Tip #9. Compliance and Procurement – Definition of an Advance for a Federal Grant from our Compliance & Resource Development Director, Vince Franco.
In the 2 CFR Part 200 (Uniform Guidance or Super Circular), Advance Payment is referenced in Section 200.3 as:
- A payment that a Federal awarding agency makes by any appropriate payment mechanism
- To a non-Federal organization
- Before the non-Federal organization disburses the funds for program purposes
In other words, it’s a payment method where the funder (such as HUD) pays the federal grant recipient in advance of spending the grant funds.
It sounds great, but it comes with strings attached in the form of:
- Additional management regulations
- Additional financial regulations
- Additional operational regulations
Additional Regulations for Advance Payment:
In the 2 CFR Part 200 (Uniform Guidance), section 200.305 Payment, it states that federal grant recipients can use the advance payment method as they:
- Demonstrate the willingness and ability to maintain written procedures that minimize the time elapsing between the transfer of funds to the federal grant recipient and the disbursement of funds by the federal grant recipient
- Demonstrate the willingness and ability to maintain written procedures for financial and operational management systems that meet the standards for fund control and accountability, as stated in 2 CFR Part 200.302 (Financial Management) and 2 CFR Part 303 (Internal Controls).
Extra Steps to Ensure the Advance Funds are Properly Spent:
Requesting the minimum amount needed to support the actual, immediate cash needs for the federally funded program or project
Paying contracts promptly
Depositing the advanced funds in insured interest-bearing accounts
Have a written payment management policy
What Your Written Policies Must State:
We monitor for insufficient documentation
- Missing documents
- Document that are copies and not the original
- Documents that are altered
We check for unauthorized payments
- Falsified signatures
- Who is authorized to sign and for how much
We look for financial and program reporting falsification
- Shifting costs from account to account or program to program
- Records that are inaccurate or incomplete, not dated or reconciled
Our monitoring plan includes:
- Periodic review of accounts and program records by someone other than the person maintaining the accounts and/or programs
