We are currently working on a street reconstruction project where a contractor has signed an agreement to construct the project for the city. No construction work has started. Are we able to pay for materials in advance and store them at our public works yard or do we need to wait until actual materials are needed at the job site?
Date Published: May 2015
In order for the grantee to comply with 24 CFR 85.20(b)(7), grantees must have procedures in place to minimize the time elapsed between the transfer of funds from Treasury and disbursement by the grantee. You should have procedures in place to avoid time gaps between drawdowns and disbursement of funds and should make every attempt to make drawdowns as close as possible to the time of making the disbursement. It appears as if the project may be underway soon, but the grantee should wait until the materials are needed at the job site to purchase them. One of the main values of the requirements under 24 CFR 85.20(b)(7) is there are less likely to be errors made in ordering of materials for the project when the materials are ordered closer to the project schedule. If materials are purchased in advance, some of them may not be used or deemed as unnecessary. If that occurs, the grantee may end up having to pay back the CDBG funds used to purchase those materials. Ensure all materials are properly procured via 24 CFR 85.36.
(24 CFR 85.20(b)(7); 24 CFR 85.36; 2 CFR Part 225 (formerly OMB Circular A-87))