GRANTS 

MANAGEMENT

Actions Needed to 

Address Persistent 

Grant Closeout 

Timeliness and 

Undisbursed Balance 

Issues

Report to Congressional Requesters

April 2016

GAO-16-362

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-16-362, a report to 

congressional requesters

April 2016

GRANTS MANAGEMENT

Actions Needed to Address Persistent Grant Closeout 

Timeliness and Undisbursed Balance Issues 

Why GAO Did This Study

In 2008 and 2012, GAO reported on 

hundreds of millions of dollars in 

undisbursed balances in expired grant 

accounts in the largest civilian payment 

system for grants, PMS. GAO was 

asked to update this work. GAO 

examined: (1) the extent to which there 

are undisbursed balances remaining in 

expired grant accounts in PMS; (2) the 

reasons selected agencies give for 

their grant accounts remaining open 

past their end dates; and (3) the extent 

to which OMB monitors agency 

progress with regard to tracking and 

reporting undisbursed balances in 

expired grant accounts. To do this, 

GAO analyzed PMS data as of 

September 30, 2015; reviewed audit 

reports issued by GAO and federal 

inspectors general, agency 

performance reports, and OMB 

guidance; and interviewed agency 

officials from OMB, HHS, Commerce, 

Justice, NASA and NSF.

What GAO Recommends

GAO recommends that OMB resume 

instructing agencies to report 

undisbursed balances for expired grant 

accounts as required under their 

respective appropriations acts and that 

NASA and Commerce resume 

reporting on these balances. GAO also 

recommends that HHS require its 

grant-making operating divisions to

identify grants expired more than 1

year past their period of performance 

end date and close those grants or 

determine why they are not closed, 

consistent with agency policy. OMB 

and the agencies agreed with the 

recommendations. 

What GAO Found

GAO found approximately $994 million in funding remained in expired grant 

accounts in the Payment Management System (PMS), operated by the 

Department of Health and Human Services (HHS), at the end of fiscal year 2015. 

PMS identifies expired grant accounts for users as those accounts more than 3 

months past their grant end date that have not had payment activity for 9 months.

PMS makes payments for 12 federal entities and about 77 percent of all federal 

civilian grant payments. GAO’s analysis of the September 30, 2015, PMS data 

indicated the following:

• The total undisbursed balance increased by approximately $200 million from 

what GAO reported for the end of fiscal year 2011. However, the number of 

expired grant accounts with undisbursed balances decreased to 8,832 in 

2015 compared to 10,548 in 2011.

• More than half the accounts exceeded their expiration date by 1 to 3 years. 

• A relatively small number of expired grant accounts represented more than 

half of the total undisbursed balance—151 grants represented $514.7 million 

in undisbursed balances. 

• HHS grant accounts in PMS comprised approximately $651 million (66 

percent) of the identified undisbursed balances in expired grant accounts.

• The number of expired grant accounts with no undisbursed balance that 

PMS flagged for closeout dropped to 5,906 from the more than 28,000

accounts GAO reported for the end of fiscal year 2011. HHS accounts made 

up 66 percent of the 5,906 expired accounts flagged for closeout, which is 

inconsistent with HHS policy. 

Agency officials told GAO that closeout delays can occur for a number of 

reasons, including grantee failure to submit final financial and performance 

reports and agency failure to review, process, and reconcile grantees’ final 

reporting in a timely manner. These agency officials included staff from HHS, the 

largest PMS user, and the Departments of Commerce (Commerce) and Justice 

(Justice), the National Aeronautical and Space Administration (NASA), and the 

National Science Foundation (NSF), which previously reported undisbursed 

balances for expired grants. These agencies have implemented various internal 

policies to elevate the issue of timely grant closeout internally, including 

developing internal working groups that set grant closeout goals and analyzing 

the number of expired grants not yet closed out. 

Since 2010, Congress has required the Office of Management and Budget 

(OMB) to specifically instruct Commerce, Justice, NASA, and NSF to track and 

provide information on balances in expired grant accounts. OMB has not issued 

this guidance since 2011, and NASA and Commerce have not reported on these 

balances since 2011 and 2012, respectively. OMB staff did not think that it was 

necessary to restate the requirements given the language in these agencies’ 

appropriations acts. OMB updated its guidance on grant closeout in December 

2013. However, OMB did not specify procedures for tracking and reporting 

undisbursed balances in expired grant accounts.

View GAO-16-362. For more information, 

contact Michelle Sager at (202) 512-6806 or 

sagerm@gao.gov.
Page i GAO-16-362 Grants Management

Letter 1

Background 5

Approximately $994 Million in Undisbursed Balances Remained in 

Expired Grant Accounts in the Payment Management System 13

Final Reporting and Processing Challenges Contribute to Delayed 

Grant Closeout, but Selected Agencies Have Begun to 

Implement Policies to Improve Closeout Timeliness 23

OMB Does Not Monitor Selected Agencies’ Reporting of 

Undisbursed Balances in Expired Grants 37

Conclusions 40

Recommendations for Executive Action 41

Agency Comments and Our Evaluation 42

Appendix I Objectives, Scope and Methodology 44

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

as of April 2015 49

Appendix III Comments from the Department of Commerce 52

Appendix IV Comments from the Department of Health and Human Services 53

Appendix V Comments from the National Aeronautics and Space Administration 55

Appendix VI Comments from the Office of Management and Budget 57

Appendix VII GAO Contact and Staff Acknowledgments 59

Contents
Page ii GAO-16-362 Grants Management

Figures

Figure 1: Grant Life Cycle for Federal Grant-Making Agencies and 

Grant Recipients 6

Figure 2: Uniform Guidance Timeline for Federal Award Closeout 

Actions 9

Figure 3: Deobligating Undisbursed Balances in Expired Grant 

Accounts 10

Figure 4: Number and Amount of Undisbursed Balances in 

Expired Payment Management System (PMS) Grant 

Accounts by Years Exceeding Grant Expiration Dates, 

September 30, 2011 and 2015 14

Figure 5: Number and Amount of Undisbursed Balances in 

Expired Payment Management System (PMS) Grant 

Accounts by Size of Undisbursed Balances, September 

30, 2011 and 2015 16

Figure 6: Number and Amount of Undisbursed Balances in 

Expired Health and Human Services Grant Accounts in 

Payment Management System (PMS) by Years 

Exceeding Grant Expiration Dates, September 30, 2011 

and 2015 18

Figure 7: Number and Amount of Undisbursed Balances in 

Expired Administration for Children and Families (ACF) 

Grant Accounts in Payment Management System (PMS) 

by Years Exceeding Grant Expiration Dates, September 

30, 2011 and 2015 20

Figure 8: Agencies Note Multiple Reasons for Delayed Grant 

Closeout 24
Page iii GAO-16-362 Grants Management

Abbreviations

ACF Administration for Children and Families 

ASAP Automated Standard Application for Payments 

ACMS Award Cash Management Service 

BTOP Broadband Technology Opportunities Program 

CFDA Catalog of Federal Domestic Assistance 

CFO Act Chief Financial Officer Act of 1990 

COPS Community Oriented Policing Services

DCAA Defense Contract Audit Agency 

DOE Department of Energy 

DOJ Department of Justice 

DPM Division of Payment Management 

GMS Grants Management System

GOL Grants Online 

GONE Act Grants Oversight and New Efficiency Act

HHS Department of Health and Human Services 

IG inspector general 

NASA National Aeronautics and Space Administration 

NIJ National Institute of Justice 

NIST National Institute of Standards and Technology 

NOAA National Oceanic and Atmospheric Administration 

NSF National Science Foundation 

OJP Office of Justice Programs 

OMB Office of Management and Budget 

PMS Payment Management System 

PSC Program Support Center 

USDA Department of Agriculture

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Page 1 GAO-16-362 Grants Management

441 G St. N.W.

Washington, DC 20548

April 14, 2016

The Honorable Ron Johnson

Chairman

The Honorable Thomas R. Carper

Ranking Member

Committee on Homeland Security and Governmental Affairs

United States Senate

The Honorable Jim Cooper

House of Representatives

Grants are an important tool the federal government uses to achieve 

diverse national objectives for the American people. In 2008 and 2012, 

we reported on the existence of significant undisbursed balances in grant 

accounts that remained open past their period of performance end date.1

For example, in 2012 we reported on almost $800 million in undisbursed 

balances in expired grant accounts at the end of fiscal year 2011 in the 

largest civilian payment system.2 Undisbursed balances occur when the 

grant recipient has not drawn down or the awarding agency has not 

disbursed all the authorized federal grant funds by the period of 

performance end date. Grant closeout is an important final point of 

accountability and is necessary for effective management of expired 

grants. Effective and efficient grant closeout processes allow awarding 

agencies to make better use of unspent funds or return these funds to the 

Department of the Treasury (Treasury). Also, the existence of unspent 

funds can hinder the achievement of national objectives by leaving 

projects incomplete. Reducing undisbursed balances in expired grant 

accounts is crucial to making the best and most efficient use of federal 

funds to support a grant program’s mission and, ultimately, national 

priorities.

 1

GAO, Grants Management: Action Needed to Improve the Timeliness of Grant Closeouts 

by Federal Agencies, GAO 12-360 (Washington, D.C.: Apr. 16, 2012) and; Grants 

Management: Attention Needed to Address Undisbursed Balances in Expired Grant 

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

2

These undisbursed balances were in accounts in the Department of Health and Human 

Services’ Payment Management System. 

Letter
Page 2 GAO-16-362 Grants Management

In 2008, we stated that tracking undisbursed balances in expired grant 

accounts, including the status of grant closeouts on annual performance 

reports, could raise the visibility of this issue both within the agency and 

government-wide. We recommended that the Office of Management and 

Budget (OMB) instruct agencies to track undisbursed balances that 

remain in grantees’ accounts after the grant funding period has ended 

and report on the resolution of this funding in their annual performance 

reports. While OMB generally agreed with the intent of this 

recommendation, it did not take action or commit to having agencies 

report these balances in agency performance reports.3

In 2012, we again found the presence of undisbursed balances in expired 

grants and recommended that OMB revise future guidance to better 

target undisbursed balances in grants eligible for closeout and instruct 

agencies to take action to close out grants that are several years past 

their end date or have no undisbursed balances remaining.4 OMB 

generally agreed with this recommendation but did not require agencies 

to report undisbursed balances in expired grant accounts. OMB did, 

however, issue a Controller’s Alert in 2012 that instructed agencies to 

take appropriate action to close out grants in a timely manner.

You asked us to update our previous work on grant closeout issues. This 

report reviews: (1) the extent to which undisbursed balances remain in 

expired grant accounts in the federal government’s largest civilian 

payment system—the Payment Management System (PMS) 

administered by the Department of Health and Human Services’ (HHS) 

Program Support Center (PSC); (2) the reasons selected agencies give 

for their grant accounts remaining open past their end dates; and (3) the 

extent to which OMB monitors agency progress with regard to tracking 

and reporting on undisbursed balances in expired grant accounts.

To determine the amount of undisbursed balances in expired grant 

accounts, we analyzed data from closeout reports provided to PMS users 

at the end of fiscal year 2015.5 Closeout reports list all grant accounts that 

remain open more than 3 months past their period of performance end 

 3

GAO-08-432.

4

GAO-12-360.

5

Fiscal year 2015 ended on September 30, 2015. 
Page 3 GAO-16-362 Grants Management

date and have had no disbursement activity in the preceding 9 months.6

These grant accounts are referred to as “expired grant accounts.” Using 

the PMS data, we determined the amount of funds that remained in 

expired grant accounts for varying lengths of time, from less than 1 year 

to more than 10 years.

We selected PMS because it provides payment services to other federal 

departments and entities and accounts for a significant percentage of 

federal grant disbursements.7 PMS provided payment services to 12 

departments and agencies in fiscal year 2015 and disbursed 

approximately 77 percent of all civilian federal grant awards.8 To assess 

the reliability of the PMS data used in this report, we (1) reviewed existing 

documentation on the systems, including the most recent system audit by 

independent auditors; (2) interviewed officials responsible for the 

administration of the system and discussed potential limitations of the 

data; and (3) performed electronic testing for obvious errors in 

completeness and accuracy. On the basis of our assessment, we believe 

that the data are sufficiently reliable for the purposes of this review. See 

appendix I for additional details on our analysis of the payment system 

data, including limitations to our analysis.

