GRANTS 

MANAGEMENT

Action Needed to 

Improve the 

Timeliness of Grant 

Closeouts by Federal 

Agencies

Report to Congressional Requesters

April 2012

GAO-12-360

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12-360, a report to 

congressional requesters

April 2012

GRANTS MANAGEMENT

Action Needed to Improve the Timeliness of Grant 

Closeouts by Federal Agencies 

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 

recommendations and will consider 

them as they review and streamline 

grant policy guidance.

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

(see fig. below). 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. 

Amount and Aging of Undisbursed Balances in Expired Grant Accounts in PMS as of 

September 30, 2011

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.

View GAO-12-360. 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. 
Page i GAO-12-360 Grants Management

Letter 1 

Background 4

More Than $794 Million in Undisbursed Balances Remained in 

Expired Grant Accounts in PMS; More Than $126 Million Also 

Remained in Dormant Accounts in ASAP 11

Audits Continue to Raise Concerns about Timely Grant Closeout 22

Absence of Clear Guidance Has Resulted in a Lack of Consistent 

Governmentwide Reporting on Undisbursed Balances in 

Expired Grant Accounts 26

Conclusions 31

Recommendations for Executive Action 33

Agency Comments 33

Appendix I Objectives, Scope, and Methodology 35

Appendix II Federal Agencies Using the Payment Management System (PMS) 

for Grant Payments (as of June 2011) 45

Appendix III Federal Agencies Using the Automated Standard Application for 

Payments (ASAP) System for Grant Payments (as of June 2011) 48

Appendix IV Comments from the Department of Commerce 49

Appendix V Comments from the Department of Health and Human Services 51

Appendix VI GAO Contact and Staff Acknowledgments 54

Figures

Figure 1: Grant Life-Cycle of Federal Awarding Agency 6

Figure 2: Deobligating Undisbursed Balances in Expired Grant 

Accounts 9

Contents
Page ii GAO-12-360 Grants Management

Figure 3: Amount and Aging of Undisbursed Balances in Expired 

Grant Accounts in PMS as of September 30, 2011 13

Figure 4: Distribution of Undisbursed Balance Remaining per 

Expired Grant Accounts in PMS as of September 30, 2011 14

Figure 5: Amount and Aging of Undisbursed Balances in Expired 

HHS Grant Accounts in PMS as of September 30, 2011 16

Figure 6: Amount of Undisbursed Grant Balances in Dormant 

Accounts in the ASAP System as of September 30, 2011 21
Page iii GAO-12-360 Grants Management

Abbreviations

ACF Administration for Children and Families

AFR Agency Financial Reports 

ASAP Automated Standard Application for Payments 

CDC Centers for Disease Control and Prevention

CFDA Catalog of Federal Domestic Assistance

CFO Act Chief Financial Officer Act of 1990 

CFO Council Chief Financial Officers Council

DHS Department of Homeland Security 

DOC Department of Commerce 

DOE Department of Energy 

DOJ Department of Justice 

DPM Division of Payment Management

EPA Environmental Protection Agency 

FMS Financial Management Service

GPC Grants Policy Committee

HHS Department of Health and Human Services 

IG inspector general 

NASA National Aeronautics and Space Administration 

NSF National Science Foundation 

OMB Office of Management and Budget 

PAR Performance and Accountability Report

PMS Payment Management System 

PSC Program Support Center

USDA Department of Agriculture 

This is a work of the U.S. government and is not subject to copyright protection in the 

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without further permission from GAO. However, because this work may contain 

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Page 1 GAO-12-360 Grants Management

United States Government Accountability Office

Washington, DC 20548

April 16, 2012

The Honorable Tom Carper

Chairman

Subcommittee on Federal Financial Management, Government 

 Information, Federal Services, and International Security

Committee on Homeland Security and Governmental Affairs

United States Senate

The Honorable Tom Coburn, M.D.

Ranking Member

Permanent Subcommittee on Investigations

Committee on Homeland Security and Governmental Affairs

United States Senate

In 2008, we reported that at the end of calendar year 2006 about 

$1 billion in undisbursed funding remained in grant accounts whose 

period of availability to the grantee had expired as identified in the largest 

civilian payment system for grants.1 Undisbursed balances are funds that 

the federal awarding agency has obligated by entering into a grant 

agreement, but the grantee has not drawn down, or the federal awarding 

agency has not “disbursed.” Once the grant’s period of availability to the 

grantee has expired, the grant can be closed out and the funds 

deobligated by the awarding agency. Grant closeout is an important final 

point of accountability for grantees that helps to ensure they have met all 

financial requirements and have provided final reports, as required. 

Closing out of grants also allows agencies to identify and redirect unused 

funds to other projects and priorities as authorized or to return unspent 

balances to the Treasury. Conversely, failure to close out grants could 

allow grantees to draw down funds after the agreed-upon grant end date. 

Federal regulations generally require that financial records and other 

documents pertinent to a grant are to be retained for a period of 3 years 

from the date of submission of the final report.2

 

1

GAO, Grants Management: Attention Needed to Address Undisbursed Balances in 

Expired Grant Accounts, 

If a grant account is not 

closed out within this time frame, there is the risk that agencies may not

GAO-08-432 (Washington, D.C.: Aug. 29, 2008). 

2

This requirement is included in OMB Circular No. A-110 and has generally been 

incorporated into federal grant-making agencies’ regulations. 

 
 

Page 2 GAO-12-360 Grants Management

be able to obtain the documents needed to make the necessary financial 

adjustments and collect any unallowable costs or erroneous payments.

In 2008, we reported that our and inspectors general (IG) past audits of 

federal agencies as well as agencies’ annual performance reports had 

suggested that failure to close out grants in a timely manner was a longstanding problem. We also found that when federal agencies made timely 

grant closeout a high priority and took corrective actions, there were 

improvements in grant closeouts and resolution of undisbursed funding. 

In 2008, we recommended that the Office of Management and Budget 

(OMB) instruct agencies to track undisbursed balances that remain in 

grantees’ accounts after the grant funding period has ended and report on 

the resolution of this funding in their annual performance reports—

Performance and Accountability Reports (PAR) and Agency Financial 

Reports (AFR). We stated that tracking undisbursed funding in expired 

grant accounts and including the status of grant closeouts in annual 

performance reports could raise the visibility of the problem both within 

the agency and governmentwide and lead to improvements in the 

timeliness of grant closeouts and a reduction in undisbursed balances. 

OMB supported the intent of our recommendations, but it did not favor 

having agencies track and report on these balances in their annual 

performance reports and therefore did not take action.

You asked us to update our previous analysis by 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 us and federal IG 

related to timely grant closeout by federal agencies; and (3) what actions 

OMB and agencies have taken to track undisbursed balances in grants 

eligible for closeout.

To determine the amount of undisbursed balances in expired accounts, 

we analyzed data from the quarterly closeout reports provided to users of 

the largest civilian federal payment system—the Payment Management 

System (PMS) administered by the Department of Health and Human 

Services’ (HHS) Program Support Center (PSC)—at the end of fiscal year 

2011.3

 

3

Fiscal year 2011 ended on September 30, 2011. 

Closeout reports list all grant accounts that remain open more than 

3 months past the grant end date and for which there has been no 
 

Page 3 GAO-12-360 Grants Management

disbursement in the preceding 9 months. These grant accounts are 

referred to as “expired grant accounts.” Using PMS data, we determined 

the amount of funds that remained in expired accounts for 5 years or 

more past the grant end date and the amount that remained in these 

accounts for 10 years or more. In addition, for this report we also 

analyzed data from “dormant account reports” provided to users of a 

second payment system, the Automated Standard Application for 

Payments (ASAP), administered by the Department of the Treasury 

(Treasury) and the Federal Reserve Bank of Richmond. Dormant account 

reports list ASAP accounts for federal grants that had been inactive for 

2 years or more. Unlike PMS accounts, ASAP accounts can include 

multiple grant agreements between a federal agency and a grantee. 

Therefore, these reports cannot be used to identify individual grants 

eligible for closeout or the amount of funds that remain undisbursed for an 

individual grant agreement. Instead, these reports provide a list of 

accounts in need of attention that agencies can use to help identify 

unspent funds available for deobligation.

These two payment systems were selected because they provide 

payment services to other federal departments and entities and account 

for a significant percentage of federal grant disbursements. These two 

systems provided payment services to offices from 20 departments and 

other federal entities in fiscal year 2011, disbursing about 79 percent of all 

civilian federal grant awards. See appendixes II and III for a full list of 

PMS and ASAP users. To assess the reliability of the payment system 

data used in this report, we (1) reviewed existing documentation on the 

systems, including system audits by independent auditors; (2) interviewed 

officials responsible for administration of the systems and discussed 

potential limitations of the data; and (3) performed electronic testing for 

obvious errors in completeness and accuracy. On the basis of our 

assessment, we believe that the data are sufficiently reliable for the 

purposes of this review. See appendix I for additional details on our 

analysis of payment system data, including limitations to our analysis.

To identify issues we and federal IGs have raised related to the timely 

closeout of grants, we conducted a web-based search for audit reports 

issued by GAO from September 2007 to May 2011 and federal IGs at the 

24 Chief Financial Officer Act of 1990 (CFO Act) agencies from January 

2008 to June 2011, and contacted officials from each of the IG to ensure 

that our web search did not omit any relevant reports. To analyze actions 

OMB has taken to track undisbursed balances, we interviewed agency 

officials and reviewed related OMB circulars and other guidance related 

to grant management and performance reporting. To analyze actions 
 

Page 4 GAO-12-360 Grants Management

agencies have taken to track undisbursed balances in expired accounts, 

we reviewed the fiscal years 2009, 2010, and 2011 performance reports 

for the 24 agencies required to issue audited financial statements under 

the CFO Act for information reported on undisbursed balances in grants 

eligible for closeout since our 2008 report was issued.

We conducted this performance audit from May 2011 to April 2012 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

The federal government uses grants to achieve national priorities through 

nonfederal parties, including state and local governments, educational 

institutions, and nonprofit organizations. While there can be significant 

variation among different grant programs, most federal grants share a 

common life cycle for administering the grants: pre-award, award, 

implementation, and closeout (see fig. 1). During the award stage, the 

federal awarding agency enters into an agreement with grantees 

stipulating the terms and conditions for the use of grant funds including 

the period of time funds are available for the grantee’s use. Also in the 

award stage, the awarding agency opens accounts in one of several 

payment management systems through which grantees receive 

payments.4

 

4

The Grants Policy Committee (GPC), a committee of the Chief Financial Officers Council 

(CFO Council), was charged by the Director of OMB with coordinating governmentwide 

streamlining and simplification activities for federal grants and cooperative agreements. 

GPC recommended that federal agencies move to one of three systems: two systems for 

civilian agencies—ASAP and PMS—and one for defense agencies. Federal grant-making 

agencies were directed to select by January 1, 1999, one or more of the payment 

systems, but the consolidation effort was never fully completed. OMB confirmed that there 

were at least nine civilian federal payment systems, including the ASAP system and PMS, 

still active at the time of our review. 

