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S. Hrg. 112–670 

ASSESSING GRANTS MANAGEMENT PRACTICES AT 

FEDERAL AGENCIES 

HEARING 

BEFORE THE

FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT 

INFORMATION, FEDERAL SERVICES, AND 

INTERNATIONAL SECURITY SUBCOMMITTEE 

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

JULY 25, 2012 

Available via the World Wide Web: http://www.fdsys.gov 

Printed for the use of the 

Committee on Homeland Security and Governmental Affairs 

( 
(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

JOSEPH I. LIEBERMAN, Connecticut, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

MARK BEGICH, Alaska 

SUSAN M. COLLINS, Maine 

TOM COBURN, Oklahoma 

SCOTT P. BROWN, Massachusetts 

JOHN MCCAIN, Arizona 

RON JOHNSON, Wisconsin 

ROB PORTMAN, Ohio 

RAND PAUL, Kentucky 

JERRY MORAN, Kansas 

MICHAEL L. ALEXANDER, Staff Director 

NICHOLAS A. ROSSI, Minority Staff Director 

TRINA DRIESSNACK TYRER, Chief Clerk 

JOYCE WARD, Publications Clerk and GPO Detailee 

SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT 

INFORMATION, FEDERAL SERVICES, AND INTERNATIONAL SECURITY 

THOMAS R. CARPER, Delaware, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

MARK L. PRYOR, Arkansas 

CLAIRE MCCASKILL, Missouri 

MARK BEGICH, Alaska 

SCOTT P. BROWN, Massachusetts 

TOM COBURN, Oklahoma 

JOHN MCCAIN, Arizona 

RON JOHNSON, Wisconsin 

ROB PORTMAN, Ohio 

JOHN KILVINGTON, Staff Director 

WILLIAM WRIGHT, Minority Staff Director 

DEIRDRE G. ARMSTRONG, Chief Clerk 
(III) 

C O N T E N T S 

Opening statements: Page 

Senator Carper ................................................................................................. 1 

Senator Coburn ................................................................................................. 4 

Senator Brown .................................................................................................. 4 

Prepared statements: 

Senator Carper ................................................................................................. 37 

Senator Brown .................................................................................................. 40 

WITNESSES 

WEDNESDAY, JULY 25, 2012 

Hon. Daniel I. Werfel, Controller, Office of Federal Financial Management, 

Office of Management and Budget ..................................................................... 6 

Hon. Elizabeth M. Harman, Assistant Administrator, Grants Program Directorate, Federal Emergency Management Agency, U.S. Department of Homeland Security ........................................................................................................ 8 

Nancy J. Gunderson, Deputy Assistant Secretary, Office of Grants and Acquisition Policy and Accountability, U.S. Department of Health and Human 

Services ................................................................................................................. 10 

Stanley J. Czerwinski, Director, Strategic Issues, U.S. Government Accountability Office ......................................................................................................... 12 

ALPHABETICAL LIST OF WITNESSES

Czerwinski, Stanley J.: 

Testimony .......................................................................................................... 12 

Prepared statement .......................................................................................... 63 

Gunderson, Nancy J.: 

Testimony .......................................................................................................... 10 

Prepared statement .......................................................................................... 59 

Harman, Hon. Elizabeth M.: 

Testimony .......................................................................................................... 8 

Prepared statement .......................................................................................... 50 

Werfel, Hon. Daniel I.: 

Testimony .......................................................................................................... 6 

Prepared statement .......................................................................................... 43 

APPENDIX 

The chart referenced by Senator Carper ............................................................... 77 

Questions and responses for the Record from: 

Mr. Werfel ......................................................................................................... 79 

(1) 

ASSESSING GRANTS MANAGEMENT 

PRACTICES AT FEDERAL AGENCIES 

WEDNESDAY, JULY 25, 2012 

U.S. SENATE, SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, FEDERAL SERVICES, AND INTERNATIONAL SECURITY, OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:30 p.m., in Room 

SD–342, Dirksen Senate Office Building, Hon. Thomas R. Carper, 

Chairman of the Subcommittee, presiding. 

Present: Senators Carper, Brown, and Coburn. 

OPENING STATEMENT OF SENATOR CARPER 

Senator CARPER. Welcome one and all. I call the hearing to order. 

We are glad you all could be all with us today. 

This hearing, as you know, will focus on some challenges related 

to Federal agencies’ grant management practices and the opportunities that exist for addressing those practices. 

Each year, the Federal Government allocates, as you know, billions of dollars, actually hundreds of billions of dollars through 

grants to State and local governments, to educational institutions, 

to medical researchers, and to others. Effective management of 

those grants involves, among other things, ensuring that the funds 

are spent appropriately and are actually achieving the intended results for taxpayers. Now more than ever, it is important that we 

ensure strong, effective oversight over grant money. 

From Fiscal Years (FY) 1990 through 2010, Federal grant spend- ing increased from about $135 billion annually, to over $612 billion, 

almost one-quarter of the Fiscal Year 2010 Federal budget. This 

money went out through more than 1,600 Federal grant programs 

managed by 23 Federal grant-making departments and agencies. 

These programs help first responders and State and local government improve their ability to withstand disasters. They fund efforts 

to find cures to cancer and other diseases. It is our responsibility 

in Congress and in the Administration to ensure that all this 

money is spent as intended and that, at the end of the day, we see 

real results. 

As everyone in the room knows, both the Federal Government 

and most State and local governments have struggled with record 

budget deficits in recent years. Today, our national debt stands at 

more than $15 trillion, well over double what it was just a decade 
2 

ago when we actually had a balanced budget, if you can believe 

that. The last time our national debt was this high was at the end 

of World War II. That level of debt was not sustainable then. It is 

certainly not sustainable today. In order to address the burden that 

this debt places on our country, we need to look in every nook and 

cranny of the Federal Government with programs large and small 

and make certain that the resources we are investing in are being 

spent efficiently and effectively. We need to demand results and 

focus the scarce resources the taxpayers entrust us with on our 

highest priorities as a country and on solutions that are proven effective in addressing the many challenges that we face. 

Across the Federal Government, program managers need to 

sharpen their pencils and stop making the kind of expensive, avoidable mistakes that lead to improper payments. According to the 

Government Accountability Office (GAO), Federal agencies made 

an estimated $115 billion in improper payments in 2011. We have 

seen this before. Actually, we have seen more of this before. A year 

ago it was $119 billion. We are making a little progress. 

Senator Coburn, you will be happy, I just learned from Peter 

Tyler who sits behind my left shoulder, that we are going to hotline 

our Improper Payments Bill, the latest version of the Improper 

Payments Bill, grandson of the original improper payments bill I 

think, and try to get that done in the next few months—there you 

go. Version 3.0. 

But Federal grants are not the whole cause of improper payments. We know that error and fraud unfortunately occur in all 

categories of Federal spending. 

But, improving management and accountability in grant spending is one important piece of the puzzle when it comes to curbing 

waste and fraud. Success in doing so will help us as we work to 

curb our national debt, and in the case of Federal grants, it will 

help us get better results, we hope, both for grant recipients and 

the public at large. Ultimately all of us, that includes the Congress, 

that includes the Administration, State and local governments, 

grant recipients large and small. We want to improve the way that 

grants are managed and need to work together to do so. 

Our witnesses today will describe some important progress that 

has been made during the last few years, maybe even in the last 

few days, in improving the oversight and management of Federal 

grants. We will also be looking today at additional steps that the 

Federal Government ought to take. 

One stark example of the need for improved Federal grants management is the problem of money remaining in expired grant accounts. After a grant is awarded, the recipient has a specific 

amount of time to complete the grant requirements and to spend 

those funds. 

The grants must then be closed out, a process which includes an 

audit of the spending. In effect, the grant recipient has to show the 

receipts for the money that has been spent. 

However, according to GAO, at the end of Fiscal Year 2011, almost $1 billion in undisbursed funding remained in expired grant 

accounts. 

We have a chart1 here that shows the amount of money in expired grants within one grant management system called the Pay-
3 

1The chart referenced by Senator Carper appears in the appendix on page 77. 

ment Management System, and the chart shows the levels and the 

ages of expired Federal grants. It shows about $794 million of grant funds remaining in accounts 

after the expiration date, sometimes going back as long as 5 or 10 

years. 

GAO has also identified an additional Federal grant manage- ment system with $126 million in expired grant amounts of money. 

This is just not acceptable. 

Our GAO witness today will describe how a lack of a timely 

grant close out will lead to a higher risk of waste and fraud. 

The second problem we will discuss today is that of drawdown 

or ensuring the grant recipients spend their award of money in a 

timely manner. Unfortunately, problems have been identified in 

this area as well. 

For example, since its formation, the Department of Homeland 

Security (DHS) has provided State and local governments with over 

$35 billion in grant funding to help prepare for disasters and acts 

of terrorism. 

However, for a variety of reasons, the Department and its stakeholders have struggled to draw down some of this money and put 

these funds to work in our communities, and this could be due to 

sloppy bookkeeping or problems with how the grant program is 

structured. It could even be a sign that some of the unspent funds 

are not needed and could have been put to better use elsewhere. 

For whatever the reason, though, this is another issue that needs 

to be addressed. 

Finally, we will discuss the importance of measuring performance in our grant programs. As I have said earlier, we have got to 

work smarter with our limited resources, and this includes finding 

better ways to look at what we got for the grant money that has 

been spent. 

We look forward today to hearing from Danny Werfel, the Controller of the Office of Management and Budget (OMB) about how 

the Administration intends to build on what has worked so far in 

grant management oversight and also improve the performance of 

those initiatives that have not worked as well as we would like. 

We also look forward to hearing from officials from two of the 

largest grants making Federal agencies, the Department of Health 

and Human Services (HHS) and the Department of Homeland Security about grants management within their agencies. 

We are here today in large part, though, because we have a 

moral imperative to ensure that grant dollars are spent wisely and 

have proper oversight; and at the same time, we also need to ensure that scarce taxpayer resources are invested and spent as effectively as possible and that they show good measurable results. 

I am happy to turn it over to Senator Brown for any comments 

for any comments he wants to make or if he would he like to yield 

to Dr. Coburn. 

Senator BROWN. I will yield. 

Senator COBURN. I thank my colleague 

Senator CARPER. Dr. Coburn has another conference. I am glad 

that you are here and you are recognized. 
4 

OPENING STATEMENT OF SENATOR COBURN 

Senator COBURN. I thank my colleagues for recognizing me early. 

Unfortunately, I have a meeting at 2:45. 

As most of you know, I am keenly interested in this issue and 

have been through the testimony, and I am very pleased with the 

Controller alert that went out this week on grant management. 

Not all of this is the Administration’s problems because a lot of 

the problems we find are from earmarks that were written improperly, than the money went out and there is no way to get it back. 

The grant funds are sitting there in limbo. This is what we need 

to fix. 

So, take my comments with a grain of salt but I would note a 

couple of things, and I have some questions for the Hon. Danny 

Werfel that we will submit for the record in terms of how you plan 

to follow up with the Controller alert. 

But, I would make a comment and just a little example. The city of Nederland, Texas, just got a $2.1 million grant for port security 

that was allegedly to renovate its city hall. 

The first story to be published in the paper said this was for the 

city hall. The corrected paper that was printed after that said, ‘‘oh, 

well, we are going to build a new city hall,’’ but the port security 

funds are for an emergency operations center for a land-locked city, 

even though it is close to Port Arthur. 

It just shows you when we have needs to deepen ports in South 

Carolina and to deepen the Kerr-McClellan navigation system to 12 

feet all the way to Arkansas so we can ship the bread basket of 

wheat and corn that comes out of the middle of the country, we are 

spending $2.1 million to renovate a city hall. I know that is the instruction from the Secretary to spend the money. I understand 

that. I am not sure it is a wise use of the money. 

We are going to request that the city council and their planning 

commission show us that this was, in fact, for an emergency operations center and not for a new city hall. 

Grant management is key to making sure we are following what 

we want to do. I appreciate the efforts from all of you, and how you 

are trying to do this right. 

I think we are making some progress. I am really excited about 

some of the things that are happening, and I know it is slow, but 

I appreciate your dedication to do that. We will have questions for 

the panel through the questions for the record (QFRs), if we could, 

Mr. Chairman. 

Again, I thank my colleague from Massachusetts for yielding to 

me. 

Senator CARPER. You are welcome. Thank you so much for your 

comments, and thanks for your steadfast work on these issues too. 

Thank you. 

OPENING STATEMENT OF SENATOR BROWN 

Senator BROWN. Thank you, Mr. Chairman. 

And, thank you to Senator Coburn. 

As you know, grants are important not only to other States but 

to Massachusetts. We have world class research facilities: MIT, 

Northeastern, UMass, WPI, and others. We are second in NIH 

funding and fourth on a per capita basis. I have heard anywhere 
5 

from first to fourth. That is pretty impressive for a State our size 

and it drives an information based, 21st Century economy that 

serves as a model for our Nation. I support the increase in NIH 

funding and ensuring consistency in that funding, not just to create 

jobs in the Bay State, but more importantly to save and improve 

people’s lives. 

I have learned in my brief time in Washington that throwing 

more money at a problem without adequate oversight and management is a recipe for waste, fraud, and abuse. Unfortunately, the 

current grants management system is beset by longstanding problems. For example, GAO recently reported that some 3,700 grant 

and contract recipients receiving $24 billion in Recovery Act money 

collectively owed more than $750 million in Federal taxes. The government also improperly pays many grants, for example, 5 of the 

top 10 government programs making improper payments were 

grant programs. These grants programs represent approximately 

$40 billion of the $115 billion total of government improper payments. This hearing will focus on the government’s failure to properly disperse grant dollars and GAO reports at the end of Fiscal 

Year 2011, $794 million remain in expired accounts as was referenced by Senator Carper. 

The lifecycle is also characterized by many other problems, from 

not assessing the capability of prospective grantees to account for 

funds, to poor monitoring of grantee performance, to grants that 

are not closed out in a timely manner. Simply put, the grants management system is broken. We need to fix it. Grants now account 

for more Federal outlays than contracts, yet the grant management 

system is woefully behind the Federal contract management system. To achieve these grants and the grants reform that we need, 

there must be robust governance structure that effectively incorporates input from all of the stakeholders. It is our role as leaders 

to make sure that we fix this right away. The taxpayers have a 

right to expect better management. 

We cannot continue to waste money, Senator Carper, as you have 

referenced. We have to do it better. We just have to. I am looking 

forward to the testimony and I have some questions and go and do 

some votes. Thank you. 

Senator CARPER. Thank you so much, Senator Brown. Thanks for 

being here. 

I want to thank our staffs, for the work that they continue to do 

here and help us to our oversight jobs. 

Danny Werfel is, I think this is the first time you have been before us, Mr. Werfel. I was kidding. Somebody the other day said if 

we had to pay him on the basis of every appearance, the Federal 

deficit would be a lot larger. We are glad you come for no extra 

charge. 

But our first witness today is Daniel Werfel. He is the Controller 

at the Office of Management and Budget. Mr. Werfel is responsible 

for OMB’s efforts to improve financial management in all areas of 

the government, including financial reporting, improper payments, 

real property management, financial accounting standards, grant 

management, and financial systems, a lot of which are things we 

worked on in this Subcommittee. 
6 

1The prepared statement of Mr. Werfel appears in the appendix on page 43. 

Mr. Werfel generously testifies in front of our Subcommittee 

quite frequently. We thank him for being with us today. So welcome. 

Elizabeth M. Harman, Assistant Administrator for the U.S. Department of Homeland Security. She is our second witness and has 

served in this role since 2010. She is responsible for the development, the administration, the implementation, award, and close out 

of more than 50 different grants and financial assistance programs. 

Ms. Harman has over 20 years of experience in the emergency 

management community, starting at the age of 12—is that right? 

I do not know if that is right or not—where she has held positions 

as an administrator, an academic, a volunteer and a career firefighter. That is pretty impressive. 

We want to thank you for appearing before this Subcommittee. 

Welcome. 

Ms. Nancy Gunderson, U.S. Department of Health and Human 

Services. She is the Deputy Assistant Secretary for the Office of 

Grants and Acquisition Policy and Accountability at the Department of Health and Human Services. 

Her office is responsible for department-wide leadership in the 

areas of grants and acquisition. Ms. Gunderson joined the Department of Health and Human Services in 2009. She was also the onetime Director of Acquisition Operations for the Federal Emergency 

Management Agency (FEMA). And has also held several key positions within the Department of Defense. We look forward to your 

testimony. I want to thank you for joining us today. 

And finally Mr. Stanley Czerwinski, who was the Director on the 

Strategic Issues Team for GAO. He is responsible for leading a 

broad range of evaluations concerning Federal, State, and local governments. Prior to coming to GAO, Mr. Czerwinski worked for both 

the Congressional Research Service (CRS) and the Congressional 

Budget Office (CBO). He has testified numerous times before Congress. We thank him for being with us today. 

One of the sounds that people most enjoy hearing is the sound 

of their own name correctly pronounced. So, we try to get it right 

and excuse us when we do not please. 

Mr. Werfel, you are in the leadoff spot. 

Mr. Czerwinski, you get to bat cleanup. In between we have 

these two ladies. A good lineup. Please proceed. 

TESTIMONY OF HON. DANIEL I. WERFEL,1 CONTROLLER, OFFICE OF FEDERAL FINANCIAL MANAGEMENT, OFFICE OF 

MANAGEMENT AND BUDGET 

Mr. WERFEL. Thank you, Chairman Carper, Ranking Member 

Brown, Dr. Coburn, and Members of the Subcommittee, for the invitation to discuss with you today how the Federal Government can 

improve our management of Federal grants. 

In response to the President’s charge to build a 21st Century 

government that operates efficiently, effectively, and accountably, 

this Administration is taking transformative steps to improve the 

oversight and accountability of funds awarded through Federal 

grants. 
7 

We are doing this by targeting oversight resources on the risk of 

waste, fraud, and abuse and by reducing administrative burden on 

recipients to improve grants delivery. 

To meet these goals, OMB has worked over the past year to review our policies on the single audit tool to ensure that we are best 

focusing our oversight resources where they can be most targeted 

on addressing the risk of waste, fraud, and abuse. 

Similarly, we are reviewing our cost allocation and administrative requirements to ensure that we are minimizing the administrative burden and resources associated with compliance so that recipients can focus their efforts on achieving outcomes. 

Consistent with our belief that successful resolution of policy 

questions requires strong input from those who may be affected, 

OMB began by engaging with both Federal and non-Federal stakeholders to generate ideas for reform. 

Last October, we created the Council on Financial Assistance Reform (COFAR), an interagency council to provide a unified governance voice to the grants community and coordinate grants policies 

across the government. 

The COFARs first assignment has been to work with OMB to 

further develop these ideas for reform while also charting its own 

path for further ongoing stakeholder engagement. 

In order to provide all interested stakeholders with an opportunity to formally and transparently provide their input at the 

formative stages of this process, OMB published an advance notice 

of proposed guidance in the Federal Register last February. 

For each reform idea discussed, we looked for new and creative 

ways to ensure that our grants policies best serve the Federal Government, grant recipients, and ultimately the taxpayer. 

We received more than 350 public comments through this process, including views from State, local, and tribal governments, institutions of higher education, organizations, and the audit community. 

Since then, OMB has worked with the COFAR to review the 

feedback and develop concrete reform proposals for consideration. 

We intend to publish a notice of proposed guidance for public comment in the coming months. 

Beyond this effort, OMB is also improving the financial stewardship of Federal grants through verification of recipient eligibility 

using a new do-not-pay tool which I know you are aware of. 

And, as I discussed in a hearing last week, we are also working 

to increase the transparency of Federal spending of which grants 

is a major component. 

I would also like to specifically address GAO’s recently issued report on the timeliness of grant closeout actions. We fully agree with 

GAO that timely closeout of grants can be improved. Failure to 

close out these accounts in a timely fashion may, in some cases, 

represent a worthy opportunity to improve our financial management and grants management practices, and I commend this Subcommittee and GAO for drawing attention to this issue and calling 

on Federal agencies to act. 

We are committed to working with agencies to ensure that appropriate steps are taken to improve accounting and other controls in 

this area. 
8 

1The prepared statement of Ms. Harman appears in the appendix on page 50. 

Having said that, we believe there are a few important caveats 

to the GAO report that I have highlighted in my written remarks. 

Most critical of these caveats, the prolonged period for closeout in 

some cases may reflect deliberate agency controls to ensure that 

proper grant recipient documentation is provided prior to disbursement of grant funds that closeout. Caveats aside, we fully agree 

with GAO that there are opportunities to improve the timeliness in 

the closeout of grant awards. 

To that end, yesterday I issued an alert on this topic to all agency chief financial officers (CFOs) that include specific strategies 

that agencies should explore for improving this process, including 

establishing strong linkages between the program and the CFO 

shop to determine what timely closeout means for programs and 

how to achieve it, focusing first on closing out expired grants that 

are several years past their end dates and have no remaining 

funds, establishing policies and procedures describing when it is 

appropriate for the agency to unilaterally close out grants, establishing annual or semiannual performance targets for timely grant 

closeout, leveraging internal control procedures to mitigate risks 

associated with not closing out grants in a timely manner, and 

monitoring closeout activity and tracking progress in terms of reducing our closeout backlog. 

