CHAPTER 2

FORMULA GRANT CLOSEOUT

When JTPA is repealed on June 30, 2000, the fund availability period for all JTPA formula funds allotted through PY97 will have expired. Thus, all grants through PY 97 should be closed in accordance with the regular closeout procedures specified at 20 CFR 627.485. However, the JTPA funds from PY 98 and PY 99 will still be available for expenditure after June 30, 2000.

The closeout procedures included in this guide are intended to address the closeout of PY 98 and PY 99 expenditures for the JTPA program, and not those funds transferred into the WIA program which will be subject to closeout after the end of the funding period.

CLOSEOUT

Each recipient is responsible for developing and operating a system for closing agreements so it can comply with the closeout requirements contained in 20 CFR 627.485.

States and subrecipients should issue closeout instructions to lower-tiered entities with sufficient time to conduct an orderly closeout of JTPA operations. States should include instructions for the completion and submission with their closeout packages to subrecipients. These instructions should also include the name and phone number of awarding agency staff that the subrecipient can contact if questions arise.

Submission dates should be clearly established. Such dates should be based on required dates for the State's submission of closeout documents to the DOL. States should establish early dates to allow for staff time to review and correct, if needed, such documents.

SUBMISSION OF CLOSEOUT DOCUMENTS TO DOL

Under 20 CFR 627.455(d)(3), each State is required to submit a final financial report to the DOL within 90 days after the expiration of the funding period for each program year. To assist in the orderly transition to WIA, the period for submittal of the closeout package, including the final JTPA financial report for PY 98 and PY 99 funds is extended until December 31, 2000. Reports are to be marked "final" and signed by the state JTPA liaison. The closeout package will consist of the following final JTPA expenditure reports, copies of which are included as Appendix D to this Technical Assistance Guide (TAG):

• ETA 9040, JTPA Title II Quarterly Status Report; and

• ETA 9041, Worker Adjustment Formula Financial Report

TRANSFER OF FUNDS

Prior to closeout of the JTPA program, States will be requested to identify those JTPA funds by PY 98 and PY 99 fund streams that will not be utilized for closeout, two percent (2%) WIA transition planning, or PY 99 JTPA operations. Those funds will be transferred to WIA. If there is an over- or underestimation of the transferred funds necessary for remaining JTPA activities, a final adjustment will be made transferring funds back to JTPA or forward to WIA at time of final closeout by DOL. The adjustment will be based on the State's final expenditure reports.

Funds are to be transferred to the WIA funding streams in the following manner:

• Local Title II-A funds are to be transferred to the adult funding stream;

• Local Titles II-B and II-C funds are to be transferred to the youth stream;

• Local Title III funds are to be transferred to the dislocated worker funding stream;
• Rapid Response funds are to be carried forward as Rapid Response funds. Other Title III Governor's Reserve funds are to be carried forward to support Statewide Rapid Response activities [WIA Sec. 134(a)(2)], and Statewide employment and training activities [WIA Sec. 134(a)(2)(B) and (3)];

• The five percent (5%) set-aside for Statewide administration is to be carried forward as Statewide activity funds;

• The 5% set-aside for incentive grants, technical assistance and capacity building is carried forward as Statewide activity funds. Any of these funds that have already been awarded to SDAs but have not been spent continue to remain available for local level expenditure (Note: There is no administrative cost limitation on incentive grants under JTPA or WIA.);

• The 5% set-aside for services to older individuals under section 204(d) of JTPA is to be carried forward as local adult funds if the funds have already been distributed to the SDAs under JTPA. Where such funds were not distributed to the SDAs, funds not needed for completion of services to on-board participants should be carried forward as Statewide activity funds;

• Any remaining funds from the 20% of the eight percent (8%) set-aside for education coordination should be carried forward as Statewide activity funds; and

• The 80% of the 8% was for education and training services to participants. JTPA allowed these funds to be distributed to either SDAs or local education agencies. If the funds were distributed to local SDAs, they are to be carried forward as local youth and adult funds in the same proportion as the youth and adult contribution. When the funds were distributed to local education agencies, any remaining funds that are not needed for completion of already on-board participants are to be carried forward as Statewide activity funds.

For each program year of funds, each local area may take 10% of all of the funds carried forward for administrative costs. At the State level, one-third of the amount carried forward for Statewide activities may be used for administrative costs.

