Financial Resources

Payment procedures for USAID grant funds

USAID funds can be disbursed to the grantee in several ways, which are appropriate for different types of activities. The most commonly used payment methods are as follows:

1.  Direct Payments:

Under this method, USAID pays directly to the contractors, suppliers and other payees against presentation of original invoices, evidence of receipt or delivery of goods or services, and other documents specified in the grant or Implementation Letter (IL).

2. Periodic Advance Method: 

Under this method, USAID funds are advanced to the non-profit organizations and host country government or its organizations. Following procedure is used to provide advances.

USAID/Kenya will carry out a Financial Management Assessment of the recipient to determine whether the grantee has sound management and accounting control systems to manage and account for USAID funds. Based on the outcome of the assessment, USAID will determine the appropriate method of financing. If the control mechanism is found to be inadequate, grantee will be financed on a reimbursement method of payment. Under this method the grantee will spend its own funds to implement the activities and seek monthly reimbursement from USAID on USAID Government Form SF-1034 (Exhibit C) and statement of expenditures (Exhibit B 2).

If grantee has reliable management and accounting control system, funding of activities under this Implementation Letter will be provided to the grantees on an advance/liquidation basis. Based upon issuance of the Implementation Letter (IL) confirming financing authorizing grantee to proceed with the agreed upon activities, grantees can request USAID for advance of up to 3 months cash requirements supported by cash requirements broken down into 30 days requirement period specifying the IL number. Since USAID’s current policy does not allow an advance of funds for more than 30 days cash requirements at one time, the advance checks will be released on a monthly or at 30- day interval. All requests for advance should be submitted to Controller, RFMC, REDSO/ESA on U.S. Government Form SF-1034 (Exhibit A 1) supported by certified statement (Exhibit A 2) and a bank statement reconciled to the actual cash in hand. Payment request should be made at least 30 days prior to the date funds are required to allow sufficient processing time and ensure timely payments.

The advances and all other payments made under the IL shall be deposited into a separate non-commingled interest-bearing account established by grantee. No other funds can be deposited into this account. All expenditures reported under the IL to account for funds advanced by USAID must be disbursed from this account. All receipts and payments from this account shall be recorded in such a manner that it will be possible to ascertain the balance in the account at any time. Separate accounting ledgers and files for supporting original paid vouchers shall be maintained for financial reviews and audit. Any interest in the amount of US$250.00 or more per year shall accrue to and be paid to USAID not less than annually.

Grantees should submit to RFMC, REDSO/ESA within fifteen days after the end of each quarter, an advance liquidation voucher on U.S. Government Form SF1034 (Exhibit B1) supported by a certified expenditure report (Exhibit B2). USAID will terminate further advances if the recipient fails to submit the advance liquidation vouchers on timely basis. Occasionally, USAID may review expenditures or disbursement transactions made by grantee. If at any time it is determined that the grantee has demonstrated unwillingness or inability to:
1. Establish procedures that will minimize the time elapsing between cash advance and the disbursement there of; or
2. Provide timely cash disbursement and expenditure reports; or
3. Impose the same standards of having advances and reporting on any sub-recipient, if any;
USAID may take any necessary steps to have the advance payment method revoked or suspended.

3. Reimbursement Method:

This is the preferred method of payment for USAID funds. Under this method USAID reimburses grantee for all expenses already made from grantees own resources.
Grantee should submit to the Controller, RFMC, REDSO/ESA within fifteen days after the end of each calendar quarter, a reimbursement claim utilizing following forms:

a) U.S Government form SF 1034 (Exhibit C)
b) Certified expenditure report  (Exhibit B 2)

Grant management challenges:

1. Advance requests and liquidation:

a) USAID policy states that:
i. No commingling of USAID funds with other recipient owned or controlled funds,
ii. Advances shall be limited to the minimum amounts needed to meet current disbursement needs ( generally not more than 30 days).
iii. Recipient may submit a new set of SF 1034s (“Request fo Advance”) once the “Liquidation of Advances” has been submitted. The recipient may submit “Request for Advance” on a quarterly basis.

Challenges:

> Late submission of advance request, USAID/Kenya needs a lead period of 30 days for a check to reach the recipient. Late submission leads to non-processing of advances and postponement of activities being implemented.
> Late submission of SF 1034s for “Liquidation of Advances”, and in most cases the previous advance is not fully liquidated. This may lead to non-processing of subsequent advances or subsequent advances being reduced by the outstanding amount of the overdue advance.
> Little attention given to attaching a short narrative statement to support advances request for, especially where the advance request is more than the previous quarterly average. Becomes difficult to provide administrative approval without going back to the recipient, an action that is time consuming.

2. Audits and Financial reviews.

Types of audit.

i. Statutory audit: All recipient are expected to conduct these audits annually. Please share a copy of the audit with us.
ii. Recipient contracted audit (RCA): Recipient develops statement of work and contracts a firm from among the approved list of CPA firms. USAID concurrence to carry out the audit and use of the audit firm shall be required.
iii. Mission contracted audit: Mission develops statement of works, contracts the CPA firms and pays for the audit.

USAID reserves the right to determine which of the above audits to use for the audit of its funds.
    
A. USAID Standards Provision state that foreign for-profit organizations that expend US$300,000 or more per their fiscal year in “USAID awards” shall have an annual audit conducted in accordance with the “Guidelines for Financial Audits contracted by Foreign Recipients” issued by USAID Inspector General.
B. Those that expend less than US$300,000 are subject to requirement to make records available upon request for review by USAID officials or their designee.