Amounts received by state agencies that represent a return of monies paid from state appropriated funds are to be immediately documented and transmitted to the State's Treasury pursuant to §121 of the State Finance Law. Such amounts are to be credited to the fund from which the original payment was made.

Since all federal fund payments are charged to appropriation/segregation records, any refunds of such expenditures, including audit disallowances, should be credited back to the appropriation/segregation (provided the appropriation has not lapsed) that was charged when the initial payment was made. Applying the refund reduces the expenditures charged to the appropriation/segregation and federal grant award.

State agencies must record all federal grant refunds in the Statewide Financial System (SFS) before remitting funds to the U.S. Treasury or the cognizant federal agency. The sections below provide guidance on accounting for federal grant refunds, calculating applicable interest, and returning funds to the Federal Government. 

• IX.8.A – Accounting for Federal Refunds
• IX.8.B – Interest on Advance Payments to Vendors
• IX.8.C – Returning Funds to Federal Agencies via Check
• IX.8.D – Returning Funds to Federal Agencies via ACH or Wire

Guide to Financial Operations

REV. 10/27/2026