To identify the reasons selected agencies give for their grant accounts 

remaining open past their end dates, we reviewed available data on grant 

closeout from selected agencies. These agencies included HHS, the 

largest user of PMS, and the Departments of Commerce (Commerce) 

and Justice (Justice), the National Aeronautical and Space Administration 

(NASA), and the National Science Foundation (NSF), which, as we 

reported on in our 2012 report, are the agencies that reported on 

undisbursed balances in expired grant accounts in their 2010 and 2011 

annual performance reports. We also reviewed annual performance 

reports and inspectors general (IG) reports from all 24 Chief Financial

Officer Act (CFO Act) agencies in order to provide coverage of the major 

 6

We use the phrase “grant accounts” in this report to refer to individual grant awards that 

are identified by individual document numbers in the PMS closeout reports. 

7

PMS accounted for about $479 billion, or 77 percent, of all civilian federal grant 

disbursements in fiscal year 2015.

8

See appendix II for a full list of PMS customers in fiscal year 2015.
Page 4 GAO-16-362 Grants Management

grant-making agencies.9 In addition, we interviewed officials at selected 

agencies responsible for grant closeout to better understand obstacles to 

closing out grant accounts in a timely manner.

To determine the extent to which OMB monitors agency progress with 

regard to tracking and reporting on undisbursed balances in expired grant 

accounts, we reviewed OMB guidance related to grant management. In 

addition, we reviewed reporting requirements established for selected 

agencies in appropriations legislation in fiscal years 2010 through 2016 

and agency performance reports for those agencies OMB is required to 

instruct to report undisbursed balances in expired grant accounts.10 In 

addition, we interviewed staff from OMB and officials from Commerce, 

Justice, NASA, and NSF to understand their perspectives on reporting 

this information in agency performance reports.

We conducted this performance audit from April 2015 to April 2016 in 

accordance with generally accepted government auditing standards. 

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

sufficient, appropriate evidence to provide a reasonable basis for our 

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

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

 9

The 24 agencies identified in the CFO Act of 1990 are the Departments of Agriculture, 

Commerce, Defense, Education, Energy, Health and Human Services, Homeland 

Security, Housing and Urban Development, the Interior, Justice, Labor, State, 

Transportation, the Treasury, and Veterans Affairs, as well as the Agency for International 

Development, Environmental Protection Agency, General Services Administration, 

National Aeronautics and Space Administration, National Science Foundation, Nuclear 

Regulatory Commission, Office of Personnel Management, Small Business 

Administration, and Social Security Administration. Pub. L. No. 101-576, 104 Stat. 2838 

(Nov. 15, 1990), codified, in relevant part, as amended, at 31 U.S.C. § 901(b).

10Pub. L. 111-117, div. B, title V, § 537, 123 Stat. 3158 (Dec. 16, 2009); Pub. L. 112-10, 

125 Stat. 38 (Apr. 15, 2011); Pub. L. 112-55, div. B, title V, § 536, 125 Stat. 638 (Nov. 18, 

2011); Pub. L. 113-6, div. B, title V, § 534, 127 Stat. 277 (Mar. 26, 2013); Pub. L. 113-76, 

div. B, title V, § 531, 128 Stat. 84 (Jan. 17, 2014); Pub. L. 113-235, div. B, title V, § 

531,128 Stat. 2215 (Dec. 16, 2014); Pub. L. 114-113, div. B, title V, § 530 (Dec.18, 2015). 
Page 5 GAO-16-362 Grants Management

The federal government uses grants to achieve national priorities through 

nonfederal parties, including state and local governments, educational 

institutions, and nonprofit organizations.11 Grant programs are established 

through legislation and vary in numerous ways including type, size, nature 

of recipients, and types of programs they fund. While there is significant 

variation among different grant program goals and grant types, most 

federal grants follow a common life cycle comprising four stages for 

administering the grants: (1) pre-award stage; (2) award stage; (3) 

implementation; and (4) closeout (see figure 1). During the award stage, 

the federal awarding agency enters into an agreement with the grantee 

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

the period funds are available for the grantee’s use. The awarding agency 

also opens accounts in a federal payment management system through 

which the grantee receives payments. During the implementation stage, 

the grantee carries out the requirements of the agreement and requests 

payments, while the awarding agency approves payments and oversees 

the grantee. The grantee and the awarding agency close the grant once 

the grantee has completed all the work associated with a grant 

agreement, the grant period of performance end date (or grant expiration 

date) has arrived, or both. The closeout stage includes preparation of final 

reports, financial reconciliation, and any required accounting for property. 

Closeout procedures ensure that the grantee has met all financial 

requirements, provided all final reports, and returned any unspent 

balances.

 11For the purposes of this report we refer to grants and cooperative agreements as grants.

Background

Federal Grant Awards and 

the Closeout Stage
Page 6 GAO-16-362 Grants Management

Figure 1: Grant Life Cycle for Federal Grant-Making Agencies and Grant Recipients

All stages of the grant life cycle, including grant closeout, are subject to a 

wide range of requirements derived from a combination of OMB 

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

statutes. OMB is responsible for developing government-wide policies to 

ensure that grants are managed properly and the grant funds are spent in 

OMB’s Uniform Guidance 

and Grant Closeout
Page 7 GAO-16-362 Grants Management

accordance with applicable laws and regulations. For decades, OMB has 

published circulars to aid grant-making agencies on various subjects, 

including administration, audit, record keeping, and allowability of costs.12

In December 2013, OMB consolidated its grants management circulars 

into a single document, Uniform Administrative Requirements, Cost 

Principles, and Audit Requirements for Federal Awards, (Uniform 

Guidance) to streamline its guidance, promote consistency among 

grantees, and reduce administrative burden on nonfederal entities.13 The 

Uniform Guidance includes revised rules that set the standard 

requirements for financial management of federal awards across the 

federal government.14 In December 2014, OMB, along with federal grantmaking agencies, issued a joint interim final rule implementing OMB’s 

Uniform Guidance for new grant awards made on or after December 26, 

2014.15 Federal agencies that award and administer grants and 

agreements are responsible for issuing regulations—with which grantees 

must comply—that are consistent with the Uniform Guidance, unless 

 12In 1971, OMB published Circular No. A-102, Uniform Administrative Requirements for 

Grants-In-Aid to State and Local Governments. In 1976, OMB published Circular No. A110, Grants and Agreements with Institutions of Higher Education, Hospitals and Other 

Nonprofit Organizations, 41 Fed. Reg. 32,016 (July 30, 1976). Other key circulars and 

guidance have included OMB Circulars Nos. A-21, A-87, and A-122 establishing principles 

for determining costs applicable to grants, contracts, and other agreements with 

educational institutions, state, local, and tribal governments, and nonprofit organizations, 

and OMB Circular A-133 setting forth standards for obtaining consistency and uniformity 

among federal agencies for the audit of states, local governments, and nonprofit 

organizations expending federal awards. 

132 C.F.R. pt. 200, 78 Fed. Reg. 78,590 (Dec. 26, 2013). OMB’s Uniform Guidance 

consolidated eight grants management circulars, including A–21, Cost Principles for 

Educational Institutions; A–87, Cost Principles for State, Local and Indian Tribal 

Governments; A–110, Uniform Administrative Requirements for Grants and Agreements 

With Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations; A–

122, Cost Principles for Non-Profit Organizations; A–89, Federal Domestic Assistance 

Program Information; A–102, Grants and Cooperative Agreements with State and Local 

Governments; A–133, Audits of States, Local Governments and Non-Profit Organizations;

and A–50, Audit Follow-up. The new Uniform Guidance went into effect for grantees on 

December 26, 2014.

142 C.F.R. pt. 200, 78 Fed. Reg. 78,590 (Dec. 26, 2013).

15The Uniform Guidance followed from a Notice of Proposed Guidance issued February 1, 

2013 (available at 78 Fed. Reg. 7282) and an Advanced Notice of Proposed Guidance 

issued February 28, 2012 (available at 77 Fed. Reg. 11778). The final guidance 

incorporated feedback received from the public in response to those earlier issuances. 

OMB also worked with the Council on Financial Assistance Reform (COFAR) to develop 

the Uniform Guidance. 79 Fed. Reg. 75,871 (Dec. 19, 2014).
Page 8 GAO-16-362 Grants Management

different provisions are required by federal statute or are approved by 

OMB.

Agency regulations issued under the Uniform Guidance typically impose 

closeout procedures upon both the grantee and the awarding agency. To 

close an awarded grant, the grantee and the awarding agency must 

complete certain actions within the time frames specified by agency 

regulations and the Uniform Guidance (see figure 2).16 Generally, within 

90 calendar days from the period of performance end date, the grantee 

must submit all financial, performance, and other reports as required by 

the terms and conditions of the award and liquidate all permissible 

expenses incurred under the award.17 Grantees then are to promptly 

refund any remaining balances to the awarding agency and account for 

any real and personal property acquired with federal funds or received 

from the federal government.18 The awarding agency must make prompt 

payments to the grantee for allowable reimbursable costs under the 

award being closed out.19 If required by the terms and conditions of the 

award, the awarding agency must also make a settlement for any upward 

or downward adjustments to the federal share of costs after the closeout 

reports are received. Upon the receipt and acceptance of all required final 

reports from the grantee, the awarding agency should complete all 

closeout actions within 1 year. Some federal agencies’ grant policies 

require less than the 1 year closeout period allowed by the Uniform 

Guidance. For example, HHS’s grant policies specify that all closeout 

actions must be completed within 180 days of the receipt and acceptance 

of all required grantee final reports, allowing for a maximum of 270 days 

for the total closeout process.20

 162 C.F.R. pt. 200, 78 Fed. Reg. 78,590 (Dec. 26, 2013).

17Generally, agency regulations specify that the period for closeout may be extended 

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

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

182 C.F.R. § 200.343.

19Except where otherwise authorized by statute, costs must meet general criteria to be 

allowable under federal awards. 78 Fed. Reg. 78,640 (Dec. 26, 2013).

20HHS adapted OMB’s final Uniform Guidance with certain amendments, based on 

existing HHS regulations, to supplement the guidance as needed for the department. 

HHS’s amendments are incorporated into its implementing regulations at 45 C.F.R. pt. 75.
Page 9 GAO-16-362 Grants Management

Figure 2: Uniform Guidance Timeline for Federal Award Closeout Actions

Closing out grants could allow an agency to redirect resources toward 

other projects and activities or return unspent funds to the Treasury (see 

figure 3). Generally, if the undisbursed balances that are deobligated from 

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

agency may use the funds to enter into new grant agreements.21 This 

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

grant projects. If the undisbursed balances are returned to expired 

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

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

make adjustments to, or liquidate existing, obligations that were incurred 

before the appropriations account expired. Expired appropriations 

accounts remain available for 5 years to make adjustments, after which 

the undisbursed balances are canceled and returned to the Treasury. At 

this point, these funds are no longer available for agency use. This helps 

 21An appropriation’s period of availability for making new obligations lasts a set number of 

years, which is established in law. Annual budget authority lasts for one fiscal year. 

Multiple-year budget authority lasts for longer periods, and no-year authority generally 

lasts until the funds are expended for their designated purpose. A notable exception to 

using undisbursed balances for new obligations is balances deobligated from grants made 

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

the general fund of the Treasury. Pub. L. No. 111-203, § 1306,124 Stat. 2135 (July 21, 

2010).
Page 10 GAO-16-362 Grants Management

ensure that federal agency resources are properly spent and helps 

agencies maintain accurate accounting of their budgetary resources. It 

may also reduce future federal outlays relative to the federal 

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

Figure 3: Deobligating Undisbursed Balances in Expired Grant Accounts

Note: An agency may have statutory authority that would allow it to deobligate undisbursed balances 

from a grant and roll those funds into another appropriation. For example, the Department of Justice 

has the authority to transfer prior year undisbursed balances in expired grant accounts to its working 

capital fund not later than 5 years after the fiscal year for which the funds were appropriated or 

otherwise made available.