As you will hear from HHS and DHS today, they are already engaging on these types of actions in their improvement efforts. 

Through these and other steps, we look forward to continuing to 

work closely with agencies, GAO, and this Subcommittee to ensure 

that the financial management policies governing Federal grants 

are delivering the high standard of accountability appropriate for 

an efficient, effective, and accountable 21st Century government. 

Thank you again for the opportunity to testify today. I look forward to answering your questions. 

Senator CARPER. Thank you so much. Ms. Harman. 

TESTIMONY OF HON. ELIZABETH M. HARMAN,1 ASSISTANT ADMINISTRATOR, GRANTS PROGRAM DIRECTORATE, FEDERAL 

EMERGENCY MANAGEMENT AGENCY, U.S. DEPARTMENT OF 

HOMELAND SECURITY 

Ms. HARMAN. Good afternoon. Chairman Carper, Ranking Member Brown, Dr. Coburn, and other Members of the Subcommittee. 

My name is Elizabeth Harman. I am the Assistant Administrator 

for the Grant Programs Directorate (GPD) at the Federal Emergency Management Agency, part of the Department of Homeland 

Security. 

On behalf of Secretary Napolitano and Administrator Fugate— 

Senator CARPER. I would just ask, do not call it GPD. 

Ms. HARMAN. OK. 

Senator CARPER. I am not big on acronyms, just so you know. 

Ms. HARMAN. We will go with Grant Programs Director. 

Senator CARPER. That is great or just call it the Directorate. 

Ms. HARMAN. Thank you. 

On behalf of Secretary Napolitano and Administrator Fugate, it 

is my pleasure to appear before you today to discuss the grant 
9 

management practices within FEMA. FEMA grant programs have 

significantly contributed to the security and preparedness— 

Senator CARPER. If you could slow down just a little bit. If you 

use 6 minutes that is OK. 

Ms. HARMAN. OK. 

Senator CARPER. If you use 16 minutes, that is another problem. 

Ms. HARMAN. I will not go to 16 minutes. I promise. 

Over the past 10 years, these programs have provided more than $35 billion in Federal funds to enhance the capabilities to plan, 

prepare, prevent, respond to, and recover from both natural and 

terrorist events. Over the past 10 years, we have also made 

progress in how these grants are managed and administered. 

Since its creation, the Directorate has matured as an organization. In the past 21⁄2 years, we have made significant strides and 

improvements to our operations, focusing heavily on the development, management, and oversight of FEMA grant programs. 

These improvements include managing grant closeouts, enhancing grant management information technology (IT) system, and expanding our monitoring activities both programmatic and financial. 

The ultimate responsibility for management and oversight of 

FEMA grant programs rests with the Grant Programs Directorate. 

As of Fiscal Year 2011, the Grant Programs Directorate was experiencing delays in processing grant closeouts for FEMA’s grant 

programs. These delays resulted in significant backlog of open 

grants which were several years past their period of performance 

end date. 

Our Directorate identified solutions to address the immediate 

closeout of awards as well as to establish long-term goals to support ongoing sustainability of closeouts that would mitigate future 

delays. 

Our Directorate conducted a current State assessment of the 

grant closeout process, evaluated our universe of open and closed 

grants, coordinated with related stakeholders to identify process 

improvements, and developed and implemented a closeout manual 

to detail the process and enhance stabilization and standardization. 

Through a phased approach, our Directorate initially focused its 

efforts on grants awarded in Fiscal Years 2005 and prior; and within the first 3 months of 2011, we effectively closed out 588 grants. 

To date, we have successfully closed 8,000 of 14,000, going back as 

far as 1997. 

Moving forward, we are currently concentrating our closeout efforts on the closeout of all Fiscal Year 2007 by March 31, 2013, in 

conjunction with all eligible Fiscal Year 2008 through 2010 grants. 

Our Directorate has taken a proactive approach in ensuring that 

all current and future grants are closed in a timely manner. To 

sustain and maintain continued progress on this effort, we have 

implemented a tracking system designed to identify grants nearing 

closeout within the 30-day period as well as developed a grant 

closeout guide defining roles, responsibilities, and processes for 

stakeholders. 

To fulfill FEMA’s strategic initiative of consolidating and automating the entire non-disaster grants management lifecycle into a 

single system, we have developed and implemented the Non-Disaster Grant Management System. This system further enhances 
10 

1The prepared statement of Ms. Gunderson appears in the appendix on page 59. 

the grant management infrastructure of FEMA preparedness grant 

programs. 

We began accepting applications in the system in Fiscal Year 

2011 and we currently use it to manage approximately 20 different 

preparedness programs. When fully implemented, the system will 

consolidate all of FEMA’s non-disaster grant programs into one 

comprehensive system that covers the entire grant management 

lifecycle. 

The expansion of this system and its improved functionality will 

provide FEMA with a flexible system that can quickly adapt to 

changing business needs, reporting requirements, and performance 

metrics. 

With regards to financial and programmatic monitoring, FEMA 

has launched a long-term solution. This approach implements risk 

management principles to direct scarce monitoring resources to 

grantees and programs with the most need. 

As part of a multiyear process, FEMA has refined criteria for deciding which programs to monitor, standardized regional financial 

and program monitoring activities and expanded ongoing oversight 

activities to ensure early identification of any issues. 

This methodology builds upon the established monitoring approach and will drive FEMA toward continuously advancing his 

grants management capability. 

The Fiscal Year 2012 monitoring plan lays the foundation for future risk-based monitoring which supports DHS’s risk management 

philosophy. 

FEMA plans to continue to further refine this approach. We will 

begin focusing our efforts on the development of a unified financial 

and programmatic monitoring plan for Fiscal Year 2013. 

The purpose of this integrated approach will be to encourage and 

promote the coordination of activities and communication between 

financial and programmatic monitoring staff and build the foundation for robust integration into Fiscal Year 2014. 

Over the last several years, FEMA has strived to improve how 

our grants have been managed and administered fiscally and programmatically. I believe we have made significant progress and improvements in that area and will continue to do so moving forward. 

Mr. Chairman, Ranking Member Brown, and other Members of 

the Subcommittee, this concludes my statement and I am happy to 

answer any questions you may have. 

Senator CARPER. Good. Thanks for that statement. 

Ms. Gunderson, you are recognized. 

TESTIMONY OF NANCY J. GUNDERSON,1 DEPUTY ASSISTANT 

SECRETARY, OFFICE OF GRANTS AND ACQUISITION POLICY 

AND ACCOUNTABILITY, U.S. DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Ms. GUNDERSON. Chairman Carper, Ranking Member Brown, 

and Members of the Subcommittee, thank you for this opportunity 

to discuss the Department of Health and Human Service’s grants 

management policies and practices. 
11 

As the Deputy Assistant Secretary for Grants and Acquisition 

Policy and Accountability, I am responsible for providing department-wide leadership in the area of grants and acquisition management. My office oversees and supports the Department’s 13 

grants management offices and 10 procurement activities as they 

award and administer grants and contracts in fulfilling the Department’s mission to enhance the health and well-being of Americans. 

As the largest Federal grant making organization and one that 

manages a great variety of grant programs, the Department is 

often called upon for leadership and advice in the area of grants 

management. 

We proudly serve as a managing partner of grants.gov, the Federal-wide site used to find and apply for grants opportunities. 

As co-chair of the Council on Financial Assistance Reform, we 

are engaged in the Office of Management and Budget’s Federalwide efforts to streamline existing grants administration policies. 

Our grantees provide vital services and conduct important research, all for the benefit of the public; and therefore, it is in the 

Department’s and the public’s best interest that our grantees succeed. And, I would like to highlight some of our grants management practices and policies. 

Our agencies provide technical assistance to facilitate grantee 

performance and their compliance. They also monitor grantee 

progress over the project’s lifecycle. Grantees are required to submit financial reports, quality performance measures, and annual 

and final progress reports, all of which provide assurance that the 

grant funds are expended in accordance with the original purpose 

and intent of the grant program. 

With regard to grant closeout, this process reflects the culmination of the business relationship between the Federal grant program and the grantee and is a vital step in ensuring accountability 

of the grantee and the financial integrity of the program expenditures. When the financial reporting and expenditure information 

come together, the grant may be closed out in our payment management system. 

As reported by the Government Accountability Office, the Department has made progress in its closeout effort. It was noted that 

the total amount of undisbursed balances and expired Federal 

grant accounts was over $200 million less in 2011 than the amount 

previously reported in 2006, while during this time the overall 

amount of grant expenditures and disbursements increased by 23 

percent. 

In 2011, at the Department, we identified 60,000 grants as eligible for closeout compared to 64,000 in 2006 and closed approximate 

26,000 of the eligible grants in 2011. 

Additionally, the Government Accountability Office also reported 

on grants that remained undisbursed more than 5 years past the 

grant end date, and we recognize that more work remains to close 

out grants that have long expired and to keep up with the overall 

workload. 

My office led an accelerated closeout effort last year to get ahead 

of grants closeout and prevent a sizable backlog from occurring. In 

addition to focusing on closeout efforts on grants facing funds cancellation, which generally occurs five Fiscal Years after the funds 
12 

1The prepared statement of Mr. Czerwinski appears in the appendix on page 63. 

were appropriated, we asked our agencies to concentrate also on 

Fiscal Year 2008 funded grants that had more recently expired. 

This effort resulted in the de-obligation of $116 million from a 

total of 2,700 grants and also revealed some of the systemic problems and challenges we have between our grants systems, the payment management system, and our grantees’ financial reports. 

We plan to keep this accelerated closeout initiative moving, update our grants policies by the end of the calendar year, resolve the 

system challenges within 24 months and supplement our agencies 

initiatives to dedicate staff to grants closeout by establishing an 

intradepartmental grants closeout task force. 

Finally, as part of the Secretary’s commitment to program integrity, we are collaborating across the Department to further improve 

our grants closeout practices. Incorporating grants closeout into our 

program integrity initiative will ensure that closeout remains a departmental priority, facilitate a consistent method to assess on a 

program-by-program basis the challenges associated with closeout, 

and provide an opportunity to share the agency’s risk mitigation 

practices across the Department. 

I have spoken with the agencies reflected in the report that have 

aged grants expirations. The challenge they have in closing these 

grants primarily involved discrepancies between the authorized, expended, and disbursed amounts recorded in the grants and financial and payment management systems. 

These grants require significant analysis and coordination to ensure that all accounts are equal and that the grants may be closed 

out. The agencies are taking steps to closeout these grants. 

The Department strongly agrees with the need to protect taxpayer dollars and is committed to doing so as we work to support 

our mission. 

Thank you for the opportunity to appear before the Subcommittee about this important topic, and I am glad to answer any 

questions you may have. 

Senator CARPER. Thank you, Ms. Gunderson. 

Mr. Czerwinski, all yours. 

TESTIMONY OF STANLEY J. CZERWINSKI, DIRECTOR,1 STRATEGIC ISSUES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. CZERWINSKI. Thank you, Chairman Carper and Ranking 

Member Brown, Dr. Coburn, Members of the Subcommittee. 

Thank you both for asking us to be here as well as asking us to 

do the work that we are here to talk about. One of the themes that 

I am going to touch on today is the importance of congressional 

oversight in achieving results. 

Back in 2008, you asked us to look at undisbursed grants. What 

we found was over $1 billion sitting in one payment system, the 

one that HHS runs, and these funds had not been disbursed even 

though their grants had expired. You subsequently asked us to 

take another look at this situation in 2011. This time we looked at 

the grant accounts that HHS has along with the 12 agencies that 

it services. That is about 70 percent of all grants. This time we also 
13 

1The chart referenced appears in the appendix on page 77. 

added in the Department of Treasury that services their own 

grants as well as those for other agencies for about 10 percent. 

The story at Treasury was really interesting because we had not 

looked at Treasury last time, and this time when we went in there 

4 years later, they said, we have been waiting for GAO to come for 

4 years. 

What they had said was that you have been asked by Senator 

Carper and Coburn and we know they will be asking you to come 

back. And, when you did your report in 2008, we thought that you 

would be here to ask and we wanted to be doing some things that 

we could actually show improvement on. 

At that point in 2008 Treasury set up a dormant account report. 

They also went to all the agencies they service and said that GAO 

will be here to ask questions and we want to be able to show improvement. 

We looked at what happened from 2008 to 2012 and we saw 

roughly about $100 million improvement over that 4-year time. I 

can tell you that would not have happened without congressional 

oversight. 

Similarly, what we have found in our work is when the inspectors general, GAO, or internal auditors look at an agency, it raises 

the visibility of what is going on and we see actions taken. 

This is similar to what Ms. Gunderson talked about with HHS. 

The Inspector General for HHS did four reports looking at grants 

that should have been closed out. Their internal auditor in their 

performance of accountability report identified grant closeout as an 

ongoing, lasting management challenge. 

As a result, HHS took action, and the results that Ms. Gunderson talked about today are really a good indication of that. 

This goes back to a point that you and Senator Coburn mentioned at the hearing that Comptroller General Gene Dodaro did on 

the Data Act. You only get improvement when agencies step up, 

take individual accountability and carry out what they are supposed to be doing. 

In terms of grant closeout, there is essentially a process that 

they have to follow step by step, grant by grant; and the work that 

you asked us to do this time around really gives a good roadmap 

for how to do that. 

You asked us to look at the oldest. You asked us to focus on the 

biggest. And, as the chart1 that you have up there shows, over 

$100 million sits in accounts that had been dormant for 5 years or 

longer. 

What we also found, looking at the biggest, was that about 1 percent of the grants in terms of numbers are over $1 million. Yet, 

they account for one third of the monies sitting there unspent. 

If agencies follow the roadmap that you laid out and focus on the 

oldest and biggest, they will get a good leg up on going forward the 

way they should on this. 

It is really important that agencies close out the grants because 

it allows for more efficient and effective use of the Federal funds. 
14 

Right now that money is sitting there; and if they can collect it, 

it can either go back to Treasury or agencies can redirect it for 

other purposes. 

Now, grant closeout is just one step in the grant making process 

but it shows the importance of grants. Chairman Carper, as you 

mentioned in your opening statement, over $600 billion in grants 

went out this past year. 

That goes out in over half a million individual grant awards. 

Also, there are about 1,000 different grants programs. We are talking about one in almost every five Federal dollars going out 

through grants. This is a really important process. 

In your oversight agenda for next year, we are hoping to help you 

out. We are doing some work at your request, Chairman Carper, 

and your request, Ranking Member Brown, to look at a number of 

grant issues. I just want to lay those out for a moment before I 

close my statement. 

First, we are looking at streamlining grants. Second, as you mentioned in your statement, Chairman Carper, we are looking at performance measurement. What are we getting with grants? And finally, internal controls. 

On streamlining, in 1997 Congress passed PL 106–107 and PL 

106–107 was aimed at improving the way we apply for grants, the 

way we manage them, and the way we oversee them; and we know 

that, 15 years later, we are not where we should be. 

And so, at your request what we are going to be looking at where 

we stand on streamlining efforts to date and hopefully come up 

with recommendations to improve. 

Now, one of the questions that people always ask is, What are 

we getting out of our grants? And that is probably one of the hardest answers to come up with—How do you measure performance? 

But, there are some grantees and some grantmakers who have 

done some very innovative things trying to measure performance. 

What we are going to do, at your request, is to look at those, see 

what has worked, see what has not and hopefully have some best 

practices for others to draw on. 

Finally, as you know, there have been a number of reviews raising a lot of problems with how we go about either managing or 

overseeing grants. Often that comes back to internal controls. 

So, once again at your request, we will be looking at how internal 

controls can be improved on by grant makers. 

Going forward, we hope this will help you with your oversight 

agenda. And, I have to tell you, I have done a lot of hearings and 

I have worked with a lot of committees—we love working for people 

like you. 

What you have is a dedication to accountability that we share, 

what you have is a discipline for carrying out oversight over the 

long haul, and a determination to make change. And frankly, that 

is what we at GAO live for. 

We look forward to helping you all the way through. 

Senator CARPER. What we also have is really dedicated Subcommittee staff on both sides and we are grateful for the terrific 

work that they do and we see you as a real partner, OMB as a real 

partner, the IG as a real partner, and the agencies as well. We are 
15 

in this together and I think we are making some progress and that 

is encouraging. Senator Brown. 

Senator BROWN. Thank you, Senator Carper. 

I guess in listening to the testimony, one of the questions I have, 

I think I will start with FEMA, at what point do you terminate the 

grant if it has not been disbursed? I mean some of them go for 10 

plus years, number one. 

If you cannot verify how the money is spent, is there any mechanism to, and you believe that there is a fraud perpetrated or just 

there is some type of negligence, actual, per se, what do you do? 

Ms. HARMAN. Thank you. Those are excellent questions. 

With regards to termination of the grants, the majority of our 

grants are really focused on preparedness and preparing our Nation to build capabilities so that we can respond to and take care 

of any events. 

Many of those come in the form of target allocations and are 

driven through a risk formula that is in statute of the 9/11 Act. 

There area lot of grants over the years that have been proscribed 

with statutory minimums going to each stakeholder. Other grants, 

we are now moving to more of a competitive, more of a bottom-up 

needs approach. 

I think you are going to see some changes as we move to that 

with regards to un-obligated bounces that are out there. We have 

more of a request for funding that is needed as opposed to a dollar 

amount that has been calculated, based off risk for stakeholders to 

spend within a defined period of time. 

Traditionally, our period of performance is a policy decision. In 

the past years, it has been a 36-month period of performance. We 

are moving more to have a 24-month period of performance effectively this year as we roll grants out the door. 

We work very closely with our stakeholders to ensure how that 

money is being spent. It has to tie currently to their State homeland security strategies. In the future, it will be tied to their threat 

hazard identification risk assessment. 

You may have heard the term THIRA thrown around. It is an 

acronym. However, if you have heard of that, that is what they 

should be spending that money toward. 

With regards to terminating grants, we have terminated grants 

in cases of fraud or waste or things that have been identified; but 

with regards to spending the dollars, it takes a long time to build 

capabilities and build preparedness. 

Senator BROWN. Does it take over 10 years? 

Ms. HARMAN. Well, what I can tell you is from the FEMA preparedness grant programs that we have obligated more than $35 

billion over the last 10 years. Of those dollars, our average return 

to the Treasury after closeout is roughly 1 percent. 

There are some grant programs that a little bit more goes back 

for a variety of reasons. I can chat with you about whether it is 

matching funds or other constraints in the program. 

Senator BROWN. I just want to make sure you have in place a 

mechanism in the event that it is clear that they are not going to 

fulfill their grants request. If you find out that there is a fraud or 

some type of negligence that there is recourse. 

Ms. HARMAN. Absolutely. 
16 

Senator BROWN. We can follow up on that off-line because I do 

want to shift gears just a little bit, I am going to ask the same 

question to Health and Human Services. 

Mr. Werfel, thank you for coming back. One of the things that 

is always perplexing to me is that we are awarding grants of substantial money to people that owe us a tremendous amount in delinquent taxes. 

How do we address that? How is that allowed? How do we know 

that, when they get their grant, a portion of that money is actually 

going to paid back, the money that they owe us anyway? 

Should there not be just a straight prohibition on those types of 

awards? If you owed taxes to the Federal Government you are not 

getting any grants until you pay it off. 

Mr. WERFEL. Thank you for the question, Senator. It is a very 

straightforward question. Unfortunately, there is not a straightforward answer. 

Senator BROWN. Of course. 

Mr. WERFEL. Let me amplify why. 

The status of our taxpayers and all the elements of that, who 

they are, their household size, their adjusted gross income, and 

their delinquency status is all protected information. Section 6103 

of the tax code provides significant constraints on the IRS’s ability 

to release that information, not just publicly but within and among 

Federal agencies as well. We certainly do not have unconstrained 

access. 

Senator BROWN. It does not need a congressional fix then? 

Mr. WERFEL. It potentially could. But it is a trade-off. There is 

a trade-off. There is a balance there in terms of privacy and protection of data versus sharing that information for program integrity 

purposes. 

As the world exists today, Federal agencies do not have real-time 

access or a way of gauging a recipient’s tax status in terms of 

whether they are delinquent or not. 

Senator BROWN. What about if there is a Federal lien? Would 

these agencies check for a Federal lien or State liens? 

Mr. WERFEL. When you get into certain levels of delinquency, the 

more severe delinquencies, others certain public indicators start to 

emerge such as— 

Senator BROWN. I think $750 million is kind of severe. Obviously, 

it is just not one entity. 

Mr. WERFEL. Right. 

Senator BROWN. At what point, I guess is what I am getting at. 

I think you know the problem. I think you know my concerns and 

probably Senator Carper’s. 

I would love a suggestion as to how you feel we should address 

and fix it, whether it is through Executive Order, a legislative fix, 

an administrative fix. I just want to fix it. 

Mr. WERFEL. Right. There was legislative action recently. Several 

appropriations bills required that agencies consider suspension and 

debarment for issues where we have a recipient that is either a 

convicted felon or has an outstanding tax liability, and we are currently working on guidance to articulate how agencies will do that. 

Again, I just want a caveat that the constraint we have here is getting access to the information on who is delinquent or not and that 
17 

makes the process a little bit more clumsy in terms of us executing 

to make sure that— 

Senator BROWN. Right. I want to find a way to streamline it, 

though, and maybe we can work with your office. 

