Issue Brief: Cash Management Improvement Act of 1990Updated January 2008
Background
The Cash Management Improvement Act (CMIA) of 1990 was enacted to ensure efficiency, effectiveness, and equity in the transfer of funds between State and Federal Governments. The legislation was written to address two specific problems: States drawing Federal funds in advance of need, and the Federal Government providing late awards to States. There was concern that States were drawing funds too early and benefiting from interest earned on balances remaining in their accounts prior to payout, and that the Federal Government was delaying legitimate drawdown requests, causing States to advance their own money to cover Federal liabilities. CMIA’s major provisions include:
- Federal agencies must make timely fund disbursements and grant awards to States.
- States and Federal agencies must minimize the time between the transfer of Federal funds to States and the presentment of States' checks/warrants or settlement of electronic funds transfer (EFT) payments for program purposes.
- With minor exceptions, States are entitled to interest from the Federal Government for the time State funds are advanced for program purposes pending Federal disbursement. The Federal Government is entitled to interest from the States for the time Federal funds are in State accounts pending presentment of checks/warrants and settlement of EFT payments for program purposes.
- Treasury may charge responsible Federal agencies if they are found to be egregious or repeatedly incur Federal interest liabilities. Interest charges will be paid from agency operating budgets and not amounts available for program funding.
Final Regulations
The U.S. Department of the Treasury's Financial Management Service (FMS) released the final rule for 31 CFR Part 205
("Rules and Procedures for Efficient Federal-State Funds Transfers") on May 10, 2002. Significantly, the FMS deleted
the provision in the proposed regulation that would have made disallowances subject to interest liability under the Cash
Management Improvement Act. The treatment of disallowances under the Final Rule is consistent with existing practice.
This proposal received strong feedback from state, local and territorial governments and state, local and territorial
government organizations. FMS intends to retain the proposal in any final regulation for coverage of disallowances. The
view the final regulations, visit: www.fms.treas.gov/fedreg/31cfr205final.pdf.
Outlook 2008
The FMS is expected to review the Act in 2008 to see if new proposals are warranted. GFOA will monitor these developments.
GFOA • Federal Liaison Center • (202) 393-8020 • (202) 393-0780 FAX • Email
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