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New York State Accounting System User Procedures Manual

Volume Name
CONTROLS AND SPECIAL PROCEDURES
Volume
XI
Date
8/13/08
Section Name
Accounting for Federal Grants-Cash Management Improvement Act (CMIA)
Section
5.0300

Congress enacted the Cash Management Improvement Act of 1990 (CMIA) to ensure efficiency, effectiveness and equity in the exchange of funds between the Federal government and states. This Federal statute (Public Law 101-143) can be accessed at http://fms.treas.gov/cmia/statute.html and the regulations (31 CFR Part 205) at http://fms.treas.gov/fedreg/31cfr205final.pdf.

Key provisions :

  1. Federal agencies must make timely grant awards and fund disbursements to States;
  2. States must draw Federal funds in amounts necessary to fund only “actual immediate cash needs”,
  3. (3) Federal cash which is transferred by the Federal government to State primary government agencies (i.e., not public authorities or local governments) will be subject to CMIA interest calculations if the total annual expenditures for any Federal program, as recorded in a given Single Audit, exceed the CMIA program threshold calculated for the upcoming State Fiscal Year (SFY); certain State funding in support of covered Federal programs may also be subject to CMIA; and
  4. (4) Federal agencies and States must minimize the time from (a) the date on which funds are transferred between the Federal government and the States to (b) the date such funds are paid out for Federal program purposes through either presentment of checks or settlement of electronic fund transfers (EFT).

Federal responsibility: Overall coordination of the Federal government’s implementation of CMIA was assigned to the U.S. Department of the Treasury, which maintains a CMIA website at http://fms.treas.gov/cmia/.

State responsibility: Overall coordination of the State’s implementation of CMIA was assigned to the Division of the Budget (DOB), which partners with the Office of the State Comptroller (OSC) on virtually all aspects of implementation. OSC is responsible for most aspects of the State's Federal grant and payment management processes, which are the primary focus of CMIA. DOB contracts with a certified public accounting firm to assist State agencies with CMIA implementation on an as-needed basis, and provides for payment or receipt of CMIA interest liabilities by the State. Cognizant (“lead”) State agencies responsible for administration of covered programs have designated CMIA contacts, usually located in the budget or finance office, who are regarded as the State’s subject matter experts for purposes of their agency’s CMIA program(s). Such individuals are expected to (1) bring any potential CMIA issues associated with their agency’s covered programs to the attention of OSC and DOB CMIA staff as quickly as possible, (2) help analyze the CMIA implications of such issues, (3) and help frame the State’s response, possibly including participation in negotiations with Treasury Department or other Federal agency CMIA staff.

Most of New York’s State CMIA interest liabilities are attributable to factors outside the control of individual State agencies. However, on rare occasion inefficient cash management practices by one or more State agencies may unnecessarily increase the State’s CMIA interest liability. Therefore, at any time OSC and DOB may elect to jointly analyze State interest liabilities for any or all covered Federal programs, for purposes of identifying opportunities to improve State cash management practices and reduce such liabilities. In those instances, CMIA contacts for the affected lead State agencies will be expected to work closely with OSC and DOB in addressing any agency cash management weaknesses identified.

  • State interest liabilities will be paid to the Federal government from General Fund appropriations provided for such purpose. Federal interest liabilities are credited to the State’s Special Revenue - Other “Federal Liability Account,” under the Division of the Budget’s CMIA Program.

Federal funding subject to CMIA: Technically, nearly all cash disbursed under Federal programs listed in the Catalog of Federal Domestic Assistance (CFDA) is subject to CMIA. Only larger programs, however, are subject to the interest provisions of CMIA. This distinction can be better understood by consulting the CMIA regulations. Subpart A of the regulations deals with the larger Federal programs under which the State receives funding, and which are subject to the cash management requirements detailed in the CMIA statute INCLUDING the interest provisions. Subpart B deals with the State’s smaller Federal programs, which are also subject to the cash management requirements EXCLUDING the interest provisions. If a State or Federal program agency fails to comply with the provisions of Subpart B, (205.3-c), the Treasury Department may decide to require that certain Subpart B programs also become subject to Subpart A, which would probably increase the amount of CMIA interest the State will have to pay the Federal government. Please see CMIA regulations (e.g. 205.27b and 205.29) for other potential actions.

