CHAPTER 11. CASH ADVANCES UNDER FEDERAL GRANTS AND OTHER PROGRAMS
SECTION A. GENERAL
11A.01 INTRODUCTION
a. This chapter states the VA policy on advance financing of Federal programs and implements the Department of the Treasury requirements relating to this subject. It prescribes the procedures to be used relative to the issuance and processing of letters of credit and advances by Treasury check. It does not replace or authorize deviations from other governing regulations such as those included in part [32] of the [FAR (Federal Acquisition Regulation).]
b. Federal grant and other programs involving advances to various organizations outside the Federal Government constitute a significant portion of the Federal budget. Advances of cash from the Treasury to such organizations (hereinafter called "recipient organizations") for the purpose of financing their current operations under the Federal programs have a substantial impact on Treasury financing cost and the level of the public debt.
11A.02 SCOPE
The provisions of this chapter apply to all program offices within the VA.
11A.03 POLICY
a. The Department of the Treasury is responsible for prescribing the general policy relating to advance financing of Federal programs. The objective of such policy is to minimize the impact on the public debt level and financing cost.
b. It is the policy of the VA that cash advances to contractors and grantees shall be limited to the minimum amounts needed and shall be timed to be in accord only 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 actual disbursements by the recipient organization for direct program costs and proportionate share of any allowable indirect costs.
c. If a relationship with a contractor or grantee is not expected to continue for a year regardless of the amount of advances or is not expected to give rise to requirements for cash advances aggregating $120,000 annually, advance financing will be accomplished by Treasury check. Such cash advances will be made on an as needed basis considering the cost and benefit of the frequency of payment.
d. If a relationship with a contractor or grantee is expected to continue for at least a year and a requirement exists for advance financing aggregating at least $120,000, the letter-of-credit method shall be used.
e. The requirements in this chapter do not apply to disbursements made to reimburse a contractor or grantee for work already performed and financed through the contractor's or grantee's own resources. In accordance with title 2, GAO Policy and Procedures Manual, subsection 16.8, payments to grantees under grants where no performance or reporting by grantees is required or where the payments are scheduled to correspond approximately with performance shall be accounted for as liquidations of the obligations and as costs incurred.
11A.04 RESPONSIBILITY-[DIRECTOR,] OFFICE OF BUDGET AND FINANCE [(CONTROLLER)]
a. Serves as the central coordination and liaison point for departments and staff offices with the [TFCS (Treasury Financial Communications System) Programs Branch, Financial Management Service, Department of the Treasury], and the Fiscal Assistant Secretary of the Treasury on advance financing matters.
b. Obtains agency station symbols from the Department of the Treasury for use on letters of credit.
c. Obtains approval from the Fiscal Assistant Secretary of the Treasury on agency policy and instructions issued that relate to advance financing.
d. Consults with the [Financial Management Service], Department of the Treasury, on proposed modifications to approve systems, revisions in processing procedures, and requests for waivers relating to advance financing.
e. Processes any requests for waivers of specific provisions of the procedural requirements for advance financing set forth in the Treasury Fiscal Requirements Manual.
f. Furnish to Treasury, upon request, a [TFS Form 1201,] Status of Federal Funds Report, on a selective basis, in lieu of the semiannual report of advances and cash balances of Federal funds. This is to be forwarded to Treasury within 30 days after the date of Treasury's request.
11A.05 RESPONSIBILITY-PROGRAM OFFICES
a. Program offices will be responsible for the following when advanced financing is used in funding any of its programs or projects:
(1) Forwarding requests for agency station symbol (agency location code) for use on letters of credit to the [Director,] Office of Budget and Finance [(Controller)] (047) for review and presentation to the Department of the Treasury.
(2) Ensuring that processing procedures are consistent with requirements relating to advance financing contained in the Treasury Fiscal Requirements Manual and the General Accounting Office Policy and Procedures Manual and that internal processing procedures are consistent with the procedures contained herein relative to the use of letters of credit.
(3) Forwarding any requests for waiver of specific provisions of the procedural requirements relating to advance financing to the [Director,] Office of Budget and Finance [(Controller)] (047) for review and presentation to the Director, [TFCS Program Branch, Financial Management Service, Department of the Treasury.)
(4) Forwarding to Financial Reports Division (047B1)] a Status of Federal Funds Report, when requested. This report replaces the semiannual summary reports and shows Federal funds received and disbursed, and the actual cash amount of Federal funds on hand, on a monthly basis.
(5) Making such reviews of the financial practices of recipient organizations, both primary and secondary, as are necessary to ensure that the Treasury regulations are being compiled with.
(6) Instituting such remedial measures as may be necessary in the event that a recipient organization demonstrates its unwillingness or inability to comply with the Treasury regulations.
(7) Consolidating their letter-of-credit authorizations to each recipient organization. This requires that all advance funding to the same recipient organizations be combined under one letter of credit. This will be accomplished by including all advance funding to the recipient organization including that which ordinarily would not qualify because it does not meet the criteria established for the letter-of-credit method.
(8) Prior to award of any contract requiring advance payments, the contracting officer must submit the information required by [FAR 32.409] to the [Director, Office of Procurement and Supply]. The [Director, Office of Procurement and Supply] will make the appropriate determination required by [FAR 32.402(c)(1)(iii).] If advance payment is authorized, a copy of the determination will be submitted with the letter of credit.
11A.06 OPERATING PROCEDURES
The operating procedures prescribed in this chapter are contained in Section B, Procedures on the Use of Letters of Credit, Section C, Cash Advances by Treasury Checks, and Section D, Accounting for Cash Advances for Federal Grants and Other Programs.
11A.07 FORMS AVAILABILITY
All standard forms described in this chapter shall be procured in the usual manner, unless stated otherwise. Forms TFS 5401, Payment Voucher on Letter of Credit, SF's 1193, Letter of Credit and SF's 1194, Authorized Signature Card for Payment Vouchers on Letter of Credit must be obtained from the Supply and Property Management Branch, Division of Facilities Management, [Financial Management Service,] Department of the Treasury, in accordance with the procedures outlined in section B, paragraph 11B.10a, of this chapter.
SECTION B. PROCEDURES ON THE USE OF LETTERS OF CREDIT
11B.01 PURPOSE
This section provides procedures on the use of letters of credit for financing of Federal programs.
11B.02 METHOD OF OPERATION
a. The following is a brief outline of the major steps involved in applying the letter-of-credit procedures.
(1) The appropriate program office makes the award relative to the contract, grant, or other forms of agreement; forwards the necessary copies of such agreement to their Fiscal activity for recording in the accounts as an obligation; makes a determination that the project will be funded through the letter-of-credit technique; and requests certain information from the recipient. The determination that a contract requires advance payments must be made by the Associate Deputy Administrator for Logistics.