Mr. WERFEL. Something to work on. 

Senator BROWN. Thank you. 

Then, getting back to you, Ms. Gunderson, I know it is kind of 

the same question, but Health and Human Services has a large 

percentage, $794 million in undisbursed grant money. 

While there may be reasons why these accounts have not been 

closed out in the short-term, why have they not closed out expired 

accounts that are 3 years or older? Kind of the same question I 

asked earlier. 

I mean, at what point do you say, OK it is clear that they are 

not going to fulfill the grant award and we need to get the money 

back. Also, it is clear that there was some type of fraud or negligence. 

Do you have a mechanism to recoup the money? 

Ms. GUNDERSON. Thank you. Of the $795 million, about $595 

million of that was reported by the GAO to be accountable to 

HHS’s programs. 

Senator BROWN. Thank you for that correction. 

Ms. GUNDERSON. We are a portion and subset of that, but again 

a large subset of that, and it is a significant amount of money. We 

believe the amount is slightly overstated because we have since 

found, through our own analysis, that some of those grants had actually been extended and performance was not yet completed. 

Senator BROWN. Well, it says $400 million. 

Ms. GUNDERSON. Even in that case, it still is a significant 

amount of money. We are engaged in closing out that effort. 

We have since focused, as I mentioned earlier, a lot of our closeout effort on the more recently expired grants and this audit 

brought to light the need to close out those ones that have long 

been expired. 

As one of the examples, one of our agencies has closed out over 

17,000 of those aged grants this Fiscal Year, and 8,000 of those 

were funded from Fiscal Year 2007 or prior. So, we are making 

progress. 

Senator BROWN. What about the earlier ones? The ones that are 

10 years and over. 

Ms. GUNDERSON. Those ones are the Fiscal Year 2007 prior, 

about 8,000 from one agency alone have been closed out. We are 

making progress and putting our attention towards this. 

Senator BROWN. I do not want to take Senator Carper’s time. I 

may come back to this. Thank you. 

Senator CARPER. Did you want to finish your sentence? 

Ms. GUNDERSON. I did not know if you wanted me to address the 

other half of your question. 

Senator CARPER. Go ahead. 

Senator BROWN. Yes, please thank you. I did not want to take 

the Chairman’s time. 

Ms. GUNDERSON. That is OK. We do have mechanisms and processes to be able to terminate a grant if need be when a grantee is 
18 

not performing or is underperforming. A great majority of our 

grants. 

Senator BROWN. How about fraud and negligence, though? 

Ms. GUNDERSON. And in those cases as well, and having those 

issues referred either to our Office of Inspector General for action 

as well. 

A great majority of our grants are awarded to State and local 

governments. We do work in partnership with them to ensure that 

they are performing against the grants that we do award with 

them. 

Senator BROWN. Do you have a mechanism though? For example, 

I just told my staffer, hey, I want you to go through and see how 

many are outstanding in Massachusetts because I want to write 

them and call them and say, did you know there may be a turn 

over with personnel so we can get that grant out the door. 

It is about jobs. It is about obviously maximizing the grant opportunities in your State so you are not falling behind. 

Is there something that you all have that you can let us, as legis- lators, know that your State has $300 million that has not gone out 

the door yet. I am sure you would like to know that, right, Tom? 

Ms. GUNDERSON. We can provide that information through our 

payment management system and we can provide information 

about all the awards that your States received through our Tracking Accountability in Government Grant System. 

Senator BROWN. Thank you. 

Senator CARPER. Let me direct my first question to Mr. Werfel. 

I understand from Peter Tyler, who is the fellow sitting over my 

left shoulder here, that yesterday your office put out an important 

document to the Federal agencies, controller community, that specifically addresses the issue of expired grants. 

In your alert, I am told, your alert to agencies highlighted the 

importance of closing out grants in a timely manner, the subject 

that we are talking about here today; and it specifically mentioned 

the importance of curbing waste and fraud which we have talked 

about here again today. 

And, we believe that this is an excellent example of the Administration taking positive, proactive action when a problem becomes 

known as this one has. 

We understand the communication I mentioned also described 

the many issues and recommendations that came out of GAO. And, 

I just wondered if you might comment for us on yesterday’s alert, 

and also describe any specific additional steps that the Administration is contemplating taking to further improve the timeliness of 

agencies in performing grant closeouts and the associated audits. 

Mr. WERFEL. Thank you, Senator. 

I think it is an example of this entire hearing and the GAO report and our response I think is an example of how sometimes in 

small ways and through small steps we can make significant 

progress in terms of understanding the nature of deficiencies that 

are occurring in financial management and work collectively to 

close them out. 

GAO’s report, I think, prompted by this Subcommittee highlighted and area that we did not have full insight on. On an individual agency basis I think they did; but collectively across the 
19 

community whether it be the CFO council or the grants council 

that we recently created, looking at that issue in its entirety, we 

are able to say, OK, cross government we have varying levels of 

performance. 

I think you are hearing from two witnesses today whose agencies 

are very actively engaged in this issue with or without OMB 

issuing directions or alerts. 

But, we have other agencies that self reflective can say this is 

an area that we have not focused on and the fact that it is being 

raised, whether it is by our Inspector General or GAO, there is 

something we can do about it. 

So, we get our communities together. We just, for example, met 

yesterday with every CFO, had a robust discussion on a whole host 

of issues probably all important to this Subcommittee. 

Senator CARPER. Give us a couple of examples. 

Mr. WERFEL. Of what we talked about? 

Senator CARPER. Yes. 

Mr. WERFEL. Well, we talked about the implementation of donot-pay, its importance, and made sure that every agency was on 

track in terms of thinking about their signing up for that solution. 

And, we talked about— 

Senator CARPER. How was the reaction? That is something that 

is obviously of great interest to us. 

Mr. WERFEL. I think the reaction is very positive. The way we 

talked about it, just to share with you, we consider the use of data 

and leveraging the information age in new and effective ways as 

the major game changer in the area of improper payments; and the 

issue is how well the agency is positioned to move from being in 

an embryonic phase of using data to a more sophisticated one. We 

have a few agencies that are off and running at 40 yards down the 

football field and they are doing excellent work. HHS is certainly 

one of them with their CMS fraud lab and all the forensics they 

have going on. 

Senator CARPER. They have a lot of money at stake there. So, 

good to hear. 

Mr. WERFEL. Yes. It is the right agency to be advancing down 

the football field ahead of everyone. 

The other agencies are not in that same place; and the point is 

that, by signing up for the do-not-pay solution, it is kind of a, we 

are going on the journey together; and Treasury and OMB are 

helping agencies lead because we are taking them on a journey to 

start with some very basic data matches against the death master 

file, against the occluded party list. 

But we are building on that to say there are more sophisticated 

analysis that can take place. And, Treasury is going to house that 

data analytics center for the agencies. If they do not have the 

wherewithal right now to get 40 yards down the football field on 

their own, the do-not-pay solution is kind of a collective amongst 

the Federal agencies to move them along. 

And, I think there is a lot of excitement and energy around the 

help that the do-not-pay solution will provide agencies in helping 

them along. So, that is an example. 

But, we also talked about grants closeout. I talked about the elements of the Controller alert that was issued. This fell into a cat-
20 

egory of an area where the agencies felt like, with many GAO reports, let us know the problem, highlight it for us so that we can 

understand the nature of its, and then talk to us about the different types of strategies that are at play. 

So, looking at, for example, tracking, performance targets, the 

right times and places to unilaterally close out grants just when 

certain criteria are hit, all of those things are things that, in response to the Controller alert, that agencies are reviewing and we 

will continue that dialogue going forward. 

Senator CARPER. OK. Mr. Czerwinski, let me just ask how would 

you react, if you will, to the news that Mr. Werfel and his team 

put out the document yesterday to the Federal agency controller 

community that specifically address these expired grants? 

Mr. CZERWINSKI. Thank you, Chairman Carper, and we are very 

pleased to see that. 

As you will recall, this is stemming from a recommendation that 

we made in 2008 to you. So, to have the action taken now is very 

gratifying to us. And, going back to my statement, I think this is 

testimony to essentially congressional oversight. 

In terms of the actual content of the alert, we agree completely 

with the concept; and that is, by raising the attention, that you will 

get better performance; and then again, the implementation, the 

kind of things that I talked about emphasizing those that are most 

at risk, the oldest, largest. 

So, we are in very much agreement with where OMB is going 

with this. 

Senator CARPER. OK. Good. 

This is a question, to some extent you all have already spoken 

to this but I am going to ask you just to drill down a little bit more, 

just reiterate what you have already said. 

But, I am going to ask Ms. Gunderson and Ms. Harman, if you 

would just comment a bit more on the steps that you all are taking 

to address within your own Departments the expired grants. 

Ms. GUNDERSON. We have issued department-wide guidance to 

accelerate the close out initiative; and as I mentioned, my office engaged in an accelerated closeout team effort last year and really 

had our agencies focus in on the Fiscal Year 2008 funded grants 

that had recently expired. 

Senator CARPER. What was the catalyst for that, for you all doing 

that? 

Ms. GUNDERSON. It was again as a result of some of the OIG reports that we had seen, our auditor’s reports reflecting a concern 

with it in our financial statements, and just a need to move forward and again breakdown that backlog that creates the cumulative effect of these grants having expired and being added to the 

pool to be closed out. 

So, we wanted to get them ahead of the game in addition to the 

efforts that they took to focus in on the grants that were having 

funds canceled or those older ones. So, that was one main initiative. 

We’ve asked our agencies to dedicate staff to this and many have 

already done that, or done that on their own, several in those 

cases. I personally have this in my performance plan to ensure that 
21 

our Department increases grants closeout and several of our agencies have also taken that same initiative. 

Senator CARPER. That is good. Ms. Harman. 

Ms. HARMAN. With regards to FEMA, the need for closeouts was 

really identified through our Internal Controls Branch that was 

created also in January of last year. I realigned our Directorate to 

create an Internal Controls Branch to sort of highlight what do we 

really need to be working on. 

Closeouts was one of the biggest ones. So, although we did not 

get to a full branch, we did put together a task force to sort of do 

an assessment and say, what are we dealing with here? 

Our grants have a very big spotlight on them. Everyone is very 

interested in what are we doing with preparedness and how much 

money is going there; and as such, we send those financial documentation to the Hill on quite a regular basis, quarterly. 

The drawdown issue was sort of coupled and hiding in there and 

a lot of the discussion was never on drawdown. It was really, well, 

we cannot really deal with drawdown. 

When we look at the numbers that we were sending and what 

we were reporting, it was, wait a second, some of that money has 

already gone back to the treasury. We need to take a look at this. 

So, coupled with closeout and internal controls, it really highlighted a lot of concerns for us. So, that task force was able to do 

an internal assessment; and as I mentioned, we have already 

closed out 8,000 of 14,000 awards. 

All of those awards of 2007 which will be closed, this will be that 

5-year mark where money goes back to Treasury as of September 

30. Those grants will be closed. Our mark is March 30, 2013, and 

all open grants that are eligible and expired to closeout will be 

closed by the end of the Fiscal Year 2013. 

Senator CARPER. Mr. Werfel and Mr. Czerwinski, would you say 

that these two agencies are good examples of what is going on 

across the Executive Branch or are they agencies that are doing an 

especially good job or are they the laggards? 

How would you characterize the job they are doing in this regard? 

Mr. CZERWINSKI. I would say they are probably on the leadingedge at this point by the focus they are placing on it. They may 

be very well leading-edge because their risks were the greatest to 

start with. 

Senator CARPER. OK. Mr. Werfel. 

Mr. WERFEL. Those are my exact sentiments. I think the work 

that HHS and DHS are doing are commendable. In some ways in 

terms of the directions that OMB has issued yesterday, these agencies are on top of many of those elements in terms of tracking and 

understanding. 

But, they are driven in some cases by risk; and in particular I 

think HHS being the largest grant making agency, there is a lot 

of focus from their OIG and from oversight entities on their grants 

portfolio and some issues have surfaced over the years and they 

have organized themselves to prioritize the grants management. 

They look at these indicators and they delve deeper into them to 

understand what do these accounts and their hold over balances 

mean, and both of these agencies are evaluating them. 
22 

I think it is now incumbent upon the rest of the community, as 

generated by the GAO report and in this hearing, to follow suit, 

understand the data better, and figure out where there is need for 

improvements. 

Senator CARPER. OK. Good. Senator Brown. 

Senator BROWN. I just want to go backwards just for a minute, 

Mr. Werfel. 

So, there is no sharing. I know the privacy issues. Why then do 

the agencies as part of their format when they are putting up their 

grant application say, let us know, do you have any tax arrearage 

and/or under the pains and penalties of perjury? I hereby certify 

that I have paid all State and Federal taxes and no outstanding 

monies are owed to any entities thereof. 

Why can we not do something like that? 

Mr. WERFEL. That is definitely an option that is under close consideration. I mentioned earlier that the legislation that was recently issued requires us to have at least some basis of knowledge 

of taxpayers status in order to consider suspension and debarment. 

The self-certification of the recipient comes out first and foremost 

as a major and significant option. 

Senator BROWN. We just did insider trading in the STOCK Act, 

and we are signing our documents when we are doing our ethics 

documents. We are signing under the pains and penalties of perjury. 

I would think that somebody applying and getting millions of 

taxpayer dollars, the least they could do is certify that they are in 

compliance with all applicable tax laws. 

I would suggest whomever is making that decision, let us get it 

done. 

Mr. WERFEL. It is definitely under consideration as a component. 

Senator BROWN. All right. Also, the agency gave notice, thankfully yesterday, as you were just discussing. 

Did you put in penalties or suggestions of penalties if you, in 

fact, do not do it? For example, you are sending out a notice to the 

agencies of the things they need to do. Is there anything that, if 

you do not do it, this is what is going to happen, your budget is 

going to be cut, or you are not going to be eligible to issue any 

grants, or is there some type of penalty? 

Mr. WERFEL. Not at this stage and that is something we can talk 

about as an approach, as a strategy. The approach that we tried 

to take at OMB in working with the agency is to do things in 

stages, and particularly we get a lot of feedback from the agencies 

in our relationship with them. 

They often tell us, tell us what the issue is, not the how, and 

allow us to fix the issue and defer to our expertise. 

So, yesterday what you saw us telling them what the issue was, 

making sure that we are a community looking last at what the 

issue is, making suggestions on how to do it, but not necessarily 

dictating the exact procedures that the agencies will take. 

If that does not work and we move forward now that this issue 

is squarely on our radar screen, we would move to a next stage of 

development of the process with the agencies of more directive, 

maybe a little bit more, I hate the term, but micromanagement. 
23 

Whatever term you want to use, but much more specific requirements would be put in place as we grow and develop on the issue. 

Senator BROWN. So, what time frame is that, like, at what point 

do you say, this is not really working. The thing that is kind of 

gnawing at me is that we are talking, about a lot of money, and 

at some point we have to kind of get off our duffs and just move 

forward and get it back into the system. 

I know Massachusetts and Delaware, we would love to have that 

money back in the system to look for other ways to spend it or use 

it to pay down our debt. 

Maybe I am too anxious. I just want to get it done. However you 

can do that to basically light a fire with the agencies who are obviously, now that you are bringing it to their attention, now that we 

have a hearing and, they are making better efforts. I think it is a 

collective effort, us pushing it on our end, you guys hearing about 

it, you guys pushing it. 

Everyone is doing their job. I understand that. I want to take it 

a step further now and really I want to close out the accounts. 

There should be a working balance within these things, but not 

hundreds of millions of dollars. It just does not make sense. 

That being said, I would like to go back to Ms. Harman. What 

performance metrics do you have in your agency, or your agencies, 

or at the program level to evaluate how effective the grant was in 

achieving its purpose. As Senator Coburn referenced, they have a 

port emergency response, but they do not have a port. 

How do you figure out if somebody is actually doing what they 

are saying they are going to do? 

Ms. HARMAN. That is a really good question. 

We have a variety of grant programs as I mentioned earlier. 

Some of them are target allocations where there is a given amount 

of money that comes to a State and that is intended to be used on 

your State’s strategic plan. 

During the application process, there is a review where they will 

submit investment justifications or projects and then there are 

milestones that are measured throughout the monitoring process 

for that. 

Other programs that are competitive programs similar to the 

port and transit programs undergo a significant review process; 

port in particular, those projects have to be reviewed by the captain 

of the port in addition to having a national review panel. 

If those dollars, through monitoring, are being used for anything 

other than what was approved, we usually know about it pretty 

quickly and steadfast. 

There was concern, I realize, with the memo and the direction 

that came out earlier in the year to allow greater flexibility with 

some of the open dollars that are out there. We are ensuring, as 

we work with our stakeholders one on one, that those dollars under 

those individual grant programs are respective of the integrity of 

that grant program. 

If it is a port grant program, any of those dollars being spent 

need to be focused on port and maritime security, not other things. 

There are mechanisms there that are in place for that. With regards to what we know outside of the administrative factors of 

monitoring the grants and the performance and the stakeholders 
24 

know what we are doing, holistically performance-wise we know exactly what we have purchased, who has purchased what at what 

State level, at what FEMA region to look at the capabilities that 

has been built. 

Senator BROWN. So, is there anything that you all, I am talking 

about you two in the middle, is there anything that you need us 

to do? Do you have enough bodies to do the job? Is it a personnel 

thing that you need? More processors or you need more computers? 

What is it that is kind of leading up to a good effort but maybe 

we could make a better effort? 

Ms. HARMAN. It is a variety of issues that go on with managing 

grants. We have approximately 20,000 open grants within FEMA 

that we manage. That does not include disaster grants. I am talking sort of preparedness, mitigation types of grants. 

Senator BROWN. Yes. 

Ms. HARMAN. So, there is a large work load there. 

We are using currently sort of risk factors or key indicators to 

determine where should we be doing the monitoring and where 

should we not. Obviously, we cannot monitor every single one of 

those grants so there has got to be some indicators that are going 

to lead us to monitor some more so than others. 

So, we are doing a lot of that. But, there is a capacity there that 

is needed with regards to personnel, with regards to funding. 

Currently, the funding that supports FEMA is a percentage of 

the overall amount of grants that are appropriated each year. That 

amount fluctuates year to year. 

We had a $4 billion budget at one point. I have a $1 billion budget this last year at the Secretary’s discretion to allocate. It is still 

the same number of grants that go out the door that need to be 

monitored. So, it still continues to build up. 

I think our biggest challenge that we have which we are making 

progress on is to move to a consolidated grant management system, 

the IT system that we use. 

The grant programs Directorate within FEMA is a combination 

from DHS programs, Justice programs, and legacy FEMA programs. With that combination back in 2007, came the people, the 

business processes, and the systems with that. 

In order for us to extract information when you or your staff are 

requesting, what did so and so do with this grant dollar, we are 

searching multiple systems to ensure that the query was correct. 

Systems for us is a critical portion of what we do, and we are 

making progress there but that is dependent on available funding 

and the capacity of the contractor and everyone else to consolidate 

all of these systems into one. 

Senator BROWN. OK. The same question. 

Ms. GUNDERSON. I would add to what was said and as an ask 

associated with what we would need and it goes to what is required 

to report on progress. 

We had several programs that are similar, but the authorizing 

legislation requires different types of reporting and often those are 

among the same grantee community. 

We are confusing the grant community with the types of reports 

that we want. As an example of that, we have recently aligned 2 

of our programs, related to FEMA’s work, our hospital prepared-
25 

ness program and our public health emergency preparedness program. We have brought those programs together so they can align 

their programs, understand the types of reports that were required 

by the authorizing statutes and design a combined strategy to help 

facilitate a better demonstration of what the outcomes were of 

those programs. 

I guess I would emphasize, as these programs are authorized and 

put forward, an emphasis on some of the standard data that we 

can collect so that we do not create disparate reporting systems 

and have that duplication. 

Senator BROWN. Yes, you are not duplicating your efforts. 

Ms. GUNDERSON. Right. 

Senator BROWN. You just want to keep it simple. 

Ms. GUNDERSON. Right. Exactly. 

Senator BROWN. Well, thank you all for your testimony. 

Mr. Chairman, I have to head out. 

Senator CARPER. Thanks for being a part of this very much. 

I am going to give our audience a chance to take a nap if they 

want and I am going to ask a question of Mr. Werfel that no one 

else in the room might be interested in but I am. 

In my briefing materials that I read, Mr. Werfel, the term Single 

Audit Act came up, and that was actually something I worked on 

in my first year as a freshman member of the House of Representatives a while back. 

I remember once my State auditor, a fellow named Dennis 

Greenhouse, said to me, ‘‘We need a Single Audit Act, and we need 

somebody to be the champion for the Single Audit Act in the House 

of Representatives.’’ 

I was looking for something to champion as a new guy, a new 

kid on the block, so that was one of the things I championed. 

My briefing materials indicated that the Single Audit Act needs 

a refresher. Could you just explain for us sort of the rationale, Mr. 

Werfel, for why we have a Single Audit Act, what has worked well, 

what has not, and why we need that refresher? 

Mr. WERFEL. Absolutely. The history here is that, as a recipient 

of Federal dollars, before the Single Audit Act framework was in 

place, there was a lot of auditors descending from the Federal Government into State and local governments, universities, and elsewhere to do their audit work, we are the auditors from HHS, we 

are the auditors from Education, et cetera. 

