[Title 31 CFR ]
[Code of Federal Regulations (annual edition) - July 1, 1997 Edition]
[From the U.S. Government Publishing Office]
[[Page i]]
31
Money and Finance: Treasury
PART 200 to END
Revised as of July 1, 1997
CONTAINING
A CODIFICATION OF DOCUMENTS
OF GENERAL APPLICABILITY
AND FUTURE EFFECT
AS OF JULY 1, 1997
With Ancillaries
Published by
the Office of the Federal Register
National Archives and Records
Administration
as a Special Edition of
the Federal Register
[[Page ii]]
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 1997
For sale by U.S. Government Printing Office
Superintendent of Documents, Mail Stop: SSOP, Washington, DC 20402-9328
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Table of Contents
Page
Explanation................................................. v
Title 31:
Subtitle B--Regulations Relating to Money and Finance--Continued:
Chapter II--Fiscal Service, Department of the Treasury.... 5
Chapter IV--Secret Service, Department of the Treasury.... 409
Chapter V--Office of Foreign Assets Control, Department of
the Treasury.......................................... 419
Chapter VI--Bureau of Engraving and Printing, Department
of the Treasury....................................... 841
Chapter VII--Federal Law Enforcement Training Center,
Department of the Treasury............................ 849
Chapter VIII--Office of International Investment,
Department of the Treasury............................ 849
Finding Aids:
Material Approved for Incorporation by Reference.......... 877
Table of CFR Titles and Chapters.......................... 879
Alphabetical List of Agencies Appearing in the CFR........ 895
List of CFR Sections Affected............................. 905
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Cite this Code: CFR
To cite the regulations in this volume use title, part
and section number. Thus, 31 CFR 202.1 refers to title
31, part 202, section 1.
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[[Page v]]
EXPLANATION
The Code of Federal Regulations is a codification of the general and
permanent rules published in the Federal Register by the Executive
departments and agencies of the Federal Government. The Code is divided
into 50 titles which represent broad areas subject to Federal
regulation. Each title is divided into chapters which usually bear the
name of the issuing agency. Each chapter is further subdivided into
parts covering specific regulatory areas.
Each volume of the Code is revised at least once each calendar year
and issued on a quarterly basis approximately as follows:
Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1
The appropriate revision date is printed on the cover of each
volume.
LEGAL STATUS
The contents of the Federal Register are required to be judicially
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HOW TO USE THE CODE OF FEDERAL REGULATIONS
The Code of Federal Regulations is kept up to date by the individual
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To determine whether a Code volume has been amended since its
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EFFECTIVE AND EXPIRATION DATES
Each volume of the Code contains amendments published in the Federal
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OMB CONTROL NUMBERS
The Paperwork Reduction Act of 1980 (Pub. L. 96-511) requires
Federal agencies to display an OMB control number with their information
collection request.
[[Page vi]]
Many agencies have begun publishing numerous OMB control numbers as
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OBSOLETE PROVISIONS
Provisions that become obsolete before the revision date stated on
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of provisions in effect on a given date in the past by using the
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INCORPORATION BY REFERENCE
What is incorporation by reference? Incorporation by reference was
established by statute and allows Federal agencies to meet the
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to materials already published elsewhere. For an incorporation to be
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This material, like any other properly issued regulation, has the force
of law.
What is a proper incorporation by reference? The Director of the
Federal Register will approve an incorporation by reference only when
the requirements of 1 CFR part 51 are met. Some of the elements on which
approval is based are:
(a) The incorporation will substantially reduce the volume of
material published in the Federal Register.
(b) The matter incorporated is in fact available to the extent
necessary to afford fairness and uniformity in the administrative
process.
(c) The incorporating document is drafted and submitted for
publication in accordance with 1 CFR part 51.
Properly approved incorporations by reference in this volume are
listed in the Finding Aids at the end of this volume.
What if the material incorporated by reference cannot be found? If
you have any problem locating or obtaining a copy of material listed in
the Finding Aids of this volume as an approved incorporation by
reference, please contact the agency that issued the regulation
containing that incorporation. If, after contacting the agency, you find
the material is not available, please notify the Director of the Federal
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20408, or call (202) 523-4534.
CFR INDEXES AND TABULAR GUIDES
A subject index to the Code of Federal Regulations is contained in a
separate volume, revised annually as of January 1, entitled CFR Index
and Finding Aids. This volume contains the Parallel Table of Statutory
Authorities and Agency Rules (Table I), and Acts Requiring Publication
in the Federal Register (Table II). A list of CFR titles, chapters, and
parts and an alphabetical list of agencies publishing in the CFR are
also included in this volume.
An index to the text of ``Title 3--The President'' is carried within
that volume.
The Federal Register Index is issued monthly in cumulative form.
This index is based on a consolidation of the ``Contents'' entries in
the daily Federal Register.
[[Page vii]]
A List of CFR Sections Affected (LSA) is published monthly, keyed to
the revision dates of the 50 CFR titles.
REPUBLICATION OF MATERIAL
There are no restrictions on the republication of material appearing
in the Code of Federal Regulations.
INQUIRIES
For a legal interpretation or explanation of any regulation in this
volume, contact the issuing agency. The issuing agency's name appears at
the top of odd-numbered pages.
For inquiries concerning CFR reference assistance, call 202-523-5227
or write to the Director, Office of the Federal Register, National
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Raymond A. Mosley,
Director,
Office of the Federal Register.
July 1, 1997.
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THIS TITLE
Title 31--Money and Finance: Treasury is composed of two volumes.
The parts in these volumes are arranged in the following order: parts 0
to 199, and part 200 to end. The contents of these volumes represent all
of the current regulations codified under this title of the CFR as of
July 1, 1997.
A redesignation table for subtitle A--Office of the Secretary of the
Treasury appears in the Finding Aids section of the first volume.
For this volume, Scott D. Andreae was Chief Editor. The Code of
Federal Regulations publication program is under the direction of
Frances D. McDonald, assisted by Alomha S. Morris.