Specific programs subject to CMIA: While most Federal funding is, in fact, subject to the cash management principles embodied in CMIA, as a practical matter “programs subject to CMIA” is now commonly used to mean those larger programs which are subject to CMIA interest calculations. This is the interpretation we will use for purposes of this procedure manual. The State’s CMIA “major program” threshold for determining what constitutes a covered Federal assistance program in a given SFY is recalculated annually by the CMIA consultant in accordance with Section 205.5 of the CMIA regulations , using the most recently issued Single Audit data available. The threshold comprises the greater of (1) the dollar amount of all Federal assistance being received by the primary State government under all Federal assistance programs including non-cash programs times .3%, or (2) $60 million. (For example, New York’s threshold for SFY ‘08-09 is $120 million.) When State (i.e. primary government) disbursements for a particular CFDA program code (as recorded in the annual Single Audit) exceed the State’s CMIA threshold for the upcoming SFY, that program will be subject to CMIA during the upcoming SFY.

CMIA interest liabilities paid by either the Federal government or the State to the other, compensate for lost value (e.g. investment earnings) of funds. A Federal interest liability (which the Federal government pays to the State) accrues for any covered program whereby a State pays out its own funds for Federal assistance program purposes with valid obligational authority under Federal law, Federal regulation, or Federal-State agreement as, for example, when a delay occurs in establishing a Federal appropriation. Conversely, a State interest liability (which the State pays to the Federal government) is recorded for any covered program whereby the State receives Federal funds earlier than required for “actual immediate cash needs”, or prior to the date that checks containing covered Federal funds clear the State’s bank account, an EFT settlement involving covered Federal funds occurs, or Federal funds are returned to the U.S. Treasury.

Check clearance patterns:
A “check clearance pattern” projects the amount subtracted from a State’s bank account each day after the State makes a disbursement of Federal funds. That is, the clearance pattern reflects how those checks clear the bank account in the days following the date the checks are mailed. Under the CMIA the Treasury Department may require states to develop check clearance patterns for the purpose of (1) timing the drawdown of selected Federal programs, as with Medicaid beneficiary payments (“programmatic clearance pattern”), or (2) for use when calculating CMIA interest owed to the Federal government for the time that Federal funds are held in State bank accounts (“functional clearance pattern,” such as for beneficiary or subrecipient payments).

Key CMIA documents: While CMIA applies to Federal program funding, all aspects of implementation – program coverage, implementation agreement, interest calculations – are keyed to a state’s fiscal year. Annually OSC, DOB, and lead State agencies responsible for administration of covered programs must prepare two major documents for review and approval by the Treasury Department:

1. Annual Treasury-State Agreement (TSA): Details the terms of implementation of CMIA in the State for each SFY. The TSA includes the list of Subpart A Federal programs subject to CMIA, funding techniques the State will use to draw Federal funds for each payment type under each covered program, types of payments expected to be made for each covered program (e.g., payroll, vendor/contractor, beneficiary, subrecipient), and methodologies for both development of required check clearance patterns and interest calculations. The TSA must be updated and fully executed (i.e., approved and signed by authorized officials of OSC, DOB, and the Treasury Department) by the first day of the SFY (April 1).

2. Annual Report: Details CMIA interest liabilities owed by either the State or Federal government to the other level of government for a given SFY. The State prepares the report for the most recently concluded SFY and submits this to the Treasury Department by the following December 31. Actual payment of interest liabilities, once approved by the Treasury Department, is made on or before the following March 31. Along with each Annual Report, the State may submit an Interest Calculation Cost Claim requesting Federal reimbursement of certain CMIA costs incurred by the State for the actual calculation of interest or the development and maintenance of check clearance patterns.