And, there was a concern that there was a lot of overlap and 

stepping on each other’s feet in terms of trying to figure out what 

the right audit footprint was. 

So, the notion was that we needed a framework to reconcile all 

of these various audit streams that were flowing down out of the 

Federal Government, recognizing that the dollars need to be audited, there needs to be strong oversight scrutiny and accountability but maybe there is a more rational way to do it in the single 

audit framework; and the Single Audit Act was born. 

And, OMB is charged with the responsibility essentially for 

issuing the regulations, although we call them circulars, that affect 

how the single audit framework plays out. 

In terms of a couple of different key questions, for example, who 

gets a single audit, in terms of how much money they get from the 
26 

Federal Government, we set thresholds, and then what types of 

questions they are asked in their single audit framework. 

And, over the years there has been a whole host of different concerns raised about the single audit framework. One of the ones that 

we are very focused on is that the single audit is not always asking 

the question that is most central to the taxpayers bottom line. 

That is very important to me. I have gotten some feedback over 

the years from those that are in the field doing the work and in 

particular program managers or State comptrollers saying, oftentimes I read my single audit results from my State and there is a 

lot of, hum, I do not know really what to do with this information, 

it is not all that helpful to me as a manager versus in some cases 

I read the results and I say this is huge, it is significant, it is 

impactful, and it changes the way I am going to do my work. 

And, our response at OMB was we wanted to make sure that the 

questions that were being asked and the resources that were being 

deployed were more around the significantly relevant issues and 

less around the ones that were not eating helpful. 

So, when the President issued his Executive Order on improper 

payments in 2009, one of the things that is in that Executive Order 

is he asked OMB to explore the audit of dollars in the field and 

how they can be improved, and that led us to the single audit and 

it led us to some fundamental questions which is, are we asking 

the right questions in the single audit to get at that fundamental 

bottom line question of whether the dollars are being spent correctly, are we auditing the right entities, are we auditing where the 

risks are, because for every minute we spend auditing a low risk 

entity it is a minute not spent and a deeper dive not being done 

into an entity with a higher risk. 

And so, what we issued last February as part of our reform, and 

I do not think we need the law to change per se, it is more of our 

regulations that have to change, is how can we refine the process 

to get after this bottom line question more aggressively and how 

can we continuously improve this model. 

And, we floated three different ideas essentially. One was should 

we raise the threshold so that this block of audit resources that are 

in place are placed more squarely on higher dollar grantees than 

lower dollar grantees. That was one question we asked. We got a 

lot of diverse feedback on that. 

The second question we asked is should we narrow the set of 

questions that we are asking so that there are more at the bottom 

line of improper payments and so we can go deeper with that same 

audit footprint into the area of whether the money was spent correctly or not versus some of the other tangential questions that are 

being asked. We got a lot of good feedback on that. 

And the third is are we doing enough to be transparent and aggressive in follow-up and resolution of all the audit findings that 

surface under single audit, and there was clear consensus in the 

comments received that is an area of significant area of improvement. 

So, here is where we stand. We issued the notice. We have gotten 

public comment, and we are now getting ready to issue a more formal proposal, not the final, but a formal proposal for a second public comment period and then we will go final. 
27 

And, we are currently grappling with those comments and trying 

to determine should we raise that threshold to gather the higher 

dollar grantees or is our risk distribution better the way it has 

been with the lower dollar grantees still covered by a single audit. 

And, the second question that we are grappling with is how 

much and whether to narrow the question footprint so that it is 

more centrally, and what are the trade-offs of taking away some of 

the other areas of inquiry. 

And, I think we have a huge game changing opportunity. I mentioned data analytics earlier as a game changer. Also, the strength 

of the audit, making sure that it is more risk-based and more targeted on what I believe to be a more bottom-line question from the 

taxpayer is another opportunity that we are going to see help in 

the battle against improper payments. 

Senator CARPER. Let me just make this comment. I thought that 

was a great response to a rather obscure question and issue. 

The Olympics are underway in London. Not so much in the Summer Olympics but in the Winter Olympics they have judges and 

they raise up scorecards. 

I am just going to ask the other three judges here, we will just 

say this is the Olympics and Mr. Werfel, you have just been one 

of the athletes. And, if you were to take your name tags and turn 

them over and write a score between 1 and 10, what score, Ms. 

Harman, would you give Mr. Werfel for his response on that? 

Did he knock it out of the park? What do you think? 

Ms. HARMAN. Yes, I am fairly certain I would go with a 10. 

[Laughter.] 

Senator CARPER. Ms. Gunderson, I know you are pretty tough 

grader but what do you think? 

Ms. GUNDERSON. I would go with 10 maybe, 9.9, yes. 

Senator CARPER. Mr. Czerwinski, what do you think? 

Mr. CZERWINSKI. Well, he oversees their budgets. [Laughter.] 

Senator CARPER. You can be the honest broker here. 

Mr. CZERWINSKI. But also remember I am from GAO so we always say more can be done. 

Senator CARPER. OK. All right. 

Mr. CZERWINSKI. It was a really good answer and I was thinking 

it was a really good primer to hear. I do have two other points to 

add to it, though— 

Senator CARPER. Go ahead. 

Mr. CZERWINSKI [continuing]. Coming out of the Recovery Act, 

because the Recovery Act stressed a lot of systems and it showed 

us there are two lessons that appeared to me had to do with single 

audit. 

One is timing. Timing of the audit is essential because if you get 

the audit out there too late, it does not do anybody any good. So, 

whatever we do, and I think Dan has got it exactly right, and the 

context too, it has to be with the concept of improving the timing 

in mind also. 

The second is, looking at the State and local fiscal condition, 

their resources have been stressed worse than ours at the Federal 

level. What we saw during the Recovery Act were when States that 

fiscal stress, they tended to make cuts to people like me. 
28 

They cut the State and local audit functions, and so, what you 

are talking about is asking State and local auditors to look at more, 

do it more quickly, do it with less. 

Where Danny gets a really high mark, and I probably give him 

a 9.5, is that you do it by targeting better, by what you look at and 

how you go about it, and I thought his answer was fabulous. 

Senator CARPER. OK. All right. Good work. 

I have a question. I want to return to an issue that has been 

raised already but I want to really pose this for the entire panel. 

When the issue of performance metrics comes up, I am often reminded of the saying by I think it was Vince Lombardi, who used 

to say, if you are not keeping score, you are just practicing. 

In 2010, Congress, with the help of this Subcommittee, passed a 

law requiring the use of measures that would help the Federal 

Emergency Management Agency keep better score of its grants and 

called on the National Association of Public Administration to assist the agency in studying and developing and implementing performance metrics to assess the effectiveness of the grants. 

It is my understanding that FEMA is already implementing several of these recommendations and is developing an implementation timeline for some of the remaining measures. 

And, I would just say to, Ms. Harman and Ms. Gunderson, could 

you just describe for us some of these specific ways that your agencies are implementing quantifiable performance metrics to measure 

the effectiveness of your grants? 

And, do you have any best practices that you would like to share 

with the rest of us, the other panelists, and with me? 

Ms. HARMAN. Sure. I can talk a little bit to that. That is a great 

question. We obviously hear that a lot, critically from FEMA. You 

have invested $35 billion over the last 10 years, what are we getting for it? 

We did work very closely with NAPA on that report. We 

partnered within FEMA, one of our partner Directorates is the National Preparedness Directorate where really smart people with 

really big brains analyze all of this data that we collect from our 

stakeholders. 

So, as we work with them, we have worked very closely, what information are we collecting, why are we collecting it, and what do 

we need. 

There are a lot of reporting requirements, everything from financial reporting requirements, tell us what you are doing with your 

money, tell us how you are progressing on your investment justification. 

It, at times, can be overly burdensome to a stakeholder to do 

that. So, we have had to really step back and think, with the help 

of NAPA, saying what should we be collecting and why. So, we are 

in the process of making some enhancements with that. 

We have also looked at individual grant programs such as the 

Emergency Management Performance Grant Program that is out 

there. That is roughly $350 million a year. You hear some folks 

who like that program, it is great, and others that do not like it 

say what are we doing with this, what are we getting for it. 

We instituted some very specific measures to show that this 

grant program is not just paying for people, for local emergency 
29 

managers, they are paying for people that meet certain knowledge, 

skills, and abilities. 

So, we have performance metrics with regards to the types of 

training that is required for these emergency managers, the types 

of activities they should be performing each year with regards to 

participation and exercises. When they are writing plans, they 

should be writing their plans to a certain level. 

So, all of that has been incorporated, and this is just one program out of a multitude of programs that we have. So, we are making a lot of progress with that. 

But, with the intel and the data that we currently have we, as 

I mentioned earlier, we know exactly what was purchased and 

where we purchased it. 

But, I think the true metric of performance and the capabilities 

that we have built over time is nothing beats through performance. 

When you look at the performance of the events last year in Joplin 

and Tuscaloosa, those events were handled very swiftly, very quickly and efficiently at a local level. 

FEMA did not have to deploy one Federal urban search and rescue team down there because it was already handled at a local 

level. So, these dollars are making a difference. 

By 2010, 75 percent of States and urban areas had emergency 

operation plans that they were comfortable with to say we can deal 

with a catastrophic event here. 

We have more than 10 million stakeholders trained in the incident command system across the board. That was sort of unheard 

of. Incident command prior to 9/11 not a lot of folks really knew 

what that was. 

So, we have data that can show us what they are capable of, 

what they are comfortable of, what training they have taken, but 

nothing beats the true performance that we have seen in some of 

the recent disasters. 

Senator CARPER. Ms. Gunderson. 

Ms. GUNDERSON. At the Department level, we do not have a singular set of performance metrics to apply to all of our programs. 

We manage over 300 programs across the Department. 

I do have some examples of what our agencies do at the program 

level. In our Health Resources Services Administration, for an example, under their HIV–AIDS Bureau, something that is near and 

dear to our heart given the conference that is occurring this week 

in Washington, they have created a set of performance measures 

which comprise indicators that the providers can use to monitor 

the quality of care that they are providing based on a core set of 

data and reporting metrics. 

So, we are able to capture that data and understand it. They 

have also recently begun to introduce language into their funding 

opportunities announcements that have let them open the door to 

consider that performance information in making future funding 

decisions. 

Senator CARPER. Mr. Czerwinski, do you want to add anything 

or, Mr. Werfel, anything on this point? 

Mr. CZERWINSKI. One thing I was thinking about is that you 

have a great staff. 

Senator CARPER. Me? 
30 

Mr. CZERWINSKI. Yes. You have a great staff. 

Senator CARPER. You are right. I know. 

Mr. CZERWINSKI. The kind of questions that they are asking are 

really helpful to us as we do our work. Our Assistant Director who 

is going to be doing the performance report that we talked about 

in my statement, I am sure he is taking a lot of notes based on 

what you are asking. So, thanks for helping us. 

Senator CARPER. I saw somebody back there writing a lot. 

[Laughter.] 

OK. Thank you. Mr. Werfel, anything on this particular point? 

Mr. WERFEL. I think it is a really good question and it goes to, 

I think, the appropriate evolution of grants. And, right now if you 

look where our metrics are, they are in the nuts and bolts issues. 

We have lots of metrics on improper payments and outstanding 

debts as an example. 

We have audit on the findings, whether in the single audit or the 

financial statement audit. We have a bunch of metrics that go at 

the heart of these financial management issues, and those are all 

important. 

Where we do not have a global framework is on performance 

metrics across the government, and I think that with the enactment of the GPRA Modernization Act and other efforts, it seems to 

me that this is where we are evolving to, to grow from nuts and 

bolts metrics on the money and the timing of the money. These are 

all really important questions, but what we are getting for the 

money I think is the next evolution of metrics and definitely in 

grants there is a huge opportunity there. 

Senator CARPER. Anything? Anybody else? Ms. Harman. 

Ms. HARMAN. Well, I will just add. The other important thing for 

us at DHS, and I know we have partnered with HHS in aligning 

some of our grant programs, is the overall what we are trying to 

accomplish with performance metrics and where are we going as a 

Nation with regard to capabilities. 

So, the other thing that has helped guiding us, of course, is Presidential Policy Directive Number 8, and the national preparedness 

goal and everything else that fits within that with the strategy and 

the framework and the core capabilities that now all of our grant 

programs are aligning to, to help us get to sort of a single fashion 

and a goal in mind. 

So, that is an overarching strategy for us. 

Senator CARPER. OK. Good. Thank you. 

Maybe one more question for you, Mr. Werfel. 

As some of you know, I often like when I get to the end of hearing, sometimes I will ask the panelists to kind of reflect back on 

what has been said, what you have said, what others have said, 

questions that have been asked. Just maybe make a closing statement. You always get to give an opening statement but I am going 

to give you an opportunity to make a closing statement if you like. 

Before we do that, though, I want to ask one more question, if 

I could, of Mr. Werfel, and this deals with the new Federal Grant 

Management Council. 

I understand that the Administration has established a new 

council—I am sure there is an acronym for it—for the oversight of 
31 

grants—and, yes there is, we talked about it earlier—grants across 

the Federal Government. 

And, there are a lot of issues, questions, and concerns that need 

to be addressed by the Council on Financial Assistance Reform. 

Please do not call it COFAR but I know that is what it is. You may 

just call it the Council. 

But, Mr. Werfel, what are the top priorities for the new oversight 

body—you talked a little bit about this earlier—for the Council on 

Financial Assistance for the next, we will say, calendar year? 

Mr. WERFEL. Well, at the Council we focused on three main 

areas and then a high-level burden reduction, error reduction, and 

transparency. That is where we have started. 

And, part of that comes from making sure we know and are in 

touch with our stakeholders, and we have a couple of big ones. The 

grantee community, I will put them in blocks of State and local 

governments, colleges and universities, and nonprofits; and they 

certainly are extraordinarily vocal, and as they should be, on places 

where they see a lot of unnecessary administrative activity. 

It is that type of feedback that led the President to issue a directive in, I believe it was, February 2011 for the Federal Government 

with emphasis on OMB on looking at the burdens we impose on 

our recipients and looking for strategies to reduce that burden; and 

that is part of the effort that I described when I was talking about 

the single audit. 

There are other components of that and burden reduction is one. 

And so, before I leave burden reduction, I will just say the major 

tension there is that on all the paperwork we are trying to pull 

back and say, is it really worth it, are we getting the bang for the 

buck in terms of requiring all these check the boxes. 

On the other side of that is the auditor and the Inspector General community saying, in some cases and in many cases that paperwork is critical to our investigations. 

So, we cannot just, unfortunately there is no easy pull back on 

the paperwork and everyone is happy. It has got to be done very 

strategically and in concert with the auditor. 

And, this Council is having meetings and I have sat in a few of 

them that are fascinating where you have the universities in one 

chair and the Inspector General community in the other and they 

are talking about this paperwork burden and we are trying to figure out is there a solution set their. 

On error reduction, we have been talking about that. It is do not 

pay. It is improper payments. It is all the various work we are 

doing; and in many cases, it is trying to empower the State and 

local governments to be a part of the solution. 

So, we have programs like Medicaid and unemployment insurance where there is 50 different State administrative solutions. So, 

it is not like at HHS or at Labor. They can fashion the solution 

that is going to solve the problem. 

It involves outreach and partnership and best practice sharing 

and working amongst the State and local governments in a way to 

cultivate solutions and having good things go viral in terms of what 

we can do, in terms of error reduction. That is a clear priority. 

And then finally, last week I was here and talking about transparency; and the big stakeholder there is the public. It is the sun-
32 

light groups. It is this Committee. It is the House of Representatives as well and it is the President’s commitment that he has had 

in transparency since he cosigned and coauthored the Transparency Act in 2006. 

And, as we discussed last week, there are important steps that 

the grants community needs to take to position our information, 

not only to get public more quickly but more reliably. 

And so, the Council is focused on those areas as well. 

Senator CARPER. Thank you. Just a follow-up for you and then 

I just have one related question for Mr. Czerwinski. 

I understand that there are no stakeholders, no stakeholders 

such as grant recipients, on the Council. Is that true? And, if that 

is true, is the lack of stakeholder involvement a potential problem? 

And, if it is, how would you engage grant recipients? 

Mr. WERFEL. It is a very tough question that I have wrestled 

with and lost some sleep over. The answer is there are no official 

non-government entities on our Council. 

The reason, there are probably two primary reasons for that. The 

first is that we feel that there is an appropriate time and place to 

have external outreach, an appropriate time and place to have an 

internal free exchange of ideas, collaborative spirit without knowing that everything we say is public, could end up on the front 

cover of the New York Times, that type of thing. And so, we are 

trying to balance that. 

And so, our answer to balance that was to essentially have a government-only Council by judge us not based on the structure of 

that Council. Judge us on whether we are both actively engaging 

stakeholders and that active engagement is resulting in improvements and changes to the manner in which we are carrying out 

government programs, because it does not really matter—I am 

sure, I am going to make an assumption here, that if you had the 

recipient stakeholders community in here and they were testifying 

and asked them, what would be more important, a name and a 

seat at the table at the Council with no real change in the direction 

of Federal policy that is to your benefit or no seat on the Council 

but active engagement in a real dynamic set of changes coming 

from the Federal Government in response to your concerns. 

I think they would take the latter every time. When I have 

talked to them, I have asked them to judge us and judge me on 

that frame. 

And, I think this first project that the Council has undertaken, 

this very transformative change, the Single Audit Act to administrative requirements, this is a major first test because the comments that we got back from the community were filled with passion and concern and energy; and to the extent we can make sure 

that we are navigating all of them, I think we will demonstrate to 

them that they really do have a voice. 

Senator CARPER. OK. Mr. Czerwinski, based on the work that 

you all are doing at GAO, what would you consider to be some of 

the important questions or issues that this new oversight Council 

should take up? 

Mr. CZERWINSKI. Well, you started with one and that is the input 

from the stakeholders. A second is to take a look at both the finan-
33 

cial and programmatic management of what you want to achieve 

with grants. 

A third, and this is something that we looked at back when we 

were falling on PL 106–107, is setting clear objectives and clear 

time frames, and then holding yourselves accountable to that, that 

is one issue that we found looking back to the Grant Executive 

Board, the Grand Policy Committee, that this was not quite as 

clear as what they wanted to achieve and when they were going 

to achieve it by. Hence, things have stretched out. 

So, I would say that would probably be the other piece is to really have a very clear objective, a clear plan, clear time frames. 

Senator CARPER. OK. Good. Thanks. 

OK. What I would like to do now is just ask each of you help me 

give the benediction, and just a short statement. Your opening 

statements were about 5 minutes. This one should not be that long. 

But, just a point or two that you would like to reiterate. I think 

we ought to underline some points before we wrap this up and I 

go start voting. 

Do you want to go first, Mr. Czerwinski? 

Mr. CZERWINSKI. Yes. I went last the last time so I will go first 

this time if that is ok. 

Senator CARPER. Go right ahead. 

Mr. CZERWINSKI. To me this hearing goes back to the point that 

we were talking about congressional oversight and also we talked 

about a plan for OMB with its Council. I think there is a plan for 

the accountability community and for the oversight community as 

to what we want to achieve in the next session of Congress. 

So, I personally was very gratified to hear the line of questioning 

that went along the lines of internal controls, went along the lines 

of streamlining in performance measurement because those, I believe, are three central pieces if we are going to make grant management work better. 

And of course, when we talk about grant management, we have 

to think about the impact it has not just on the recipient community but also on the Federal budget, and this is a huge piece of the 

budget. It is a very complicated piece, and we need to get some 

handle on making it more straightforward and to work better. 

The issue of closeouts is a very specific issue. It is a small one; 

but it is also an example of where, when we start to pay attention 

and we start to focus efforts, they can get better. 

We talked about reporting in 2008 that we roughly found about 

$1 billion. We saw improvement when we came back in 2012. Assuming that we come back again at another time, we would expect 

to see similar or greater improvement. 

Senator CARPER. OK. Thanks. 

Ms. Gunderson, you can repeat, do not hesitate to repeat some 

of the same points that Mr. Czerwinski made. If you have others, 

that will be fine as well. 

Ms. GUNDERSON. I do want to emphasize the Department is committed to protecting the taxpayer dollars and serving as a steward 

of the public’s trust. 

We do take grants management very seriously and we really appreciate the work of the Subcommittee, the Government Accountability Office and our own Inspector General in continuing to bring 
34 

grants management to the forefront because it is an important part 

of the way we execute our mission at the Department. 

We did make great success last year in terms of our grant close 

out and we did get noticed for that both by the GAO, which we appreciate, and our own internal auditors. 

We have come off the risk list internally in terms of our audit, 

and the fear for that is that means we have declared success and 

we will move on and will not pay attention. 

This work of the Subcommittee and the GAO continues to emphasize that this is important work to do in terms of closing out 

our accounts, managing our ongoing projects. 

We appreciate that and the attention that your Subcommittee 

gives to these types of initiatives and the resources we need and 

systems we need to make these things happen is appreciated. 

Senator CARPER. Thank you. Ms. Harman, a closing thought. 

Ms. HARMAN. Sure. I would just like to say thank you for the opportunity to be here. It is not often we get to talk about grant management with regards to FEMA. 

We have talked a lot about our different programs and what is 

good, what is bad, which ones are working, what are we getting for 

our dollars. 

