Compliance Requirements - Cash Management (C)

Cash Management (C)

This section covers the actual management, or handling, of funds pertaining to a Federal program, specifically on how Federal assistance is distributed to recipients and how recipients manage the funds until disbursement. The actual transfer of funds, commonly referred to as “drawdowns”, is usually done electronically by requesting the funds to the Federal agency via website or a network. The funds are automatically transferred from the US Department of Treasury to the recipient’s bank account. Federal assistance for program operations is provided to recipients usually by one of two methods, also called “funding techniques”: by either advances of funds or by reimbursement of funds.

• Advances of funds – Advances are Federal funds provided to a recipient before the program activity is performed. Recipients determine the amount needed for a future expenditure (e.g., through budget process) and request the amount to the Federal government (or in the case of subrecipients to the pass-through entity, see Subrecipient Monitoring below). The Federal funds received are then expended to perform the specific activity (e.g., purchase good or service or for payroll). However, laws and regulations require recipients to request funds only when it is immediately needed, and recipients must try to minimize the amount of time between the receipt of funds to the actual disbursement. Examples of programs under these funding techniques are the Section 8 program and the Community Development Block Grant program.

• Reimbursement of funds – This funding technique requires the recipient to pay program expenditures with their own funds, and then request a reimbursement for those expenses from the Federal government or pass-through entity. Recipients prepare and send reimbursement requests, and maintain supporting documentation showing that the costs for which reimbursement was requested were paid prior to the date of the reimbursement request.