Remitting Interest on Advances

Contract-funded programs at institutions of higher education and nonprofit organizations are not generally paid on the basis of an advance; however, the government does have authority, if determined to be in the government’s best interest and other criteria to authorize advances for select programs. General information and statutory authority pertaining to the payment of advances on contract programs can be found at FAR 32.102 - Description of contract financing methods.

Direct Award-Specific Advance Payments

Contract-funded programs at institutions of higher education and nonprofit organizations authorized advance payments will usually contain the FAR clause 52.232-12 Advance Payments, Alt. II. The applicability and remittance requirements of interest on contract programs will be in accordance with the above or other specified contract advance payment clause depending on contract type and the effort being performed. Basic information on interest requirements on contract programs can be found at FAR 32.407 - Interest.

As always, refer to the terms and conditions of the contract. You must first determine if advance payments are authorized under your contract and if so then refer to the advance payment clause for specifics on how and when interest is to be remitted to the government.

Advance Payment Pool Agreements

A more common method of obtaining advances at universities on contract programs is through the use of an advance payment pool agreement. Advances obtained and any related unliquidated balances that occur under the agreement are generally not subject to the remittance of interest to the government. This is in accordance with the terms and conditions of the applicable advance payment pool agreement clause titled "Interest" except in certain circumstances. Interest may become payable by subadvances to subcontractors or if the agreements are terminated and demand has been requested on any remaining unliquidated balance. For additional information, please refer to your specific agreement.

A contractor or recipient receiving an award must always check the clauses, and terms and conditions to determine specific and current requirements concerning payment, reporting and interest requirements. In many cases additional agency or other regulations are incorporated by reference concerning payment processing and interest requirements. Recipients and contractors should ensure they have a clear understanding of obligations under the provisions of their specific awards.

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