Closing Out a Federal Award: The 120-Day Clock and the Three Years After

The short answer. A recipient must submit all financial, performance, and other reports required by the terms of the award, and liquidate all financial obligations incurred under it, no later than 120 calendar days after the end date of the period of performance (2 CFR 200.344(b)). A subrecipient must do the same within 90 calendar days to its pass-through entity, which needs the interval to prepare its own closeout. Unobligated balances must be refunded, property must be accounted for, and records must be retained for three years from the date the final expenditure report is submitted (2 CFR 200.334). The award’s administrative life is therefore roughly three and a half years longer than its programmatic one.

What must be submitted

The closeout package varies by agency but ordinarily contains the following:

• The final financial report, usually the SF-425 Federal Financial Report, showing total federal funds authorized, total expenditures, unliquidated obligations if any, and the unobligated balance
• The final performance or progress report, in the form the award specifies
• A final inventory of federally funded equipment and, where applicable, real property and intangible property (2 CFR 200.311, 200.313, 200.315)
• A final invention report where the award supported research
• Any final subrecipient closeout documentation the pass-through entity is required to hold

The final financial report must reconcile to the general ledger and to cumulative drawdowns. Discrepancies between the amount drawn and the amount reported are the most common reason a closeout is returned, and the most common reason an agency later questions costs.

Liquidating obligations

An obligation is a commitment to pay, whether or not the payment has been made. To be allowable, an obligation must have been incurred within the period of performance (2 CFR 200.309). The 120 days after the end date exist to pay those obligations, not to incur new ones. A recipient that receives a final invoice from a subcontractor in month two of the closeout period for work performed in the final month of the award may pay it. A recipient that orders supplies in month one of the closeout period may not charge them to the award.

The distinction generates a recurring problem with personnel costs. Staff time spent preparing the closeout reports themselves is incurred after the period of performance and is not chargeable to the award, unless the agency has extended the period or the award’s terms provide otherwise. Organizations should budget closeout labor from unrestricted funds or, where a negotiated rate applies, recover it through indirect costs on other awards.

Unobligated balances and cash on hand

Any federal cash the recipient holds in excess of allowable expenditures must be returned. The mechanism varies; some agencies net the balance against the final drawdown, others require a refund by check or electronic transfer. Interest earned on federal advances above $500 per year must also be remitted, to the Department of Health and Human Services Payment Management System regardless of which agency made the award (2 CFR 200.305(b)(12)).

Where the recipient believes it is owed funds, the final report is the last opportunity to draw them. Agencies may, but are not required to, permit a final drawdown after closeout, and the request must be made within the 120-day period.

Property

Equipment purchased with federal funds remains subject to federal interest after closeout. Where the current per-unit fair market value is $10,000 or less, the recipient may retain, sell, or otherwise dispose of it with no further obligation. Above that amount, the recipient must request disposition instructions, and the agency is entitled to its share of the proceeds or the value (2 CFR 200.313(e)). The inventory submitted at closeout is the document against which those obligations will later be measured.

What survives closeout

Closeout does not end the relationship. Section 200.345 preserves the agency’s right to disallow costs and recover funds on the basis of a later audit or review, the recipient’s obligation to return funds owed, the audit requirements of Subpart F, the property management requirements, and the records retention requirement.

The three-year retention period runs from the submission of the final expenditure report, not from the end of the period of performance, and it is extended for the duration of any litigation, claim, or audit that begins before it expires. Records include the financial records, the supporting documentation for every charge, the time-and-effort records, the procurement files, and the subrecipient monitoring files. A Single Audit conducted in year two after closeout may test the award. An agency review may occur later still.

A note on the current rulemaking

In May 2026 the Office of Management and Budget proposed further revisions to 2 CFR Part 200, with an anticipated effective date no earlier than October 1, 2026. As proposed, the revisions leave the closeout timelines, the audit threshold, the de minimis rate, and the other figures cited in this article unchanged, and are directed principally at pre-award review and the agencies’ authority to terminate awards. The proposal was not final at the time of writing. Recipients should confirm the current text before relying on any figure in this article.

Regulatory references: 2 CFR 200.344 (closeout); 2 CFR 200.345 (post-closeout adjustments and continuing responsibilities); 2 CFR 200.309 (period of performance); 2 CFR 200.305 (federal payment); 2 CFR 200.311, 200.313, and 200.315 (real property, equipment, and intangible property); 2 CFR 200.334 (retention requirements for records).

This article is general information about federal grant administration. It is not legal or accounting advice.