‍Chapter 12: Final Reconciliation and Closeout

FEMA requires timely and complete project-level information from a recipient as work is completed to facilitate efficient and effective closeout of the recipient's prime award. To initiate project-level closeout, subrecipients must inform the recipient that their project is complete and provide the exact date the work was finalized.

I. Project Reconciliation and Closeout

A. Small Projects

Under simplified procedures, FEMA bases awards for small projects on cost estimates rather than final accounting, reducing the administrative burden typically associated with large projects. Once a small project is obligated, FEMA does not adjust the funding amount unless specific exception criteria are met.

Baseline Ingestion Fields

Small Project Adjustments Triggers

FEMA will adjust a closed small project's funding level only under the following specific conditions:

• The subrecipient failed to physically complete the approved scope of work (SOW).
• FEMA approves a formal change in SOW, including additional hazard mitigation.
• The subrecipient receives funding not previously deducted, creating a duplication of benefits (e.g., when actual insurance proceeds exceed the estimated deduction).
• Actual insurance proceeds end up being less than the estimated amount originally deducted.
• Documented errors, omissions, or hidden damage are discovered.
• The subrecipient undergoes non-compliance with applicable laws, regulations, and executive orders, or commits fraud, waste, or abuse.

Recipient Certification Mandates

To close small projects, recipients must submit a small project completion certification confirming that:

• The subrecipient completed the approved SOWs for all small projects in compliance with the FEMA-state/territory/tribe agreement.
• The recipient has successfully issued all final payments according to the agreement.

Net Small Project Overrun Appeal Requests

The Combined 60-Day Appeal Window

Subrecipients can request additional funding if the combined actual cost of all their small projects exceeds the total amount obligated for all their small projects. This is termed a Net Small Project Overrun (NSPO) appeal request.

Submission Cutoff Rules

Timing Mandate: Subrecipients must submit an NSPO request through the formal appeal process within 60 days of the latest work completion date of all its small projects. If all small projects are not yet obligated at that time, the subrecipient has 60 days from the date FEMA obligates its final small project to submit the appeal. The appeal must include actual cost documentation for all approved small projects.

Small Project Closeout Deadlines

If a subrecipient is not requesting an NSPO, they must submit a certification of completion for all small projects to the recipient within 90 days of the last small project completion date, or the last approved completion deadline, whichever is sooner. If work on the last small project was completed prior to obligation, the 90-day timeline begins exactly on the date of obligation. Recipients closing their own small projects face the same 90-day structural cutoff.

B. Large Projects

With the exception of capped projects, the final eligible amount for a large project is the actual documented cost incurred to complete the approved SOW.

Submission Timelines

• Subrecipient Cutoff: Subrecipients must provide documentation supporting actual costs within 90 days of work completion. If work was completed prior to obligation, the 90-day window begins on the date of obligation.
• Recipient Cutoff: A recipient must submit its certification of a subrecipient's completion of each large project with the final claim for PA funding to FEMA within 180 days of the work completion date or the project completion deadline, whichever occurs first. If work was completed prior to obligation, the 180-day deadline begins on the date of obligation.

Required Large Project Closeout Request Checklist

At a minimum, large project closeout packages must include all applicable documentation to support the work and costs, structured around the following fields:

• A final inspection report and a summary of the scope of work performed.
• A summary of expenditures alongside project-related documents supporting claimed costs (invoices, timesheets, work orders, trip tickets) for force account labor, force account equipment, materials/supplies, and contracted work.
• Procurement documentation (advertisements, bid tabulations, selections, evaluation history).
• Certified mutual aid agreements and final insurance statements of loss.
• Project-related correspondence with regulatory agencies, formal change orders, and agency personnel pay policies.
• All codes and standards incorporated into the scope of work.
• Documentation substantiating compliance with award terms, including Environmental and Historic Preservation (EHP) documentation, impartial community delivery requirements, and duplication of benefits tracking.
• Photographs of the completed project (strictly mandated for Categories C–G).

