Can funds be deobligated from a closed out contract? or should the funds have been deobligated before the contract was closed?
Funds should have been deobligated as part of the closeout process to promptly free up the funds for possible use on other agency requirements. However, after closeout DFAS can be notified so the contract can be re-opened to remove the funds in MOCAS which should have been de-obligated during original closeout. There is an additional procedure to remove the remaining funds without reopening the contract, which may apply in your situation. Please see section 22.214.171.124 (p. 16) of DCMA Instruction 112
on Canceling Funds.