During the post-award stage, the grantee carries out the 

requirements of the agreement and requests payments, while the 

awarding agency approves payments and oversees the grantee. Once 

Background 

Federal Grant Awards and 

Grant Life-Cycle
 

Page 5 GAO-12-360 Grants Management

the grantee has completed all the work associated with a grant 

agreement or the end date for the grant has arrived, or both, the awarding 

agency and grantee close out the grant. Closeout procedures ensure that 

grantees have met all financial requirements, provided their final reports, 

and returned any unspent balances.
 

Page 6 GAO-12-360 Grants Management

Figure 1: Grant Life-Cycle of Federal Awarding Agency

Grant closeout procedures, like other stages of the grant cycle, are 

subject to a wide range of requirements derived from a combination of 

OMB guidance, agency regulations, agency policy, and program-specific 

statutes. OMB Circular No. A-110, Uniform Administrative Requirements 

for Grants and Agreements with Institutions of Higher Education, 

Hospitals, and Other Non-Profit Organizations, and OMB Circular No. 

A-102, Grants and Cooperative Agreements with State and Local 

Governments, provide OMB guidance to federal agencies on grant 

administration. These circulars apply only to federal awarding agencies; 
 

Page 7 GAO-12-360 Grants Management

they do not apply directly to grantees. Each federal agency that awards 

and administers grants and agreements that are subject to the guidance 

in Circulars A-110 and A-102 is responsible for issuing regulations, with

which grantees must comply, that are consistent with the circulars, unless 

different provisions are required by federal statute or are approved by 

OMB.

Agency regulations issued under the circulars typically impose closeout 

procedures upon both the awarding agency and the grantee. Generally, 

within 90 days after the completion of the award, grantees must submit all 

financial, performance, and other reports as required by the terms and 

conditions of the award.5 Also within this 90-day period, grantees 

generally are to liquidate all obligations incurred under the award. 

Grantees then are to promptly refund any remaining cash balances to the 

awarding agency. Awarding agencies must make prompt payments, often 

defined as within 90 days, to grantees for allowable reimbursable costs 

under the award being closed out.6

While there can be substantial variation among grant programs, figure 2 

illustrates how closing out grants could allow an agency to redirect 

resources toward other projects and activities or return unspent funds to 

Treasury.

Also, if allowed by the terms and 

conditions of the award, the awarding agency must make a settlement for 

any upward or downward adjustment to the federal share of costs after 

the closeout reports are received. Some federal agencies’ grant policies, 

such as HHS’s, further specify that grants are to be closed out within 180 

days of the end of the grant funding period.

7

 

5

Generally, agency regulations specify that the time period for closeout may be extended 

under certain circumstances, including when the grantee requests an extension of the 

period of performance or there are delays in completing the final financial reports. 

Generally, if the undisbursed balances that are deobligated 

from closed grant accounts are still available for incurring new obligations, 

6

Allowability of cost is determined by the cost principle applicable to the grantee incurring 

the costs. For example, the allowability of costs incurred by the State, local, or federallyrecognized Indian tribal government is based on OMB Circular A-87. 

7

The Department of Justice, for example, has the authority to transfer undisbursed 

balances in expired appropriations accounts to a working capital fund prior to their 

cancellation. 
 

Page 8 GAO-12-360 Grants Management

the agency may use the funds to enter into new grant agreements.8 This 

may allow the federal agencies to use existing resources to fund new 

grant projects. If the undisbursed amounts are returned to expired 

appropriation accounts, the agency may not use the deobligated funds to 

make new grants. However, the agency may use the deobligated funds to 

make adjustments to obligations that were incurred before the 

appropriations account expired. Expired appropriations accounts remain 

available for 5 years to make adjustments, after which, the undisbursed 

balances are canceled and returned to the Treasury. In other words, the 

funds are no longer available for use by the agency. This helps ensure 

that federal agency resources are not improperly spent and helps 

agencies maintain accurate accounting of their budgetary resources. It 

may also reduce future federal outlays relative to the federal 

government’s original estimated amount of spending for these programs.

 

8

This period of availability for making new obligations lasts for a set number of years, 

which are established in law. Annual budget authority lasts for up to 1 fiscal year. Multiyear authority lasts for longer periods, and no-year authority lasts until the funds are 

expended for their designated purpose. A notable exception to using undisbursed 

balances for new obligations are balances deobligated from grants made under the 

American Recovery and Reinvestment Act of 2009, which must be deposited in the 

general fund of the Treasury. Pub. L. No. 111-203, § 1306.
 

Page 9 GAO-12-360 Grants Management

Figure 2: Deobligating Undisbursed Balances in Expired Grant Accounts

One way agencies can track whether grants are being closed out and 

undisbursed grant balances deobligated in a timely manner is through 

federal payment systems. Some agencies make grant payments directly 

to grantees using their own proprietary payment systems, while others 

entered into arrangements with payment systems that serve multiple 

agencies to make payments on their behalf. Payment systems represent 

an important control point for managing federal grant funds. After a grant 

agreement reaches its end date, an agency may need to close out a grant 

in multiple systems, including the agency’s general ledger or in a 

separate grant management system. However, failure to also close out a 

grant in the payment system and deobligate any unspent balances could 

allow grantees to continue to draw down federal funds even after the 

grant’s period of availability to the grantee has ended. In addition, failure 

to close out the grant in the payment system also prevents the timely 

deobligation of unspent funds and limits agencies’ ability to recapture 

funds that might be used for other purposes.

Tracking Grant Awards in 

Federal Payment Systems
 

Page 10 GAO-12-360 Grants Management

The largest civilian federal payment system is the Payment Management 

System (PMS) which is operated by PSC. PMS allows grantees to draw 

federal funds from grant accounts preauthorized by federal agencies. 

Grantees request payments from PMS, which transmits authorized 

payments to either the Federal Reserve Bank or Treasury for deposit into 

the grantee’s bank account. Each PMS account represents a different 

grant agreement with a specified expiration date. To help federal grantmaking agencies identify and close out grant accounts in a timely 

manner, each quarter PSC makes available a “closeout” report, listing 

expired grant accounts—those that remain open more than 3 months past 

the grant end date and for which there has been no disbursement in the 

preceding 9 months. These grant accounts are referred to as “expired 

grant accounts.” 

Another large payment system, the Automated Standard Application for 

Payments (ASAP) system, is implemented jointly by Treasury’s Financial 

Management Service (FMS) and the Federal Reserve Bank of Richmond.

Like PMS, ASAP allows grantees to draw federal funds from accounts 

preauthorized by federal agencies.9 Since 2009, FMS has issued a 

“dormant account report” to all ASAP users to help agencies identify and 

address undisbursed balances that remain in accounts for which there 

has been no activity for 2 years or more. Dormant account reports have 

generally been provided twice each year. The first report lists all dormant 

accounts as of a specific date, and the second report shows agencies’ 

progress toward addressing dormant accounts. Unlike PMS accounts, 

ASAP accounts can include multiple grant agreements between a federal 

agency and a grantee. Therefore, these reports cannot be used to identify 

individual grants eligible for closeout or the amount of funds that remain 

undisbursed for an individual grant agreement. Instead, these reports 

provide a list of accounts in need of attention that agencies can use to 

help identify unspent funds available for deobligation.

 

9

The ASAP system provides payment services for a range of federal programs including 

nongrant programs. For the purposes of this report, our focus is on accounts for grant 

programs only. 
 

Page 11 GAO-12-360 Grants Management

We found that more than $794 million in undisbursed balances remained 

in expired PMS accounts, including undisbursed balances that remained 

in accounts several years past their expiration date. Roughly three-fourths 

of all undisbursed balances in expired grant accounts were from grants 

issued by HHS, the largest grant-making agency in the federal 

government. Although this represents only a small share (2.7 percent) of 

the total funding that was made available for these grants, department 

officials told us they are taking action to improve timely closeout. We also 

found that more than $126 million in undisbursed balances remained in 

dormant grant accounts—accounts for which there had been no activity 

for 2 years or more—in ASAP, another large federal payment system.

As of September 30, 2011, we found that $794.4 million in undisbursed 

balances remained in PMS, the largest federal civilian payment system in 

10,548 expired grant accounts. These are accounts that were more than 

3 months past the grant end date and had no activity for 9 months or 

more. Undisbursed balances in expired grant accounts were spread 

across numerous federal agencies and almost 400 different programs. 

(See app. II for a list of PMS customers.) For comparison, the total 

amount of undisbursed balances in expired grant accounts in PMS is 

more than $200 million less than the amount we previously reported for 

calendar year 2006, while the overall amount of grant disbursements 

through PMS increased by about 23 percent during this time, from 

$320 billion in fiscal year 2006 to $415 billion in fiscal year 2011. Overall, 

total undisbursed balances as of September 30, 2011, represent roughly 

3.3 percent of the total amount of funds made available for these grants, 

down from 7.4 percent at the end of calendar year 2006.10 However, at 

the department or agency level, the total amount of undisbursed balances 

in expired accounts as of September 30, 2011, varied from 2.7 percent to 

34.8 percent of the total funding made available for these grant accounts 

during this period.

OMB guidance and agency regulations generally require grantees to 

submit all financial and performance reports and liquidate all obligations 

 

10Overall, more than $24 billion was originally made available for grants with undisbursed 

balances identified as expired on the PMS closeout report for September 30, 2011, and 

more than $14 billion for the PMS closeout for December 31, 2006. 

More Than 

$794 Million in 

Undisbursed Balances 

Remained in Expired 

Grant Accounts in 

PMS; More Than 

$126 Million Also 

Remained in Dormant 

Accounts in ASAP

Undisbursed Balances 

Remained in Expired 

Grant Accounts in PMS
 

Page 12 GAO-12-360 Grants Management

incurred under the award within 3 months (or 90 days) after the 

completion of the award; awarding agencies must then make prompt 

payments to grantees for allowable reimbursable costs for the award 

being closed out. Therefore, based on the information in PMS, these 

expired grant accounts should be considered for grant closeout. Failure to 

close out a grant in the payment system and deobligate any unspent 

balances can allow grantees to continue to draw down federal funds in 

the payment system even after the grant’s period of availability to the 

grantee has ended, making these funds more susceptible to waste, fraud, 

or mismanagement.

As figure 3 shows, we found that undisbursed balances remained in grant 

accounts several years past their expiration date. We found that 991 

expired grant accounts were more than 5 years past the grant end date; 

they contained a total of $110.9 million in undisbursed funding. Of these, 

115 expired grant accounts containing roughly $9.5 million remained 

open more than 10 years past the grant end date. Federal regulations 

generally require that grantees retain financial records and other 

documents pertinent to a grant for a period of 3 years from the date of 

submission of the final report. The risk increases after several years that 

grantees will not have retained the financial documents and other 

information for these grants that are needed by federal agencies to 

properly reconcile financial information and make the necessary 

adjustments to the grant award amount and the amount of federal funds 

paid to the recipient, potentially resulting in the payment of unnecessary 

and unallowable costs.
 

Page 13 GAO-12-360 Grants Management

Figure 3: Amount and Aging of Undisbursed Balances in Expired Grant Accounts in 

PMS as of September 30, 2011

Note: Excludes expired grant accounts with no undisbursed balances remaining, which are discussed 

later in this report. Data may not add to total due to rounding.