[[Page x]]
[[Page 1]]
TITLE 31--MONEY AND FINANCE: TREASURY
(This book contains part 200 to end)
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Part
SUBTITLE B--Regulations Relating to Money and Finance (Continued)
Chapter ii--Fiscal Service, Department of the Treasury...... 202
Chapter iv--Secret Service, Department of the Treasury...... 401
Chapter v--Office of Foreign Assets Control, Department of
the Treasury.............................................. 500
Chapter vi--Bureau of Engraving and Printing, Department of
the Treasury.............................................. 601
Chapter vii--Federal Law Enforcement Training Center,
Department of the Treasury................................ 700
Chapter viii--Office of International Investment, Department
of the Treasury........................................... 800
Editorial Note: Other regulations issued by Department of the Treasury
appear in title 12, chapter I; title 19, chapter I; title 26, chapter I;
title 27, chapter I; title 48, chapter 10.
[[Page 3]]
Subtitle B--Regulations Relating
to Money and Finance
(Continued)
[[Page 5]]
CHAPTER II--FISCAL SERVICE, DEPARTMENT OF THE TREASURY
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SUBCHAPTER A--FINANCIAL MANAGEMENT SERVICE
Part Page
202 Depositaries and financial agents of the
Government.............................. 9
203 Treasury tax and loan depositaries.......... 12
204 [Reserved]
205 Rules and procedures for funds transfers.... 19
206 Management of Federal agency receipts,
disbursements, and operation of the Cash
Management Improvements Fund............ 33
208 Federal agency disbursements................ 38
210 Federal payments through financial
institutions by the Automated Clearing
House method............................ 40
211 Delivery of checks and warrants to addresses
outside the United States, its
territories and possessions............. 50
215 Withholding of District of Columbia, State,
city and county income or employment
taxes by Federal agencies............... 51
223 Surety companies doing business with the
United States........................... 56
224 Federal process agents of surety companies.. 63
225 Acceptance of bonds, notes, or other
obligations issued or guaranteed by the
United States as security in lieu of
surety or sureties on penal bonds....... 65
226 Recognition of insurance covering Treasury
tax and loan depositaries............... 69
235 Issuance of settlement checks for forged
checks drawn on designated depositaries. 71
240 Indorsement and payment of checks drawn on
the United States Treasury.............. 72
245 Claims on account of Treasury checks........ 79
247 Regulations governing FedSelect checks...... 81
[[Page 6]]
248 Issue of substitutes of lost, stolen,
destroyed, mutilated and defaced checks
of the United States drawn on accounts
maintained in depositary banks in
foreign countries or United States
territories or possessions.............. 85
250 Payment on account of awards of the Foreign
Claims Settlement Commission of the
United States........................... 87
256 Payments under judgments and private relief
acts.................................... 90
270 Availability of records..................... 90
281 Foreign exchange operations................. 91
285 Debt collection authorities under the Debt
Collection Improvement Act of 1996...... 94
SUBCHAPTER B--BUREAU OF THE PUBLIC DEBT
306 General regulations governing U.S.
securities.............................. 98
308 General regulations governing full-paid
interim certificates.................... 128
309 Issue and sale of Treasury bills............ 129
312 Federal savings and loan associations and
Federal credit unions as fiscal agents
of the United States.................... 132
315 Regulations governing U.S. Savings Bonds,
Series A, B, C, D, E, F, G, H, J, and K,
and U.S. Savings Notes.................. 133
316 Offering of United States Savings Bonds,
Series E................................ 159
317 Regulations governing agencies for issue of
United States Savings Bonds............. 166
321 Payments by banks and other financial
institutions of United States Savings
Bonds and United States Savings Notes
(Freedom Shares)........................ 171
323 Disclosure of records....................... 188
328 Restrictive endorsements of U.S. bearer
securities.............................. 190
330 Regulations governing payment under special
endorsement of United States Savings
Bonds and United States Savings Notes
(Freedom Shares)........................ 193
332 Offering of United States Savings Bonds,
Series H................................ 197
337 Supplemental regulations governing Federal
Housing Administration debentures....... 200
339 Exchange offering of United States Savings
Bonds, Series H......................... 203
340 Regulations governing the sale of Treasury
bonds through competitive bidding....... 206
341 Regulations governing United States
Retirement Plan Bonds................... 208
342 Offering of United States Savings Notes..... 219
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343 Offering of United States Mortgage Guaranty
Insurance Company Tax and Loss Bonds.... 224
344 Regulations governing United States Treasury
Certificates of Indebtedness, Treasury
Notes, and Treasury Bonds--State and
local government series................. 226
345 Regulations governing 5 percent Treasury
Certificates of Indebtedness-- R.E.A.
Series.................................. 246
346 Regulations governing United States
Individual Retirement Bonds............. 247
351 Offering of United States Savings Bonds,
Series EE............................... 257
352 Offering of United States Savings Bonds,
Series HH............................... 277
353 Regulations governing United States Savings
Bonds, Series EE and HH................. 283
354 Regulations governing book-entry securities
of the Student Loan Marketing
Association (Sallie Mae)................ 310
355 Regulations governing fiscal agency checks.. 315
356 Sale and issue of marketable book-entry
Treasury bills, notes, and bonds
(Department of the Treasury Circular,
Public Debt Series No. 1-93)............ 318
357 Regulations governing book-entry Treasury
bonds, notes and bills (Department of
the Treasury Circular, Public Debt
Series No. 2-86)........................ 358
358 Regulations governing CUBES (coupons under
book-entry safekeeping)................. 394
361 Claims pursuant to the Government Losses in
Shipment Act............................ 396
362 Declaration of valuables under the
Government Losses in Shipment Act....... 399
370 Regulations governing the transfer of funds
by electronic means on account of United
States securities....................... 400
391 Waiver of interest, administrative costs,
and penalties........................... 405
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SUBCHAPTER A--FINANCIAL MANAGEMENT SERVICE
PART 202--DEPOSITARIES AND FINANCIAL AGENTS OF THE GOVERNMENT1--Table of Contents
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1The regulations, which previously appeared in this part,
governing payment of checks drawn on the United States Treasury now
appear in revised form in part 240 of this chapter (Department Circular
21 (Second Revision)).
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Sec.