Updated and expanded CMIA regulations were promulgated effective June 24, 2002 which:

1. Allowed the State to increase significantly the CMIA program threshold, thereby excluding several smaller programs which previously would have been subject to CMIA.

2. Program Amendments (Subject Under Discussion*)

Require the State to notify Treasury in writing of a Federal program change that should be reflected in the TSA, within 30 days of the date on which the State becomes aware of such change. The notification must include a proposed amendment to the TSA. Amendments may address, but are not limited to:

  • Changes in funding techniques (i.e., methods used by the State to draw down Federal funds);
  • Changes in clearance patterns; and
  • Additions or deletions of programs to be covered by a TSA.*

3. Raised the refund transaction exemption threshold from $10,000 to $50,000. That is, refund transactions of less than $50,000 for a single Federal program will no longer be subject to CMIA interest calculations. A “refund transaction” comprises one or more refunds dealt with in a single transaction, such as a deposit into a State bank account.

* NOTE: Since the beginning of CMIA, programs have been added or deleted from a TSA only in response to the issuance of a new Single Audit, and then the changes become effective at the start of the next SFY.

State requirements in support of CMIA implementation include the following;

  • For most Federal programs subject to CMIA, interest liabilities will be calculated from Central Accounting System (CAS) and bank records. Agencies which “cash manage” their own grant awards will be responsible for supplying information needed for such calculations.
  • All vouchers payable from Federal fund appropriations MUST contain a Statistic Type Code that identifies the functional payment type used to develop annual check clearance patterns. (See this section)

  • Agencies should make accurate voucher coding a priority, since incorrect coding can create flaws in clearance patterns used for CMIA interest calculations, thereby unnecessarily and inappropriately increasing the State’s CMIA interest liability.

Budget Certificate Requirements

To facilitate compliance with federal reporting requirements, agencies must include a CFDA program number on ALL Budget Certificates of Approval, as stated in Budget and Policy Reporting Manual Item I-290, for the following appropriated Federal funds.

Fund No. Fund Title
221 Combined Student Loan Fund
261 Federal USDA Food and Nutrition Services Fund
265 Federal Health and Human Services Fund
267 Federal Education Grants Fund
269 Federal HHS Block Grant Fund
290 Federal Operating Grants Fund
291 Federal Capital Projects Fund
382 SUNY Federal Direct Lending Program
480 Unemployment Insurance Administration Fund
481 Unemployment Insurance Benefit Fund
484 Unemployment Insurance Occupational Training Fund
486 Federal Job Training Partnership Fund

It is essential that agencies determine the correct CFDA program number and report it in the space provided on all Budget Certificates. Proper CFDA codes have to be assigned by State agencies at the segregation level on budget certificates. Agencies should determine or verify the correct CFDA program number assignment at the time the certificate is prepared to ensure proper reporting of federal program expenditures for the year. Failure to report the CFDA program number on federal funds Budget Certificates will result in processing delays and possible rejection since OSC cannot establish federal fund segregation records without assigning a CFDA number. An index of federal domestic assistance programs and CFDA program numbers is available at the following website:  


Temporary CFDA Numbers

In very rare instances, the CFDA program number is not available at the time the Budget Certificate is prepared, due to one of the conditions listed below. Temporary CFDA numbers may be used on the Budget Certificate as shown in the following table. NN represents federal awarding agency.
Condition Temporary CFDA Number
Segregation covers two or more federal programs and the federal department code is known. (Use of this code for the Department of Health and Human Services would appear as 93997.) NN997
Segregation covers two or more federal programs and the federal department code is unknown. 99997
Program number is not assigned or is unknown and the federal department code is known. (Use of this code for the Department of Agriculture would appear as 10998.) NN998
Program number is not assigned or is unknown and the federal department code is unknown 99998

Within 30 days, agencies using temporary CFDA numbers referenced above are responsible for reporting the permanent CFDA number to OSC's Bureau of State Accounting Operations - Appropriation Section so the correct CFDA number can be incorporated into the State’s central accounting system records. 

