Award Closeout

What is Closeout?

  • Process to finalize all sponsor requirements at the conclusion of the award
  • Each award will detail the requirements but typically these include: 
    • Final Technical (programmatic) Report
    • Final Property Report
    • Invention Report
    • Final Fiscal (financial) Report

Important points to remember

  • Standard timeline for completion of reconciliation and closeout is within 90 days of project end date.
  • Must show cost sharing
  • Must not show unpaid obligations. Overdrafts must be transferred to non-restricted funds!
  • Technical reports by PI – refer to terms/conditions for submission requirements
  • Carefully review terms/conditions to determine the full complement of closeout requirements (e.g., property report, data sharing).

Closeout complexities

  • Subcontracts
  • Subaccounts
  • Encumbrances
  • Late purchases/expenditures
  • Less than timely direct charges
  • Residual inventory of unused supplies

Introduction to Award CloseoutTime ConstraintsFinancial ConsiderationsEquipment
Residual Inventory of Unused SuppliesProgram IncomeContinuing ResponsibilitiesRecord Retention
Retained PropertyAudit Rights and AdjustmentSuspension and TerminationTransfer of Investigator


Introduction to Award Closeout

The closeout of a grant or cooperative agreement involves fairly routine administrative actions completed by both the awardee and the federal awarding agency.

As stipulated in OMB Circular A-110, a recipient is expected to submit all final financial, programmatic, and other reports, such as property and inventions, within 90 days after the end of the funding period. OMB Circular A-110 provides for an extension of this reporting deadline, but such an extension must be requested in writing and approved in advance of the end of the 90-day period. Such extensions are not always granted.

While closeout requirements generally are identical across federal agencies, the specific type of closeout procedures required will differ according to the specific award. For example, NIH makes awards that generally involve both a project period and a budget period. The award is not typically "closed out" until the project period is concluded, and the grantee has submitted a required official final financial report. Although there may be a new multi-year renewal funded by NIH (which carries the same base award number, changing only the prefix and suffix numbers), each of the competitive segments is viewed independently, and closeouts are performed on each of the multi-year competitive segments. This is true only in some of the awards made by NIH; others require annual financial reporting that effectively "closes" the award each year.

Grants from NSF are handled differently. That agency makes individual multiyear awards but adds the increments after the original award as modifications to the initial award and never changes the grant number, not even the prefix or suffix. In such instances all years of the award are viewed as a single award and the award is closed out at the end of that period. Any "renewal" may be treated as an independent, new award, and receive a new agency grant number. Thus, the clock for closeouts starts over with each new award, necessitating all of the closeout documentation at the end of each. In lieu of an official final financial report (as required by NIH, see paragraph above), NSF uses the financial information on the grantee institution's quarterly report for closeout purposes.

Prior to beginning closeout procedures, colleges and universities should consult the appropriate program regulations governing their respective awards to assure that all reporting requirements will be met.

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Time Constraints

All obligations associated with the project must be met within 90 days after the end of the period to correspond with the submission of the final financial reports. Accordingly, invoices from vendors, payments to consultants, and wage payments to staff involved in preparing final documents are all matters that should be resolved by the 90-day deadline. Likewise, any transfer of costs appropriate to the award also must be made within that same 90-day period.

"Trailing charges" are often a problem when trying to closeout an award. These trailing charges usually are those made by other parts of the institution to an award, such as costs relating to animal care, printing, shops, stockrooms, etc. Institutional systems generating these charges often do so several months behind charges being lodged against a federal account. It is important that these institutional charging entities understand the constraints of federal reporting requirements

Closeout of subawards may complicate this process. Many institutions allow for this complication at the time a subaward is issued by making reports due to the institution 60 days after award termination or the end of a competitive segment. Another effective procedure is to set the term of the subaward to end 30 days prior to the date the prime award terminates. This allows the subrecipient to submit all final documents 30 days prior to the submission date for the prime recipient and provides sufficient time for the prime awardee to incorporate subaward expenditures into its prime grant financial assistance award.

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Financial Considerations

Financial closeout requirements vary according to awarding agency. With few exceptions, the closeout process will always include a final financial report. What may differ is the method of final payment. For grantees who receive their funds in the form of letter of credit drawdowns from their granting agency, final payment will most likely have been made in the form of an advance cash draw. For grantees that invoice their granting agency in order to receive payment, final payment may occasionally be withheld pending receipt of all reports, including technical and patent reports.

Regardless of payment method, if a grantee receives excess funds, reimbursement should be made to the government at the time of final reporting.

