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Federal Grants - Payments and Cash Management (Policy)

Office of Origin: Finance 
Responsibility: Finance
Original Date Adopted: 1/24/17 
Dates Reviewed:    1/24/17, 2/24/21(C) 
Last Date Board Approved:    1/24/17 

Two methods of payment are provided in Federal regulations for all Federal awards made by the Federal awarding agency to the recipient:  the Advance Method and the Reimbursement Method. Lake Michigan College (the College) uses the Reimbursement Method for requesting payments from Federal awarding agencies. 

Reimbursement Method Process 

The Finance Department (Finance) will request reimbursement for actual expenditures incurred for Federal grants as specified by the awarding agency’s system (e.g., Department of Education’s G5 grant management system) for direct grants.  Any funding agency requiring an invoice prior to reimbursing must be provided an invoice prepared by Finance.  

  • All costs for which reimbursement is being requested must: 
  • Be approved by Grant Director or applicable award director; 
  • Be necessary and directly allocable to related award; 
  • Be reasonable for the performance of the award; 
  • Have cost basis to support requested amount (e.g., quantity x unit cost = total); 
  • Be administratively efficient; 
  • Conform to any limitations or exclusions set forth in Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, program regulations, and/or cost principles; 
  • Be treated by the College in a consistent manner as a cost, regardless of source of funds involved;  
  • Be categorized in accordance with Generally Accepted Accounting Principles; 
  • Not be included as an item of cost against any other budget, operational or restricted; and, 
  • Be properly documented. 

The College will only request reimbursement for obligations incurred during a grant period, and only for goods and services that have been actually received.  In addition, the College will not request payment for any cost that cannot be supported by appropriate source documentation. 

Finance is responsible for subsequently obtaining the reimbursement funds through monthly cash draws or billing.   

Unlike the Advance Method, the Reimbursement Method does not require an interest calculation. 

Advance Method 

Federal requirements require that payments under the Advance Method be limited to the minimum amount needed, in accordance with the actual, immediate cash requirements, and as close as is administratively feasible to the amount of actual disbursement.  

Use of the Advance Method also requires an organization to have written procedures that minimize time elapsing between transfer of funds and disbursement by College and financial management systems that meet standards for fund control and accountability.   

Currently the College uses only the Reimbursement Method.  Should the College adopt the Advance Method in the future, the requirements listed above would have to be addressed and documented. 

Interest Under the Advance Method 

The Advance Method requires that an organization remit to the funding agency interest earned advanced payments monies after receipt but before disbursal that in total exceeds $500 per year.  

Currently the College uses only the Reimbursement Method; should the College adopt the Advance Method in the future, requirements applicable to interest calculation on advance payments would have to be addressed and documented. 

References:  2 CFR § 200.305; § 200.305 section 9 

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