw down funds from  two different  FFYs  PMS subaccounts. In accordance with the  
guidance indicated above, states and territories should ensure that the draws are made  from the  
correct PMS subaccount.  For example, a draw made for a $1,500 MAP expenditure that will be  
reported on the  quarter 4 FFY 2022  expenditure report,  should be drawn from the  XIX-MAP22  
PMS subaccount. A draw made for a $2,000 MAP  expenditure that will be reported on the  
quarter 1  FFY 2023  expenditure report, should be drawn from  the  XIX-MAP23  PMS 
subaccount.   
 
CHIP Draws  (Title XXI)  
 
CHIP allotments are available  for expenditures  by a state or territory through the end of the  
succeeding  FFY.  Payments for expenditures are applied to  reduce the earliest  FFY  CHIP  
allotments before the payments are applied to reduce later  FFY  CHIP allotments. For example,  
for FFY 2023, a state would have available for expenditures  any FFY 2022 CHIP allotment that  
remained unexpended at the end of FFY 2022, and the FFY 2023 CHIP  allotment.  Such CHIP 
allotment amounts are available  for expenditures that will be  reported on one of the four Form  
CMS-21 and/or Form CMS-64 quarterly expenditure reports  for FFY 2023.  Using the same 
example for  FFY 2023, states and territories should draw from  the unexpended FFY 2022 CHIP  
allotment (CHIP22 subaccount), if any, until exhausted, and then draw from the FFY 2023 CHIP  
allotment (CHIP23 and/or CHIP23-3002 subaccounts) for expenditures that will be  reported on  
one of the four quarterly expenditure  reports for FFY 2023.  If at the end of FFY 2023, a state  
does not expend its full FFY 2022 CHIP allotment, the unexpended amount of FFY 2022 CHIP  
allotment as shown on the quarter ending  September  30, 2023,  Form CMS-21C will be recovered 
by CMS through  a negative grant award (de-obligated) once expenditures are  finalized in the  
following FFY.  States that do not expend the full amount of FFY 2022 CHIP allotment based on 
expenditures reported and applied to allotments as shown on the quarter ending September 30, 
2023,  Form CMS-21C should be careful  not  to draw down any unexpended FFY 2022 CHIP  
allotment remaining in the CHIP22 subaccount for expenditures that will be  reported on one of  
the four  FFY 2024  quarterly expenditure reports.   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  CMCS Informational Bulletin  - 7  
 
 
Appendix  B:  Grants Closeout Steps  for  States and Territories  
 
The following  Action Steps,  1 through 6, describe the stages in the FFY grants closeout process.  
 
Action Steps  for Quarter 4  
 
1.   No later than  30 days after the end of  the fourth quarter,  a state/territory  must submit the  
Form CMS-64/CMS-21.   
 
2.   No later than  30 calendar days after the end of the  fourth quarter, the state/territory:  
 
a.   Should assess the subaccount balances to determine if there are any discrepancies  
between the subaccount authority and draw balance.   
b.   If there are discrepancies, identify the reasons (i.e.  pending future reconciling 
items such as an audit finding or deferral related issue)  and notify CMS of any  
pending items that may delay the timely closeout of the PMS subaccount.   
 
3.   Approximately  180 calendar days after the end of the fourth quarter,  states/territories  
receive a finalized  grant award  which will provide  the final authority in PMS  for the  
FFY. (The final authority is the reconciled expenditures as  certified by states/territories  
on the Form CMS-64/CMS-21 expenditure reports in MBES/CBES for the  FFY.)  
 
4.   No later than  30  calendar days  after receiving  the finalized grant award,  the state/territory  
should reconcile the authority  to the  draws in PMS, if not reconciled,  and work with 
CMS to resolve any discrepancies.   
 
Reconciliation to Closeout  PMS Subaccount Balances After Quarter 4 of the FFY  
 
5.   For all open PMS subaccounts, current and prior  FFYs, CMS  will send  an email to the 
state or  territory including an excel  file containing  the following information regarding  
the draw balance in the PMS subaccount(s). The state and territory should ensure  that the  
subaccount(s) are reconciled within 30 days of the  email notification.  
 
   PMS subaccount information identifying the grant  award requiring closure.  
   Finalized  Grant Award Authority based on state/territory  certified expenditures  
   State Disbursements to date  (automatically  populated with state reported charges  
(draw)  amount  
   State Charges  Advanced  (draws) posted to date in PMS  
   Draw Balance to date   difference between  reconciled Grant Award Authority  
and Charges Advanced  (draws)  
 
6.   CMS  will request that the state or  territory  respond to CMS within 10 workdays of  
receiving  the grant closeout email  providing  a relevant analysis,  explanation relating to 
the overdrawn amounts, and a corrective action plan or  request an extension of up to 20 
days to provide this information.  CMS  may follow up with the state  or territory  to discuss 
the issue, determine if any further information is needed, and address any actions  or   CMCS Informational Bulletin  - 8  
 
 
preparation of action plans that may need to be completed by the state  or territory  to 
address the grants closeout  of the PMS subaccount.   
 
CMS and State/Territory  Can Make No  Further Progress   
 
Federal regulations  at  2 C.F.R. 200.344(a)  require  recipients to complete all closeout 
requirements not later than 120 calendar days after the end date of the period of performance,  
unless an extension has been approved  as referenced in the guidance  identified above. CMS has 
made a concerted effort since the enactment of  the 2016 GONE Act  to  work with  
states/territories to  close all expired awards on a timely basis.  However, when  despite CMS  
efforts to work cooperatively with  a  state/territory  to closeout  a PMS subaccount  that remains  
open,  further progress  cannot be made, CMS will initiate a demand letter  to resolve a  negative 
subaccount balance.