The JTPA obligational authority transferred to WIA in accordance with this paragraph is not subject to these closeout procedures.

STATE FINAL EXPENDITURE REPORTS

The final expenditure reports for each of the JTPA funding streams (Titles II-A, II-B, II-C, and III) and for both PY 98 and PY 99 must be submitted with the closeout package no later than 180 days following the full implementation of WIA, but no later than December 31, 2000, unless an extension has been granted. This final report will be in addition to the regularly required quarterly reports due 45 days after the end of the quarter. After the closeout process has been completed, no Federal funds will be available to pay for allowable JTPA claims. State and/or local funds will be necessary to pay for any such costs.

As a result of the mandatory requirement to operate a 1999 JTPA Title II-B program, for early implementing States, the earliest date on which the 180-day closeout period will have begun was on October 1, 1999. Due to the issuance date of this TAG, the closeout period for States that began implementation prior to January 1, 2000, will end on June 30, 2000.

While reported as administrative costs, the costs incurred during the closeout period for closing out the JTPA programs will not be subject to the administrative cost limitations. Also, States are not required to allocate these costs among funding streams. Closeout costs may be charged to a single fund stream, subject to the availability of funds in that funding stream.

Closeout costs will be reported separately in the remarks sections of the applicable JTPA expenditure report along with any funds used for 2% WIA transition planning costs. In addition, these costs are to be included in the total administrative costs on Line 6 or 23 of the ETA 9040 or Line 7, 16, or 21 of the ETA 9041. Closeout and transition costs may be charged to any or all of these line items subject to availability of funds in the grant. By identifying these costs in the remarks section of the expenditure reports, ETA will deduct these costs from the total reported expenditures prior to calculation of compliance with the cost limitations.

Administrative costs applicable to program year JTPA operations will continue to be reported on the appropriate expenditure report, and the State will calculate compliance by comparing actual administrative costs with the total local area allocation for each funding stream. Those funds carried forward to WIA will be treated as WIA funds, and WIA cost limitations will apply.

Example: A State has $2 million total in its Title II fund streams after a preliminary transfer of $500,000 to the WIA program on or before June 30, 2000. Shortly after June 30, 2000, the State calculates that total program expenditures including those of its subrecipients for PY 99 for Title II totaled $1.5 million, leaving a balance of $500,000. To this amount the State applied $80,000 in WIA transition costs accrued as of June 30, 2000, as there is no requirement that transition expenditures be allocated across fund streams. The amount of $80,000 represented 2% of its total JTPA Title II and III appropriations of $4 million. This left $420,000 that the State could use for closeout expenses. At the expiration of the grant, any unexpended funds remaining of the $420,000 would be transferred to the WIA program. In addition, all funds not expended on program operations in Title III were transferred to WIA.

If this State is subject to an administrative cost limitation for Title II, the cost limitation at the State level will be 20% of $2.5 million (the original allocation prior to the preliminary transfer of $500,000 to WIA). The State would use the same basis for calculating the administrative cost limitation of each of its subrecipients (administrative costs applicable to PY 99 program operations less WIA transition and closeout costs compared to the subrecipients' initial allocation for PY 99 before fund transfers).

DOL AUTHORITY

Closeout of a recipient's JTPA grant will not affect:

• The Grant Officer's right to disallow costs and recover funds on the basis of a later audit or other review;
• The recipient's obligation to return any funds due as a result of later refunds, corrections, subrecipient audit disallowances, or other transactions;

• Records retention requirements, requirements for records, and public access to records;

• Property management requirements; and

• JTPA audit and audit resolution requirements.

OBJECTIVES OF AN EFFECTIVE CLOSEOUT PROCESS

Whether pertaining to a recipient or subrecipient, the objectives of a successful closeout process should be:

• To ensure that States/recipients can meet the Federal closeout requirements by the required due date;
• To ensure that recipients and subrecipients reserve sufficient funds to pay all final JTPA obligations, including the costs of closeout;

• To ensure that organizations receiving funds are aware ahead of time of what actions are required for closeout and what conditions should exist at closeout;

• To ensure that each organization receiving JTPA funds can fulfill its closeout responsibilities to the awarding agency;

• To ensure that organizations receiving JTPA funds understand that certain rights of awarding agencies continue beyond closeout; and

• To identify problems/issues that frequently arise subsequent to closeout and to prescribe a way to handle them that minimizes the effort required to resolve them.