One way agencies can track whether grants are closed out and 

undisbursed grant balances are deobligated in a timely manner is through 

federal payment systems. Some agencies make grant payments directly 

to grantees using their own payment systems, while others enter into 

arrangements with payment systems that serve multiple agencies to 

make payments on their behalf. Payment systems represent an important 

control point for managing federal grant funds. After a grant agreement 

reaches the period of performance end date, an agency may need to 

close out a grant in multiple systems including in its payment system, the 

agency’s general ledger, or in a separate grant management system. 

Failure to close out a grant in the payment system could prevent the 

timely deobligation of unspent funds and limit agencies’ ability to regain 

budget authority that could be used for other purposes.

Tracking and Closing Out 

Grants in Federal 

Payment Systems
Page 11 GAO-16-362 Grants Management

The largest civilian federal payment system is the Payment Management 

System (PMS). Operated by HHS’s Program Support Center (PSC), PMS 

allows grantees and awarding agencies to manage all payment-related 

activities, including grant payment requests, drawing down federal funds 

from preauthorized grant accounts, and disbursement reporting.22

Grantees request payments from PMS, which then transmits authorized 

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

the grantee’s bank account.23 Each PMS account represents a different 

grant agreement with a specified period of performance end date. To help 

federal grant-making agencies identify and close out grant accounts in a 

timely manner, PSC makes available a quarterly “closeout” report. The 

closeout report lists expired grant accounts that meet the following 

conditions: (1) remain open more than 3 months past the grant period of 

performance end date and (2) not having any disbursements in the 

preceding 9 months.

Appropriations acts for selected agencies have called attention to the 

issue of undisbursed balances in expired grant accounts. For example, 

Section 530 of the Commerce, Justice, Science, and Related Agencies 

Appropriations Act of 2016 required the Director of OMB to instruct any 

affected agencies receiving funds under that act to track undisbursed 

balances in expired grant accounts and report on their efforts to address 

the issue in their annual performance plans and performance and 

accountability reports.24 Further, Section 530 requires OMB to instruct the 

 22PSC charges PMS customers using two rate types for each open account in PMS. PSC 

officials said PMS is part of HHS’s Service and Supply Fund (SSF), which is a revolving 

fund authorized under 42 U.S.C. §231. The SSF does not have an annual appropriation 

but is funded entirely through charges to its customers which include HHS’s Operating 

Divisions and other federal departments and agencies. 

23According to HHS officials, since 2012 PMS has undergone two major changes. First, in 

2013 PMS began to require that all accounts be set up as sub-accounts, unless approved 

by the HHS Office of Grants and Acquisition Policy and Accountability. Officials said this 

new policy would enhance visibility into all accounts. Second, PMS now notifies an 

awarding agency if a grantee submits a payment request more than 90 days after the 

period of performance end date. 

24For a list of the affected agencies receiving funds under the Commerce, Justice, 

Science, and Related Agencies Appropriations Act, 2016, see appendix I. OMB’s 

requirements under § 530 apply only to those agencies receiving appropriated funds 

under Division B of the Consolidated Appropriations Act for Fiscal Year 2016. See Pub. L. 

114-113, § 3 (Dec.18, 2015). 

Appropriations Acts for 

Selected Agencies 

Continue to Call Attention 

to Undisbursed Balances 

in Expired Grant Accounts
Page 12 GAO-16-362 Grants Management

affected agencies to report on their methods to track undisbursed 

amounts in expired grants and future actions to resolve the issue, the 

amount of the undisbursed balances that may be returned to the U.S. 

Treasury, the total number of expired accounts with undisbursed 

balances in the preceding 3 fiscal years, and the total finances remaining 

in expired accounts that have not been obligated to a specific project.25

On January 28, 2016, the Grants Oversight and New Efficiency Act 

(GONE Act) was signed into law.26 This law requires that not later than 

180 days after enactment the Director of OMB instruct the head of each 

agency, in coordination with the Secretary of HHS, to provide a report to 

Congress and the Secretary on grants for which the grant’s period of 

performance has been expired for more than 2 years, including those with 

undisbursed balances and with zero dollar balances remaining in the 

accounts. The report, to be delivered by December 31, 2017, is also to 

describe the challenges leading to delays in grant closeout and explain 

why each of the 30 oldest grant awards has not been closed out. It is 

expected that this identification will help lead to a reduction in the number 

of expired grants that have not been properly closed out from the financial 

payment systems, improve financial accountability over grant programs, 

and save taxpayer money on costs associated with maintaining the grants 

in open status.27

 25Pub. L. 114-113, div. B, title V, § 530 (Dec.18, 2015).

26Pub. L. 114-117 (Jan. 28, 2016).

27S. Rep. No. 114-169, at 1-2 (2015).

GONE Act Will Affect 

Reporting on Expired 

Grants
Page 13 GAO-16-362 Grants Management

As of September 30, 2015, $993.5 million in undisbursed balances 

remained in 8,832 expired grant accounts in PMS (see figure 4).28 The 

total undisbursed balances comprised about 0.2 percent of the $479 

billion disbursed through PMS in fiscal year 2015, unchanged from the 

percentage of the $415 billion disbursed through PMS in fiscal year 2011. 

The undisbursed balances comprised about 3 percent of the amount 

authorized for these expired grant accounts, similar to the percentage we 

found in 2011.29 Among the departments and agencies that are 

customers of PMS, the undisbursed balances as a percentage of the 

authorized amounts available for these expired grant accounts ranged 

from less than 1 percent to 31 percent.30 These expired grant accounts 

should be considered for closeout based on OMB’s Uniform Guidance, 

which specifies that within 90 calendar days from the period of 

performance end date, grantees must submit all financial, performance, 

and other reports as required by the terms and conditions of the award. 

 28The 8,832 expired grant accounts do not include expired grant accounts that have no 

balances—that is, expired grant accounts in which the amount disbursed equals the 

amount authorized for the account. We discuss the expired grant accounts with no 

balances separately. These results exclude PMS accounts associated with grant 

programs for which the duration of the grant is not limited to a specified period, such as 

Temporary Assistance for Needy Families (TANF) and Medicaid grants to states (see 

appendix I).

29The total authorized amount available for the expired grant accounts we found with 

undisbursed balances as of September 30, 2015 was about $32 billion as compared to 

$24 billion in September 30, 2011. 

30In 2015, three agencies had undisbursed balances as a percentage of the authorized 

amounts below 3 percent while 5 had percentages over 10 percent indicating grantees 

spent the majority of available funds. For a list of PMS customers, see appendix II. 

Approximately $994 

Million in Undisbursed 

Balances Remained 

in Expired Grant 

Accounts in the 

Payment 

Management System

Undisbursed Balances 

Increased While the 

Number of Expired Grant 

Accounts Decreased 

Since 2011
Page 14 GAO-16-362 Grants Management

Grantees must also liquidate all permissible expenses incurred under the 

award. Moreover, within 1 year of receiving the final reports, awarding 

agencies should close out grant accounts that are past their period of 

performance end date (expired grant accounts).

Figure 4: Number and Amount of Undisbursed Balances in Expired Payment Management System (PMS) Grant Accounts by 

Years Exceeding Grant Expiration Dates, September 30, 2011 and 2015

As figure 4 shows, in 2015, the undisbursed balances increased to 

$993.5 million while the number of expired grant accounts decreased to 

8,832, in comparison with 2011. The distribution of expired grant 

accounts and their associated undisbursed balances categorized by the 
Page 15 GAO-16-362 Grants Management

number of years the accounts exceed their grant expiration dates were 

roughly similar for 2015 and 2011. More than half of the accounts 

exceeded their expiration date by 1 to 3 years. However as of September 

30, 2015, we found expired grant accounts exceeding their grant 

expiration date by at least 10 years almost doubled to 223 accounts with 

undisbursed balances increasing fourfold to $39.1 million. Given the 

general 3 year federal record retention period, there is an increased risk 

that these grant accounts expired for 10 years or more may not have the 

necessary financial documents and other information available for 

account reconciliation.31

As of September 30, 2015, 151 expired grant accounts with undisbursed 

balances of $1 million or more comprised approximately 2 percent of the 

8,832 expired grant accounts (see figure 5). However, grants in this 

category had a total of $514.7 million in undisbursed balances that made 

up 52 percent of the $993.5 million in PMS undisbursed balances, an 

increase from $316 million or about 40 percent in 2011. This indicates 

that targeting efforts to close out a small number of expired grant 

accounts with high undisbursed balances could reduce the total 

undisbursed balance significantly. It is worth noting that many of the 

expired grant accounts did not have large undisbursed balances—about 

half of the expired grant accounts had undisbursed balances of less than 

$10,000.

 312 C.F.R. § 200.333.

Expired Grant Accounts 

with Large Undisbursed 

Balances Comprised a 

Small Share of Total 

Expired Accounts, but a 

Large Share of Total 

Undisbursed Balances
Page 16 GAO-16-362 Grants Management

Figure 5: Number and Amount of Undisbursed Balances in Expired Payment Management System (PMS) Grant Accounts by 

Size of Undisbursed Balances, September 30, 2011 and 2015
Page 17 GAO-16-362 Grants Management

As of September 30, 2015, $651.3 million in undisbursed balances in 

expired HHS grant accounts made up 66 percent of the total $993.5 

million in undisbursed balances in PMS (see figure 6). This is down from 

HHS’s 75 percent of the total $794 million in undisbursed balances in 

2011.

HHS had 7,158 expired grant accounts (81 percent of all expired PMS 

grant accounts in the data we analyzed), a decrease from 8,262 accounts 

in 2011. These accounts comprised the bulk of the expired grant 

accounts among the 11 federal agencies and departments that are PMS 

customers.32 Similar to all PMS expired grant accounts and undisbursed 

balances, about half of expired HHS grant accounts and undisbursed 

balances exceeded their expiration dates by 1 to 3 years. In 2015, 

expired HHS grant accounts exceeding their expiration dates by at least 

10 years increased to $16.3 million in undisbursed balances and 129 

accounts. HHS’s undisbursed balance as a percentage of the authorized 

amount available for these expired grant accounts, increased to 3.3 

percent, up from 2.7 percent in 2011. These expired grant accounts far 

exceeded HHS’s 270-day window for closing out grants after the grant 

expiration date as outlined in HHS’s Grant Policy Administration 

Manual.33

 32In addition to the federal agencies and departments with expired grant accounts in PMS 

(see appendix II), the Office of National Drug Control Policy under the Executive Office of 

the President also uses PMS. In September 30, 2015, the Executive Office of the 

President did not have any expired grant accounts in PMS.

33Department of Health and Human Services, Grant Policy Administration Manual, Part H: 

Post-Award, Chapter 5: Closeout of Awards and Programs, (Dec. 31, 2015).

About $651 Million of 

Undisbursed Balances in 

Expired HHS Grant 

Accounts Comprised More 

than Half of Those in PMS
Page 18 GAO-16-362 Grants Management

Figure 6: Number and Amount of Undisbursed Balances in Expired Health and Human Services Grant Accounts in Payment 

Management System (PMS) by Years Exceeding Grant Expiration Dates, September 30, 2011 and 2015
Page 19 GAO-16-362 Grants Management

Of the 11 HHS sub-organizations with grant accounts in PMS, the 

Administration for Children and Families (ACF) continued to make up a 

large proportion of the expired HHS grant accounts and undisbursed 

balances in 2015 (see appendix II for HHS sub-organizations). However, 

in comparison to 2011, ACF’s proportion of the total expired HHS grant 

accounts decreased. ACF’s $324.4 million in undisbursed balances, up 

slightly from $321.7 million in 2011, made up about half of HHS’s

undisbursed balances in 2015, compared to 54 percent in 2011 (see 

figure 7). In 2015, ACF’s 2,395 expired grant accounts decreased to 

about one-third of HHS’s total, as compared to the 53 percent in 2011. 

Despite the drop in the number of expired grant accounts, a significant 

number of expired accounts remain open. HHS and ACF grant managers 

have failed to appropriately monitor expired grant accounts and adhere to 

HHS closeout policies.