(2) The recipient organization selects a commercial bank; prepares SF 1194, Authorized Signature Card for Payment Vouchers on Letter of Credit, which bears the signatures of the officials designated to withdraw funds; and forwards the requested information relative to the selected bank and the signature card to the Fiscal activity serving the program office.
(3) The Fiscal activity certifies the signatures appearing on the signature card; prepares the letter of credit; and transmits the necessary copies of the signature card and letter of credit to the Department of the Treasury. Following processing by the-Department of the Treasury, the Fiscal activity transmits copies of the letter of credit to the recipient organization and records the letter of credit as a commitment in the agency accounts. Copies of the letter of credit and signature card will be forwarded by the Fiscal activity to the responsible contracting officer.
(4) The Department of the Treasury, transmits the letter of credit and the signature card to the applicable Federal Reserve bank or branch which serves the commercial bank selected by the recipient organization.
(5) As funds are needed to meet the Federal share of disbursements, the recipient organization prepares and submits payment vouchers to its commercial bank for transfer (advance) of funds from the Federal Reserve bank or branch to the recipient's account. The payment voucher, Form TFS 5401, will be submitted to the Federal Reserve bank. The Federal Reserve bank will forward the paid triplicate copy to the [TFCS Programs Branch, Financial Management Service, Department of the Treasury] for periodic distributions to the program agencies.
(6) At the end of each month the Fiscal activity reports by means of a separate Statement of Transactions, SF 224, to the Department of the Treasury the expenditures relating to the letter-of-credit transactions.
(7) The grant, contract or other forms of agreement entered into between the recipient organization and the appropriate VA program office will contain a provision to require the recipient organization to report no later than the 15th workday following the end of each quarter of the actual expenditures for the quarter made by them. The report will be forwarded to the applicable VA Fiscal activity for recording in the appropriate general ledger and subsidiary accounts.
11B.03 PROGRAM AUTHORIZATION
a. Procedures relative to the awarding of grants or contracts remain unchanged by this letter-of-credit instruction. All matters of a program nature shall continue to be handled by the responsible program official. The letter of credit is a fiscal device which authorizes a recipient organization to draw cash to pay for the Federal share of contract or grant disbursements. The letter of credit does not authorize disbursements. A separate authorizing document (that is, the grant, contract, or other form of agreement) must be processed by the applicable program office in the VA and must be in the recipient organization's possession before cash can be drawn. In other words, if the recipient organization has a letter o credit but has not received a grant award or other authorizing program document, then no withdrawals are authorized. This covers all program or protect situations, and includes continuing type grants where awards are made periodically (for example, quarterly or annually).
b. In each instance which it is determined by the applicable program office that the letter-of-credit technique will be utilized as the method of financing, there shall be included in the grant, contract, or other form of agreement a clause whereby the recipient organization commits itself to the practice of requesting cash drawdowns only as and when actually needed for its disbursements and to timely reporting as required by the Fiscal activity, with the understanding that failure to adhere to these commitments may cause the letter of credit to be revoked. It shall be the responsibility of the applicable program office in the VA to assure that the above clause is contained in the agreement and that it is understood by the recipient organization. It is also the responsibility of the applicable program office to forward the necessary confirmed copies of each agreement to its Fiscal activity.
11B.04 ISSUANCE OF THE LETTER OF CREDIT, SF 1193
Prior to issuing a letter of credit, the authorized certifying officer shall have in his/her possession a confirmed copy of the program authorization (grant award, contract, or other form of agreement). Upon receipt of the program authorization and the required information relative to the selected commercial bank, signature cards, etc., from the recipient organization (specific information contained in these instructions), the Fiscal activity serving the VA administering program office shall prepare the letter of credit. The use of SF 1193, Letter of Credit, is mandatory for this purpose. A facsimile of SF 1193 and an explanation of the information required to be entered in the numbered blocks is shown as follows (fig. 11.1):
Figure 11.1. SF 1193. Letter of Credit
*Form TUS 5401 will be changed to Form TFS 5401 at next revision of SF 1193.
Preparation of SF 1193
Block
Number Explanation
1. Enter "Veterans Administration" and the address of the Fiscal activity issuing the letter of credit.
2. Uniformity of numbering the letters of credit shall be followed. No alphabetical designations shall be used as part of the basic number or amendment. A basic eight-digit number shall be used, cipher ("Ø") will be used if needed to complete the eight digits, as follows: The first two digits identify the VA and the second two will always be 00 and shall be the same as in the agency station symbol (agency location code) prescribed by the Department of the Treasury. The last four digits shall be determined by the administering Fiscal activity and may be used to identify the program, project, State, period of availability, etc., provided there is no duplication of numbers.
3. Enter the amendment number beginning with number "1" and continuing in numerical sequence for each letter-of credit amendment. On the initial letter of credit, this block will remain blank.
4. Enter the applicable eight-digit accounting station symbol (location code) assigned by the Department of the Treasury for this purpose.
5. Enter the appropriation symbol applicable to the program being financed by the letter of credit.
6. Enter the effective date the recipient organization may begin drawing against the letter of credit. This date should not be the same as, or in advance of, the certified date. A minimum of 2 weeks should be allowed between the date of certification and the effective date so that the [TFCS Programs Branch, Financial Management Service, Department of the Treasury], can process the SF 1193 and forward it to the appropriate Federal Reserve bank or branch.
7 & 8. The name of the Federal Reserve bank or branch must be inserted in the appropriate box. All that is necessary is the name of the city and State in which the Federal Reserve bank or branch is located. If the recipient organization is located in the District of Columbia, enter "Richmond, VA."
9. Enter the name, address, and project or contract number of the recipient organization.
10. Enter the name and address of the commercial bank and the bank account number in which the drawdown will be deposited.
11. The total dollar amount of the current authorization must appear in this box on every letter of credit, and amendment thereto, submitted to Treasury.
12. One of the four blocks, which indicate a time limitation on the amount authorized, must be checked. If the fourth block is checked a time limitation must be typed in the space provided such as: EACH FISCAL YEAR, EACH CALENDAR YEAR, or a date (month, day, and year) when the authorization will terminate.
Block
Number Explanation
13. A dollar amount must appear in this box on every amending letter of credit. Where the purpose, or one of the purposes, of the current amendment is to increase or decrease the amount authorized, the PRIOR AUTHORIZATION will be the AMOUNT AUTHORIZED on the initial letter of credit (if the current amendment is number 1) or on the previous amendment (if the current amendment is number 2 or subsequent).
14 & 15. A dollar amount must appear in the box to either increase or decrease the authorization if the purpose, or one of the purposes, of the current amendment is to change the amount authorized.