While the amount of funds remaining in individual expired grant accounts 

ranged from less than $1 to more than $19 million, a small percentage (a 

little more than 1 percent) of grant accounts with undisbursed balances of 

$1 million or more accounted for more than a third of the total 

undisbursed funds in expired grant accounts. Overall, 123 accounts from 

eight different federal agencies had more than $1 million in undisbursed 

balances at the end of fiscal year 2011. These expired grant accounts 

had a combined total of roughly $316 million in undisbursed balances, or 

40 percent of the total undisbursed funding in expired grant accounts as 

of September 30, 2011 (see fig. 4). Accounts with undisbursed balances 

remaining at the end of the agreed-upon grant end date can indicate a 

potential grant management problem. Data showing grantees that have 

not expended large amounts of funding such as $1 million or more by the
 

Page 14 GAO-12-360 Grants Management

specified grant end date raise concern that grantees have not fully met 

the program objectives for the intended beneficiaries within the agreedupon time frames.

Figure 4: Distribution of Undisbursed Balances Remaining per Expired Grant 

Account in PMS as of September 30, 2011

Note: Excludes expired grant accounts with no undisbursed balances remaining, which are discussed 

later in this report.

Roughly three-fourths of all undisbursed balances in expired grant 

accounts ($594.7 million) in PMS as of September 30, 2011, were from 

8,262 HHS-issued grants. HHS is the largest grant-making agency in the 

federal government in terms of total dollars awarded and disbursed. 

Overall, the total undisbursed balances in expired HHS grant accounts 

represented 2.7 percent of the total amount authorized for these 

accounts, which is the lowest percentage for any federal department with 

undisbursed balances in expired grant accounts included on the 

About $600 Million of 

Undisbursed Balances in 

Expired Grant Accounts 

Were for Grants Issued by 

HHS
 

Page 15 GAO-12-360 Grants Management

September 30, 2011 PMS closeout report. This indicates that the 

grantees have typically spent the vast majority of the funds awarded. 

However, the remaining funds add up to hundreds of millions of dollars 

that the agency could potentially redirect toward other projects and 

activities or return to Treasury. Furthermore, 85 of the 123 expired grant 

accounts with $1 million or more remaining at the end of fiscal year 2011 

discussed earlier in this report were HHS-issued grants. Of the 10 HHS 

operating divisions with accounts in PMS, the Administration for Children 

and Families (ACF) and the Centers for Disease Control and Prevention 

(CDC) had the largest undisbursed balances at the end of fiscal year 

2011 with roughly $321.7 million and $110.1 million, respectively.11

While HHS policy generally requires that grants be closed out within 180 

days after the grant’s end date, we found more than $265 million in 

undisbursed balances in expired grant accounts that remained open 3 or 

more years past the grant end date. This includes more than $86 million 

in expired grant accounts that were 5 years or more past the grant end 

date, of which more than $7 million remained unspent 10 years after the 

grant end date (see fig. 5).12

 

11A list of the 10 operating divisions with PMS accounts is provided in appendix II. 

Of this total, ACF and CDC had a combined 

$70.8 million in undisbursed balances in expired grant accounts that were 

5 years or more past the grant end date, including $6.1 million that 

remained unspent 10 years after the grant end date.

12HHS Grants Policy Directive 4.02 outlines the department’s grants management 

requirements for closeout.
 

Page 16 GAO-12-360 Grants Management

Figure 5: Amount and Aging of Undisbursed Balances in Expired HHS Grant 

Accounts in PMS as of September 30, 2011

Note: Excludes expired grant accounts with no undisbursed balances remaining, which are discussed 

later in this report.

In response to past audit reports, officials from HHS’s Division of Grants 

said that they have increased monitoring of grant closeout.13

 

13The Division of Grants in the Office of Grants and Acquisition Policy and Accountability 

provides departmentwide leadership and management directions in grant policy and 

oversight, grants systems management and coordination, and other related areas. 

In February 

2011, HHS established an interagency workgroup—the Accelerated 

Closeout Team—led by the Office of Grants and Acquisition Policy and 

Accountability to coordinate a departmentwide response in strengthening 

financial controls and accelerating the number of grant and contract 

HHS Reports Taking 

Actions to Address 

Backlog in Response to 

Previous Audits
 

Page 17 GAO-12-360 Grants Management

closeouts. The Accelerated Closeout Team for grants reviewed and 

analyzed PMS data from previous years and used the data to develop a 

list of eligible grant awards—focusing specifically on those from fiscal 

year 2008. They have a near-term goal of closing out all eligible grants 

with a grant end date of 2008. According to HHS, they have identified 

tens of millions of dollars in undisbursed balances in PMS available for 

deobligation through this initiative. The initiative will conclude later this 

year at which point HHS will re-evaluate any additional areas requiring 

specific attention. HHS officials said that they are drafting a

departmentwide grants closeout policy to improve the grant closeout 

process going forward.

HHS officials said that attention on timely grant closeout in PMS 

increased in response to previous audits. Both the HHS Office of 

Inspector General and the HHS independent auditor14 have reported a 

backlog of expired HHS grant accounts with undisbursed balances in 

PMS. The HHS Inspector General issued four reports from 2008 to 2009 

on grant closeout in PMS at four selected operating divisions.15

 

14Independent auditors are independent accounting experts who conduct impartial audits 

of the financial statements of public and private organizations to ensure there are no 

misstatements and assess whether organizations’ systems to detect and prevent fraud 

(internal controls) are effective. 

Using 

PMS data from March 30, 2006, to March 31, 2007, the HHS Inspector 

General found between $174 million and $1.3 billion in undisbursed 

balances at the four operating divisions in grant accounts that had not 

been closed within 180 days of the grant end date as specified in agency 

policy. The HHS Inspector General attributed the backlog in grant 

closeout in part to lack of staff and resources, inconsistent guidance, and 

a lack of supporting documentation and recommended that the agency 

use the information in the audit reports to ensure that grants are closed 

out in a timely manner and to eliminate the backlog of grants eligible for 

closeout. The operating divisions generally concurred with the Inspector 

15These four divisions included the two operating divisions (ACF and CDC) mentioned 

above. See HHS, Office of the Inspector General, Review of the Centers for Medicare and 

Medicaid Services Grant Close out Procedures, A-02-06-02001 (Washington, D.C.: 2008); 

Review of Administration for Children and Families Grant Closeout Procedures, A-02-07-

02000 (Washington, D.C.: 2009); Review of Centers for Disease Control and Prevention 

Grant Closeout Procedures, A-02-07-02014 (Washington, D.C.: 2009); and Review of 

Health Resource and Services Administration Grant Closeout Procedures, A-02-07-02008 

(Washington, D.C.: 2009).
 

Page 18 GAO-12-360 Grants Management

General’s recommendations and described actions that they planned to 

take to improve timely closeouts in response.

Findings from HHS’s independent auditor as reported in the agency’s 

PARs over several years indicate that timely closeout of grants has been 

a long-standing issue at HHS but that the agency has been making 

progress. From fiscal year 2006 to fiscal year 2011, the HHS independent 

auditor routinely reported on concerns with management controls over 

grant closeout, including a backlog of HHS grant accounts in PMS that 

were already beyond what the auditor considered a reasonable time 

frame for closeout. For example, during its review of fiscal year 2009 

grant activity provided from PMS as of March 31, 2009, the independent 

auditor identified approximately 644 grant obligations totaling 

$40.3 million that were dated prior to fiscal year 2002 that had not been 

closed out.16 The independent auditor concluded at that time that HHS 

management needed to increase its emphasis on closeout in order to 

reduce the backlog and ensure consistency between PMS and HHS 

operating divisions’ separate grant tracking systems, and, as part of the 

department’s fiscal year 2011 PAR, the independent auditor noted 

significant improvements in this and other financial management 

processes.

Promptly closing out grants in the payment management system after the 

grant end date would help agencies minimize the amount that they are 

charged in monthly service fees. PSC, which operates PMS, does not 

close out a grant account in PMS until instructed to by the awarding 

agency and continues to charge service fees to the awarding agencies. 

PMS fees are calculated to allow PSC to fully recover the cost of its PMS 

operations. In addition to payment services, PMS also provides a number 

of other services to assist users, such as standardized electronic forms 

for meeting federal grant reporting requirements, audit support, and 

collection services on overdrawn grants and disallowed costs. PSC 

provides these additional services for all open accounts, regardless of the 

grant account balance. PSC charges federal grant-making agencies 

based on two billing rates: a hybrid rate referred to as the “Type I” rate, 

which is generally applied to grants awarded to state, local, and tribal 

governments, and a flat rate referred to as the “Type II” rate, which is 

 

16HHS, Department of Health and Human Services FY 2009 Agency Financial Report, 

(Washington, D.C.: November 2009). 

Agencies Were Charged 

Fees to Maintain 

Thousands of Expired 

Accounts, Including 

Accounts with No 

Undisbursed Balances 

Remaining
 

Page 19 GAO-12-360 Grants Management

generally applied to grants awarded to nonprofit agencies, hospitals, and 

universities.

We identified more than 28,000 expired grant accounts in PMS with no 

undisbursed balances remaining as of the end of fiscal year 2011 for 

which the grant-making agency was charged a fee. More than 21,000 of 

these expired grant accounts with no undisbursed funds remaining—

approximately 79 percent of all such accounts—were for HHS grants with 

the remaining amount spread across 11 other federal agencies. The 

closeout report made available to PMS users identifies these accounts 

using a special status symbol, which indicates that the awarding agency 

only needs to submit the closeout code to finalize grant closeout. Until the 

code is submitted, these grant accounts continue to cost the awarding 

agency through accumulated monthly service fees. According to data 

provided by PSC, PMS users were charged a total of roughly $173,000 

per month to maintain the more than 28,000 expired grant accounts with 

zero dollar balances listed on the yearend closeout report. Roughly 

$137,000 of this was charged to HHS operating divisions. Overall, the 

total charges for all expired grants with a zero dollar balance would 

represent roughly $2 million in fees if agencies were billed for these 

accounts for the entire year.17 While the fees are small relative to the size 

of the original grant awards, they can accumulate over time. We found 

roughly 9,770—about 34 percent—of the expired grant accounts with no 

undisbursed balances remained open 3 or more years past the grant 

expiration date. If the grant has otherwise been administratively and 

financially closed out, then agencies paying fees for expired accounts 

with zero dollar balance are paying for services that are not needed 

instead of providing services to grant recipients. The presence of expired 

grant accounts with no undisbursed funds remaining also raises concerns 

that administrative and financial closeout—the final point of accountability 

for these grants, which includes such important tasks as the submission 

of financial and performance reports—may not have been completed.

 

17The total presented above is an illustration of potential costs assuming that all accounts 

with no undisbursed balances remaining as of September 30, 2011, had a zero dollar 

balance for the entire fiscal year. Based on the information in the closeout report, we could 

not determine the number of months in fiscal year 2011 that these accounts had a zero 

dollar balance.
 

Page 20 GAO-12-360 Grants Management

As of the end of fiscal year 2011, we found that $126.2 million in 

undisbursed balances remained in dormant grant accounts in ASAP, 

another large federal payment system. These balances remained in 1,094 

dormant grant accounts—accounts for which there had been no activity 

for 2 years or more. According to the dormant account report, this 

represents roughly 15 percent of the cumulative authorized funding made 

available for these accounts. Grant accounts for eight federal 

departments and other federal entities that use the ASAP system for 

payment services appeared on the report, with undisbursed balances 

ranging from roughly $41,000 to more than $40 million, per entity. (See 

app. III for a list of ASAP customers.)