202.1 Scope of regulations.
202.2 Designations.
202.3 Authorization.
202.4 Contract of deposit.
202.5 Previously designated depositaries.
202.6 Collateral security.
202.7 Maintenance of balances within authorizations.
Authority: Sec. 10, Pub. L. 77-603, 56 Stat. 356 (12 U.S.C. 265);
sec. 2, Pub. L. 95-147, 91 Stat. 1227 (12 U.S.C. 266, 12 U.S.C. 1464(k),
12 U.S.C 1725(d) and 12 U.S.C. 1709(a)); and sec. 4(a), Pub. L. 95-369,
92 Stat. 607 (12 U.S.C. 3101 and 3102).
Sec. 202.1 Scope of regulations.
The regulations in this part govern the designation of Depositaries
and Financial Agents of the Government (hereinafter referred to as
depositaries), and their authorization to accept deposits of public
money and to perform other services as provided for in section 10, Pub.
L. 77-603, 56 Stat. 356 (12 U.S.C. 265); section 2, Pub. L. 95-147, 91
Stat. 1227 (12 U.S.C. 266, 12 U.S.C. 1464(k), 12 U.S.C. 1725(d) and 12
U.S.C. 1709(a)); and section 4(a), Pub. L. 95-369, 92 Stat. 607 (12
U.S.C. 3101 and 3102). Public money includes, without being limited to,
revenue and funds of the United States, and any funds the deposit of
which is subject to the control or regulation of the United States or
any of its officers, agents, or employees. The designation and
authorization of Treasury Tax and Loan Depositaries for the receipt of
deposits representing payments for certain United States obligations and
of internal revenue taxes are governed by the regulations in part 203 of
this chapter.
[46 FR 28152, May 26, 1981]
Sec. 202.2 Designations.
(a) Financial institutions of the following classes are designated
as Depositaries and Financial Agents of the Government if they meet the
eligibility requirements stated in paragraph (b) of this section:
(1) Every bank insured by the Federal Deposit Insurance Corporation.
(2) Every institution insured by the Federal Savings and Loan
Insurance Corporation.
(3) Every credit union insured by the Administrator of the National
Credit Union Administration.
(4) Banks, savings banks, savings and loan, building and loan, and
homestead associations, credit unions created under the laws of any
State, the deposits or accounts of which are insured by a State or
agency thereof or by a corporation chartered by a State for the sole
purpose of insuring deposits or accounts of such financial institutions,
every United States branch of a foreign banking corporation authorized
by the State in which it is located to transact commercial banking
business, and every Federal branch of a foreign banking corporation, the
establishment of which has been approved by the Comptroller of the
Currency.
(b) In order to be eligible for designation, a financial institution
is required to possess, under its charter and the regulations issued by
its chartering authority, either general or specific authority to
perform the services outlined in Sec. 202.3(b). A financial institution
is required also to possess the authority to pledge collateral to secure
public funds.
(Sec. 10, 56 Stat. 356, as amended, 12 U.S.C. 265; sec. 2, Pub. L. 95-
147 (12 U.S.C. 266, 1464(k), 1725, 1789a, and 31 U.S.C. 1038); sec. 503
of the Rehabilitation Act of 1973 (29 U.S.C. 793); and sec. 503 of the
Veterans Employment and Readjustment Act of 1972, Executive Order 11701
(38 U.S.C. 2012))
[44 FR 53066, Sept. 11, 1979, as amended at 46 FR 28152, May 26, 1981]
Sec. 202.3 Authorization.
(a) To accept deposits covered by the appropriate Federal or State
insurer.
[[Page 10]]
Every depositary is authorized to accept a deposit of public money in an
official account, other than an account in the name of the United States
Treasury, in which the maximum balance does not exceed the ``Recognized
Insurance Coverage''. ``Recognized Insurance Coverage'' means the
insurance provided by the Federal Deposit Insurance Corporation, the
Federal Savings and Loan Insurance Corporation, the National Credit
Union Share Insurance Fund, and by insurance organizations specifically
qualified by the Secretary of the Treasury pursuant to 31 CFR part 226.
(b) To perform other services. (1) Upon the request of a Government
agency, the Secretary of the Treasury may authorize a depositary to
perform other services specifically requested by the agency, including:
(i) The maintenance of official accounts in which balances will be
in excess of the applicable Federal or State insurance coverage;
(ii) The maintenance of accounts in the name of the United States
Treasury;
(iii) The acceptance of deposits for credit of the United States
Treasury;
(iv) The furnishing of bank drafts in exchange for collections.
(2) To obtain authorization to perform services specifically
requested by a Government agency, a depositary must:
(i) File with the Secretary of the Treasury an appropriate agreement
and resolution of its board of directors authorizing the agreement (both
on forms prescribed by and available from the Financial Management
Service), and
(ii) Pledge collateral security as provided for in Sec. 202.6.
(Sec. 10, 56 Stat. 356, as amended, 12 U.S.C. 265; sec. 2, Pub. L. 95-
147 (12 U.S.C. 266, 1464(k), 1725, 1789a, and 31 U.S.C. 1038); sec. 503
of the Rehabilitation Act of 1973 (29 U.S.C. 793); and sec. 503 of the
Veterans Employment and Readjustment Act of 1972, Executive Order 11701
(38 U.S.C. 2012))
[32 FR 14215, Oct. 13, 1967, as amended at 44 FR 53066, Sept. 11, 1979;
49 FR 47001, Nov. 30, 1984]
Sec. 202.4 Contract of deposit.
A depositary which accepts a deposit under this part enters into a
contract of deposit with the Treasury Department. The terms of this
contract include:
(a) All of the provisions of this part.
(b) Any instructions issued pursuant to this part by the Treasury or
by Federal Reserve Banks as Fiscal Agents of the United States or by any
other Government agency.
(c) The provisions prescribed in section 202 of Executive Order
11246, entitled ``Equal Employment Opportunity'' (30 FR 12319) as
amended by Executive Order 11375, entitled ``Equal Employment
Opportunity Clause''.
(d) The requirements of section 503 of the Rehabilitation Act of
1973, 29 U.S.C. 793, and the regulations issued thereunder at 41 CFR
part 60-741, which are incorporated herein by reference, requiring
Government contractors to take affirmative action to employ qualified
handicapped individuals, except that depositaries which under this part
receive gross annual earnings of less than $2,500 are exempt from
compliance with these regulations.
