Notes on Financial Policies

The basic federal requirements for recipients' financial policies are found at 2 CFR 200.300 through __.309.

The first group of specific requirements are found at 2 CFR 200.302, paragraph (b), items (1) through (7). They are:

  • Identification, in its accounts, of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the CFDA title and number, Federal award identification number and year, name of the Federal agency, and name of the pass-through entity, if any. (__.302(b)(1))
  • Accurate, current, and complete disclosure of the financial results of each Federal award or program to assure compliance with the following:
    • Financial reporting in accordance with 2 CFR 200.327;
    • Monitoring and reporting program performance in accordance with 2 CFR 200.328;
    • The ability to develop accrual accrual data for reports, if the accrual basis for accounting is not adopted;
  • Records that identify adequately the source and application of funds for federally-funded activities.
  • Effective control over and accountability for all funds, property, and other assets, including to adequately safeguard all assets and assure that they are used solely for authorized purposes. See also § 200.303 Internal controls (more on that below).
  • Comparison of expenditures with budget amounts for each Federal award.
  • Written procedures to implement the requirements of § 200.305 Payment, which includes the following:
    • minimize the time elapsing between the transfer of funds from the funder and the disbursement by the recipient;
    • assure the timely payment to contractors in accordance with the contract provisions;
    • assure that, whenever possible, requests for advance payments are consolidated to cover anticipated cash needs for all Federal awards made by the Federal awarding agency to the recipient;
    • assure the disbursement of funds available from program income (including repayments to a revolving fund), rebates, refunds, contract settlements, audit recoveries, and interest earned on such funds before requesting additional cash payments;
    • assure appropriate accounting for the receipt, obligation and expenditure of funds;
    • assure that advance payments are maintained in interest-bearing accounts (with some exceptions - see 2 CFR 200.305(b)(8)); and
    • assure that interest earned in excess of $500 per year must be remitted annually to the Department of Health and Human Services Payment Management System.
  • Written procedures for determining the allowability of costs in accordance with Subpart E—Cost Principles of 2 CFR 200 and the terms and conditions of the Federal award.

The federal rules then go on to require the following specific financial policies:

  • Internal controls that assure the following (2 CFR 200.303):
    • provide reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO);
    • recipient compliance with Federal statutes, regulations, and the terms and conditions of the Federal awards;
    • evaluation and monitoring of the recipient's compliance with statutes, regulations and the terms and conditions of Federal awards;
    • prompt action in response to identified instances of noncompliance, including noncompliance identified in audit findings; and
    • reasonable measures to safeguard protected personally identifiable information and other information the Federal awarding agency designates as sensitive or the recipient considers sensitive consistent with applicable laws regarding privacy and obligations of confidentiality.
  • Procedures for accounting for cost sharing or matching, when required, consistent with 2 CFR 200.306. (See also About Cost Sharing (Matching).)
  • Procedures for accounting for program income, when earned, consistent with 2 CFR 200.307. (See also About Program Income.)
  • Requirement that program budgets may be revised only in accordance with the terms and conditions of the governing award agreement. The general federal requirements for this are found at § 200.308 Revision of budget and program plans.
  • Requirement that costs may be charged to a final cost objective only when they are allowable under the terms and conditions of the funding award, including that they are incurred during the stated period of performance or as otherwise authorized by the funder. (2 CFR 200.309)
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