A few agencies, most notably some Department of Defense agencies, provide cash advances. At the time of closeout, it is important to determine whether those cash advances generated interest and require payment to the government pursuant to Sec. __.22, Payment of OMB Circular A-110. That section of A-110 provides that advances deposited in interest-bearing accounts shall be subject to annual remittance of interest earned on federal funds. Interest amounts up to $250 per year may be retained by the institution for administrative expenses.

There is generally little closeout review of financial reports by granting agencies. However, financial records remain subject to future audit — including those conducted under OMB Circular A-133 — and cost disallowances may occur at that time. Grantees are legally required to retain all financial records for a minimum of three years after submission of all final reports and to have those records available for any subsequent audit.

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Equipment

For most federal-funded grants and cooperative agreements, title to equipment acquired during the project period vests in the institution. OMB Circular A-110, Part __.33 defines this as "exempt property." If title does vest with the institution, the grantee has no further responsibilities to the government upon closeout. A-110 does state that the equipment should be used for the project, if it is continued, or on other federal projects, but if there is no further use for it, an institution may dispose of it by selling it, trading it in, or simply scrapping it. If the institution sells the equipment, there is no requirement to reimburse the government.

There may be a rare occasion when equipment is acquired as government-furnished equipment (GFE). Although much more common in contracts, any defined GFE under a grant award normally is returned to the awarding agency as part of the closeout process. [Note: The Circular A-110 requirement is less stringent than that listed in the companion Circular A-102, which is applicable to state and local government programs. In Circular A-102, federal agencies are instructed to provide advance notice in the Federal Register, or through other appropriate means, of their intended funding priorities for discretionary assistance programs unless those funding priorities are established by federal statute.]

Disposition of equipment acquired under the grant is subject to the specific regulations of the funding agency and begins with the determination of which party has title to the equipment. If title to equipment remains with the government, OMB Circular A-110 stipulates that the recipient organization will either:

  1. repay the federal government its share of the fair market value of the property;
  2. receive payment for its share of the fair market value of the property and return the asset to the government; or
  3. transfer title to the property to a third party (perhaps another grant recipient).

In the latter case, a recipient will be paid its fair share of the fair market value along with any shipping costs. In order to accomplish this, federal agencies — as part of the closeout process — will generally require a recipient to submit an inventory of property acquired with grant funds. OMB Circular A-110 states that, if any capital asset has fallen below $5,000 of fair market value, that asset may be retained without compensation to the government. This policy would be implemented after a cost benefit analysis by the federal government shows that the cost of recovering the asset is sufficiently large as to not justify that action when compared to the asset's value. The combination of exempt equipment where an institution retains title and the depreciation of equipment to market values of less than $5,000, generally has the result that the institution retains virtually all of the equipment acquired under grants and cooperative agreements.

An often difficult issue arises when an institution has title to equipment, but the award has not been totally closed out and the principal investigator moves from one institution to another. In such cases, a federal agency may mandate that the equipment acquired under the award be transferred to the new institution.

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Residual Inventory of Unused Supplies

Section ___.35 of OMB Circular A-110 addresses the requirement of reimbursing the federal government for any inventory of unused supplies which exceeds $5,000 at the time of termination of the award. In this instance, the federal government requires that the institution reimburse the government for its fair share of such supplies.

In reality, a college or university will seldom find itself in the position of having such an inventory, but because the regulations apply in those rare instances, institutions should have some method of determining whether these residual inventories exist. This can be easily accomplished by querying the principal investigator or department administrator.

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Program Income

Institutions are required to report program income acquired during the life of an award. Reporting of program income is done in accordance with the requirements of the award either as an addition to the award, cost-sharing on the project, or as a deduction from the award. This is a reconciliation which is normally performed by an institution's grant accounting office and may well need coordination and consultation with the principal investigator.

Once the final financial report has been submitted, any further program income belongs to the institution and the institution has no further reporting requirements to the federal funding agency.

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Continuing Responsibilities

A number of requirements extend beyond the closeout of the award and must be addressed by a recipient organization. These include:

  • record retention;
  • retained property; and
  • audit rights and adjustment.

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Record Retention

Record retention requirements are specified in OMB Circular A-110, Section __.53, and the government may not impose additional record retention requirements on grantees. For what appear to be simple requirements, they create considerable confusion, particularly in the area of retention of technical records.

The specific regulation states that financial records, supporting documents, statistical records, and all other records pertinent to an award shall be retained for a period of three years from the date of submission of the final expenditure report or, for awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, as authorized by the federal awarding agency. The only exceptions are as follows:

  1. If any litigation, claim or audit is started before the expiration of the three-year period, records must be maintained until all litigation, claims and findings have been resolved and final action taken;
  2. Records for real property and equipment shall be retained for three years after final disposition;
  3. When records are transferred to the federal awarding agency, retention is no longer required of the grantee; and
  4. Indirect cost (F&A) rate proposals, cost allocation plans, etc. may have three-year retention periods with different start dates if the rates are, or are not, submitted for negotiation (see Section __.53g).