(e) The requirements of section 503 of the Veterans Employment and
Readjustment Act of 1972, 38 U.S.C. 2012, Executive Order 11701, and the
regulations issued thereunder at 41 CFR Subpart 1-12.11, which are
incorporated herein by reference, for the promotion of employment of
disabled and Vietnam-era veterans, except that depositaries which under
this part receive gross annual earnings of less than $10,000 are exempt
from compliance with these regulations.
(Sec. 10, 56 Stat. 356, as amended, 12 U.S.C. 265; sec. 2, Pub. L. 95-
147 (12 U.S.C. 266, 1464(k), 1725, 1789a, and 31 U.S.C. 1038); sec. 503
of the Rehabilitation Act of 1973 (29 U.S.C. 793); and sec. 503 of the
Veterans Employment and Readjustment Act of 1972, Executive Order 11701
(38 U.S.C. 2012))
[44 FR 53067, Sept. 11, 1979]
Sec. 202.5 Previously designated depositaries.
A depositary previously designated will, by the acceptance or
retention of deposits, be presumed to have assented to all the terms and
provisions of this part and to the retention of collateral security
theretofore pledged.
[32 FR 14215, Oct. 13, 1967]
[[Page 11]]
Sec. 202.6 Collateral security.
(a) Requirement. Prior to receiving deposits of public money, a
depositary authorized to perform services under Sec. 202.3(b) must
pledge collateral security in the amount required by the Secretary of
the Treasury.
(b) Acceptable security. Unless otherwise specified by the Secretary
of the Treasury, collateral security pledged under this section may be
transferable securities of any of the following classes:
(1) Obligations issued or fully insured or guaranteed by the United
States or any U.S. Government agency, and obligations of Government-
sponsored corporations which under specific statute may be accepted as
security for public funds: At face value.
(2) Obligations issued or fully guaranteed by the International Bank
for Reconstruction and Development, the Inter-American Development Bank
or the Asian Development Bank: At face value.
(c) Deposits of securities. Unless the Secretary of the Treasury
provides otherwise, collateral security under this part must be
deposited with the Federal Reserve Bank or Branch of the district in
which the depositary is located (depositaries located in Puerto Rico and
the Virgin Islands will be considered as being located in the New York
Federal Reserve district), or with a custodian or custodians within the
United States designated by the Federal Reserve Bank, under terms and
conditions prescribed by the Federal Reserve Bank. Securities deposited
with a Federal Reserve Bank must be accompanied by a letter stating
specifically the purpose for which the securities are being deposited.
(d) Assignment. A depository that pledges securities which are not
negotiable without its endorsement or assignment may, in lieu of placing
its unqualified endorsement on each security, furnish an appropriate
resolution and irrevocable power of attorney authorizing the Federal
Reserve Bank to assign the securities. The resolution and power of
attorney shall conform to such terms and conditions as the Federal
Reserve Banks shall prescribe.
(e) Disposition of principal and interest payments of the pledged
securities after a depositary is declared insolvent--(1) General. In the
event of the depositary's insolvency or closure, or in the event of the
appointment of a receiver, conservator, liquidator, or other similar
officer to terminate its business, the depositary agrees that all
principal and interest payments on any security pledged to protect
public monies due as of the date of the insolvency or closure, or
thereafter becoming due, shall be held separate and apart from any other
assets and shall constitute a part of the pledged security available to
satisfy any claim of the United States.
(2) Payment procedures. (i) Subject to the waiver in paragraph
(e)(2)(iii) of this section, each depositary (including, with respect to
such depositary, an assignee for the benefit of creditors, a trustee in
bankruptcy, or a receiver in equity) shall immediately remit each
payment of principal and/or interest received by it with respect to
collateral pledged pursuant to this section to the Federal Reserve Bank
of the district, as fiscal agent of the United States, and in any event
shall so remit no later than ten days after receipt of such a payment.
(ii) Subject to the waiver in paragraph (e)(2)(iii) of this section,
each obligor on a security pledged by a depositary pursuant to this
section shall make each payment of principal and/or interest with
respect to such security directly to the Federal Reserve Bank of the
district, as fiscal agent of the United States.
(iii) The requirements of paragraphs (e)(2) (i) and (ii) of this
section are hereby waived for only so long as a pledging depositary
remains solvent. The foregoing waiver is terminated without further
action immediately upon the involvency of a pledging depositary or, if
earlier, upon notice by the Treasury of such termination. For purposes
of this paragraph, a depositary is insolvent when, voluntarily or by
action of competent authority, it is
[[Page 12]]
closed because of present or prospective inability to meet the demands
of its depositors or shareholders.
(Sec. 10, 56 Stat. 356, as amended, 12 U.S.C. 265; sec. 2, Pub. L. 95-
147 (12 U.S.C. 266, 1464(k), 1725, 1789a, and 31 U.S.C. 1038); sec. 503
of the Rehabilitation Act of 1973 (29 U.S.C. 793); and sec. 503 of the
Veterans Employment and Readjustment Act of 1972, Executive Order 11701
(38 U.S.C. 2012))
[32 FR 14216, Oct. 13, 1967, as amended at 36 FR 6748, Apr. 8, 1971; 36
FR 17995, Sept. 8, 1971; 39 FR 30832, Aug. 26, 1974; 44 FR 53067, Sept.
11, 1979; 46 FR 28152, May 26, 1981]
Sec. 202.7 Maintenance of balances within authorizations.
(a) Government agencies must contact this Department before making
deposits with a financial institution insured by a State or agency
thereof or by a corporation chartered by a State for the sole purpose of
insuring deposits or accounts. The contact should be directed to the
Federal Finance, Financial Management Service, Department of the
Treasury, Washington, DC 20226.
(b) Government agencies having control or jurisdiction over public
money on deposit in accounts with depositaries are responsible for the
maintenance of balances in such accounts within the limits of the
authorizations specified by the Secretary of the Treasury.
