	Introduction

Federal outlays for grants to state and local governments have grown from $15.4 billion in 1940 to $509.7 billion in 2013. The number of congressionally authorized grant programs has also increased over time, with over 2,179 congressionally authorized grant programs currently being administered by federal agencies. Recently, congressional interest has focused on the efficient and effective management of federal grant programs. GAO has reported that it found more than $794 million in undisbursed federal grant funds in expired grant accounts administered by federal agencies and concluded that federal agencies needed to improve the timeliness of federal grant closeouts to address the undisbursed funds issue. While delayed federal grant closeout may contribute to the issue of undisbursed grant funds, there may be underlying causes, other than inefficient grants management, that might help to explain how undisbursed funds end up in expired grant accounts. Furthermore, it is possible, if not likely, that the estimated amount of undisbursed funds in expired grant accounts may be inflated. While the undisbursed funds identified by GAO represent significantly less than 1% of annual federal grant outlays to state and local governments, the existence of undisbursed grant funds in expired grant accounts is an indicator of a systemic grants management challenge. It suggests a lack of coordination between the financial and program management of federal grants. This report is designed to assist Congress in its oversight of federal grants-in-aid programs by providing a summary of relevant laws, processes, and authorities. The report analyzes the causes of undisbursed grant funds in expired grant accounts and presents congressional options to reform federal grant administration to increase the timeliness, reliability, and comprehensiveness of grant management-related information. The agency's authority to reprogram undisbursed grant funds in expired accounts may be limited by the type of budget authority provided for that particular grant program. Challenges in Reconciling Grants Administration Systems and Cash Management Systems

Federal agencies have discretion in determining the methods by which grant funds are administered.
Federal outlays for grants to state and local governments have grown from $15.4 billion in 1940 (in constant FY2009 dollars) to $509.7 billion in 2013 (in constant FY2009 dollars). The number of congressionally authorized grant programs has also increased over time, with over 2,179 congressionally authorized grant programs currently being administered by federal agencies. Recently, congressional interest has focused on the efficient and effective management of federal grant programs. A recent congressional hearing evaluated the impact of alleged inefficient grant management which, according to a GAO report, resulted in more than $794 million in undisbursed federal grant funds in expired grant accounts. GAO concluded that federal agencies needed to improve the timeliness of federal grant closeouts to address the undisbursed funds issue. However, there may be underlying causes, other than inefficient grant management, that might help to explain why undisbursed funds may end up in expired grant accounts. Furthermore, it is possible, if not likely, that the estimated amount of undisbursed funds in expired grant accounts may be inflated. While the undisbursed grant funds identified by GAO represent significantly less than 1% of annual outlays for grants to state and local governments, the existence of undisbursed grant funds in expired grant accounts is an indicator of a systemic grants management challenge; suggesting a lack of coordination between the financial and program management of federal grants.
This report is designed to assist Congress in its oversight of federal grants-in-aid programs by first providing a summary of relevant processes and authorities and then analyzing the causes of undisbursed grant funds in expired grant accounts. The report also presents congressional options to reform federal grant administration to increase the timeliness, reliability, and comprehensiveness of grant management-related information.
The analysis contained in this report concludes that delays in federal grant closeout may be attributed to unclear guidance from federal agencies; that the ability of a federal agency to reprogram undisbursed grant funds in expired accounts may be limited by the type of budget authority for that particular grant program; and that federal agencies struggle to reconcile grant administration systems and grant management systems. Among other potential consequences of this disconnect, inadequate reconciliation of grant management systems could result in inflated estimates of the amount of undisbursed grant funds in expired accounts and increasing the likelihood of inefficient administration of federal grants.