It is exciting for me to be able to share with you what a lot of 

our staff are working on. We have a very dedicated staff at FEMA. 

They are in the grants world and sometimes they get a little bit 

left out of the excitement when it comes to the response and recovery phases and working directly with victims of incidents. 

I just wanted to throw kudos to them because there are many 

times under some of the statutory deadlines that we have to get 

the grants out the door that many of them have given up there 

summers and there vacations to obligate all of those fun in a timely 

manner. So, I want to throw kudos to there. 

With regards to things that we need, you are most likely aware 

of the President’s budget, the request for the consolidation of 16 

different preparedness grant programs into the National Preparedness Grant Program, one single program. 

That most certainly would ease a lot of the things we have to do. 

It is difficult enough as a stakeholder, a former stakeholder myself, 

but at the State level to manage not only the funds that we appropriate and allocate to the States but funds that are coming in from 

other Federal agencies. 

It is a big and heavy workload, and what we have proposed is 

a consolidation of 16 programs to achieve the national preparedness goals. When Ranking Member Brown asked earlier what do 

you need, I was a little selfish in the point where I focused on IT 

systems and really what our Directorate needs. 

But, in the larger scope of things, the streamlining of these programs and achieving the same goal will also not only build capability and preparedness but it will also streamline a lot of the administrative functions behind managing these grants. 

Thank you for the time. 

Senator CARPER. You bet and thanks for yours. 

Mr. Werfel, last statement. 
35 

Mr. WERFEL. Two quick points. First of all, I want to echo something that Mr. Czerwinski said earlier about the talent and dedication of the people sitting behind you. 

Senator CARPER. On both sides? 

Mr. WERFEL. On both sides for sure. 

Senator CARPER. I know. 

Mr. WERFEL. And I have been working with this Committee and 

the Subcommittee coming up on 9 years since I transitioned into 

the financial management sphere and this group is especially collaborative and smart and thoughtful and challenging, challenging 

us in the right ways. And so, I just wanted to give that feedback 

to the group and to you. 

Senator CARPER. Thank you. 

Mr. WERFEL. And, one of the particular areas which is most encouraging and I am hearing more and more of is outreach and 

connectivity that the folks sitting behind you have with the stakeholders, State and local governments, and particularly those that 

are impacted by grants policy, and I encourage that type of ongoing 

discussion. 

I mean a lot of things get lost in translation. I do not want to 

be the voice of the State and local governments or the universities 

on these issues. I want to make sure that you are hearing it directly from them so you can make the best informed judgment. 

I am hearing more and more just in the chatter of this entity or 

that entity going up and meeting with the Homeland Security and 

Governmental Affairs Committee (HSGAC) staff and I think that 

is an enormously positive development and we are hoping that it 

continues. 

Senator CARPER. Well, good. I just want to make one observation. 

This, I think, has been a very helpful hearing, and we appreciate 

the work that has gone into not just preparing for what you said 

here today but literally the work that has gone on for months, in 

some cases years, to enable us to report the sort of progress that 

is being realized especially by these two agencies. 

This is not a hearing that is maybe as attention-gathering as 

Fast and Furious. It is not as riveting as the fiscal cliff or something along those lines or cybersecurity. 

Having said that, Federal grants is important stuff and we realized that and obviously you know that, and in the end, it will help 

us save some money and we need to save a lot of money. This is 

not the whole fiscal package but this adds up. 

And, I always like to see progress being made. We are seeing 

progress being made. I want to congratulate you for that because 

we all know everything we do we can do better. We need to improve more but I am pleased with the progress that we heard about 

today. Let us keep it coming. 

Thanks so much. 

We are adjourned. 

[Whereupon, at 4:12 p.m., the Subcommittee was adjourned.] 

(37) 

A P P E N D I X 

FOR RELEASE: July 25, 2012 

CONTACT: Emily Spain (202) 224-2441 or emiILspain@carper,scllale.gov 

U.S. SENATE COMMITTEE ON HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT, 

GOVERNMENT INFORMATION, FEDERAL SERVICES, AND 

INTERNATIONAL SECURITY 

HEARING: "Assessing Grants Management Practices at Federal Agencies" 

Opening Statement of Senator Tom Carper, Chairman 

As preparedfor delivery 

Today's hearing will focus on some challenges related to federal agencies' grant 

management practices and the opportunities that exist for addressing them. 

Each year, the federal government allocates billions of dollars through grants to state and 

local governments, educational institutions, medical researchers and others. Effective 

management of these grants involves, among other things, ensuring that the funds are 

spent properly and are actually achieving results for taxpayers. Now, more than ever, it is 

important that we ensure strong, effective oversight over grant money 

From fiscal years 1990 through 2010, federal grant spending increased Irom about $]35 

billion annually, to over $612 billion, almost one-quarter of the fiseal year 2010 federal 

budget. This money went out through more than 1,600 federal grant programs managed 

by 23 federal grant-making departments and agencies. 

These programs help first responders and state and local government improve their ability 

to withstand disasters. They fund efforl~ to find cures to cancer and other diseases. They 

help communities deal with transportation challenges. It is our responsibility in Congress 

and in the administration (0 ensure that all of this money is spent as intended and that, at 

the end of the day, we sec ro:al results. 

As everyone in this room knows, both the federal government and most state and local 

governments have struggkd with record budget deficits in recent years. Today. our 

national debt stands at more than $15.8 trillion, well over double what it was just ten 

years ago. The last time our national debt lVas this high was at the l:nd of World War II. 

That level of debt was not sustainable thcn, and it is not sustainable today. In order to 

address the burden this debl places on our country, we need to look in every nook and 

cranny of federal spendillg~" in programs large and small . and make certain that the 
38 

resources we're investing are being spent efficiently and effectively. We need to demand 

results and focus the scarce resources taxpayers entrust us with on our highest priorities 

as a country, and solutions that are proven effective in addressing the many challenges 

we face. 

Across the federal government, program managers need to sharpen their pencils and stop 

making the kind of expensive, avoidable mistakes that lead to improper payments. 

According to the Government Accountability Office, federal agencies made an estimated 

$115 billion in improper payments in 2011. 

Fed\!ral grants are not the whole cause of improper payments. Errors and fraud, 

unfortunately, occur in all categories offederal spending. But improving management 

and accountability in grant spending is one important piece of the puzzle when it comes 

to curbing waste and fraud. Success in doing so will help us as we work to curb our 

federal debt and, in the case of federal grants, it win help get better results both for grant 

recipients and the public at large, 

Ultimately, all of us -- Congress, the Administration, state and local governments, and 

grant recipients small and large -- want to improve the way grants are managed and need 

to work together to do so. Our witnesses today will detail some important progress that 

has been made during the last few years in improving the oversight and management of 

federal grants, We will also be looking today at additional steps that the federal 

government should take. 

One stark example of the need for improved federal grants management is the problem of 

money remaining in expired grants accounts, After a grant is awarded, the recipient has a 

specific amount of time to complete the grant requirements and spend the funds. The 

grant must then be "closed out," a process which includes an audit of the spending, In 

effect, the grant recipient has to show the receipts for the money spent. 

However, according to the Government Accountability office, at the end of fiscal year 

2011, almost $1 billion in undisbursed funding remained in expired grant accounts. 

We have a chart that shows the amount of money in expired grants within one grant 

management system, called the Payment Management System, The chart shows $794 

million dollars in grant funds remaining in accounts after the expiration date, sometimes 

going back as long as five to (en years. 

GAO has also iclcntiJied an additional federal grant management system with $126 

million in expired grant money, This is simply unacceptable, Our GAO witness will 

describe how a lack of timely grant close out will lead to a higher risk of waste and 

fra\ld, 

A second problem we will discuss today is that of "draw down," or ensuring that grant 

recipients spend their awarded money in a timely manner. Unfortunately, problems have 

been identified in this area as well. For example, since its formation, the Department of 
39 

Homeland Security has provided state and local governments with over $35 billion in 

grant funding to help prepare for disasters and acts of terrorism. 

However, for a variety of reasons, the Department and its stakeholders have struggled to 

"draw down" some of this money and put these funds to work in our communities. This 

could be due to sloppy bookkeeping or problems with how the grant program is 

structured. It could even be a sign that some of the unspent funds were not needed and 

could have been put to better use elsewhere. For whatever the reason, this is another 

issue that needs addressing. 

Finally, we will discuss the importance of measuring performance in our grant programs. 

As I said earlier, we must work smarter with our limited resources. This includes finding 

better ways to look at what we get for the grant money we spend. 

I look forward to hearing today from Danny Werfel, the Comptroller of the Office of 

Management and Budget, about how the Administration intends to build on what has 

worked so far in grants management and oversight, and also to improve the performance 

of those initiatives that have not worked as well. I also look forward to hearing from 

officials from two of the largest grant-making federal agencies, the Department of Health 

and Human Services and the Department of Homeland Security, about grants 

management within their agencies. 

We are here today in large part because we have a moral imperative to ensure that grant 

dollars are well spent, and have proper oversight. At the same time, we must also ensure 

that the scarce taxpayer resources we invest are being spent as effectively as possible, and 

show good, measurable results. 

### 
40 

Opening Statement by Senator Scott P. Brown 

July 25th, 2012 

Subcommittee on Federal Financial Management, Government Information, 

Federal Services, and International Security 

U.S. Senate Homeland Security & Governmental Affairs Committee 

"Assessing Grants Management Practices at Federal Agencies" 

Grants are important to Massachusetts. We have world class research 

universities like MIT, Northeastern, UMass, WPI, and others. Massachusetts is 

second in NIH funding and fourth on a per capita basis. That is pretty impressive 

for a state our size and drives an information based 21 sl century economy that 

serves as a model for the nation. I strongly support increasing NIH funding and 

ensuring consistency in that funding not just to create jobs in the Bay State but 

more importantly to save and improve people's lives. 

I have learned in my brief time in Washington that throwing more money at 

a problem without adequate oversight and management is a recipe for waste, fraud 

and abuse. Unfortunately the current grants management system is beset by 

longstanding problems. For example, GAO recently reported that some 3,700 

grant and contract recipients receiving $24 billion in Recovery Act monies 

collectively owed more than $750 million in federal taxes. The government also 

improperly pays many grantees, for example five of the top ten government 
41 

programs making improper payments were grant programs. These grant programs 

represent approximately $40 billion of the $115 billion total of government 

improper payments. This hearing focuses on the government's failure to properly 

disburse grant dollars. GAO reports at end of fiscal year 2011 $794 million 

remained in expired grant accounts with $110 million remaining unspent more than 

5 years past the grant end date. The grant life cycle is also characterized by many 

other problems from not assessing the capability of prospective grantees to account 

for funds, to poor monitoring of grantee performance to grants that are not closed 

out in a timely manner. Simply put, the grants management system is broken and 

Congress and too many past administrations have failed to reform it. 

Grants now account for more federal outlays than contracts, yet the grant 

management system is woefully behind the federal contract management system. 

To achieve grants reform, there must be a robust governance structure that 

effectively incorporates input from stakeholders. Congress has an essential role to 

play in guiding this reform, including reducing duplication amongst grants by 

removing obstacles to consolidation and supporting comprehensive reform that 

brings grants management into a 21 st century government the taxpayers' expect. 

I intend to take a leadership role in Congress to achieve this reform by 

increasing transparency, accountability and enhancing research productivity by 

eliminating onerous requirements and streamlining administrative rules. The goals 
42 

of any grant reform process should be guided by fairness, efficiency, consistency 

and accountability. Taxpayers have a right to expect better management of the 

grants they're funding. 

We can no longer afford business as usual- allowing millions of dollars in 

grant money to be wasted each and every year. The people of the Baystate sent me 

to Washington a little of two years ago to solve problems like this. Reforming the 

grants management process is important to the people of Massachusetts and 

America. Fixing this Washington problem could be a key to invigorating our 

economy, so the rest of the nation can follow the lead of Massachusetts and 

become a world leader in the information based economy. 
43 

EXECCTIVE OFFICE OF THE PRESm[\T 

OFFICE OF V1A\AGE\,IE:'iT A\D BCDGET 

WASHI\GTO:'i, D.C. 20S(l3 

Testimony of Danny I. Werfel 

Controller, Office of Federal Financial Management 

Before the Homeland Security and Governmental Affairs Committee 

Subcommittee on Federal Financial Management, Government Information, Federal 

Services and International Security 

United States Senate 

July 25, 2012 

Thank you Chairman Carper, Ranking Member Brown, and Members of the Subcommittee, for 

the invitation to discuss with you today how the Federal Government can improve oversight and 

accountability in managing Federal grants. 

In response to the President's charge to build a 21 st Century Government that operates 

efficiently, effectively and accountably, this Administration is taking transformative steps to 

improve the management and administration of funds awarded through Federal grants. The 

President outlined three key principles that together establish the foundation for grants reform 

mitigate the risk of waste, fraud and abuse, reduce administrative burden on recipients to 

improve grants delivery by ensuring resources are focused on achieving programmatic outcomes, 

and create an institutionalized structure of governance across Federal grant-making agencies. 

Two Presidential directives - Executive Order 13520 on Reducing Improper Payments and the 

President's Memorandum on Administrative Flexibility - complemented by the creation of a new 

government-wide grants management council, have equipped us with the tools necessary to build 

on this foundation in order to enhance existing grants management policies. 
44 

Foundation for Grants Reform 

To help drive our efforts to mitigate waste,jraud and abuse, in November 2009 the President issued 

Executive Order 13520 on Reducing Improper Payments and Eliminating Waste in Federal Programs. In 

this Order, the President directs Federal agencies "to more effectively tailor their methodologies 

for identifying and measuring improper payments to those programs, or components of 

programs, where improper payments are most likely to occur." Accordingly, we reviewed our 

use of the Single Audit tool across the government to ensure that the independent audit 

community can focus on oversight and strengthening of the entities, programs, and practices that 

pose the greatest risk of improper payments, waste, fraud, and abuse. 

To reduce administrative burden on recipients and improve program delivery, the President 

issued in February 2011 a Memorandum on Administrative Flexibility, Lower Costs, and Better 

Resultsfor State, Local. and Tribal Governments. In this Memorandum, the President instructed 

the Federal government to work with our state, local and tribal partners to "reduce unnecessary 

regulatory and administrative burdens and redirect resources to services that are essential to 

achieving better outcomes at lower cost." Accordingly, the Administration conducted a 

comprehensive review over the past year and a half of the administrative requirements placed on 

recipients of Federal grants to determine where we can relieve some of those burdens to focus 

our resources on achieving outcomes without compromising accountability. 

To create an institutionalized governance structure, concurrent with our work to review the 

policies that govern grants management, in October 2011, OMB created a formal body, the 

Council on Financial Assistance Reform (COF AR)l, to coordinate grants policies across thc 

government. This body, which I co-chair along with Ellen Murray, the Chief Financial Officer at 

the Department of Health and Human Services, is comprised of the eight largest grant-making 

agencies plus one rotating member to represent the smaller agencies, and meets regularly to 

advance grants policy, deliberate on reforms, and ensure government-wide coordination and 

collaboration. 
45 

Importantly. as we pursue grants reform efforts. it is critical that the Federal government 

maintain a close and dynamic feedback loop with other stakeholders. Prior to beginning our 

reform efforts, OMB engaged with both Federal and non-Federal stakeholders to provide 

recommendations for how to approach reform. This outreach included input from 

representatives of many Federal agencies, two Offices of Inspectors General, the Government 

Accountability Office (GAO). non-profit representatives, state. local. and tribal governments. 

and institutions of higher education. The input of these stakeholders was integral in setting up a 

framework for grants management reform. and ultimately. the creation of the COFAR. 

As the COF AR begins to solidify its role in the grants community, and as our reform process 

moves forward. we are committed to furthering these outreach efforts to solicit regular input 

from both Federal and non-Federal stakeholders. 

Proposal to Improve Accountability and Oversight in Grants Management 

Armed with the collective wisdom of the Federal government and external stakeholder groups 

that we have amassed through this process, OMB published an Advance Notice of Proposed 

Guidance in the Federal Register on February 28th , 2012. The intent of that notice was to share 

the key areas where policy changes may be appropriatc and further our goals to improve 

management and oversight of Federal grants while reducing administrative burden. These ideas 

fall into three broad categories: administrative requirements. cost principles, and audit 

requirements. In each of these areas, we are looking for new and creative ways to rework 

existing OMB circulars to ensure that our grants policies arc consistent, coherent, and serve the 

Federal Government. grantees, and ultimately the taxpayer. 

Through the Advance Notice process, we were able to provide all public stakeholders with 

transparent access to early ideas under consideration and a chance to formally provide their input 

at the formative stages. We received more than 350 public comments through this process. 

including views from state. local, and tribal governments, institutions of higher education, 

nonprofit organizations, and the audit community. All of these are available for the public to 

review at www.regulations.gov. 
46 

With these comments in hand, OMB is now working with the COF AR to review the feedback 

that we have received and develop concrete reform proposals for consideration. We intend to 

publish a Notice of Proposed Guidance for public comment in the coming months. 

These multiple rounds of public comment are critical. The draft proposal will reflect our best 

analysis of how to improve accountability for Federal dollars while focusing our resources most 

efficiently. This analysis will be based heavily on the feedback received from the Advance 

Notice, but we will rely on all the interested stakeholders to review the proposals and advise us 

on opportunities to refine and improve them to ensure that we are meeting our collective goals 

for grants reform. 

Other Efforts to Improve Grants Management 

While pursuing this overarching effort to improve grants management, OMB is also exploring 

other avenues to improve the financial stewardship of Federal funds expended through grants. 

Several complementary efforts are underway to enhance the tools we use to provide oversight 

and ensure accountability. 

The first of these is enhanced attention to the use of evidence in Federal agency budget 

submissions and implementation efforts, in particular for Federal grants. We want to focus our 

funds strategically and we want to fund what works. I f we don't yet know what works to address 

the problems we need to tackle, we want to fund projects to identify effective interventions. 

And. once we have identified effective government practices and programs, we want to find 

lower cost ways to deliver. The goal is to find the highest return-on-investment opportunities 

emphasizing facts and evidence. In the Information Age, it is critical that we use the tools of 

more affordable technology to marshal the evidence to make smarter decisions. Accordingly, 

this year, OMB issued guidance to Federal agencies that fiscal year 20 I 4 budget submissions 

should demonstrate the use of evidence. where available, to justify funding requests for various 

programs and to produce successful program outcomes. 
47 

In addition. OMB is strengthening efforts to crack down on waste. fraud and abuse in all Federal 

spending. For instance. in April 2012. OMB issued a Memorandum on "Reducing Improper 

Payments through the 'Do Not Pay List.'" Following on agencics' efforts to review internal 

controls and processes surrounding existing pre-payment and pre-award procedures, OMB and 

the Department of Treasury established the "Do Not Pay" solution to provide a single-entry 

access portal for agencies to access multiple data sources and assist in validating eligibility for 

payment. The April 2012 memorandum requires agencies to develop implementation plans to 

employ the Do Not Pay solution, and we are currently reviewing those plans. This effort is part 

of a broader focus on eliminating wasteful payment errors and cracking down on fraud. both in 

grants and across the spectrum of Federal spending. 

We are also focused on refining our approach to providing improved transparency to the public 

on Federal spending data. as I discussed in a hearing before the full Homeland Security and 

Government Affairs Committee last week. In order to maximize the public's ability to digest 

and analyze information on Federal spending, we are focusing on improving the reliability and 

quality of data reported through sites such as USAspending.gov. It will allow overseers to better 

track grant dollars. And it will allow the public to know who is getting grants, what they are for, 

and what their status is. 

Undisbursed Grant Balances 

Finally, I would also like to discuss a particular issue of interest to this Subcommittee regarding 

undisbursed balances in expired grant accounts. As you know, GAO recently issued a report 

entitled "Grants Management: Action Needed to Improve the Timeliness of Grant Closeouts by 

Federal Agencies" (GAO-12-360)," which highlighted a finding of$794 million in undisbursed 

balances in expired grant accounts. We agree with GAO that timely closeout of grants can be 

improved overall. Failure to closeout these accounts in a timely fashion may, in some cases, 

represent a worthy opportunity to improve our financial management and grants management 

practices, and I commend this Committee and GAO for drawing attention to this issue and 
48 

calling on Federal agencies to act. We are committed to working with agencies to ensure that 

appropriate steps arc taken to improve accounting and other controls in this area. 

Having said that, we believe there are a few important caveats to this finding where (I) this 

figure includes undisbursed funds in grant accounts that have not expired; and (2) for truly 

expired grant accounts, the prolonged period for closeout reflects deliberate agency controls to 

ensure that proper grant recipient documentation is provided prior to disbursement of grant funds 

at close-out. 

I would like to make four specific points regarding this issue: First, GAO's estimate of$794 

million in undisbursed grant balances is overstated. In its report, GAO acknowledged certain 

grants may have received extensions of their period of performance, but such extensions may not 

actually be reflected in the payment systems. As a result, while GAO's survey of the payment 

systems would have identified these as expired grant accounts, they have not actually expired. 

Second, as GAO points out, it is important to recognize the legitimate needs for additional time 

required to properly close-out grant awards in some cases. Certain grants may not be eligible for 

closeout, despite the expiration of the period of performance. For instance, homeland security 

grant accounts often take a longer time to close out because expenditures get delayed as 

recipients refine plans for how best to prepare for potential terrorist events or disasters. 

