Cash Management – Federal Drawdowns

Scope

The specific requirements for cash management are unique to each federal program and are found in the laws, regulations, and the provisions of award agreements pertaining to the program. This policy identifies documentation required when cash requests for federal awards are paid through a Letter of Credit (LOC) financing system or other electronic payment mechanisms.

Reason for Policy

To provide guidance and identify requirements of using LOC’s or other electronic payment mechanisms to Drawdown federal funding.

Policy Statement

The UM System Controller’s Office is responsible for preparing and performing cash drawdowns for federally sponsored programs.  Under the terms of certain awards with some federal agencies, the university can drawdown funds via electronic systems. The federal sponsoring agencies (e.g., NIH, NSF, USDA) authorize funds that meet the aggregate expenditure activity of the agency’s awards to the University.

Letter of Credit or Federal Drawdown
The University submits a payment request for an identified group of federal awards when funds are needed for reimbursement of expenses. Amounts received under this method of payment are recorded directly to the applicable sponsored program revenue account. The University must not draw funds from the U.S. Treasury in excess of immediate needs or in excess of the limits for any award.  Program costs must be paid for by University funds before reimbursement is requested from the Federal Government.

The UM System Controller’s Office must manage the cash position of the respective LOCs and other Federal drawdowns. The Draws are prepared as close as possible to the actual expenditure of funds to maximize the cash balance of the University based upon the cash positions of the awards involved.

Supporting documentation for each draw will be reviewed and approved by management.

Refunds to Sponsor
Any amounts Drawn in excess of expenditures resulting in a positive cash balance, must be remitted to the federal government in a timely manner.  Any interest earned on excess cash in excess of $250 per year is required to be remitted to DHHS.

Federal Appropriation Draws
Appropriations are generally released on a quarterly basis from U.S. Department of Agriculture (USDA). The appropriation amount is determined by a statutory formula set by the Congressional Committee on Appropriations. The University receives Federal Appropriations annually from the Federal Government with quarterly releases.  Congress annually considers 11 or more Appropriation measures, which provide funding for numerous activities, for example, education.

The Draw-down should not exceed the federal year-to-date expenditure amounts. If expenditures exceed the amount of the Draw, the remaining expenditures should be paid from other funding sources, such as general operating funds, or a third party. After verification of the expenditure amounts, the UM System Controller’s Office must perform a managerial review to verify the Draw amount and document the review with a signature and date indicating approval to make the Draw.

Supporting documentation for the draw must be retained by the UM System Controller’s Office in accordance with the records retention policy for the University and Federal Appropriation requirements.

Definitions

Draw-down (Draw) - accessing the payment website designed by the federal agency and transferring funds from the federal government account to the University’s account.

Letter of Credit (LOC) - an electronic method of payment for requesting reimbursement of expenditures aggregated by funding source.

Appropriation - money for a particular purpose: a sum of money that has been set aside from a budget, especially a government budget, for a specific purpose.

Accountabilities

UM System Controller’s Office:

• Perform managerial review to approve all LOC and other Federal Draws.
• Execute and manage LOC and other Federal Draws to maximize cash position of the University.
• Monitor the release of Appropriated funds by sponsor and ensure federal compliance for cost sharing requirements are met before drawdowns.
• Ensure compliance with federal cash management requirements

Principle Investigator (PI):

• Make immediate corrections if expenditures exceed the budget for the award.
• Monitor sponsored project expenditures on a timely basis.

Additional Details

Forms

Related Information

History

This policy combines the following former policies:

• Accounting Policy Manual 60.05 – Accounting for Sponsored Federal Appropriations (revised 6/12/2008)
• Accounting Policy Manual 60.15 – Cash Management – Letters of Credit (revised 10/8/2008)

Procedure