April 8, 1983
Subject: Cash Advances for Sponsored Projects
In a memo dated September 30, 1981 addressed to Chancellors and Vice President Kendrick, the Vice President--Financial and Business Management stated the University's commitment to a policy of securing payment from sponsors in advance of expenditures and outlined a plan aimed at reducing the cash deficit attributable to sponsored projects. The Vice President--Financial and Business Management further advised that once Systemwide Administration worked out a structure with agencies for advance payment, (1) the main responsibilities to negotiate advance payment as a term and condition in all contracts and grants would shift to the campuses, and (2) that specific guidelines would be issued via the Contract and Grant Manual and the Accounting Manual, as appropriate.
Accordingly, since the structural aspects of the cash management program have been completed by Systemwide Administration, this C& G Memo is issued to recognize the shift in main re responsibilities to campuses for cash management and to set forth the appropriate operating requirements which apply. Policy concerns in this area will be incorporated into the new C& G Manual. Separate and related implementing requirements will soon be issued in the revised Accounting Manual, Chapter C-557-21.
Within the guidelines of the United States Department of the Treasury (Treasury Circular No. 1075) advance payments are available to educational institutions. The letter of credit is the preferred method of cash advance if the institution meets certain qualifications. If the qualifications are not met, cash advances can be made by direct Treasury check. The Office of Management and Budget Circular A-l!0 and the Federal Procurement Regulations follow the Treasury Department guidelines. A summary of the Federal regulations concerning advance payment is attached as Appendix A to Accounting Manual Chapter C-557-21.
Agencies differ in their implementation of the regulations, but they should not be in conflict with the basic guidelines of Treasury Circular No. 1075, the Office of Management and Budget Circular A-110, and the Federal Procurement Regulations. In the case of contracts as opposed to grants, agencies will usually insist on greater control of cash advances and verification of actual costs in relation to cash advanced. Although the responsibilities of Federal agencies for monitoring cash advances are to be recognized, excessive requirements should be resisted and the negotiated provision not be accepted unless the campus Accounting Officer agrees that he/she is able to comply.
The State of California has a policy of maximizing interest on its funds. State Administrative Manual 8099 consolidates the State policy and guidelines which appear throughout the manual and includes instructions to the agencies that payments in advance are permitted only when authorized by law and should not be made unless absolutely necessary.
The State is not precluded by law from making payments in advance, but it is difficult to negotiate an advance of more than start-up funds for the first three months of an agreement. Systemwide Contracts and Grants Administration will continue to devote efforts toward negotiating a standard agreement with the State tailored to University use which would include an appropriate advance payment clause. In the interim, Contracts and Grants Officers should attempt to negotiate advances from the State agencies to cover start-up costs for a project.
State Interagency Agreements do allow for advance payments, and the University may execute such agreements with the State using the State Standard Form 13 within the guidelines provided from time to time by the Systemwide Contracts and Grants Administration.
Private sponsors normally are receptive to the acceptance of some form of advance payment. The negotiating Contracts and Grants Officer should coordinate with the Accounting Officer if a financial report is required to secure the cash advance. A clause which may be used as a model in negotiations for a cash advance provision when the sponsor requires that the advance request be based on estimated expenditures appears as Appendix C in the revised Accounting Manual Chapter C-557-21.
The campus Contracts and Grants Officer and Accounting Officer should work out a mechanism so that the Contracts and Grants Office is notified if a private sponsor fails to pay cash advances as negotiated.
The Contracts and Grants Officer is responsible for negotiating a cash advance method of payment whenever it is feasible. It is important to the University that its own funds not be used unnecessarily to finance sponsored projects.
If there appear to be problems with a particular agency, Systemwide Contracts and Grants Administration should be notified in order to assist in solving the problem.
Letter, Vice President--Financial and Business Management to Chancellors and Vice President Kendrick, September 30, 1981, Plan to Reduce Cash Deficit of Sponsored Projects.
Accounting Manual Chapter C-557-21, Contracts and Grants: Cash Advance Programs.
Treasury Fiscal Requirements Manual, Vol. 1, Part 6, Appendix 1 to Chapter 1000 (Treasury Circular No. 1075) and Chapter 2000.
Office of Management and Budget Circular A-110, Uniform Administrative requirements, Attachment I--Payment Requirements.
Federal Procurement Regulations, Part 1-30, Contract Financing.
State Administrative Manual 8099, Cash, Maximization of Interest Earnings.
Refer: Willie Archie
Joseph A. Pastrone
cc: Laboratory Contract and Grant Officers Accounting Officers
Subject Index: 06
Organization Index: U-115
David F. Mears
University Contracts and Grants Coordinator