Administration for Children 

and Families’ $324 Million 

in Undisbursed Balances 

in Expired Grant Accounts 

Comprised the Largest 

Share of HHS’s 

Undisbursed Balances
Page 20 GAO-16-362 Grants Management

Figure 7: Number and Amount of Undisbursed Balances in Expired Administration for Children and Families (ACF) Grant 

Accounts in Payment Management System (PMS) by Years Exceeding Grant Expiration Dates, September 30, 2011 and 2015
Page 21 GAO-16-362 Grants Management

As of September 30, 2015, PMS data identified 5,906 expired grant 

accounts which had no undisbursed balance remaining as ready for 

closeout processing pending instructions from the awarding agency to 

finalize the process.34 The percentage of expired grant accounts ready for 

immediate closeout varied across all PMS customers. According to PMS 

officials, the 5,906 accounts incurred about $29,000 in fees for the month 

of September 2015, a significant reduction from the 28,000 accounts with 

fees totaling about $173,000 that we reported for 2011. In 2015, 3,922 

expired HHS grant accounts made up 66 percent of the 5,906 grants 

PMS flagged for closeout, down from 79 percent (more than 21,000) in 

2011.

Promptly closing out expired grants in the PMS system would minimize 

the monthly service fees charged to the agencies. As HHS’s Program 

Support Center (PSC) does not close out grant accounts until instructed 

to do so by the awarding agency, expired accounts flagged by PMS for 

closeout continue to incur fees until they are closed. PMS fees are set to 

recover operating costs.35 PSC uses two billing rates for federal grantmaking agencies—one rate generally applies to grants awarded to state, 

local, and tribal governments and the second rate generally applies to 

grants awarded to nonprofit agencies, hospitals, and universities. 

Agencies are billed monthly for all open accounts making it difficult to 

disaggregate the fees attributable to different types of grantees and those 

attributable to expired accounts with (1) undisbursed balances, (2) no 

remaining undisbursed balance (not flagged for closeout), and (3) no 

remaining undisbursed balances that have been flagged for closeout.

The September 2015 fee of $29,000 for the 5,906 grant accounts PMS 

has flagged for closeout is small relative to the grant award amounts. But, 

it is important to note that it represents only a portion of the total fees 

 34In its closeout report, PMS flagged certain expired grant accounts available to PMS 

users to indicate that the awarding agency need only submit a closeout code to finalize 

grant closeout. These accounts PMS identifies for closeout represent only a portion of the 

accounts with no undisbursed balance remaining.

35Other services PSC provides to the PMS users include standardized electronic forms for 

meeting federal grant reporting requirements, audit support, and collection services on 

overdrawn grants and disallowed costs. PSC operates PMS under HHS’s Service and 

Supply Fund (SSF) as a revolving fund authorized under 42 U.S.C. § 231. SSF is funded 

entirely through charges for business services provided to HHS as well as other federal 

departments and agencies. SSF bills its customers by either fee-for-service billing or by an 

allocated methodology.

Expired Grant Accounts 

Flagged by PMS for 

Closeout Continue to Incur 

Fees
Page 22 GAO-16-362 Grants Management

customers pay to keep open expired grant accounts that should have 

been closed out by the awarding agency. In particular, the estimate does 

not include expired accounts which should have been closed and have 

undisbursed balances nor does it include those with zero balances that 

have not been flagged for closeout by PMS. However, without examining 

each expired grant account individually, we cannot determine whether 

expired grant accounts that have exceeded their expiration date should 

be closed or not. For example, the awarding agency may be renewing the 

grant or there could be pending action as a result of an audit.

The monthly charges for expired grant accounts which have been flagged 

by PMS for closeout can accumulate over time and can be 

considerable.36 For example, of the 5,906 accounts PMS flagged for 

closeout in September 2015, 359 of these accounts had also been 

flagged for closeout in September 2011. Of these 359 expired grant 

accounts, 260 belong to HHS. If the grant has otherwise been 

administratively and financially closed out, then agencies paying fees for 

expired accounts with a zero dollar balance are paying for services that 

are not needed. The presence of expired grant accounts with no 

undisbursed funds remaining also raises concerns that administrative and 

financial closeout—the final point of accountability for these grants, which 

includes important tasks such as the submission of financial and 

performance reports—may not have been completed.

 36Of the 5,906 accounts which PMS has flagged for closeout, 29 percent have exceeded 

their expiration dates by more than 3 years. Although an account flagged for closeout may 

have remained open 3 years beyond its expiration date, it is unclear when a particular 

account became eligible for closeout in PMS. 
Page 23 GAO-16-362 Grants Management

Grant closeout is a necessary step for all types of grant programs that 

serve a variety of missions and provide different services. As the final 

stage of the grant life cycle, grant closeout requires the submission and 

approval of all final grantee reports. Agency officials told us that grant 

closeout delays can occur for a number of reasons that may be placed 

into several larger categories, and sometimes these reasons can be 

attributed to more than one category: grantee failure to submit final 

reporting in a timely manner; agency failure to review, process, and 

reconcile final reporting in a timely manner; and external processes or 

factors. Officials we spoke with at Commerce, Justice, NASA, and NSF—

agencies that reported on undisbursed balances in expired grant 

accounts in their 2010 and 2011 annual performance reports—as well as 

ACF which accounted for the largest share of undisbursed expired grant 

balances at HHS as of September 30, 2015, told us that the grantee and 

awarding agency face the following challenges that may delay grant 

closeout (see figure 8).

Final Reporting and 

Processing 

Challenges 

Contribute to Delayed 

Grant Closeout, but 

Selected Agencies 

Have Begun to 

Implement Policies to 

Improve Closeout 

Timeliness

Agencies Cite Various 

Reasons for Grant 

Closeout Delays
Page 24 GAO-16-362 Grants Management

Figure 8: Agencies Note Multiple Reasons for Delayed Grant Closeout

Federal grant awards may fund projects that generate research products 

or technical deliverables. Untimely submission of these deliverables on 

the part of the grantee can delay grant closeout. For example, certain 

grant awards at NASA require specialized reporting if the work funded by 

the grant is for developmental research or leads to new research 

accomplishments. According to NASA officials, grant award closeout can 

be delayed if the grantee has yet to submit required new technology 

reports, summary of research reports, or property reports.37 Justice 

 37Parties performing experimental, developmental, or research work under NASA funding 

agreements, including contracts, grants, and cooperative agreements, are required by law 

to submit new technology reports. Summary of Research reports must include a 

comprehensive summary of significant accomplishments during the duration of the grant. 

Property reports are required for final disposition of all federally owned property under the 

contract or grant.

Grantee Delayed Technical 

Deliverables
Page 25 GAO-16-362 Grants Management

officials also told us missing technical deliverables would prevent the 

National Institute of Justice (NIJ) from closing out grants in a timely 

manner. Justice officials said NIJ grants typically require a technical 

deliverable and they cannot close the grant until it has received the 

deliverable and deemed it acceptable.38

There are instances in which a recipient of a federal award may cease to 

exist. Grantees that cease operations after receiving a grant award may 

not be able to submit their final financial or performance reports to the

federal awarding agency. For example, Commerce officials said if a 

grantee is late in submitting reports, further investigation may find that the 

grantee is no longer operational or is bankrupt. Commerce officials noted 

that, while grant awards involving grantee bankruptcies are uncommon, 

they could present challenges for grant closeout.

Some grant programs may have cost-sharing or matching funds 

requirements in the award that are designed to supplement the resources 

available to the project from grant funds and to foster the dedication of 

state, local, and community resources to the purposes of the project.39 In 

addition, some federally funded grants support programs that earn 

program income or income generated from activities funded by the 

grant.40 Grant awards affected by these types of arrangements may 

require additional layers of review by the grantee and agency and delay 

grant closeout. For example, Commerce officials said grant programs with 

cost-sharing can experience closeout challenges if the grantee 

inaccurately documents the agreed upon shared costs and fails to meet 

 38According to the NIJ website, NIJ may award grants for physical and social science 

research, development, and evaluation projects about criminal justice. Grantees are 

required to submit final progress reports that address achievement of the goals and 

objectives of the award, significant results, and any products developed under the award, 

such as journal publications, technologies, or techniques resulting from the research 

activities.

39Cost sharing or matching is the portion of project costs not paid by federal funds (unless 

otherwise authorized by federal statute). 2 C.F.R 200.29.

40Program income is gross income earned by the non-federal entity that is directly 

generated by a supported activity, or earned as a result of the federal award during the 

period of performance. Program income includes but is not limited to income from fees for 

services performed, the use of rental or real or personal property acquired under federal 

awards, the sale of commodities or items fabricated under a federal award, license fees 

and royalties on patents and copyrights, and principal and interest on loans made with 

federal award funds. 2 C.F.R. 200.80. 

Grantee No Longer in 

Existence

Grants with Cost-Sharing 

Agreements and Grants that 

Earn Program Income
Page 26 GAO-16-362 Grants Management

the matching costs. Commerce officials said in cases where the grantee 

is short on the matching costs, Commerce’s bureaus would be required to 

investigate the issue and in some cases require that grantees return 

excess funds, which can delay grant closeout.

Grant-making agencies may use grants management systems to track 

their grants and payment systems, sometimes operated by a different 

federal agency, to make payments to their grantees. As we have 

previously reported, the separation of grant management and payment

functions in different systems could make it possible for an agency to 

close a grant in a grants management system but not close the grant in a 

separate payment system.41 In addition, it is possible for a grant 

expiration date to be extended in the grant management system and not 

in the payment system. ACF officials said the separation between grants 

management systems and payment systems can present challenges 

when awarding agencies attempt to reconcile final reports and close out 

grants in the two separate systems. According to ACF officials, grant 

closeout can become a manual process that presents challenges for 

agencies that may have a limited number of grants specialists. 

Specifically, officials explained that this process requires ACF grant 

managers to compare their internal grant reports with the PMS closeout 

report, identify grant awards to be closed, and request to close all eligible 

awards in PMS.

ACF officials told us that, after completing this step, they have noted 

instances where grants they previously requested be closed continue to 

appear on subsequent PMS closeout reports—meaning that the grants 

for which they requested closure were not closed in the payment system. 

According to these officials, it could be possible for ACF to close a grant 

award in its grants management system while the grant remains open in 

the payment system due to a difference in the payments reported to the 

awarding agency and PMS.42 As a result, the disconnection between 

these systems can lead to undisbursed funds remaining in the payment 

system when the grant is closed in the agencies’ grants management 

 41GAO-12-360.

42According to HHS officials, ACF and PMS, as of February 2016, are working together on 

a pilot program for grant financial reporting. This pilot will consolidate financial reporting 

and payment into one system which should help resolve the disconnection between the 

systems.

Agency Manual Report 

Reconciliation and the 

Disconnection between Grants 

Management and Payment 

Systems
Page 27 GAO-16-362 Grants Management

system. In these cases, ACF grant managers may need to deobligate 

funds from the grant and this requires taking additional steps to reopen 

the grant in the grant management system. The disconnection between 

these two systems and, in some cases, the manual steps needed to 

reconcile the differences between systems can lead to additional 

administrative burden and resource use to close out grants.

Recipients of federal grant awards may be subject to certain federal 

oversight requirements including having audits conducted.43 Under a 

federal audit, the grantee must prepare appropriate financial statements, 

follow up and take corrective action on audit findings, and provide the 

auditor access to records, as needed. Agency officials told us grant 

audits, and the related work, can delay grant closeout. For example, 

Justice officials noted that open inspector general (IG) audits and 

investigations, agency financial and programmatic monitoring activities, or 

open legal or compliance issues can delay grant closeout. Commerce 

officials also told us grants undergoing audit present closeout challenges. 

They also said that grants under audit resolution remain open until the 

audit is complete and a final decision has been issued. Certain types of 

grants may have audits that take years to complete. For example, NASA 

officials told us they have faced challenges in closing out grants to forprofit entities that require incurred cost audits by the Defense Contract 

Audit Agency (DCAA).44 NASA officials said these audits for commercial 

 43For example, a grantee that expends $750,000 or more in federal awards during the 

grantee’s fiscal year must have a single or program-specific audit conducted for grant 

awards issued after December 26, 2014. 

44For an incurred cost audit at DCAA, “The auditor’s primary objective is to examine the 

contractor’s cost representations, in whatever form they may be presented (such as 

interim and final public vouchers, progress payments, incurred cost proposals, termination 

claims, and final overhead claims), and to express an opinion as to whether such incurred 

costs are reasonable, applicable to the contract, determined under generally accepted 

accounting principles and cost accounting standards applicable in the circumstances, and 

not prohibited by the contract, by statute or regulation, or by previous agreement with, or 

decision of, the contracting officer.” Department of Defense, Defense Contract Audit 

Agency, DCAA Contract Audit Manual, 6-102.1 (Sept. 16, 2015). 