Individual accounts in the ASAP system can include multiple grant 

agreements between a federal agency and a grantee; therefore, these 

reports cannot be used to identify individual grants eligible for closeout or 

the amount of funds that remain undisbursed for an individual grant 

agreement. However, the existence of undisbursed balances in inactive 

accounts can indicate the need for increased attention. This is particularly 

true of accounts where there has been no activity for a prolonged period 

of time. While nearly three-quarters of the undisbursed balances in 

dormant accounts were inactive for 3 years or less, we found roughly 

$33 million in 430 accounts that had been inactive for 3 years or more. Of 

that $33 million, $11 million in 179 accounts had been inactive for 5 years 

or more (see fig. 6).

More Than $126 Million 

Remained in Dormant 

Accounts for 2 Years or 

More in ASAP
 

Page 21 GAO-12-360 Grants Management

Figure 6: Amount of Undisbursed Grant Balances in Dormant Accounts in the ASAP 

System as of September 30, 2011

FMS officials first began issuing “dormant account reports” to all ASAP 

users in 2009 in response to the findings in our 2008 report that using 

federal payment systems to track undisbursed balances in grant accounts 

could help reduce unused funding. ASAP dormant account reports have 

evolved over time to improve their usability. Currently, accounts with 

undisbursed balances are included in dormant account reports if (1) the 

grantee has not drawn down funds for 2 years or more and (2) the 

awarding agency has made no changes to the authorized amount of 

funding available to the grantee in 2 years or more. Dormant account 

reports are generally provided twice a year—once in the fall or winter 

followed by a second report in the spring or summer. The first report lists 

all of the dormant accounts as of a specific date, and the second report 

shows the status of these same accounts several months later, allowing 

agencies to track progress toward addressing the dormant accounts that 
 

Page 22 GAO-12-360 Grants Management

appeared on the first report. The amounts reported for the end of fiscal 

year 2011 represent the first phase of this two-phase cycle.

Unlike PMS, the ASAP system does not provide grant management 

operations for users; therefore, it is the agencies’ responsibility to 

maintain grant management information such as the grant end date. 

However, as with PMS, the separation of grant management and 

payment functions makes it is possible for agencies to closeout a grant in 

a separate grant management system but fail to close out the grant in the 

ASAP system. According to FMS officials, if an ASAP account remains 

open, grantees may be able to continue to draw funds so long as there 

are funds available in the account. ASAP accounts that have no balances 

remaining but remain open are not included in dormant account reports 

regardless of their period of inactivity. FMS has encouraged agencies to 

close these accounts, but it does not charge users for these accounts or 

for other payment system services provided by the ASAP system. 

Instead, Congress appropriates funds to FMS to cover the cost of its 

operations.

In addition to the HHS audits described earlier, we and agency IGs have 

continued to raise concerns about timely grant closeout in federal 

agencies and grant programs. As part of our previous report on 

undisbursed balances in expired grant accounts issued in 2008, we 

reviewed 7 years of past audits and found that both we and federal IGs 

issued numerous reports indentifying specific grant programs or awarding 

agencies that had undisbursed funding in grants eligible for closeout.18

 

18For our 2008 report, we conducted a web-based literature search for related audit 

reports and reviewed over 150 reports issued by GAO, various federal IGs, and federal

agencies from 2000 to 2006 to identify some common grants management problems 

related to closing expired grants. The results of this work are summarized in 

Since that time, we have issued additional reports identifying challenges 

related to timely closeout of grants, and the Inspectors General at the 

Departments of Agriculture (USDA), Education, Energy (DOE), HHS, 

Homeland Security (DHS), and Labor (Labor) have all issued reports 

identifying similar challenges in offices or programs within their respective 

agencies. These reports identified a lack of adequate systems or policies 

in place to properly monitor grant closeout and inadequacies in awarding 

agencies’ grant management processes, in part because closeouts are a 

low management priority. While they focused on expired grants in specific 

GAO-08-432. 

Audits Continue to 

Raise Concerns about 

Timely Grant 

Closeout 
 

Page 23 GAO-12-360 Grants Management

offices or grant programs, when taken together, these report findings 

indicate that the timely closeout of grants continues to be an issue for 

multiple programs and grant-making agencies across the federal 

government.

We found that agencies did not have adequate systems and policies in 

place to properly monitor grant closeout. For example, in 2011, we 

reported that USDA’s draft grant closeout policies for the McGovern-Dole 

Food for Education Program did not include time frames for when grant 

agreements should be closed.19 As a result, this put USDA at risk that 

grant agreements will not be closed out in a timely fashion, preventing 

USDA from ensuring that grantees of the McGovern-Dole Food for 

Education Program have met all financial requirements and that unused 

or misused funds are promptly reimbursed to USDA. We recommended 

that the Secretary of Agriculture formalize policies and procedures for 

closing out grant agreements and establishing guidance to determine 

when agreements should be closed. USDA agreed with our 

recommendations and said it will take steps to address them. Similarly, in 

2011 we found that roughly $24 million in Farm Labor Housing program 

loan and grant obligations remained undisbursed more than 5 years after 

the funds were obligated and that the Rural Housing Service had no 

guidelines for deobligation in force.20

We also found that agencies did not deobligate funds from grants eligible 

for closeout in a timely manner. For example, in 2012, we reported that 

Department of Justice’s (DOJ) Bulletproof Vest Partnership program had 

not deobligated about $27 million in balances from grants awarded from 

fiscal years 2002 through 2009 whose terms have ended and whose 

grantees are no longer eligible for reimbursement.

The Rural Housing Service has 

since issued guidance, as we had recommended.

21

 

19See GAO, International School Feeding: USDA’s Oversight of the McGovern-Dole Food 

for Education Program Needs Improvement, 

DOJ agreed with our 

recommendation that the department deobligate undisbursed funds from 

GAO-11-544 (Washington, D.C.: May 19, 

2011). 

20See GAO, Rural Housing Service: Opportunities Exist to Strengthen Farm Labor 

Housing Program Management and Oversight, GAO-11-329 (Washington, D.C.: Mar 30, 

2011). 

21GAO, Law Enforcement Body Armor: DOJ Could Enhance Grant Management Controls 

and Better Ensure Consistency in Grant Program Requirements, GAO-12-353 

(Washington, D.C.: Feb. 15, 2012). 
 

Page 24 GAO-12-360 Grants Management

Bulletproof Vest Partnership program grants that have closed and said 

that in the absence of statutory restrictions stating otherwise, it intends to 

use the deobligated, undisbursed funds to supplement appropriations in 

fiscal years 2012 and 2013. In another example, we reported in 2010 that 

recipients of 58 percent of Department of the Interior’s Office of Insular 

Affairs project grants failed to submit final closeout reports on time, which 

can delay the deobligation of any unspent grant funds from the project 

account.22

Federal IGs identified similar issues at their agencies. For example, in 

September 2009 the Inspector General at Labor reported that funds were 

not deobligated when a grant expired because of delays in grant 

closeouts. Also, grants from the Employment and Training Administration 

and the Veteran’s Employment and Training Service were not closed 

within 12 months of their expiration because of a large backlog of grants 

in need of close out.

The Department of Interior agreed with our recommendations 

to improve the Office of Insular Affairs’ ability to manage grants. 

23 In another example, USDA’s Agricultural Research 

Service reported in April 2009 that it deobligated the $2.75 million in 

response to a finding from the department’s inspector general, making the 

funds available for other research projects and preventing the potential 

misuse of funds.24 IGs also reported that system updates and a lack of 

timely information led to problems at DHS25 and the Department of 

Education, respectively.26

 

22See U.S. Insular Areas: Opportunities Exist to Improve Interior's Grant Oversight and 

Reduce the Potential for Mismanagement, GAO-10-347 (Washington, D.C.: Mar. 16, 

2010). Results are based on a review of a random probability sample of 173 grant project 

files. We were able to project our sample results to the 1,771 Office of Insular Areas grant 

projects in the grant management database as of April 27, 2009. The confidence interval 

for this estimate is within +/- 11 percent. 

23Department of Labor, Office of the Inspector General, Management Advisory Comments 

Identified in an Audit of the Consolidated Financial Statements for the Year Ended 

September 30, 2009, 22-10-006-13-001 (Washington, D.C.: 2010). 

24USDA, Office of Inspector General, Agricultural Research Service Management Controls 

Over Research Agreements, 02601-1-SF (Washington, D.C.: July 2009). 

25DHS, Office of the Inspector General, Opportunities to Improve FEMA’s Disaster 

Closeout Process, OIG-10-49, (Washington, D.C.: 2010) and DHS, Office of the Inspector 

General, Management Letter for the FY 2010 DHS Financial Statements and Internal 

Control over Financial Reporting Audit, OIG-11-45 (Washington, D.C.: 2011).

26Department of Education, Office of the Inspector General, Audit of the Department’s 

Process to Resolve Lapsed Funds; ED-OIG/A19H0010 (Washington, D.C.: 2009). 
 

Page 25 GAO-12-360 Grants Management

Federal IGs reported that grant closeout procedures have been viewed as 

a low priority for federal agencies and that agencies have devoted limited 

staff resources to other grant management functions, including the 

issuance of new grant awards. Lack of attention and staffing contribute to 

delays in grant closeout and the timely deobligation of funds. For 

example, DOE’s Inspector General found that one of DOE’s regional 

offices was not closing out Small Business Innovation and Research 

Phase II grants in a timely manner in part because staff focused their 

attention instead on active awards.27

These findings are consistent with the results of a survey of IGs and other 

investigative agencies by the National Procurement Fraud Task Force’s 

Grant Fraud Committee, a committee chaired by the Inspector General 

for DOJ, which aims to detect and prevent grant fraud. Many respondents 

to the survey suggested that grant awarding agencies are often focused 

on awarding grant money and do not devote sufficient resources to the 

oversight of how those funds are spent. Survey respondents noted that 

awarding agencies often inadequately monitor grantee activities by, 

among other things, not properly closing out grants in a timely manner.

The Inspector General found expired 

grants had been completed for more than 3 years but had not been 

closed out. In addition, the Inspector General found questionable or 

unallowable costs during their review of grant closeout. Because grantees 

are only required to maintain annual audit and expense reports to support 

progress on projects and costs incurred and other information for 3 years, 

the supporting cost data may not be available for review, resulting in the 

payment of unnecessary and unallowable costs.

28

 

27Department of Energy, Office of Inspector General, Management Controls over 

Monitoring and Closeout of Small Business Innovation Research Phase II Grants, OAS-M08-09 (Washington, D.C.: July 2008).

28National Procurement Fraud Task Force, Grant Fraud Committee, A Guide to Grant 

Oversight and Best Practices for Combating Grant Fraud (February 2009). 
 

Page 26 GAO-12-360 Grants Management

OMB has not issued governmentwide guidance on tracking or reporting 

undisbursed balances for grants eligible for closeout, as we 

recommended in 2008. OMB did issue instructions for tracking and 

reporting on undisbursed grant balances to a small number of affected 

federal agencies in 2010 and 2011 as required by law. However, this 

guidance included grant accounts that were still available for 

disbursement and was not limited only to those grant accounts eligible for 

closeout. We found that agencywide information on undisbursed balances 

in grant accounts eligible for closeout is largely lacking.

