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Recap of Financial Management Conference, “Sponsored Programs Invoicing Letter of Credit Draws”

Have you ever wondered how grant recipients actually get the cash into their bank accounts? Check out this article for an overview of a presentation given at the SRAI Financial Management Conference in 2021 that discusses Letter of Credit Draws.

A broad range of sponsors fund research activities, including Federal, State and Local Government, Foundations/Nonprofits and Industry. Here is an overview of award mechanisms: 

Grants are financial assistance where the principal purpose is to benefit the public (and the grantee). Cooperative Agreements are also grants, but there is more sponsor involvement in scientific or programmatic activities. Grants and cooperative agreements are definitely more flexible with requesting payments because the majority of them are cost reimbursement awards. Please see the link below to the Federal Uniform Guidance.

• Federal Uniform Guidance - Electronic Code of Federal Regulations (eCFR) 

Contracts are associated with procurement and acquisition where the principal purpose is to benefit the sponsor. Invoicing is much more complex and tied to deliverables.

The Sponsor’s terms and conditions and the award mechanism determine how an award is set up for Letter of Credit (LOC) or non-LOC. Important elements of prep work for LOC draws include:

• Understanding the schedules of sponsor systems and internal systems
• Establishing the frequency of LOC draws and generation of invoices from the financial system
• Reviewing cash requests and entering LOC draws for one sponsor at a time
• Looking for abnormal cash requests- a large increase or refund should be reviewed before submitting a request
• Generating invoices by each award/grant, exporting all invoices to Excel in sponsor templates for upload 

Examples of Sponsors and their Systems:

• ASAP – Environmental Protection Agency (EPA), National Organization for Atmospheric Activity (NOAA), US Dept of Energy (DOE)
• G5 – US Dept of Education (ED)
• ACM$ - National Science Foundation (NSF)
• Payment Management System (PMS) – Multiple Federal agencies 

Collaboration is the key to success:

Utilizing the Payment Management System for Federal awards. 

Payment Management System (PMS) is the most popular one-stop shop for grant payments. It is a tool to help grant recipients draw down funds and file the Federal Financial Report (FFR). PMS provides disbursement, grant monitoring, reporting, and cash management services to both awarding agencies and grant recipients.

PMS can be accessed through the PMS home page at https://pms.psc.gov

Requesting payments in PMS is a simple process. PMS enables a bulk payment upload to allow grantees to make payment requests from multiple sub-accounts.  It provides the option of entering the draw amounts in the system as well as downloading the file via “Payment File Processing”. PMS recommends that the file be saved to the desktop as either a “.csv” or “.txt” document for easy retrieval. When retrieving the saved document, remember the file name that has been saved in order to upload the correct bulk payment file.

Accounts Receivable reconciliation is a very important step in payment request process. Before finally uploading the draw file in PMS, make sure internal invoice numbers are assigned to each grant for mass application. Reconcile any differences in accounts receivable and make appropriate notes for follow up e.g. for deficit overruns, incorrect grant numbers and amounts etc.

For uploading the payment request file, enter the payment request amounts and save. Verify that all payment request amounts have been correctly uploaded into PMS. Then upload the file and submit.

There is a detailed procedure about the “payment file upload” in PMS. https://pms.psc.gov/pms-user-guide/payment-file-upload.html

Here are some tips for making the draw process go smoothly in PMS:

• Requested funds need to be disbursed within 3 business days unless otherwise specified in your Notice of Award.
• Reconcile invoices to payments and return any excess funds erroneously drawn.
• Submit Federal Cash Transaction Reports (FCTRs) on time and review them each quarter for assessing cash position. 

PMS provides frequent 2-hour training sessions. These sessions include a highly interactive question and answer period at the conclusion of the webinar.

https://pms.psc.gov/training/grant-recipient-training.html

Authored by Alpana Gautam, Senior Post Award Accountant, Office of Sponsored Programs
University of Virginia