Grantee under Audit
Page 28 GAO-16-362 Grants Management

grants may take up to 3 years to complete as the federal audit agency 

faces an ongoing audit backlog.45

Some grant programs fund inherently complex projects. These projects

may involve multiple levels of review to comply with state statutes which 

can delay grant closeout. For example, Commerce officials said grant 

closeout delays can occur if grant reports are required to be reviewed by 

various jurisdictions—including universities and state and local 

governments—before the federal awarding agency. These officials noted 

that construction grant programs such as the Broadband Technology 

Opportunities Program (BTOP), a federal grant program to promote the 

expansion of broadband infrastructure, have a complex review process 

and have presented challenges for grantees in submitting reports in a 

timely manner.46 The officials said BTOP construction grant projects 

involve many equipment purchases that grantees must have reviewed 

through state and local jurisdictions.47 The officials explained that grant 

projects, such as the BTOP projects, that have a complex multijurisdictional review process require extra filings and additional grants 

management, which can cause grant closeout delays.

Indirect costs represent a grantee’s general support expenses that cannot 

be specifically identified with an individual grant project. Indirect costs 

include, for example, building utilities and administrative staff salaries. To 

determine the share of indirect costs that may be charged to federally 

funded awards, grantees use a mechanism called the indirect cost rate, 

which may be applied to a portion of direct costs and is available to the 

grantee for a given period. A grantee may continue using a provisional 

rate until agreement is reached on a new final rate. The procedure for 

 45According to DCAA’s fiscal year 2014 report to Congress, the time to complete an 

incurred cost audit is measured from the time an adequate annual incurred cost 

submission is received until the date of the audit report issuance. In fiscal year 2014 the 

average elapsed days for these audits were 1,006. Defense Contract Audit Agency, 

Report to Congress on FY 2014 Activities (Fort Belvoir, VA: Mar. 25, 2015).

46The National Telecommunications and Information Administration, a Commerce agency, 

was authorized to award BTOP grants under the American Recovery and Reinvestment 

Act of 2009, Pub. L. No.111-5, div, B, title VI, 123 Stat. 128 (Feb. 17, 2009). 

47For example, Commerce officials said obtaining the BTOP grant recipients’ Uniform 

Commercial Code (UCC)-1 filings, which are required for the BTOP closeout process, lead 

to grant closeout delays. According to a U.S Department of Commerce Inspector General 

report, the UCC-1 filing is made to secure the federal interest in the property, in 

accordance with the applicable state’s law.

Grants Requiring Multijurisdictional Levels of Review

Final Indirect Cost Rate 

Negotiation
Page 29 GAO-16-362 Grants Management

requesting an indirect cost rate varies based on the type of grantee 

organization, but it entails submitting an indirect cost rate proposal and 

negotiating with the grantee’s cognizant rate-setting agency.48

Agency officials told us negotiating an approved indirect cost rate can 

delay grant closeout. For example, NASA officials said grant closeout 

challenges can occur if the final approved rate differs from the provisional 

indirect cost rate used when the grant was awarded. The officials said 

that in those cases the grantee must make reporting adjustments based 

on the final approved rate for the period of performance. In some cases, 

NASA officials said negotiating a final indirect cost rate agreement can 

take years. OMB staff told us that one of the main reasons for grant 

closeout delays involves the complexity of finalizing indirect cost rate 

agreements. OMB staff explained that while a majority of grantees have 

negotiated indirect cost rate agreements, the status of the agreement, 

whether it is a provisional or a final negotiated indirect cost rate, can 

affect when a grantee can close out. OMB staff said if a rate is not 

finalized and the award has reached the end date, closing out a grant 

using a provisional rate may involve subsequent complexities. Indirect 

cost rate agreements are also an issue for closing grants at the National 

Institute of Standards and Technology (NIST). According to NIST officials, 

grantees have to negotiate a final rate in order for NIST to properly close 

an award, and grantees have to wait for their next audit cycle to be able 

to negotiate a final rate, which could be over a year after the award has 

expired. Consequently it may not be ideal to close out grants without a 

final rate. For example if the final indirect rate after closeout is lower, the 

grantee owes money to the federal government, and the agency would 

have to recover the funds. However, other agencies we spoke with did 

not view indirect cost rate agreements as a major challenge that delays 

grant closeout.

 48An entity may establish an indirect cost rate by submitting a proposal to its cognizant 

rate-setting agency. For educational institutions, this is determined by which federal 

agency provides the greatest amount of funds to the entity for the most recent 3 years. 

After the proposal has been reviewed or audited, the cognizant rate-setting agency and 

the school negotiate and come to agreement on the rate. The rate is then documented in

a formal indirect cost rate agreement. Any non-federal entity that has never received an 

indirect cost rate may elect to charge a de minimis rate of 10 percent of modified total 

direct costs. If chosen, the non-federal entity must use this methodology consistently for 

all federal awards until the non-federal entity chooses to negotiate for a rate. 
Page 30 GAO-16-362 Grants Management

We and the federal inspectors general (IG) have continued to report on 

grant closeout issues and actions taken by federal agencies. These 

reports, in addition to our 2008 and 2012 reports, identified grant closeout 

issues at federal award-making agencies and reported on agency 

progress addressing concerns with grant closeout activities.49 For 

example, in 2014 we reported that the Department of State (State) 

generally did not adhere to its policies and procedures relating to 

documenting internal-control activities such as grant closeout activities. 

Through a grants file review, we found four grant awards that State grant 

officers had closed without evidence that they had reviewed the 

recipient’s final reports. We recommended that grant officials complete all 

required documentation for all grants. State concurred with the 

recommendation and said it would increase the emphasis on the file 

documentation and will expand the extent of file reviews.50 In another 

example, in 2014 we issued a follow-up report on the status of 

recommendations we made in 2012 to Justice for its Bureau of Justice 

Assistance to improve grantee accountability in the use of federal funds. 

We found that Justice took actions to address our 2012 

recommendations, including implementing an annual process to review 

and deobligate all undisbursed grant funds.

51

Issues with final grantee reporting and awarding agency oversight of 

closeout procedures have also been cited in federal IG reports. Since 

2012, IGs at the Departments of Agriculture, Commerce, Energy, Housing 

and Urban Development, Labor, and State, the United States Agency for 

International Development, and NASA have issued reports identifying 

grant closeout challenges experienced in their respective agencies. For 

example, the IGs at Agriculture and Energy found agency officials were 

waiting for final grantee reporting for expired grants but also noted that 

 49GAO-12-360 and GAO-08-432.

50GAO, State Department: Implementation of Grants Policies Needs Better Oversight, 

GAO-14-635 (Washington, D.C.: July 21, 2014).

51GAO, Law Enforcement Body Armor: Status of DOJ’s Efforts to Address GAO 

Recommendations, GAO-14-610R (Washington, D.C.: May 14, 2014).

Grant Closeout Delays 

and Undisbursed 

Balances Are a Recurring 

Audit Issue
Page 31 GAO-16-362 Grants Management

the agency failed to send a closeout letter as required by regulation and 

its standard operating procedures.52

Federal IGs have also reported on closeout issues related to oversight 

and internal controls. For example, an IG report from State cited 

significant deficiencies in the agency’s grant-management process 

including insufficient oversight caused by too few staff managing too 

many grants, insufficient training of grant officials, and inadequate 

documentation and closeout of grant activities.53 Two separate Agriculture 

IG reports highlight issues related to grant closeout oversight. A 2013 

Agriculture IG report found one of its grant-making agencies had 

weaknesses in controls for deobgliating grant funds remaining after 

projects were completed.54 In a 2014 report, the Agriculture IG found that 

another of its grant-making agencies lacked effective controls, including 

the lack of established time frames and milestones for completing 

closeout reviews.55 The Commerce IG found that one of its grant-making 

agencies had incomplete grant closeout procedures and another had 

incomplete standard operating procedures.56 The Housing and Urban 

Development IG found that one of its grant-making agencies lacked 

adequate controls over the closeout process. This included written 

policies and procedures for management’s oversight to ensure that 

closeout data were consistently and accurately tracked and grants were 

 52Department of Agriculture, Office of the Inspector General, Section 2501 Program 

Grants Awarded FYs 2010-2011, Audit Report 91099-0003-21 (Washington, D.C.: March 

2015); and Department of Energy, Office of the Inspector General, Audit Report: The 

Department of Energy’s Small Business Innovation Research and Small Business 

Technology Transfer Programs, DOE/IG-0876 (Washington, D.C.: November 2012).

53Department of State, Office of the Inspector General, Management Alert (Grants 

Management Deficiencies, MA-14-03 (Washington, D.C.: September 2014).

54Department of Agriculture, Office of the Inspector General, Rural Utilities Service 

Controls Over Recovery Act Water and Waste Loans and Grants Expenditures and 

Performance Measures, Audit Report 09703-0001-22 (Washington, D.C.: March 2013). 

55Department of Agriculture, Office of the Inspector General, Private Voluntary 

Organization Grant Fund Accountability, Audit Report USDA 07601-0001-22 (Washington, 

D.C.: March 2014). 

56Department of Commerce, Office of the Inspector General, Closeout Procedures for the 

Broadband Technology Opportunities Program Need Strengthening, OIG-14-010 

(Washington, D.C.: December 2013). According to Commerce officials, these agencies 

have completed their standard operating procedures. 
Page 32 GAO-16-362 Grants Management

closed in a timely manner.57 The NASA IG found NASA lacked a uniform 

closeout process and that the agency had not deobligated grant funds in 

a timely manner. In addition to untimely deobligation, the NASA IG found 

that the agency incurred unnecessary service fees associated with 

expired grants.58 The United States Agency for International Development 

IG found an agency grant program was not performing grant closeout 

procedures on schedule and that millions of dollars of grant funds sat idle 

while awaiting deobligation.59 The Labor IG reported that one of its grantmaking agencies had delays in closing out expired grants because of 

agency resource constraints developed over several years.60

Agency officials told us grants management and payment systems with 

automated system closeout features provide agencies with useful 

methods to monitor, track, and close out expired grants. For example, 

HHS officials told us about an automated feature in PMS that had a 

positive impact in identifying late requests for payments for expired 

grants. HHS officials said the feature allows the system to flag payment 

requests for expired grants more than 90 days past the period of 

performance end date and require the awarding agency to approve the 

request. Justice officials told us its grant-awarding components use a 

 57Department of Housing and Urban Development, Office of the Inspector General, Indian 

Community Development Block Grant Closeout, 2014-LA-0006 (Washington, D.C.: August 

2014).

58National Aeronautics Space Administration, Office of the Inspector General, NASA’s 

Award Closeout Process, Report No. IG-14-014 (Washington, D.C.: February 2014).

59U.S. Agency for International Development, Office of the Inspector General, Audit of the 

Management of Grants Awarded by USAID’s Office of American Schools and Hospitals 

Abroad, Audit Report No. 9-000-12-002-P (Washington, D.C.: March 2012).

60Department of Labor, Office of the Inspector General, Management Advisory Comments 

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

September 30, 2014, Report Number 22-15-006-13-001 (Washington, D.C.: March 2015).

Selected Agencies 

Implemented Systems and 

Policies to Improve the 

Timeliness of Grant 

Closeout

Selected Agencies Use 

Features in their Grants 

Management and Payment 

Systems to Monitor Expired 

Grants
Page 33 GAO-16-362 Grants Management

combination of the grants management system (GMS) and financial 

systems to track undisbursed balances in expired grants. Justice officials 

told us that their systems, particularly GMS and the Community Oriented 

Policing Services (COPS) Office’s Enterprise Content Management 

System, helped Justice’s components reduce their closeout backlog. 

