A strategic objective of the Department of Justice (DOJ) is to improve the crime fighting and criminal justice administration capabilities of state, local, and tribal governments.¹ While the federal government continues to play an important role in crime-fighting, much of the responsibility for crime control and prevention rests with state, local, and tribal governments. To this end, DOJ seeks to provide support to state, local, and tribal governments to develop their capacity to prevent and control crime and administer justice fairly and effectively through various grant, training, technical assistance, and research programs.

Within DOJ, the Office of Community Oriented Policing Services (COPS), Office of Justice Programs (OJP), and Office on Violence Against Women (OVW) are the primary agencies responsible for providing criminal justice grant funding to state, local, and tribal governments. From October 1, 1999, through March 31, 2006, DOJ awarded 49,151 grants with funds totaling $23.65 billion. The details of the grants awarded by COPS, OJP, and OVW are shown in Table 1.

Grant monitoring is a critical management tool to determine whether grantees have adequately implemented the grant program, achieved the grant objectives, and properly expended grant funds. An important aspect of grant monitoring and administration is timely and proper grant closeout because it is the final point of accountability for the grantee. Timely grant closeout is an essential program and financial management practice because it can identify grantees that have failed to comply with grant requirements, as well as identify excess and unallowable costs charged to the grant or unused funds that can be deobligated and used for other grants.

Federal Regulations Regarding Grant Closeout

According to federal regulations, grants should be closed out when the grant has expired (reached the end date) and all open administrative, compliance, legal, and audit issues have been resolved. During the period covered by our audit, OJP and OVW policy required grants to be closed within 6 months after the grant end date. COPS did not have a specific timeframe in which expired grants should be closed. However, in our judgment, 6 months after the grant end date is a reasonable timeframe for closing out expired grants; therefore, we used the 6-month timeframe in analyzing all grants, including COPS grants.

Additionally, federal regulations require that:

• Grantees submit, within 90 calendar days after the date of completion of the grant, all financial, performance, and other reports as required by the terms and conditions of the grant.²

• Grantees liquidate all obligations incurred under the grant and request the final reimbursement (draw down) not later than 90 calendar days after the funding period or the date of completion as specified in the terms and conditions of the grant, unless the federal awarding agency authorizes an extension.

• The awarding agency will, within 90 days after the receipt of the final financial report and draw down, make upward and downward adjustments to the allowable costs.

• The grant recipient promptly refunds any balances of unobligated cash that the federal awarding agency has advanced or paid and that is not authorized to be retained by the recipient for use in other projects.

• Financial records, supporting documents, statistical records, and all other records pertinent to a grant must be retained for a period of 3 years from the date of submission of the final financial report.

Background

For the past 6 years, grant management has been identified by the Office of the Inspector General (OIG) as one of DOJ’s top 10 management and performance challenges. Specifically, the OIG has reported that grant management continues to be a challenge for the following reasons:

• OIG reviews continue to find that many grantees do not submit required financial and progress reports or do not submit them timely;

• Numerous deficiencies continue to be found in DOJ’s monitoring of grantee activities;

• OIG audits found that grant funds were not regularly awarded in a timely manner and that grantees were slow to spend available monies; and

• More than 375 OIG audits of grants have resulted in significant dollar‑related findings.

In March 2005, the OIG issued an audit report on the Administration of Department of Justice Grants Awarded to Native American and Alaska Native Tribal Governments (Report No. 05‑18) that included an evaluation of the effectiveness of the COPS, OJP, and OVW closeout processes for tribal‑specific grant programs. This audit revealed that:

• Only 20 percent of the expired grants had been closed;

• Only 21 percent of the closed grants were closed in a timely manner, within 6 months after the grant end date;

• Despite the fact that financial guidelines require that grant funds must be drawn down within 90 days after the end of the grant period, grantees were allowed to draw down grant funds more than 90 days after the grant end date; and

• Unused grant funds for expired grants, which should have reverted back to the granting agency pursuant to financial guidelines, had not been deobligated.

