The Department of Justice’s Grant Closeout Process

Audit Report 07-05
December 2006
Office of the Inspector General

Appendix VI
Office on Violence Against Women
Response to the Draft Report


The text in this Appendix was prepared by the auditee and uncorrected by the OIG.
  United States Department of Justice
Office on Violence Against Women

 
TO: Glenn A. Fine
Inspector General
United States Department of Justice
 
THROUGH: Guy K. Zimmerman
Assistant Inspector General for Audit
Office of the Inspector General
 
FROM: Mary Beth Buchanan
Acting Director
Office on Violence Against Women
 
DATE: December 1, 2006
 
SUBJECT: OVW Response to the OIG Draft Audit Report – The Department of Justice’s Grant Closeout Process
 

Attached you will find the Office on Violence Against Women’s (OVW) response to the Draft Audit Report issued on November 17, 2006 on the Department of Justice’s Grant Closeout Process. The draft report contains 14 recommendations for OVW (#6, 7, 24, 25, 26, 27, 28, 29, 30, 31, 41, 42, 43 and 44). Each recommendation has been addressed separately.

The Office on Violence Against Women (OVW) recognizes that there have been significant delays in the past in the grant closeout process. During fiscal year 2006, OVW made revisions to its closeout process aimed at minimizing the time lapse between the grant end date and the closeout date. To achieve this goal, OVW has revamped and streamlined the internal closeout process, and continues to work with the Office of Justice Programs’ Office of the Comptroller (OJP OC) to improve the overall process. Highlights of enhancements to OVW’s internal closeout process include:

OVW has included its responses to the recommendations made by the Grant Closeout Process Audit conducted by the OIG.

TIMELINESS OF GRANT CLOSEOUT

Recommendation #6: Revise and fully implement grant closeout policies and procedures to ensure that expired grants are closed within 6 months after the end date.

OVW agrees with the recommendation to revise and fully implement grant closeout policies and procedures to ensure that expired grants are closed within six months after the grant end date.

During FY 2004 OVW became a separated component independent from OJP. Within this separation, OVW became responsible for performing certain functions that were previously performed by OJP OC, such as grant closeout status tracking, quality assurance of the closeout documentation, grantee follow-up for required final closeout report submission. OVW now contracts with OJP OC to obtain services similar to those it received when OVW was a component within OJP. In addition, the separation brought changes to the manner in which information is shared between the two entities. Also in 2004, OJP and OVW entered into a concerted effort to close-out grants. This resulted in both entities identifying gaps in the close-out procedures.

OVW has developed automated processes using data provided by OJP to identify and track grants that are approaching and past the grant expiration date on a graduated scale based on regulatory guidance. As part of this process, OVW has integrated a quality review of expired grant file documentation to ensure that all required forms have been submitted for programmatic and financial closeout. In addition, items identified through status tracking and quality review are used as a basis for grantee outreach and follow-up to facilitate timely closeout. These initiatives have necessitated increased data sharing, communication and collaboration between OJP and OVW that will result in improved grant closeout compliance within six months of the grant end-date.

During FY 2006 OVW conducted an internal evaluation to address the need for greater attention to the closeout process leading to an internal evaluation and revision of its internal closeout process. The revisions to the closeout process included measures aimed at improving the information flow, improved coordination with OJP, standardization of the internal closeout process, development of an internal closeout desk guide, and dedicating specific staff resources to the closeout process.

OVW understands that in order to discharge its obligation to promptly close out grants, additional measures must be taken both internally and externally. OVW will continue its reengineering of the closeout process so that expired grants will be closed within six months of the end date.

Response to Recommendation #7: Establish a system to track progress towards eliminating the backlog within the established timeframe.

OVW agrees with the recommendation to track progress towards eliminating the backlog within the established timeframe.

Prior to FY 2006 OVW did not have an internal tracking tool to track its closeouts and relied solely on periodic reports from OJP for closeout workload reporting. During FY 2006 OVW developed an internal grant closeout tracking tool as part of its revision of the overall closeout process. OVW created and maintains an MS Access tool which allows OVW to track its progress toward closing all grants, as well as the backlog of expired grants. The closeout tracking tool allows OVW leadership to monitor the progress of grant closeouts by period and by individual program. Additionally, the tool ages the grants within the closeout process which allows OVW to pursue necessary follow-up action in a timely manner.

