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.

  1. 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 Award payments via advance payment when Awardees 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. Awardees may request advance payment for each Award issued by IDHS. Requests must be submitted to the respective Award 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 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 program Award operation. 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 Awardee 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 Awardee for direct program or project costs and the proportionate share of any allowable indirect costs. Additionally, the Awardee entity must make timely payments 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. Awardees must submit monthly invoices on the Monthly Grant Invoice form (IL444-5257) in the method prescribed in the Awardee's executed Uniform Grant Agreement Exhibits. The first invoice is due after the first month of Award operations. Invoices must include only allowable incurred costs that have been paid by the Awardee. For Awards that have Awardee 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 Award program and will be adjusted up or down, based on a comparison of actual cumulative expenditures to cumulative advance payments, to date.
    7. Awardees that do not expend all advance payment amounts by the end of the Award term or that are unable to demonstrate that all incurred costs were necessary, reasonable, allowable, or allocable as approved in their respective Award budget, must return the funds or be subject to Grant funds recovery.
  2. Reimbursement Method

    1. Awardees 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 an Awardee's request to use the reimbursement method of payment, or as stipulated in a specific condition. Awardees 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 Awardee based on actual allowable costs incurred as reported in the monthly financial invoice submitted for the respective month, as described below.
    3. Awardees must submit monthly invoices on the Monthly Grant Invoice form (IL444-5257) in the method prescribed in the Awardee's executed Uniform Grant Agreement. Invoices must include all allowable incurred costs for the first and each subsequent month of operations until the end of the Award term. Invoices will be submitted to the respective Award program points of contact on or before the 15th day following the end of any respective monthly invoice period. Award Program Managers may amend the due date from the 15th day of the month to facilitate program and Awardee requirements. IDHS Award 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.
  3. Working Capital Advance Method

    1. For Awardees 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 Award Program Manager determines that reimbursement is not feasible because the Awardee lacks sufficient working capital, the Award program may, in its sole discretion, provide a working capital advance to the Awardee.
    2. Awardees may request separate working capital advance payments for each Award issued by IDHS at any point in the current grant term. Requests must be submitted on the IDHS Advance Payment Request Cash Budget Template (Cash Budget) to the respective Award Program Manager in the method prescribed in the Award program NOFO or the CSFA - Program Listing. The Cash Budget must include program NOFO or the CSFA - Program Listing. The Cash Budget must include monthly cash requirements for an amount not to exceed two months of forecasted cash needs. A separate request must be submitted for each IDHS Award 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 Award Program Managers will advance working capital payments to the Awardee to cover their estimated disbursement needs for an initial period not to exceed two months of Award expenses. Startup costs may be approved if determined by IDHS Award Program Managers to be allowable.
    4. Awardees must submit monthly invoices for each of the one or two months covered by the Working Capital Advance on the Monthly Grant Invoice form (IL444-5257) in the format and method prescribed in the Awardee's executed Uniform Grant Agreement Exhibits. The first invoice is due after the first month of Award operations. Invoices must include only allowable incurred costs that have been paid by the Awardee. For Award programs that have Awardee matching requirements, allowable costs are only reimbursable when matching costs have also been incurred.
    5. Awardees shall be required to submit supporting documentation for their requests at the request of and in a manner prescribed by the respective Award Program Manager.
    6. Working Capital Advance Payments are limited to a single occurrence per Award term.
    7. Following the initial period, the Award Program Managers must reimburse the Awardee for its actual cash disbursements as described in Section II of this Administrative Directive, or via advance payment methodology if requirements stated in Section I are met.
  4. Pre-Award Costs
    1. Limitations: On a program-by-program basis, IDHS may allow Pre-Award Costs for Awardees and subrecipients, considering the following factors:
      1. No Pre-Award Costs are allowed for a previous fiscal year.
      2. Entities selected to receive an 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. Awardees must submit a uniform Grant budget to the Award program manager. The 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 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 Award 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. Awardees 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 Awarding program manager will issue the written approval on IDHS form name and number, on the Pre-Award Cost Authorization Letter form (IL444-5141).
    2. Procedure for Establishing Allowability of Pre-Award Costs
      1. The Award program manager will review the Awardee 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 Award program manager will provide the Awardee 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 Awardee.
      4. The Award program manager will include the Pre-Award cost language from the Pre-Award Cost Authorization Letter in the designated section of the Uniform Grant Agreement. The Uniform Grant Agreement will also include language from Section D below regarding Pre-Award Costs for sub-Awardees.
    3. Procedure for Disbursing Pre-Award Costs
      1. Awardees 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 (CAO) and General Counsel or their designees must approve all such exception requests.
      2. The Awardee must submit the appropriate backup documentation such as receipts, bank records, and other materials that document that the Pre-Award Costs have been incurred and paid by the Awardee. Awarding IDHS program managers shall determine if backup documentation is sufficient to demonstrate that Pre-Award Costs were incurred, necessary, reasonable, allowable, and allocable.
      3. Upon receipt of the backup documentation, the Award program manager will review the materials to ensure that the Pre-Award Costs expended are consistent with the final approved budget.
      4. Upon completion of the review, the Award program manager will advise the Awardee 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 Awardee to incur Pre-Award Costs, Awardees may allow subrecipients to incur Pre-Award Costs and reimburse for those costs after the subrecipient agreement is fully executed.
      2. Awardees 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 sub-award Pre-Award Cost review and approval process.
      3. Awardees must determine the Period of Performance for their subrecipients.
      4. If a subrecipient is allowed to incur Pre-Award Costs the Awardee must review the backup documentation, require any necessary corrections, and submit it to their IDHS Award Specialist for final approval. If Pre-Award Costs are paid by the Awardee to the sub-Awardee without final approval from IDHS, the Awardee is at risk that these costs could ultimately be disallowed, and consequently not reimbursed to the Awardee. For questions and concerns regarding the allowability of Pre-Award Costs to sub-Awardees, the Awardee should contact the IDHS Award Specialist for technical assistance.
  5. Allowable Costs