The OIG has issued several other reviews of COPS and OJP’s grant management that describe concerns related to grant closeout. Specifically:

• U.S. Department of Justice Annual Financial Statement, Fiscal Year 2005, Audit Report No. 06-17, March 2006, found that OJP program managers were not consistently closing out grants in accordance with existing policy or adequately documenting a justification for the delay. The report also found insufficient communication between the OJP program offices and the OJP Office of the Comptroller (OC) to ensure that once grants are closed remaining funds are deobligated in a timely manner. In addition, the OC did not adequately work with grantees to ensure that all financial criteria were met; as a result, the OC was not able to deobligate all remaining funds as required.³

• Office of Justice Programs Technical Assistance and Training Program, Audit Report No. 04-40, September 2004, found that OJP grant managers did not ensure that required financial and progress reports were submitted timely and accurately, and other monitoring and closeout requirements were not being adhered to.

• Streamlining of Administrative Activities and Federal Financial Assistance Functions in the Office of Justice Programs and the Office of Community Oriented Policing Services, Audit Report No. 03-27, August 2003, found that OJP did not maintain in its Grant Management System information related to grant monitoring and closeout after the grant was awarded.

• Management and Administration of the Community Policing Services Grant Program, Audit Report No. 99-21, July 1999, found that COPS had not deobligated remaining funds for 127 of 500 expired grants totaling over $15 million. Moreover, the remaining funds for 373 grants that were deobligated were not done so in a timely manner.

In sum, prior audit reports identified significant and continuing concerns related to grant closeout within DOJ.

Audit Approach

Based on the frequency and magnitude of the findings related to grant closeout in the previous reports, and the fact that for the past 6 years grant management has been identified by the OIG as one of DOJ’s top 10 management and performance challenges, we conducted an audit of the COPS, OJP, and OVW closeout processes to determine whether their grant closeout policies and procedures are adequate to ensure that:

• Expired grants are closed in a timely manner;

• Grant funds are drawn down in accordance with federal regulations, DOJ policy, and the terms and conditions of the grant; and

• Unused grant funds are deobligated prior to closeout.

Our review included 60,933 expired COPS, OJP, and OVW grants totaling $25.02 billion. These grants consisted of 44,197 grants totaling $17.61 billion that were closed from October 1997 through December 2005, and 16,736 expired grants totaling $7.41 billion that had not been closed as of December 2005. The details of our universe related to COPS, OJP, and OVW is shown in Table 1.

Summary of Findings and Recommendations

Overall, we found that OJP, COPS, and OVW substantially failed to ensure that grants were closed appropriately and in a timely manner. If the grants had been closed out more timely, hundreds of millions of dollars in questioned costs could have been used to provide the DOJ with additional resources to fund other programs or returned to the federal government’s general fund.

Our audit includes findings related to our analysis of three general areas: (1) timeliness of grant closeout, (2) drawdowns on expired grants, and (3) unused grant funds on expired grants. As discussed in the following sections, we found that:

• COPS, OJP, and OVW failed to ensure that grants were closed in a timely manner. Only 13 percent of the 60,933 grants included in our sample were closed within 6 months of the grant end date. Further, we identified a backlog of 12,505 expired grants, more than 6 months past the grant end date that had not been closed.

• Forty-one percent of the expired grants that we sampled did not comply with grant requirements, including financial and programmatic reporting requirements and local matching fund requirements. Despite this, non-compliant grantees were awarded 129 additional grants totaling $106.04 million during the period of non-compliance.

• Despite the fact that grantees must draw down all allowable grant funds within 90 days after the grant end date (the 90-day liquidation period), grantees were allowed to draw down funds totaling $554.19 million after the end of the liquidation period.