As a matter of practice, institutions normally retain such records for longer periods than specified in the federal regulations. This practice arises from a number of practical considerations: (1) institutions often address awards — particularly NIH awards — in terms of competitive segments; (2) such a segment may consist of as many as five budget periods and the way institutions manage such awards (e.g., in terms of creating new accounts) dictates treating the entire competitive segment as a single unit; (3) payroll offices, accounting offices, purchasing departments, and property offices do not normally segregate transaction-level records by type of sponsor, preferring to collect and store such records in sequential order regardless of the source of funds; (4) (for public institutions) state government retention requirements are often longer than those imposed by the federal government; and (5) federal regulations governing record retention for contracts generally specify longer retention times than for assistance awards, and it is often easier to retain all records for the period specified in the contract regulations.

Institutions are advised to balance these practical considerations against the requirement to allow access to such records if they are retained longer than the retention period specified in OMB Circular A-110.

For financial and administrative data, there seems to be little controversy over what constitutes records. The same cannot be said for technical and programmatic data. For example, are the printouts from an instrument's calibration runs data that must be retained? What about gel samples or degradable slides? Because agencies of the federal government have defined such research data as records subject to retention, institutions of higher education have begun creating policies to attempt to define scientific records for retention purposes.

In general, institutions have defined research data as information, regardless of form or the media on which it may be recorded, including computer software. In practice, scientific data generally is defined to include material contained in laboratory notebooks or other media such as computer disks and machine printouts and includes both intangible data (e.g., statistics, findings, conclusions) and tangible data (e.g., notebooks, printouts). Retention of this data generally is delegated to the principal investigator (who, after all, needs the data for future research activities), but institutions are beginning to establish policies about the retention/return of such data if an investigator leaves the institution.

Retention of technical and scientific records has become a thorny issue with the implementation of formal regulations related to misconduct in science cases. Because of reported instances where scientific records were no longer available at the time of a scientific misconduct allegation, NSF formally sought and received an opinion from OMB stating that scientific data constituted records. In these instances, such records will be required and are the primary basis for the establishment of this requirement.

Compounding the issue of retention of scientific and technical records is the potential for Freedom of Information Act requests under OMB Circular A-110, Section __.36. While this requirement did not specifically state a data retention period and one could presume that it is the same as other record retention requirements, there may be some reason to retain certain research data longer if it fits within the definition of Section __.36 and is known to be the basis for federal regulation.

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Retained Property

If tangible property (e.g., equipment) acquired with grant funds is retained, as may be allowable in the specific grant provisions, an institution must continue to account for such property. This means

  1. the property must be part of the property management system of the institution (i.e., on the property records);
  2. the property must be periodically inventoried to assure its continued existence and condition;
  3. reconciliation of any losses must occur;
  4. final disposition of the property must be tracked. Customarily, the fact that an organization has retained property is usually a recognition that there was sufficient basis for acquiring the asset during the life of the grant-funded project and any residual financial value is de-minimis; and
  5. property must be tracked for indirect (F&A) cost purposes. Property originally acquired under federal grants is exempt from inclusion in an institution's indirect cost pool for calculation of indirect (F&A) rates. The government has already paid for the equipment. To include it in the F&A cost pools would, in effect, double charge the government. Thus, even though title has transferred to the institution, the institution must ensure that such property is never factored into its F&A rate proposal.

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Audit Rights and Adjustment

The federal government's right to audit and disallow costs is not affected by closeout. That right may involve the conduct of audits by many different agencies, including those by federal personnel (such as the Office of the Inspector General (OIG) of the awarding agency, the awarding agency, or by the cognizant audit agency of the institution (e.g., either the Department of Health and Human Services or Defense Contract Audit Agency/Office of Naval Research)). Audits may also be performed by independent nonfederal auditors engaged by the grant recipient. If, as a result of any of those audits, questioned costs are disclosed or other findings related to policies and procedures, internal controls, or other administrative matters arise, those issues must be resolved.

The possibility exists that a grant that has been closed out would be reopened as a result of subsequent audit activity and the federal government may very well be able to adjust claims downward if it determines that questioned costs generated by the auditor should be disallowed. Alternatively, the possibility does exist that if the recipient has failed to submit a claim related to the federal project and there are funds remaining from the appropriation that funded that project, an adjusted final financial report with additional claims could be submitted. As long as the statute of limitations on that project or program has not expired, the recipient conceivably might recover additional funds. The likelihood of this latter event occurring is, of course, relatively remote.