16 & 17. Ifcthe time designation (block 12) is without time limit, block 16 should be checked indicating that the unpaid balance of the letter of credit will remain available until revoked. If the time designation is each month, each quarter, or each fiscal/calendar year, block 17 should be checked indicating the unpaid balance of the letter of credit will be revoked at the end of the period indicated and the full amount reestablished at the beginning of the following period.
18. If this letter of credit covers more than one project, project numbers and applicable dollar amounts should not appear on the original and duplicate copies of the SF 1193 sent to Treasury. Also, use this space to explain the nature of all amendatory letters of credit other than those which provide an increase or decrease in the amount of funds authorized. This space shall also be used if authority is to be granted to permit an individual payment voucher to exceed $5,000,000.
19. Enter the date the document is signed by the authorized certifying officer.
20 & 21. Type the name and title of the VA authorized certifying officer, in block 21 and the authorized certifying officer shall affix his/her signature in block 20, after determining that all the information in all blocks is proper.
As general information in filling out the SF 1193, Letter of Credit, all information must be typed.
11B.05 DISTRIBUTION OF COPIES OF LETTER OF CREDIT
The original and first carbon copy of the letter of credit shall be sent, with a transmittal letter, to the Department of the Treasury, [Financial Management Service, TFCS Programs Branch,] Treasury Annex No. 1, [PB-704], Washington, DC 20226, ATTN: [FMS/TFCS:LOC], Telephone [201-634-5770]. One copy will be forwarded to the recipient organization and one or more copies, as required, shall be retained by the Fiscal activity. The copy sent to the recipient organization shall not be released before the original and first carbon copy are processed by the Department of the Treasury.
11B.06 COMPLETING AND DISTRIBUTION OF SF 1194
A facsimile of SF 1194, and an explanation as to what information it should contain, is shown as figure 11.2 of these instructions. Upon receipt of two original SF's 1194 from the recipient organization, the applicable VA certifying officer who issues the letter of credit shall complete the forms by inserting the applicable letter-of-credit number in block 1 and the date, typed name, and the signature of the VA authorized certifying officer in block 9. After both forms have been completed, one shall be sent to the [Financial Management Service,] Department of the Treasury and the other retained for reference purposes. The first signature card applicable to a specific letter of credit must be forwarded with the letter of credit. Superseding signature cards which change the persons authorized to sign payment vouchers should be forwarded, as required, promptly by means of a transmittal letter to the [Financial Management Service,] Department of the Treasury.
11B.07 PROCESSING OF LETTER OF CREDIT AND SIGNATURE CARDS BY TREASURY DEPARTMENT
It is the responsibility of the applicable VA Fiscal activity to assure that the recipient organization is not permitted to process payment vouchers against the letter of credit until such time as the Department of the Treasury has processed the necessary documentation and forwarded the copy of the letter of credit and accompanying signature cards to the appropriate Federal Reserve bank or branch. The length of time required to accomplish this is dependent upon the location of the Federal Reserve bank or branch. For those recipient organizations located in the District of Columbia, 2 workdays should be allowed for processing the letter of credit, following delivery to the [Financial Management Service,] Department of the Treasury. For those recipient organizations located outside the District of Columbia allow 2 weeks for the letter of credit to be received and reviewed by the [TFCS Programs Branch, Financial Management Service, Department of the Treasury,] and forwarded to the appropriate Federal Reserve bank or branch. This is to ensure that the recipient organization does not forward payment vouchers to the Federal Reserve bank for payment before the letter of credit, or any amendment thereto, reaches the Federal Reserve bank.
11B.08 DESIGNATING THE CERTIFYING OFFICER
A minimum of one primary and one alternate certifying officer should be designated in each applicable VA Fiscal activity to certify letters of credit and authorized signature cards. Even though the individual(s) selected have previously been designated to certify all classes of vouchers, a separate designation is required for letters of credit. Therefore, an SF 210 must be properly filled out following the procedures prescribed in ITFRM 4-2580.30e. and forwarded to the Department of the Treasury, along with a transmittal letter, either prior to certifying the first letter of credit, or accompanying the first letter of credit. In completing the SF 210, Signature Card for Certifying Officer, the class of vouchers to be certified will be described as "Letter of Credit" and the place of payment as "Federal Reserve Bank." The completed SF 210 and accompanying transmittal letter shall be forwarded to the same Treasury address as indicated above for the letter of credit.
11B.09 RESPONSIBILITIES OF THE CERTIFYING OFFICER
The certifying officer who signs the letter of credit and thus certifies that payments authorized by the letter of credit are correct and proper has the same responsibility for priority of the payment as for an expenditure by a check drawn on the Treasurer of the United States. The SF 1194, Authorized Signature Card for Payment Vouchers on Letter of Credit, submitted by the recipient organization, must a so be signed by the authorized certifying officer prior to forwarding to the Department of the Treasury. Therefore, if the recipient's designated official who certifies as to the authenticity of the persons authorized to sign payment vouchers is unknown to the VA certifying officer, the VA certifying officer should request documentation of the designating official's authority. In any event, responsibility for signatories rests with the VA certifying officer.
11B.10 PROVIDING FORMS TO THE RECIPIENT ORGANIZATION
a. Providing the recipient organization with the necessary forms with which to comply with the Federal Government regulations is the responsibility of the applicable VA Fiscal activity. The standard forms described here are immediately available and should be procured in the usual manner unless stated otherwise. A supply of Forms TFS 5401 should be obtained by addressing a memorandum to the Supply and Property Management Branch, Division of Facilities Management, [Financial Management Service], Department of the Treasury, Franklin and Union Streets, Ford Plant, Building No. 12, Alexandria, Virginia 22314, Subject: Requisition of Forms, TFS 5401; citing: (1) the name, address and ALC [(Agency Location Code)] of the requesting office; (2) the number of forms requested; and (3) the address to which the supply should be sent. The applicable VA Fiscal offices should limit the frequency of their requisitions, insofar as possible, to yearly.
b. A recipient organization should, upon being furnished a supply of Forms TFS 5401, be cautioned that if they receive grants or advances in the form of letters of credit from more than a single agency station, the payment vouchers furnished by each agency station are not interchangeable but must be used only for the respective agency station. Since these forms are prenumbered and are the same as cash when properly completed and presented to the local commercial bank selected by the recipient organization, the applicable VA Fiscal activity must maintain records of the exact number which have been provided to each recipient organization. Receipts should be obtained from the recipient organization to assist in this accounting, as outlined in paragraph 11B.16g(1) of these instructions.
