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Interest Earned on Federal Funds

Letter Head: Tom Torlakson, State Superintendent of Public Instruction, California Department of Education

July 1, 2014

Dear County and District Superintendents, County and District Chief Business Officials,
and Charter School Administrators:

INTEREST EARNED ON FEDERAL FUNDS

The California Department of Education (CDE) is issuing this letter to remind local educational agency (LEA) fiscal officials of the federal administrative requirements for remitting interest earned on advances of federal program funds.

Title 34, Code of Federal Regulations (CFR) – Education, Part 80, Section 80.21, requires grantees and sub-grantees to remit interest earned on advances to the federal agency. The grantee or sub-grantee may keep interest amounts up to $100 per year for administrative expenses.

LEAs should remit to the CDE only the interest earned on federal program advances administered by the CDE; interest earned on non-CDE administered program advances should be calculated separately and remitted to the Federal Treasury via the appropriate state or federal agency. In addition, LEAs should only calculate interest on the cash balances of federal program advances; the cash balances of federal reimbursement programs and school food service funds should be omitted in calculating federal interest due to the Federal Treasury.

To assist LEAs in complying with the federal administrative requirements for interest earned on federal program advances, please see the CDE’s guidelines for calculating and remitting interest at http://www.cde.ca.gov/fg/ac/co/interestearnedltr.asp.

  1. Calculate and remit interest at least on a quarterly basis. If there is no interest to remit, please submit an e-mail or letter to the CDE’s Cash Management Analyst stating no interest is due and specify the reporting period.
  2. When remitting interest payments, please include the County-District-School code and specify the time period(s) for which interest was earned (e.g., July1,2014 through September 30, 2014). If remittance comprises of multiple time periods, separately report the interest for each time period.
  3. If federal cash balances cannot be separated from commingled state and federal funded programs, interest should be calculated on the entire combined cash balance. However, if state funds can be separated from federal program funds, interest should be calculated only on the federal program funds.
  4. If on a reimbursement basis, LEAs should omit Special Education programs from their calculations.

If you have any questions or need assistance regarding the federal administrative requirements for interest earned on federal program advances, please contact Teresa Palomino, Cash Management Analyst, by phone at 916-319-0698, or by e-mail at tpalomino@cde.ca.gov.

Sincerely,

Kevin W. Chan, Director

Audits and Investigations Division

KWC:pm:dr