[GNC] Vendor Refund - Best Practice

[M]

I'm not very familiar with the Business functions of GnuCash and have 
been experimenting with them.  I'm looking for a "best practice" and how 
to accomplish this in GNC:

I am treasurer for a non-profit PTA.  We issued a grant to the school.  
Over time the school would use the grant and I would make payments to 
the school.  At the end of the year, the school did not use the entire 
grant.

I first created a Vendor (the school) and a Bill (as if we owed the 
school) for the amount of the grant.  Each month, I would make a payment 
on this bill as the school used our grant money.  I did this so we could 
show the entire amount of the Grant as an Accounts Payable and thus not 
accidentally use the money during the year on other things.

I am stumped how to end this scenario.  The school will not use the 
entire grant.  I imagine this is similar to a scenario where I owed 
money to a vendor, but that vendor "wrote off"  or discounted a portion 
of my obligation after the original bill was issued. Should I un-post 
and modify the original bill?  Can I create a second bill with a 
"refund" to offset the unused portion?

I would love to know how others handle this.

Thanks in advance,

Mike