Grantee Payment Methods Notification

Notification Date:  01/25/2022

Effective 10/26/2021 IDHS adopted and implemented Administrative Directive 01.07.01.070 Grant Payments. This Administrative Directive complies with 2 CFR 200.302, 2 CFR 200.305, 31 CFR 205 (procedures implementing Cash Management Improvement Act and the Treasury-State Agreement (TSA)), and 44 Ill. Admin. Code 7000.120 (GOMB Adoption of Supplemental Rules for Grant Payment Methods). Three different award payment methods exist, namely Advance Payment, Reimbursement, and Working Capital Advance. Each is discussed below.

I. Advance Payment Method (Advance and Reconcile)

  1. Because IDHS is subject to the Grant Accountability and Transparency Act, IDHS is required by 44 Ill. Admin. Code 7000.120 to remit grant payments via advance payment when grantees meet the requirements set forth in 2 CFR 200.302 (Financial Management), 44 Ill. Admin. Code 7000.120(b)(i)(A)(i and ii) (Advance Payments), and other requirements as described in this Directive.
  2. Grantees may request advance payment for each grant program awarded by IDHS. Requests must be submitted to the respective grant Program Manager by the method prescribed in the grant program Notice of Funding Opportunity (NOFO) or the Catalog of State Financial Assistance (CSFA) - Program Listing. A separate request must be submitted for each IDHS grant program application.
  3. Requests for advance payment must be accompanied by an IDHS Advance Payment Request Cash Budget Template (Cash Budget) for each grant award. Cash Budgets must be signed by either the Chief Executive Officer (or equivalent) or Chief Financial Officer (or equivalent) for the entity. The executive's signature certifies that their entity complies with the requirements set forth in 2 CFR 200.302 (Financial Management) and 44 Ill. Admin. Code 7000.120(b)(i)(A) (Advance Payments). The Cash Budget must demonstrate the estimated monthly cash requirements for each month of the program grant term. Advance payments must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the grantee in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the grantee for direct program or project costs and the proportionate share of any allowable indirect costs. Additionally, the grantee entity must make timely payment to sub-recipients and contractors.
  4. Upon program approval for advance payment, an initial payment will be processed in an amount equal to the first two months' cash requirements as reflected in the submitted Advance Payment Requirements Forecast (Cash Budget) Form.
  5. Grantees must submit monthly invoices in the format and method prescribed in the grantee's executed Uniform Grant Agreement Exhibits. The first invoice is due after the first month of grant operations. Invoices must include only allowable incurred costs that have been paid by the grantee. For grant programs that have grantee matching requirements, allowable costs are only reimbursable when matching costs have also been incurred.
  6. Subsequent monthly payments will be based on each monthly invoice submitted to the grant program and will be adjusted up or down, based on a comparison of actual cumulative expenditures to cumulative advance payments, to date.
  7. Grantees that do not expend all advance payment amounts by the end of the grant term or that are unable to demonstrate that all incurred costs were necessary, reasonable, allowable, or allocable as approved in their respective grant budget, must return the funds or be subject to grant funds recovery.

II. Reimbursement Method

  1. Grantees will be paid via the reimbursement method when they do not meet the requirements of 44 Ill. Admin. Code 7000.120(b)(2), or upon a grantee's request to use the reimbursement method of payment, or as stipulated in a specific condition. Grantees that have specific conditions noted in their Uniform Grant Agreement Exhibit language for any of the following items must be paid using the reimbursement method:
    1. Fiscal and administrative high risk (weak internal controls).
    2. Have a history of failure to comply with general or specific terms and conditions of grant awards.
    3. Fail to meet expected performance goals as described in 2 CFR 200.211 or their program deliverables as stated in their applicable Uniform Grant Agreement.
    4. Or otherwise not responsible.
  2. IDHS will disburse payments to the grantee based on actual allowable costs incurred as reported in the monthly financial invoice submitted for the respective month, as described below.
  3. Grantees must submit monthly invoices in a format prescribed by grant program management to the respective grant Program Manager in the method prescribed in the grant program of the grantees executed Uniform Grant Agreement Exhibits. Invoices must include all allowable incurred costs for the first and each subsequent month of operations until the end of the grant term. Invoices will be submitted to the respective grant program points of contact on or before the 15th day following the end of any respective monthly invoice period. Grant Program Managers may amend the due date from the 15th day of the month to facilitate program and grantee requirements. IDHS grant programs must process all payments to ensure that payments can be made (subject to appropriation, cash availability, and processing by the Office of the Comptroller) within 30 calendar days after receipt of the invoice, unless the State awarding agency reasonably believes the request to be improper.