OVW will continue to coordinate with OJP regarding enhancements it makes to its internal process and will integrate its enhancements into our tool. OVW will continue to enhance and maintain its internally developed closeout tracking tool.

DRAWDOWNS ON EXPIRED GRANTS

Response to Recommendation #24: Ensure that grantees are not allowed to draw down funds more than 90 days after the grantee end date without requesting and receiving an extension not to exceed 90 days.

OVW appreciates the OIG’s concern that grant drawdowns occurring after the end of a 90-day liquidation period may include unallowable or unsupported costs, and that limiting the timeframe for the liquidation of all obligations may mitigate this practice.

The grantee payment system used by OVW grantees is managed and maintained by OJP OC. Furthermore, the financial aspects of the closeout process, including tracking the liquidation and drawdown of grant funds, are handled by the OJP OC. At present, the grantee payment system does not include a control that specifically prevents a grantee from drawing funds after the liquidation period as long as the grantee has submitted a current SF-269. OVW is aware that OJP plans to migrate to a new financial system that would provide greater controls. We have communicated with OJP formally to express our commitment to assist in implementing this new system.

OVW acknowledges an obligation to take a more active role on its own to monitor expiring grants to that obligations are promptly liquidated and unused appropriated funds may be put to productive use. In the interim and as part of the planned enhancements to the regular grant management process, OVW will take the following steps to address this recommendation and improve the timeliness of grantee liquidation and drawdowns following the grant end date. First, OVW will inform grantees of the grant closeout requirements during all new grantee orientations. Second, OVW will conduct outreach to grantees whose grants are set to expire within 30 to 60 days to remind them of the closeout requirements and to encourage them to complete all liquidations and drawdowns in a timely manner. During this outreach effort, OVW will inform the grantees of their reported balances per the financial status reports, and payment balances based on their payment history reports, and work with grantees at that time to mitigate the occurrences of excess or unsupported payments. Grantees will be encouraged to request liquidation extensions, if needed. Third, OVW will highlight the requirements of the grant closeout process during other OVW-sponsored events such as the recent meeting of STOP Formula Program and State Coalition grantees. Fourth, OVW will review all grants with an expiration date that is 60 days past. For those grants with a remaining balance which exceeds $50,000, OVW will create a Grant Adjustment Notice (GAN) to freeze funds unless the grantee makes a liquidation extension request by the final liquidation date.

OVW recognizes that the decreasing and eliminating late drawdowns is an important goal, and that the time needed to implement systemic changes to correct this issue is not yet certain. OVW also recognizes the significant time, effort, and cost required to manually generate a GAN for each expired grant. Therefore, OVW will concentrate on expired grants with award balances that exceed $50,000, and will periodically revise this figure for reasonableness. This will allow OVW to target those grantees with the highest remaining balances while allowing us an opportunity to assess the overall impact of our new internal grant closeout process.

OVW anticipates taking corrective action related to this recommendation by the end of the current fiscal year.

Response to Recommendation #25: Work with the Office of Justice Programs’ Office of the Comptroller to ensure that the current grant payment system includes a control to prohibit grantees from drawing down funds after the end of the 90-day liquidation period.

See response to recommendation #24.

Response to Recommendation #26: Remedy the $37,279,986 in questioned costs related to drawdowns occurring more than 90 days past the grant end date.

OVW understands that the OIG is questioning the above costs because they represent the amount of grant funds grantees were allowed to draw down more that 90 days past the grant end date and may have included otherwise unallowable or unsupported costs. OVW recognizes and agrees with the OIG on the importance of timely drawdowns on grant funds.

OVW ’s analysis of the 404 grants revealed that a large number of grants included on this list are from state grantees, most of which fall under OVW’s STOP Formula Program through which states receive a statutorily determined amount of funds which they then distribute to subgrantees. These grants represent approximately 76% of the question costs. While we understand the importance of timely drawdowns after the grant project ends, we also recognize that formula grantees have an additional requirement of coordinating with subgrantees for final billing of approved obligated expenditures. This sometimes may cause a delay in the timing of liquidation and drawdowns of remaining obligated funds. In addition, STOP Formula grantees have a 25% match requirement that must be satisfied during the grant project period and reported on the final financial status report. As with liquidations, STOP grantees have experience delays in receiving the appropriate information for their subgrantees in order to report in a timely manner. OVW is aware that OJP questions the continued validity of the Department’s current 90-day regulatory standard for closing out grants. OVW is also aware that OJP takes the position that grant expenses duly obligated during the grant period should be liquidated, even if outside of the Department’s current 90-day regulatory standard, in order to achieve the purposes for which these grants (some of which are mandatory) were appropriated. We share OJP’s concern that the Department’s 90-day standard may not be feasible for state and local government agencies in particular to complete these financial activities.

