**NASA Procedural Requirements**

**NPR 9680.1**

**Effective Date: October 31, 2008**

**Expiration Date: October 31, 2013**

**NASA'S Management of Grants and Cooperative Agreements**

**Responsible Office: Office of the Chief Financial Officer**

**TABLE OF CONTENTS**

**PREFACE**

P.1 PURPOSE

P.2 APPLICABILITY

P.3 AUTHORITY

P.4 APPLICABLE DOCUMENTS

P.5 MEASUREMENT/VERIFICATION

P.6 CANCELLATION

**CHAPTER 1. NASA's Management of Grants and Cooperative Agreements**

1.  Overview

2.  Agency Requirements

3.  Roles and Responsibilities

**CHAPTER 2.** **Agency Payment of Advances to Recipients**

2.1 Overview

2.2 Agency Requirements

2.3 Roles and Responsibilities

**CHAPTER 3.** **Administering Letters of Credit**

3.1 Overview

3.2 Agency Requirements

3.3 Roles and Responsibilities

**CHAPTER 4. Administrative Reviews and Actions**

4.1 Overview

4.2 Agency Requirements

4.2 Roles and Responsibilities

**CHAPTER 5. Instructions for Recipient Organizations**

5.1 Overview

5.2 Agency Requirements

5.3 Roles and Responsibilities

**APPENDIX A. Advance Payment Requirements for Recipients**

**APPENDIX B. Responsibilities and Requirements for Handling Letters of
Credit**

**APPENDIX C. Recipient Advance Payment Suspension or Termination**

**APPENDIX D. Instruction to Recipient Organizations**

**PREFACE**

**P.1 PURPOSE**

This NASA Procedural Requirement (NPR) provides criteria for the
financial management of grants and cooperative agreements with regard to
fund advances, letters of credit, suspension and termination of
advances, and instructions to recipient organizations.

**P.2 APPLICABILITY**

This NPR is applicable to NASA Headquarters and NASA Centers, including
Component Facilities and Technical and Services Support Centers. This
NPR applies to JPL, other contractors, grant recipients, or parties to
agreements only to the extent specified or referenced in the appropriate
contracts, grants, or agreements.

**P.3 AUTHORITY**

a.  OMB Circular No. A-110, *Uniform Administrative Requirements for
    Grants and Agreements with Institutions of Higher Education,
    Hospitals and other Non-Profit Organizations*

b.  Department of Treasury Circular No. 1075, (Fourth Revision, Appendix
    1).

c.  Treasury Financial Manual, Volume I, Part 6, Chapter 2000

d.  NASA Policy Directive (NPD) 9010.2, "Financial Management"

**P.4 APPLICABLE DOCUMENTS**

a.  NPR 5800, "Grant and Cooperative Agreement Handbook"

**P.5 MEASUREMENT/VERIFICATION**

Quality assurance reviews and analysis of financial and budgetary
reports and data submitted through the continuous monitoring program
will be used to measure compliance with this NPR. Funds control will be
in place as required by NPR 9010.

**P.6 CANCELLATION**

None.

**/S/**

**Terry Bowie**

**NASA Deputy Chief Financial Officer**

**[DISTRIBUTION]{.underline}:**

**NODIS**

**CHAPTER 1. Overview NASA's Management of Grants and Cooperative
Agreements**

**1.1 Overview**

1.1.1 The purpose of this chapter is to set forth policies for National
Aeronautics and Space Administration's (NASA) financial management of
grants and cooperative agreements with regard to advance payments as
prescribed by Department of the Treasury Circulars and Manual, and
Office of Budget and Management (OMB) Circulars. The management of
financial transactions between NASA and grantees and recipients is
covered in NASA Financial Management Requirements, Volume 6. Other
management and financial issues are addressed in NASA Procedural
Requirements (NPR) 5800.

**1.2 Agency Requirements**

1.2.1 NASA policy is that payment methods shall minimize the time
elapsing between the transfer of funds from the U.S. Treasury and the
redemption of checks, warrants, or payment by other means by the
recipients. Specifically, this policy will apply to agency advance
payment to recipients, administering Letter of Credit, administrative
and review actions, and instructions to recipients by NASA.

1.2.2 NASA will use the Department of Health and Human Services' Payment
Management System (DHHS/PMS) to provide advance payments of Federal
funds to educational organizations, other public or private
organizations, and state and local governments.

**1.3 Roles and Responsibilities**

1.3.1 Agency Chief Financial Officer (CFO)/ Deputy CFO shall ensure that
NASA and its recipients meet Department of Treasury and OMB advance
payment requirements.

1.3.2 Recipients shall comply with NASA/DHHS/PMS requirements when
submitting requests for advances for grants and agreements with NASA.

1.3.3 Center CFOs and the NASA Shared Services Center (NSSC) shall
ensure compliance of recipients with DHHS/PMS requirements.