Justice officials cited a useful feature in both systems that includes an 

automatic notification to the grantee as the award approaches its period 

of performance end date. Commerce officials told us that the National 

Oceanic and Atmospheric Administration (NOAA) grants management 

system, Grants Online (GOL), offers automated features that assist 

agencies in managing grant closeout. For example, Commerce officials 

said GOL notifies the grantee of award expiration; due dates for final 

progress and financial reports; report overdue notices; and issues a copy 

of any enforcement actions. Commerce officials said GOL provides 

NOAA the ability to electronically review and complete deobligation 

memorandums, complete a closeout checklist, and view a workflow 

history that includes dates, times, and electronic signatures of progress 

and financial report submissions and approvals by grants managers. 

Commerce officials also noted that GOL provides the option to generate a 

report that tracks expired awards.61

NSF officials told us NSF implemented its new award payment 

management system, the Award Cash Management Service (ACMS), in 

2013. NSF officials explained an advantage of using the new system is 

that ACMS provides award payment and expenditure detail upon each 

grantee drawdown of funds.62 NSF uses the payment and expenditure 

detail from ACMS to notify grantees that have grants with large 

undisbursed balances 3 months prior to the grants period of performance 

end date. NSF officials said this approach has improved the timeliness of 

no cost extension requests.

 61Commerce said that NIST uses the Grant Management Information System (GMIS) and 

the Economic Development Administration uses the Operations Planning and Control 

System for grant processing and tracking; both NIST and the Economic Development 

Administration would migrate to GOL in 2017. 

62Under NSF’s previous payment system, grant financial information may not have been 

current for up to 90 days as NSF previously relied on quarterly Federal Financial 

Reporting to collect final grant expenses. NSF officials said the previous reliance on 

quarterly information can result in grant closeout delays of up to 3 to 6 months.
Page 34 GAO-16-362 Grants Management

NASA officials said the contractor responsible for the agency’s award 

closeout process uses a database tracking tool to facilitate grant closeout 

and track undisbursed balances. NASA officials said the contractor 

prepares monthly reports for NASA including reports that may highlight 

reasons why expired grants remain open. This can help inform NASA’s 

analysis of undisbursed balances and efforts to close out expired grants.

Selected agencies have developed and implemented various policies to 

manage the grant closeout process. OMB’s Uniform Guidance clarified 

language on award closeout to help standardize federal agencies’ policies 

for the award closeout process. In their implementing regulations, some 

federal award-making agencies have provided additional language 

beyond the Uniform Guidance. This additional language provided more 

detail with respect to how these agencies intend to implement their award 

policies with regard to OMB’s new guidance.63

In addition to the additional guidance on federal award policies used by 

some agencies to complement the Uniform Guidance, agency officials 

told us about various internal policies and practices they implemented to 

manage the grant closeout process. Specifically, selected agencies 

incorporated expired grant review analyses and established goals to 

reduce the number of expired grants in their portfolios. For example, 

Justice officials told us that Office of Justice Programs (OJP) set an 

internal grant closeout goal to have no more than 10 percent or 250, 

whichever is greater, of all expired grants in a fiscal year extend 180 days 

past the period of performance end date. OJP officials told us they 

produce monthly and annual grant closeout analyses that track the 

number of expired grant awards and potential deobligation amounts. 

These reports compare awards past their period of performance end date 

by 120-179 days and 180 days or more and present the total number of 

expired grants that fall into these two categories. According to officials in 

Justice’s Community Oriented Policing Services (COPS) Office, they use 

a similar internal grant closeout goal to process at least 90 percent of all 

expired grants within 180 days of the grant performance end date. The 

office prepares an annual report to identify the total number of grants to 

be closed within 180 days of the grant end date. A quarterly analysis is 

completed to measure the number of expired grant awards that have 

 6379 Fed. Reg. 75,871 (Dec. 19, 2014).

Selected Agencies Have 

Implemented Policies and 

Practices to Track and Manage 

Grant Closeout
Page 35 GAO-16-362 Grants Management

completed the closeout process and the total grant funding that has been 

deobligated.

Similarly, Commerce has established a Grants Council that serves as an 

informal working group that meets every 2 months to discuss 

intergovernmental grant policies and ways to improve Commerce’s grant 

business processes. Commerce officials told us that their bureaus provide 

the Grants Council information on their expired grants that are more than 

180 days past the period of performance end date. At each Grants 

Council meeting, the council reviews closeout trends and any 

undisbursed balances in expired grants that are more than 180 days past 

the period of performance end date. Commerce officials said this process 

helps the council categorize the reasons why grants have not been 

closed. NSF officials also told us that they conduct an analysis at the end 

of each fiscal year to determine the number of awards which have expired 

and the amount of undisbursed balances remaining for each award.

Compared to other agencies we contacted, NASA took a different 

approach to managing its grant closeout backlog. It uses a contractor to 

facilitate its award-closeout process and track undisbursed balances 

across the entire agency. NASA officials said the contractor coordinates 

with the NASA grants management office on all aspects of closeout. The 

contractor provides a monthly report to NASA’s Shared Service Center, 

which performs various transactional, administrative, and business 

functions including financial management for NASA grants, highlighting 

reasons grants remain open. According to NASA officials, using a 

contractor to facilitate the closeout process ensures consistency with 

award closeout across the agency. However, similar to other agencies, 

NASA conducts an analysis of expired grants. In addition, NASA’s Shared 

Service Center’s finance office conducts an analysis of undisbursed 

balances. NASA officials explained that since a 2014 IG review, the 

agency has evaluated and refined its award closeout process, reduced 

closeout duplication, and placed more emphasis on tracking expired 

grants.64

 64National Aeronautics and Space Administration, Office of the Inspector General, NASA’s 

Award Closeout Process, Report No. IG-14-014 (Washington, D.C.: February 2014). 

NASA IG officials confirmed to us they closed all recommendations related to this report 

on grant closeout.
Page 36 GAO-16-362 Grants Management

Officials from Commerce and Justice also told us their respective 

agencies have developed training guides for grantees or awarding 

agency grant managers. NOAA officials told us they conducted grants 

workshop training for grantees and provided training materials on grant 

closeout. For example, NOAA training materials provide information on 

grant closeout topics including Commerce closeout policies and 

regulations, responsibilities of the grantee and awarding agency, closeout 

checklists, definitions, and a list of closeout issues for grant managers to 

raise awareness for potential challenges.65 Justice also placed an 

emphasis on developing closeout training for grantees and awarding 

agency grant managers. Officials from OJP, the Office on Violence 

Against Women, and the COPS Office, which represent all of Justice’s 

grant-making agencies, said their respective offices provide closeout 

training and financial management training for grantees. For example, the 

OJP training guide covers closeout topics such as the OJP closeout 

process and time frame, key grant closeout terms and definitions, 

responsibilities, and a step-by-step guide to assist the grantee in using 

the closeout module in the GMS to close the grant. By developing training 

and information resources for both grantees and awarding agencies, 

these agencies are using training as a method of informing all grant 

stakeholders of the importance of a timely grant closeout.

OMB’s 2012 Controller Alert advised grant-making agencies to consider 

establishing policy and procedures for unilaterally closing out expired 

grants. Selected agency officials also told us they have implemented 

various internal policies that address administrative obstacles which can 

cause grantees to fail to meet the terms of the agreement and delay grant 

closeout processing. For example, Commerce officials said they 

implemented a policy in 2013 that allowed the grants officer to carry out 

an administrative closeout of expired and unexpired awards when the 

recipient was no longer in existence or the recipient was unresponsive to 

 65In 2013, NOAA developed training materials for grant managers that identified issues 

that could prevent a timely grant closeout. This included late or incomplete grantee 

reports, issues related to indirect costs, grantee failure to sign documents, late progress 

report certifications, understanding the difference between award and closeout 

extensions, grantee failure to make the final drawdown of funds, grantee not meeting cost 

share requirements, grantee failing to return excess funds, and issues involving the 

deobligation of funds. 

Selected Agencies Report an 

Increased Use of Unilateral 

Grant Closeout
Page 37 GAO-16-362 Grants Management

attempts to make contact.66 OJP, COPS, and the Office on Violence 

Against Women use a similar policy to carry out an administrative 

closeout of grant awards in which the grantee was unable or unwilling to 

complete the requirements of the award. Under this policy, Justice 

officials said the closeout process was initiated by either the grant 

manager or automatically by GMS for an expired grant that reached 91 

days past the grant period of performance end date. NASA has an 

administrative closeout policy that enables the grant officer to initiate a 

closeout within 270 days of the end of the period of performance if the 

recipient is not cooperating with the terms of the award.67 HHS officials 

explained that unilateral closeout exists as an option for closing awards, 

but it is used infrequently and judiciously. HHS officials noted that 

nuanced analysis and detailed communication should occur prior to 

exercising a unilateral closeout to avoid negatively impacting recipients 

that are cooperating. In situations where attempts to contact a recipient 

are unsuccessful, or when an agreement cannot be reached with a 

recipient, unilateral closeout is a tool of last resort when HHS operating 

divisions have not been successful in obtaining acceptable final reports 

from grant recipients.

From fiscal year 2010 through 2016, the Appropriations Act for 

Commerce, Justice, Science and Related Agencies has required that 

OMB instruct any department, agency, or instrumentality of the United 

States receiving funds appropriated under the act to track undisbursed 

balances in expired grant accounts and include these balances in its

annual performance plan and performance and accountability reports. In 

response to these laws, in 2010 and 2011 OMB issued instructions for 

tracking and reporting on undisbursed grant balances to these affected 

federal agencies. However, according to OMB staff and officials at the 

affected agencies we interviewed, OMB had not issued any instructions 

on reporting these balances since 2011, and OMB staff did not think that 

restating additional guidance was necessary given the language in the 

selected agencies’ appropriations acts. OMB staff explained that they did 

 66This policy does not apply to unexpired awards where the recipient is in existence but is 

materially noncompliant with the terms and conditions of the award. The policy also does 

not apply to recipients that are a party to an active bankruptcy case. 

67NASA award closeout policy states “a recipient is considered non-compliant with the 

terms and conditions of an award when they do not provide acceptable final reports by the 

identified due date or an extension granted.”

OMB Does Not 

Monitor Selected 

Agencies’ Reporting 

of Undisbursed 

Balances in Expired 

Grants
Page 38 GAO-16-362 Grants Management

not conduct a detailed review of agency reporting of undisbursed 

balances in expired grant accounts.

Our review included four of the affected agencies under this 

appropriations act—Commerce, Justice, NASA, and NSF. While all four 

agencies demonstrated that they have internal policies in place to review 

expired grants and undisbursed balances, only Justice and NSF have 

continually reported these undisbursed balances in expired grant 

accounts. NASA stopped reporting these balances in its annual

performance reporting after fiscal year 2011, and Commerce stopped 

reporting them after fiscal year 2012. They both cited a lack of guidance 

from OMB related to reporting undisbursed balances in expired grants as 

the reason why they stopped reporting.

Our previous work has found that reporting on the status of grant 

closeouts in annual performance reports can raise the visibility of untimely 

grant closeout within federal agencies. It can also lead to improvements 

in grant closeouts and reduce undisbursed balances in expired grant 

accounts.68 These reports help the President, Congress, and the 

American people assess agencies’ accomplishments for each fiscal year 

by comparing agencies’ actual performance against their annual 

performance goals, summarizing the findings of program evaluations 

completed during the year, and describing the actions needed to address 

any unmet goals. For example, in accordance with the appropriations act, 

both Justice and NSF have been reporting undisbursed balances in 

expired grant accounts in their agency performance reporting since 2010. 

These reports clearly point to the number of expired grants and the 

amount of related undisbursed grant balances. Specifically, in fiscal year 

2012, NSF reported $184.5 million in undisbursed balances in almost 

8,000 expired grants. In fiscal year 2015, NSF reported an undisbursed 

balance of $72.3 million in approximately 4,400 expired grant accounts.

However, as we noted above, NASA and Commerce have not been 

reporting these balances as required since fiscal years 2011 and 2012, 

respectively. As a result of OMB not recognizing the language in the 

appropriations acts as a requirement to instruct agencies to report these 

balances and NASA and Commerce not recognizing the language in the 

appropriations acts to report, the undisbursed balances in expired grant 

 68GAO-08-432.
Page 39 GAO-16-362 Grants Management

accounts for NASA and Commerce have not been reported since fiscal 

years 2011 and 2012, respectively.