11B.11 PROCESSING LETTER-OF-CREDIT TRANSACTIONS
A general ledger control account with appropriate subsidiary accounts, must he established to account for the authority to withdraw cash SF 1193 which has not yet been exercised by the recipient organization. The third copy (white) of Form TFS 5401, Payment Voucher on Letter of Credit, forwarded to the VA Fiscal activity by the Department of the Treasury, [Financial Management Service] shall be used to reduce the balance of the authority to withdraw cash and to record the outstanding advance (principles and standards in Title 2, GAO Policy and Procedures Manual, subsec. 12.2, shall be observed in this regard).
11B.12 REPORTING LETTER-OF-CREDIT TRANSACTIONS
a. Letter-of-credit transactions, like other expenditures, shall be reported for inclusion in the Treasury's central accounts for the Government's cash operations. The applicable VA Fiscal activity shall prepare a separate SF 224, Statement of Transactions, on a paid month basis, confined to payment voucher transactions. VA stations will transmit the SF 224 data by telecommunications to the Department of the Treasury. The data will be transmitted by accessing the system with the password and new account number obtained from [Financial Management Service], Department of the Treasury, after completing the signature card as explained in MP-4, part V, chapter 4B.06d. Classification by appropriation and fund account symbol will be shown in section I of the SF 224 in the usual manner. The total of payment vouchers classified in section I will be shown under item 1 in section II according to the month paid (date debited) by the Federal Reserve bank, and shall be supported by a listing of the individual payment vouchers. The SF 224 data will reflect the following information:
(1) Letter-of-credit number;
(2) TFS Form 5401 number;
(3) TFS Form 5401 serial number;
(4) Date paid (date debited by Federal Reserve bank);
(5) TFS Form 5401 amount;
(6) Subtotal amounts for each paid month; and
(7) Total amount of the listing.
b. The SF 224 report data on letter-of-credit transactions will be transmitted by telecommunications by the VA so as to be received by the Financial Management Service, Department of the Treasury not later than noon of the eighth working day following the reporting month. Every effort should be made to include all requests for payment accomplished during the month of September on the SF 224 which is due in the Financial Management Service, Department of the Treasury not later than noon of the eighth workday in October. A September supplemental report will be made for any significant amounts of unreported requests for payments, based upon analysis of the September statement of transactions. To facilitate yearend accounting and reporting, all adjustments possible on the SF 224 reports should be submitted through August.
c. On a paid-month basis, Treasury will develop summary totals for each reporting office (ALC) using the original copy of the TFS Form 5401 received from Federal Reserve banks. A comparison of the paid month summary totals developed will be made as of the close of each month following the payment month. If the paid month summary totals agree, the paid month is considered reconciled. Differences disclosed in this comparison will be furnished each ALC on TFS Form 6652, Statement of Differences Deposit Transactions, for the purpose of resolving the difference in cooperation with the appropriate Treasury disbursing centers. A list of accomplished expenditures transfer and adjustment documents processed under D.O. symbol 999, Washington, DC will accompany each TFS Form 6652 to assist in localizing the difference.
d. If all or a portion of the difference shown on the TFS Form 6652 was caused by a TFS Form 5401 document(s) not reported or incorrectly reported by the ALC on its SF 224, the adjustment will be included on the next SF 224. All adjustments will be identified as to their correct paid month. If the ALC finds that Treasury has incorrectly charged them with an item (TFS Form 5401) that is not theirs, or has not charged them with an item (TFS Form 5401) that is theirs, Treasury should be contacted at [the following address or telephone number:]
[Financial Adjustment Branch]
[Financial Management Service]
Department of the Treasury
Treasury Annex No. 1,
Attention: GAO Building, Room 3108
Washington, DC 20226
(Telephone 202-566-6521)
Treasury will accomplish appropriate corrections of Treasury errors in the next reporting month following notification. It will include the total of the expenditures relating to letter-of-credit transactions based upon the triplicate copy of the TFS Form 5401 received from Treasury.
e. In addition to the monthly reports outlined above, each applicable VA Fiscal activity shall furnish to Treasury, upon request, Status of Federal Funds Reports. These summary reports shall be based upon the reports provided by the recipient organizations and shall be forwarded within 5 days to permit the Office of Budget and Finance (Controller) (047B1) to prepare the VA consolidated report for submission to the Department of the Treasury within 30 days after the date of Treasury's request. The summary reports will be in the following format for each recipient:
Figure - Status of Federal Funds Report
EXPLANATION OF ITEMS TO BE REPORTED ON STATUS OF FEDERAL FUNDS REPORT
NUMBER
(1) Enter month being reported.
(2) Enter name of Federal program agency (Grantor).
(3) Enter name of recipient organization (Grantee).
(4) Enter agency location code assigned to Federal program agency.
(5) Enter the letter-of-credit number, if part or all advances of Federal
funds are received through a letter of credit.
(6) Enter actual ending cash balance of previous month.
(7) Enter the amount received each day. Federal funds received includes
payment by letter of credit, direct Treasury check, and/or refunds
and receipts, whether or not deposited.
(8) Enter the total amount disbursed each day. Normally, Federal funds
are considered disbursed when checks have been released to pay for
program and/or project costs. Disbursement include refunds, of
Federal funds received, to the Federal Government.
(9) Enter the amount on hand each day. The amount of Federal funds on
hand refers to the undisbursed balance of Federal funds received.
(10) Enter totals for Federal funds received, Federal funds disbursed
during month, and cash on hand at end of month.
(11) Enter estimated number of days until the cash on hand at end of month
will be expended.
(12) Enter signature of individual preparing report for recipient
organization with typed name, title, and date prepared.
(13) Enter signature of authorized official of recipient organization with
typed name, title, and date signed.
NOTE: All balances should reflect the actual cash (not accrued) balance of Federal funds in the hands of the recipient organization at time periods indicated.
11B.13 AMENDMENT OR CANCELLATION OF LETTER OF CREDIT
The conditions which require an amendment or cancellation to the letter of credit are explained in paragraph 11B.16i and j of these instructions. Amendments or cancellations shall be processed by the applicable VA Fiscal activity as follows:
a. Amendments. Upon receipt of the required information from the recipient organization and/or the applicable VA program office, an amended letter of credit shall be promptly prepared and certified by an authorized certifying officer. Distribution and processing of the amended letter of credit shall be the same as for the initial letter of credit.