III. Working Capital Advance Method

  1. For grantees that cannot meet the requirements set forth in 2 CFR 200.302 (Financial Management), 44 Ill. Admin. Code 7000.120(b)(1)(A)(i and ii) (Advance Payments), and other requirements as described in this Directive, if the grant Program Manager determines that reimbursement is not feasible because the grantee lacks sufficient working capital, the grant program may, in its sole discretion, provide a working capital advance to the grantee.
  2. Grantees may request separate working capital advance payments for each grant program awarded by IDHS. Requests must be submitted on the IDHS Advance Payment Request Cash Budget Template (Cash Budget) to the respective grant Program Manager in the method prescribed in the grant program NOFO or the CSFA - Program Listing). The Cash Budget must include monthly cash requirements for every month of the grant term. A separate request must be submitted for each IDHS grant program application. Requests must be signed by either the Chief Executive Officer (or equivalent) or the Chief Financial Officer (or equivalent) for the entity. The executive's signature certifies the cash requirements are actual expected costs.
  3. IDHS Grant Program Managers will advance working capital payments to the grantee to cover their estimated disbursement needs for an initial period not to exceed two months of grant expenses. Startup costs may be approved if determined by IDHS Grant Program Managers to be allowable.
  4. Grantees must submit monthly invoices for each of the one or two months covered by the Working Capital Advance in the format and method prescribed in the grantee's executed Uniform Grant Agreement Exhibits. The first invoice is due after the first month of grant operations. Invoices must include only allowable incurred costs that have been paid by the grantee. For grant programs that have grantee matching requirements, allowable costs are only reimbursable when matching costs have also been incurred.
  5. Grantees may be required to submit supporting documentation for their requests at the request of and in a manner prescribed by the respective grant Program Manager.
  6. Working Capital Advance Payments are limited to a single occurrence per grant term.
  7. Following the initial period, the grant Program Managers must reimburse the grantee for its actual cash disbursements as described in section II of this Administrative Directive.