(Sec. 10, 56 Stat. 356, as amended, 12 U.S.C. 265; sec. 2, Pub. L. 95-
147 (12 U.S.C. 266, 1464(k), 1725, 1789a, and 31 U.S.C. 1038); sec. 503
of the Rehabilitation Act of 1973 (29 U.S.C. 793); and sec. 503 of the
Veterans Employment and Readjustment Act of 1972, Executive Order 11701
(38 U.S.C. 2012))
[44 FR 53067, Sept. 11, 1979, as amended at 49 FR 47001, Nov. 30, 1984]
PART 203--TREASURY TAX AND LOAN DEPOSITARIES--Table of Contents
Subpart A--General Information
Sec.
203.1 Scope.
203.2 Definitions.
203.3 Designation of financial institutions as Treasury tax and loan
depositaries.
203.4 Sources of deposits.
203.5 Deposits of Federal taxes.
203.6 Parties to the contract.
203.7 Obligations of the depositary.
Subpart B--Options
203.8 General requirement.
203.9 Note option.
203.10 Remittance option.
203.11 Change of options.
Subpart C--Interest and Compensation
203.12 Rate of interest.
203.13 Compensation for services.
Subpart D--Collateral Security
203.14 Collateral security requirements.
Subpart E--Miscellaneous Provisions
203.15 Termination of contract.
203.16 Implementing instructions.
203.17 Effective date.
Authority: 31 U.S.C. 3122, 31 U.S.C. 323, 12 U.S.C. 265 and 12
U.S.C. 391.
Source: 58 FR 35396, July 1, 1993, unless otherwise noted.
Subpart A--General Information
Sec. 203.1 Scope.
The regulations in this part govern the designation of Treasury tax
and loan depositaries and their contract with the Treasury Department to
process deposits of Federal taxes and to maintain and administer
separate accounts to be known as Treasury tax and loan accounts.
Sec. 203.2 Definitions.
As used in this part:
(a) Advices of credit means those Treasury forms which are supplied
to depositaries to be used in supporting credits to Treasury tax and
loan accounts.
(b) Business day means any day on which the Federal Reserve Bank of
the district is open to the public.
(c) Delivery of advices of credit to the Federal Reserve Bank means
delivery of the paper advice of credit form or electronic delivery by
Fedline or Voice Response of the information on the advice of credit
form.
(d) Depositary means a Treasury tax and loan depositary.
(e) Election of option form means a document supplied by the Federal
Reserve Bank of each district, on which a depositary indicates the
option under
[[Page 13]]
which it will administer its Treasury tax and loan account.
(f) Federal funds rate means the weekly Federal funds rate as
published in the Federal Reserve Statistical Release, ``H.15 Selected
Interest Rates,'' which is published weekly by the Board of Governors of
the Federal Reserve System.
(g) Federal Reserve Bank of the district means the Federal Reserve
Bank which services the geographical area in which the depositary is
located. Depositaries located in Puerto Rico, the Virgin Islands, and
the Panama Canal Zone are included in the Second Federal Reserve
District.
(h) Federal tax deposit form means a preinscribed form supplied to a
taxpayer by the Treasury Department to accompany deposits of Federal
taxes.
(i) Federal taxes means those Federal taxes specified by the
Secretary of the Treasury or the Secretary's delegate as eligible for
payment through the procedures prescribed in this part.
(j) Note Option means that choice available to a depositary under
which funds debited from its Treasury tax and loan account are added by
the Treasury to its investments in obligations of the depositary. The
amount of such investments will be evidenced by an open-ended interest-
bearing note maintained at the Federal Reserve Bank of the district.
(k) Off premises collateral arrangement means a collateral custody
arrangement established pursuant to Sec. 203.14(c)(2) of this part
wherein a depositary is permitted to hold in its possession for the
Federal Reserve Bank collateral security for funds invested with the
depositary as special direct investments.
(l) Procedural Instructions for Treasury Tax and Loan Depositaries
means Volume IV of the Treasury Financial Manual, published by the
Financial Management Service.
(m) Recognized insurance coverage means the insurance provided by
the Federal Deposit Insurance Corporation, the National Credit Union
Share Insurance Fund and insurance provided by insurance organizations
specifically qualified by the Secretary of the Treasury pursuant to 31
CFR part 226.
(n) Remittance Option means that choice available to a depositary
under which funds equivalent to the amount of deposits credited by the
depositary to its Treasury tax and loan account will be withdrawn by the
Federal Reserve Bank immediately upon receipt by the Federal Reserve
Bank of the advices of credit supporting such deposits.
(o) Reporting cycle means the time period established for reporting
and computation purposes. A reporting cycle begins on the first Thursday
of each month and ends on the Wednesday preceding the first Thursday of
the following month.
(p) Reserve account means that account every member of the Federal
Reserve System maintains at the Federal Reserve Bank of its district for
reserve purposes pursuant to 12 CFR part 204.
(q) Special depositary means a depositary that had been designated
under the provisions of 31 CFR part 203 prior to November 2, 1978. A
depositary thereafter designated under this part shall be known as a
Treasury tax and loan depositary.
(r) Special direct investment means the type of addition to a
depositary's note account referred to in Sec. 203.9(d) of this part,
where the addition specifically is identified as a ``special direct
investment'' and is secured by collateral retained in the possession of
the depositary pursuant to the terms of Sec. 203.14(c)(2) of this part.
Sec. 203.3 Designation of financial institutions as Treasury tax and loan depositaries.
(a) Previously authorized depositaries. A special depositary which,
at the close of business on November 1, 1978, was authorized to maintain
a Treasury tax and loan account is hereby redesignated as a Treasury tax
and loan depositary and subject to the provisions of the current part
203.
(b) New designations. In order to be designated as a Treasury tax
and loan depositary, a financial institution is required to possess
under its charter either general or specific authority permitting the
maintenance of the Treasury tax and loan account, the balance of which
is payable on demand without previous notice of intended withdrawal.
[[Page 14]]
A financial institution also is required to possess the authority to
pledge collateral to secure Treasury tax and loan balances.
(1) Eligible institutions. (i) Every incorporated bank and trust
company in the United States, Puerto Rico, the Virgin Islands, every
United States branch of a foreign banking corporation authorized by the
State in which it is located to transact commercial banking business,
and every Federal branch of a foreign banking corporation, the
establishment of which has been approved by the Comptroller of the
Currency.
(ii) Every financial institution insured by the Federal Deposit
Insurance Corporation.
(iii) Every credit union insured by the Administrator of the
National Credit Union Administration.
