Closing a Federal Grant

With a clear understanding of the process and allowable expenses that may be charged to federal grants, you can prepare for a smooth and compliant closeout. Here's an overview to help you navigate this process.

Understanding the closeout process

The closeout process is the final step in the lifecycle of a federal grant. It involves determination that all grant activities are completed, all funds are properly accounted for in accordance with federal requirements, and necessary reports are submitted.

Here are the key steps to follow:

1. Complete all grant activities — Verify all approved project activities funded by the grant are completed. This includes any deliverables, milestones, and objectives outlined in the grant agreement.
2. Reconcile financial records — Review and reconcile all financial records related to the grant. Ensure all expenses are properly documented and that there are no discrepancies between your records and the grantor's records.
3. Submit final reports — Prepare and submit all required final reports to the grantor by the due dates. This may include a final financial report and/or a final performance report.
4. Return unspent funds — Unspent funds that were advanced must be returned to the grantor. Follow the grantor's instructions for returning these funds and account for them in your records.

Allowable termination and closeout costs

Termination of a federal award can lead to costs that would not have arisen if the award hadn't been terminated. Allowable termination and standard closeout costs may include:

• Loss of useful value — Costs related to the loss of useful value of items that cannot be used for other work, such as special tooling, machinery, and equipment that were grant-specific.
• Unavoidable costs — Costs that cannot be discontinued immediately after the termination date despite all reasonable efforts.
• Settlement expenses — Accounting, legal, clerical and similar costs that are reasonably necessary for termination and settlement of subawards, settlement claims related to the terminated award, and costs related to the disposition of property procured with federal funds.
• Indirect costs — The treatment of indirect costs must be consistent with that of other indirect costs charged to your federal programs.
• Administrative costs — Costs associated with the administrative activities required for termination and closeout activities, such as preparing final report, publication, and printing costs. Wage-related costs needed for those tasks may be incurred until the due date of the final reporting, if liquidated prior to the due date and charged to the award, unless otherwise specified by the grant entity.

Also be mindful of unallowable costs, such as:

• Reusable costs — Cost of items reasonably usable on other work, either directly or through a subrecipient, unless you submit evidence that you would incur a loss by retaining those items.
• Negligence — Costs that continue after termination resulting from negligent or willful failure to discontinue the costs.
• Generally unallowable — Any other costs that were unallowable under the federal award.

Effects on financial obligations

Costs resulting from financial obligations incurred after the termination of a federal award are not allowable unless the federal agency or pass-through entity expressly authorizes them. However, costs during suspension or after termination are allowable if:

• The costs result from financial obligations which were properly incurred before the effective date of suspension or termination, and not in anticipation of the award being terminated.
• The costs would be allowable if the federal award was not terminated or expired normally at the end of the period of performance in which the termination takes effect.

How CLA can help

Closing out a federal grant requires careful attention to detail and adherence to the grantor's requirements. CLA’s grant compliance professionals can work with you to offer guidance throughout the closeout process.