The federal government uses grants to achieve national priorities through nonfederal parties, including state and local governments, educational institutions, and nonprofit organizations. 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. 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 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. 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. The Uniform Guidance includes revised rules that set the standard requirements for financial management of federal awards across the federal government. In December 2014, OMB, along with federal grant- making agencies, issued a joint interim final rule implementing OMB’s Uniform Guidance for new grant awards made on or after December 26, 2014. 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 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). 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. 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. The awarding agency must make prompt payments to the grantee for allowable reimbursable costs under the award being closed out. 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. 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. 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 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. 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. 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. 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. 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. Further, Section 530 requires OMB to instruct the 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. On January 28, 2016, the Grants Oversight and New Efficiency Act (GONE Act) was signed into law. 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. As of September 30, 2015, $993.5 million in undisbursed balances remained in 8,832 expired grant accounts in PMS (see figure 4). 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. 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.