**CHAPTER 2. Agency Payment of Advances to Recipients**

**2.1 Overview**

2.1.1 The purpose of this chapter it to set forth policies for National
Aeronautics and Space Administration's (NASA) use of the Department of
Health and Human Services' Payment Management System (DHHS/PMS); a
letter of credit system of providing advance payments of Federal funds
to educational institutions; other public or private organizations,
referred to as "recipient organizations;" and state and local
governments.

**2.2 Agency Requirements**

2.2.1 NASA uses the Department of Health and Human Service's Payment
Management System (DHHS/PMS) to handle advance payments to recipient
organizations.

**2.3 Roles and Responsibilities**

2.3.1 Agency Chief Financial Officer (CFO)/ Deputy CFO shall ensure that
NASA and recipients meet NASA/DHHS/PMC advance payments requirements.

2.3.2 Recipient Organizations shall comply with NASA/DHHS/PMS
requirements when submitting requests for advances for grants and
agreements with NASA.

2.3.3 Center CFOs and the NASA Shared Services Center (NSSC) shall:

a\. Ensure that each Center is properly charged for its recipients' draw
downs.

b\. Reconcile Centers' and Department of Health and Human Services'
data.

c\. Distribute PMS reports.

d\. Assist Centers with recipient registration.

e\. Acquire and maintain registration listings.

f\. Coordinate activity between Centers and DHHS/PMS.

**CHAPTER 3. Administering Letters of Credit**

**3.1 Overview**

3.1.1 The purpose of this chapter is to define the administration of
Letters of Credit by National Aeronautics and Space Administration
(NASA) in terms of policy authorities and references, responsibilities,
and requirements.

**3.2 Agency Requirements**

3.2.1 NASA policy is to use the Department of Health and Human Services'
Payment Management System (DHHS/PMS) method of payment in administering
letters of credit. This method ensures timely payments to the
recipients. Recipient requests for funds are submitted through the PMS
system from the recipient's personal computer into PMS. After successful
negotiation of the system's edits, the transaction is written to tape
and forwarded to the Richmond Federal Reserve. The Federal Reserve makes
the electronic payment to the organization's financial institution the
next business day.

3.2.2 Under NASA policy, the DHHS provides instructions to the
recipients for requesting funds through the PMS.

**3.3 Roles and Responsibilities**

3.3.1 Agency Chief Financial Officer (CFO)/ Deputy CFO shall ensure that
NASA and recipients meet NASA/DHHS/PMS Letters of Credit requirements.

3.3.2 Recipients Organizations shall comply with NASA/DHHS/PMS
requirements when utilizing Letters of Credit for grants and agreements
with NASA.

3.3.3 Center CFOs and the NASA Shared Services Center (NSSC) shall:

a Consolidate funding for the same recipient organizations.

b\. Assign Letter of Credit Numbers.

c\. Notify Recipients of award authorizations.

d\. Determine NASA compensation to DHHS for processing service charges.

e\. Process Monthly billings and transactions.

f\. Handle General Ledger accounting for advances, letter of credit
financing, and related transactions.

g\. Prepare closing Letters of Credit in accordance with DHHS
procedures.

h\. Reopen Recipients accounts as required by DHHS.

i\. Prepare Final reports and close outs.

j\. Review Responsibilities and Requirements for Handling Letters of
Credit, Appendix B of NASA Financial Management Requirements of this
Volume 14, which provides additional details on roles and
responsibilities.

**CHAPTER 4. Administrative Reviews and Actions**

**4.1 Overview**

4.1.1 This chapter provides National Aeronautics and Space
Administration (NASA) policy for suspension or termination of recipients
who are unwilling or unable to comply with cash management requirements,
financial systems, or financial reporting requirements.

**4.2 Agency Requirements**

4.2.1 Using the inquiry capability of the Payment Management System
(PMS) for letter of credit recipients and the quarterly SF 272's
(Federal Cash Transaction Report) submittal by all recipient
organizations, Centers will monitor recipients' drawdown practices. If a
recipient withdraws funds in excess of current requirements or fails to
submit required reports on a timely basis, subsequent requests for funds
may be suspended until the situation is remedied.

4.2.2 If the recipient organization continues to withdraw funds in
excess of current needs or fails to submit reports on a timely basis,
the advance financing arrangement may be terminated and the recipient
organization shall then be required to finance its operations with its
own working capital. Appendix C of this NPR lists specific circumstances
under which the advance payments shall be suspended or terminated.

**4.3 Roles and Responsibilities**

4.3.1 Agency Chief Financial Officer (CFO)/ Deputy CFO shall ensure that
NASA and recipients meet NASA/DHHS/PMS Suspension and Termination
requirements.