• Based on a sample of 66 grants with drawdowns more than 90 days past the grant end date totaling $75.90 million, we found that the drawdowns included unallowable costs totaling $5.7 million and unsupported costs totaling $574,940. Additionally, we identified drawdowns totaling $13.04 million for which we were unable to determine if the drawdowns included unallowable or unsupported costs because the accounting records or supporting documentation was no longer available.⁵

• Unused grant funds totaling $172.28 million related to grants that were more than 90 days past the grant end date had not been deobligated and put to better use.

The following sections describe our findings in more detail.

Closed Grants

The timely closeout of expired grants has been a long-standing problem within DOJ. Based on our review of the 44,197 grants closed by COPS, OJP, and OVW, we found that timely grant closeout continues to be a significant problem, as shown in Table 2.

Specifically, this chart demonstrates that:

• 38,533 grants (87 percent) were not closed within 6 months after the grant end date;

• 22,875 grants (52 percent) were not closed until more than 2 years after the grant end date; and

• 4,096 grants (9 percent) were not closed until more than 5 years after the grant end date.

However, we found that COPS, OJP, and OVW have made some improvements in the timeliness of grant closeout. Specifically:

• On average, the grants closed by COPS in 2003 had been expired for 4 years before they were closed; conversely, the grants closed in 2005 had only been expired for 2.8 years.

• On average, the grants closed by OJP in 2004 had been expired for 2.6 years before they were closed; conversely the grants closed in 2005 had only been expired for 1.5 years.

• On average, the grants closed by OVW in 2004 had been expired for 2.2 years before they were closed; conversely the grants closed in 2005 had only been expired for 1.3 years.

Further, since 2002 it appears that grant closeout has become a higher priority within DOJ. Of the 44,197 closed grants, we found that only 9 percent were closed between 1998 and 2001, while 91 percent were closed between 2002 and 2005. Despite these improvements, we found that a significant backlog of expired grants that have not been closed still exists within COPS, OJP, and OVW.

Expired Grants That Have Not Been Closed

Based on our review of the 16,736 expired grants that had not been closed, we identified a significant backlog of grants more than 6 months past their end dates, as shown in Table 3.

Specifically, this chart demonstrates that:

• 12,505 grants (75 percent) had been expired more than 6 months but had not been closed;

• 8,359 grants (50 percent) had been expired more than 2 years but had not been closed; and

• 2,443 grants (15 percent) had been expired more than 5 years but had not been closed.

We determined that on average: (1) the COPS grants had been expired for more than 3.5 years without being closed, (2) the OJP grants had been expired for more than 2 years without being closed, and (3) the OVW grants had been expired for more than 1.5 years without being closed.

Expired Grants Backlog

In addition to improving the timeliness of the closeout process, it is important that DOJ eliminate the backlog of expired grants that have not been closed to determine: (1) if grantees complied with grant requirements, (2) grant funds were expended properly, and (3) unused funds are deobligated. Therefore, we analyzed the backlog of expired grants that had not been closed to determine if it was increasing or decreasing. We found that the backlog increased slightly from FYs 2000 to 2005, but has been declining since 2003, as shown in Chart 1.

CHART 1.  ANALYSIS OF EXPIRED DOJ GRANTS BACKLOG

Source:

OIG analysis of expired COPS, OJP, and OVW grants as of FY 2005 and grants awarded between FYs 2000 and 2005

As shown in Chart 1, the backlog of expired DOJ grants that had not been closed increased by 1,592 grants between FYs 2000 and 2005. Specifically:

• The backlog of expired COPS grants increased by 2,791 grants between FYs 2000 and 2005.

• The backlog of expired OJP grants decreased by 1,728 grants between FYs 2000 and 2005.

• The backlog of expired OVW grants increased by 529 grants between FYs 2000 and 2005.

While the overall backlog of expired grants that have not been closed increased between FYs 2000 and 2005, the overall backlog has decreased since FY 2003. However, COPS, OJP, and OVW still need to make significant improvements in their closeout processes in order to substantially eliminate the backlog of expired grants that have not been closed.

