The federal government uses grants to achieve national priorities through nonfederal parties, including state and local governments, educational institutions, and nonprofit organizations. While there can be significant variation among different grant programs, most federal grants share a common life cycle for administering the grants: pre-award, award, implementation, and closeout (see fig. 1). During the award stage, the federal awarding agency enters into an agreement with grantees stipulating the terms and conditions for the use of grant funds including the period of time funds are available for the grantee’s use. Also in the award stage, the awarding agency opens accounts in one of several payment management systems through which grantees receive payments. During the post-award stage, the grantee carries out the requirements of the agreement and requests payments, while the awarding agency approves payments and oversees the grantee. Once the grantee has completed all the work associated with a grant agreement or the end date for the grant has arrived, or both, the awarding agency and grantee close out the grant. Closeout procedures ensure that grantees have met all financial requirements, provided their final reports, and returned any unspent balances. Grant closeout procedures, like other stages of the grant cycle, are subject to a wide range of requirements derived from a combination of OMB guidance, agency regulations, agency policy, and program-specific statutes. OMB Circular No. A-110, Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations, and OMB Circular No. A-102, Grants and Cooperative Agreements with State and Local Governments, provide OMB guidance to federal agencies on grant administration. These circulars apply only to federal awarding agencies; they do not apply directly to grantees. Each federal agency that awards and administers grants and agreements that are subject to the guidance in Circulars A-110 and A-102 is responsible for issuing regulations, with which grantees must comply, that are consistent with the circulars, unless different provisions are required by federal statute or are approved by OMB. Agency regulations issued under the circulars typically impose closeout procedures upon both the awarding agency and the grantee. Generally, within 90 days after the completion of the award, grantees must submit all financial, performance, and other reports as required by the terms and conditions of the award. Also within this 90-day period, grantees generally are to liquidate all obligations incurred under the award. Grantees then are to promptly refund any remaining cash balances to the awarding agency. Awarding agencies must make prompt payments, often defined as within 90 days, to grantees for allowable reimbursable costs under the award being closed out.conditions of the award, the awarding agency must make a settlement for any upward or downward adjustment to the federal share of costs after the closeout reports are received. Some federal agencies’ grant policies, such as HHS’s, further specify that grants are to be closed out within 180 days of the end of the grant funding period. Also, if allowed by the terms and While there can be substantial variation among grant programs, figure 2 illustrates how closing out grants could allow an agency to redirect resources toward other projects and activities or return unspent funds to Treasury. 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.may allow the federal agencies to use existing resources to fund new grant projects. If the undisbursed amounts are returned to expired appropriation accounts, the agency may not use the deobligated funds to make new grants. However, the agency may use the deobligated funds to make adjustments to obligations that were incurred before the appropriations account expired. Expired appropriations accounts remain available for 5 years to make adjustments, after which, the undisbursed balances are canceled and returned to the Treasury. In other words, the funds are no longer available for use by the agency. This helps ensure that federal agency resources are not improperly spent and helps agencies maintain accurate accounting of their budgetary resources. It may also reduce future federal outlays relative to the federal government’s original estimated amount of spending for these programs. We found that more than $794 million in undisbursed balances remained in expired PMS accounts, including undisbursed balances that remained in accounts several years past their expiration date. Roughly three-fourths of all undisbursed balances in expired grant accounts were from grants issued by HHS, the largest grant-making agency in the federal government. Although this represents only a small share (2.7 percent) of the total funding that was made available for these grants, department officials told us they are taking action to improve timely closeout. We also found that more than $126 million in undisbursed balances remained in dormant grant accounts—accounts for which there had been no activity for 2 years or more—in ASAP, another large federal payment system. As of September 30, 2011, we found that $794.4 million in undisbursed balances remained in PMS, the largest federal civilian payment system in 10,548 expired grant accounts. These are accounts that were more than 3 months past the grant end date and had no activity for 9 months or more. Undisbursed balances in expired grant accounts were spread across numerous federal agencies and almost 400 different programs. (See app. II for a list of PMS customers.) For comparison, the total amount of undisbursed balances in expired grant accounts in PMS is more than $200 million less than the amount we previously reported for calendar year 2006, while the overall amount of grant disbursements through PMS increased by about 23 percent during this time, from $320 billion in fiscal year 2006 to $415 billion in fiscal year 2011. Overall, total undisbursed balances as of September 30, 2011, represent roughly 3.3 percent of the total amount of funds made available for these grants, down from 7.4 percent at the end of calendar year 2006. However, at the department or agency level, the total amount of undisbursed balances in expired accounts as of September 30, 2011, varied from 2.7 percent to 34.8 percent of the total funding made available for these grant accounts during this period. OMB guidance and agency regulations generally require grantees to submit all financial and performance reports and liquidate all obligations incurred under the award within 3 months (or 90 days) after the completion of the award; awarding agencies must then make prompt payments to grantees for allowable reimbursable costs for the award being closed out. Therefore, based on the information in PMS, these expired grant accounts should be considered for grant closeout. Failure to close out a grant in the payment system and deobligate any unspent balances can allow grantees to continue to draw down federal funds in the payment system even after the grant’s period of availability to the grantee has ended, making these funds more susceptible to waste, fraud, or mismanagement. As figure 3 shows, we found that undisbursed balances remained in grant accounts several years past their expiration date. We found that 991 expired grant accounts were more than 5 years past the grant end date; they contained a total of $110.9 million in undisbursed funding. Of these, 115 expired grant accounts containing roughly $9.5 million remained open more than 10 years past the grant end date. Federal regulations generally require that grantees retain financial records and other documents pertinent to a grant for a period of 3 years from the date of submission of the final report. The risk increases after several years that grantees will not have retained the financial documents and other information for these grants that are needed by federal agencies to properly reconcile financial information and make the necessary adjustments to the grant award amount and the amount of federal funds paid to the recipient, potentially resulting in the payment of unnecessary and unallowable costs. While the amount of funds remaining in individual expired grant accounts ranged from less than $1 to more than $19 million, a small percentage (a little more than 1 percent) of grant accounts with undisbursed balances of $1 million or more accounted for more than a third of the total undisbursed funds in expired grant accounts. Overall, 123 accounts from eight different federal agencies had more than $1 million in undisbursed balances at the end of fiscal year 2011. These expired grant accounts had a combined total of roughly $316 million in undisbursed balances, or 40 percent of the total undisbursed funding in expired grant accounts as of September 30, 2011 (see fig. 4). Accounts with undisbursed balances remaining at the end of the agreed-upon grant end date can indicate a potential grant management problem. Data showing grantees that have not expended large amounts of funding such as $1 million or more by the specified grant end date raise concern that grantees have not fully met the program objectives for the intended beneficiaries within the agreed- upon time frames. Roughly three-fourths of all undisbursed balances in expired grant accounts ($594.7 million) in PMS as of September 30, 2011, were from 8,262 HHS-issued grants. HHS is the largest grant-making agency in the federal government in terms of total dollars awarded and disbursed. Overall, the total undisbursed balances in expired HHS grant accounts represented 2.7 percent of the total amount authorized for these accounts, which is the lowest percentage for any federal department with undisbursed balances in expired grant accounts included on the September 30, 2011 PMS closeout report. This indicates that the grantees have typically spent the vast majority of the funds awarded. However, the remaining funds add up to hundreds of millions of dollars that the agency could potentially redirect toward other projects and activities or return to Treasury.