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Plain-English guide · for nonprofits
2 CFR 200.305, explained in plain English
Updated October 2026
Under §200.305, you must be paid in advance if two things are true. You keep written steps that keep the time between drawing federal cash and spending it short. And your books meet federal standards. If not, or if your award sets reimbursement as a specific condition under §200.208, is for construction, or you ask to be reimbursed, reimbursement is preferred, paid within 30 days of your request.
Advance or reimbursement
In fuller terms, the two advance conditions in §200.305, the payment section of the Uniform Guidance, are these. You maintain written procedures that minimize the time between the transfer of funds and your disbursement of them, and your financial management system meets the Part 200 standards for fund control and accountability. Each advance is limited to the minimum needed, timed to actual immediate cash requirements.
The 30-day reimbursement rule
Under (b)(3), the agency or pass-through must pay within 30 calendar days of receiving your reimbursement request, unless it reasonably believes the request is improper.
There's a third route. If you can't meet the advance conditions and reimbursement won't work because you lack working capital, (b)(4) lets the agency or pass-through advance cash for an initial period, then reimburse your actual disbursements after that.
The cash management rule
The principle running through the section is that federal cash should not sit in your account. Draw what you are about to spend, and spend what you draw. Where you have several federal awards, consolidate the requests rather than drawing separately for each.
For a small nonprofit with thin cash reserves this cuts against instinct. Drawing a comfortable buffer is exactly what the section prohibits.
Interest
Under (b)(5), if you have program income, rebates, refunds or interest earned on federal funds available, spend those before you request more cash.
Under (b)(10) to (b)(12), keep advances in insured accounts whenever possible. Keep advances in an interest-bearing account unless an exception applies, for example you receive less than $250,000 a year in federal funds. You may keep up to $500 of interest a year for admin costs. Return the rest each year to the HHS Payment Management System.
Separate bank accounts
Under (b)(9), a federal agency or pass-through must not require you to keep a separate depository account for federal funds. Some organizations open one because someone told them to. That's your choice. What the rule does ask is that your accounting records can identify the funds.
What to actually do
Write the drawdown procedure, however short
Advance payment is conditional on having written procedures. One page naming who draws, on what trigger, and how fast it is disbursed.
Time draws to payroll and payables
The defensible pattern is drawing against known imminent disbursements.
Do not open a separate account because you assume you must
Fund accounting in your books is what is actually required.
This is general information, not legal or accounting advice. Federal grant rules change and are applied differently by different agencies and auditors. Check with your auditor, your grant officer, or an attorney before relying on any of it.
The Ember tool for thisSign up for Ember Budget
The rule asks you to account for every federal dollar. In Ember Budget you record gifts and costs against each program and can restrict a gift to a program, so you see that balance draw down. You still request payment through your funder's own system. Free for budgets under $50K a year, no credit card.
Sources: 2 CFR Part 200 (eCFR), read 29 August 2026, re-checked 1 September 2026 and again 30 October 2026. Federal grant rules change; check the current text before relying on this.