b. Cancellation or Revocation. Cancellation or revocation of a letter of credit is a matter for administrative determination as outlined in paragraph 11B.16j of these instructions. If it should become necessary for a letter of credit to be canceled or revoked, the applicable VA Fiscal activity shall prepare a letter signed by a certifying officer to the Department of the Treasury, [Financial Management Service, TFCS Programs Branch,] Treasury Annex No. 1, [PB-704], Washington, DC 20226, ATTN: [FMS/TFCS:LOC], requesting such action. The request shall be coordinated with the program office prior to forwarding to the Department of the Treasury, in duplicate, and shall cite the letter-of-credit number and the latest amendment number (if any), as well as the name and address of the recipient to whom the letter of credit was issued. This letter should also request that the duplicate copy be used by the Department of the Treasury to indicate the unexpended balance which has been revoked and returned to originator. The recipient organization shall be advised of the revocation or cancellation action at the same time that the request to accomplish such action is transmitted to the Department of the Treasury. The letter to the recipient organization shall state the specific reasons for the cancellation or revocation and shall request the recipient to discontinue the use of payment vouchers under the cited letter-of-credit number. A copy of all correspondence relating to the cancellation or revocation of a letter of credit shall be maintained in the applicable Fiscal activity. A letter-of-credit number may be reused starting 18 months after revocation. It should be noted, with regard to cancellation or revocation, the letter of credit is the equivalent of cash available to the recipient organization and is irrevocable to the extent the recipient organization has obligated funds in good faith thereunder in executing the authorized Federal program in accordance with the grant, contract, or other agreement. Thus, upon cancellation or revocation of the letter of credit, the terms of the program authorization govern the settlement of costs.
11D.14 REPORTS REQUIRED FROM THE RECIPIENT ORGANIZATION
The applicable program office designated to administer the grant, contract, or other agreement and the Fiscal activity issuing the letter of credit share a joint responsibility for assuring that funds advanced to recipient organizations are used solely in accordance with the terms and conditions of the program authorization; that unused balances (including funds improperly applied) are returned to the Federal Government; property or facilities purchased with such funds or otherwise furnished by the Government are utilized and disposed of in accordance with the terms of the program authorization; and that advance payments do not exceed the Federal share of the current disbursements. In order to fulfill this responsibility, certain reports shall be required from the recipient organization. The exact form and content of such reports are not prescribed here, since they may vary according to the specific terms and conditions contained in the program authorization. However, the administering program office in VA shall notify the recipient organization as to their specific reporting requirements prior to issuance of the letter of credit. Such requirements may be contained in the program authorization document, itself, or may be the subject of separate written instructions. If separate written instructions are provided to the recipient organization, copies of all such instructions shall be maintained in both the VA program and Fiscal activity. The periodic reports required of the recipient organization must be provided not less frequently than each calendar quarter and must be in sufficient detail to reflect, as a minimum, the following information:
a. How the funds were applied during each reporting period.
b. Details of property acquired.
c. The difference, if any, between the total amount of funds drawn on the letter of credit and/or funds advanced by direct Treasury check and disbursements related to the Federal program.
d. That cash is being withdrawn by payment vouchers requests for payment and/or advanced by direct Treasury check only in accordance with program disbursement needs.
e. The available balance of each letter of credit.
f. Separate financial data for each secondary recipient organization.
11B.15 REVIEWS OF REPORTING AND FINANCIAL PRACTICES OF RECIPIENT ORGANIZATION
Copies of the periodic reports submitted by the recipient organizations, as outlined above, shall be the basis for reviews of the reporting and financial practices of the recipient organizations (both primary and secondary). The applicable VA Fiscal activity shall review such reports and reconcile them with their own subsidiary accounts. They shall also be reviewed in terms of the reasonableness of cash balances on hand and the timing of drawdowns by payment voucher. If in the judgment of the responsible official in the VA Fiscal activity the recipient organization has failed to comply with the terms and conditions of either the letter of credit or the applicable program authorization document, or has failed to provide timely reports in sufficient detail to permit the necessary review of their reporting and financial practices, the administering program office in VA shall be so informed. It is the responsibility of the administering program official to determine such remedial measures as may be necessary in the event of excessive withdrawals of cash, failure to submit timely reports, etc. The responsible program official shall inform the recipient organization, in writing, as to the remedial measures deemed necessary in each instance (including cancellation or revocation of the letter of credit) and shall provide a copy of all such correspondence to the applicable VA Fiscal activity.
11B.16 RECIPIENT ORGANIZATIONAL REQUIREMENTS
a. General Requirements. Any contractor or grantee (recipient organizations) receiving a letter of credit administered by the VA shall comply with the requirements contained here, together with any special written instructions, terms and conditions contained in the grant, contract, or other agreement.
b. Grant, Contract, or Other Agreement. The grant, contract, or other agreement entered into between the recipient organization and the appropriate VA program office will generally contain the specific terms and conditions with which the recipient organization must comply. Use of letters of credit shall be covered by a cause in the grant, contract, or other agreement for advance financing whereby the recipient organization commits itself to the following:
(1) The practice of requesting cash draw downs only as and when actually needed for its disbursements, and in an amount approximately equal to the Federal share of such disbursements.
(2) Timely reporting of cash disbursements and balances as required by VA.
(3) The financial management system shall provide for effective control over and accountability for all Federal forms as stated in OMB Circular A-102 revised for State and local governments, [ ] OMB Circular A-110 for institutions of higher education, hospitals and other nonprofit organizations [, and OMB Circular A-128 for Audits of State and local governments.]
c. Accounting Records. Prior to the use of a letter of credit administered by VA, a recipient organization that does not now have a letter of credit must establish accounting records, or make the necessary changes in its existing accounting system, so as to provide control of cash and provide reports required by VA.
d. Selection of Commercial Bank
(1) The recipient organization must select a commercial bank which is a member of the Federal Reserve system or any "insured" bank within the meaning of the act creating the Federal Deposit Insurance Corporation. It should be noted that, ordinarily, the recipient organization and commercial bank should be located in the same bank or branch territory of a given Federal Reserve District. The Federal Reserve bank or branch will be Richmond, Virginia, when the commercial bank selected by recipient is located in the District of Columbia.
(2) The selected bank may agree to give immediate credit upon presentation of payment vouchers, or it may request the recipient organization to defer disbursements until the payment voucher clears the Federal Reserve bank or branch. In any event, the recipient organization shall advise the selected bank to process payment vouchers expeditiously.
(3) Recipient organizations may not use more than one commercial bank for the purpose of transacting letter-of-credit business.
(4) The administering office in VA may elect to require the recipient organization to establish a special bank account (provided the recipient organization is not a State-see sec. 202 of the Intergovernmental Cooperation Act of 1968) for deposit of federal funds withdrawn under the letter of credit. In such event, the agreement between the recipient organization and the bank shall provide that:
(a) The Federal Government shall retain a lien on all funds held in the account.
(b) The bank shall abide by written instructions of the Federal Government as regards the deposit and withdrawal of funds.
(c) The Federal Government shall have the right to inspect or audit the bank's books and records pertinent to the special account.
(5) Upon selection of the bank, the recipient organization must furnish the following information to the appropriate VA Fiscal office:
(a) The name and address of the bank selected.