OVW proposes the following remedies regarding this situation: 1) conduct targeted outreach to our formula grantees, particularly those on this list, to identify any issues or challenges they may have that we are not aware of that may also have created circumstances that delayed their ability to complete these required steps; 2) provide written notification to all other grantees on this list, many of which are current grantees, to reiterate the requirements of grant record retention and the grant closeout procedures; and 3) implement our new internal process, as noted previously, to prevent this from occurring in the future.

OVW anticipates taking corrective action related to this recommendation by within 90 days of the submission of this audit response.

Response to Recommendation #27: Work with the OC to ensure that the current grant payment system includes a control to prohibit negative award balances, e.g., total payments in excess of the net award amount.

OVW agrees with the recommendation that OVW should work with the OJP OC to ensure that the current payment system includes a control to prohibit negative award balances.

The grantee payment system in place at OVW is maintained and managed by OJP. As part of our revised internal closeout process, OVW currently requests and reviews the final closeout data for each closed grant on a periodic basis. This data review will also serve to ensure that closed grants do not have negative award balances. In addition, OVW will work with OJP OC to find alternative measures or controls to prohibit negative award balances, e.g., total payments in excess of the net award amount.

OVW anticipates taking corrective action related to this recommendation by the end of the current fiscal year.

Response to Recommendation #28: Remedy the questioned costs totaling $41,247 related to one grant for which the drawdowns exceeded the total award amount.

After an analysis of the drawdown payment history for this grant, OVW cannot conclude that a negative drawdown was made. It is important to note that the drawdown history reveals that the grantee completed a drawdown of $41,247, the exact amount of the questioned costs prior to the final recorded drawdown. When grant data was converted from ATOMIC to IFMIS, there were a few instances in which the data was not transferred accurately, and as a result, there remain some anomalies in IFMIS, in which either the payment or award balance did not transfer properly. Therefore, we believe that there may have been an error in the system rather than an additional drawdown resulting in these questioned costs.

OVW will contact the grantee and work with OJP OC to determine if this is a system error or an inappropriate drawdown. If this recommendation represents an accurate assessment, OVW will take the necessary steps to recover the questioned funds.

OVW anticipates taking corrective action related to this recommendation by the end of the current fiscal year.

Response to Recommendation #29: Ensure that grantees are not allowed to draw down funds for unallowable expenditures obligated after the grant end date.

OVW agrees with the recommendation that OVW should ensure that grantees are not allowed to draw down funds for unallowable expenditures obligated after the grant end date.

OVW has always maintained that funds be obligated within the grant period and recognizes that allowing grantees to obligate funds after the expiration of the grant is not in compliance with regulations and will continue to inform our grantees of this requirement. OVW will work with grantees and staff to promote compliance with this requirement.

In FY 2006 OVW revised its closeout process aimed at getting expired grants closed and remaining funds de-obligated in a timely manner. It is expected that by aggressively pursuing timely closeouts, the likelihood of expenditures being reported after the end date will be mitigated. As part of the planned enhancements to the regular grant management process, OVW will conduct outreach to grantees whose grants are set to expire within 30 to 60 days. During this outreach effort, OVW will inform the grantees of their reported balances per the financial status reports, and payment balances based on their payment history reports, and work with grantees at that time to mitigate the occurrences of excess or unsupported payments. OVW will also inform grantees of the process of requesting a no-cost extension of the project period to ensure that such extensions are properly recorded in a Grant Adjustment Notice (GAN) via the Grants Management System (GMS). OVW will work collaboratively with OJP OC to ensure that all no-cost extension GANs are reviewed and approved in a timely manner.

Finally, OVW will work to mitigate such instances by stressing the payment and obligation reporting rules and regulations in the new grantee orientation and grantee training, and by aggressively communicating these regulations through various outreach efforts prior to the expiration of the grants.

OVW anticipates taking corrective action related to this recommendation by the end of the current fiscal year.