It is important to note that under the provisions of the Federal Funding Accountability and Transparency Act (FFATA) of 2006 (P.L. 109-282), the office of Management and Budget (OMB) is required to establish a publicly available online database (http://www.federalspending.gov) containing information about entities that are awarded federal grants, loans, contracts, etc.  While most of the requirements of FFATA appear to be specific to federal agencies, it is anticipated that recipients of federal awards will be required to electronically report information on the status of federal awards, CFDA numbers, and payments to beneficiary, subrecipients and other payees. The passage of this Act once again emphasizes the need to ensure that all data entered in the State’s central accounting system is complete and accurate at all times.

Statistic Types Required on All Voucher Payments (for Functional Clearance Pattern Purposes)

As noted above, State interest liabilities will be calculated during the time the State holds federal funds in its accounts pending payment to a payee. This includes the time that checks are issued from appropriated federal funds until such checks clear the State's bank account or EFT settlement occurs. To calculate CMIA interest liabilities on checks issued but not cleared, it is necessary for OSC to develop Functional (check) Clearance Patterns based on Statistic Type codes contained in vouchers prepared by agencies. For each payment issued from a federal fund appropriation, the State distinguishes among beneficiary, subrecipient and other general checking payments using the Statistic Type code assigned (by agencies) to each payment in the State's Central Accounting System (CAS). Following is a list of codes which must be used in the Statistic Type field (adjacent to Payee Name) in all vouchers payable from appropriated federal funds

Statistic Type
Code
Description
B BENEFICIARY PAYMENTS are those payments made by a State agency to an individual which is the end recipient of the assistance provided through the federal program.  Examples of beneficiaries include individuals receiving Unemployment Insurance or student loan payments.  Beneficiaries are not subject to A-133 Single Audit requirements.
S SUBRECIPIENT PAYMENTS are those payments made by a State agency to another government unit or organization (including not-for-profits) to provide federal program services, and that entity is accountable to the State agency for the use of the Federal funds.  Examples of subrecipients include school districts which operate School Breakfast/Lunch programs, local governments or service delivery areas which provide employment and training assistance and counties receiving aid to administer special programs for the aging.  Subrecipients that are a local government or non-profit organization are subject to A-133 Single Audit requirements.
A OTHER PAYEES OF FEDERAL FUNDS is a miscellaneous category for payees that are neither beneficiaries nor subrecipients.  Included in this category are expenditures by State agencies for payroll and payments to vendors and contractors.  Vendor means a dealer, distributor, merchant, or other seller providing goods or services that are required for the conduct of a Federal program. These goods or services may be for an organization's own use or for the use of beneficiaries of the Federal program.   Examples include the Department of Transportation using federal grant funds to pay a contractor for bridge construction and the State Education Department paying a service provider for rehabilitation services to individuals.  Vendors are generally not subject to A-133 Single Audit requirements.

Annual Confirmation of CFDA Number Assignments

Prior to the end of each State fiscal year (usually in January), the Bureau of State Accounting Operations - Appropriation Section, will send each State agency with federal funds appropriations a report of Federal Disbursements by Federal Index Number (ASC370A). This report is used to confirm the accuracy of the CFDA numbers assigned to agency segregation records. Upon receipt of this report and confirmation request, each State agency must determine that all of their segregation records contain accurate CFDA numbers as shown in the ASC370A report. Temporary CFDA numbers assigned during the year must be replaced as soon as possible, but in no event later than March 31st each year, with the proper federal program CFDA number obtained from the Agency Program Index or from the federal agency which awarded the federal grant. The accuracy of the CFDA number in the State's segregation records is critical to the accurate and complete reporting in the annual Treasury-State Agreement, Schedule of Expenditures of Federal and Non-Federal Awards and the accurate calculation and reporting of CMIA interest liabilities by the State. 

Journal Vouchers

Generally, journal voucher payments are used (1) to reimburse service-providing State agencies for goods or services rendered to, or on behalf of the first State agency or (2) to reimburse a second State agency for State funds the second State agency disbursed for program purposes. These journal voucher payments are considered interest neutral.