Construction grants, as another example, may require additional time for grantees to consolidate 

and submit invoicing information from multiple parties to meet agency close-out reporting 

requirements. While these circumstances result in delayed grant close-out. they ensure the 

accountability of Federal spending by permitting the Federal Government to withhold 

disbursement of funds until it has received all necessary financial and program information to 

account for grant activities. 

Third, the GAO report suggests the possibility of implementing policies and procedures that 

would allow for an automatic deobligation of remaining grant funds after a certain period 

passes. The Federal government is responsible for paying grantees the allowable and allocable 

costs incurred up to the total amount of the grant. Accordingly, the potential consequences of a 
49 

pol icy of automatic deobl igation of remaining grant funds must be thoroughly evaluated before 

setting limits for allowing accounts to remain open. 

Finally, it is important to note that even in cases where funds remain in expired grant accounts to 

be closed out, deobligating these funds does not fundamentally impact the overall debt or deficit, 

as some observers have suggested, because the funds were never actually expended. That said, 

we fully agree with GAO that there are opportunities to improve the timeliness in the close out of 

grant awards and ensure that proper internal controls are in place for the accountability and 

oversight of these funds. OMB is engaging agencies on specific strategies for how to improve 

their procedures for closing out grants. 

In this and all of our efforts, our central goal is to continuously improve grants management 

practices and policies in a way that benefits the Federal Government, the grantee community, 

and the American public. As we continue to move forward with these efforts. we look forward 

to working closely with this Committee to ensure that the financial managcment policies 

governing Federal grants are delivering the high standard of accountability appropriate for an 

efficient. effective and accountable 21 st Century Government. 

Thank you again for the opportunity to testify today. I look forward to answering your questions. 
50 

STATEMENT 

OF 

ELIZABETH M. HARMAN 

ASSISTANT ADMINISTRATOR 

GRANT PROGRAMS DIRECTORATE 

FEDERAL EMERGE'JCY MANAGEMENT AGENCY 

U.S. DEPARTMENT OF HOMELAND SECURITY 

BEFORE 

TilE 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

SUBCOMMITTEE 

ON 

FEDERAL FINANCIAL MANAGEME'JT, GOVERNMENT INFORMATION. FEDERAL SERVICES. AND 

INTERNATIONAL SECURITY 

UNITED STATES SENATE 

WASHINGTON, D.C. 

"ASSESSING GRANTS MA?\AGEMENT PRACTICES AT FEDERAL AGENCIES" 

WEDNESDAY. JULY 25. 2012 

Submitted 

By 

Federal Emergency Management Agency 

500 C Street, S.W. 

Washington. D.C. 20472 
51 

Good morning Chairman Carper, Ranking Member Brown, and Members of the Subcommittee. I am Elizabeth 

Hannan, Assistant Administrator lor the Federal Emergency Management IIgency's (FEMA) Grant Programs 

Directorate (GPD). On behalf of Secretary ",apolitano and IIdministrator Fugate. it is my pleasure to appear 

before you today to discuss the grants management practices of the Department of Homeland Security (DHS), 

Federal Emergency Management Agency (FEMA). 

FEMA fulfills its role as the principal component within DIIS responsible for assisting state and local 

governments to prepare for, protect against. respond to, recovcr from, and mitigate incidents of terrorism and 

other all hazards events. To achieve this mission. FEMA relics on Congressional appropriations for state and 

local programs in emergency management and homeland security. These appropriations provide for grants. 

training. exercises, and other support activities to assist States, Territories, Tribal governments. local 

jurisdictions. as well as for-profit and non-profit organizations in furthering their preparedness missions. By 

providing funds, encouraging State, local and private sector collaboration, and encouraging risk-based 

investment planning involving the Whole Community. FEMA's grant programs. managed and administered by 

GPD, have had a positive impact on the Nation's overall preparedness and security. 

Since its inception in 2007, and in accordance with the Post-Katrina Emergency Management Reform IIct 

(PKEMRA), GPD has consolidated business operations. systems, training, policy, oversight, and program 

management of all FEMA grants. GPD is comprised of three legacy organizations inclusive of the FEMA 

Grants Management Branch. the DHS Office of Grants and Training. Office of Grant Operations, and the 

Preparedness Programs Division. This consolidation created a single entity responsible for the business and 

program management of all FEMA grant programs. lis a result of changes in GPD's approach to grants 

management, GPD now successfully provides financial management and administration of96 federal grant 

programs, including the programmatic and administrative management of over 19,000 open grants, totaling over 

$10 billion dollars in federal funding. Additionally. GPD closely collaborates with other FEMA components 

including the National Preparedness Directorate. the ten FEMA Regional Offices. thc Office of Response and 

Recovery, other DHS components, and other Federal agencies to create a fully integrated, interdisciplinary 

system of support services for other stakeholders and partners. 

GPD's focus over the past several years has been on improving grants management and related efforts to ensure 

meaningful and measurable results. By stressing the importance of providing customer service for all grantees 

as well as for internal and external partners; by engaging State. local, and Tribal stakeholders through consistent 

outreach and discussion; and by ensuring transparency in the grant process, GPD enhances the Nation's level of 

preparedness, resiliency, the public's safety. and our overall ability to prepare for. protect against. respond to, 

recover from. and mitigate all hazards. 

Over the past few years, GPD has matured as an organization. making significant improvements to its 

operations and focusing heavily on the development. management, and oversight of FEMA's grant programs. 

These improvements include: reducing the personnel vacancy rate; realigning organizational resources and 

functions; enhancing the grant award and budget review process; standardizing internal operating procedures; 

implementing drawdown and closeout improvement initiatives; enhancing financial and programmatic 

monitoring activities; strengthening regional partnerships; improving the grants management infrastructure; 

formalizing GPD's relationships with its internal and external partners; and enhancing stakeholder involvement 

with program development and administration. 

At the beginning of the third quarter of fiscal year 2010. 20 percent (37 Full Time Employees or FTEs) ofGPD 

Headquarters' 180 authorized positions were vacant in the Preparedness Grant Division and the Grants 

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52 

Operations Division. With the full support ofFEMA's senior leadership. GPD has made major strides in 

addressing its staffing shortfalls. Currently, GPD's vacancy rate is 10 percent and GPD has filled 168 of its 

189' authorized positions. GPD's staffing improvements include filling several key leadership positions such as 

the Deputy Assistant Administrator to GPD. the Director for Grant Operations. and the Director for the 

Preparedness Grants Division. The decrease in the vacancy rate has led to definitive improvements in GPD's 

overall operations allowing the Directorate to improve its oversight of grantees. 

Organizational Realignment 

In conjunction with the overall hiring initiative within GPD, the Directorate has sought to improve its overall 

mission effectiveness and financial and program management through a realignment of functions within the 

organization. To complement and support the hiring of a highly motivated and competent stafC GPD 

established two distinct but complementary divisions, the Grant Operations Office and Preparedness Grants 

Division. These GPO components serve as the financial and programmatic resources for GPO. respectively. 

The realignment has laid a path forward for increased coordination and communication efforts between 

management and staff; as well as improved collaboration between program and financial functions and 

responsibilities. As a result, GPO has increased overall mission performance through various grant process 

improvements that further support the grants management lifeeyclc. 

Grant Award and Budget Reviews 

During fiscal year 20 I 0 and prior, GPD often experienced delays in processing grant awards and releasing 

funds to grantees, These delays impacted grantee performance by reducing the time available to spend grant 

funds and in some cases, delayed grantees from proceeding with critical projects. GPO identified delays in two 

principal areas. The first was the delays associated with GPD review and approval of grantees' budgets, which 

were historically conducted post-award. The second delay involved the project reviews and approvals required 

under Federal environmental and historic preservations laws, such as the National Environmental Preservation 

Act (NEPAl. The Directorate's leadership identified both ofthcse areas as opportunities for improvement. 

To alleviate the burden on grantees. GPO undertook several internal reforms which resulted in major 

improvements and shortened both environmental and historic preservation reviews. The most significant of 

these included: 

Adding Environmental and Historic Preservation (EIIP) staff to review EHP applications; 

Improving an EHP screening form to facilitate the application process; 

Developing a Programmatic Environmental Assessment to streamline the review of certain projects; and 

Implementing a formalized process to follow-up with grantees that need to submit additional 

information in order to process their application. 

GPD also took major steps to shorten the budget review process, including setting goals to conduct all budget 

reviews prior to award. In addition. GPD created a budget review checklist designed to assist grantees by 

providing guidance on what information is needed for a complete and thorough budget, which served to 

improve consistency as well as decrease overall review time. 

i Between FY20JO and fY2012, the number of authorized positions increased from 180 to 189. 
53 

By providing these instructions, grantees were better informed on what materials were needed, were able to 

cnsure that thcir budget information was complete, and as a result, their budgets were approved more quickly. 

Overall, steps instituted within GPD strcamlined internal processes to make the entire budget review period less 

than 30 days. 

Standardizing Internal Operating Procedures 

The development and adoption of standard operating procedures (SOPs) is critical to the successfuL long-term 

operation of any organization. In 20 II. fEMA embarked on an effort to develop SOPs for all of its 

preparcdness grant programs, including the Emergency Management Performance Grant Program (EMPG). the 

Emergency Operations Center Grant Program (EOC) and thc Drivers License Security Grant Program 

(DLSGP). Those SOPs are now in force and are utilized on a daily basis by both headquarters and regional 

grants staff GPD rccently completed similar efforts with thc Homeland Security Grant Programs including the 

State Homeland Security Grant Program (SHSGP). the Urban Areas Security Initiative (UASI) Grant Program, 

Operation Stone Garden (OPSG), the Metropolitan Medical Reserve System (MMRS) Grant Program and the 

Citizen Corps Grant Program (CCP). 

Expediting Grant Drawdowns 

Another issue GPD has focused on is "draw downs," or the rate at which GPD's grantees, the recipients of 

preparedness grant funds, spend thc monies they receive. 

It is important to understand that grant funds currently in the pipeline are not idle. In the vast majority of cases, 

work is being performed, projects are underway and capabilities are being built in accordance with the rules and 

guidelines under which these grants were accepted. 

In those cases where funds do appear to be idle, GPD engages proactively with grantees to put funds to use. 

Further, based on input from grantees. DHS and FEMA undertook an effort in the fall of 20 II to evaluate ways 

to further streamline the grants process and put available funding to work now. In conjunction with the FY 2013 

budget roil-out, GPD implemented a number of measures that provide grantees with additional flexibility to 

accelerate the spending of remaining FY 2007 - FY20 12 DHSI FEMA grant funds by addressing immediate 

needs and building core capabilities that will support preparedness in the long run, consistent with existing laws. 

regulations and programmatic objectives. At the same time, similar to the recent Administration effort to 

expedite Recovery Act funding, grantees arc required to take steps to expend. draw down and close out 

previously awarded grant funding. Specific measures outlined in the Secretary's February 13,2012 

Memorandum titled "Guidance to State Administrative Agencies to Expedite the Expenditure of Certain 

DHSIFEMA Grant Funding" included: 

Support Reprioritization 

Allow grantees to apply grant balances towards more urgent priorities. 

Expand allowable expenses under the Port and Transit Security Grant Program. in accordance the SAFE 

Port Act and 9111 Act respectively. 

Allow combating violent extremism activities (CVE) outlined in the Administration's CVE Stratcgy to 

be eligible in all grant years. 

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54 

Focus on Corc Capabi I ities 

Expand maintenance and sustainment to equipment. training. and critical resources that have previously 

been purchased in order to build and sustain core capabilities tied to the five mission areas of the 

National Preparedness Goal. 

Prov ide Waivers 

Waive the 50 percent cap on personnel costs. 

Waive the match requirements under FY 2008 and 2009 Port Security Grant for public sector grantees 

and match requirements for Nonprofit Security Grant Program. the Interoperable Emergency 

Communications Grant Program and Regional Catastrophic Planning Grant Program. 

In addition to the measures described above. State Administrative Agencies arc encouraged to reduce 

administrative hurdles that can delay expenditure of funds. as well as decrease delays between receipt of 

invoices and expenditure of corresponding funds. 

Specific guidance was providcd as to the timeline grantees were encouraged to follow in spending awarded 

preparedness grant funds. Pursuant to GPD's Information Bulletin Number 379 issued February 17,2012. the 

following timcframes were encouraged. 

"Subject to ccrtain exceptions, grantees arc required to take steps to expend, draw down and close out 

DHS/FEMA grant funding by the dates outlined below. If those funds have not been spent by the dates outlined 

below, DBS! FEMA will reclaim them to the extent permitted by law. 

All FY 2007 grant funding must be spent by June 30. 2012 

All FY 2008 and 2009 grant funding must be spent by September 30, 2012 

All FY 2010 funding must be spent by September 30, 2013 

All FY 2011 and FY 2012 funding must be spent by the end date cited on the award agreement. 

The periods of performance outlined above support the effort to expedite the outlay of grant funding and 

provide economic stimulus. Agencies should request waivers sparingly. and they will be granted only due to 

compelling legal. policy, or operational challenges." 

As mentioned above, there are a variety of factors contributing to unspent grant funds. several of which FEMA 

has addressed directly by reducing administrative requirements, streamlining the grant budget review process 

and simplifying the EHP Reviews. More broadly. preparedness grant programs have historically been 

authorized and appropriated by Congress to have up to a five year performance period. This has allowed 

grantees to apply for and be awarded funding, then follow their own internal processes and statel local laws as 

they carry out grant-funded projects. In addition, the body of federal regulations imposed on grantees, including 

rules on the timing and frequency with which grant dollars can be drawn from the Treasury and predisbursement requirements such as environmental and historic reviews have impacted drawdown rates. State 

laws and regulations governing the allocation of federal grant dollars to state agencies, including those that 

impact procurement and hiring activities, also impact drawdowns. Often. agencies cannot enter into contracts 

until award or sub-awards are in hand. Once funds are in hand. contracting processes may take over a year and 

are subject to statellocal procurement laws and local officials who approve budgetslprojects and meet 

infrequently. Other factors that impact drawdown rates include cost share requirements. understaffed state 

administrative agencies due to layoffs or furloughs. and grantees unfamiliar with the federal grants process. 
55 

Managing Grant Closeouts 

GPD has also evaluated ways to improve the grants management closeout process to expedite the financial and 

programmatic closeout of open, expired grants. As such. in January of 20 II. GPO developed the Orant 

Closeout Task Force specifically designed to provide closeout support for FEMA's grant programs. 

To that end, GPO evaluated FEMA' s universe of open and closed grants, conducted a current state assessment 

of the grant closeout process, coordinated and communicated with related stakeholders on process 

improvements, identified improvement recommendations. and developed and implemented a closeout manual 

detailing each step of the process and to enhance standardization. 

GPD initially focused its efforts on grants awarded in fiscal year 2005 and prior. and within the first three 

months, OPO effectivcly closed out 588 out of 611 grants resulting in $3.2 million in deobligated funding. To 

date, GPO has successfully closed out approximately 8.000 grants out of 14.000 dating back as rar as 1997 due 

to the creation of the Grant Closeout Task Force. Moving forward, GPD is currently concentrating its closeout 

efforts on financially and programmatically closing out fiscal year 2007 grants. in conjunction with eligiblc 

fiscal year 2008 20 10 grants. 

OPO has taken a pro-active approach to ensuring all current and future grants are programmatically and 

financially closed in a timely manner. To sustain and maintain continued progress on this effort, GPO has 

implemented the following action items: 

Implemented a tracking system designed to identify grants nearing closeout within a 30 day period 

Oeveloped a closeout guide defining roles. responsibilities. and processes for stakeholders 

Identified alternate closeout methods to address system closeout limitations 

Established weekly benchmarks based on closeout needs and priority 

Financial and Programmatic Monitoring 

FEMA launched a long-term solution to enhance financial and programmatic monitoring. This approach 

implements risk management principles to direct scarce monitoring resources to grantees and programs with the 

most need. As part of a multi-year process. FEMA has standardized financial and programmatic monitoring 

activities and expanded ongoing oversight activities to ensure early identification of issues. This methodology 

builds upon the established monitoring approach and will drive FEMA toward continuously advancing its grants 

management capability. 

The fiscal year 2012 approach lays the foundation for future financial risk-based monitoring that will support 

FEMA's and DHS's risk management philosophy. We assess the monitoring needs of each grant selected for 

monitoring using eight key indicators: 

I) Spending patterns 

2) Grant dollar value 

3) Grantee responsiveness 

4) New FEMA grantee/grantee with new personnel 

5) Number of grants managed by grantee 

6) Prior fInancial monitoring findings 

7) Program type 

8) Priority areas as detennined by me and my leadership team 

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56 

As a result of these efforts over the past two and a half years, GPO is making significant improvements to its 

grant monitoring activities with the annual development and implementation of its fiscal year monitoring plans. 

In fiscal year 2012, we will continue to refine this risk-based monitoring approach. GPO also will begin 

focusing its efforts on the development ofa unified financial and programmatic monitoring plan for fiscal year 

2013. This plan will leverage existing relationships and monitoring activities between GPO's financial and 

programmatic divisions. The purpose of this integrated monitoring plan will be to encourage and promote the 

coordination of activities and communications between financial and programmatic monitoring staff and build 

the foundation for robust integration in fiscal ycar 2014. 

The development of a more closely integrated financial and programmatic monitoring approach is currently 

underway and identifies the following key initiatives and outcomes: 

Providing a unified source of guidance to conduct financial and programmatic monitoring activities 

Encouraging communication and coordination among financial and programmatic monitoring 

counterparts 

Supporting informed decision making through the use of a risk-based approach 

Regional Coordination Efforts 

Over the past two and a half years, GPO has made significant strides in strengthening capacity in FEMA's 

regional offices to playa more constructive role in managing grants. Sparked by the new strategic direction set 

forth by FEMAGPO recognizcd the importance of increased regional grants collaboration and management as 

an integral step towards building a robust grants management structure across FE:vtA. To manage and facilitate 

this new way forward, GPO established the Regional Coordination and Oversight Branch to provide oversight 

over the business grants management and program implementation efforts for all FEMA grant programs, such 

as financial monitoring and compliance oversight and cash analysis. Leveraging this resource, GPO has 

effectively managed processes and procedures to promote accountability, improved management controls over 

grants management business functions, and streamlined and standardized monitoring and cash analysis 

activities. 

GPO has developed and implemented a series of initiatives to improve our coordination and communication 

efforts across FEMA. The most significant of which include the following: 

Transferring full grants management responsibility to the regional offices for six FEV1A preparedness 

grant programs with associated guidance. tools. and operating procedures 

Conducting onsite regional grant business management assessment visits with all ten FEMA regional 

offices to collect feedback and observations on FEMA operations 

Oeveloping annual financial monitoring plans through various working groups and discussions 

Hosting and facilitating monthly conference calls to discuss financial and programmatic grant related 

issues and topics 

Implementing a formalized communications and outreach plan to improve customer service to regional 

partners 

Oue to the diversity of FE\1A's grant programs and the importance of establishing consistencies and financial 

controls, it remains a critical priority for GPD to monitor the process of regional grants management efforts. 

Through ongoing outreach activities, including discussions with FEMA Regional Administrators. GPO 

continues to explore new opportunities for future improvements and collaboration efforts. 

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Enhancing Infrastructure 

To further enhance the grants management infrastructure of FEMA 's preparedness grant programs, GPD 

developed and implemented the Non-Disaster Grants Management System (ND Grants). This system, which is 

used to manage approximately 20 preparedness grant programs, began accepting grant applications in fiscal 

year 2011. GPD has identified system improvements and capabilities that support the consolidation for all of 

FEMA's non-disaster grant programs into one system that covers the entire grants management lifecycle. 

Expansion ofND Grants and its improved functionality will provide FEMA with a flexible system that can 

quickly adapt to changing business needs, reporting requirements, and performance metrics. Once fully 

deployed, ND Grants will accomplish the following: 

Support the entire grants management life cycle from application to closeout 

Provide real time acknowledgement of information as well as notify FEMA employees and grantees of 

pending actions 

Offer integrated reporting that effectively measures award outlays and demonstrates how awards impact 

the overall preparedness of the nation 

Provide a user friendly interface that clearly highlights pending actions to be completed 

Automate and standardize processes to manage the entire grants management lifecyc!e 

Collect grant data in a structured, searchable format allowing data manipulation and customization for 

preparation, analysis, and reporting 

Complete the automation ofFEMA's Mitigation Directorate's grants 

Fonnalizing Relationships with Federal AQency Partners 

GPD has the programmatic, financial and fiduciary responsibility for the management and oversight ofFEMA's 

grant programs. Working in partnership with a number of Federal agencies, GPD draws on those agencies' 

expertise and resources in the development and administration of individual Homeland Security Grant 

Programs. For example, GPD has partnered with the C.S. Coast Guard in the development and administration 

ofPSGP. Similarly, it has partnered with the Transportation Security Administration in the development and 

administration of TSGP and with Customs and Border Protection in the development and administration of 

OPSG. Furthennore, GPD participates in the Emergency Communications Preparedness Center (ECPC) Grants 

Focus Group (GFG), which is an interagency coordinating body of Federal grants administrators whose 

programs support emergency communications. Through the GFG, GPD has worked with its Federal partners to 

develop common guidance for these programs. encouraging alignment of programs to national goals. objectives. 

and priorities, as well as tcchnical standards that promote interoperability. 