    1. Payment Requests (Invoices) must be supported by appropriate documentation for allowable costs incurred by the Award. Award Program Managers shall use a risk-based approach to identify Award budget line items to validate that Awardee costs were incurred, necessary, reasonable, allowable, and allocable. Based on this approach, Award program managers shall request that Awardees submit supporting documentation for expenditures presented in the invoices based on a sampling methodology. Samples shall be required for every budget line item as described in Section B below. If a question exists as to whether an expenditure is necessary, reasonable, allowable, or allocable, reference the approved Awardee budget and, as necessary consult with the respective Award Program Division Director, Program Attorney, IDHS CAO, or Assistant CAO.
    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 Award 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. Non-Personnel Expenditures
        1. To be reimbursed for allowable expenses, the Awardee must provide evidence that costs were incurred and paid. Supporting documentation should include the approved purchase requisition or purchase order, related receiving documents, the related invoice, proof of payment, and entry into inventory if applicable. Documented support that costs were incurred and paid generally includes the 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. Program personnel should confirm that all documents have sufficient sign-off authority to include authorizing initials, signatures, etc. Questioned costs should be further examined as necessary to validate that costs are valid and necessary, reasonable, allowable and allocable to the program being monitored.
      3. Recommended Sampling Methodology a.On a monthly basis or whenever the Awardee submits an incurred cost claim, Award program managers shall obtain a detailed listing of the line-item expenses reported on the Monthly Grant Invoice form (IL444-5257), then request supporting documentation for no less than 10% of the expenditures reported to include a minimum of one transaction.
  6. Status Verification and Payment Withholding

    1. Program personnel must verify the qualification status of grantees prior to releasing payments. A reference guide is provided to assist programs as to how to verify qualification status in the IDHS GATA Policies and Procedures located at the following link: Reference Guide for Verifying Awardee Qualification Status.
    2. Payments must be withheld in these situations:
      1. The Awardee is currently on temporary or permanent Stop Payment Status.
      2. The Awardee does not meet the Grantee Qualification Requirements described in 44 Ill. Admin. Code 7000.70.
    3. When a resolution has been achieved by the Awardee for any of the temporary non-compliance issues noted in Section B:
      1. The Award Program Manager, or designee, will initiate removal of the Awardee from the Grantee Compliance Enforcement System if the Awardee was placed on temporary Stop Payment Status.
      2. The Award Program Manager or designee will notify the Awardee that their qualification issues have been resolved and that payments will resume if payments were being withheld due to the Awardee's qualification status.
      3. The Award Program Manager, or designee, should contact IDHS Fiscal Services Expenditure Control Unit at DHS.ExpenditureControl@Illinois.gov to notify them that any of the Awardees previously withheld payments may be released.
    4. The Award Program Manager may not initiate a suspension of payment withholding for any Awardees that are on permanent Stop Payment Status.
  7. Determination of Awardee Certification for Advance Payments

    1. Awardees certify on their advance payment request form that they meet the requirements for advance payment, as specified in 2 CFR 200.302 and Ill. Admin Code 7000.120(b)(1). IDHS reserves the right to perform fiscal and administrative reviews of the Awardee's internal controls to validate that Awardees meet advance payment requirements. Awardees that are determined to not meet the requirements for advance payment will have their advance payments terminated and their payments will be converted to the reimbursement method. Reinstatement of advance payments will be provided upon a determination that deficiencies in meeting the requirements of 44 Ill. Admin. Code 7000.120(b)(1)(A) (i and ii) are fully remedied. Reinstatement determinations will be performed only after all initial determinations are concluded, at the convenience of IDHS, subject to the availability of the review team.