Federal Cash Management
Office of Origin: Purchasing and Risk Management
Date Adopted: 01-24-17
Date Reviewed: 01-24-17
Last Date Modified & Approved: 01-24-17
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 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 the College must be provided an invoice prepared by the Finance Department.
All costs for which reimbursement is being requested must:
- Be necessary and directly allocable to the related project plan (goals, objectives, and activities);
- Be reasonable for the performance of the project;
- Have a cost basis to support the requested amount (e.g., quantity x unit cost = total request);
- Be administratively efficient;
- Conform to any limitations or exclusions set forth in a Notice of Grant Opportunity, program regulations, and/or cost principles;
- Be treated in a consistent manner by the College as an item of cost, regardless of the source of funds involved;
- Be categorized in accordance with Generally Accepted Accounting Principles (GAAP);
- Not be included as an item of cost in any other Federally funded program; and,
- Be properly documented.
The College will only request reimbursement for funds actually disbursed, only 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 satisfactorily supported by appropriate source documentation.
The Finance Department is responsible for subsequently obtaining the reimbursement funds through monthly cash draws.
Unlike the Advance Method, the Reimbursement Method does not require an interest calculation.
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 the actual disbursement.
Use of the Advance Method also requires an organization to have:
- written procedures that minimize the time elapsing between the transfer of funds and disbursement by the College, and
- financial management systems that meet the standards for fund control and accountability.
Currently the College’s 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’s 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.
Responsibility: Purchasing & Risk Management
References: 2 CFR § 200.305; § 200.305 section 9