In order to fonnalize GPD's relationships with its partner agencies and ensure ongoing stability, GPD has eight 

(8) MOUs in place with the Department of Homeland Security's Office of Policy, Screening Coordination 

Office, the Department of Homeland Security'S Office of Infrastructure Protection, the Department of Health 

and Human Services, the Department of Transportation. the Transportation Security Administration, the 

Department of Homeland Security's Office of Health Affairs, FEMA 's Office of Environmental Planning and 

Historic Preservation. and the Department of Commerce's National Telecommunication and Information 

Administration. 
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Engaging Stakeholders 

GPO's partners in the development and administration of the preparedness grant programs are the grantees, and 

more broadly the stakeholder community. These are the "'ation's governors, mayors. tribal leaders, emergency 

managers, port and transit stakeholders, the law enforcement and fire service communities, and others 

connected to the Nation's overall preparedness and ability to rcspond to threats and hazards and who receive 

homeland security grant funds. 

Recognizing that its success is linked to the success of its grantees, GPO has prioritized efforts to reach out to 

the stakeholder community, listen to their concerns and be responsive to their needs. GPO has actively sought 

opportunities to address and engage stakeholders at conferences and other formal meetings including, but not 

limited to. the National Emergency Management Association (NEMA), the International Association of 

Emergency Managers (IAEM), the National Conference of Mayors, the National Association of Counties, the 

Urban Areas Security Initiative (UASI) Conference, and the Emergency Communications Planning Consortium 

(ECPC). GPO leadership meet regularly with State and local leaders including govemors, mayors, State and 

local legislators, representatives of transit and port systems as well as others from the emergency response 

community. In addition, GPO is making usc of emerging technologies to solicit comments and feedback from 

the public and stakeholders regarding the development of the proposed fiscal year 2013 National Preparedness 

Grant Program. 

The FY 2013 National Preparedness Grant Program 

As we look ahead, and in order to address evolving threats and make the most of limited resources, the 

Administration proposed a new vision for homeland security grants in the FY 2013 President's budget. The 

Administration's proposal focuses on building and sustaining core capabilities associated with the five mission 

areas within the National Preparedness Goal (NPG), helping to elevate nationwide preparedness. 

This proposal reflects the many lessons we have learned in grants management and execution over the past ten 

years. Using a competitive, risk-based model, the proposal envisions a comprehensive process to assess gaps, 

identify and prioritize deployable capabilities, limit periods of performance to put funding to work quickly, and 

require grantees to regularly report progress in the acquisition and development of these capabilities. The 

Administration looks forward to working with Congress and stakeholders on this proposal to enable all levels of 

government to build and sustain, in a collaborative way, the core capabilities necessary to prepare for incidents 

that pose the greatest risk to the security of the Nation. 

Conclusion 

Over the last several years, FEMA has strived to improve how preparedness grants are managed and 

administered fiscally and programmatically. I believe we have made significant improvements in this area and 

will continue to do so moving forward. 

Thank you, Mr. Chairman, [or providing me this opportunity to appear before you today to discuss these 

important issues. I look forward to answering any questions you or other members of the Committee may have. 

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59 

U.S. Department of Health and Human Services 

Statement of 

Nancy J. Gunderson 

Before the Homeland Security and Governmental Affairs Committee 

Subcommittee on Federal Financial Management, Government Information, 

Federal Services and International Security 

United States Senate 

July 25, 2012 

Chairman Carper, Ranking Member Brown, and Members of the Subcommittee, thank you for 

this opportunity to appear before you to discuss the Department of Health and Human 

Services' (HHS) grants management policies and practices; and, in particular, efforts to facilitate 

timely closeout of expired grants. I am the Deputy Assistant Secretary for HHS' Office of 

Grants and Acquisition Policy and Accountability, and am responsible for the management and 

oversight of the HHS grants and acquisition programs. I supervise the Department's Senior 

Grants Policy and Senior Procurement Executives, and oversee and support thirteen grants 

management offices and ten procurement activities within HHS as they award and administer 

grants and contracts in support of the Department's mission to enhance the health and well-being 

of Americans. The Department is committed to serving as a careful steward of tax-payer dollars 

and has a fiduciary responsibility to ensure that the full intent and purpose of the grants are 

carried out, and disbursements are made in accordance with government-wide policies for 

allowable and allocable costs. 

HHS Office of Grants and Acquisition Policy and Oversight 

My office, which is known as the Office of Grants and Acquisition Policy and Accountability, 

provides Department-wide leadership in the areas of grants and acquisition management through: 

(I) policy development; (2) performance measurement; (3) systems management; (4) oversight; 

and (5) workforce training, development, and certification. HHS is the federal government's 

largest grant-making organ ization and third largest Department in federal contracting. As a 

result, my staff and I are actively involved in government-wide governance bodies involving 

grant or acquisition priorities, policies, and systems; such as the Council on Financial Assistance 

Reform and the Chief Acquisition Officers Council. My office also represents the Department in 

coordinating with the Office of Management and Budget. the Government Accountability 

Office (GAO), Congress, and other federal agencies in the area of grants and acquisition policies 

and management. It is within this context, that I join you today. We appreciate the work of this 

Subcommittee and GAO in bringing attention to grants management and fostering greater 

accountability, both from a fiscal and programmatic stand point. 

Scope of HHS' Grants Programs 

In fiscal year 2011, I-IllS' grants management offices awarded $380 billion in grants. HHS' 

mission is to enhance the health and well-being of Americans by providing for effective health 
60 

and human services and by fostering sound, sustained advances in the sciences underlying 

medicine, public health, and social services. HHS accomplishes its mission through several 

hundred programs and initiatives that cover a wide spectrum of activities, serving the American 

public at every stage of life and ranging from researching life-saving new cancer therapies to 

supporting Head Start grantees in providing children a better start in life. 

Grants Management and Closeout 

Over the life of the grant's project period, the grantee provides services, conducts research, and 

supplies information, all for the benefit of the public. It is in the Department's best interest that 

grantees are given the tools to succeed - facilitating meaningful programmatic results and 

fostering fiscal integrity. The agency monitors the grantee's progress over the lifecycie of the 

project. In addition to financial reports, grantees are required to submit other reports, such as 

annual and final progress reports, all of which provide assurance that grant funds are expended in 

accordance with the original purpose and intent of the grant. At the end of the grant period, the 

grantee is accountable, through a series of reporting mechanisms, for demonstrating that it has 

expended all funding in a manner that is allowable and allocable to the grant. Once all final 

financial reports are submitted, the agency reviews the final financial transactions and financial 

expenditures, as reported by the grantee in the Federal Financial Report, and deobligates unspent 

funds in a timely manner. Therefore, the grant closeout process reflects the culmination of a 

business relationship between the federal grant program, the grants administration officials, and 

the grantee and is a vital step in ensuring the accountability of the grantee and the financial 

integrity of the grant program expenditures. 

Grant Closeout Policies and Efforts 

HHS policy and federal grants management regulations dictate that the grantee must submit the 

required closeout documentation within 90 days of the end of the grant period, and HHS aims to 

complete its review and closeout the grant in the Payment Management System (PMS) within 90 

days of the grantee's submission. While the total time frame may seem lengthy and the 

administrative aspects of grants closeout may sound straightforward, several factors influence the 

speed and complexity of the process. including grant extension reporting. a lag in the receipt of 

financial information and supporting documentation from grantees, and low balance threshold 

reconciliation. 

HHS acknowledges that additional work remains in improving the process for closing out 

expired grant accounts with undisbursed balances. Nevertheless, the Department has made 

significant progress in focusing additional attention to the importance of grant closeout, and in 

reducing the amount of undisbursed grant balances since GAO's report in December 2006. 

GAO noted in its 2012 report that, federal-wide, "the total amount of undisbursed balances in 

expired grant accounts in PMS is over $200 million less than the amount previously reported for 

calendar year 2006, while the overall amount of grant disbursements through PMS increased by 

23 percent during this time." GAO's comparison reflects the intensified focus on grant closeout 

and the significant level of improvement achieved thus far. 

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61 

Internally, HHS has also tracked progress in its grant closeout efforts. According to data in 

HHS' PMS, 60,722 HHS grants were eligible for closeout during FY2011 and of this total. 

25,799 or 42.5 percent have since been closed. Beyond the statics, HHS is also engaged in 

facilitating information sharing, heightening senior management attention and action, and 

bolstering the Department's grant closeout policies. 

Actions to Accelerate Grants Closeout 

In addition to HHS' routine efforts to educate grantees about the grants closeout process and 

monitor their financial reporting practices over the life of the grant, the Department has taken 

several concrete steps to improve its grants closeout activities. As depicted by GAO's earlier 

reports as well as HHS' 2007 financial statement audit findings, the Department clearly had the 

need to improve financial controls, monitoring, and business procedures to effectively address 

grant closeouts. HHS' Risk Management and Financial Oversight Board established and 

monitored a Department-wide Internal Control Corrective Action Plan in 2008 to address these 

critical issues, including grants closeout. 

HHS' Program Support Center, which operates the PMS, plays a key role in the Department's 

efforts to improve the rate of grant closeout activities, and implemented expedited procedures for 

closing cancelled grants. Furthermore, the Program Support Center staff provides HHS' 

agencies with a Quarterly Closeout Report of grants that appear eligible for closeout for agency 

review; the reports are also made available in the PMS itself. The Program Support Center staff 

also routinely communicate with the agency Financial Officers and Grant Management Officers 

on grant closeout activities ensuring that, at both a summary and detail level, the agencies 

understand the quantity of grants and dollar values that could be closed out through agency 

review and action. 

Building on this body of work and in response to an identified need to improve financial 

controls, monitoring, and business procedures to effectively address grant closeout, HHS 

established an internal team in February 2011, led by my office, to coordinate a Departmentwide response in strengthening financial controls and accelerating the number of grant closeouts. 

By the end of CY20II, the Accelerated Closeout Team effort resulted in the deobligation of 

$116 million from a total of2,700 grant awards. As a result of these efforts, the Risk 

Management and Financial Oversight Board officially deemed HilS' grant closeout corrective 

action plan as "complete" in 20 II. 

Improvement Plans 

In light of GAO's recent recommendations, and in an effort to strengthen our closeout process, 

HHS is taking a strategic approach to promote improvement in the rate of closeout in the short 

term, and to promote sustainable policies, processes, and resources to ensuring steady 

management of grants closeout over time. In FY20 II, HHS launched an initiative to revise and 

revitalize its internal grants administration policies. As part of that effort. HHS is working to 

revise and strengthen its grants closeout policy. The policy is in development and is projected to 

be completed by December 2012. 

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62 

In addition to revising policy, HHS recognizes the need to devote more staff to grant closeout 

activities. To supplement the initiatives launched by some of the individual agencies to increase 

or dedicate staffing for closeout, the Department has a short- and a long-term strategy to 

establish an intra-Departmental grants closeout taskforce. The purposes of the taskforce would 

be to increase the rate of grant closeout, address the complexities associated with the existing 

overdue grants, and facilitate intra-Departmental communication across the agencies and with 

the PMS tcam. 

Additionally, HHS is working internally across its grants administration systems, including the 

PMS, to facilitate the ease of grantee report submission and the integration of both financial and 

grant administrative information to better ascertain which grants are actually eligible to be closed 

out, and if they are delayed, whether there is a relationship to the type of grant and the 

complexity of the financial transactions and related reports. The Department is developing a 

strategy to identify key areas for systems improvement with an anticipated time frame of 24 

months. 

Finally, as a part of the Secretary's broader commitment to program integrity, my office is 

collaborating with the HHS Office of Finance to incorporate grants closeout as a key element of 

the Department's program risk assessment tool. This initiative will ensure that grants closeout 

remains a departmental priority and facilitate a consistent, Department-wide method to assess, on 

a program by program basis, the challenges associated with grants closeout and efforts to 

mitigate them. 

Conclusion 

The Department strongly agrees with the need to protect taxpayer dollars and is committed to 

using its grants and acquisition management practices to serve as a careful steward of these 

funds. We recognize that we have a fiduciary responsibility to ensure that the full intent and 

purpose of the grant are carried out and disbursements are made in accordance with governmentwide policies for allowable and allocable costs. HHS is actively working to strengthen its grant 

closeout policies and processes, and we appreciate the work of this Subcommittee and GAO in 

recognizing our progress and continuing to draw attention to this important aspect of grants 

management. 

Thank you for the opportunity to testify before the Committee about I-IllS' grants management 

activities. I am glad to answer any questions you may have including addressing items related to 

the work of the Council on Financial Assistance Reform. 

4 
63 

GAO 

For Helease on Delivery 

Expected at 2:30 p.m. EDT Wednesday, July 25, 2012 

GAO-12-704T 

United States Government Accountability Office 

Testimony 

Before the Subcommittee on Federal 

Financial Management, Government 

Information, Federal Services, and 

International Security, U.S. Senate 

GRANTS MANAGEMENT 

Improving the Timeliness of 

Grant Closeouts by Federal 

Agencies and Other Grants 

Management Challenges 

Statement of Stanley J. Czerwinski, 

Director, Strategic Issues 

GAO 

Accountability * Integrity * Reliability 
64 

GRANTS MANAGEMENT 

Improving the Timeliness of Grant Closeouts by 

Federal Agencies and Other Grants Management 

Challenges 

What GAO Found 

Closeout is an important final point of grants accountability. It helps to ensure 

that grantees have met all financial and reporting requirements. It also allows 

federal agencies to identify and redirect unused funds to other projects and 

priorities as authorized or to return unspent balances to the Department of the 

Treasury (Treasury). 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 severa! 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. Nevertheless, the more than $794 mimon in undisbursed balances 

remaining in PMS represents an improvement in closing out expired grant 

accounts with undisbursed balances in PMS compared to the approximately $1 

billion GAO found in 2008. This improvement is notable given that the overall 

amount of grant disbursements through PMS increased by about 23 percent from 

2006 to 2011. 

When agencies made concerted efforts to address timely grant closeout, they 

and their inspectors general and auditors reported that they were able to improve 

the timeliness of grant closeouts and decrease the amount of undisbursed 

funding in expired grant accounts, GAO found that raising the visibility of the 

problem within federal agenCies can also lead to improvements in grant 

closeouts. However, GAO's review of agencies' annual performance reports for 

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

undisbursed balances in grant accounts eligible for closeout is still largely 

lacking. 

The challenge presented by undisbursed balances in expired grant accounts is 

just one of a number of grants management challenges identified in past GAO 

work, Addressing these challenges is critical to increasing the efficient and 

effective use of federal grant funds. which represent a significant component of 

overall federa! spending, According to the Office of Management and Budget 

(OMB), federal outlays for grants to state and local governments, including 

Medicaid, increased from $91 billion in fiscal year 1980 (about $221 billion in 

2011 constant dollars) to more than $606 billion in fiscal year 2011, accounting 

for approximately 17 percent of total federal outlays, During this 30-year period 

there has been a shift in grant spending, increasing the percentage of grant 

funding of Medicaid while decreasing the percentage of funding of non·Medicaid" 

related grant programs. 

GAO work on grants over the last decade has identified a range of issues related 

to the management of grant programs, including the streamlining of grants 

management processes, the measurement of grant performance, grant lessons 

learned from implementing the American Recovery and Reinvestment Act of 

2009. and internal control weaknesses. GAO will be looking at each of these 

grants management issue areas in future work for this Subcommittee, 

_____________ United States Government Accountability Office 
65 

Chairman Carper, Ranking Member Brown, and Members of the 

Subcommittee: 

I appreciate the opportunity to discuss with you today the findings from 

our recent report for you on the timeliness of grant closeout by federal 

agencies, as well as some of the new and ongoing work we are doing for 

this Subcommittee on other key grants management challenges. 1 

Closeout is an important final point of grants accountability that helps to 

ensure that grantees have met all financial and reporting requirements. It 

also allows federal agencies to identify and redirect unused funds to other 

projects and priorities as authorized, or to return unspent balances to the 

Department of the Treasury (Treasury). (See appendix I for an illustration 

of how and when federal agencies may redirect unused funds.) In a 2008 

report to this Subcommittee, we found that timely grant closeout was a 

long-standing issue at federal agencies and that roughly $1 billion in 

undisbursed funding remained in the largest civilian payment system for 

grants. 2 Assessing grants management practices, such as ensuring that 

agencies follow proper closeout procedures, is critical to increasing the 

efficient and effective use of federal grant funds, which represent a 

significant component of federal spending. In fiscal year 2011, federal 

grants outlays to state and local governments, including Medicaid, 

accounted for approximately 17 percent of total federal outlays. 3 

Challenges involving grants management have been a repeated theme in 

our work over the last decade, and at your request, I will also briefly 

discuss some of the work we are doing for this Subcommittee on this 

important area. 

My testimony today is drawn from our recent report to you on the 

timeliness of grant closeout as well as federal grants funding data from 

the Office of Management and Budget (OMB). It will address (1) the 

amount of undisbursed funding remaining in expired grant accounts; (2) 

actions OMB and agencies have taken to track undisbursed balances in 

grants eligible for closeout; (3) GAO recommendations on how to improve 

Grants Management: Action Needed to Improve the Timeliness of Grant Closeouts 

GAO-12-360 (Washington, DC Apr. 16, 2012). 

2GAO, Grants Management: Attention Needed to Address Undisbursed Balances in 

Expired Grant Accounts. GAO-08-432 (Washington, D.C .. Aug. 29. 2008) 

3Federa! grant outlays include the federal share of Medicaid funds that are sent to the 

states. Medicaid is the largest federal grant program 

Page 1 GAO·12·704T 
66 

grant closeout from our recent report; (4) recent and historical funding 

levels for federal grants; and (5) our ongoing and future work on grants 

management challenges. 

To conduct our work on grant closeout, we analyzed data from the 

quarterly closeout reports provided to users of the Payment Management 

System (PMS), the largest civilian payment system for grants, which is 

administered by the Department of Health and Human Services' (HHS) 

Program Support Center (PSG). PMS 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 disbursement in the preceding 9 months, 

We analyzed data from "dormant account reports" provided to users of a 

second payment system, the Automated Standard Application for 

Payments (ASAP) system,4 which reports accounts for federal grants that 

remain inactive for 2 years or more. We also conducted a web-based 

search for audit reports we have issued and those issued by federal 

inspectors general. We interviewed agency officials, including officials 

from OMB, and reviewed OMB circulars and other guidance related to 

grants management and performance reporting. We reviewed 

performance reports for the 24 agencies required to issue audited 

financial statements under the Chief Financial Officers Act of 1990 (CFO 

Act) for information reported on undisbursed balances in grants eligible 

for closeout. More detailed information on our scope and methodology for 

the grants closeout work can found in our published report. 5 To determine 

the level of federal grants funding and its changes over the last three 

decades, we used OMB data for fiscal years 1980-2011 6 For a more 

accurate comparison of grant spending from year-to-year, we converted 

each fiscal year's outlays to constant 2011 dollars. 

We conducted our performance audit on grant closeout 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 

4The Automated Standard Application for Payments (ASAP) system IS administered jointty 

by the Department of the Treasury (Treasury) and the Federal Reserve Bank of 

Richmond, 

sGAO-12-360. pp. 35-44. 

6See Office of Management and Budget, Fiscal Year 2013, Historical Tables. Budget of 

the US. Government Specificafly, Table 12.3. Federal Outlays for Grants to State and 

Local Governments, by Function. Agency, and Program: 1940-2013 

Page 2 
67 

Undisbursed Balances 

in Expired Grant 

Accounts Have 

Declined but More 

Action Is Needed 

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. In addition, we are 

providing information on grants funding levels for the past three decades. 

We found that as of September 30, 2011, more than $794 million in 

undisbursed balances remained in PMS in 10,548 expired grant 

accounts. These are accounts that were more than 3 months past the 

grant end date, had no activity for 9 months or more, and therefore should 

be considered for grant closeout. This is an improvement from 2008, 

when we reported that at the end of calendar year 2006, roughly $1 billion 

in undisbursed funding remained in expired PMS grant accounts. These 

expired grant accounts do not include accounts associated with grant 

programs for which the duration of the grant is not limited to a specific 

time period. such as payments to states for the Medical Assistance 

Program, known as Medicaid, and Temporary Assistance for Needy 

Families. This improvement is notable given that the overall amount of 

grant disbursements through PMS increased by about 23 percent from 

2006 to 2011. However, more work needs to be done to further improve 

the timeliness of grant closeout and reduce undisbursed balances. We 

have highlighted three areas in need of particular attention. 

First, we found that undisbursed balances remained in grant accounts 

several years past their expiration date. We found that 991 expired grant 

accounts containing a total of $110.9 million in undisbursed funding were 

more than 5 years past the grant end date at the end of fiscal year 2011. 

Of these, 115 expired grant accounts containing roughly $9.5 million in 

undisbursed funding 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. Over time, the risk 

increases that grantees will not have retained the financial documents 

and other grant information that federal agencies need to properly 

reconcile financial information and make the necessary adjustments to 

grant award amounts and amounts of federal funds paid to recipients. 

This could potentially result in the payment of unnecessary and 

unallowable costs. 

