Guidelines for Mandated Interest Bearing Accounting Policy
- In accordance with CMIA 31, codified at 31 CFR Part 205 (Advance Payment Mechanisms and Annual Reports), and
- In accordance with §2 CFR 215.22 and 2 CFR 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards
- In accordance with 2 CFR 200.305 - Non-Federal entities other than states, payment 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. (see full text of this section attached)
- § 200.305 2 CFR Ch. II (1–1–14 Edition) (ii) Advance payments of Federal funds must be deposited and maintained in insured accounts whenever possible.
The non-Federal entity must maintain advance payments of Federal awards in interest-bearing accounts, unless the following apply.
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- The non-Federal entity receives less than $120,000 in Federal awards per year.
- The best reasonably available interest-bearing account would not be expected to earn interest in excess of $500 per year on Federal cash balances.
- The depository would require an average or minimum balance so high that it would not be feasible within the expected Federal and non-Federal cash resources.
- A foreign government or banking system prohibits or precludes interest bearing accounts.
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, Rockville, MD 20852. Interest amounts up to $500 per year may be retained by the non-Federal entity for administrative expense.
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- § 200.305 2 CFR Ch. II (1–1–14 Edition) (ii) Advance payments of Federal funds must be deposited and maintained in insured accounts whenever possible.
OVERVIEW OF PROCESS for FEDERAL FUNDS
Effective 09/01/17This process will be followed for all Federal Fixed and Prepaid Awards where funds may potentially be received in advance.
ORSP Function:
- Identify Federal Awards subject to interest bearing by indicating requirements on the NOA
- Applicable Criteria:
- Must be a Federal "pre-paid"
- Must include regulatory requirement in the award documents of interest bearing, such as 31 CFR Part 205, 2 CFR 215.22, and § 200.305 2 CFR Ch. II.
- Must be a Federal "fixed" price where advance payment are received in advance of expenditures (prepaid) or fixed scheduled payments where the potential of having more federal funds/cash on hand than expenditures.
- Prepaid and FIXED Federal Pass-Through funds are not subject to interest bearing requirements unless the Subcontract specifies the mandate (see bullet 2).
C&G Function:
- Set up one University Administrative Project for deposit of earned interest on all Federal Awards subject to this process. Project should be 226XXXXXXI.
- Update the Master "Grants – Projects with Interest" file to include the one University Administrative Project and continue to update with new federal projects subject to interest.
- On a monthly basis, calculate the following figures by project and update the Master file – "Federal Projects" tab.
- F&A (systematically or manually) to ensure F&A on all interest bearing projects are included as an expense and to provide most current "cash available" to General Accounting for the interest calculation.
Once the F&A has been calculated, enter the total "Year to Date" (up to month interest is being calculated) expenses per project in the Master file. - Include all Cash Received up to end of month interest is being calculated.
- Calculate Available Cash.
- Summarize Cash Received, Expenses and Cash Available by CFDA.
- Total the monthly figures, excluding all negative cash available by CFDA from Master File.
- F&A (systematically or manually) to ensure F&A on all interest bearing projects are included as an expense and to provide most current "cash available" to General Accounting for the interest calculation.
- Notify General Accounting once Master List is updated.
- Annually, in the month of October, review Master "Grants – Projects with Interest" and identify aggregate balance > $500 for interest earned during the current fiscal year.
- Generate refund to DHHS for the total amount of interest income exceeding $500 in the fiscal year (federal government fiscal year 10/01/XX -09/30/XX). Payment is due no later than 12/01/XX.
General Accounting Function:
- On a monthly basis, review the Master file to identify new projects subject to interest requirements.
- Based on the information (actual Cash Available) provided by C&G on the Master "Projects w Interest", General Accounting will calculated interest earned on those projects with a positive cash balance.
- The process to calculate interest is the following:
- At the end of each month, run reports showing the ending cash balances in PeopleSoft for each fund group, cost center and project generating interest. Multiply this balance by the monthly average rate of return for the 3-month Treasury Bills (3-month T-bills). The result is the interest earned that will be deposited into the Project.
- On a monthly basis, General Accounting will record and post interest in PeopleSoft.
- Update C&G spreadsheet "Projects w Interest", Tab "Interest Calcs from GA", column G "Monthly Interest Earned Amount" with the amounts posted in PS.
- Notify C&G Accounting once the Master has been updated.
OVERVIEW OF PROCESS for NON-FEDERAL FUNDS
Effective 09/01/17
This process will be followed for all Non-Federal Awardsonly when the sponsor indicates the funds awarded are subject to interest, where the interest must be reinvested into the project.
ORSP Function:
Identify Non Federal Awards subject to interest bearing by indicating requirements on the NOA.C&G Function:
- Create a separate project ID by award subject to interest requirements. Project ID should be 226XXXXXXI ("I" for Interest).
- Update the Master "Grants – Projects with Interest" file.
- On a monthly basis, calculate the following figures by project and update the Master file.
- F&A (systematically or manually) to ensure F&A on all interest bearing projects are included as an expense and to provide most current "cash available" to General Accounting for the interest calculation. Once the F&A has been calculated, enter the total "Year to Date" (up to month interest is being calculated) expenses per project in the Master file.
- Include all Cash Received up to end of month interest is being calculated.
- Calculate the Available Cash.
- Notify General Accounting once Master List is updated.
- On a monthly basis, increase the budget as designated by the project PI, up to amount of interest earned.
General Accounting Function:
- On a monthly basis, review the Master file to identify new projects subject to interest requirements.
- Based on the information (Cash Available) provided by C&G on the Master "Projects w Interest", General Accounting will calculated interest earned on those projects with a positive cash balance.
- The process to calculate interest is the following:
- At the end of each month, run reports showing the ending cash balances in PeopleSoft for each fund group, cost center and project generating interest. Multiply this balance by the monthly average rate of return for the 3-month Treasury Bills (3-month T-bills). The result is the interest earned that will be deposited into the Project.
- On a monthly basis, General Accounting will record and post interest in PS.
- Update C&G spreadsheet "Projects w Interest", Tab "Interest Calcs from GA", column G "Monthly Interest Earned Amount" with the amounts posted in PS.
- Notify C&G Accounting once the Master has been updated.