In July 2012, OMB issued a Controller Alert that instructed agencies to 

take appropriate action to close out grants in a timely manner. This alert 

asked all Chief Financial Officer Act agencies to consider the following:

• determine what closeout means for their programs;

• focus on closing out grants several years past their end date or having 

no remaining funds;

• establish policies and procedures to unilaterally close out grants;

• leverage internal control procedures outlined in OMB Circular No. A123, Management’s Responsibility for Internal Control, to minimize 

risk associated to not closing out grants in a timely manner; and

• monitor closeout activity to track progress in reducing the closeout 

backlog.

In December 2013, OMB consolidated its grants management circulars 

into a single document, OMB’s Uniform Guidance. This consolidated 

guidance included some changes and clarifications for federal awarding 

agencies and non-federal entities receiving grant funds on grant closeout 

time frames and final adjustments to grantee reimbursable expenses.69

The major change to grant closeout in the Uniform Guidance established 

the period of 1 year for federal awarding agencies to complete all 

closeout actions. It also clarifies that this closeout period begins after 

receipt and acceptance of all required final reports.

While the 2012 Controller Alert and the Uniform Guidance take steps in 

the right direction to increase government-wide awareness related to 

timely grant closeout, these alerts and guidance documents continue to 

lack instruction on tracking and reporting undisbursed balances in grant 

accounts eligible for closeout, as we recommended in 2008. At that time, 

in response to our recommendation, OMB stated that it did not believe 

that having agencies report on these balances in their performance 

 692 C.F.R. pt. 200, 78 Fed. Reg. 78,590 (Dec. 26, 2013). 

OMB Issued Updated 

Guidance on Grant 

Closeout, but Lacks 

Specificity on Tracking and 

Reporting Undisbursed 

Balances in Expired Grant 

Accounts
Page 40 GAO-16-362 Grants Management

reporting would reduce undisbursed balances in expired grant accounts.70

According to federal standards for internal control, information should be 

recorded and communicated to management and others within the entity 

who need it. It should also come in a form and within a time frame that 

enables the entity to carry out its internal control and other 

responsibilities.71 Encouraging effective external communication on 

undisbursed balances in expired grant accounts would serve to further 

transparency efforts and promote informed decision making.

Grant closeout is an important final point of accountability for grantees 

that helps to ensure they have met all financial requirements and have 

provided final reports as required. Closing out grants also allows agencies 

to identify and redirect unused funds to other projects and priorities as 

authorized or to return unspent balances to the Treasury.

We have previously reported that agencies can improve their grant 

closeout process when they direct their attention to the issue and make 

timely grant closeout a high priority. We have also stated that tracking 

undisbursed balances in expired grant accounts, including the status of 

grant closeouts on annual performance reports, could raise the visibility of 

the problem within individual agencies and across the federal 

government. However, our analysis of PMS data indicates that expired 

grant accounts, and, in some cases, the undisbursed balances 

associated with these expired accounts, persisted as an issue for 

agencies in 2015. The number of expired grant accounts decreased since 

we last reported these data in 2012. However, the amount of undisbursed 

balances in expired grant accounts has increased. HHS has not 

effectively used PMS data to help target agency efforts toward closing 

accounts that have the largest undisbursed balances and is missing an 

opportunity to help agencies significantly reduce undisbursed balances 

and deobligate funds from expired grant accounts, consistent with its 

 70OMB said it supported the intent of our recommendations to strengthen grants 

management by explicitly requiring federal agencies to track and report the amount of 

undisbursed grant funding remaining in expired grant accounts and that it believes 

agencies should design processes with strong internal controls to promote effective funds 

management for all types of obligations. OMB’s comments did not indicate a commitment 

to implement our recommendations. 

71GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1

(Washington, D.C.: November 1999).

Conclusions
Page 41 GAO-16-362 Grants Management

grant closeout policies to close out grants within 270 days of their 

expiration.

In January 2016, the GONE Act was signed into law. This act requires 

government-wide reporting of undisbursed balances in certain expired 

grants and provides a basis for government-wide reporting of these

balances. In addition, OMB’s implementation of Section 537 of the 

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

2010 and subsequent annual legislation creates a framework for such 

reporting. However, affected agencies have varied in the reporting of 

these balances and have said they need clearer instructions from OMB 

on where and how to report these balances. Effective implementation of 

grant closeout requirements in the GONE Act and appropriations acts 

depends on clear instructions for where and how to report this information 

and on appropriate agency policies for timely closeout. Improved grant 

closeout processes can in turn allow federal agencies to make better use 

of their appropriated funds.

We recommend that:

1. The Director of OMB resume instructing all affected and independent 

agencies receiving funds under the 2016 appropriations act to track 

and report undisbursed balances in expired grant accounts.

2. The Administrator of NASA resume reporting on the undisbursed 

balances in expired grant accounts in the agency’s annual 

performance reporting.

3. The Secretary for the Department of Commerce resume reporting on 

the undisbursed balances in expired grant accounts in the agency’s 

annual performance reporting.

4. The Secretary of HHS, to improve the enforcement of existing HHS 

Grant Policy Manual grant closeout guidance and reduce undisbursed 

balances in expired grant accounts, require all HHS grant-making 

operating divisions to take the following two actions:

• identify grants expired for more than 1 year past their period of 

performance end date and to either close the expired grant in the 

Payment Management System or to determine why these grants 

are not closed; and

• identify expired grant accounts designated for immediate closure 

by the Payment Management System and require these operating 

Recommendations for 

Executive Action
Page 42 GAO-16-362 Grants Management

divisions to close the expired grant accounts in PMS or explain 

why these grants are not closed.

We provided a draft of this report to the Director of the Office of 

Management and Budget; the Administrator of the National Aeronautics 

and Space Administration; the Assistant Attorney General for 

Administration of the Department of Justice; the Office of the Director of 

the National Science Foundation; and the Secretaries of the Departments 

of Commerce, Health and Human Services, and the Treasury. 

Commerce, HHS, NASA and OMB responded with written comments, 

which we have reprinted in appendixes III, IV, V, and VI, respectively. 

OMB concurred with the recommendation and said it will issue guidance 

to the heads of the Selected Agencies to report on balances in expired 

grant accounts in the agencies’ fiscal year 2016 performance and 

accountability reports. In addition, OMB stated it is currently analyzing the 

requirements of the GONE Act and will be issuing government-wide 

guidance on the reporting of the required information by July 2016. NASA 

partially concurred with GAO’s recommendation, saying it would resume 

reporting on undisbursed balances in expired grant accounts once

guidance was provided by OMB. Commerce concurred with GAO’s

recommendation. HHS concurred with GAO’s recommendations and said 

it will implement strategies, in accordance with the recommendations, to 

address and reduce grant closeout delays and further enhance 

compliance with HHS’ Grants Policy Administrative Manual. Staff from 

OMB, HHS, Justice, NSF, and Commerce also provided technical 

comments, which were incorporated as appropriate. NASA and Treasury 

had no technical comments. 

We are sending copies of this report to the heads of the Departments of 

Health and Human Services, Treasury, OMB, Commerce, Justice, NASA,

and NSF, as well as interested congressional committees and other 

interested parties. This report will also be available at no charge on the 

GAO website at http://www.gao.gov.

Agency Comments 

and Our Evaluation
Page 43 GAO-16-362 Grants Management

If you or your staff has any questions about this report, please contact me 

at (202) 512-6806 or sagerm@gao.gov. Contact points for our Offices of 

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

of our report. Key contributors to this report are listed in appendix VII.

Michelle Sager

Director, Strategic Issues
Appendix I: Objectives, Scope, and 

Methodology

Page 44 GAO-16-362 Grants Management

This report examines (1) the extent to which there are undisbursed 

balances remaining in expired grant accounts in the federal government’s 

largest civilian payment management system—the Payment Management 

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

Services (HHS); (2) the reasons selected agencies give for their grant 

accounts remaining open past their end dates; and (3) the extent to which

the Office of Management and Budget (OMB) monitors agency progress 

with regard to tracking and reporting on undisbursed balances in expired 

grant accounts.

To address the first objective, we analyzed data from PMS administered 

by HHS’s Program Support Center (PSC). Federal payment systems 

facilitate the transfer of cash payments from federal awarding agencies to 

grantees. Some agencies make grant payments directly to grantees using 

their own proprietary payment systems. Others enter into arrangements 

with payment systems that serve multiple agencies to make payments on 

their behalf. PMS was selected based on the following criteria:

• PMS provides payment services to other federal departments and 

entities. In 2015, offices from 12 federal departments and agencies 

used PMS for making grant disbursements.

• PMS accounts for a significant percentage of civilian federal grant 

disbursements. Based on fiscal year 2014 data, the most recent 

available at the time of our selection, PMS made about $429 billion in 

grant disbursements, or 74 percent of all civilian federal grants 

disbursements in fiscal year 2014.

PMS is a centralized grant payment and cash management system, 

operated by PSC in the Division of Payment Management (DPM) at HHS.

According to DPM, the main purpose of PMS is to serve as the fiscal 

intermediary between awarding agencies and the recipients of grants and 

contracts. Its main objectives are to expedite the flow of cash between the 

federal government and recipients, transmit recipient disbursement data 

back to the awarding agencies, and manage cash flow advances to grant 

recipients. PSC personnel operate PMS, making payments to grant 

recipients, serving as user/recipient liaisons, and reporting disbursement 

data to awarding agencies. Awarding agencies’ responsibilities include 

Appendix I: Objectives, Scope, and 

Methodology

Analysis of Expired Grant 

Account Data from PMS

Description of PMS
Appendix I: Objectives, Scope, and 

Methodology

Page 45 GAO-16-362 Grants Management

entry of authorization data into PMS, program and grant monitoring, grant 

closeout, and reconciliation of their accounting records to PMS 

information. Awarding agencies pay PSC a service fee for maintaining 

accounts and executing payments through PMS. PMS continues to 

charge agency customers a servicing fee until a grant account is closed.

To update our previous analysis of undisbursed balances in expired grant 

accounts and provide a degree of comparability, we replicated the 

methodology used in our 2008 and 2012 reports.1 To determine the 

amount of undisbursed balances in expired grant accounts, we analyzed 

PMS data from closeout reports PSC makes available to PMS customers 

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

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

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

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

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

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

account, the report includes such information as the identification number, 

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

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

mandatory field completed by the awarding agency.

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

fiscal year 2015 (September 30, 2015). PSC appended to the closeout 

data an additional field showing the applicable number from the Catalog 

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

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

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

including accounts that would distort the calculation of undisbursed funds 

in expired PMS grant accounts and to provide comparability with our 

previous findings. Our criteria for excluding accounts were consistent with 

the methodology we used in our 2008 and 2012 reports. We excluded 

127 programs from our review. We included programs that

 1

GAO, Grants Management: Action Needed to Improve the Timeliness of Grant Closeouts 

by Federal Agencies, GAO-12-360 (Washington, D.C.: Apr. 16, 2012); and GAO, Grants 

Management: Attention Needed to Address Undisbursed Balances in Expired Grant 

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

PMS Closeout Reports
Appendix I: Objectives, Scope, and 

Methodology

Page 46 GAO-16-362 Grants Management

• were grants or cooperative agreements;

2

• had a time limit for spending;

3

• had a zero or positive undisbursed balance;

• had a readily identifiable CFDA number and program description in 

the CFDA; and

• did not have special financial reporting procedures.

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

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

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

accounts included expired accounts with a positive undisbursed balance. 

To obtain an estimate of the total amount of fees paid for maintaining 

accounts with no undisbursed balances remaining, we requested data 

from PSC for all accounts that appear on the year-end fiscal year 2015 

closeout report (i.e., as of September 30, 2015) with a unique accounting 

status symbol indicating that no undisbursed balances remained and that 

the awarding agency only needed to submit the final closeout code to 

PSC to finalize grant closeout. According to data provided by PSC, PMS 

users were charged a total of roughly $29,000 September 2015 to 

maintain more than 5,900 expired grant accounts with no undisbursed 

balances remaining listed on the year-end closeout report.

