According to the Uniform Guidance (§200.305 Payment), payments to recipients of Federal financial assistance awards fall into two broad categories: (1) payments to State recipients (§200.305(a)); and, (2) payments to all other recipients (§200.305(b)).
State recipients of Federal financial assistance (§200.305(a))
States receive Federal financial assistance payments as outlined in their Treasury-State Cash Management Improvement Act (CMIA) Agreement.
For states, payments are governed by Treasury-State CMIA agreements and default procedures codified at 31 CFR Part 205 “Rules and Procedures for Efficient Federal-State Funds Transfers” and TFM 4A-2000 Overall Disbursing Rules for All Federal Agencies.
States follow their Treasury-State CMIA Agreement for major Federal programs listed in the agreement. The purpose of this agreement is to outline how the State (1) disburses Federal funds, and (2) calculates interest on those funds prior to disbursement by the State.  Under this agreement, States receive Federal financial assistance payments in advance of cash outlays, with the understanding they will expend those funds according to the criteria established in the agreement.
For those programs not listed as major in the agreement, the State follows the default procedures in Subpart B—Rules Applicable to Federal Assistance Programs Not Included in a Treasury-State Agreement in 31 CFR 205. §205.33 directs State recipients to draw-down and disburse Federal financial assistance funds in anticipation of immediate cash needs of the State for work under the award.
A State must minimize the time between the drawdown of Federal funds from the Federal government and their disbursement for Federal program purposes. A Federal Program Agency must limit a funds transfer to a State to the minimum amounts needed by the State and must time the disbursement to be in accord with the actual, immediate cash requirements of the State in carrying out a Federal assistance program or project. The timing and amount of funds transfers must be as close as is administratively feasible to a State's actual cash outlay for direct program costs and the proportionate share of any allowable indirect costs. States should exercise sound cash management in funds transfers to subgrantees in accordance with OMB Circular A-102 (For availability, see 5 CFR 1310.3.).
The language in Subpart B is very similar to the Uniform Guidance requirements for advance payments to non-State recipients (§200.305(b)):
For non-Federal entities other than states, payments methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means.
To summarize, for State recipients of Federal financial assistance, the default payment method is often referred to as advance payment. An advance payment is the draw-down of Federal award funds by the recipient in anticipation of “immediate cash requirements” in paying allowable direct and indirect costs for work under the Federal award. The time-frame for “immediate” is not quantified; rather, it is based on the recipient's financial system and written procedures. The intent is to minimize the amount of Federal interest the recipient may earn on drawn funds, which could, if unchecked, result in the need for the recipient to repay the Federal government for that interest.
Non-State recipients of Federal financial assistance (§200.305(b))
Non-State recipients receive payments from Federal financial assistance awards via three possible methods: (1) Advance; (2) Reimbursement; and, (3) working capital.
Advance payment (§200.305(b)(1))
Advance payments are mandatory for non-State financial assistance recipients who meet certain criteria:
The non-Federal entity must be paid in advance, provided it maintains or demonstrates the willingness to maintain both written procedures that minimize the time elapsing between the transfer of funds and disbursement by the non-Federal entity, and financial management systems that meet the standards for fund control and accountability as established in this part. Advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the non-Federal entity for direct program or project costs and the proportionate share of any allowable indirect costs. The non-Federal entity must make timely payment to contractors in accordance with the contract provisions. [emphasis added]
Reimbursement payment (§200.305(b)(3))
Reimbursement is the appropriate payment method when: (1) the criteria for advance payment cannot be met; (2) past performance history of the recipient results in the specific condition to reimburse only (formerly "high risk" designation); or, the non-State recipient requests reimbursement as the payment method. It may also be used on construction projects.