IV. Pre-Award Costs

  1. Limitations: On a program-by-program basis, IDHS may allow Pre-Award Costs for grantees and subrecipients, considering the following factors:
    1. No Pre-Award Costs are allowed for a previous fiscal year.
    2. Entities selected to receive a grant award may request Pre-Award Costs by completing and submitting a Uniform Grant Budget to the respective awarding program point of contact.
      1. The budget must contain all estimated costs for each cost line item and a supporting narrative that describes why the Pre-Award Costs are necessary.
      2. Awarding grant program personnel will review the Pre-Award Cost budget to determine if the costs are:
        1. Necessary,
        2. Reasonable,
        3. Allowable, and
        4. Allocable.
      3. If the proposed costs are supported by the narrative to meet the conditions stated in 2(a-b); the costs may be approved.
    3. Pre-Award Costs must be part of the final approved program budget. Grantees must submit a uniform grant budget to the grant program manager. Budget must be reviewed and approved prior to incurring Pre-Award Costs. Only Pre-Award Costs that are in the final budget and emergent, reasonable, necessary, allocable, allowable, and in furtherance of the purpose of the grant award shall be reimbursed. For Pre-Award Costs to be allowed, it must be clearly stated in the NOFO or the CSFA Program Listing.
    4. Pre-Award Costs should generally not be allowed for costs to be incurred more than 60 days prior to the grant agreement.
    5. Pre-Award Costs must be charged to the first grant monthly invoice unless IDHS grants an exception. 2 CFR 200.458. IDHS's Chief Accountability Officer and General Counsel or their designees must approve all such exception requests.
    6. IDHS has the right and obligation to review supporting documentation for all Pre-Award Costs that are submitted for reimbursement on the initial grant monthly invoice. Grantees and subrecipients who expend Pre-Award Costs without prior written approval bear the risk that IDHS will find that the costs are not allowable.
    7. If Pre-Award Costs are authorized, the granting program manager will issue the written approval on IDHS form name and number, Pre-Award Cost Authorization Letter IDHS Form IL444-5141.
  2. Procedure for Establishing Allowability of Pre-Award Costs
    1. The grant program manager will review the grantee budget and associated budget narrative inclusive of Pre-Award Costs to ensure compliance with 2 CFR 200 Subpart E Cost Principles, and to ensure that the costs are consistent with the priorities and objectives.
    2. The IDHS Grant Budget Committee shall review all pre-award cost requests to determine that the service needs are emergent, necessary, allocable, and reasonable.
    3. The grant program manager will provide the grantee with the Pre-Award Cost Authorization Letter. The Pre-Award Cost Authorization Letter should contain any pre-award cost limitations imposed by the program manager on the grantee.
    4. The grant program manager will include the pre-award cost language from the Pre-Award Cost Authorization Letter in Exhibit C of the grant agreement. Exhibit C will also include language from section D below regarding Pre-Award Costs for sub-grantees.
  3. Procedure for Disbursing Pre-Award Costs
    1. Grantees must seek reimbursement for Pre-Award Costs by including such costs on the first Monthly Grant Invoice, unless IDHS grants an exception. 2 CFR 200.458. IDHS's Chief Accountability Officer and General Counsel or their designees must approve all such exception requests.
    2. The grantee must submit the appropriate backup documentation such as receipts, bank records, and other materials which document that the Pre-Award Costs have been incurred and paid by the grantee.
    3. Upon receipt of the backup documentation, the Grant Program Manager will review the materials to assure that the Pre-Award Costs expended are consistent with final approved grant budget.
    4. Upon completion of the review, the Grant Program Manager will advise the grantee if any Pre-Award Costs are disallowed. Only those costs that were pre-approved will be allowed.
    5. Payment for approved expenses will be vouchered per the payment processing policy.
    6. All approved and paid Pre-Award Costs will be reported on the first quarterly PFR.
  4. Subrecipients and Pre-Award Costs
    1. If IDHS allows the grantee to incur Pre-Award Costs, grantees may allow subrecipients to incur Pre-Award Costs and reimburse for those costs after the subgrant agreement is fully executed.
    2. Grantees that elect to allow subrecipients to incur Pre-Award Costs must follow the same Pre-Award Cost review and approval process as IDHS and, upon request, must demonstrate implementation of the subaward Pre-Award Cost review and approval process.
    3. Grantees must determine the period of performance for their subrecipients.
    4. If a sub-grantee is allowed to incur Pre-Award Costs the grantee must review the backup documentation, require any necessary corrections, and submit it to their IDHS Grant Specialist for final approval. If Pre-Award Costs are paid by the grantee to the sub-grantee without final approval from IDHS, the grantee is at risk that these costs could ultimately be disallowed, and consequently not reimbursed to the grantee. For questions and concerns regarding the allowability of Pre-Award Costs to sub-grantees, the grantee should contact the IDHS Grant Specialist for technical assistance.

V. Allowable Costs

  1. Payment Requests (Invoices) must be supportable by appropriate documentation for allowable costs incurred by the grant. Grant Program Managers may request that grantees submit any or all supporting documentation for expenditures presented in the invoices. If a question exists as to whether an expenditure is allowable, reference the approved grantee budget and/or consult with the respective grant Program Manager.
  2. Examples of Appropriate Forms of Documentation (This list is not all inclusive)
    1. Personnel Expenditures:
      1. Monthly - Wages, salaries, and fringe benefit expenditures must be supported with: detailed time and attendance records for each person charged directly and/or indirectly to the respective grant program; a PDF copy of the accounting information system wages, salary, and fringe personnel payroll expenditure account(s) for the respective month; and supporting evidence that the costs were paid.
      2. Quarterly - Copies of the filed State and Federal Payroll Tax Forms 941; and the State of Illinois Department of Employment Security IDES Form UI-3/40 to evidence that the payroll taxes and employer contribution for unemployment security were paid.
    2. All other non-personnel expenditures: To be reimbursed for allowable expenses, the grantee must provide evidence that costs were incurred and paid.
    3. Documented support that costs were incurred and paid. Generally, an invoice, receipt or contract supported by a copy of a canceled check/electronic copy or other document supporting that the transaction was enacted, i.e., bank statement, electronic reference, etc. Note that all copies of canceled checks, submitted as documentation, should include both the front and back of the check. If the back side is not available, a copy of the respective bank statement can be substituted.