ELEMENTS TO BE ADDRESSED IN DESIGNING AN EFFECTIVE CLOSEOUT PROCESS

Closeout documentation requirements should be kept to the minimum necessary to achieve effective closeout and to prevent as many post closeout problems as possible. This may be accomplished by establishing and disseminating a well-designed policy that clearly defines what conditions should exist for closeout, what the rights and responsibilities of the various parties are after closeout, how to handle unresolved issues remaining at closeout deadlines, and how to address issues/problems arising after closeout.

The following are some of the issues that should be addressed in any closeout policies and procedures:

• Closing and settling by the recipient of its contracts/subgrants prior to closing the agreement with its funding agency;

• Use of a First-In, First-Out (FIFO) policy to promote expenditure of "oldest" funds first;

• Establishing a closeout due date that provides sufficient time for the funding organization to resolve issues in advance of its own closeout date;

• Identifying the financial reports required for closeout. At a minimum they should be a "final" report in the format that is routinely required of the organization closing the agreement. They should be no more complicated than is necessary to verify that all financial requirements have been met;

• How unclaimed/uncashed checks should be handled. State or local escheat legislation should be followed in addressing this issue;

• How pending claims and late arriving invoices will be handled after closeout;

• How any refunds, rebates, or credits received after closeout will be handled;

• How to reconcile grantor/grantee records to ensure that expenditures are equal to or less than budget, and that cash received, appropriately reconciled, equals expenditures;

• How JTPA funded property is to be treated at the end of the agreement;

• How the grievance system will continue to be maintained;

• How the recipient will determine compliance with the cost limitations;

• Closure of any special bank accounts required for the agreement;

• Cancellation of any fidelity bonds required only for the agreement; and

• Rights and responsibilities of the various parties after closeout has occurred; specifically those items addressed at 20 CFR 627.490 and any additional requirements established by the State, including:

• -The right to disallow costs and recover funds on the basis of a later audit or other review;
• -The funded organization's responsibility to return any funds due as a result of later refunds, corrections, subrecipient audit disallowances, or other transactions;
• -Record retention and requirements for public access to records;
• -Property management requirements;
• -Audit and audit resolution requirements; and
• -Notification of the subrecipient that closeout documentation is in order and that closeout has officially occurred.

APPLICABLE TERMS TO THE CLOSEOUT PROCESS

Accrued Expenditures Charges made to the JTPA program. Expenditures are the sum of actual cash disbursements, the amount of indirect expense incurred, and the net increase (or decrease) in the amounts owed by the recipient for the goods and other property received; for services performed by employees, contractors, subrecipients, subcontractors, and other payees; and other amounts becoming owed under programs for which no current services or performance are required, such as annuities, insurance claims, and other benefit payments.

Awardee The entity that receives a subgrant or contract award. For example, an SDA is an awardee for funds it receives from the State, and a service provider is an awardee for funds it receives from an SDA.

Awarding Agency With respect to a grant, the Department of Labor. With respect to a subgrant or contract, the party that awarded the subgrant or contract.

Cash Receipts All cash received, including program income.

Obligational Authority The total amount of the grant award.

Unpaid Accruals Allowable JTPA costs incurred during the agreement period that have not been paid.

SAMPLE JTPA CLOSEOUT PACKAGE

Appendix C to this guide provides a suggested format for a subrecipient closeout package. The forms presented are not Federally mandated and may be used or modified as necessary or desired.

The package consists of the following components, described below:

• Transmittal Sheet;
• Detailed Statement of Receipts;
• Detailed Statements of Expenditures;
• Financial Reconciliation Worksheet;
• Closeout Awardee's Release;
• Assignment of Refunds, Rebates, and Credits;
• Final Property Inventory Certification; and
• Tax certification.

Transmittal Sheet

Beyond its function as a transmittal document, this sheet may be used to fulfill the awarding agency's responsibility to notify the awardee that the agreement closeout package has been received, reviewed, and accepted, and that the agreement is administratively closed out. The document provides for signatures of individuals who have reviewed and approved the subrecipient's submission. When completed and appropriately signed, it can be returned to the subrecipient as evidence of final closeout.