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Suspension and Termination

Although it is an unlikely event, the possibility of earlier closeout does exist if the federal government exercises the suspension and termination provisions available to it under OMB Circular A-110. Unlike contracts, grants and cooperative agreements may not be unilaterally suspended and terminated by awarding agencies for convenience. If a grant or cooperative agreement is to be terminated for convenience, it may only be done unilaterally by the recipient or by mutual consent. Thus, termination for default — with the administrative requirement to perform all required closeout actions — would be the result of serious difficulties in the conduct of the project. As a matter of practice, termination for default might occur for egregious scientific misconduct of some type or due to serious lapses in financial stewardship.

Under applicable federal grant administrative procedures, in order for the federal government to terminate an award, it must first go through the suspension process. Suspension is the interruption of a project during its period of performance. If an award is suspended, it likely will be because the federal awarding agency alleges that there has been a material violation of the terms and conditions of the grant award. That material violation is the subject of a notice to the recipient with appropriate corrective action identified and a deadline for its accomplishment established.

Suspension can only be resolved in one of two ways: the recipient takes the corrective action stipulated in the notice or the federal agency is authorized to move on to termination. OMB, in writing general grant rules for federal agencies, wisely did not include a specific amount of time that must pass between suspension and termination. Federal agencies are to use judgment in deciding how quickly to move on to the more draconian measure. If an award is suspended, the recipient may incur no new costs and payment may be interrupted. Obviously, an institution faced with a suspension notice needs to assess its situation and make an appropriate response.

If a federal agency moves on to termination of a previously suspended award received by the institution, the recipient is allowed to claim any prior incurred costs so long as they meet the provisions of OMB Circular A-21. Institutions are required to take affirmative action to cancel outstanding obligations, but the awarding agency is required to honor uncancellable commitments. This situation does not arise very often and some federal officials have routinely referred to suspension and termination as "cataclysmic closeout."

In situations of termination for default, sponsored programs personnel are advised to work closely with their legal counsel (or equivalent) in seeking an appropriate resolution, since default actions can have far-reaching consequences, For example, institutional certifications for other awards often require disclosure of all recent — the past three years — termination for default actions and can result in prolonged discussions prior to subsequent awards.

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Transfer of Investigator

There are instances when an investigator chooses to leave an institution prior to the conclusion of a funded project and seeks to transfer that project to his or her new institution. In most cases, the federal government accommodates the request through a process of terminating the existing award at the original institution and making a new award to the new institution. While it often remains the prerogative of the original institution to offer a substitute investigator, it is more likely that both institutions will agree that a transfer is in the best interests of the project. Examples of the rare instances where an institution may wish to retain the award could include equipment grants, multi-investigator projects, center awards, and the like.

Most agencies have defined procedures for these cases. In general, the awarding agency is notified by the original institution of the investigator's plans and the institution's willingness to transfer the grant. NIH has forms that need to be completed by the investigator and the institution. These forms relinquish the original institution's interests in the grant and provide an estimate of funds remaining at the time of the investigator's relocation. In the case of NSF, the transfer is done in the FastLane system. In addition, equipment purchased under the grant that is subject to transfer is also identified at this time.

The new institution most likely will be required to "reapply" for the existing grant — an action that is generally not subject to a merit review process and is, in most instances, merely an action that allows the federal agency to re-award the grant to the new institution.

There are instances when the timing of an investigator's move to a new institution is so close to the date of a new award (or when the original award is in a "no cost extension" phase) that it is not feasible to go through the relinquishment/new award process. In those cases, subawards are often issued to the new institution for the duration of the original award period. This circumstance may require that a substitute investigator be named at the former institution, particularly if the time period is more than three months. (Three months because of the prior approval requirement regarding the absence of the Principal Investigator.) It is not uncommon for the substitute investigator to be the former faculty member's department chair.

The required actions surrounding the transfer of an investigator to another institution are not necessarily difficult. In fact, they become almost routine with the major granting agencies. The grants administrator needs to be mindful, however, that not all federal agencies have clearly enunciated their procedures. Likewise, when the investigator is part of a research group that has shared equipment and projects, these transfers can be difficult to complete to the mutual satisfaction of all parties. Further, there have also been instances where the investigator's departure is not an amicable one. As routine as these transfers can be, each is a separate and distinct case to be handled as circumstances warrant. Consequently, communication with all interested parties — the investigator, the investigator's department chair and/or dean, the new institution, the federal awarding agency — is paramount to completing the transfer in a manner that is efficient and satisfactory to all.

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