The Administrative Directive was implemented with the following three-year phased approach. We are currently in the 2nd year of implementation.

Year 1 (FY22): Advance and Reconcile May Continue Without Further Requirement(s) for FY22:

Payments for IDHS grant programs will follow the same methodology as FY21 payments (i.e., providers who have been funded through advance and reconcile, without meeting specific financial management requirements, can continue to be funded by that payment method). During FY22, IDHS Grant Payment Policies will be finalized and communicated to IDHS grant personnel and our grantee community. The communications will emphasize to the grantees that they should review their written procedures and financial management systems to ensure that they meet the standards for fund control and accountability as established in Uniform Guidance 2 CFR 200.302 Financial management, and 44 Ill. Adm. Code 7000.120 GOMB Adoption of Supplemental Rules for Grant Payment Methods. Additionally, IDHS grant personnel and the grantees should review and gain an understanding of Uniform Guidance 2 CFR 200.305 Payment. The communications will include an attachment that lists 2 CFR 200.302 and 2 CFR 200.305 requirements.

The method of communication to IDHS grant personnel and our grantee community will be training sessions conducted by IDHS CAO and Grant Accountability and Transparency Unit. We recommend that IDHS grant personnel communicate the training and payment methods to the grantee community via:

  • Grantee professional trade association leadership, e.g. IARF, Illinois Partners, Don Moss and Associates
  • The Secretary's Newsletter and
  • IDHS' webpage

Communication will include implementation in years 2 and 3 as described below.

Year 2 (FY23): Advance and Reconcile May Continue If Grantee Certifies That It Meets Financial Management Requirements or Has a Fiscal Agent That Has Certified the Same:

Grantees that desire advance payment will submit the required request and supporting documentation described in Section I of the IDHS Grant Payment Policies. Refer to Section I for details. Grantees will be required to certify that they meet Uniform Guidance 2 CFR 200.302 Financial Management, and 44 Ill. Admin. Code 7000.120 GOMB Adoption of Supplemental Rules for Grant Payment Methods. Certification language will be located on the advance payment request form. Grantees who cannot or do not provide such certification will either (i) need to retain a Fiscal Agent who has provided such certifications in order to receive advance payments or (ii) will be paid through reimbursement. NOTE: Grantees paid through reimbursement may receive up to two months of working capital advance, at IDHS's discretion, pursuant to 44 Ill. Admin. Code 7000.120(b)(3), and described above, at the beginning of the grant prior to being paid by reimbursement for the balance of the grant.

Year 3 (FY24): Advance and Reconcile May Continue If Grantee Certifies That It Meets Financial Management Requirements or Has a Fiscal Agent That Has Certified the Same and On a Periodic Basis, IDHS Confirms That the Grantee or Its Fiscal Agent Meets Financial Management Requirements:

IDHS will implement Section IV of the IDHS Grant Payment Policies: IDHS will perform or cause to be performed procedures to determine and document that grantees requesting advance payments meet Uniform Guidance 2 CFR 200.302 Financial Management , and 44 Ill. Admin. Code 7000.120 GOMB Adoption of Supplemental Rules for Grant Payment Methods. Refer to Section IV for details.

Grantees that do not select either the Advance Payment Method or the Working Capital Advance Method will automatically default to the Reimbursement Method. Grantees selecting the Advance Payment Method, or the Working Capital Advance Payment Method must complete the Advance Payment Request Cash Budget Template as described in the procedures above.