14-1: Cash Management Improvement Act (CMIA) compliance

Effective: July 1, 1994
Revised: October 10, 2025
Approved by: Van Christensen
References: Cash Management Improvement Act of 1990 (Public Law 101-453), as amended by the Cash Management Improvement Act of 1992 (Public Law 102-589), codified at 31 US Code 6501, 31 US Code 6503, 31 CFR Part 205, 2 CFR Part 200.302(6), 2 CFR 200.305

Purpose

This policy details the controls and procedures for managing federal funds to ensure compliance with the CMIA, which encourages efficient and equitable cash management of federal funds as per Federal Regulation 31 CFR Part 205. This policy also serves as the written procedures required by Federal Regulation 2 CFR 200.302(6) to implement the requirements of Federal Regulation 2 CFR 200.305 for the state.

This policy applies to any entity that is part of the State of Utah’s reporting entity for the Annual Comprehensive Financial Report (ACFR) and that receives and administers federal funds covered under the CMIA.

Included Entities: All funds, departments, boards, and commissions that are part of the State of Utah’s legal entity.
- Note: This includes entities that do not record their financial activity in the state’s accounting system (Vantage Financial).
Excluded Entities: Component units of the State of Utah are exempt from this policy.

This policy and 31 CFR Part 205 does not apply to payments made to states acting as vendors on federal contracts, which are subject to the Prompt Payment Act, or to direct loans from the federal government to the state. If you have questions about this policy and what entities it applies to, please contact GovOps Division of Finance by submitting a ticket to [email protected].

Definitions

Agency – Any agency, board, bureau, commission, office, department, administrative subunit, or entity considered part of the reporting entity of the State of Utah for the Annual Comprehensive Financial Report (ACFR) that receives and administers federal funds covered under CMIA, except component units.

CMIA – Cash Management Improvement Act.

Covered programs – Federal assistance programs subject to the TSA.

GovOps – The Department of Government Operations.

Interest neutral – No interest is owed by either the state or the federal government; the state should draw down federal funds at a time and in a manner that doesn’t create an interest liability for either party.

LAN – A local area network.

TSA – Treasury-State Agreement.

Policy

A – Programs covered by the Treasury-State Agreement must comply with the agreement

1 – The GovOps Division of Finance negotiates the Treasury-State Agreement (31 CFR 205.6-12, 25)

1a – To demonstrate compliance with the CMIA, the GovOps Division of Finance negotiates and maintains the Treasury-State Agreement (TSA) with the U.S. Department of the Treasury. The TSA negotiation may occur more frequently, but it must occur annually.

1a.1 – The TSA will outline funding techniques, clearance patterns, reimbursement methods, and interest calculation procedures for covered programs.

1b – Covered programs will be identified based on the most recent single audit (31 CFR 205.3-5). All major programs are covered by the TSA unless specifically excluded in the TSA. Nonmajor programs may be covered by the TSA if the state requests it or the U.S. Treasury requires it.

1c – Agencies must work with the GovOps Division of Finance to develop funding techniques that comply with 31 CFR 205.10-12 for each covered program.

1d – The GovOps Division of Finance director is the authorized state official to sign the TSA and must certify the annual report and any other reports pertaining to the CMIA.

1e – Funding techniques cannot be changed until the TSA is amended. The GovOps Division of Finance is responsible for negotiating amendments to the TSA in compliance with 31 CFR 205.7.

1f – The GovOps Division of Finance must distribute the final TSA to all agencies that administer covered programs as soon as it has been approved by the U.S. Department of the Treasury.

2 – Agencies with covered programs must develop TSA compliance policies for federal funds (31 CFR 205.6-12, 25)

2a – Agencies with covered programs must develop policies and procedures that ensure compliance with the TSA.

2b – Agencies’ TSA compliance policies and procedures must include the following:

active monitoring and tracking of federal cash balances;
the use of financial management systems to reconcile federal cash activity regularly and ensure that excess balances do not accumulate;
limitation of cash advances from the federal government to the minimum amounts actually needed to carry out immediate program functions;
avoidance of premature drawdowns that result in holding federal funds longer than necessary;
prevention of excess cash balances by ensuring that federal funds are disbursed promptly and according to approved funding techniques; and
reimbursement of indirect costs as frequently as feasible after payroll is paid.

3 – The GovOps Division of Finance calculates interest liabilities (31 CFR 205.13-19)

3a – The GovOps Division of Finance calculates state and federal interest liabilities owed to or by the federal government in accordance with 31 CFR Part 205.

3b – The interest rate used is the annualized rate equal to the average equivalent yields of 13-week Treasury Bills auctioned during the state’s fiscal year. The U.S. Department of the Treasury provides this rate.

3b.1 – The exception to A3b is Utah’s interest liability on funds withdrawn from its account in the Unemployment Trust Fund. The amount of interest for those funds will consist of the actual interest earnings, minus any related banking costs.

3c – Agencies with covered programs must provide supporting documentation for each program to the GovOps Division of Finance as needed to assist with the calculation of interest liabilities. The documentation must include proof of:

the amount of the request;
the date of the request;
the date requested funds were expended for program purposes; and
the date the funds were received.

4 – Clearance patterns must be recalculated (31 CFR 205.20-24)

4a – The GovOps Division of Finance must recalculate clearance patterns at least every five years or if a clearance pattern no longer reflects a federal assistance program’s actual clearance activity or if a federal assistance program undergoes operational changes that may affect clearance activity.