(iv) Every savings and loan, building and loan, homestead
association and credit union, created under the laws of any State, the
deposits or accounts of which are insured by a State or agency thereof,
or by a corporation chartered by a State for the sole purpose of
insuring deposits or accounts of such financial institutions.
(2) Application procedures. An eligible financial institution
seeking designation as a depositary and, thereby, the authority to
maintain a Treasury tax and loan account shall file with the Federal
Reserve Bank of the district Financial Management Service Form 458
``Financial Institution Offer to Contract and Application for
Designation as a Treasury Tax and Loan Depositary'' and Financial
Management Service Form 459 ``Resolutions Authorizing the Financial
Institution Offer to Contract and Application for Designation as a
Treasury Tax and Loan Depositary'' certified by its board of directors.
Financial Management Service Forms 458 and 459 are available upon
request from the Federal Reserve Bank of the district.
(3) Designation. Each financial institution satisfying the
eligibility requirements and the application procedures will receive
from the Federal Reserve Bank of the district notification of its
specific designation as a Treasury tax and loan depositary. A financial
institution is not authorized to maintain a Treasury tax and loan
account until it has been designated as a Treasury tax and loan
depositary by the Federal Reserve Bank of the district.
Sec. 203.4 Sources of deposits.
A depositary shall credit to its Treasury tax and loan account
deposits of Federal taxes and any public funds due to Treasury from the
depositary and authorized by the Secretary of the Treasury by regulation
to be paid by crediting the tax and loan account.
Sec. 203.5 Deposits of Federal taxes.
(a) Deposits with depositaries. A depositary shall, through any of
its offices that accept deposits:
(1) Accept from a taxpayer cash, a postal money order drawn to the
order of the depositary, or a check or draft drawn on and to the order
of the depositary, covering an amount to be deposited as Federal taxes
when accompanied by a Federal tax deposit form on which the amount of
the deposit has been properly entered in the space provided. A
depositary may accept, at its discretion, a check drawn on another
financial institution, but it does so purely on a voluntary basis and
absorbs for its own account any float involved.
(2) Issue a counter receipt when requested to do so by a taxpayer
who makes a deposit of Federal taxes in cash over the counter.
(3) Place a stamp impression on the face of each Federal tax deposit
form in the space provided, regardless of the form of payment. The stamp
shall reflect the date on which the tax deposit was received and the
name and location of the depositary. The timeliness of the tax payment
will be determined by reference to the date stamp on the Federal tax
deposit form.
(4) Credit on the date of receipt all deposits of Federal taxes to
the Treasury tax and loan account and administer that account pursuant
to the provisions of this part.
(5) Forward each day to the Internal Revenue Service Center
servicing the geographical area in which the depositary is located the
Federal tax deposit forms for all tax deposits received that
[[Page 15]]
day. Each submission of deposit information shall be on the prescribed
Treasury form and in the aggregate amount of the Federal tax deposit
forms.
(6) Establish an adequate record of all deposits of Federal taxes
prior to transmittal to the Internal Revenue Service Center so the
depositary will be able to identify deposits in the event tax deposit
forms are lost in shipment between it and the Internal Revenue Service
Center. For tracking purposes, a record shall be made of each deposit
showing as a minimum the date of deposit, the taxpayer's identifying
number and the amount of the deposit. The depositary's copies of
transmittal letters may be used to provide the necessary information if
individual deposits are listed separately showing date, taxpayer's
identifying number and amount.
(7) Not accept compensation from taxpayers for accepting deposits of
Federal taxes and handling them as required by this section.
(b) Deposits with Federal Reserve Banks. A Federal Reserve Bank
shall, through any of its offices:
(1) Accept a tax deposit directly from a taxpayer when such tax
deposit is:
(i) Mailed or delivered by a taxpayer located within that Bank's
territorial boundaries; and
(ii) In the form of cash, a check drawn to the order of that Bank
and considered to be an immediate credit item by that Bank, a postal
money order drawn to the order of the Bank; and,
(iii) Accompanied by a Federal tax deposit form on which the amount
of the tax deposit has been properly entered in the space provided.
(2) When requested to do so by a taxpayer who makes a deposit of
Federal taxes in cash over the counter, issue a counter receipt.
(3) When a deposit of Federal taxes is made in accordance with the
requirements of paragraph (a) of this section, a Bank shall place in the
space provided on the face of each Federal tax deposit form accepted
directly from a taxpayer, a stamp impression reflecting the name of the
Bank and the date on which the tax deposit was received by the Bank so
that the timeliness of the Federal tax payment can be determined.
However, if such a deposit is mailed to a Bank, it shall be subject to
the ``Timely Mailing treated as timely filing and paying'' clause of
section 7502 of the Internal Revenue Code (26 U.S.C. 7502).
(4) When a deposit of Federal taxes is not in accordance with the
requirements governing form of payment set forth in paragraph (a) of
this section, a Bank shall place in the space provided on the face of
each Federal tax deposit form a stamp impression reflecting the name of
the Bank and the date on which the proceeds of the accompanying payment
instrument are collected by the Bank. This date shall be used for the
purpose of determining the timeliness of the Federal tax payment.
Sec. 203.6 Parties to the contract.
A financial institution which is designated as a Treasury Tax and
Loan depositary enters into a depositary contract with the Department of
the Treasury. The parties to this contract are the Treasury, acting
through the Federal Reserve Banks as fiscal agents of the United States,
and each financial institution designated under Sec. 203.3. The terms of
the contract include all of the provisions of this part.
Sec. 203.7 Obligations of the depositary.
A depositary shall:
(a) Administer a Treasury tax and loan account in accordance with
this part and any amendments or supplements thereto, and instructions
issued pursuant thereto, including the Procedural Instructions for
Treasury Tax and Loan Depositaries.
(b) Comply with the requirements of section 202 of Executive Order
11246, entitled ``Equal Employment Opportunity'' (3 CFR, 1964-1965 Comp.
p. 339), as amended by Executive Order 12086 (3 CFR, 1978 Comp. p.230),
and the regulations issued thereunder at 41 CFR chapter 60, as amended.
The Secretary of the Treasury may terminate the contract with a
depositary for failure to comply with the terms of the contract set
forth in this section relating to equal employment opportunity.