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

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

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

interviewed officials responsible for administration of the database on 

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

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

and accuracy. We discussed with HHS officials any known limitations 

associated with the data. According to HHS officials, no-cost extensions 

 2

Federal grants and cooperative agreements are forms of assistance authorized by 

statute in which a federal agency transfers something of value, such as money, to a party 

for a purpose, undertaking, or activity of the grantee that the government has chosen to 

assist. The distinction between these two forms of assistance is that substantial 

involvement is expected between the executive agency and the state, local government, 

or other recipient when carrying out the activity contemplated in a cooperative agreement, 

whereas such involvement is not expected in carrying out a grant agreement (see 31 

U.S.C. §6304 and 31 U.S.C. §6305).

3

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

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

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

eligible for closeout.

Reliability Testing of PMS Data
Appendix I: Objectives, Scope, and 

Methodology

Page 47 GAO-16-362 Grants Management

that extend the grant period without changing the authorized amount of 

funding may not be reflected in PMS data. As a result, PMS closeout 

reports may include grants that have received an extension and are 

therefore not eligible for closeout. No obvious errors in completeness and 

accuracy were identified during electronic testing. After conducting these 

assessment steps, we found that the PMS closeout data were sufficiently 

reliable for the purposes of this report.

In our 2012 report, we included an analysis of data contained in “dormant 

account reports” that were provided to users of a second payment 

system, the Automated Standard Application for Payments (ASAP), 

administered by the Department of the Treasury (Treasury) and the 

Federal Reserve Bank. We were unable to include the results of a similar 

analysis of the data contained in the most recent dormant account report 

(dated October 2015) because the number of grant accounts identified 

was below the threshold at which we could report without potentially 

identifying the recipients.

To address our second objective and identify why selected agencies have 

expired grants open past their end dates, we collected and reviewed audit 

reports from GAO and inspectors general (IG) at the 24 Chief Financial 

Officers Act (CFO Act) agencies that focused on undisbursed funds in 

expired grants accounts and grant closeout.4 We reviewed IG reports 

from the 24 CFO Act agencies from September 2011 to March 2015 in 

order to provide coverage of the major grant-making agencies and 

because this approach updated the review we performed as part of the 

work on our 2008 and 2012 reports, which included IG reports issued 

between 2000 and 2011. We also reviewed annual performance reports 

for all 24 agencies to determine how the major grant-making agencies 

 4

The 24 agencies identified in the CFO Act of 1990 are the Departments of Agriculture, 

Commerce, Defense, Education, Energy, Health and Human Services, Homeland 

Security, Housing and Urban Development, the Interior, Justice, Labor, State, 

Transportation, the Treasury, and Veterans Affairs, as well as the Agency for International 

Development, Environmental Protection Agency, General Services Administration, 

National Aeronautics and Space Administration, National Science Foundation, Nuclear 

Regulatory Commission, Office of Personnel Management, Small Business 

Administration, and Social Security Administration. Pub. L. No. 101-576, 104 Stat. 2838 

(Nov. 15, 1990), codified, in relevant part, as amended, at 31 U.S.C. § 901(b).

Review of Dormant 

Account Report Data from 

Treasury’s Automated 

Standard Application for 

Payments System

Review of Agencies’

Progress with Grant 

Closeout
Appendix I: Objectives, Scope, and 

Methodology

Page 48 GAO-16-362 Grants Management

were reporting on undisbursed balances in expired grant accounts. We 

also reviewed available data on grant closeout from selected agencies.

We interviewed agency officials at selected grant-making agencies to 

determine reasons why grants remain open past their end date and 

determine to what extent there are promising practices related to grant 

closeout. Agencies selected for interviews reflect a mix of PMS 

customers, one from within HHS that, according to preliminary analysis of 

March 31, 2015 PMS data, had a large undisbursed balance. We also 

interviewed officials from the United States Department of Commerce, the 

United States Department of Justice, the National Aeronautics and Space 

Administration, and the National Science Foundation as agencies that 

have been instructed through their appropriations acts since 2010 to 

report on undisbursed balances in expired grant accounts.

To address our third objective and understand the extent to which OMB 

monitors agency progress with regard to tracking and reporting progress 

on reducing undisbursed balances in expired grant accounts, we 

reviewed relevant OMB guidance, including: Uniform Administrative 

Requirements, Cost Principles, and Audit Requirements for Federal 

Awards (Uniform Guidance) and OMB Circular No. A-136, Financial 

Reporting Requirements. We reviewed two memorandums related to 

tracking undisbursed balances in expired grant accounts issued by OMB 

in 2010 and 2011 to selected agencies receiving funding under the 

Commerce, Justice, Science, and Related Agencies appropriations act, 

and the related appropriations acts from 2010 through 2016.5 We also 

reviewed an OMB 2012 Controller Alert focused on timely grant closeout.

We interviewed OMB staff on providing government-wide guidance for 

grants management and grant closeout and officials at the four agencies 

that reported undisbursed balances in expired grant accounts in 2010 and 

2011 annual performance reports—the United States Department of 

Commerce, the United States Department of Justice, the National 

Aeronautics and Space Administration, and the National Science 

Foundation—to discuss their implementation of OMB’s instructions.

 5

Pub. L. 111-117, div. B, title V, § 537, 123 Stat. 3158 (Dec. 16, 2009); Pub. L. 112-10, 

125 Stat. 38 (Apr. 15, 2011); Pub. L. 112-55, div. B, title V, § 536, 125 Stat. 638 (Nov. 18, 

2011); Pub. L. 113-6, div. B, title V, § 534, 127 Stat. 277 (Mar. 26, 2013); Pub. L. 113-76, 

div. B, title V, § 531, 128 Stat. 84 (Jan. 17, 2014); Pub. L. 113-235, div. B, title V, § 

531,128 Stat. 2215 (Dec. 16, 2014); Pub. L. 114-113, div. B, title V, § 530 (Dec.18, 2015).

Review of Relevant OMB 

Guidance and 

Appropriations Acts
Appendix II: Federal Agencies Using the 

Payment Management System (PMS) as of 

April 2015

Page 49 GAO-16-362 Grants Management

Health Resources and Services Administration

Food and Drug Administration

National Institutes of Health

Center for Disease Control and Prevention

Substance Abuse and Mental Health Services Administration

Indian Health Service

Centers for Medicare & Medicaid Service

Administration for Children and Families

Administration for Community Living

Agency for Healthcare Research & Quality

Office of the Secretary/Assistant Secretary for Administration and 

Management

Mine Safety and Health Administration

Bureau of Labor Statistics

Occupational Safety and Health Administration

Veterans Employment and Training

Employment and Training Administration

Food Safety and Inspection Service

National Institute of Food and Agriculture

Agriculture Research Service

Forest Service

Office of Advocacy and Outreach

Internal Revenue Service

Bureau of Educational and Cultural Affairs

Bureau of Educational and Cultural Affairs Fulbright Commission, Europe

Bureau of Educational and Cultural Affairs Fulbright Commission, 

Western Hemisphere

Bureau of Educational and Cultural Affairs Fulbright Commission, East 

Asia

Bureau of Educational and Cultural Affairs Fulbright Commission, Near 

East/South Asia

Office of Global Partnership

Bureau of Conflict and Stabilization Operations

Appendix II: Federal Agencies Using the 

Payment Management System (PMS) as of 

April 2015

Department of Health & 

Human Services

Department of Labor

Department of Agriculture

Department of the 

Treasury

Department of State
Appendix II: Federal Agencies Using the 

Payment Management System (PMS) as of 

April 2015

Page 50 GAO-16-362 Grants Management

Bureau of East Asian and Pacific Affairs

Bureau of Oceans and International Environmental Scientific Affairs

Bureau of Democracy, Human Rights and Labor

Bureau of International Narcotics and Law Enforcement Affairs

Bureau of Administration, Office of Overseas Schools

Bureau of Political-Military Affairs, Office of Humanitarian Demining 

Programs

Bureau of Population, Refugees and Migration

Bureau of Diplomatic Security – Multiple Regions

Bureau of Diplomatic Security – South Asia

Bureau of Diplomatic Security – Africa

Bureau of Diplomatic Security – North East Asia

Bureau of Diplomatic Security – Eastern Asia Pacific

Bureau of Diplomatic Security – Western Hemisphere

Bureau of Diplomatic Security – Europe

Bureau of Diplomatic Security and Foreign Missions

Bureau of European and Eurasian Affairs

Bureau of Human Resources

Bureau of Intelligence and Research

Bureau of Near Eastern Affairs

Bureau of Near Eastern Affairs – Iran Awards

Bureau of Nonproliferation, Office of Export Control Cooperation

Bureau of International Security and Nonproliferation

Bureau of International Security and Nonproliferation, Office of Nonproliferation & Disarmament Fund

Bureau of South and Central Asian Affairs

Bureau of African Affair

Office of International Information Programs

Office of Global Women’s Issues

Bureau of Economic and Business Affairs

Bureau of Western Hemisphere Affairs – PDA

Bureau of Western Hemisphere Affairs – PPC

Bureau of Public Affairs

Office to Monitor and Combat Trafficking in Persons

Office of Policy, Planning, and Resources for Public Diplomacy and 

Public Affairs

Office of Counterterrorism

National Cemetery Administration

Capital Asset Management

Healthcare for Homeless Veterans

Supported Services for Veteran Families

Department of Veterans 

Affairs
Appendix II: Federal Agencies Using the 

Payment Management System (PMS) as of 

April 2015

Page 51 GAO-16-362 Grants Management

Office of National Veterans Sports

Rural Veterans Coordination Pilot

Highly Rural Transportation Grants

Federal Emergency Management Administration

Bureau of Customs and Border Protection

Office of the Chief Procurement Officer

Office of National Drug Control Policy

Agency for International Development

Ames Research Center

Armstrong Flight Research Center (Dryden Flight Research Center)

Glenn Research Center

Goddard Space Flight Center

Headquarters

Johnson Space Center

Kennedy Space Center

Langley Research Center

Marshall Space Flight Center

Stennis Space Center

Management Office

Corporation for National and Community Service 

Office of Women’s Business Ownership

Department of Homeland 

Security

Executive Office of the 

President

United States Agency for 

International Development

National Aeronautics and 

Space Administration

Corporation for National 

and Community Service

Small Business 

Administration
Appendix III: Comments from the Department 

of Commerce

Page 52 GAO-16-362 Grants Management

Appendix III: Comments from the 

Department of Commerce
Appendix IV: Comments from the Department 

of Health and Human Services

Page 53 GAO-16-362 Grants Management

Appendix IV: Comments from the 

Department of Health and Human Services
Appendix IV: Comments from the Department 

of Health and Human Services

Page 54 GAO-16-362 Grants Management
Appendix V: Comments from the National 

Aeronautics and Space Administration

Page 55 GAO-16-362 Grants Management

Appendix V: Comments from the National 

Aeronautics and Space Administration
Appendix V: Comments from the National 

Aeronautics and Space Administration

Page 56 GAO-16-362 Grants Management
Appendix VI: Comments from the Office of 

Management and Budget

Page 57 GAO-16-362 Grants Management

Appendix VI: Comments from the Office of 

Management and Budget
Appendix VI: Comments from the Office of 

Management and Budget

Page 58 GAO-16-362 Grants Management
Appendix VII: GAO Contact and Staff 

Acknowledgments

Page 59 GAO-16-362 Grants Management

Michelle Sager, (202) 512-6806 or sagerm@gao.gov

In addition to the contact named above, Thomas M. James (Assistant 

Director), Keith O’Brien (Analyst-in-Charge), Sara L. Daleski, Bertha 

Dong, and Michael Sweet made major contributions to this report. Other 

key contributors include Joy Booth, Michael Grogan, Kimberly McGatlin, 

Robert Robinson, and Cynthia Saunders.

Appendix VII: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(451144)
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investigative arm of Congress, exists to support Congress in meeting its 

constitutional responsibilities and to help improve the performance and 

accountability of the federal government for the American people. GAO 

examines the use of public funds; evaluates federal programs and 

policies; and provides analyses, recommendations, and other assistance 

to help Congress make informed oversight, policy, and funding decisions. 

GAO’s commitment to good government is reflected in its core values of 

accountability, integrity, and reliability.

The fastest and easiest way to obtain copies of GAO documents at no 

cost is through GAO’s website (http://www.gao.gov). Each weekday 

afternoon, GAO posts on its website newly released reports, testimony, 

and correspondence. To have GAO e-mail you a list of newly posted 

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The price of each GAO publication reflects GAO’s actual cost of 

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