4.3.2 Recipient Organizations shall comply with NASA/DHHS/PMS
requirements when submitting requests for advances for grants and
agreements with NASA.

4.3.3 Center CFOs and the NASA Shared Services Center (NSSC) shall:

a.  Suspend advance payments temporarily to the recipients.

b.  Notify the Grant Officer of suspensions in advance.

c.  Coordinate with cognizant Contract Offices if suspension involves
    Letters of Credit.

d.  Decide that the recipient demonstrates consistent willingness or
    inability to comply with financial requirements.

e.  Judge whether the recipients meet all requirements for suspension or
    termination.

f.  Initiate suspension or termination of advance payments to
    recipients.

g.  Review of recipient grant/contract to ensure that initiating a
    suspension or termination is allowed.

h.  Notify recipients that suspension and termination may be initiated.

4.3.4 The Grant Office. Responsible for initiating suspension or
termination of advance payments to grantees and recipients of
cooperative agreements in all other cases - for instance, when the
recipient organization has failed to comply with the non-financial terms
and conditions of the grant. In such cases, the Grant Officer shall
notify the Center Chief Financial Officer (OCFO) and the recipient
organization of the Grant Officer determinations to suspend or terminate
advance payment, and the Center OCFO shall take prompt action
accordingly.

4.3.5 The Contracting Officer. Responsible for initiating suspension or
termination of advance payments to contractors. In such cases, the
Contracting Officer shall notify the Center OCFO and the contractor, of
the Contracting Officer determinations to suspend or terminate advance
payment, and the Center OCFO shall take prompt action accordingly.

**CHAPTER 5. Instructions for Recipient Organizations**

**5.1 Overview**

5.1.1 The purpose of this chapter is to set forth the policies to be
followed by participating recipient organizations for obtaining advance
payments from National Aeronautics and Space Administration (NASA).

**5.2 Agency Requirements**

5.2.1 NASA will ensure that recipient organizations follow the policies
and procedures, of the Department of Health and Human Services' Payment
Management System (DHHS/PMS) in obtaining advance payments for Grants
and Agreements.

5.2.2 The letter of credit method of financing shall be used by NASA for
recipient organizations awarded grants or agreements with advance
payment provisions when the recipient organization has demonstrated a
willingness to maintain procedures that will minimize the time elapsing
between the drawdown of funds and their disbursement.

**5.3 Roles and Responsibilities**

5.3.1 Agency Chief Financial Officer (CFO) shall ensure that NASA and
recipients meet NASA and DHHS-PMS advance payments requirements.

5.3.2 Recipient Organizations shall comply with NASA/DHHS/PMS
requirements when submitting requests for advances for grants and
agreements with NASA.

5.3.3 Center CFOs and the NASA Shared Services Center (NSSC) shall
ensure that each Center:

a\. Charge properly for its recipients' draw-downs.

b\. Reconcile Centers' and DHHS' data.

c\. Distribute PMS reports.

d\. Assist Centers with recipient registration.

e\. Acquire and maintain registered initials.

f\. Coordinate activity between Centers and DHHS.

**APPENDIX A. Advance Payment Requirements for Recipients**

A.1 Recipients Operate under the Following Authorities:

A.1.1 Advance Payments Authority-Grants. Advance payments to recipient
organizations are an integral feature of National Aeronautics and Space
Administration (NASA) grants made pursuant to 31 U.S.C. § 6304. Advance
payments may be made without a Determination and Findings (D&F)
document.

A.1.2 Advance Payments Authority-Contracts. The Federal Acquisition
Regulation (FAR), Subpart 32.4, establishes policy for advance payments
on contracts. Subpart 32.4 of the NASA FAR Supplement (NFS) establishes
the NASA policy and requirements for advance payments on contracts; see
NFS 32.402 for approval authorities for advance payments on contracts.
The statutory authorities for advance payments are 10 U.S.C. § 2307; 42
U.S.C. § 2473(c) (5); and Public Law 85-804 as implemented by Executive
Order 10789.

A.2 Recipients Shall Meet the Following Requirements in Order to Qualify
for Advance Payments

A.2.1 The recipient organization has demonstrated a willingness and
ability to maintain procedures that will minimize time elapsing between
receipt of an advance and disbursement of funds.

A.2.2 The recipient's financial management system provides for:

a.  Accurate, current, and complete disclosures of the financial results
    of each federally sponsored project or program in accordance with
    financial reporting requirements.

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i.  Effective control over and accountability for all funds, property
    and other assets. Recipients shall adequately safeguard all such
    assets and assure they are used solely for authorized purposes.

j.  Written procedures to minimize time elapsing between receipt of
    advance and disbursement of funds.

k.  Written procedures for determining reasonableness, allocability, and
    allowability of costs in accordance with the provisions of the
    applicable Federal cost principles and the terms of the contract,
    grant, or other agreement.

l.  Recipients' financial management systems shall also adhere to:

    1.  Grants. Standards for financial management systems as specified
        in Office of Management and Budget (OMB) Circular No. A-110, and
        the "Grant and Cooperative Agreement Handbook," NASA Procedural
        Requirement (NPR) 5800.1.