In 2008, we recommended that OMB instruct all executive departments 

and independent agencies to annually track the amount of undisbursed 

balances in expired grant accounts and report on the status and 

resolution of the undisbursed funding in their annual performance reports. 

In our report, expired grant accounts were defined as the grants that 

remained open after the end of the grant period and were eligible for 

closeout. Our previous work found that reporting on the status of grant 

closeouts in annual performance reports, such as agency PARs, can 

raise the visibility of the problem within federal agencies, lead to 

improvements in grant closeouts, and reduce undisbursed balances. 

These reports enable the president, Congress, and the American people 

to assess agencies’ accomplishments for each fiscal year by comparing 

agencies’ actual performance against their annual performance goals, 

summarizing the findings of program evaluations completed during the 

year, and describing the actions needed to address any unmet goals, 

among other things.

OMB responded at the time that it supported the intent of our 

recommendations to strengthen grants management by explicitly 

requiring federal agencies to track and report the amount of undisbursed 

grant funding remaining in expired grant accounts and that it believed 

agencies should design processes with strong internal controls to 

promote effective funds management for all types of obligations. OMB’s 

comments did not indicate a commitment to implement our 

recommendations. OMB stated that, during its regular review, it would 

consider revising the grant management guidance in Circulars No. A-102 

and No. A-110 to include such instructions. As of December 2011, these 

Circulars, as well as No. A-11, Preparation, Submission and Execution of 

Absence of Clear 

Guidance Has 

Resulted in a Lack of 

Consistent 

Governmentwide 

Reporting on 

Undisbursed Balances 

in Expired Grant 

Accounts 

OMB Has Not Issued 

Governmentwide 

Guidance on Tracking or 

Reporting Undisbursed 

Balances in Grants Eligible 

for Closeout
 

Page 27 GAO-12-360 Grants Management

the Budget, and No. A-136, Financial Reporting Requirements, do not 

include any guidance or instructions to agencies on tracking or reporting 

on undisbursed balances in grants eligible for closeout in agencies’ 

performance reports.29

Section 537 of the Commerce, Justice, Science, and Related Agencies 

Appropriations Act of 2010 required that the Director of OMB instruct 

departments, agencies, and other entities receiving funds under the act to 

track undisbursed balances in expired grant accounts. The legislation 

specifically required that OMB instruct affected agencies to report on the 

following information:

1. details on future action the department, agency, or instrumentality will 

take to resolve undisbursed balances in expired grant accounts,

2. the method that the department, agency, or instrumentality uses to 

track undisbursed balances in expired grant accounts,

3. identification of undisbursed balances in expired grant accounts that 

may be returned to the Treasury of the United States, and

4. in the preceding 3 fiscal years, details on the total number of expired 

grant accounts with undisbursed balances (on the first day of each 

fiscal year) for the department, agency, or instrumentality and the total 

finances that have not been obligated to a specific project remaining 

in the accounts.

These legislative reporting requirements were similar to what we 

recommended in 2008. Subsequently, the same reporting requirements 

were carried forward for fiscal year 2011 by the Full-Year Continuing 

Appropriations Act, 2011 and for fiscal year 2012 by Section 536 of the 

Commerce, Justice, Science, and Related Agencies Appropriations Act, 

2012, affecting select agencies 2012 PAR and AFR submissions due in 

November 2012.30

In 2010 and 2011, as required by these laws OMB issued implementing 

instructions to affected federal agencies’ financial officers and budget 

officers. Four agencies—the Department of Commerce (DOC), DOJ, 

 

29OMB Circular No. A-11, Preparation, Submission and Execution of the Budget and A136, Financial Reporting Requirements, provide guidance to agencies on preparing and 

submitting their performance reports.

30Pub. L. No. 111-117, div. B, 123 Stat. 3034, 3113, 3158 (Dec. 16, 2009).

In Response to Legislation, 

OMB Instructed Select 

Agencies to Report on 

Undisbursed Balances but 

Not on the Amount in 

Grant Accounts Eligible 

for Closeout
 

Page 28 GAO-12-360 Grants Management

National Aeronautics and Space Administration (NASA), and National 

Science Foundation (NSF)—provided responses in their annual 

performance reports.31

The performance period for active grant agreements can last multiple 

years during which time authorized disbursements may be made from 

expired appropriation accounts. Under OMB’s definition, agencies were 

instructed to report all undisbursed funding in expired appropriation 

accounts which could include active grant accounts as well as grant 

accounts eligible for closeout. In contrast, in this and other reports, we 

defined expired grant accounts as accounts that remain open after the 

specified grant end date, or expiration date, and are eligible for close 

out.

However, in its instructions, OMB equated 

“expired grant accounts” with expired appropriation accounts. Specifically, 

OMB’s guidance referenced the definition of expired appropriations found 

in Circular No. A-11 in defining expired grant accounts as “including 

budget authority that is no longer available for new obligations but is still 

available for disbursement.” 

32

Following OMB’s guidance, three agencies—DOJ, NSF, and NASA—

reported on amounts in expired appropriation accounts in their 2010 

performance reports.

Undisbursed balances in these accounts are funds that the federal 

government has obligated by entering into a grant agreement but that 

should no longer be disbursed to grantees because the period of 

availability to the grantee has ended.

33

 

31The Marine Mammal Commission, an entity receiving funding under the Commerce, 

Justice, Science, and Related Agencies Appropriations Act, reported in its fiscal year 2011 

PAR that it did not have any undisbursed balances in expired grant accounts. 

For example, NSF reported in its fiscal year 2010 

AFR over $1.7 billion in undisbursed balances as of September 30, 2010, 

which agency officials confirmed to us as the total amount of expired 

32See GAO-08-432 and GAO, Federal Grants: Improvements Needed in Oversight and 

Accountability Processes, GAO-11-773T (Washington, D.C.: June 23, 2011).

33DOJ, Department of Justice FY 2010 Performance and Accountability Report, 

(Washington, D.C.: November 2010); NASA, National Aeronautics and Space 

Administration FY 2010 Performance and Accountability Report (Washington, D.C.: 

November 2010); and NSF, National Science Foundation FY 2010 Agency Financial 

Report (Washington, D.C.: November 2010). DOC reported on the number of expired 

grant accounts in the print edition of its fiscal year 2010 PAR but not the amount of 

undisbursed balances in these accounts. See DOC, Department of Commerce FY 2010 

Performance and Accountability Report [print edition] (Washington, D.C.: 

November 2010).
 

Page 29 GAO-12-360 Grants Management

appropriations in the agency’s two research-related appropriations 

accounts. The amount reported included funds available for disbursement 

on only active grant agreements. Similarly, officials from DOJ and NASA 

also confirmed to us that the number they reported in their 2010 

performance reports represented balances in expired appropriations 

accounts and not the amount of funding that remained in grant accounts 

eligible for close out. Furthermore, according to DOJ officials, most DOJ 

grants, with the exception of grants funded through the American 

Recovery and Reinvestment Act (Recovery Act), are funded with no-year 

appropriations that do not enter into an expired phase and therefore fall 

outside the scope of OMB’s guidance.

Agency officials told us that the purpose of gathering information on 

grants funded with expired appropriations was unclear. Federal agencies 

are generally required to include detailed information on the overall 

budgetary resources made available to the agency, including amounts in 

expired appropriation accounts, as well as the status of those resources 

at the end of the fiscal year. Agency officials said that the information on 

undisbursed balances reported in their PAR or AFR was derived at least 

in part from these publicly available budgetary reports and is generally 

readily available; however, information on undisbursed balances in grant 

accounts that have reached their end date and are eligible for closeout is 

generally not publicly available or otherwise provided to OMB and 

Congress.

OMB issued largely identical instructions to select agencies for reporting 

on undisbursed balances in expired grant accounts in their 2011 

performance reports. While NASA and NSF took different approaches in 

reporting compared to the prior year, DOJ reported on the amount of 

undisbursed funding in expired appropriations. DOC reported 

undisbursed balances, but could not confirm whether all of its grantmaking bureaus reported expired appropriations or grant accounts. NASA 

officials said that the number reported in their 2011 PAR represented the 

amount of undisbursed balances in grant accounts that have reached 

their end date and are eligible for closeout. Based on this understanding 

of the guidance, NASA reported in its 2011 PAR that in 2009 there were 

about 1,650 expired grants with $18 million in undisbursed balances.34

 

34NASA, National Aeronautics and Space Administration FY 2011 Performance and 

Accountability Report (Washington, D.C.: November 2011).

In 
 

Page 30 GAO-12-360 Grants Management

comparison, when reporting on amounts in expired appropriations in their 

previous year’s PAR, NASA reported over 2,100 expired grants with $58 

million in undisbursed balances for 2009.35 In its 2011 PAR, NSF reported 

on neither the amount of grants funded with expired appropriations nor on 

the amount of undisbursed balances in grant accounts that have reached 

their end date and are eligible for closeout. Instead, NSF reported the 

amount of funding that was deobligated as a result of successfully closing 

out grants. For example, NSF reported that in fiscal year 2011, the 

agency closed out a total of 18,648 grants. As a result, $35,204,328 in 

undisbursed balances were deobligated and retained for adjustments to 

existing obligations and an additional $5,610,546 was deobligated and 

returned to Treasury.36 The information provided by NSF in its 2011 PAR 

illustrates how closing out grants allows an agency to redirect unspent 

funds or return the funds to Treasury as appropriate. It does not, 

however, provide information on the number of grants past their grant end 

date or the balances remaining in these grant accounts.

In our review of CFO Act agencies’ annual performance reports for fiscal 

years 2009 to 2011, we found that systematic, agencywide information on 

undisbursed balances in grant accounts eligible for closeout is largely 

lacking in part because OMB guidance does not provide explicit 

instructions to agencies to track undisbursed balances for grants that are 

eligible for close out. Other than the four agencies receiving explicit 

instructions from OMB and the information reported by independent 

auditors, we found only one federal agency—the Environmental 

Protection Agency (EPA)—reported agencywide information on the 

timeliness of grant closeout. EPA developed an agencywide performance 

metric—the percentage of eligible grants closed out—in part as a 

response to our prior findings that the agency had a large backlog of 

grants in need of closeout.37

 

35NASA, National Aeronautics and Space Administration FY 2010 Performance and 

Accountability Report (Washington, D.C.: November 2010).

In its 2011 AFR, EPA reported that it closed 

out 99.5 percent of eligible grants from 2009 and earlier and 93.4 percent 

36NSF, National Science Foundation FY 2011 Agency Financial Report (Washington, 

D.C.: November 2011).

37See GAO, Grants Management: EPA Has Made Progress in Grant Reforms but Needs 

to Address Weaknesses in Implementation and Accountability, GAO-06-625 (Washington, 

D.C.: May 12, 2006).

