An advance for a federal grant is a payment method where the funder pays the non-Federal entity in advance of spending the grant funds. (Doesn’t that sound better than waiting for a reimbursement?)

§ 200.3 Advance payment.
Advance payment means a payment that a Federal awarding agency or pass-through entity makes by any appropriate payment mechanism, including a predetermined payment schedule, before the non-Federal entity disburses the funds for program purposes.

From 2 CFR Part 200 (aka the Uniform Guidance) § 200.29 Cost sharing or matching

But just when you think that sounds too good to be true…recognize that the federal government is also worried about advance payments “burning a hole” in the pocket of the grant recipient and getting diverted for other things.

So the Uniform Guidance contains additional payment management regulations for organizations receiving advance payments of federal funding.

What are the Additional Regulations for Advance Payments?

In § 200.305 Payment, it states that non-federal entities must be able to use the advance payment method as long as the organization “maintains or demonstrates the willingness to maintain both written procedures that minimize the time elapsing between the transfer of funds and disbursement by the non-Federal entity, and financial management systems that meet the standards for fund control and accountability” as established in this part of the regulations.

But with great power to “show me the money” comes a list of extra steps the grant recipient must do to ensure the funds are spent properly. This includes:

• Paying contractors promptly
• Requesting the minimum amount needed to support the actual, immediate cash needs for the federally sponsored program or project
• Depositing the advanced funds in insured accounts whenever possible
• Keeping the advanced funds in an interest-bearing account (with a few exceptions)
• Remitting any interest on advanced funds in excess of $500 to HHS
• Having a written payment management policy

If you are new to payment management and monitoring, check out my article about Grant Management-7 Things Your Program Officer Needs to Hear You Say to learn more about the types of monitoring you’ll want to include with our payment management functions.

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Author:

Lucy Morgan CPA, MBA

CEO, Compliance Warrior

Author of “Decoding Grant Management-The Ultimate Success Guide to the Federal Grant Regulations in 2 CFR Part 200”  The 2nd Edition is now available on Amazon in Paperback and Kindle versions.