    2.  Contracts. Generally accepted accounting principles and
        standards for financial management and reporting as specified in
        relevant contract clauses.

A.2.3 The recipient organization will be required to finance its
operations with its own working capital when it has demonstrated that it
is unwilling or unable to meet cash management requirements that will
minimize cash balances or when it's financial management system does not
meet the standards for fund control, accountability, and financial
reporting.

A.3 Financial Reporting

A.3.1 All recipients shall submit an electronic Federal Cash
Transactions Report (SF 272) to the Department of Health and Human
Services Payment Management System (DHHS-PMS) within 15 working days
following the end of each Federal fiscal quarter. NASA personnel should
reconcile drawdown during the quarter, with the ending undrawn
authorization balances. Additionally, all recipients will submit a final
SF 272 within 90 calendar days after the expiration date of each grant
or contract. (See NASA Financial Management Requirements (FMR), Volume
14, Chapter 2).

A.4 Reviews

A.4.1 Using the inquiry capability of the PMS for letter of credit
recipients and the quarterly SF 272's submittal by all recipient
organizations, Centers will monitor recipients' drawdown practices. If a
recipient withdraws funds in excess of current requirements or fails to
submit required reports on a timely basis, subsequent requests for funds
may be suspended (see FMR Volume 14, Chapter 3) until the situation is
remedied.

A.5 Withdrawals in Excess of Need

A.5.1 If the recipient organization continues to withdraw funds in
excess of current needs or fails to submit reports on a timely basis,
the advance financing arrangement may be terminated (see FMR Volume 14,
Chapter 3) and the recipient organization shall then be required to
finance its operations with its own working capital. Note that FMR
Volume 14, Appendix C lists specific circumstances under which the
Center Office of the Chief Financial Officer (OCFO) shall initiate
suspension or termination of advance payments.

A.6 Cash Management

A.6.1 Recipient organizations are required to request the minimum amount
of funds needed and schedule cash advances to coincide with actual,
immediate cash requirements. Centers shall monitor recipients' drawdown
to ensure that minimal balances are being maintained.

A.6.1.1 Recipients are required to maintain advances of Federal funds in
interest bearing accounts, unless:

a.  They receive less than \$120,000 in Federal awards per year,

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m.  The best reasonable available interest bearing account would not be
    expected to earn in excess of \$250 per year on Federal cash
    balances, and

n.  The depository would require an average or minimum balance so high
    that it would not be feasible within the expected Federal and
    non-Federal cash resources.

A.6.1.2 Interest earned on advances in interest bearing accounts in
excess of \$250 per year shall be remitted annually to the Department of
Health and Human Services, Payment Management System, P.O. Box 6021,
Rockville, MD 20852. The recipient may retain interest amounts up to
\$250 per year for administrative expenses.

A.6.1.3 Recipients shall forward excess Federal funds erroneously drawn
to the DHHS. The only exceptions are when the funds involved:

a.  Funds will be disbursed by the recipient organization within
    seven (7) calendar days.

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o.  Funds are less than \$10,000 and will be disbursed within 30
    calendar days.

A.6.1.4 DHHS shall report any interest collected on excess Federal funds
to the Center and to the Department of Treasury.

A.7 Instructions to Recipients Organizations

A.7.1 Instructions to Recipient Organizations receiving advance payments
are contained in this Volume as Appendix D. Upon award of the grant or
contract for advance payments, Centers shall provide these instructions
along with the web address where recipients may obtain copies of the
Federal Cash Transactions Report (SF 272).

**APPENDIX B. Responsibilities and Requirements for Handling Letters of
Credit Handling Letters of Credit**

B.1 This appendix summarizes the responsibilities and the requirements
which are to be followed by the National Aeronautics and Space
Administration (NASA) Center Chief Financial Officers (CFOs) for the
handling of Letters of Credit as required by Department of Health and
Human Services Payment Management System (DHHS/PMS).

B.2 Letter of Credit to Consolidate Funding to the Same Recipient
Organizations. All advances financing to the same recipient organization
shall be combined into one letter of credit by the Center. The letter of
credit shall include all advance payment grants and contracts awarded to
a recipient.

B.3 Assign Letter of Credit Number. Letter of credit numbers are
10-digit identifiers composed of three sections: (1) four zeros; (2)
Accounting Installation Number (AIN); and (3) 4-digit sequential letter
of credit number. Letter of credit numbers should not be duplicated.