5 – The annual report must be submitted to the Bureau of Fiscal Service (31 CFR 205.26-27)

5a – The GovOps Division of Finance submits an annual report to the Bureau of Fiscal Service of the U.S. Department of the Treasury by December 31st, summarizing calculated interest liabilities and claiming reimbursable direct costs allowed under CMIA for the state’s most recently completed fiscal year.

5b – The U.S. Department of the Treasury reviews the report and notifies the state of the net interest liability in early March of the following year.

6 – The payment of interest liability is the responsibility of the liable agency (31 CFR 205.28)

6a – Agencies are responsible for managing federal funds in compliance with federal regulations and the procedures outlined in the TSA. Any penalties, interest, or fees that are owed to the federal government or another state agency because an agency did not manage their federal funds efficiently or follow the procedures outlined in the TSA are the responsibility of the offending agency.

6b – Interest owed to the federal government is typically paid by the Utah Office of State Treasurer using interest earnings generated from the federal funds that were not drawn or managed in accordance with cash management rules. This approach is used because interest is earned in the State Treasurer’s accounts and not agency accounts. Also, some interest is unavoidable, for example when funding techniques are not interest neutral. However, if an agency’s actions result in excessive or avoidable interest accrual, that agency may be held responsible for paying the interest instead of the Utah Office of State Treasurer.

6c – Penalties and fees related to federal cash management noncompliance are the responsibility of the agency whose actions or inactions generated the fees.

6d – The GovOps Division of Finance submits the net interest liability payment approved by the U.S. Department of the Treasury no later than March 31 following the December 31 submission of the annual report.

6d – For state agencies using the Vantage Financial accounting system:

Apart from the exceptions noted in sections A6b and A6c, any interest liability owed to the U.S. Treasury will be paid by the state from unrestricted interest earnings in the general fund. Department funds will not be charged.
Any interest liability owed from the U.S. Treasury will be deposited into the state’s general fund as unrestricted interest earnings. Department funds will not be credited.

6e – For state agencies not using the Vantage Financial accounting system:

Any interest liability owed to the U.S. Treasury must be paid to the GovOps Division of Finance before March 31. The Division of Finance will then pay the U.S. Treasury. The agency must pay the amount from its own funds.
Any interest liability owed from the U.S. Treasury will be received by the state and then given to the agency as soon as it is feasible.

6f – The GovOps Division of Finance will appeal decisions of the U.S. Department of the Treasury as warranted.

7 – The GovOps Division of Finance must maintain records (31 CFR 205.29)

7a – The GovOps Division of Finance must maintain records supporting interest calculations, clearance patterns, interest calculation costs, and other functions directly pertinent to the implementation and administration of the TSA for audit purposes.

7b – The records for each fiscal year will be retained for 3 years from the date the state submits its annual report or until any pending dispute or action involving the records and documents is completed, whichever is later.

7c – The GovOps Division of Finance saves supporting records in a designated folder on its LAN to comply with state records retention policy.

8 – Agencies with covered programs must report noncompliance (31 CFR 205.29-31)

8a – Agencies with covered programs must report to GovOps Division of Finance any instances of noncompliance with funding techniques for covered programs, such as developing excess cash balances or making premature drawdowns, as soon as they are discovered.

8b – The report should include a description of the noncompliance, including: the duration, cause, dollar amounts, and corrective action(s) taken.

8c – The GovOps Division of Finance factors the noncompliance into the annual calculation of interest liabilities if applicable.

8d – The U.S. Department of the Treasury may seek remedies for repeated, deliberate, or material noncompliance with the TSA.

B – Programs not covered by the Treasury-State Agreement are still subject to the CMIA

1 – Agencies that use federal funds must comply with the CMIA (31 CFR 205.33a)

1a – Agencies that administer federal assistance programs must comply with the CMIA, even if the program is not covered by the TSA.

1b – Agencies must minimize the time between state disbursements for Federal programs and the related drawdowns of Federal funds.

1b – The timing and amount of funds transferred internally and to other agencies must be as close as administratively feasible to the actual cash outlay for direct federal program costs and the proportionate share of any allowable indirect costs.

1c – If federal assistance programs not covered by the TSA are managed with an unwillingness or inability to follow equitable cash management practices, the Department of the Treasury may require them to become subject to the TSA (31 CFR 205.35).

2 – Agencies must develop CMIA compliance policies for federal funds (31 CFR 205.33a)

2a – Agencies administering federal assistance programs not covered by the TSA must develop policies and procedures that comply with the CMIA.

2b – Agencies’ CMIA compliance policies and procedures must include the following:

active monitoring and tracking of federal cash balances;
use of financial management systems to reconcile federal cash activity regularly and ensure that excess balances do not accumulate;
limitation of cash advances from the federal government to the minimum amounts actually needed to carry out immediate program functions;
avoidance of premature drawdowns that result in holding federal funds longer than necessary;
prevention of excess cash balances by ensuring that federal funds are disbursed promptly according to approved funding techniques; and
reimbursement of indirect costs as frequently as feasible after payroll is paid.

3 – The state does not incur interest liability (31 CFR 205.33b)

3a – The state does not incur interest liability on the transfer of federal funds for programs not covered by the TSA.

C – Federal program agencies review agencies’ management of federal funds (31 CFR 205.34)

1 – Federal program agencies review agencies’ cash management of federal funds using formulated procedural instructions to determine if they are complying with 31 CFR 205.32-35.

2 – The state’s compliance with the CMIA and the TSA are subject to audit as part of the state’s annual single audit, which is reported to federal program agencies.

D – Agencies must follow state records management policies

1 – Agencies must follow state records management policies for federal assistance programs.