Cash Advances and Interest Calculation
Prepared by: Vince Hutnak
Finance Officer-Sponsored Programs
March 5, 2002
Procedures for Federally Sponsored Agreements Cash Advances
Introduction
In accordance with OMB Circular A-110, "Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations", the university is required to calculate interest on "Cash Advances" received.
Definition
Federal regulations define "Cash Advance" as follows:
- "Advance means a payment made by Treasury check or other appropriate payment mechanism to a recipient upon its request either before outlays are made by the recipient or through the use of predetermined payment schedules."
Requesting Cash Advances
The following forms shall be authorized for the recipients in requesting advances and reimbursements:
- SF-270, Request for Advance or Reimbursement
- SF-271, Outlay Report and Request for Reimbursement for Construction Programs
Payment
- "Cash advances to a recipient organization shall be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the recipient organization in carrying out the purpose of the approved program or project. The timing and amount of cash advances shall be as close as is administratively feasible to the actual disbursements by the recipient organization for direct program or project costs and the proportionate share of any allowable "Facilities and Administrative" costs."
- "Whenever possible, advances shall be consolidated to cover anticipated cash needs for all awards made by the Federal awarding agency to the recipient.
- Advance payment mechanisms include, but are not limited to, Treasury check and electronic funds transfer.
- Advance payment mechanisms are subject to 31 CFR part 205, "Withdrawal of Cash from the Treasury for Advances under Federal Grant and Other Programs."
- Recipients shall be authorized to submit requests for advances and reimbursements at least monthly when electronic fund transfers are not used.
- Requests for Treasury check advance payment shall be submitted on SF-270, "Request for Advance or Reimbursement," or other forms as may be authorized by OMB. This form is not to be used when Treasury check advance payments are made to a recipient automatically through the use of a predetermined payment schedule or if precluded by special Federal awarding agency instructions for electronic funds transfer."
- Recipients shall maintain advances of Federal funds in interest bearing accounts, unless (1), (2) or (3) apply.
- The recipient receives less than $120,000 in Federal awards per year.
- The best reasonably available interest bearing account would not be expected to earn interest in excess of $250 per year on Federal cash balances.
- The depository would require an average or minimum balance so high that it would not be feasible within the expected Federal and non-Federal cash resources.
Procedures For Calculation Interest
Federal Funds
Funds awarded from a federal agency or federal flow-thru funds will be subject to interest calculation. These accounts are in fund 145, programs 11 and 12.
Funds drawn on accounts with a Letter of Credit exception code will be excluded from interest calculation only if the account has a negative cash balance. Interest will be calculated on cash advances requested as a result of delays caused by system upgrades at the federal agency or for advances received for student financial aid programs. (Normally at the beginning of a semester) Interest will be calculated on accounts having a positive cash balance.
With the exception of cost reimbursable accounts that are billed as a cash advance, cost reimbursement accounts are excluded from interest calculation.
Interest will be calculated at the close of each month, retroactive to the first day of the month, on the days that an account has a positive cash balance computed on a Begin-to-Date basis.
Interest
At the close of each month, the WSU General Accounting Office will provide the Sponsored Programs Services with the daily interest rate used for calculating interest.
The "hard copy" Interest Report is filed in the Sponsored Programs Services and is retained to support the annual A-133 Single Audit.
The Sponsored Project Finance Office prepares a journal voucher to transfer the monthly interest from account: 01Z-9490-7781(Investment Income) to account: 14N-1142-0016 (Interest Earned on Federal Funds)
At fiscal year end, the interest earned in account 14N-1142-0016 is remitted to the Department of Health and Human Services (DHHS) - less $250.00 that is retained for administrative costs as allowed by federal regulation.
Remitting Interest
Interest shall be remitted annually to Department of Health and Human Services, Payment Management System, Rockville, MD 20852. Interest amounts up to $250 per year may be retained by the recipient for administrative expense.
End of procedures....