B.4 Letter of Advice. Recipients are notified of award authorization
actions by a letter of advice. A cognizant authorized certifying officer
shall sign the letter. The letter of advice should contain, at a
minimum, the following information:

p.  The recipient organization's name and address.

q.  The recipient organization's Entity Identification Number (EIN) and
    the NASA-assigned letter of credit number.

r.  The amount and effective date of the initial or amended
    authorization.

s.  For initial authorizations, the recipient shall be informed that
    payments will be made under DHHS/PMS.

t.  Certification that the authorized amount will be available as of the
    effective date of the initial authorization or amendment.

B.5 Closing Letters of Credit. A recipient's letter of credit account
shall be closed if the Center has no plans for awarding additional
grants or contracts to the recipient organization. Centers shall forward
a letter to the PMS Coordinator to indicate:

a.  A notification that the recipient's award authorization has been
    closed.

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u.  A request for closure of the recipient's account.

v.  Signed by the certifying officer.

B.6 Reopening Recipient Accounts. Closed accounts shall be reopened by
requesting, in writing, that the PMS Coordinator have the account
reopened (the letter should be signed by a certifying officer).
Re-opening is performed by processing a "050 Transaction" within the PMS
system.

B.7 Final Report/Closeout. A final Federal Cash Transactions Report (SF
272) shall be submitted in paper form within 90 calendar days after the
expiration date of a grant or contract (HHS accounts can be closed by
processing a "059 transaction within the PMS system"). The final SF 272
pertains only to the completed grant or contract. The report shall be
marked "Final" and shall include total disbursements from inception
through completion. Upon receipt of a final grant or contract
expenditure report, the Office of the Chief Financial Officer (OCFO) and
Deputy OCFO shall request that the appropriate Grant or Contracting
Officer initiate closeout procedures. NASA Procedural Requirement (NPR)
5800.1 requires that recipients promptly refund any balances of
undisbursed cash that NASA has advanced to them that are not authorized
to be retained by the recipient for use in other projects. When
outstanding advances exist and are to be collected from recipients on
completed grants, the amounts should be reclassified as accounts
receivable and the collection procedures set forth in Financial
Management Requirements, Volume 14 should be followed.

**APPENDIX C. Recipients Advance Payment Suspension or Termination**

C.1 This appendix defines the responsibilities and the requirements
which are to be followed by the National Aeronautics and Space
Administration (NASA) Center Office of the Chief Financial Officers
(OCFOs) and the NASA Shared Services Center (NSSC), the Grant Office,
and the Contract Office for the handling of Recipient advance payment
suspension and termination as required by Department of Health and Human
Services Payment Management System (DHHS/PMS).

C.2 [Suspension or Termination]{.underline}

C.2.1 General. When a recipient organization has demonstrated an
unwillingness or inability to comply with cash management, financial
management system, or financial reporting requirements, the Center
OCFO/NSSC may temporarily suspend payment to the recipient organization
pending corrective action by the recipient or pending a decision to
terminate the advance financing agreement. The Center OCFO/NSSC shall
promptly notify the Grant Officer of any such action.

C.2.2 Impact on Letters of Credit. When the Letter of Credit includes
contracts, the Center OCFO/NSSC shall consult with all cognizant
Contracting Officers before implementing a suspension or termination of
advance financing applicable to contracts.

C.3 [Decision to Terminate]{.underline}

C.3.1 A decision to terminate the advance financing agreement shall be
predicated upon a recipient organization\'s consistent demonstration of
an unwillingness or inability to comply with cash management, financial
management system, or financial reporting requirements. Under normal
circumstances, the recipient organization should have been suspended two
times before advance payment termination proceedings are initiated. If
the severity of the violation warrants, the OCFO/NSSC may begin advance
payment termination proceedings immediately by notifying the Grant
Officer promptly. Upon termination of the advance financing arrangement,
the recipient organization shall finance its operations with its own
working capital and the Center shall reimburse the recipient\'s cost.

C.4 [Criteria for Suspension/Termination]{.underline}

C.4.1 The Center OCFO/NSSC shall take action to either suspend or
terminate a recipient\'s advance financing arrangement, and shall
promptly notify the Grant Officer when:

a.  A recipient organization receiving advance payments from the
    DHHS/PMS is unwilling or unable to establish a financial management
    system that meets the requirements of advance financing as evidenced
    by an audit report or failure to comply with the requirements of
    NASA Financial Management Requirements (FMR). The OCFO/NSSC may
    require submission of the recipients' written procedures or take
    other appropriate measures to validate the recipient's compliance
    with these system requirements. Centers may take reasonable steps to
    assist the recipient organization in establishing or improving their
    financial management system.