Drawdowns on Expired Grants

According to 28 C.F.R. § 66.23, grantees are required to liquidate all obligations incurred under the grant award not later than 90 days after the end of the funding period. Additionally, according to 28 C.F.R. §66.50(b), within 90 days after the expiration of the grant, the grantee must submit the final request for payment (drawdown).⁶ At the request of the grantee, the DOJ awarding agency may extend the liquidation period. In other words, the grantee must draw down all allowable grant funds within 90 days after the grant end date, unless an extension is authorized. If an extension is not authorized, any grant funds not drawn down within the 90-day liquidation period should revert back to the DOJ awarding agency to be regranted or returned to the general fund. During the period included in our audit, COPS, OJP, and OVW also had requirements in their own policies that required grantees to draw down all allowable grant funds within 90 days after the grant end date to coincide with the grantee’s submission of its required final financial report.⁷

However, we found that the current practices of COPS, OJP, and OVW do not conform to federal regulations and their own policies. In fact, we found that a common practice of COPS, OJP, and OVW was to contact grantees and instruct them to draw down any remaining funds even though the 90-day liquidation period has passed. The DOJ awarding agencies spend a significant amount of time following up with grantees to ensure that funds are drawn down more than 90 days after the end date but before the grant is closed. This practice not only violates federal regulations, it also contributes to the failure to close out grants in a timely manner.

Based on our review of 60,933 expired grants totaling $25.02 billion, we found that COPS, OJP, and OVW allowed grantees to draw down funds from 8,917 expired grants totaling $554.19 million more than 90 days past the grant end date. We are questioning this amount as unallowable because federal regulations and component policy prohibit drawdowns more than 90 days past the grant end date. The details of our questioned costs related to COPS, OJP, and OVW is shown in Table 4.

Impact of Drawdowns on Expired Grants

To determine the potential impact in allowing grantees to draw down funds after the 90-day liquidation period, we selected a judgmental sample of 90 grants for which drawdowns occurred at least 1 year after the end of the grant liquidation period. We reviewed the most recent financial reports for the 90 grants in our sample and found that:

• Grantees reported costs for periods that occurred after the grant end date for 53 percent of the sample grants, indicating that over $6.09 million in unallowable costs may have been included in the drawdowns occurring after the end of the liquidation period.

• Expenditures reported on the financial reports provided did not support the total drawdowns for 9 percent of the sample grants, indicating that $116,950 in unsupported costs may have been included in the drawdowns occurring after the end of the liquidation period.

Based on our review of the financial reports for the 90 grants in our sample, we developed concerns that drawdowns occurring after the end of the 90‑day liquidation period included unallowable and unsupported costs. As a result, we selected an additional sample of 66 grants with drawdowns more than 90 days past the grant end date totaling $75.90 million. For each grant in our sample, we conducted a limited review of expenditures at the grantee’s location to determine whether the drawdowns included costs that were obligated after the grant end date or unsupported costs.⁸

Based on our review, we found that the drawdowns included unallowable costs totaling $5.7 million for expenditures obligated after the grant end date or paid after the end of the 90-day liquidation period. We also identified unsupported drawdowns totaling $574,940. Additionally, we identified drawdowns totaling $13.04 million for which we were unable to determine if the drawdowns included unallowable or unsupported costs because the accounting records or supporting documentation was no longer available. The results of these reviews appear to confirm our initial concern that drawdowns occurring after the grant end date are likely to include unallowable or unsupportable costs.

Funds Remaining on Expired Grants

As stated previously, timely closeout of grants is an essential financial management practice to ensure that any unliquidated grant funds are recovered and used for other programs, as permitted by statute, or returned to the general fund. During our audit, we identified unused grant funds totaling $163.96 million that had not been deobligated and put to better use. These funds were related to expired grants more than 90 days past the grant end date that had not been closed, for which the grantees had neither requested nor received an extension of the time in which to draw down funds. The details of the funds that should be deobligated and put to better use are shown in Table 5.