Consistent Reporting on 

Grant Closeout in 

Performance Reports 

Lacking 
 

Page 31 GAO-12-360 Grants Management

of grants that expired in the prior fiscal year.38 As part of our prior work we 

concluded that while EPA’s performance measure did not assess 

compliance since it did not reflect the 180-day closeout standard, the 

measure was a valuable tool for determining if grants were ultimately 

closed.39 EPA does not provide information in its AFR on the amount of 

undisbursed funds that remain in expired grants. While we have noted 

progress in EPA’s recovery of funds from expired grants in our prior work, 

we have also observed that EPA’s budget justification documents do not 

describe the amount of deobligated funding available for new obligations; 

such information could be useful to Congress because the availability of 

these funds could partially offset the need for new funding.40 We found 

that information on timely grant close out in other agencies’ performance 

reports was limited to sections of the performance reports prepared by 

independent auditors, where two agencies’ auditors raised concerns 

related to timely grant closeout.41

Our analysis shows that there has been an improvement in closing out 

expired grant accounts with undisbursed balances in PMS since our 2008 

report. Undisbursed balances in these accounts declined from roughly 

$1 billion at the end December 2006 to a little more than $794 million at 

the end of September 2011, despite a significant increase in annual grant 

disbursements through PMS during this time. However, more work needs 

 

38EPA, U.S. Environmental Protection Agency Fiscal Year 2011 Agency Financial Report 

(Washington D.C: November 2011). 

39 GAO-06-625.

40See GAO, Environmental Protection Agency: Management Challenges and Budget 

Observations, GAO-12-149T (Washington, D.C.: Oct. 12, 2011).

41Audits of financial statements of the 24 CFO Act agencies are required to be performed 

by the agency’s IG or by an independent auditor as selected by the IG. Auditors are 

responsible for preparing an audit report, or separate audit reports, on the principal 

statements, internal control, and compliance with applicable laws, regulations, and 

governmentwide policy requirements. These reports are published as part of the agency’s 

PAR or AFR. For issues related to timely grant closeout identified by independent auditors 

in agencies’ performance reports in fiscal years 2009, 2010, and 2011, see HHS, 

Department of Health and Human Services FY 2009 Agency Financial Report

(Washington, D.C.: November 2009), Department of Health and Human Services FY 2010 

Agency Financial Report (Washington, D.C.: November 2010), Department of Health and 

Human Services FY 2011 Agency Financial Report (Washington, D.C.: November 2011), 

and DHS, U.S. Department of Homeland Security Annual Financial Report Fiscal Year 

2011 (Washington, D.C.: November 2011).

Conclusions 
 

Page 32 GAO-12-360 Grants Management

to be done to further improve the timeliness of grant closeout and reduce 

undisbursed balances. In our 2008 report, we found that agencies can 

improve their grant closeout process when they direct their attention to 

the issue and make timely grant closeout a high priority. Since this time, 

HHS has increased attention on grant closeout, and both the agency and 

its independent auditor have reported that progress has been made 

toward addressing the agency’s existing backlog of grant accounts in 

PMS eligible for closeout. The dormant account report developed by 

Treasury offers further encouragement by raising agencies’ awareness of 

undisbursed balances in inactive grant accounts in the ASAP system. 

We have found that agencies can raise the internal and external visibility 

of the issue of undisbursed balances and improve performance by 

reporting on undisbursed balances in grants that are eligible for closeout 

in agencies annual performance reports. However, the number of 

agencies that have voluntarily provided this information in their 

performance reports is limited. We therefore reiterate our previous 

recommendation, not yet implemented, that OMB should instruct all 

executive departments and independent agencies to report on the status 

and resolution of the undisbursed funding in grants that have reached the 

grant end date in their annual performance reports, the actions taken to 

resolve the undisbursed funding, and the outcomes associated with these 

actions.

OMB’s implementation of Section 537 of the Commerce, Justice, 

Science, and Related Agencies Appropriations Act of 2010 and 

subsequent legislation creates a framework for such reporting. However, 

interviews with agency officials and variations in agencies’ responses to 

OMB’s instructions indicate that additional clarification is needed, 

particularly to the definition of “expired grant accounts,” if this information 

is to be effectively used by agency management, OMB, and Congress to 

address the backlog of grants in need of closeout. The definition included 

in guidance issued by OMB equates “expired grant accounts” with grants 

funded with expired appropriations and therefore includes active grant 

agreements still in the implementation phase for which the agency would 

have valid reasons to make future disbursements. By instead focusing on 

undisbursed balances obligated to grant agreements that have reached 

the end of their period of performance and are eligible for closeout, OMB 

could better direct agency management focus toward a subset of grants 

in need of more immediate attention. OMB could also better direct agency 

management’s focus by putting an emphasis on grants that have not 

been closed out several years past their expiration date. As time passes, 
 

Page 33 GAO-12-360 Grants Management

these funds become more susceptible to improper spending or 

accounting as monitoring diminishes over time.

OMB’s guidance currently does not address grants with no undisbursed 

balances remaining. The presence of tens of thousands of expired grant 

accounts in PMS with no undisbursed funds remaining raises concerns 

that these accounts are not receiving sufficient attention. Reducing the 

number of accounts with zero balances remaining would help ensure that 

administrative and financial closeout—the final point of accountability for 

these grants—is being completed. It would also minimize the amount 

agencies pay in potential fees for maintaining these accounts, which can 

accumulate over time.

In addition to the previous recommendation reiterated above, we 

recommend that the Director, OMB, take the following three actions:

• 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.

• 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.

• 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.

We provided a draft of this report to the Administrator of the National 

Aeronautics and Space Administration; the Attorney General; the Director 

of the National Science Foundation; the Acting Director of the Office of 

Management and Budget; and the Secretaries of Commerce, Health and 

Human Services, and Treasury. OMB staff provided the following 

comments via e-mail: “OMB is in general agreement with GAO’s 

recommendation in regards to providing better guidance for agencies in 

the management and closeout of expired grants with undisbursed 

balances. We are in the process of reviewing and streamlining our grant 

Recommendations for 

Executive Action

Agency Comments
 

Page 34 GAO-12-360 Grants Management

policy guidance to the agencies and will consider these 

recommendations.” The Chief Financial Officer and Assistant Secretary 

for Administration at DOC and the Assistant Secretary for Legislation at 

HHS responded with written comments, which we have reprinted in 

appendixes IV and V. Staff at the other agencies provided technical or 

clarifying comments, which we incorporated as appropriate, or had no 

comments. 

As agreed with your offices, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to the Administrator of the 

National Aeronautics and Space Administration; the Attorney General; the 

Director of the National Science Foundation; the Acting Director of the 

Office of Management and Budget; and the Secretaries of Commerce, 

Health and Human Services, and Treasury. We will also make copies 

available to others upon request. In addition, the report will be available at 

no charge on the GAO website at http://www.gao.gov. 

If you have any questions about this report, please contact Stanley J. 

Czerwinski at (202) 512-6806 or czerwinskis@gao.gov or Beryl H. Davis 

at (202) 512-2623 or davisbh@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. Key contributors to this report are listed in appendix VI.

Stanley J. Czerwinski

Director, Strategic Issues

Beryl H. Davis

Director, Financial Management and Assurance
Appendix I: Objectives, Scope, and 

Methodology

Page 35 GAO-12-360 Grants Management

Our objectives for this report were to evaluate: (1) the amount of 

undisbursed funding remaining in expired grant accounts including the 

amounts that have remained unspent for 5 years or more and for 10 

years or more, (2) issues raised by GAO and federal inspectors general 

(IG) related to timely grant closeout by federal agencies, and (3) what 

actions the Office of Management and Budget (OMB) and agencies have 

taken to track undisbursed balances in grants eligible for closeout.

To address the first objective, we analyzed data from two federal payment 

systems: the Payment Management System (PMS) administered by 

Department of Health and Human Services’ (HHS) Program Support 

Center (PSC) and the Automated Standard Application for Payments 

(ASAP) system administered jointly by the Department of the Treasury 

(Treasury) and the Federal Reserve Bank of Richmond. Federal payment 

systems facilitate the transfer of cash payments from federal awarding 

agencies to grantees. Some agencies make grant payments directly to 

grantees using their own proprietary payment systems, while others enter 

into arrangements with payment systems that serve multiple agencies to 

make payments on their behalf. The PMS and ASAP systems were 

selected for review based on the following criteria:

1. These payment systems provide payment services to other federal 

departments and entities. In 2011, offices from 13 federal 

departments and other federal entities used PMS for making grant 

disbursements, and offices from 9 federal departments and other 

federal entities used ASAP for grant disbursements. See appendixes 

II and III for a full list of federal entities that use PMS and ASAP for 

payment services.

2. These payment systems account for a significant percentage of 

civilian federal grant disbursements. Based on fiscal year 2010 data, 

the most recently available at the time of our selection, PMS made 

about $411 billion in grant disbursements, or 68 percent of all civilian 

federal grants disbursements in fiscal year 2010, and ASAP made 

payments of an additional $45 billion in grant disbursements, or 7 

percent of all civilian federal grant disbursements in that year. In 2011, 

PMS and ASAP disbursed $415 billion and $62 billion in federal grant 

funding, respectively, or 79 percent of all civilian federal grant 

disbursements in fiscal year 2011.

Appendix I: Objectives, Scope, and 

Methodology 
Appendix I: Objectives, Scope, and 

Methodology

Page 36 GAO-12-360 Grants Management

PMS is a centralized grant payment and cash management system, 

operated by HHS’s Program Support Center (PSC) in the Division of 

Payment Management (DPM). According to DPM, the main purpose of 

PMS is to serve as the fiscal intermediary between awarding agencies 

and the recipients of grants and contracts. Its main objectives are to 

expedite the flow of cash between the federal government and recipients, 

transmit recipient disbursement data back to the awarding agencies, and 

manage cash flow advances to grant recipients. PSC personnel operate 

PMS, making payments to grant recipients, maintaining user/recipient 

liaison, and reporting disbursement data to awarding agencies. Awarding 

agencies’ responsibilities include entry of authorization data into PMS, 

program and grant monitoring, grant closeout, and reconciliation of their 

accounting records to PMS information. Awarding agencies pay PSC a 

service fee for maintaining accounts and executing payments through 

PMS. PMS continues to charge agency customers a servicing fee until an 

account is closed.

To update our previous analysis of undisbursed balances in expired grant 

accounts and provide a degree of comparability, we replicated the 

methodology used in our 2008 report.1

 

1

GAO, Grants Management: Attention Needed to Address Undisbursed Balances in 

Expired Grant Accounts, 

Namely, to determine the amount 

of undisbursed balances in expired grant accounts, we analyzed PMS 

data from closeout reports PSC makes available to PMS customers each 

quarter. These closeout reports list all expired grant accounts that, 

according to the data system, have not completed all of their closeout 

procedures. An account is considered expired in PMS if (1) the grant end 

date is more than 3 months old and (2) the latest date of disbursement 

was at least 9 months old. PMS does not close a grant account until 

instructed to do so by the awarding agency. For each grant account, the 

report includes such information as the identification number, the amount 

of funding authorized for the grant, the amount disbursed, and the 

beginning and end dates for the grant. The grant end date is a mandatory 

field completed by the awarding agency.

GAO-08-432 (Washington, D.C.: Aug. 29, 2008). 

Analysis of Expired Grant 

Account Data from PMS

Description of PMS

PMS Closeout Reports
Appendix I: Objectives, Scope, and 

Methodology

Page 37 GAO-12-360 Grants Management

PSC provided us with the PMS quarterly closeout report for the end of 

fiscal year 2011 (September 30, 2011). PSC appended to the closeout 

data an additional field showing the applicable number from the Catalog 

of Federal Domestic Assistance (CFDA) for each grant account. We used 

the CFDA number provided by PSC to help determine which accounts to 

exclude from our analysis. The purpose of these exclusions was to avoid 

including accounts that would distort the calculation of undisbursed funds 

in expired PMS grant accounts and to provide comparability with our 

previous findings. Our criteria for excluding accounts were consistent with 

the methodology we used in our 2008 report.2

• We excluded accounts from our analysis that did not have a defined 

end date. The purpose of the PMS closeout report is to alert awarding 

agencies of accounts in PMS that remain open after their posted end 

date. If a grant does not have a defined end date, such as the 

Temporary Assistance for Needy Families, then HHS staff consider 

the PMS closeout report merely as a reminder to the awarding agency 

of the open account and that PMS continues to charge fees on this 

open account.

