Grant Drawdown

A grant drawdown is how a federal grantee gets paid. Unlike private foundation grants — which typically arrive as a check or wire transfer at the start of a grant period or on a schedule specified in the award — federal grants require the grantee to actively request funds through a federal payment system.

The request is called a drawdown. The grantee logs into the relevant payment portal, specifies the amount requested, and submits the request. The funds are typically disbursed within one to three business days.

How it works

Federal payment systems serve as the intermediary between the federal awarding agency and the grantee’s bank account. The most widely used is ASAP — the Automated Standard Application for Payments, administered by the U.S. Department of the Treasury’s Bureau of the Fiscal Service. Other agencies use system-specific portals: the HHS Payment Management System for Department of Health and Human Services awards, E-Grants for Department of Labor grants, and others.

When the federal award is activated, the awarding agency loads the grant funds into the payment system account. The grantee can then draw against that account balance through drawdown requests. The account balance decreases with each drawdown. At grant closeout, any remaining balance is deobligated.

Advance payment vs. reimbursement

Under 2 CFR 200.305, grantees can receive federal grant funds through one of two payment methods.

Advance payment releases funds before the corresponding expenses are incurred. The grantee requests an amount sufficient to cover anticipated immediate cash needs — typically projected expenses for the next 30 days. Advance payment is permitted when the grantee has adequate financial controls to ensure proper use of the funds. The advance must be deposited into an interest-bearing account if the balance exceeds a specified threshold, and excess advance funds must be returned promptly after the period’s expenses are documented.

Reimbursement releases funds after expenses have been incurred and documented in the grantee’s accounting system. The grantee posts all relevant expenses to the grant fund code, runs an expenditure report to confirm the amounts, and submits a drawdown request for the documented total. Reimbursement is the safer method from a compliance standpoint — it is impossible to over-draw when the request is based on posted actuals.

Most mid-sized nonprofits use the advance payment method because they cannot float payroll and operating expenses while waiting for reimbursement. This is appropriate when the internal accounting controls are in place to document expenses accurately and return any excess advance promptly.

What triggers a drawdown problem

Drawdown problems almost always trace to one of three causes.

Over-drawing means requesting more funds than are supported by allowable, documented expenditures. If a grantee has $35,000 in posted expenses and requests $50,000, the $15,000 difference is not supported. The excess must be returned; an audit may question why the controls did not prevent the over-draw.

Under-drawing means leaving documented expenses in the accounting system without requesting the corresponding reimbursement. Under-drawing creates cash flow problems and, in some federal programs, may result in automatic deobligation of undrawn funds near the award end date.

Drawing against unallowable costs means requesting reimbursement for expenses that are not allowable under the grant’s cost principles — for example, claiming reimbursement for lobbying costs from a federal award, or for entertainment expenses that the grant agreement specifically excludes. Drawdowns must be limited to allowable costs as defined in 2 CFR 200 Subpart E.

See also

• Grant Expenditure Report — the financial documentation submitted to funders to account for how grant funds were spent
• SF-425 — the Federal Financial Report form used to report on federal grant expenditures and remaining balances