Detailed Statement of Receipts and Detailed Statements of Expenditure

More detail may be warranted. The Detailed Receipts List and Detailed Expenditure Listings may make reconciliation easier. If awardee cash received does not match the awarding agency's tally, the discrepancy must be reconciled; the Detailed Receipts List will allow the reviewer to find the error immediately. There is an added burden to the awardee, especially if cash is drawn on a frequent basis. The Detailed Expenditure Listings might be useful to entities that negotiate line item budgets in their agreements and require their awardees to track costs by the line item budget. These forms can be substituted with computer facsimiles from the awardee's accounting system. While this can be burdensome for the awardee, it affords the awarding entity maximum administrative control.

Unclaimed or Outstanding Checks When a recipient or subrecipient has one or more unclaimed or outstanding checks, it should follow its local escheat law(s). Typically, escheat laws cover the reversion of funds to a local or State government when there are no legal claimants for the monies. In some instances, the funds are retained at the local level and then revert to the State government where they are deposited in the general fund, and there is no further obligation on the part of the subrecipient or recipient to track those funds for Federal reporting purposes. In cases where there are no local escheat provisions, the entity should then follow the State escheat law for disposition of the funds. States should ensure that subrecipients are aware of the process for handling unclaimed or outstanding checks. At a minimum, States should ensure that the following information is obtained for claim:

• Claimant's name, last known address, amount of money due, and social security number (where appropriate) for each individual to whom checks for wages (or other outstanding checks) were due;

• For employees (payroll checks), the pay period during which the money was earned, including the number of hours, hourly rate of pay, and dates worked;
• Check number, date of issuance, and amount of each uncashed check; and
• Name, address, and telephone number of any person who may be contacted in connection with any claim which may arise. Normally, this would be the individual who has control of the subrecipient's financial records.

Any unclaimed funds must be included in the total accrued expenditures reported in the closeout package.

Example: A subrecipient determines at time of closeout that it has unclaimed checks from two work experience participants in the amount of $820. Subrecipient staff have made every attempt to contact the participants involved, including sending certified letters to their last known addresses. When no claim is forthcoming, at closeout the subrecipient reports these costs on the appropriate final JTPA expenditure report, draws the funds to cover these costs, and deposits those funds in its bank account. Normally, the funds are retained at the local level for one year and then forwarded to a State government agency to be deposited in the general fund with separate accountability maintained. If not eventually claimed in accordance with State requirements and guidelines, the funds revert to the State and are no longer considered Federal funds.

Prepaid Expenses The prepayment of necessary, reasonable, and allocable costs is allowable. States and subrecipients are authorized to pay for the storage of records for a period of three years from the submittal of the final expenditure report to comply with JTPA regulatory requirements. They are also authorized to pay the allocable share of the single audit(s) that cover the program year(s) to be closed. Any prepaid expense is an actual expenditure that is to be included on the total expenditure line of the appropriate financial report and reported in the closeout package.

Program Income Income generated from program activities during PY 99 and prior years may be used to pay for closeout expenses or may be transferred to WIA. Program income must be liquidated within the three-year period of availability of the funds that generated the income.

Program income not used within the fund availability period must be returned to DOL. JTPA program income earned after the end of the program and received after the implementation of WIA may be retained by the entity with no further obligation to DOL and does not have to be carried forward to WIA.

Financial Reconciliation Worksheet

The objective of the financial reconciliation is to achieve the status where obligational authority, allowable reported costs, and payments (for most recipients, the amount of drawdowns) are equal or in balance. Adjustments will have to be made to reflect the portion of obligated funds and drawdowns that relate to the JTPA funds being transferred into the WIA program.

States should review cash advances made to subrecipients several months prior to June 2000 to ensure that, by the last month of program operation, subrecipient cash on hand is limited to immediate cash needs.

Excess cash from subrecipients must be returned to the State as appropriate. If the State is not able to recover excess cash from a subrecipient, it will be reflected in the total cash received by the State and place the State in an excess cash position. When obligations, costs, and drawdowns are not equal and the discrepancies cannot be reconciled, or where other violations are evident, the grant officer's initial and final determination process will be used to resolve the findings.