We excluded a total of 115 

grant programs—both HHS and non-HHS—based on the following:

3

• We excluded expired accounts associated with the following HHS 

block grant programs: Community Mental Health Services Block 

Grant, Preventive Health and Health Services Block Grant, Substance 

Abuse and Preventive Treatment Block Grant, Maternal and Child 

Health Services Block Grant, Social Services Block Grant, Low 

Income Housing Energy Assistance Block Grant, and Community

Services Block Grant. An independent audit of PMS stated that (1) the 

funds for these block grants continued to be available to the grantees 

 

2

GAO-08-432. 

3

We did not exclude grant accounts for similar programs or HHS block grants that were 

identified in the CFDA as Recovery Act related, because, to achieve the purposes of the 

Act, Congress explicitly directed Federal departments and agencies to expend the funds 

made available in this Act as quickly as possible consistent with prudent management. On 

September 15, 2011, the Director of OMB further directed agencies to “accelerate the 

spending of remaining Recovery Act funds in discretionary grant programs (including 

formula grant programs that received discretionary funding in the Recovery Act), 

consistent with existing laws and regulations and programmatic objectives.” If those funds 

have not been spent by September 30, 2013, agencies have been instructed to reclaim 

them to the extent permitted by law.
Appendix I: Objectives, Scope, and 

Methodology

Page 38 GAO-12-360 Grants Management

until the obligation/expenditure period expired, and (2) traditional 

financial reporting requirements do not apply to these programs.4

• We excluded grant accounts with a negative undisbursed balance, 

meaning that total payments to the grantee exceed the authorized 

amount. According to PSC officials, an overadvancement on a PMS 

account can occur if the awarding agency reduces a grant’s 

authorization limit below the amount already paid to the grantee 

because the awarding agency determines that the grant recipient is 

entitled to a lesser amount than the agency originally authorized. 

Agencies use their accounting systems to send authorization 

transactions to PMS. If an agency’s authorization transaction will 

create an overadvanced account in PMS, the transaction is sent to an 

exception file for review. The agency must override the exception to 

transmit an authorization transaction that causes an overadvanced 

account. According to officials from PSC, agencies will do so (1) if 

they want PSC to initiate a collection action to recover the 

overadvanced amount or (2) for grantees with multiple grant accounts 

in PMS that are “pooled,” to redistribute charges to open grant 

accounts to correct the overadvanced grant.

• We excluded accounts that were excluded in our 2008 analysis 

because the CFDA number and program description had been 

deleted from the Catalog before 2000 (the last Catalog entry would 

have been in 1999) or we could not find any information on the CFDA 

number either in CFDA or in the CFDA Historical Index, which 

provides the history of all CFDA numbers.

• We excluded accounts if we could not associate them with a grant 

program. For instance, we found some PMS accounts that, based on 

the most recent CFDA, were for nongrants.

We included expired accounts that were associated with grants or 

cooperative agreements that had a time limit for spending the funds.5

 

4

HHS, Division of Payment Management, Report of Independent Auditor on Controls 

Placed in Operation and Tests of Operating Effectiveness for the Payment Management 

System (PMS), for the Period October 1, 2005 to June 30, 2006 (Washington, D.C.:

August 2006). 

We 

also included accounts for letters of credit. According to PSC officials, 

almost all accounts in PMS are grants or cooperative agreements with the 

5

According to HHS officials, some no-cost extensions that extend the grant period without 

changing the authorized amount of funding may not be reflected in PMS data. As a result, 

data may include some grants that have received an extension and are therefore not 

eligible for closeout. 
Appendix I: Objectives, Scope, and 

Methodology

Page 39 GAO-12-360 Grants Management

exception of a few letters of credit. The recipient of a letter of credit may 

not be required to meet the same performance reporting requirements as 

the recipient of a grant, but, as with grants, they are required to meet 

certain reporting requirements, such as submitting a Federal Financial 

Report (SF-425). Letters of credit, according to PSC officials, also have 

end dates in PMS comparable to grants and follow the same the same 

closeout procedures in PMS. PSC informed us that it would not be able to 

exclude letters of credit from the data they provide us.

For reporting purposes, we separated data into two sets of expired grant

accounts: (1) one set consisted of expired accounts for which all of the 

funds made available had been disbursed and (2) a second set of 

accounts that included expired accounts with a positive undisbursed 

balance. To obtain an estimate of the total amount of fees paid for 

maintaining accounts with no undisbursed balances remaining, we 

requested data from PSC for all accounts that appear on the year-end 

fiscal 2011 closeout report (i.e., as of September 30, 2011) with a unique 

accounting status symbol indicating that no undisbursed balances 

remained and that the awarding agency only needed to submit the final 

closeout code to PSC to finalize grant closeout. According to data 

provided by PSC, PMS users were charged a total of roughly $173,000 

per month to maintain more than 28,000 expired grant accounts with no 

undisbursed balances remaining listed on the year-end closeout report. 

Roughly $137,000 of this was charged to HHS operating divisions. The 

closeout report provided by PSC does not provide information on when 

the authorized funds in these accounts were fully disbursed. However, 

more than 9,000 of these grants were more than 3 years past their end 

date. For illustrative purposes, we multiplied the monthly fees for these 

accounts by 12 to obtain a rough approximation of what the total annual 

fees charged for these accounts would be assuming that all accounts with 

no undisbursed balances remaining balance as of September 30, 2011, 

had a zero dollar balance for the entire fiscal year.

To test the reliability of PMS closeout data, we (1) reviewed existing 

documentation related to PMS, including the most recent audit of the 

design and operating effectiveness of the system’s controls, (2) 

interviewed officials responsible for administration of the database on 

data entry and editing procedures and the production of closeout reports, 

and (3) conducted electronic testing for obvious errors in completeness 

and accuracy. An independent auditor assessed internal controls for PMS 

Reliability Testing of PMS 

Closeout Data
Appendix I: Objectives, Scope, and 

Methodology

Page 40 GAO-12-360 Grants Management

in 2011 and reported that, with one exception, the controls were suitably 

designed to provide reasonable assurance the control objectives would 

be achieved if the controls operated effectively.6 We discussed with HHS 

officials data entry and editing procedures, the production of closeout 

reports, and any known limitations associated with the data. According to 

HHS officials, no-cost extensions that extend the grant period without 

changing the authorized amount of funding may not be reflected in PMS 

data. As a result, PMS closeout reports may include grants that have 

received an extension and are therefore not eligible for closeout. No 

obvious errors in completeness and accuracy were identified during 

electronic testing. After conducting these assessment steps, we found 

that the PMS closeout data were sufficiently reliable for the purposes of 

this report.

ASAP is an electronic payment system implemented jointly by the 

Department of the Treasury’s (Treasury) Financial Management Service 

(FMS) and the Federal Reserve Bank of Richmond. ASAP allows grantee 

organizations receiving federal funds to draw from accounts 

preauthorized by federal agencies. In addition to grants, ASAP is also 

used to make payments to financial agents that are performing financial 

services for FMS and other federal agencies. For example, ASAP can be 

used for reimbursing financial institutions for payments made by federal 

agencies through debit cards. Agencies establish and maintain accounts 

in ASAP to facilitate the flow of funds to organizations. Unlike PMS grant 

accounts, which represent an individual grant agreement between a 

federal agency and grantee, accounts in ASAP can represent multiple 

grant agreements between an awarding agency and a grantee. Individual 

grant agreements within these accounts may have reached their grant 

 

6

HHS, Description of the U.S. Department of Health & Human Services, Program Support 

Center Financial Management Service Division of Payment Management Grants 

Management System For the Period October 1, 2010 through June 30, 2011 (Washington 

D.C.: August 2011). This was a Statement on Standards for Attestation Engagements No. 

16 (SSAE 16) audit conducted in accordance with attestation standards established by the 

American Institute of Certified Public Accountants. The exception noted by the 

independent auditor related to access by a program developer to install certain changes in 

the PMS program. 

Analysis of Dormant Grant 

Account Data from ASAP

Description of ASAP System
Appendix I: Objectives, Scope, and 

Methodology

Page 41 GAO-12-360 Grants Management

end date, while others may not have. Therefore, the ASAP system cannot 

be used to determine which individual grants are eligible for closeout.

FMS officials began issuing “dormant account reports” to all ASAP users 

in 2009 as a response, Treasury officials told us, to the findings in our 

2008 report that using federal payment systems to track undisbursed 

balances in grant accounts can help reduce unused funding.7 Dormant 

account reports provide information on all inactive ASAP accounts, 

including accounts for nongrant programs. For the purposes of this report, 

our focus was on accounts for grant programs only. The first dormant 

account report focused only on undisbursed balances in accounts where 

the grantee had not drawn down funds for a prolonged period of time. 

However, the criteria used by FMS for generating dormant account 

reports have evolved over time to improve the usability of the reports. For 

the dormant account report provided to us for the end of fiscal year 2011, 

accounts with undisbursed balances were included if: (1) the grantee had 

not drawn down funds for at least 2 years, and (2) the awarding agency 

had made no changes to the authorized amount of funding available for at 

least 2 years. For each grant account, the report includes information 

such as the identification number, the account balance, the cumulative 

amount of funding authorized to the grantee, and the date of the last 

payment request. The grant account end date is an optional field 

completed by the awarding agency. FMS did not include accounts with no 

balance remaining on this report, but has encouraged agencies to close 

these accounts if they are no longer active. FMS does not charge users 

for these accounts or for other payment system services provided by the 

ASAP system and instead receives appropriations to cover the cost of its 

operations.8

According to FMS officials, dormant account reports are generally 

provided twice a year, allowing agencies to track progress on addressing 

inactive accounts. The first report lists all of the dormant accounts as of a 

specific date, and the second report shows agencies’ progress toward 

addressing dormant accounts included on the first report. For this report, 

 

7

GAO-08-432. 

8

For fiscal year 2011, Congress appropriated $233,253,000 to FMS for salaries and 

expenses. Since fiscal year 1998, Congress has also provided Treasury with permanent 

indefinite appropriations for sums needed to reimburse the Federal Reserve Banks for 

services performed as fiscal agents of the United States, including expenses incurred 

related to the ASAP system.

ASAP Dormant Account 

Reports
Appendix I: Objectives, Scope, and 

Methodology

Page 42 GAO-12-360 Grants Management

we reviewed the most recently available dormant account report for the 

end of fiscal year 2011.9

To test the reliability of ASAP dormant account report data, we: 

This report listed all ASAP accounts that have 

not had any activity (i.e., no payment requests and no funding added or 

removed) since September 30, 2009.

