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Interest Earned on Federal Funds

Letter Head: Jack O'Connell, State Superintendent of Public Instruction, California Department of Education

January 25, 2010

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

INTEREST EARNED ON FEDERAL FUNDS

Code of Federal Regulations, Title 34 –Education, Part 80 – Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments, Subpart C – Post Award Requirements, Section 80.21 Payment, requires grantees and sub-grantees to promptly, but at least quarterly, remit to the federal agency interest earned on advances. The grantee or sub-grantee may keep interest amounts up to $100 per year for administrative purposes.

Since federal regulations do not require grantees and sub-grantees to return interest earned on federal funds on an individual program basis, interest may be returned in total for all federal programs. However, grantees and sub-grantees are prohibited from reducing or offsetting federal interest earnings for the temporary use of non-federal cash resources for federal programs. For example, although a sub-grantee may have temporarily supported a federal program with non-federal funds, the amount of interest that the sub-grantee could have earned on those non-federal funds cannot offset or be netted against the interest earned on the unspent funds of that or another federal program.

To ensure compliance with federal administrative requirements, school district and charter school fiscal officials should coordinate with their county offices of education in developing internal controls and a sound methodology to calculate and return, at least quarterly, interest earned in excess of $100 on federal program funds. Interest calculation methodologies must be based on actual, not estimated, interest earnings on federal funds. In calculating federal interest, it may be helpful to consider the enclosed guidelines (Enclosure I).

If you have any questions regarding the administrative requirements for interest earned on federal funds, please contact Teresa Palomino, Cash Management Analyst, Audits and Investigations Division, at 916-319-0698, or by e-mail at tpalomino@cde.ca.gov.

Sincerely,



Kevin W. Chan, Director
Audits and Investigations Division

KWC:dr
Enclosure

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