Department of Justice
with the financial reporting require-
ments of the grant or subgrant.
(2) Accounting records. Grantees and
subgrantees must maintain records
which adequately identify the source
and application of funds provided for fi-
nancially-assisted activities. These
records must contain information per-
taining to grant or subgrant awards
and authorizations, obligations, unobli-
gated balances, assets, liabilities, out-
lays or expenditures, and income.
(3) Internal control. Effective control
and accountability must be maintained
for all grant and subgrant cash, real
and personal property, and other as-
sets. Grantees and subgrantees must
adequately safeguard all such property
and must assure that it is used solely
for authorized purposes.
(4) Budget control. Actual expendi-
tures or outlays must be compared
with budgeted amounts for each grant
or subgrant. Financial information
must be related to performance or pro-
ductivity data, including the develop-
ment of unit cost information when-
ever appropriate or specifically re-
quired in the grant or subgrant agree-
ment. If unit cost data are required, es-
timates based on available documenta-
tion will be accepted whenever pos-
sible.
(5) Allowable cost. Applicable OMB
cost principles, agency program regula-
tions, and the terms of grant and
subgrant agreements will be followed
in determining the reasonableness, al-
lowability, and allocability of costs.
(6) Source documentation. Accounting
records must be supported by such
source documentation as cancelled
checks, paid bills, payrolls, time and
attendance records, contract and
subgrant award documents, etc.
(7) Cash management. Procedures for
minimizing the time elapsing between
the transfer of funds from the U.S.
Treasury and disbursement by grantees
and subgrantees must be followed
whenever advance payment procedures
are used. Grantees must establish rea-
sonable procedures to ensure the re-
ceipt of reports on subgrantees’ cash
balances and cash disbursements in
sufficient time to enable them to pre-
pare complete and accurate cash trans-
actions reports to the awarding agen-
cy. When advances are made by letter-
§ 66.21
of-credit or electronic transfer of funds
methods, the grantee must make
drawdowns as close as possible to the
time of making disbursements. Grant-
ees must monitor cash drawdowns by
their subgrantees to assure that they
conform substantially to the same
standards of timing and amount as
apply to advances to the grantees.
(c) An awarding agency may review
the adequacy of the financial manage-
ment system of any applicant for fi-
nancial assistance as part of a
preaward review or at any time subse-
quent to award.
§66.21 Payment.
(a) Scope. This section prescribes the
basic standard and the methods under
which a Federal agency will make pay-
ments to grantees, and grantees will
make payments to subgrantees and
contractors.
(b) Basic standard. Methods and pro-
cedures for payment shall minimize
the time elapsing between the transfer
of funds and disbursement by the
grantee or subgrantee, in accordance
with Treasury regulations at 31 CFR
part 205. ~
(c) Advances. Grantees and sub-
grantees shall be paid in advance, pro-
vided they maintain or demonstrate
the willingness and ability to maintain
procedures to minimize the time elaps-
ing between the transfer of the funds
and their disbursement by the grantee
or subgrantee.
(ad) Reimbursement. Reimbursement
shall be the preferred method when the
requirements in paragraph (c) of this
section are not met. Grantees and sub-
grantees may also be paid by reim-
bursement for any construction grant.
Except as otherwise specified in regula-
tion, Federal agencies shall not use the
percentage of completion method to
pay construction grants. The grantee
or subgrantee may use that method to
pay its construction contractor, and if
it does, the awarding agency’s pay-
ments to the grantee or subgrantee
will be based on the grantee’s or sub-
grantee’s actual rate of disbursement.
(e) Working capital advances. If a
grantee cannot meet the criteria for
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