Note: Agencies are required to make every effort to properly allocate State voucher payments between State and Federal funds. In very rare cases, it may be necessary to finance payments from federal fund appropriations that later are journal transferred to state fund appropriations. However these must be the exception and not the norm since such journal transfers reduce federal expenditures/disbursements and increase the cash balance in the federal fund which results in a State CMIA interest liability.

Fund Availability and Interest Liability
On occasion, the Federal awarding agency may issue a Notice of Grant Award before the award authorization is entered in the Payment Management System (PMS) and State payments must be made.

State agencies should contact the Federal awarding agency to report the delay in posting the award authorization in the PMS. If you are unable to contact the awarding agency, then contact your PMS Account Representative to inform them that the award is not available in the PMS. After all avenues of resolution have been exhausted, it may be necessary to make mandated payments from State funds. A CMIA federal interest liability will accrue when it is demonstrated that the State paid out its own funds for Federal program purposes prior to receiving federal funds. The federal interest liability on a transaction will generally be based on the difference in whole days between the average date of check clearance for the disbursement and the date the related federal funds are deposited in a State account. With Federal-State matching programs, interest will be calculated on the federal portion of the disbursement. Federal interest liabilities will also be calculated for any eligible federal program that is funded on a reimbursable basis.
To support State claims for federal interest liabilities, each agency shall maintain a report for each federal program subject to CMIA, as follows:

  • The amount of the disbursement for which the State paid out its own funds (as recorded on a voucher);
  • The date of the check issuance for the disbursement (as recorded in either the Daily Disbursement Journal (JRN080) or the Daily Payee Report (VOU065);
  • The date federal funds are requested (provided by OSC})
  • The date federal funds are received and deposited in a State account (provided by the OSC);
  • The federal percentage of the disbursement; and
  • The basis for the federal interest liability (late federal appropriations, late setup of federal award authorization appropriated by Congress, quarterly shortfall, deferral, prior years claim, etc.).

To support a Federal interest liability claim over $5,000 the State must provide the following documentation to the Federal Treasury Department:

  • the amount of funds requested
  • the date the funds were requested
  • the date the funds were paid out for Federal assistance program purposes
  • the date the funds were received by the State
  • the date of award

The State and the Secretary of the U.S. Department of the Treasury have agreed that no interest liability will be incurred or calculated for indirect costs, with one exception. If the State requests federal funds in accordance with approved procedures, and the federal funds are NOT made available to the State, the Federal government will incur an interest liability. The federal interest liability will accrue from the date the State requests funds to the date federal funds are credited to a State account.

Refunds - Transaction Threshold

Interest will be calculated on the federal percentage of all refund transactions executed by the State where such amounts are $50,000 (gross value) or more. The federal share of refunds by federal program is identified through a review of a unique annual Refund of Appropriation Expense report (REV060Y) produced by OSC. The report identifies all federal refunds by federal program. Information from the report is summarized by federal program to identify those refunds credited to federal fund appropriations that reflect a gross transaction threshold of $50,000 or more.

Refunds - State Interest Liability

For each refund, a State interest liability accrues from the date the State agency receives the refund to the date the funds are returned to the U.S. Department of the Treasury or offset against program disbursements. In order to minimize the State’s interest liability and pursuant to Section §121 of the State Finance Law, agencies are directed to return all refunds, immediately upon receipt, to the State Treasury for credit to the appropriate federal funds appropriation, but in no event shall this transfer occur less than semi-monthly. State agencies that do not remit refunds to the federal funds appropriation on a timely basis will have to separately account for the time (number of days, program, total refund and federal portion of the refunded amount) that they hold the refund prior to crediting it to the federal fund appropriation. However, State agencies that immediately remit original refund checks to the State Treasury pursuant to State statute will not have to separately account for refunds held when the State’s interest liability is calculated on refunds for their federal programs subject to the CMIA.