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w.  A recipient organization receiving advance payments from the
    DHHS/PMS is unwilling or unable to report, on an accurate and timely
    basis, cash disbursements or cash balances, as required by the
    Center. Advance financing shall be temporarily suspended when two
    successive quarterly reports are late or when two reports are late
    in a fiscal year. The OCFO/NSSC may reinstate the advance financing
    upon corrective action by the recipient. During the temporary
    suspension period, the Center shall reimburse the recipient's cost.

x.  A recipient organization receiving letter of credit payments from
    the DHHS/PMS has demonstrated an unwillingness or inability to
    establish procedures that will minimize time elapsing between
    drawdown and related disbursements.

C.5 Initiation Responsibilities For Suspension/Termination

C.5.1 The responsibilities for initiating suspension or termination of
advance payments are assigned as follows:

a.  The Center OCFO/NSSC are responsible for initiating suspension or
    termination of advance payments to grantees and recipients of
    cooperative agreements in cases involving financial management
    issues, and shall notify the Grant Officer promptly of such actions.
    When the Letter of Credit includes contracts, the Center OCFO/NSSC
    shall consult with all cognizant Contracting Officers before
    implementing a suspension or termination of advance financing
    applicable to contracts.

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y.  The Grant Office is responsible for initiating suspension or
    termination of advance payments to grantees and recipients of
    cooperative agreements in all other cases - for instance, when the
    recipient organization has failed to comply with the non-financial
    terms and conditions of the grant. In such cases, the Grant Officer
    shall notify the Center OCFO/NSSC and the recipient organization of
    the Grant Officer determinations to suspend or terminate advance
    payment, and the Center OCFO/NSSC shall take prompt action
    accordingly.

z.  The Contracting Officer is responsible for initiating suspension or
    termination of advance payments to contractors. In such cases, the
    Contracting Officer shall notify the Center OCFO/NSSC and the
    contractor, of the Contracting Officer determinations to suspend or
    terminate advance payment, and the Center OCFO/NSSC shall take
    prompt action accordingly.

C.6 [Preliminary Review]{.underline}

C.6.1 A review shall be made of the grant or contract and the statute
under which the grant or contract was negotiated to ensure that
termination of advance payments is permitted. When the reimbursement
method is not feasible, arrangements may be made whereby the operations
of the recipient organizations are financed on a working capital advance
basis. Under this basis, funds are advanced to the recipient
organization to cover its estimated disbursement needs for a given
initial period (not to exceed 30 calendar days). Thereafter, payments
will be made to the recipient for the amount of its actual cash
disbursements. The amount of the initial advance should be computed to
ensure that after the initial period, the payments are approximately
equal to the average amount of the recipient organization\'s
unreimbursed program payments.

C.7 [Notification]{.underline}

C.7.1 Suspension, Termination, and Reinstatement of advance payments may
be initiated by the Center OCFO/NSSC or by the responsible Grant Officer
or Contracting Officer, depending on the nature of the issue at hand.
When the Grant Officer or Contracting Officer is the initiator, they
shall notify the Center OCFO/NSSC in writing, using the notification
documents outlined in (A) through (C) below, and the Center OCFO shall
take prompt action accordingly. When the Center OCFO/NSSC is the
initiator, they shall notify the Grant Officer or Contracting Officer in
writing, also using the notification documents outlined in (A) through
(C) below. When the Letter of Credit includes contracts, the Center
OCFO/NSSC shall consult with all cognizant Contracting Officers before
implementing a suspension or termination of advance financing applicable
to contracts. The notification documents are as follows:

a.  The initiator of suspension (that is, a Center OCFO/NSSC or a Grant
    Officer or Contracting Office, depending on the reason for
    suspension) shall provide reasonable notice, in writing, to the
    recipient organization of the determination to temporarily withhold
    further payments pending corrective action by the recipient or
    pending a decision to terminate advance financing.

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a.  The initiator of termination (that is, a Center OCFO/NSSC or a Grant
    Officer or Contracting Officer, depending on the reason for
    termination) shall promptly notify the recipient and the cognizant
    Grant or Contract officer, in writing, of the determination, the
    reasons for termination, and the effective date.

b.  The initiator of reinstatement (that is, a Center OCFO/NSSC or a
    Grant Officer or Contracting Officer, depending on the reason for
    the initial suspension or termination) shall promptly notify the
    recipient, in writing, of the determination that a previously
    suspended or terminated advance payment arrangement is to be
    reinstated, including the reasons for the reinstatement and the
    effective date.

**APPENDIX D. Instructions to Recipient Organizations**

D.1 This appendix provides the instructions which the recipient
organizations need to follow to comply with National Aeronautics and
Space Administration (NASA), Department of Health and Human Services
Payment Management System (DHHS/PMS), and U.S. Department of Treasury
(Treasury) requirements on obtaining advance payments for grants and
agreements.

