The State has a contact person for you to work with, perhaps by Region. You should contact them to find out how they are going to handle corrected reporting, that an audit resulted in returned funds.You're not the only party that this happened to, I'm sure.

I assume you are on accrual basis, and they would be reporting the audited difference as collectible from you. And for your fiscal year, they might be going to report your return of funds as a 2021 event, even though you see it as a liability in 2020 due to the audit.

I support towns and other local governmental entities.