Are you current on your Contract Closeouts?

So you have some old contracts &/or grants from the government.  You haven’t charged to them for some time.  Are they closed out, especially from the government’s viewpoint?  What are the main drivers behind wanting to close out those old awards?  The pain from not closing out Federal Awards are:

1)      Unbilled time/uncollected funds (are you leaving money on the table?)

2)      Penalties from the contracting agency

3)      Possible loss of contract and or future contracts

To avoid these problems, every company should evaluate their prior awards to see if they have been closed out properly.  If they haven’t, you should look for some professional help to get these closed out properly. 

The requirements for closeout vary, depending upon the type of award and the agency.  Cost type contracts are the most complex contracts to administer and close.  Their final price is based mostly on a negotiated settlement of allowable and allocable cost that may not be decided for several years after physical completion.  There are several initiatives in place such as Real Time Rates and Quick Closeout that can minimize the impact that delays in settling indirect cost rates often have on closeout.  However, to prevent closeout problems, the contract should be monitored.  With grants, there are typically different procedures (though the process is generally simpler, and involves less documentation and forms), and not as many potential serious issues or threats from late closeout or non-closeout, but there are still consequences.  Typically, the granting agency will close out the grant as soon as possible after the termination date or end date of the grant award, as provided in 45 CFR 74.1-3.   Table 1 shows a listing of some of the main requirements for some of the largest agency and award types.

Table 1 Closeout Requirements Checklist

Table 2 DoD Closeout timeframes

http://guidebook.dcma.mil/17/ContractCloseoutGuidebook.htm#COST_TYPE_CONTRACT_CLOSEOUT

At the beginning of this blog we talked about the problems.  What are the consequences of these problems?  The first, and most painful, is a loss of revenue.  Not closing out a contract can result in not getting paid the full amount of the contract.  Often times this is the difference between making money and losing money on the contract.  The second impact could result in jeopardizing future business.  The government keeps track of non-closed out contracts and at some point may put the contractor on a list that restricts future business with the government.

Consequences of late or non-closeout of HHS and NSF grants.  An internal audit performed in 2003 found that 88% of all HHS grants were closed out late, beyond the typical 150 day timeframe deemed acceptable by the HHS, and “grantees failing to submit the proper documentation” was the primary reason.  While there may not be painful penalties like with the DoD or NASA, the HHS makes prompt payments to a recipient for allowable reimbursable costs outstanding once the award is closed out. A late closeout can result in a recipient not collecting the remaining owed funds for work performed under/or obligated by the award.