Rules and Procedures for Funds Transfers

SUMMARY: This final rule amends regulations on rules and procedures for

funds transfers which implement the Cash Management Improvement Act of

1990 (CMIA), as amended. CMIA governs the transfer of funds between the

Federal Government and States under Federal assistance programs, and

requires Federal agencies and States to minimize the amount of time

between the transfer of Federal funds to a State and the payout of

those funds by a State for program purposes. Under the regulations, the

application of CMIA is limited to major Federal assistance programs.

The purpose of this final rule is to revise the dollar thresholds used

to define major Federal assistance program for purposes of the

regulations in order to add flexibility and, thereby, make it easier

for States to comply with the requirements of the regulations. This

final rule does not make any substantive changes.

EFFECTIVE DATE: May 5, 1999.

ADDRESSES: Cynthia L. Johnson, Director, Cash Management Policy and

Planning Division, Financial Management Service, 401 14th Street, SW,

Room 420, Washington, DC 20227. A copy of the final rule is being made

available for downloading from the Financial Management Service's web

site at the following address: http://www.fms.treas.gov/

FOR FURTHER INFORMATION CONTACT: Stephen K. Kenneally (Financial

Program Specialist, Cash Management Policy and Planning Division) at

(202) 874-6799; Cynthia L. Johnson (Director, Cash Management Policy

and Planning Division) at (202) 874-6590; or Randall Lewis (Attorney-

Advisor) at (202) 874-6680.

SUPPLEMENTARY INFORMATION:

Background

This rulemaking is authorized by the Cash Management Improvement

Act of 1990 (``CMIA''), Public Law 101-453, as amended. See 31 U.S.C.

3335, 6501, and 6503. The purpose of the CMIA is to ensure greater

efficiency, effectiveness, and equity in the exchange of funds between

the Federal Government and the States for Federal assistance programs.

For major Federal assistance programs, States and the Financial

Management Service (the ``Service'') negotiate Treasury-State

Agreements which include the procedures used to determine the timing

and amount of funds transfers. In the absence of an agreement, the

Service is authorized to issue default procedures. In accordance with

the CMIA, these funds transfer procedures are developed with the

objective of minimizing the time between the transfer of cash from the

Treasury and the payout of cash for program purposes by a State. Non-

major Federal assistance programs generally are not addressed in

Treasury-State Agreements, but are subject to requirements in Subpart B

of Part 205 which limit funds transfers to the minimum amounts needed

at the time of the request.

Under the current regulation, the distinction between major and

non-major Federal programs is based on dollar thresholds contained in

the Single Audit Act of 1984, Public Law 98-502. The Single Audit Act

of 1984 used these thresholds to determine which Federal programs were

subject to the substantive provisions of the Single Audit Act. In 1992,

the Service adopted the Single Audit Act's thresholds as a means of

meeting the CMIA's goals of efficient, effective, and equitable

transfers of funds between the Federal Government and the States, while

limiting the burden of implementing the CMIA. Use of these thresholds

also eased implementation of the CMIA by incorporating a framework that

was familiar to Federal agencies, States and auditors. See 57 FR 10102.

The Single Audit Act Amendments of 1996, Public Law 104-156,

revised the thresholds and added risk-based criteria to the

determination of major programs. 31 U.S.C. 7501 et seq. As a

consequence, the thresholds published in Appendix A to Subpart A of

Part 205 no longer are consistent with the thresholds used by States

and their auditors for purposes of conducting Single Audits. Revising

Appendix A to Subpart A of Part 205 by incorporating the new Single

Audit Act thresholds allows States the option to keep their CMIA and

Single Audit Act thresholds consistent.

However, in implementing the CMIA, the Service's primary concern is

cash management. CMIA requires Federal agencies and States to minimize

the amount of time between transfers of Federal funds to a State and

the payout of those funds by States for program purposes. The risk-

based criteria included in the Single Audit Act's new definition of

major program address other risk management issues which are not

related to cash management, and their inclusion in the CMIA definition

of major Federal assistance program would not ensure that a majority of

funds transferred are covered in Treasury-State agreements. For that

reason, the Service is not incorporating the risk-based criteria into

Part 205.

Regulatory Analysis

This rule is not a significant regulatory action as defined in E.O.

