You’ve probably read about the GAO report from April finding nearly $800 million in funding remaining in expired grant accounts (those which were more than 3 months past the grant end date and had not been active for 9 months or more). That kind of news should wake up grant makers and seekers alike. The grant close-out process is the responsibility of both the funding agency and the awardee, but award recipients can/should take steps to ensure an effective close-out, making everyone—funding agencies, auditors, and especially taxpayers—happy. (Subscribers to KnowledgeBase can read a variation of this article here.)
Definition of the Grant Close-out
The grant close-out is the process by which the funding agency determines that all applicable administrative actions and all required work associated with the award have been completed. If an awardee does not seek a supplemental grant or a no-cost extension on the completion date, the grant is closed out.
Why Maintain Grant Close-out Documentation?
Because you could be audited, among other reasons. Any veteran grant manager will tell you that even when a grant is closed out, you're not quite finished. Subsequent steps must be determined, such as seeking funding for additional phases or converting a pilot program into a standard service. Even more important, records and supporting documentation must be maintained for a certain amount of time following grant close-out. For federally funding projects, records must be maintained for a minimum of three years from close-out. At any point during that time, your program may be audited. A number of other strings may also exist behind the grant life. Therefore, conduct a final review of your records and create a final section that calls out specific requirements and length of terms as identified within the grant award agreement.
What to File Under a Grant Close-out
At a minimum, the grant close-out consists of the following (a grant award agreement will contain more specific requirements than this list):
- Final reports: receipt of all required reports
- Ownership: disposition or recovery of federally owned assets—as distinct from property acquired under the grant
- Settlement of accounts: adjustment of the award amount and the amount of federal cash paid to the award recipient
Final reports include financial, performance, and other reports required under the grant. Typically, these reports are due within 90 days of the end of the project period.
Although no standard, government-wide disposition process exists for property, you should carefully review the requirements related to the disposal or transfer of equipment, real property, and other prescribed property that is specific to the grant.
Ideally, when all is done, zero dollars remain in the grant account. However, it is more likely that some amount exists. Any unencumbered balanced of cash advanced to you must be returned to the funding agency (see GAO report above). Similarly, if cash is owed for incurred expenses, the funding agency must promptly make payment.
Other Things to Keep in Mind
Records for a federal grant must be maintained for at least three years from the close-out date. This means that a multi-year grant of four years requires that documentation be maintained for at least seven years.
Simply having made final payment does not relinquish you of further financial obligation. It is possible that during a follow-up audit incurred expenses are identified as ineligible. In such a case, you may have to repay the funds.
Last, rules and accountability continue as long as you hold property acquired under a grant. Department of Interior programs come to mind here: Suppose funds were used to acquire property as a public park; that funding must continue to be used as originally authorized, in perpetuity. You cannot arbitrarily decide to "pave paradise and put up a parking lot." (Forgive the Joni Mitchell reference, but you get my point.)
The grant close-out between the funding agency and the recipient requires continuous sharing, communication, and feedback. It is the responsibility of the funding agency to notify award recipients in writing before the end of the grant period of the required final reports, the dates by which they must be received, and where they must be submitted. However, the awardee must reciprocate by adhering to all the grant close-out requirements, including final reports, ownership, account settlement, and recordkeeping.
What has been your experience with grant close-outs?
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