(c) Comply with the requirements of section 503 of the
Rehabilitation Act of 1973, as amended, 29 U.S.C. 793, and the
[[Page 16]]
regulations issued thereunder at 41 CFR parts 60-741, requiring
Government contractors to take affirmative action to employ qualified
handicapped individuals, and
(d) Comply with the requirements of section 503 of the Vietnam Era
Veterans' Readjustment Assistance Act of 1972, as amended, 38 U.S.C.
4212, Executive Order 11701, and the regulations issued thereunder at 41
CFR parts 60-250, for the promotion of employment of disabled and
Vietnam era veterans.
Subpart B--Options
Sec. 203.8 General requirement.
A Treasury tax and loan depositary shall administer its Treasury tax
and loan account under either the Note Option or the Remittance Option.
Sec. 203.9 Note option.
(a) Classes. Depositaries electing this option will be subdivided
into Note Option Class A, B, or C depending upon the volume of deposits
credited to their tax and loan accounts during the previous calendar
year, as specified in the Procedural Instructions for Treasury Tax and
Loan Depositaries.
(b) Additions. The Treasury will invest funds in obligations of
depositaries selecting the Note Option. Such obligations shall be in the
form of open-ended notes and additions and reductions will be reflected
on the books of the Federal Reserve Bank of the district. A depositary
electing the Note Option shall debit, as of the first business day after
crediting deposits to its tax and loan account, its tax and loan account
in the amount of such deposits and simultaneously credit the note
thereby reflecting an increase in like amount in Treasury's investment
in obligations of the depositary.
(c) Delivery. A depositary administering its tax and loan account
under the Note Option shall forward at the close of business each day
its advices of credit for that day to the Federal Reserve Bank of the
district via the most expeditious means reasonably available. This may
include the U.S. Postal Service, in instances where the depositary does
not use a faster method for other documents (e.g., checks) being
remitted to the Federal Reserve Bank or Branch city.
(d) Other additions. Other funds from the Treasury's operating cash
may be offered from time to time to certain Note Option depositaries.
Each such Note Option depositary shall have the opportunity to decide
whether to receive from the Treasury such additional investments in its
notes.
(e) Withdrawals. The amount of the note shall be payable on demand
without previous notice. Calls for payment on the note will be by
direction of the Secretary of the Treasury through the Federal Reserve
Banks. A depositary shall arrange for the payment of calls on the
payment date specified in the calls by a charge to the reserve account
of the depositary or the reserve account of a member bank correspondent.
(f) Interest. A note shall bear interest at the rate specified in
Sec. 203.12. Such interest is payable monthly by a charge to the reserve
account of the depositary or through the reserve account of a member
bank correspondent. Specific details about the computations of the
amount of interest due, the means of payment, payment dates, Federal
Reserve Bank responsibilities, and other related details are described
in the Procedural Instructions for Treasury Tax and Loan Depositaries.
(g) Maximum balance. A depositary selecting the Note Option shall
establish a maximum balance for its note account by providing notice to
that effect in writing to the Federal Reserve Bank of the district. That
portion of any advice of credit which, when posted at the Federal
Reserve Bank, would cause the note balance to exceed the amount
specified by the depositary will be withdrawn automatically by the
Federal Reserve Bank. The maximum balance applies to that portion of the
note account balance which is secured by collateral deposited in
accordance with Sec. 203.14(c)(1) with either Federal Reserve Banks or
authorized third party custodians. Special direct investments, which are
secured by collateral held by the depositary in accordance with
Sec. 203.14(c)(2) under off premises custody arrangements, shall not be
considered
[[Page 17]]
in determining the amounts to be withdrawn automatically where a
depositary's maximum balance is exceeded.
Sec. 203.10 Remittance option.
(a) Remittance Option classes. Depositaries electing this option
will be subdivided into Remittance Option Class 1 or 2 depending upon
the volume of deposits credited to their tax and loan accounts during
the previous calendar year, as specified in the Procedural Instructions
for Treasury Tax and Loan Depositaries.
(b) Delivery. A Remittance Option depositary shall establish and
maintain procedures to ensure timely delivery of its advices of credit
at the Federal Reserve Bank of the district prior to the Federal Reserve
Bank's cutoff time for processing such credits the next business day
after the date of credit.
(c) Late fee. If an advice of credit does not arrive at the Federal
Reserve Bank before the designated cutoff hour for receipt of such
advices, a late fee in the form of interest at the rate specified at
Sec. 203.12 will be assessed for each day's delay in receipt of such
advice. Such late fee assessments will be effected on a monthly basis
through a depositary's reserve account or the reserve account of a
member bank correspondent. Specific details and procedures are included
in the Procedural Instructions for Treasury Tax and Loan Depositaries.
(d) Withdrawals. For a depositary selecting the Remittance Option,
funds equivalent to the amount of deposits credited by a depositary to
its Treasury tax and loan account will be withdrawn by the Federal
Reserve Bank upon receipt by the Federal Reserve Bank of the advices of
credit supporting such deposits. A depositary shall arrange for the
payment of withdrawals by an immediate charge to its reserve account or
the reserve account of a member bank correspondent.
Sec. 203.11 Change of options.
A depositary is subject to the provisions of the option it has
selected until such time as it provides notice to the Federal Reserve
Bank requesting a change of option and receives formal notification from
the Federal Reserve Bank of the effective date of the change of option.
Specific details regarding changes of option are included in the
Procedural Instructions for Treasury Tax and Loan Depositaries.
Subpart C--Interest and Compensation
Sec. 203.12 Rate of interest.
The rate of interest to be used in connection with the Note Option
and the Remittance Option will be equal to the Federal funds rate less
twenty-five basis points (i.e., \1/4\ of 1 percent). Details about the
computation are included in the Procedural Instructions for Treasury Tax
and Loan Depositaries.
Sec. 203.13 Compensation for services.
Except as provided in the Procedural Instructions for Treasury Tax
and Loan Depositaries, depositaries will not be compensated for
servicing the tax and loan account or for the bookkeeping costs of
maintaining that account.
Subpart D--Collateral Security
Sec. 203.14 Collateral security requirements.
