All federal refunds will be processed through AP as an adjustment voucher regardless of whether the grant award is open or closed with the federal agency or whether the appropriation/segregation is active or lapsed. See Chapter VII, Section 3 - Refund of Appropriation/AP Adjustment Vouchers of this Guide for further information. There are two main reasons for processing refunds in AP:

• When the refund relates to a contract payment, the adjustment voucher will restore the contract value.

• For 1099 reporting, the adjustment voucher will adjust the taxable income amount reported to the vendor and the IRS.

When a refund is received on an open award and it relates to a lapsed appropriation, other appropriations may be used to record the refund depending on whether a different appropriation was used for the same grant or whether the federal agency allows a different grant to receive the refund. Often a federal agency will allow an alternate award to be used, such as when a subsequent year's award has an overlapping period with the original award or if the grant is fungible with another grant.

When a refund is received on a closed award, an agency is more limited in their options on how to process the refund. An award may be considered closed in two instances:

• It is closed on the federal system.
• It is open on the federal system, but the agency has submitted a final report and will not submit a revised report.

OSC is encouraging agencies to minimize the number of instances where a Single Payment Voucher must be used to pay back the federal agency. By limiting these payments, agencies maximize the use of federal funds and minimize the use of State funds. OSC has developed a table to assist agencies in determining the process to be followed given the various scenarios they may encounter. These processes allow increased opportunities for agencies to spend the refunded funds, without violating any federal agreements or compromising reporting integrity.

Click here for the procedures in table form (pdf).

Click here for the procedures in flowchart form (pdf).

After the adjustment voucher is posted by OSC BSAO, if OSC BSAO performs the drawdown, OSC BSAO will adjust the drawdown accordingly. Refunds must be offset by disbursements within 3-5 days to minimize potential CMIA interest liabilities. Those refunds that cannot be offset by immediate program disbursements MUST be refunded to the U.S. Treasury.

If an agency uses an electronic system to draw funds, the refund should be processed within that draw system if the account is still open on the draw system. Otherwise refunds should be prepared and submitted following the Single Payment Voucher procedures outlined in Section 8.C - Payments to the U.S. Treasury of this Chapter.

For instances where account code 36121 (Redeposit/Recovery Fed Pymnts) must be used, if the fund where the original payment was made from is no longer active, fund 25488 should be used to record the refund. This fund should only be used if the original fund used is not available in SFS.  If the Project ID is no longer available or active, and there is no PCIP converted project ID / PCBU combination, Project ID 999999999 should be used. This Project ID should only be used if a Single Payment Voucher is being used. It should never be used to set up a project budget.

Credit Memos

Should an agency reach an agreement with a vendor that a refund debt will be entered as a credit memo, rather than submitted via check, agencies should be aware that the complete processing of that credit memo will not occur until another payment is made to the vendor. If the Project used on the payment involves a grant that will be closing before another payment is made to that vendor, the credit memo will fail processing edits.

Guide to Financial Operations

REV. 09/07/2023