Additionally, we identified 309 grants reported as closed, with unused funds totaling $8.32 million that had not been deobligated and put to better use. These included 103 COPS grants with unused funds totaling $4.87 million, 195 OJP grants with remaining funds totaling $3.49 million, and 11 OVW grants with remaining funds totaling $102,595.

Conclusion

Grant closeout is a critical component of grant monitoring because it is the final point of accountability for the grantee. Timely grant closeout is an essential program and financial management practice to identify grantees that have failed to comply with grant requirements, as well to identify any excess funds. Our audit found that DOJ substantially failed to ensure that grants were closed in a timely manner.

If grants are not closed in a timely manner, non-compliant grantees may not be identified until years after the grant end date. Our analysis of a sample of expired grants that had not been closed found that 41 percent of the grantees were not compliant with grant requirements, including financial and programmatic reporting requirements and local matching fund requirements. Nonetheless, these non-compliant grantees were awarded 129 additional grants totaling $106.04 million during the period of non‑compliance.

Recommendations

Our report contains 44 recommendations that focus on specific steps that COPS, OJP, and OVW should take to improve the grant closeout process. These recommendations include requiring that:

• Expired grants are closed within 6 months of the grant end date;

• Timelines are established for eliminating the backlog of expired grants that have not been closed;

• Grantees are prohibited from drawing down grant funds after the end of the 90-day liquidation period, unless an extension is requested by the grantee and approved by the DOJ awarding agency;

• Questioned costs related to drawdowns after the end of the 90-day liquidation period are addressed; and

• Unused grant funds for expired and closed grants are deobligated in a within 6 months after the grant end date and put to better use.

1. Department of Justice Strategic Plan, Fiscal Years 2003 - 2008.

2. According to 28 C.F.R. §66.50 and 28 C.F.R. §70.71, the federal awarding agency may approve extensions when requested by the recipient.

3. These findings were also identified in U.S. Department of Justice Annual Financial Statement, Fiscal Year 2003 as Restated, Audit Report No. 05‑36, September 2005; and U.S. Department of Justice Annual Financial Statement, Fiscal Year 2004 as Restated, Audit Report No. 05‑38, September 2005.

4. Throughout this report, differences in the total amounts are due to rounding, in that the sum of individual numbers prior to rounding reported may differ from the sum of the individual numbers rounded.

5. It should be noted that we did not question the unallowable and unsupported costs identified during our on-site reviews. The sample of 66 grants with drawdowns totaling $75.90 million that occurred more than 90 days past the grant end date were already included in the question costs totaling $554.19 million that we previously identified in this finding.

6. 28 C.F.R. § 66.50(b) requires that within 90 days after the expiration of the grant, the grantee must submit the final request for payment, Standard Form 270 (SF 270). The C.F.R. is outdated in that the DOJ awarding agencies no longer use the SF 270, Request for Advance or Reimbursement. Instead, grantees request funds (drawdown) using: (1) Phone Activated Paperless Request System (PAPRS); or (2) Letter-of-Credit Electronic Certification System (LOCES). Generally, funds will be deposited into the grantees financial institution within 48 hours after the drawdown request is received. In our judgment, although the DOJ awarding agencies no longer use the SF 270 cited in 28 C.F.R. § 66.50, grantees are still required to draw down all allowable grant funds within 90 days after the grant end date.

7. 28 C.F.R. § 66.50 requires that within 90 days after the expiration of the grant, the grantee must submit the final financial report. The OJP financial guide does not require the final financial report to be submitted until 120 days after the expiration of the grant, which contradicts the C.F.R. The OJP has recognized this problem and is planning to revise the financial guide.

8. We found that the grantees had not maintained records for 9 grants with drawdowns totaling $36.14 million; therefore, we were unable to review the expenditures for these grants and the results of our analysis are based on 57 grants with drawdowns totaling $435.03 million.