(b) The title and/or number of the bank account.
(c) A copy of the agreement (if a special account) with the bank.
(d) The identity and location of the Federal Reserve bank or branch through which the commercial bank will clear the payment vouchers. If the recipient organization is located in the District of Columbia, Richmond, Virginia, will serve as the Federal Reserve bank.
e. Authorized Signature Cards. A signature card (SF 1194) must be on file with the letter of credit at the Federal Reserve bank or branch before payment vouchers will be processed. Recipient organization must adhere to the following instructions with regard to the authorized signature card:
(1) The signature cards are available at VA and will be provided to the recipient organization by the appropriate VA fiscal office. The recipient orgainzation shall prepare and forward to the VA Fiscal activity two original authorized signature cards.
(2) The number of signatures on any one signature card, representing the officials who are authorized to draw on letters of credit, is limited to four. Two or more signature cards are required if there are more than four officials authorized to draw on one letter of credit.
(3) Any blocks reserved for signatures of individuals authorized to draw on letters of credit which are not used, should be crossed out, and you should not submit any signatures which have been pasted over, erased, or painted over with correction fluid. In addition, facsimile signatures should not be submitted.
(4) The number of officials who are authorized to draw on letters of credit should be limited to a practical number.
(5) An official of the recipient organization, who has the authority to designate the officials to sign payment vouchers, must certify that the signatures appearing on the signature card are the signatures of the officials so authorized to sign payment vouchers. The VA certifying office may require the certifying official to present proper evidence (such as an official organization chart or minutes of board meetings, etc.) that he/she has the authority to designate the officials who will sign payment vouchers. If an individual is both a designated signer of payment vouchers or requests for payment and a designated official of the recipient organization, his or her signature must appear in both of the appropriate spaces provided on the SF 1194.
(6) Only one signature is required on the payment voucher. However, the recipient organization is encouraged to use more than one signature.
(7) One or more officials should be recognized as authorized alternates to sign payment vouchers to provide for cases of absence of the principal official. However, recipient organizations should limit the authority to draw on a letter of credit to the smallest practical number of officials.
(8) Complete new signature cards must be submitted immediately when there is a change of principal or alternate officials authorized to sign payment vouchers. The new cards must contain the signature of all officials who will sign payment vouchers and the signature of the certifying official, as though the initial signature card did not exist. A change in position or title of an official does not require a new signature card if the person's authority to sign payment vouchers remain unchanged. Facsimile signatures are not acceptable.
(9) For the guidance of recipient organizations, the following (fig. 11.2) is a facsimile of the SF 1194, Authorized Signature Card for Payment Vouchers on Letter of Credit, and an explanation of the information which shall be entered in the numbered blocks:
Figure 11.2. SF 1194, Authorized Signature Card for Payment Vouchers on Letter of Credit
Preparation of SF 1194
Block
Number Explanation
1. Leave blank-to be completed by VA.
2. Enter the city address of the Federal Reserve bank or branch which serves the recipient organization's selected commercial bank. If the recipient is located in the District of Columbia, enter "Richmond, VA."
3. Enter the name, address, and applicable project number of contract number of the recipient organization.
4. Leave blank-to be completed by VA.
5. Enter an "X" if only one signature is to be required on payment vouchers. If more than one signature is to be required, leave this block blank.
6. Enter an "X" if more than one signature is to be required on payment vouchers. If only one signature is to be required, leave this block blank.
7. Enter the typed names and original signatures of the recipient organization which are authorized to execute Form TFS 5401, Payment Voucher on Letter of Credit.
8. Enter the date, typed name, title, and original signature of the recipient organization's official who is authorized to certify the authenticity of the signature of individuals authorized to execute the payment vouchers.
9. Leave blank-to be completed by VA.
f. Letter of Credit. Upon receipt of the required information relative to selection of a commercial bank, signature cards, etc., from the recipient organization, the appropriate VA Fiscal activity will prepare the letter of credit. One copy of the letter of credit will be forwarded to the recipient organization by the appropriate VA Fiscal activity. SF 1193, Letter of Credit, is the authorization from VA to a Federal Reserve bank or branch to advance funds to the designated recipient, upon presentation of payment vouchers by the recipient organization to its commercial bank. No payment vouchers shall be presented by the recipient organization until the letter of credit has been received from VA, nor shall the recipient organization submit payment vouchers before the effective date on their letter of credit.
g. Preparation of Payment Vouchers. The recipient organization shall execute a Form TFS 5401, Payment Voucher on Letter of Credit, each time it is determined that funds are needed to meet the Federal Government's share of current expenses. The following procedures shall be observed in executing the payment voucher:
(1) Form TFS 5401, Payment Voucher on Letter of Credit, is mandatory for use by recipient organizations in making withdrawals against letters of credit. A supply of these forms should be obtained from the appropriate VA Fiscal activity. They are "prenumbered" forms and must be receipted for at the time they are received from VA. They shall be treated as "accountable" forms by the recipient organization and replenishment forms should be requested from VA allowing approximately 1 week for delivery.
(2) Following receipt of a letter of credit from VA, the payment vouchers drawn thereon shall be numbered sequentially beginning with "1". Amendments to the letter of credit shall not interrupt the sequential numbering of the payment vouchers. The letter of credit number is required on the payment voucher, but the amendment number should not be shown. Alphabetical designations shall not be used as part of the payment voucher number.
(3) Payment vouchers should not be drawn more frequently than daily, nor for amounts less than $5,000 or more than $1,000,000, and in no case more than $5,000,000 unless specifically authorized and stated on the letter of credit. When disbursements of the recipient organization amount to less than $5,000 in any calendar month, only one payment voucher should be drawn during the month to cover the amount needed.
(4) The "date voucher drawn" on the payment voucher is the date of actual presentation to the recipient organization's bank. The official who actually submits the voucher to the bank is responsible for the correct date. The payment vouchers will not be presented to the commercial bank until the recipient organization has need for the cash to cover its disbursements.
(5) Payment vouchers are distributed as follows:
(a) Original (blue), duplicate (green), and triplicate (white), shall be presented (without snapshot separation) to the commercial bank for transmittal to the Federal Reserve bank.
(b) The Federal Reserve bank will forward the triplicate copy (white) to the [Financial Management Service, Department of the Treasury] for periodic distribution to the appropriate VA Fiscal activity that issued the letter of credit.
(c) The quadruplicate copy (salmon) shall be retained by the recipient organization.
(6) If, for some reason, amounts drawn (advanced) for certain programs are not disbursed, the cash should be used for the Federal share of disbursements on other programs funded by the same letter of credit.
(7) Any payment voucher form which is voided and not used by the recipient organization shall be appropriately marked "VOID" across the face of the voucher and all copies except the quadruplicate (salmon) forwarded to the applicable VA Fiscal activity.
