More Than $794 Million in Undisbursed Balances Remained in Expired Grant Accounts in PMS; More Than $126 Million Also Remained in Dormant Accounts in ASAP

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. 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. These are accounts that were more than  3 months past the grant end date and had no activity for 9 months or  more. $70.8 million in undisbursed balances in expired grant accounts that were  5 years or more past the grant end date, including $6.1 million that  remained unspent 10 years after the grant end date. The HHS Inspector General issued four reports from 2008 to 2009  on grant closeout in PMS at four selected operating divisions. Individual accounts in the ASAP system can include multiple grant  agreements between a federal agency and a grantee; therefore, these  reports cannot be used to identify individual grants eligible for closeout or  the amount of funds that remain undisbursed for an individual grant  agreement. We found that agencies did not have adequate systems and policies in  place to properly monitor grant closeout. The Rural Housing Service has  We also found that agencies did not deobligate funds from grants eligible  for closeout in a timely manner. The legislation  specifically required that OMB instruct affected agencies to report on the  following information:  1.  details on future action the department, agency, or instrumentality will  take to resolve undisbursed balances in expired grant accounts,  2.  the method that the department, agency, or instrumentality uses to  track undisbursed balances in expired grant accounts,  3.  identification of undisbursed balances in expired grant accounts that  may be returned to the Treasury of the United States, and  4.  in the preceding 3 fiscal years, details on the total number of expired  grant accounts with undisbursed balances (on the first day of each  fiscal year) for the department, agency, or instrumentality and the total  finances that have not been obligated to a specific project remaining  in the accounts. By instead focusing on  undisbursed balances obligated to grant agreements that have reached  the end of their period of performance and are eligible for closeout, OMB  could better direct agency management focus toward a subset of grants  in need of more immediate attention. Instruct agencies with undisbursed balances still obligated to grants  several years past their grant end date to develop and implement  strategies to quickly and efficiently take action to close out these  grants and return unspent funds to the Treasury when appropriate. Appendix I: Objectives, Scope, and Methodology

Our objectives for this report were to evaluate: (1) the amount of  undisbursed funding remaining in expired grant accounts including the  amounts that have remained unspent for 5 years or more and for 10  years or more, (2) issues raised by GAO and federal inspectors general  (IG) related to timely grant closeout by federal agencies, and (3) what  actions the Office of Management and Budget (OMB) and agencies have  taken to track undisbursed balances in grants eligible for closeout. To address the first objective, we analyzed data from two federal payment  systems: the Payment Management System (PMS) administered by  Department of Health and Human Services’ (HHS) Program Support  Center (PSC) and the Automated Standard Application for Payments  (ASAP) system administered jointly by the Department of the Treasury  (Treasury) and the Federal Reserve Bank of Richmond. In 2011,  PMS and ASAP disbursed $415 billion and $62 billion in federal grant  funding, respectively, or 79 percent of all civilian federal grant  disbursements in fiscal year 2011. To identify federal governmentwide guidance related to federal agency  performance reporting, we reviewed OMB Circular No.
Why GAO Did This Study

In 2008,GAO reported that about $1 billion in undisbursed funding remained in expired grant accounts in the largest civilian payment system for grants, PMS, operated by the Department of Health and Human Services Program Support Center. GAO was asked to update its 2008 analysis evaluating: (1) the amount of undisbursed funding remaining in expired grant accounts, including the amounts that have remained unspent for at least 5 years or more and for 10 years or more; (2) issues raised by GAO and federal inspectors general related to timely grant closeout by federal agencies; and (3) actions OMB and agencies have taken to track undisbursed balances in grants eligible for closeout. To do this, GAO analyzed data from two federal payment systems disbursing 79 percent of all civilian federal grant awardsPMS and the ASAP system, which is operated jointly by the Department of the Treasury and the Federal Reserve Bank of Richmond. In addition, GAO also reviewed audit reports that it and federal inspectors general issued; relevant OMB circulars and guidance; and performance reports from federal agencies.

What GAO Found

At the end of fiscal year 2011, GAO identified more than $794 million in funding remaining in expired grant accountsaccounts that were more than 3 months past the grant end date and had no activity for 9 months or morein the Payment Management System (PMS). GAO found that undisbursed balances remained in some grant accounts several years past their expiration date: $110.9 million in undisbursed funding remained unspent more than 5 years past the grant end date, including $9.5 million that remained unspent for 10 years or more. GAO also found $126 million in grant accounts in the Automated Standard Application for Payments (ASAP) for which there had been no activity for 2 years or more, including $11 million that remained inactive for 5 years or more. However, data from these two systems are not comparable because, unlike PMS, ASAP accounts can include multiple grant agreements between a federal agency and a grantee, only some of which may be eligible for closeout.
GAO and agency inspectors general have raised concerns in audit reports about timely grant closeout. These reports found that some agencies lack adequate systems or policies to properly monitor grant closeout or did not deobligate funds from grants eligible for close out in a timely manner.
OMB issued guidance to certain agencies at the direction of Congress for reporting undisbursed balances in expired grant accounts that instructed agencies to report on expired appropriations accounts rather than grant accounts eligible for closeout. By focusing on grants eligible for closeout, OMB could better direct agency management toward grants in need of more immediate attention. Grant closeout makes funds less susceptible to fraud, waste, and mismanagement; reduces the potential costs in fees related to maintaining grants; and may enable agencies to redirect resources to other projects.

What GAO Recommends

GAO recommends 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. OMB staff said that they generally agreed with the recommendGAO recommends 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. OMB staff said that they generally agreed with the recommendations and will consider them as they review and streamline grant policy guidance.ations and will consider them as they review and streamline grant policy guidance.