12866. Therefore, a regulatory assessment is not required. Because no

notice of proposed rulemaking is required, the provisions of the

Regulatory Flexibility Act (5 U.S.C. 601 et seq.) do not apply.

Special Analyses

The Service is promulgating this final rule without opportunity for

prior public comment, because the Service has determined notice and

public procedure is unnecessary and contrary to the public interest. 5

U.S.C. 553(b)(3)(B).

This final rule makes only one change to Part 205; it revises the

thresholds used in the definition of major Federal assistance programs

for the purposes of CMIA. When FMS first published a Notice of Proposed

Rulemaking (``NPRM'') implementing CMIA, it proposed the inclusion of

provisions which, after a phase-in period, limited the mandatory

application of CMIA to programs defined as major Federal assistance

programs under the Single Audit Act of 1984. (57 FR 10102). The

specific thresholds, which are based on the total amount of Federally

funded State expenditures in a given year, were included in Appendix A

to Subpart A of Part 205. After notice and an opportunity for comment,

the Service retained the proposed definition of major Federal

assistance program in the final rule published on September 24, 1992

(57 FR 44272).

As stated in the NPRM, the Single Audit Act thresholds were

incorporated into Part 205 because they provide a consistent standard

between the application of CMIA and the Single Audit Act. Use of the

threshold also allows the Service to limit the administrative burden

and costs of compliance, while still covering the majority of Federal

program funds transferred to the States. This final rule does not

change the substantive policy determinations underlying Part 205, it

only makes technical changes to the thresholds included in the

definition of major Federal assistance program which

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add flexibility to the requirements of Part 205. Because the new

thresholds are incorporated in a manner which allows for the

application of either the existing thresholds or the new thresholds,

there is no detrimental impact on States. For most States, the final

rule reduces administrative burden and costs of compliance.

The Service has determined that good cause exists to make this

final rule effective immediately upon publication, without the 30 day

period between publication and the effective date contemplated by 5

U.S.C. 553(d). Because this final rule does not make any substantive

changes to Part 205, but, instead, adds flexibility which may reduce

the administrative burden and costs of compliance, making this final

rule effective immediately is for the convenience of the States

governed by Part 205.

List of Subjects in 31 CFR Part 205

Administrative practice and procedure, Electronic funds transfers,

Grant programs, Intergovernmental relations.

Authority and Issuance

For the reasons set out in the preamble, the Service amends 31 CFR

part 205 as follows:

PART 205--RULES AND PROCEDURES FOR FUNDS TRANSFERS

1. The authority citation for part 205 continues to read as

follows:

Authority: 5 U.S.C. 301; 31 U.S.C. 321, 3335, 6501, 6503.

2. Appendix A to subpart A of part 205 is revised to read as

follows:

Appendix A to Subpart A of Part 205--Definition of Major Federal

Assistance Program

Beginning with State fiscal year 2000, ``Major Federal Assistance

Program'' for State governments is defined by the following criteria:

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Total expenditure of Federal

financial assistance for all Major Federal assistance program means any program that exceeds

programs

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Between $300,000 and $100 million $300,000 or 3 percent of such total expenditures.

inclusive.

Over $100 million but less than $3 million or 0.30 percent of such total expenditures.

or equal to $1 billion.

Over $1 billion but less than or $4 million or 0.30 percent of such total expenditures.

equal to $2 billion.

Over $2 billion but less than or $7 million or 0.30 percent of such total expenditures.

equal to $3 billion.

Over $3 billion but less than or $10 million or 0.30 percent of such total expenditures.

equal to $4 billion.

Over $4 billion but less than or $13 million or 0.30 percent of such total expenditures.

equal to $5 billion.

Over $5 billion but less than or $16 million or 0.30 percent of such total expenditures.

equal to $6 billion.

Over $6 billion but less than or $19 million or 0.30 percent of such total expenditures.

equal to $7 billion.

Over $7 billion but less than or $20 million or 0.30 percent of such total expenditures.

equal to $10 billion.

Over $10 billion................. $30 million or 0.15 percent of such total expenditures.

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Dated: April 29, 1999.

Richard L. Gregg,

Commissioner.

[FR Doc. 99-11193 Filed 5-4-99; 8:45 am]

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