D.2 Method of financing advance payments. The letter of credit method of
financing shall be used by NASA for recipient organizations awarded
grants or agreements with advance payment provisions when the recipient
organization has demonstrated a willingness to maintain procedures that
will minimize the time elapsing between the transfer of funds and their
disbursement; and the recipient organization\'s financial management
system provides for:

a.  Accurate, current, and complete disclosure of the financial results
    of each federally sponsored project or program in accordance with
    the financial reporting requirements.

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c.  Effective control over and accountability for all funds, property,
    and other assets. Recipients shall adequately safeguard all such
    assets and assure they are used solely for authorized purposes.

d.  Written procedures to minimize the time elapsing between the
    transfer of funds and the disbursement of funds.

e.  Written procedures for determining if costs are reasonable,
    allocable, and allowable, in accordance with the provisions of the
    applicable Federal cost principles and the terms of the contract,
    grant, or other agreement.

f.  Recipients\' financial management systems shall also adhere to:

    1.  Standards for financial management systems as specified in
        Office of Management and Budget (OMB) Circular No. A-110 and the
        "Grant and Cooperative Agreement Handbook" (NASA Procedural
        Requirement (NPR) 5800.1).

    2.  Generally Accepted Accounting Principles for financial
        management and reporting as specified in relevant contract
        clauses.

D.3 Reimbursement by electronic funds transfer, rather than advance
payments, will be used when the recipient\'s financial management system
does not meet the standards for fund control, accountability, and
financial reporting or when the recipient is unwilling or unable to meet
cash management requirements.

D.4 Financial Reporting Requirements. Recipients are required to submit
a Federal Cash Transactions Report (SF 272), and, when applicable, a
Continuation Sheet (SF 272A) electronically to the DHHS/PMS. The SF 272
report shall be submitted within 15 working days following the end of
each Federal fiscal quarter, i.e., December 31, March 31, June 30, and
September 30. One Federal Cash Transactions Report shall be submitted
for all grants and contracts financed under a letter of credit
arrangement with a Center. A final Federal Cash Transactions Report
shall be submitted in paper form within 90 calendar days after the
expiration date of a grant or contract. The final SF 272 pertains only
to the completed grant or contract and shall include total disbursements
from inception through completion. The report shall be marked \"Final."
Recipients may obtain copies of the Federal Cash Transactions Report
from the Office of Management and Budget.

D.5 Reporting Interest. Recipients are required to maintain advances of
Federal funds in interest bearing accounts, unless: (1) they receive
less than \$120,000 in Federal awards per year, (2) the best reasonably
available interest bearing account would not be expected to earn in
excess of \$250 per year on Federal cash balances, and (3) the
depository would require an average or minimum balance so high that it
would not be feasible within the expected Federal non-Federal cash
resources. Interest earned on advances in interest bearing accounts in
excess of \$250 per year shall be remitted annually to the Department of
Health and Human Services, Payment Management System, Rockville, MD
20852. Interest amounts up to \$250 per year may be retained by the
recipient for administrative expenses. The remittance should be made
payable to DHHS and should indicate the recipient organization\'s Entity
Identification Number (EIN) and reason, i.e., \"Interest earned.\"

D.6 Erroneous Withdrawal of Excess Funds. The letter of credit system is
designed to make funds available to a recipient organization on the
first business day following receipt of a request for funds. Recipient
organizations are required to (a) request the minimum amount of funds
needed; and (b) schedule such requests so that cash advances coincide
with actual, immediate cash requirements. NASA will monitor letter of
credit drawdown to ensure that the timing and amount of cash advances
are as close as administratively feasible to actual disbursements.
Should funds be erroneously drawn in excess of actual needs, one of two
actions should be taken: (a) if the request itself was made erroneously,
the recipient organization should contact its financial institution and
request that the payment be returned; or (b) if the payment has already
been deposited or the excess drawdown is only part of the total payment,
the recipient organization should promptly remit the excess funds to the
Department of Health and Human Services, Payment Management System,
Rockville, MD 20852.

D.7 Remittance. The remittance should be made payable to DHHS and should
indicate the recipient organization\'s EIN and reason, i.e., \"Excess
funds erroneously drawn\" DHHS shall report any interest collected on
excess Federal funds to the Center and to the Treasury. The only
exceptions are when the funds involved:

a.  Funds will be disbursed by the recipient organization within
    seven (7) calendar days.

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g.  Funds are less than \$10,000 and will be disbursed within 30
    calendar days.

D.8 Letter of Credit Procedures -- Initial Authorization. A Direct
Deposit Sign-up form (SF 1199A) and a Contact Information form must be
on file before funds may be advanced. The recipient organization shall
forward the original forms as soon as practicable, but no later than
four (4) weeks prior to implementation, to the Office of the Chief
Financial Officer (OCFO) of the cognizant Center or the NASA Shared
Services Center (NSSC). An official who is known to the Center or NSSC
shall sign the forms. DHHS will accept only forms with original
signatures, no facsimile or copies. Upon receipt of the completed
SF-1199A form and the Contact Information form, the Center or NSSC will
forward notification of the authorization amount and effective date, by
a letter of advice, to the recipient organization. Instructions, an
account number, and a password will be forwarded to the recipient by the
Department of Health and Human Services (see Procedures for Drawing
Federal Funds).

