Information Memorandum No. 07-274 Subject: Deobligation of Excess Funds (INFORMATION) Date:
July 27, 2007 Target Audience:
Team Leaders, ACOs, Contract
Administrators and Performance Improvement Officers
This Information Memorandum is to remind ACOs
to identify and deobligate Excess Funds remaining on contract as soon as possible
after receiving evidence of physical completion in accordance with
Excess Funds are defined as funds relating to a specific line
item or deliverable that was not performed on a contract.
When excess or negative funds exist, a funds review should be
performed at the ACRN level to determine the cause and a contract modification
should be issued to deobligate the excess funds.
The modification should adjust the contract line
items, the funding and /or the deliverable quantity, as appropriate and be
sent to the accounting and funding station/s
cited in the contract, in accordance with
DFARS PGI 204.2
ACOs are not required to obtain PCO authorization prior
to deobligating excess funds, but should notify the PCO before taking action.
Due to funding constraints imposed upon the Services, identifying and deobligating
excess funds is extremely important.
The Navy is
currently conducting an audit of its DCMA administered contracts with
significant unliquidated obligations (ULOs) in order to verify
controls for identifying excess funds prior to contract closeout. It
wants to ensure that excess funds are deobligated in a timely manner so that
can be used for other requirements.
The Air Force has also expressed
concern over the timely deobligation
of excess funds.
Excess funds do not
include remaining funds in the administrative closeout process.
Remaining funds are funds left on contract due to
price variance, rounding, or cost underrun funding and where all required
contract performance has been completed.
Remaining funds on a contract should be annotated in the ACO
Notebook with a remark specifying the amount of funds
remaining. Remaining funds are removed via the Q-Final process in MOCAS
with final disposition performed by the PCO at final closeout.