Refunds - State Interest Liability Exceptions

Due to their uniqueness, exceptions to the special refund calculations apply to the following programs:

  • Special Supplemental Food Program for Women, Infants and Children (CFDA #10.557)
  • Unemployment Insurance Program (CFDA #17.225)
  • Highway Planning and Construction Program (CFDA #20.205)
  • Pell Grant Program (CFDA #84.063)
  • Federal Direct Student Loan Program (CFDA #84.268)
  • Medical Assistance Program (CFDA #93.778)

Refunds - Active Grant Awards

Occasionally, State agencies receive refunds (e.g. overpayments, disallowances, etc.) of payments made from federal funds. Such refunds must always be refunded to the federal funds appropriation from which such payments were made (See Volume IV, Refunds of Appropriation Expense, Section 5). The effect of the refund transaction is to increase the amount of federal funds the State has on hand, and this causes a State interest liability to accrue until such time as the excess federal funds are returned to the U.S. Treasury (see Section 5.0500) or used for program purposes. In certain cases, the State’s CMIA auditor/ consultant will contact the State agency to determine the date the refund was received so that the total number of days the State held the funds can be determined and the State’s interest liability related to such refunds can be calculated.

Refunds - Closed Grant Awards

Amounts recovered from payees after a federal award has been closed, reconciled and lapsed must still be returned to the U.S. Treasury, but since the grant records have been lapsed, it is not possible for agencies to refund such recoveries to the appropriation to which the refund relates. In these cases, special accounting arrangements will be made with OSC’s Bureau of State Accounting Operations - General Ledger Section, Federal Payment Management Unit to record the receipt (Report of Moneys Received {AC909}) of the recovered funds. At the time the Report of Moneys Received document is prepared and submitted to OSC for processing, the State agency is required to prepare a Special Charge Voucher to return the recovered funds to the Federal government. Procedures relating to refunding recoveries to the Federal government are provided in Section 5.0500 of this manual.

Annual Schedule of Expenditures of Federal and Non-Cash Awards

The annual Schedule of Expenditures of Federal and Non-Federal Awards, which displays both CFDA number and the corresponding disbursement of federal funds or value of assistance for non-cash benefit programs, must be presented accurately since it provides the basis for the State's single audit. Furthermore, accurate presentation of both CFDA numbers and corresponding disbursements (net of refund transactions) is essential since this information is used by the State’s auditor/consultant engaged to determine which federal programs will be subject to CMIA, to calculate the CMIA interest liabilities and to review the State's administrative and federal funds cash management procedures for federal funds.
The annual schedule also includes federal financial assistance programs that do not have cash receipts and disbursements posted in the CAS. Non-cash benefits represent services and products provided directly to New York State beneficiaries and subrecipients by the Federal government. These non-cash
programs are NOT included in the Annual TSA because they do not involve the transfer of funds between the federal and state government. However, the value of non-cash benefit programs are used in the determination of major program thresholds to identify programs which are subject to interest liability calculations. The following non-cash benefit programs are included in the Schedule of Expenditure of Federal and Non-Federal Awards.

10.550 Food Distribution
10.559 Summer Food Service Program for Children
10.565 Commodity Supplemental Food Program
10.569 Emergency Food Assistance Programs (Food Commodities)
10.570 Nutrition Program for the Elderly (Commodities)
16.578 Federal Surplus Property Transfer Program
93.268 Immunization Grants

Annual CFDA Confirmation for Schedule of Expenditures of Federal and Non-Cash Awards

After the close of the State fiscal year, the OSC's Bureau of Financial Reporting will contact certain State agencies to confirm that expenditures for all federal programs that they administer are accurate and correctly reported. Responses received from this confirmation process will be reviewed by the State’s auditor/consultant engaged to conduct the State's Single Audit and CMIA interest calculation.

Questions relating to CMIA implementation and/or requests for copies of CMIA documents may be addressed to either the Office of the State Comptroller, Bureau of State Accounting Operations, at (518) 474-4017 or 474-8387, or to the Division of the Budget, Expenditure/Debt Unit at (518) 474-5236 or 474-4855.