Reimbursement is the preferred method when the requirements in paragraph (b) cannot be met, when the Federal awarding agency sets a specific condition per §200.207 Specific conditions, or when the non-Federal entity requests payment by reimbursement. This method may be used on any Federal award for construction, or if the major portion of the construction project is accomplished through private market financing or Federal loans, and the Federal award constitutes a minor portion of the project. When the reimbursement method is used, the Federal awarding agency or pass-through entity must make payment within 30 calendar days after receipt of the billing, unless the Federal awarding agency or pass-through entity reasonably believes the request to be improper.
Working capital payment (§200.305(4))
A third payment option for non-State recipients is the working capital payment method . This method addresses those financial assistance recipients who cannot meet the criteria for advance payments, nor have sufficient funds to make a cash outlay first before drawing down Federal funds (i.e., reimbursement).
If the non-Federal entity cannot meet the criteria for advance payments and the Federal awarding agency or pass-through entity has determined that reimbursement is not feasible because the non-Federal entity lacks sufficient working capital, the Federal awarding agency or pass-through entity may provide cash on a working capital advance basis. Under this procedure, the Federal awarding agency or pass-through entity must advance cash payments to the non-Federal entity to cover its estimated disbursement needs for an initial period generally geared to the non-Federal entity's disbursing cycle. Thereafter, the Federal awarding agency or pass-through entity must reimburse the non-Federal entity for its actual cash disbursements. Use of the working capital advance method of payment requires that the pass-through entity provide timely advance payments to any subrecipients in order to meet the subrecipient's actual cash disbursements. The working capital advance method of payment must not be used by the pass-through entity if the reason for using this method is the unwillingness or inability of the pass-through entity to provide timely advance payments to the subrecipient to meet the subrecipient's actual cash disbursements.
The 3-day rule
A common deadline attributed to advance payment timing (i.e. for immediate cash needs) is three (3) days. This is not found in either 31 CFR 205 or 2 CFR 200. Thompson Grants, a well-regarded company offering training and information on Federal financial assistance, published a short article on this rule a few years ago. In short, the three-day rule comes from the SF-425, which directs recipients to report excess Federal cash-on-hand if the recipient has not expended it within three business days. According to the article, the reason is, again, related to the earning of interest by recipients on Federal funds.
Grantees drawing down funds should put them in an interest-bearing account, and any interest earned should be refunded to the federal government.
2 CFR 200.305 provides instructions on when this interest must be repaid to the Federal government.
Repayment of Federal interest
Under the Uniform Guidance (200.305(b)(9)), non-State recipients of Federal financial assistance awards who earn interest on Federal funds in excess of $500 per year must be returned to the Federal government annually. Amounts up to $500 may be retained by the recipient for administrative expenses.
Interest earned amounts up to $500 per year may be retained by the non-Federal entity for administrative expense. Any additional interest earned on Federal advance payments deposited in interest-bearing accounts must be remitted annually to the Department of Health and Human Services Payment Management System (PMS) through an electronic medium using either Automated Clearing House (ACH) network or a Fedwire Funds Service payment.
Payments to recipients of Federal financial assistance awards are meant to be made in a manner that makes those funds available for immediate use on award activities. For recipients in good standing, access to those funds should be reasonably accessible to minimize delays in completing the work. The chief concern is Federal interest earned on Federal funds between disbursement by the Federal program and expenditure by the recipient, which is restricted by the Cash Management Improvement Act (CMIA).
 §205.6 What is a Treasury-State agreement? (https://www.ecfr.gov/cgi-bin/retrieveECFR?gp=&SID=cb97ae172a0a04802dcd9ee212f510ae&mc=true&n=pt31.2.205&r=PART&ty=HTML#se31.2.205_16)
 Subpart B of 31 CFR 205 can be viewed at https://www.ecfr.gov/cgi-bin/retrieveECFR?gp=&SID=cb97ae172a0a04802dcd9ee212f510ae&mc=true&n=pt31.2.205&r=PART&ty=HTML#sp31.2.205.b.
 The Truth Behind the Three-Day Rule. Thompson Grants. February 9, 2011. http://fundingattractions.blogs.thompson.com/2011/02/09/the-truth-behind-the-three-day-rule/