Response to Recommendation #30: Ensure that grantees are not allowed to draw down excess funds for unsupported expenditures.

OVW agrees with the recommendation that OVW should ensure that grantees are not allowed to draw down excess funds for unsupported expenditures.

The current payment system does not prevent grantees from drawing down more that their reported expenditures. OVW will coordinate with OJP to develop a strategy to mitigate such instances. OVW will also complete more desk-based monitoring of grants, which when combined with site visits already being conducted, will help to identify grantees that may have drawn down funds for unsupported expenditures.

As part of the planned enhancements to the regular grant management process, OVW will conduct outreach to grantees whose grants are set to expire within 30 to 60 days. During this outreach effort, OVW will inform the grantees of their reported balances per the financial status reports, and payment balances based on their payment history reports, and work with grantees at that time to mitigate the occurrences of excess or unsupported payments.

OVW anticipates taking corrective action related to this recommendation by the end of the current fiscal year.

Response to Recommendation #31: Immediately discontinue the practice of allowing grantees to draw down unliquidated obligations beyond the 90-day liquidation period without an extension.

See response to recommendation #24.

OVW anticipates taking corrective action related to this recommendation by the end of the current fiscal year.

FUNDS REMAINING ON EXPIRED GRANTS

Response to Recommendation #41: Ensures that all funds remaining on grants are de-obligated within 180 days after the expiration of the grant and regranted, or returned to the general fund.

OVW agrees with the recommendation that all remaining grant funds are de-obligated within 180 days after the expiration of the grant and put to better use.

OVW will take closeout action on all expired grants to ensure that they are programmatically closed within 180 days of the grant end date. OVW does face the challenge of closing grants that are not compliant with specific requirements which make them ineligible for closure. For these grants, OVW is committed to ensuring that they are programmatically closed within 180 days, working with OJP OC to financially close and de-obligate remaining funds in a timely manner, and to ensure that they are not considered for additional grants until the outstanding issue(s) are resolved.

OVW anticipates taking corrective action related to this recommendation by the end of the current fiscal year.

Response to Recommendation #42: De-obligate and put to better use the $14,285,431 in remaining funds related to expired grants that are more than 90 days past the grant end date.

OVW agrees with the recommendation to de-obligate and reprogram the $14,285,431 in remaining funds related to expired grants that are more than 90 days past due to the extent that these grantees are not entitled to appropriate extensions for obligation or liquidation purposes.

OVW will dedicate additional resources to the addressing the closeout backlog and work with OJP OC to de-obligate the remaining funds on grants that comprise the closeout backlog. OVW will address all of the grants in the closeout backlog and will programmatically close all of the grants in the backlog during the current fiscal year. Furthermore, OVW will work with OJP to de-obligate any remaining funds in a timely manner in accordance with the revised grant closeout process. It is anticipated that the majority of the backlog will be closed and de-obligated prior to the end of the current fiscal year.

OVW anticipates taking corrective action related to this recommendation by the end of the current fiscal year.

Response to Recommendation #43: Ensure that remaining grant funds are de-obligated prior to closure.

OVW agrees with the recommendation to ensure that grant funds are de-obligated prior to closure.

The financial portion of the grant closeout which includes de-obligating funds prior to closing grants is conducted by OJP OC. OVW will communicate the need to address this issue via a memo to OJP requesting that OJP ensure that grant funds are de-obligated prior to the grants being closed. Additionally, OVW will work with OJP to ensure that the closeout process does not allow for such instances.

The recent OVW revisions to the closeout process include requesting data and performing analysis on all financially closed grants, this analysis will also include ensuring that the remaining balances have been appropriately de-obligated.

OVW anticipates taking corrective action related to this recommendation by the end of the current fiscal year.

Response to Recommendation #44: De-obligate and put to better use the $102,595 in remaining funds related to grants that were reported as closed.

OVW agrees with the recommendation to de-obligate and reprogram the $102,595 in remaining funds related to grants that were reported as closed.

OVW will work with the OJP OC to identify any OVW grants that were reported as closed but not fully de-obligated and to ensure the de-obligation of any remaining funds. Furthermore, the recent OVW revisions to the closeout process include requesting data and performing analysis on all financially closed grants, this analysis will also include ensuring that the remaining balances have been appropriately de-obligated.

OVW anticipates taking corrective action related to this recommendation by the end of the current fiscal year.


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