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  • Question

    If excess funds are discovered on expired delivery order contracts (funds are also expired and/or cancelled), is it necessary to prepare a deobligation modification to finalize the contract closeout?


    Answer

    The following answer is based solely on the background information provided as we do not have all the facts pertaining to your contract.  As we do not have access to the contract folder or program particulars that apply to this situation, we highly recommend you consult the Contracting Officer as well as the Legal Office.
     
    Excess funds on a contract must be removed (deobligated) by issuance of a contract modification.  Expired funds are no longer available for new obligations, but can be disbursed for payments or obligated for upward adjustments.  All funds are in the "expired" status for 5 years after the period ends for availability for obligation.  At the end of the 5-year period, the funds are "canceled." The cancelled funds are no longer available for anything to include paying bills. You cannot close out a contract until it is physically complete (see FAR 4.804-4), and all delivery orders must be closed prior to closing out the contract.  In accordance with FAR 4.804-5 (a) (15), Procedures for closing out contract files, it clearly states that --

    (a) The contract administration office is responsible for initiating
    (automated or manual) administrative closeout of the contract after receiving evidence of its physical completion. At the outset of this process, the contract administration office must review the contract funds status and notify the contracting office of any excess funds the contract administration office might deobligate. When complete, the administrative closeout procedures must ensure that --
    (15) Contract funds review is completed and excess funds deobligated.

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