(8) If a payment voucher is rejected by the Federal Reserve bank or one of its branches, the Federal Reserve bank or branch will send the original of any rejected payment voucher to the [Financial Management Service, Department of the Treasury]. The original of the payment voucher, stamped "VOID" with the bank's letter giving the reason for rejection, will be sent by the [Financial Management Service., Department of the Treasury] to the appropriate office of the Federal program agency concerned.
(9) The payment voucher forms are not interchangeable. If a recipient organization has more than one letter of credit, issued by more than a single VA office, care must be exercised to assure that only those payment voucher forms which are provided for each letter of credit are utilized to draw funds against that specific letter of credit and no other.
(10) For the guidance of recipient organizations, the following (fig. 11.3) is a facsimile of Form TFS 5401 and an explanation of the information which shall be entered in the numbered blocks:
Figure 11.3 Form TFS 5401, Payment Voucher on Letter of Credit
Block
Number Explanation
1. Enter the payment voucher number commencing with number "1" for each letter of credit and progressing in consecutive order. Amendments to the letter of credit (beginning of a new fiscal year, or rejected payment vouchers) shall not interrupt the progression.
2. Enter the letter of credit number exactly as shown on the applicable letter of credit. Amendment numbers shall not be shown.
3. Enter the applicable eight-digit accounting station symbol [(location code)] of the VA office executing the letter of credit. Must be the same as reflected on the letter of credit.
4. Enter the actual date that the payment voucher is presented to the local commercial bank.
5. Enter the dollar amount of the drawdown against the letter of credit. If the drawdown covers funds for more than one project, each project number and the amount of drawdown applicable to each project shall be shown on the reverse side of the form.
6. Enter the name, address, project number(s), and/or contract number(s) of the recipient organization. The information shown in this block shall be exactly the same as shown on the letter of credit and the applicable authorized signature card.
7. Enter the name and address of the commercial bank which handles the recipient organization's bank account.
8. Enter the city location of the Federal Reserve bank or branch which serves the local commercial bank, exactly as it appears on the letter of credit.
9. [Enter amount of Federal funds on hand at the time the voucher is drawn. Federal funds on hand refers to the undisbursed balance of Federal funds received. Normally, Federal funds are considered disbursed when checks have been released to pay for program and/or project costs.]
Block
Number Explanation
10. Enter "Veterans Administration" and the address of the VA office executing the applicable letter of credit, as reflected on the letter of credit.
11 & 12. The name and title of the person authorized to sign payment voucher as reflected on the applicable authorized signature card, SF 1194, shall be typed in block 12, and the person so authorized shall affix his/her signature in ink in block 11.
13 & 14. The instructions provided in 11 and 12 above shall apply, with the exception that the countersignature (if any) shall be accomplished by a person other than the person who signed in block 11.
15 & 16. Leave blank-to be completed by the Federal Reserve bank.
h. Secondary Recipients. When primary recipient organizations, those which receive advances of funds directly from the Federal Government, make advances of funds to secondary recipients, such advances shall conform substantially to the same standards of timing and amount as apply to cash advances to primary recipient organizations. The primary recipient organization will develop procedures whereby secondary recipient organizations can obtain funds from the primary recipient organization as needed for disbursements. Thus, the primary recipient organization is responsible for control of the cash flow to the secondary recipient. This imposition upon the secondary recipient also includes the furnishing of reports of cash disbursements and balances, with the understanding that failure to adhere to these provisions may cause the unobligated portion of the letter of credit to be revoked by the VA program office or by the Department of the Treasury.
i. Amendments to Letter of Credit. Anyone of the following conditions will require amendment of the letter of credit. The appropriate VA program office shall immediately notify the applicable administering VA Fiscal office when there is:
(1) An increase or decrease in the total amount of program authorization covered by letter of credit, or its related period of availability. Under ordinary circumstances, amendments should not be submitted to increase or decrease the amount authorized by less than $5,000.
(2) A change in the name of the recipient organization.
(3) A change in the title of the bank account or a change in the information relative to the commercial bank.
(4) Established or rescinded the authorization for the recipient organization to draw amounts in excess of $5,000,000.
j. Cancellation or Revocation of Letter of Credit. In each instance, cancellation or revocation of a letter of credit is a matter for administrative determination by the administering program office in VA which issued the program authorization. Any of the following conditions may result in cancellation or revocation of the letter of credit:
(1) Where the annual aggregate financing falls below $120,000 annually. If the reduced level is only temporary, the letter of credit may remain in force.
(2) Where the business relationship between the VA program office and the recipient organization is completed or terminated, except where it is expected that followup programs will be authorized.
(3) Where it is determined that the recipient organization has failed to comply with the terms and conditions of either the letter of credit or the applicable grant, contract, or other agreement.
(4) Where the VA program office determines that progress is not satisfactory toward achievement of the objective of the letter-of-credit system. The letter of credit shall be irrevocable for the Federal share of encumbrances, obligations, and expenditures which have been properly incurred by the recipient organization within the terms set forth by the program authorization through the date of canceling of the letter of credit. To this extent, the letter of credit is a cash demand instrument. A provision to this effect may be included in the letter of credit if necessary to satisfy legal requirements of the recipient organization. If, however, the program authorization terminated, then the terms of the program authorization govern the settlement of costs.
k. Report Required of the Recipient Organization. Periodic reports will be required by VA. The nature and type of reports required may vary in accordance with the nature of the program authorization and, therefore, the specific reports are not prescribed here. They may be made a part of a grant, contract, or other agreement or they may be the subject of separate written instructions provided to the recipient organization by VA. However, these instructions should normally be issued only by the official responsible for administering the grant, contract, or other agreement. In any event, such reports shall be submitted to the applicable office in VA in a timely manner. Failure to do so may result in the revocation of the letter of credit. The financial management system of the recipient organization shall provide the effective control over and accountability for all Federal funds as stated in OMB Circular A-102 revised for State and local governments, OMB Circular A-110 for instructions of higher education, hospitals, and other nonprofit organizations [, and OMB Circular A-128 for Audits of State and local Governments.]
11B.17 REFUND OF EXCESS FEDERAL FUNDS
a. Federal funds shall be promptly refunded to the applicable program office and redrawn when needed if the funds are erroneously drawn in excess of immediate disbursement needs.
(1) The only exceptions to the requirement for prompt refunding are when the funds involved, will be disbursed by the recipient organization within 7 calendar days, or are less than $10,000 and will be disbursed within 30 calendar days.