Second, we found that a small percentage of grant accounts (a little more 

than 1 percent) with undisbursed balances of $1 million or more 

accounted for more than a third of the total undisbursed funds in expired 

Page 3 GAO·12·704T 
68 

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 for a combined total of roughly $316 million in 

undisbursed balances< Accounts with undisbursed balances remaining 

after the grant end date can indicate a potential grant management 

problem< Data showing that some grantees have not expended large 

amounts of funding, such as $1 million or more, by the specified grant 

end date raise concern that the grantees may not have fully met the 

program objectives for the intended beneficiaries within the agreed-upon 

time frames< 

Third, we found more than 28,000 expired grant accounts in PMS with no 

undisbursed balances remaining that had not been closed out as of the 

end offiscal year 2011 < 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 

year-end closeout report This would represent roughly $2 million in fees 

if agencies were billed for these accounts for the entire year. While the 

fees are small relative to the size of the original grant awards, they can 

accumulate over time< If the grant has otherwise been administratively 

and financially closed out, then agencies are paying fees to maintain 

grant accounts that are no longer needed< However, the presence of 

expired grant accounts with no undisbursed funds remaining 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< 

In addition to data from PMS, we also reviewed data from the ASAP 

system and found that as of September 30,2011, $1262 million in 

undisbursed balances remained in 1,094 dormant grant accounts< 

Agencies can use the information in these reports to help identify 

accounts in need of attention and unspent funds available for 

deobligation< For example, agencies may want to focus attention on 

accounts where there has been no activity for a prolonged period< We 

found roughly $11 million in 179 accounts that had been inactive for 5 

years or more< 

Page 4 
69 

Raising the Visibility 

of Grant Closeout Can 

Lead to 

Improvements 

We have found that when agencies made concerted efforts to address 

timely grant closeout, they, their inspectors general, and auditors reported 

that they were able to improve the timeliness of grant closeouts and 

decrease the amount of undisbursed funding in expired grant accounts, 

Agencies' approaches generally focused on elevating timely grant 

closeouts to a higher agency management priority and on improving 

overall closeout processing. For example, in response to past audit 

reports, HHS officials reported increasing monitoring of grant closeout. 

Since fiscal year 2006, the HHS independent auditor had 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. 7 In fiscal year 2011, the independent auditor noted significant 

improvements in the closeout of grants in PMS. While we found that 

roughly three-fourths of all undisbursed balances in expired PMS grant 

accounts were from grants issued by HHS, we also found that the total 

undisbursed balances in these accounts represented the lowest 

percentage (2.7 percent) for any federal department included on the 

September 30, 2011, closeout report. 8 In comments on our draft report, 

HHS reported that it had identified $116 million in undisbursed balances 

in PMS available for deobligation through a special initiative begun in 

2011 and is updating existing department policies and procedures to 

improve the grant closeout process going forward. 

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 

71ndependent 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 Independent auditors also provide consulting non-audit 

services in areas such as information technology 

aWe excluded grant accounts from our analYSIS that did not have a defined end date, 

Including large Medicaid formula grants for the Medical Assistance Program. The purpose 

of the PMS closeout report is to alert awarding agencies of accounts in PMS that remain 

open after their posted end date. !f a grant does not have a defined end date then HHS 

staff conSider the PMS closeout report merely as a reminder to the awarding agency of 

the open account. We did not exclude grant accounts for similar programs that were 

identified In the Catalog of Federal Domestic ASSistance 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. 

Page 5 
70 

GAO Recommends 

that OMB Issue 

Govemmentwide 

Guidance to Track 

and Report on 

Undisbursed Balances 

in Grants Eligible for 

Closeout 

resolution of the undisbursed funding in their annual performance reports. 

At the time, OMB supported the intent of our recommendations, but its 

comments did not indicate a commitment to implement our 

recommendations. Starting in 2010, OMB has issued guidance to track 

and report on undisbursed balances in expired grant accounts to only 

certain federal departments and entities covered by the Commerce, 

Justice, Science, and Related AgenCies Appropriations Act, as required 

by law. However, in its instructions, OMB equated "expired grant 

accounts" with expired appropriation accounts. Based on this definition, 

OMB's guidance included grant accounts that were still available for 

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

closeout. 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 was largely lacking. 

In our 2012 grant closeout report, we reiterate our recommendation that 

OMB 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. In addition, we recommend that the 

Director of OMB take the following three actions: 

Revise the definition of "undisbursed balances in expired grant 

accounts" in future guidance issued to agencies to focus on 

undisbursed balances obligated to grant agreements that have 

reached the grant end date and are eligible for closeout 

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. 

OMB staff said that they generally agreed with the recommendations and 

will consider them as they review and streamline grant policy guidance. 

Page 6 GAO~12·704T 
71 

While Grants Have 

Consistently Been a 

Significant 

Component of 

Federal Spending, the 

Focus of Grants 

Outlays Has Shifted In 

the Last 30 Years 

OMB did not provide specific actions or time frames with which it would 

address the issues that we have raised. We will continue to monitor 

OMB's action on our recommendations. 

The challenge presented by undisbursed balances in expired grant 

accounts is just one of a number of grants management challenges we 

have identified in our past work. Grants continue to be an important tool 

used by the federal government to achieve national objectives. As the 

federal government confronts long-term and growing fiscal challenges, its 

ability to maintain the flow of intergovernmental revenue, such as through 

grant programs, could be constrained. To make the best use of federal 

grant funds, it is critical to address grants management challenges that 

could impact the efficiency and effectiveness of federal grants processes. 

Accordingly, the Subcommittee has requested that we examine a number 

of areas involving these issues in future work. However, before I discuss 

these I would like to put them in a broader context by briefly describing 

the level of recent federal grant spending and how it has changed over 

the last three decades. 

Grants have been, and continue to be, an important tool used by the 

federal government to provide program funding to state and local 

governments. According to OMB, federal outlays for grants to state and 

local governments increased from $91 billion in fiscal year 1980 (about 

$221 billion in 2011 constant dollars) to over $606 billion in fiscal year 

2011.9 Although many federal departments and agencies award grants, 

HHS, which administers the Medicaid program, is by far the largest grantmaking agency, with grants outlays of almost $348 billion in fiscal year 

2011, or about 57 percent of the total federal grants outlays that year. 

Even when Medicaid's outlays of $275 billion are excluded, HHS remains 

the largest federal grant-making department. 10 Figure 1 shows the total 

federal outlays for grants to state and local governments over the period 

from fiscal years 1980 to 2011, in constant dollars, and the increasing 

amount of this total that went to Medicaid over time. 

SWe used OMS data on grants outlays to state and local governments for thIS testimony 

Constant dollar amounts reflect adjustments for inflation (e g., the purchasing power of the 

$91 billion spent In 1980 represents about $221 billion in fiscal year 2011 dollars) 

10Ail further references to total or overall federal grants outlays refer to outlays to state 

and local governments 

Page 7 GAO·f2»704T 
72 

Figure 1: Total Federal Outlays for Grants to State and Local Governments and Medicaid, in 2011 Constant Dollars, Fiscal 

Ye.", 1980·2011 

Dollars in billions 

700 

Ffscalyea:r 

-- Total grants outlays 

Non-Medicaid granis outlays 

It is important to note that although federal outlays for grants have 

increased during the past three decades, as shown in Figure 2, grants 

outlays as a percentage of total federal outlays in fiscal year 2011 was at 

a roughly comparable level to what it was more than 30 years earlier 

(15.5 percent vs. 16.8 percent). At the same time, Medicaid outlays 

increased from over 2 percent of total federal outlays in 1980 to almost 8 

percent in 2011, The considerable increase in Medicaid outlays was 

offset by an approximately equivalent decrease in the share of outlays for 

all other grants. 

Page 8 
73 

Figure 2: Total Federal Outlays for Grants to State and Local Governments and Medicaid as a Percentage of Total Federal 

Outlays, Fiscal Yea", 1980-2011 

POl'ant 

20 

F~lyUf 

Ongoing and Future 

Work Targets Key 

Grants Management 

Issues 

-- Tota! grants outley!> as a per~ntage of total outlays 

Non-Medicaid grants outlays as a percentage of lotal ouuays 

Medicaid outlays as a percentage of lotal outlays 

Given the federal government's use of grants to achieve national 

objectives and respond to emerging trends, this Subcommittee has 

recently requested that we conduct a number of grant-related reviews in 

support of its oversight efforts. Today, I would like to briefly highlight four 

areas where our previous work and that of the inspectors general and 

others have identified challenges, and where we are beginning the work 

you requested related to the management of grant programs. Specifically, 

they are the streamlining of grants management processes; the 

measurement of grant performance; grant lessons learned from 

implementing the American Recovery and Reinvestment Act of 2009 

(Recovery Act): and internal control weaknesses in grants management 

processes. 

For more than a decade, the federal government has undertaken several 

initiatives aimed at streamlining governmentwide grants management. 

Page 9 GAO-12-704T 
74 

Over the years, Congress has expressed concern over the 

inconsistencies and weaknesses we and the inspectors general have 

found in grants management and oversight In response to your request 

we plan to examine the progress OMS and federal grant governance 

bodies have made toward streamlining grants management. We also 

expect to assess what further actions should be taken to simplify 

processes, reduce unnecessary burdens, and improve the governance of 

streamlining initiatives. We plan to report our results next year. 

We also expect to evaluate the extent to which there are governmentwide 

requirements for measuring and reporting grant performance and the 

extent to which federal agencies measure grant performance to report 

progress toward their goals, as well as offer assistance to grantees on 

collecting data and reporting grant performance. As with our streamlining 

work, the specifics of this grant performance reporting work are currently 

under development, and we anticipate a 2013 report. In our past work we 

have reported that effective performance accountability provisions are of 

fundamental importance in assuring the proper and effective use of 

federal funds to achieve program goals. 

Under the Recovery Act, grants have played an important role in 

distributing federal funds in light of the most serious economic crisis since 

the Great Depression. As of June 2012, Treasury had paid out more than 

$250 billion in Recovery Act funds to state and local governments, much 

of it through grants. Given the significant investment made in the 

Recovery Act, and the considerable challenges facing our nation moving 

forward, this Subcommittee recognized the importance of collecting, 

analyzing, and sharing grant lessons and insights gained as a result of 

this process. Bullding on our previous reviews, we will examine lessons 

from the implementation of the Recovery Act-including specific 

examples of practices and approaches that worked as well as challenges 

encountered by federal, state, and local agencies. Among the potential 

issues to consider are the efforts to facilitate coordination and 

collaboration among federal, state, local, and nongovernmental partners 

and actions taken to enhance the organizational and administrative 

capacity of federal partners. Once again, we anticipate reporting to the 

Subcommittee next year. 

Finally, in numerous reviews over the years, we have identified 

weaknesses in federal agencies' processes for managing and overseeing 

grant programs. Among the issues we are planning to address in future 

work is how federal agencies can improve internal control over grants 

monitoring. We will also examine what improvements, if any, are needed 

Page 10 
75 

Concluding 

Observations 

Contacts and 

Acknowledgments 

in federal agencies' internal controls to help ensure the primary grantees 

are providing adequate oversight of subgrantees. 

The improvements made in the timeliness of grant closeouts since our 

2008 report demonstrate that congressional oversight can lead agencies 

to focus attention on a specific grant challenge, and result in real 

progress. However, our recent update of our earlier analysis of 

undisbursed balances also shows that more still needs to be done to 

close out grants; agencies would use their resources most effectively by 

focusing initially on older accounts with larger undisbursed balances. As 

our review of past grant work suggests, there are numerous other issues 

where congressional attention could also likely pay dividends. This is all 

the more relevant because federal grant programs remain important tools 

to achieve national objectives and continue to be a significant component 

of federal spending. We look forward to continuing to support this 

Subcommittee's efforts to examine the design and implementation of 

federal grants and participating in its active oversight agenda. 

Chairman Carper, Ranking Member Brown, and Members of the 

Subcommittee, this completes my prepared statement. I would be 

pleased to respond to any questions that you or other members of the 

Subcommittee may have. 

If you or your staff have any questions about this testimony, please 

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

Director, 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 statement. GAO staff who made key contributions to 

this testimony are Phyllis L. Anderson, Assistant Director; Peter Del Toro, 

Assistant Director; Thomas M. James, Assistant Director; Kimberly A. 

McGatlin, Assistant Director; Laura M. Bednar, Maria C. Belaval, Anthony 

M. Bova, Amy R. Bowser, Virginia A. Chanley, Melissa L King, Thomas 

J. McCabe, Diane N. Morris, and Omari A. Norman. Additional 

contributions were made by Andrew Y. Ching, Travis P. Hill, Jason S. 

Kirwan, Jennifer K. Leone, Cynthia M. Saunders, Albert C. Sim, and 

Michael Springer. 

Page 11 GAO·12·704T 
76 

Appendix I: Deobligating Undisbursed 

Balances in Expired Grant Accounts 

(450984) 

While there can be substantial variation among grant programs, figure 1 

illustrates how closing out grants could allow an agency to redirect 

resources toward other projects and activities or return unspent funds to 

Treasury. 

Figure 1: Oeobligating Undisbursed Balances in Expired Grant Accounts 

Page 12 
77 

Ul 

= 

~ '5 

.S 

'" l.. 

.s 

'0 

~ 

UNDISBURSED FUNDS FROM EXPIRED GRANT ACCOUNTS 

PA YMENT MANAGEMENT SYSTEM (PMS) 

900 

800 

700 

600 

500 

400 

300 

200 

100 

Years past grant expiration Source: GAO 
78 

IMPROPER 

PAYMENTS 

2011 

$115 BILLION 
79 

Post-Hearing Questions for the Record 

Submitted to the Honorable Daniell. Werfel From Senator Torn Coburn 

"Assessing Grants Management Practices at Federal Agencies" 

July 25, 2012 

1. In your written statement to the Committee, you said that GAO's estimate of$794 

million in undisbursed grant balances is overstated because that figure may include 

grants whose periods of performance have been extended. What is the accu rate 

amount of undisbursed grant balances? 

In the testimony, I pointed to the statement in the GAO audit report that GAO may have 

overstated the amount of undisbursed grant balances. OMB also provided possible 

causes of the overstatement that were not raised in the GAO report (including, for 

example, extended closeout periods). The amount of undisbursed grant balances is a 

piece of information that is not currently collected or maintained across the government. 

Regardless of the actual amount of the balances, OMB does agree with GAO that 

undisbursed grant balances warrant further agency attention, and we have asked agencies 

to examine specific strategies to address those balances. 

2. On July 24th, OMB issued a Comptroller Alert highlighting strategies that agencies 

can take to close out federal grants in a timely manner. Specifically, how does OMB 

plan to follow up on agency progress in implementing the strategies outlined in the 

Comptroller Alert? Will OMB require agencies to publicly report data on unspent 

grant balances, as recommended by GAO in 2008? 

OMB will follow up with agencies to determine what progress they have made and what 

assistance they need to improve timely grant closeout. This issue affects each agency 

differently and, therefore, we will be working with each agency through the Council on 

Financial Assistance Reform and the Chief Financial Officer's Council to determine the 

appropriate strategies and next steps. Agencies should design processes with strong 

internal controls to promote effective funds management for all types of obligations. 

OMB will keep this Committee informed about agency progress in addressing this issue. 

135501 
80 

'< I 

Topic: media reports 

Hearing: i Assessing Grants Management Practices at Federal Agencies 

Primary: The Honorable Tom A. Coburn 

Committee: HOMELAND SECURITY (SENATE) 

Question: At the hearing, I expressed concerns about media reports that funds under the 

Port Security Grant Program were allocated to the city of Nederland, Texas to either 

renovate its city hall or to build an emergency operations center. Please provide a list of 

all projects in the city of Nederland that have been funded by the Port Security Grant 

Program since 2007, included a description of the project, as well as the total amount of 

funding provided. 

Response: The City of Nederland is part of the Sabine Neches Port Area, which includes 

the Ports of Port Arthur and the Port of Beaumont. 

Nederland, Texas received PSGP funding in the FY 2007 Supplemental and FY 2012 

grant rounds. In the FY 2007 Supplemental, they received $98,735 in federal funding 

through Jefferson County, the Fiduciary Agent for the Sabine-Neches port area, to 

enhance existing communications equipment in the police and fire departments to meet 

"Project 25" (P25) compliance for Interoperability by the year 2015. With this grant P25 

compliant (standards based) communications equipment was purchased. In FY 2012, 

Nederland Fire Rescue will receive $2,100,169 in federal funding to construct an 

Emergency Operations Center and procure dispatch equipment that would allow any 

entity on the regional radio system to utilize the system in case of disruption of their 

primary dispatch center. Currently Nederland houses and provides dispatching services 

for the Police and Fire Departments of Nederland, Port Neches, and Groves. The 

proposed equipment would serve as backup to dispatch in the event of system failure. 

Nederland FirelRescue provides first response capabilities to Sunoco Logistics Terminal, 

a primary Strategic Petroleum Reserve shipping and receiving site and crude oil storage 

facility, and Chevron Terminal, an alternate Strategic Petroleum Reserve shipping and 

receiving site and crude oil storage facility. The Sunoco terminal receives and transports 

crude oil to the Motiva refinery for its 600,000 barrel per day operation. The pipeline 

responsible for this runs through Nederland, TX. The organization participates in mutual 

aid to an additional 34 Maritime Transportation Security Act (MTSA) regulated port 

facilities along the Sabine-Neches River, which has been identified as a Group II Port 

Area. 

Due to Nederland's geographic location within the port areas, the establishment of the 

Nederland Central Fire Station I Emergency Operations Center is considered by the Coast 

Guard's Captain of the Port to be a priority project. The request for the EOC was found 

to be in alignment with the Sabine-Neches Area Maritime Security Plan, and it aligns 
81 

Question#: I I I 

I 

Topic: media reports 

Hearing: Assessing Grants Management Practices at Federal Agencies 

Primary: The Honorable Tom A. Coburn 

Committee: HOMELAND SECURITY (SENATE) 

with the Port Wide Risk Mitigation Plan (PWRMP). This alignment was demonstrated 

by the Captain of the Port's ranking and recommendation to fully fund this project, which 

was heavily weighted when the National Review Panel (NRP) approved the project. 
82 

I 

Question#: 2 

Topic: guidance 

Hearing: Assessing Grants Management Practices at Federal Agencies 

Primary: The Honorable Tom A. Coburn 

Committee: HOMELAND SECURITY (SENATE) 

Question: In January, Secretary Napolitano issued guidance to the states to expedite the 

spending of the $S billion in unspent grant funds under FEMA's preparedness grants, 

citing "the need for further fiscal stimulus." How did the purpose of these grant programs 

corne to include fiscal stimulus? Have you developed any metrics to track the fiscal 

stimulus impact ofFEMA's preparedness grants? How does FEMA plan to measure and 

balance the new stimulus of these funds with our nations important preparedness goals? 

Response: The expedited expenditure measures instituted in February were designed to 

support grantee efforts to put grant funding to work quickly by addressing immediate 

needs and building core capabilities that will support long-term preparedness, consistent 

with existing laws, regulations and programmatic objectives. Any fiscal stimulus gained 

by the expedited drawdown of grant funding serves as a secondary benefit As such, 

specific metrics to track the fiscal stimulus for these grant funds are not planned. 

As part of the implementation of Presidential Policy Directive S (PPD-S): National 

Preparedness, the Department is measuring preparedness efforts across the Whole 

Community. The first edition of the National Preparedness Goal (NPG), released 

October 2011, identifies 31 core capabilities and preliminary capability targets necessary 

to achieve national preparedness. FEMA requires states, territories and urban areas to 

complete a standardized Threat and Hazard Identification and Risk Assessment (THIRA) 

to identify their targets for each core capability defined in the NPG. FEMA also requires 

states and territories to assess their current capability levels relative to their THIRA 

targets in the 2012 State Preparedness Report (SPR). Together, the THTRA and the SPR 

constitute an assessment of capability gaps based on capability-specific performance 

objectives. The THlRA and SPR provide a preparedness baseline that enables FEMA 

and grantees to measure and track progress towards closing those capability gaps. 
83 

Æ 

Question#: 3 

Topic: unspent grant funds 

Hearing: Assessing Grants Management Practices at FederalAgencTes 

Primary: The Honorable Tom A. Coburn 

Committee: HOMELAND SECURITY (SENATE) 

Question: With regard to the $8 billion in unspent grant funds, in your statement, you 

said that "the unspent funds in the pipeline are currently not idle, and that in the vast 

majority of cases, work is being performed and projects are underway." You then listed 

"Reprioritization" as the first measure to help spend these funds, including allowing 

grantees to apply grant balances to other priorities, and expanding allowable expenses 

under some grant programs. If the majority of the unspent funds are being put towards 

projects that are underway, why does the Department's strategy include allowing states 

and grantees to reprioritize funds for other uses? Are states required to report to FEMA 

when they want to reprioritize grant funds in accordance with Secretary Napolitano's 

guidance? Of the $8 billion in unspent funds identified in January, what is the specific 

amount of money that has been rcprioritized and put to a different use? 

Response: The Secretary provided guidance to grantees to reprioritize their grant funds 

to put grant funding to work more quickly by addressing immediate needs and building 

core capabilities that will support preparedness in the long run. To ensure accountability, 

States are required to submit their written reprioritization requests for approval to FEMA. 

To that end, of the $8 billion in unspent grant funds, over $135 million has been 

reprioritized to date.