D.8.1 Letter of Credit Procedures - Reporting Changes in Recipient
Organization Data.

D.8.2 A revised Direct Deposit Sign-up form (SF 1199A) shall be
submitted should any of the following occur:

a.  Change or termination of the official(s) authorized to sign the
    forms;

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h.  Change in the name or address of the recipient organization; or

i.  Change in the account or financial institution.

D.8.3 A Contact Information form shall be submitted should any of the
following occur:

a.  Change or termination of the official(s) authorized to sign the
    forms;

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j.  Change in the contact names or telephone numbers.

D.8.4 Letter of Credit - Amendments. Amendments are required for funding
actions that result in an increase or decrease in the authorized amount
of the letter of credit. Amendments to the authorized amount are issued
by the cognizant Center OCFO/NSSC. Upon notification that a funding
action has been taken, the Center OCFO/NSSC will advise the recipient
organization of the amount, whether the total authorization has been
increased or decreased, and the effective date of the change.

D.8.5 Letter of Credit -- Drawing Federal Funds. Recipient requests for
funds are submitted through the PMS system. Requests for funds are
processed from a recipient organization\'s personal computer. The
Department of Health and Human Services will provide instructions on
using a PMS account number and password.

D.8.6 Letter of Credit - Suspension and Termination. The
responsibilities for initiating suspension or termination of advance
payments are assigned as follows:

a.  The Center OCFO or NSSC are responsible for initiating suspension or
    termination of advance payments to grantees and recipients of
    cooperative agreements in cases involving financial management
    issues, and shall notify the Grant Officer promptly of such actions.
    When the Letter of Credit includes contracts, the Center OCFO or
    NSSC shall consult with all cognizant Contracting Officers before
    implementing a suspension or termination of advance financing
    applicable to contracts.

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k.  The Grant Officer is responsible for initiating suspension or
    termination of advance payments to grantees and recipients of
    cooperative agreements in all other cases -- for instance, when the
    recipient organization has failed to comply with the non-financial
    terms and conditions of the grant. In such cases, the Grant Officer
    shall notify the Center OCFO or NSSC and the recipient organization
    of the Grant Officer determinations to suspend or terminate the
    advance payment, and the Center OCFO shall take prompt action
    accordingly.

l.  The Contracting Officer is responsible for initiating suspension or
    termination of advance payments to contractors. To initiate
    suspension or termination of advance payments, the Contracting
    Officer shall notify the Center OCFO or NSSC and the contractor of
    such Contracting Officer determinations, and the Center OCFO or NSSC
    shall take prompt action accordingly.

D.8.7 Letter of credit payments may be suspended or terminated if the
recipient organization has failed to:

a.  Comply with the terms and conditions of the grant or contract,
    including all reporting requirements.

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m.  Comply with financial management system requirements.

n.  Comply with financial reporting requirements.

o.  Comply with cash management requirements.

p.  Make progress adequate for performance of the contract.

    D.8.8 Under suspension, the recipient's costs shall be reimbursed
    until the condition is remedied.

D.8.9 NASA policy is that the NASA Center OCFO or NSSC, notifying the
Grant Officer, shall take action to either suspend or terminate a
recipient's advance financing arrangement when:

a.  A recipient organization is unwilling or unable to establish a
    financial management system that meets the requirements of advance
    financing as evidenced by an audit report or failure to comply with
    NASA requirements.

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q.  A recipient organization is unwilling or unable to report, on an
    accurate and timely basis, cash disbursements or cash balances as
    required by NASA. Advance financing shall be temporarily suspended
    when two successive quarterly reports are late or when two reports
    are late in a fiscal year.

r.  A recipient organization has demonstrated an unwillingness or
    inability to establish procedures that will minimize time elapsing
    between draw-downs and related disbursements.

D.8.10 Furthermore, a letter of credit arrangement may also be
terminated for either of the following reasons:

a.  The business relationship between the Center and the recipient
    organization is completed or terminated (except when follow-on
    awards are expected to be authorized).

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s.  The cognizant Center OCFO or NSSC determines progress is not
    satisfactory toward achievement of the cash management objective of
    the letter of credit method of financing.

D.8.11 Advance financing may be terminated if the recipient fails to
correct a condition causing suspension within a reasonable period of
time. Upon termination, the recipient organization shall finance its
operations with its own working capital and be reimbursed by NASA. The
Center will promptly notify the recipient in writing of the
determination, the reasons for termination and the effective date.