(2) These exceptions to the requirement for prompt refunding should not be construed as approval by Treasury for a recipient organization to maintain excessive funds; they are applicable only to excessive amounts of funds which are erroneously drawn.
b. Any interest income earned by a recipient organization on Federal funds shall be promptly refunded to the program agency unless specifically prohibited by law.
c. The VA will deposit their portion of the amount refunded which represents the initial advance to the appropriation or fund accont initially charged with the advance. The interest portion of any refunds should be deposited to receipt account "1499, Miscellaneous Interest Collections, not otherwise classified."
SECTION C. CASH ADVANCES BY TREASURY CHECKS
11C.01 PURPOSE
This section provides procedures on the use of cash advances made to a recipient organization by Treasury check.
11C.02 METHOD OF OPERATION
The following is a brief outline of the major steps involved applicable to cash advance to a recipient organization by Treasury check:
a. The appropriate program office makes the award relative to the contract, grant, or other forms of agreement for which a cash advance will be required and forwards the necessary copies of such agreement to its Fiscal activity for recording in the accounts as an obligation.
b. The Fiscal activity involved will schedule the amount of the advance payment to be made by Treasury check in accordance with the terms set forth in the contract, grant, or other form of agreement, ordinarily on a monthly basis and record the amount advanced in the appropriate general ledger and subsidiary accounts.
c. The grant, contract or other forms of agreement entered into between the recipient organization and the appropriate VA program office will contain a provision to require a recipient organization to report no later than the 15th workday following the end of each quarter the amount of the actual expenditures for the quarter made by them. The report will be forwarded to the applicable VA Fiscal activity for recording in the appropriate general ledger and subsidiary accounts.
d. Cash advances by Treasury check will be included in the regular statement of transactions (SF 224) report submitted by the Fiscal activity accounting for the advance.
e. Each applicable VA Fiscal activity shall furnish to Treasury, upon request, Status of the Federal Funds Reports. These reports shall be based upon the reports provided by the recipient organizations and shall be forwarded within 5 days to permit the [Office of Budget and Finance (Controller)] (047B1) to prepare the VA consolidated report for submission to the Department of the Treasury within 30 days after the date of Treasury's request. These reports will be prepared as outlined in the procedures prescribed in paragraph 11B.12d under the letter-of-credit instructions.
11C.03 RECIPIENT ORGANIZATIONAL REQUIREMENTS
a. General Requirements. Any contractor or grantee (recipient organization) receiving funds shall comply with the requirements contained herein, together with any special written instructions and terms and conditions contained in the grant, contract, or other agreement which will be financed by Treasury checks.
b. Grants, Contract, or Other Agreement. The grant, contract, or other agreement entered into between the recipient organization and the appropriate VA program office will generally contain the specific terms and conditions with which the recipient organization must comply.
c. Accounting Records. Prior to the use of a Treasury check advance, a recipient organization must establish accounting records, or make the necessary changes in its existing accounting system, so as to provide control of cash and provide reports required by VA. The administering VA program office shall retain a lien on all funds not applied to grants or other programs.
d. Reports Required of the Recipient Organization. Periodic reports will be required by VA. The nature and type of reports required may vary in accordance with the nature of the program authorization and, therefore, the specific reports are not prescribed herin. They may be made a part of the grant, contract, or other agreement or they may be the subject of separate written instructions provided to the recipient organization by VA. However, these instructions should normally be issued only by the official responsible for administering the grant, contract, or other agreement. In any event, such reports shall be submitted to the applicable office in VA in a timely manner.
11C.04 TERMINATION OF ADVANCE METHODS OF FINANCING GRANT PROGRAMS
a. When a recipient organization receiving cash advances by a letter of credit or by direct Treasury check method has demonstrated to the program office an unwillingness or inability to establish procedures that will minimize the time elapsing between cash advances and the disbursement thereof, the program office, unless prohibited by the statute(s) governing the program(s) in question, shall terminate advance financing. The program office shall require the recipient organization to finance its operations with its own working capital, and payments to the recipient organization shall be made by direct Treasury check method to reimburse it for actual cash disbursements. The VA shall then process such reimbursements expeditiously so as to minimize the time elapsing between disbursement by and payment to the recipient organization.
b. In those cases in which the reimbursement method as stated in subparagraph a above is not feasible, arrangement may be made whereby the operations of the recipient organizations are financed on a working capital advance basis.
(1) Funds are advanced to the recipient organization to cover its estimated disbursement needs for a given initial period, which normally should not exceed a 30-day requirement. Thereafter, payments are made to the recipient organization for the amount of its actual cash disbursements.
(2) The amount of the initial advance shall be geared to the reimbursement cycle, so that after the initial period the payments are approximately equal to the average amount of the recipient organizations unreimbursed program payments.
SECTION D. ACCOUNTING FOR CASH ADVANCES FOR FEDERAL GRANTS AND OTHER PROGRAMS
11D.01 GENERAL LEDGER ACCOUNTS
The following general ledger accounts contained in appendix A, are prescribed for cash advances and interest income under Federal grants and other programs by letters of credit or Treasury checks:
1012 Disbursing Authority
1017 Disbursing Authority-Letters of Credit
1124 Advance Payments-Other Than Federal
1125 Advance Payments-Letters of Credit
2031 General Fund Receipts
2227 Unobligated Allotment
2228 Undelivered Orders
2229 Accrued Expenditures
3014 Miscellaneous General Fund Earnings-Current Year
4011 Operating Expense-General
7125 General Fund Receipts Deposited
11D.02 ACCOUNTING FOR FEDERAL GRANTS AND OTHER PROGRAMS
The following accounting steps represents the most common types of transactions which will be encountered in accounting for cash advances under Federal grants and other programs:
a. The Accounting Section receives a contract or other forms of agreements authorizing advance payments by letters of credit or Treasury check for obligation in the accountability accounts (2227/2228).
b. Letters of Credit, SF 1193 issued will be recorded as a commitment in the disbursing authority accounts (1017/1012).
c. Advance payments made by Treasury check will be recorded in the proper advance account and disbursing authority account (1124/1012).
d. Advance payment voucher, Form TFS 5401 drawndown on a letter of credit received from the participating organization will be recorded in the letter-of-credit advance account and letter-of-credit disbursing authority account (1125/1017).
e. Reports of expenditures from participating organizations will be recorded in the proper advance account, expense account and accountability accounts (4011/1124 or 1125, 2228/2229).
f. Increases or decreases in obligation for Federal grants and other programs will be recorded in the accounts listed in subparagraph a, of this paragraph.
g. Increases or decreases in amended letters of credit issued will be recorded in the accounts listed in subparagraph b above.
h. Collection of outstanding advances held by the participating organization will be recorded in the disbursing authority account (1012) and applicable advance account (1124 or 1125).
i. The portion which represents interest income should be deposited to receipt account 1499, miscellaneous interest collections, not otherwise classified (7125/2031 or 3014).