(1) reviewed existing documentation related to the ASAP system, 

(2) interviewed officials responsible for administration of the database on 

data entry and editing procedures and the production of dormant account 

reports, and (3) conducted electronic testing for obvious errors in 

completeness and accuracy. We discussed with FMS officials internal 

control testing and other quality review procedures for the ASAP system 

as well as dormant account reports. We also discussed missing data in 

certain fields on the dormant account report identified during electronic 

testing to ensure that omissions did not indicate potential errors. After 

conducting these assessment steps, we found that the data from dormant 

account reports were sufficiently reliable for the purposes of this report.

To address our second objective, we collected and reviewed audit reports 

issued by GAO from September 2007 to May 2011 and by the offices of 

inspectors general at the 24 Chief Financial Officers Act (CFO Act) 

agencies from January 2008 to June 2011, which since the issuance of 

our 2008 report, had focused on undisbursed funds in expired accounts. 

We reviewed IG reports from the 24 CFO Act agencies in order to provide 

coverage of the major grant-making agencies and because this approach 

updated the review we performed as part of the work on our 2008 report, 

which included IG reports issued between 2000 and 2006. Based on our 

review for this report, we identified IG reports on HHS, Departments of 

Energy and Homeland Security, and the Environmental Protection 

Agency with findings of weaknesses related to undisbursed grant 

balance, or grant closeout. We then interviewed IG officials at these four 

agencies to discuss their findings and any plans to conduct future audits 

on undisbursed grant funds. We also interviewed IG officials from four 

additional agencies—the Department of Commerce (DOC), Department 

 

9

This report was run on October 31, 2011. To familiarize ourselves with the evolving 

process FMS was developing to generate the dormant account reports, we also reviewed 

the first dormant account report provided to ASAP system users dated January 2009, a 

follow-up to this initial report dated April 2009, and a dormant account report dated July 

2011. Because the criteria for determining which accounts are dormant have changed 

over time, it is not possible to compare information on dormant account reports from 

different reporting cycles. 

Reliability Testing of ASAP 

Dormant Account Data

Review of Audits by GAO 

and Federal IGs and of 

Agencies’ Performance 

and Accountability 

Reports Issued Since 2008
Appendix I: Objectives, Scope, and 

Methodology

Page 43 GAO-12-360 Grants Management

of Justice (DOJ), National Aeronautics and Space Administration (NASA), 

and National Science Foundation (NSF)—where agency management 

had reported on undisbursed balances in expired grant accounts in the 

agencies’ 2010 and 2011 annual performance reports, as described 

below. Finally, we followed up with each of the IG Offices at the remaining 

16 CFO Act agencies via e-mail to ensure we had obtained any relevant 

reports and to determine if they had any plans to conduct future audits 

related to undisbursed grant funds, or grant closeouts. As a result of this 

follow up, we identified two additional IG reports related to timely grant 

closeout at the Departments of Agriculture and Labor.

To analyze actions agencies have taken to track undisbursed balances in 

expired accounts, we reviewed annual performance reports for all 24 

agencies required to issue audited financial statements under the CFO 

Act from fiscal years 2009 to 2011.10 The 24 CFO Act agencies were 

responsible for the vast majority—more than the 95 percent—of grant 

programs identified in the CFDA database as of June 2, 2011. We 

performed a keyword search to determine if the agency, its office of 

inspector general, or the independent auditor had reported on 

undisbursed balances in expired grant accounts or the timely closeout of 

grant accounts. We also reviewed the Performance and Accountability 

(PAR) and Agency Financial Reports (AFR) of four entities receiving 

funds under the Commerce, Justice, Science, and Related Agencies Act 

provision of P.L.111-117 for compliance with relevant reporting 

requirements in Section 537.

To address our third objective, we reviewed relevant OMB guidance and 

regulations from federal grant-making agencies. Specifically, we reviewed 

the OMB Circulars No. A-102, Grants and Cooperative Agreements with 

State and Local Governments, and No. A-110, Uniform Administrative 

Requirements for Grants and Other Agreements with Institutions of 

Higher Education, Hospitals, and Other Non-Profit Organizations. Each 

federal agency that awards and administers grants and cooperative 

agreements that are subject to the guidance in Circulars A-102 and A-110 

is responsible for issuing regulations that are consistent with the circulars, 

 

10The Government Management Reform Act of 1994 amended the requirements of the 

Chief Financial Officers (CFO) Act of 1990 by requiring, among other things, the annual 

preparation and audit of organizationwide financial statements of 24 executive 

departments and agencies.

Review of Relevant OMB 

Circulars and Federal 

Regulations 
Appendix I: Objectives, Scope, and 

Methodology

Page 44 GAO-12-360 Grants Management

unless different provisions are required by federal statute or are approved 

by OMB. We reviewed regulations from federal grant-making agencies 

that have codified governmentwide grants requirements, as identified on 

OMB’s website, to determine (1) the length of time prescribed for closing 

out federal grants and (2) the length of time federal grantees are required 

to retain records related to grant awards.11

To identify federal governmentwide guidance related to federal agency 

performance reporting, we reviewed OMB Circular No. A-11, Preparation, 

Submission and Execution of the Budget and Circular No. A-136, 

Financial Reporting Requirements. We also reviewed two memoranda 

related to tracking undisbursed balances in expired grant accounts issued 

by OMB in October 2010 and August 2011 to select agencies receiving 

funding under the Commerce, Justice, Science, and Related Agencies 

appropriations act, as required by law.12

 

11See 

We interviewed officials from 

OMB to discuss the purpose and scope of their guidance and officials at 

the four agencies that reported undisbursed balances in expired grant 

accounts in 2010 and 2011 annual performance reports—DOC, DOJ, 

NASA, and NSF—to discuss their implementation of OMB’s instructions.

http://www.whitehouse.gov/omb/grants_chart/. This list includes regulations from 28 

federal departments and independent agencies. 

12Pub. L. No. 111-117 and Pub. L. No. 112-10. 
Appendix II: Federal Agencies Using the 

Payment Management System (PMS) for Grant 

Payments (as of June 2011)

Page 45 GAO-12-360 Grants Management

Department of Health and Human Services

Health Resources and Services Administration

Food and Drug Administration

National Institutes of Health

Centers for Disease Control and Prevention

Substance Abuse and Mental Health Services Administration

Agency for Healthcare Research and Quality

Indian Health Service

Centers for Medicare & Medicaid Services

Administration for Children and Families

Administration on Aging

Department of Agriculture

Food Safety and Inspection Service

National Institute of Food and Agriculture

Agriculture Research Service

Forest Service

Office of Advocacy Outreach

Department of Homeland Security

Federal Emergency Management Administration

Bureau of Customs and Border Protection

Immigration and Customs Enforcement

Office of the Chief Procurement Officer

Department of the Interior

U. S. Fish and Wildlife Service

National Park Service

Department of Labor

Mine Safety and Health Administration

Bureau of Labor Statistics

Occupational Safety and Health Administration

Veterans Employment and Training

Employment and Training Administration

Appendix II: Federal Agencies Using the 

Payment Management System (PMS) for 

Grant Payments (as of June 2011)
Appendix II: Federal Agencies Using the 

Payment Management System (PMS) for Grant 

Payments (as of June 2011)

Page 46 GAO-12-360 Grants Management

Department of State 

Bureau of Educational and Cultural Affairs

Bureau of Educational and Cultural Affairs Fulbright Commission, Europe

Bureau of Educational and Cultural Affairs Fulbright Commission, 

Western Hemisphere

Bureau of Educational and Cultural Affairs Fulbright Commission, East 

Asia

Bureau of Educational and Cultural Affairs Fulbright Commission, Near 

East/South Asia

Bureau of East Asian and Pacific Affairs

Bureau of Oceans and International Environmental Scientific Affairs

Bureau of Democracy, Human Rights and Labor

Bureau of International Narcotics and Law Enforcement Affairs

Bureau of Administration, Office of Overseas Schools

Bureau of Political-Military Affairs, Office of Humanitarian Demining 

Programs

Bureau of Population, Refugees and Migration

Bureau of Diplomatic Security

Bureau of European and Eurasian Affairs

Bureau of Human Resources

Bureau of Intelligence and Research

Bureau of Near Eastern Affairs

Bureau of Nonproliferation

Bureau of Nonproliferation, Office of Export Control Cooperation

Bureau of International Security and Nonproliferation and Disarmament 

Fund

Bureau of South Asian Affairs

Bureau of African Affairs

Office of International Information Programs

Bureau of Economic and Business Affairs

Bureau of Western Hemisphere Affairs

Bureau of Public Affairs

Department of the Treasury

Internal Revenue Service

Office of the Fiscal Assistant Secretary

Department of Veterans Affairs

National Cemetery Administration

Veterans Health Administration
Appendix II: Federal Agencies Using the 

Payment Management System (PMS) for Grant 

Payments (as of June 2011)

Page 47 GAO-12-360 Grants Management

Health care for Homeless Veterans

Supported Services for Veteran Families

Corporation for National Service

Executive Office of the President

Office of National Drug Control Policy

National Aeronautics and Space Administration

Ames Research Center

Dryden Flight Research Center

Glenn Research Center

Goddard Space Flight Center

Headquarters

Johnson Space Center

Kennedy Space Center

Langley Research Center

Marshall Space Flight Center

Stennis Space Center

Small Business Administration

Office of Women’s Business Ownership

United States Agency for International Development

Agency for International Development
Appendix III: Federal Agencies Using the 

Automated Standard Application for Payments 

(ASAP) System for Grant Payments (as of 

June 2011)

Page 48 GAO-12-360 Grants Management

Department of Agriculture

Food and Nutrition Service

National Institute of Food and Agriculture

Department of Commerce

Economic Development Administration

International Trade Agency

Minority Business Development Agency

National Institute of Standards

National Oceanic and Atmospheric Administration

National Telecommunications and Information Agency

Department of Energy

Environmental Protection Agency

General Services Administration

Department of the Interior

Bureau of Reclamation

Bureau of Land Management

Office of Surface Mining

Minerals Management Service

U.S. Geological Survey

Library of Congress

Nuclear Regulatory Commission

Social Security Administration

Appendix III: Federal Agencies Using the 

Automated Standard Application for Payments 

(ASAP) System for Grant Payments (as of 

June 2011) 
Appendix IV: Comments from the Department 

of Commerce

Page 49 GAO-12-360 Grants Management

Appendix IV: Comments from the 

Department of Commerce
Appendix IV: Comments from the Department 

of Commerce

Page 50 GAO-12-360 Grants Management
Appendix V: Comments from the Department 

of Health and Human Services

Page 51 GAO-12-360 Grants Management

Appendix V: Comments from the Department 

of Health and Human Services
Appendix V: Comments from the Department 

of Health and Human Services

Page 52 GAO-12-360 Grants Management
Appendix V: Comments from the Department 

of Health and Human Services

Page 53 GAO-12-360 Grants Management
Appendix VI: GAO Contact and Staff 

Acknowledgments

Page 54 GAO-12-360 Grants Management

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

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

In addition to the individuals named above, Phyllis L. Anderson, Assistant 

Director, Thomas M. James, Assistant Director, Thomas J. McCabe, 

Analyst-in-Charge, and Andrew Y. Ching, Travis P. Hill, Jennifer Leone, 

Omari A. Norman, Susan Ragland, Cynthia M. Saunders, and Michael 

Springer made major contributions to this report.

Appendix VI: GAO Contact and Staff 

Acknowledgments 

GAO Contacts

Staff 

Acknowledgments 

(450907)
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