While cash will be available for JTPA purposes through the end of the closeout period, it is imperative that State JTPA administrative agencies ensure that State departments responsible for making cash requests submit their final request timely and as soon after the closeout period ends to ensure reconciliation can be achieved. The remaining unspent cash will continue to be available for WIA costs.

Closeout Awardee's Release

Listing of unpaid liabilities submitted to the State by subrecipients should include a worksheet indicating outstanding amounts as of the final closeout disbursement date. Sources and methods of determining the accrued unpaid liabilities should be documented. Supporting documents and methods should include:

• Total unpaid invoices from vendors and suppliers for shipments received and services provided;

• Computed amounts to be billed on receiving reports showing quantities requested for which invoices have not been received;
• Total vouchers for travel, payroll, etc., which have been prepared but not paid. Claims prepared and sent for payment, but not yet paid by the closeout date, must be included as an accrual;
• Estimated salaries and benefits based on the amount of the most recent completed payroll, for the days from the end of the last payroll period to the end of the closeout report period (only if still unpaid); and
• Amounts reported for subrecipient and subcontractor services for the period not yet received or paid.

Unpaid bills as defined in the JTPA Financial Management TAG are allowable JTPA costs that have resulted from program operation that have not been paid. States should establish a system for identifying those claims submitted after closeout reports have been filed by subrecipients to ensure payments are made only for authorized unpaid liabilities. States should ensure that these local late claims are paid prior to the submittal of the State's closeout package.

States will be authorized to draw funds from the U.S. Treasury for up to 30 days from the date of submittal of the final closeout package. This should provide adequate time to permit the liquidation of unpaid obligations, including payroll costs, incurred during the closeout of the program. The final actual cash drawdown for allowable costs incurred during closeout needs to occur as soon as possible after the date of closeout submittal. States are encouraged to make all payments for unpaid liabilities prior to December 31, 2000, as no funds may be requested for these liabilities under JTPA more than 30 days after the date of submittal of the final closeout package.

DOL will not be liable for any costs that States failed to ensure were paid before closeout. Furthermore, DOL will not be liable for any late claims received by the States. DOL will not have the funds available for such claims.

Obligational authority required to pay these bills should be included in the amount reserved for the completion of the closeout process. These liabilities are also to be included in the final expenditure report as an accrual by program year. Every effort should be made by subrecipients to pay allowable program expenditures before the end of their closeout process to minimize the tracking of unpaid liabilities by the State.

Assignment of Refunds, Rebates, and Credits

Refunds such as worker's compensation, sale of accountable property, and sale of real estate received up to the date of implementation of WIA are to be used to reimburse the JTPA program by reducing expenditures, thus freeing up obligational authority for transfer to WIA. Any refunds made after closeout of the JTPA program must be remitted to DOL and may not be applied to WIA expenditures.

Any funds remaining in the State's JTPA account after closeout that cannot be transferred to WIA because the fund availability period has lapsed, or any refunds received from disallowed costs associated with lapsed fund availability periods, plus any other refunds received after closeout, must be remitted to DOL. It is recommended that monies drawn down through the Health and Human Services (HHS) Payment Management System be returned through the same system during the closeout process. After closeout, refunds will need to be made by check to DOL.

Refunds to DOL should be made on a quarterly basis including the following information for each amount returned:

• Grant Number;

• Fund Stream or Title;
• Program Year; and
• Reason for return of funds.

Checks should be sent to:

U.S. Department of Labor

Employment and Training Administration

Division of Accounting

200 Constitution Avenue, NW Room N4702

Washington, DC 20210

Final Property Inventory Certification

As discussed in Chapter 4, all useable and accountable property will be transferred to WIA at the time of JTPA closeout. The State shall provide a listing of accountable JTPA-acquired property certifying to the condition codes described in Appendix C of this guide. This document will represent the beginning inventory of accountable equipment under the WIA program.

Tax Certification

The tax certification form is an attestation by the awardee to the awarding agency that all Federal, state, and local tax requirements have been met. If this form is not included as part of the closeout process, the awarding entity could face claims from the subrecipient after its ability to access JTPA funds is gone.

In addition to the suggested subrecipient closeout package, included as Appendix E is a copy of the DOL/ETA closeout package that will be issued to the State for closeout of the JTPA program.