FEMA Pre-Closeout Review Steps

Prior to closing large projects, FEMA executes a systematic audit to verify that:

• There are no outstanding appeals, audits, or active arbitration cases.
• Invoices and documentation show the work was consistent with the approved SOW, including any approved 406 hazard mitigation.
• The subrecipient completed the work within the approved deadline, limiting reimbursement to costs incurred within the deadline.
• No duplication of funding exists with insurance or other related projects.
• Costs comply with cost principles, including equipment/property disposition, procurement regulations, and cost reasonableness.
• The project complies with all terms of the award, including codes and standards, EHP mandates, civil rights, and insurance obtain-and-maintain requirements.

Completed Work Review Waivers

Streamlining Provision: If the work was 100 percent complete at the time the project was obligated based on actual costs, FEMA completes these compliance reviews prior to obligation. Therefore, reviews for deadlines, procurement, cost reasonableness, code upgrades, and EHP requirements do not need to be repeated during closeout.

For projects with post-obligation funding changes, FEMA prepares a project amendment to obligate additional funds or reduce funding based on actual costs. FEMA does not re-evaluate the cost-effectiveness of 406 mitigation based on final actual costs. If a subrecipient fails to complete the approved mitigation SOW, FEMA designates the project as an improved project and caps funding strictly at the repair/restoration SOW.

C. Subrecipient Closeout Staging

Recipients request that FEMA close each subrecipient once all of its respective projects have been completed and closed for the disaster. The request should include a project completion certification report listing all of the subrecipient's projects. If all projects are closed and there are no outstanding audits, FEMA closes the subrecipient and notifies the recipient in writing.

II. Stafford Act Section 705

Recovery Authority Limitations

Stafford Act Section 705 imposes a strict 3-year limit on FEMA's authority to recover payments made to SLTT government recipients and subrecipients unless there is explicit evidence of fraud.

Notice of Intent Cutoffs

FEMA must provide a formal notice of intent to recover payments within 3 years from the date the recipient submitted the certification of project completion to FEMA.

Private Nonprofit Exclusion

Statutory Limit Exception: The 3-year statute of limitations on payment recovery under Section 705 applies exclusively to SLTT government entities; it does not apply to private nonprofits (PNPs).

III. Public Assistance Award Closeout

A recipient must submit its final Federal Financial Report (SF-425) with a written request to close the overall PA award. The PA award is programmatically closed when FEMA ensures that all projects awarded for the incident met statutory and regulatory requirements.

Prime Award Closure Prerequisite Checklist

For FEMA to formally close the overarching PA award, the following six conditions must be met:

1. FEMA has issued final determinations on all active appeals.
2. FEMA has obligated all eligible PA funding for the disaster declaration.
3. All recipient and subrecipient projects are programmatically closed.
4. The recipient has passed through all obligated funds appropriately and submitted its final expenditure report to FEMA.
5. FEMA has adjusted the final funding level for the program, as appropriate.
6. Both FEMA and the recipient have completed all administrative actions related to the PA Program.

Mandatory Liquidation Timelines

Liquidation Cutoff: Recipients must liquidate all obligations within 120 days of the end of the prime award period of performance. FEMA extends this deadline only if the recipient submits a written time extension providing a reasonable justification for the delay.

IV. Documentation Retention Requirements

Grant Closeout Audit Protection Windows

Subrecipient Source Document Records

Subrecipients must maintain all source documentation for each project for a minimum of 3 years after the date of transmission of the final expenditure report for project completion as certified by the recipient.

Recipient Prime Award Records

A recipient must keep all financial and program documentation for a minimum of 3 years after the date it submits the final SF-425 report.

Extended Retention Exceptions

Retention Notice: Several exceptions may require longer retention periods beyond the 3-year baseline, including requirements relating to real property and equipment disposition, active audits, or ongoing litigation. SLTT government laws may also mandate longer retention windows.

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