(a) Note Option. (1) Before crediting deposits to its Treasury tax
and loan account, a Note Option depositary shall pledge collateral
security in accordance with the requirements of paragraphs (c)(1), (d)
and (e) of this section in an amount that is sufficient to cover the sum
of 100 percent of the pre-established maximum balance for the note
account (see Sec. 203.9(g) of this part), and the closing balance in its
Treasury tax and loan account which exceeds recognized insurance
coverage, minus the amount of the note balance attributable to special
direct investments.
(2) Before special direct investments are credited to a depositary's
note account, a Note Option depositary shall pledge collateral security
in accordance with the requirements of paragraphs (c)(2) and (e) of this
section, and in accordance with the instructions provided in the
Procedural Instructions for Treasury Tax and Loan Depositaries, to cover
100 percent of the
[[Page 18]]
amount of the special direct investments to be received.
(b) Remittance Option. Prior to crediting deposits to its Treasury
tax and loan account, a Remittance Option depositary shall pledge
collateral security in accordance with the requirements of paragraph
(c)(1), (d), and (e) of this section in an amount which is sufficient to
cover the maximum balance in the tax and loan account at the close of
business each day, less recognized insurance coverage.
(c) Deposits of securities. (1) Collateral security required under
paragraphs (a)(1) and (b) of this section shall be deposited with the
Federal Reserve Bank of the district, or with a custodian or custodians
within the United States designated by the Federal Reserve Bank, under
terms and conditions prescribed by the Federal Reserve Bank.
(2)(i) Collateral security required under paragraph (a)(2) of this
section shall be pledged under a written security agreement on a form
provided by the Federal Reserve Bank of the district. The collateral
security pledged to satisfy the requirements of paragraph (a)(2) of this
section may remain in the pledging depositary's possession and the fact
that it has been pledged shall be evidenced by advices of custody to be
incorporated by reference in the written security agreement. The written
security agreement and all advices of custody covering collateral
security pledged under that agreement shall be provided by the
depositary to the Federal Reserve Bank of the district. Collateral
security pledged under the agreement shall not be substituted for or
released without the advance written approval of the Federal Reserve
Bank of the district, and any collateral security subject to the
security agreement shall remain so subject until an approved
substitution is made. No substitution or release shall be approved until
an advice of custody containing the description required by the written
security agreement is received by the Federal Reserve Bank of the
district.
(ii) Treasury's security interest in collateral security pledged by
a depository in accordance with paragraph (c)(2)(i) of this section to
secure special direct investments is perfected without the Treasury's
taking possession of the collateral security for a period of not to
exceed 21 days from the day of receipt of the special direct investment.
(d) Acceptable securities. Unless otherwise specified by the
Secretary of the Treasury, collateral security pledged under this
section may be transferable securities of any of the classes listed
below. Collateral will be accepted at values assigned by the Federal
Reserve Bank of the district.
(1) Obligations issued or fully insured or guaranteed by the United
States or any U.S. Government agency, and obligations of Government-
sponsored corporations which under specific statute may be accepted as
security for public funds.
(2) Obligations issued or fully guaranteed by the International Bank
for Reconstruction and Development, the Inter-American Development Bank
or the Asian Development Bank.
(3) Obligations partially insured or guaranteed by any U.S.
Government agency.
(4) Notes representing loans to students in colleges or vocational
schools which are insured either by Federal insurance or by a State
agency or private nonprofit institution or organization administering a
student loan insurance program in accordance with a formal agreement
with the Commissioner of Education under the provisions of the Higher
Education Act of 1965, as amended, 20 U.S.C. 1001, or the National
Vocational Student Loan Insurance Act of 1965, as amended, 20 U.S.C.
981.
(5) Obligations issued by States of the United States.
(6) Obligations of Puerto Rico.
(7) Obligations of counties, cities, and other governmental
authorities and instrumentalities which are not in default as to
payments on principal or interest.
(8) Obligations of domestic corporations which may be purchased by
banks as investment securities under the limitations established by
Federal bank regulatory agencies.
(9) Commercial and agricultural paper and bankers' acceptances
approved by the Federal Reserve Bank of the district.
[[Page 19]]
(10) Zero-coupon obligations of the U.S. Treasury and the Resolution
Funding Corporation.
(e) Assignment of securities. A tax and loan depositary that pledges
securities which are not negotiable without its endorsement or
assignment may furnish, in lieu of placing its unqualified endorsement
on each security, an appropriate resolution and irrevocable power of
attorney authorizing the Federal Reserve Bank to assign the securities.
The resolution and power of attorney shall conform to such terms and
conditions as the Federal Reserve Bank shall prescribe.
(f) Effecting payments of principal and interest on securities
pledged as collateral subsequent to the insolvency of a depositary--(1)
General. In the event of the depositary's insolvency or closure, or in
the event of the appointment of a receiver, conservator, liquidator or
other similar officer to terminate its business, the depositary agrees
that all principal and interest payments on any security pledged to
protect the note account (if applicable) and the Treasury tax and loan
account, due as of the date of the insolvency or closure, or thereafter
becoming due, shall be held separate and apart from any other assets and
shall constitute a part of the pledged security available to satisfy any
claim of the United States.
(2) Payment procedures. (i) Subject to the waiver in paragraph
(f)(2)(iii) of this section, each depositary (including, with respect to
such depositary, an assignee for the benefit of creditors, a trustee in
bankruptcy, or a receiver in equity) shall immediately remit each
payment of principal and/or interest received by it with respect to
collateral pledged pursuant to this section to the Federal Reserve Bank
of the district, as fiscal agent of the United States, and in any event
shall so remit no later than 10 days after receipt of such a payment.
(ii) Subject to the waiver in paragraph (f)(2)(iii) of this section,
each obligor on a security pledged by a depositary pursuant to this
section shall make each payment of principal and/or interest due with
respect to such security directly to the Federal Reserve Bank of the
district, as fiscal agent of the United States.
(iii) The requirements of paragraphs (f)(2) (i) and (ii) of this
section are hereby waived for only so long as a pledging depositary
remains solvent. The foregoing waiver is terminated without further
action immediately upon insolvency of a pledging depositary or, if
earlier, upon notice by the Treasury or the Federal Reserve Bank of the
district of such termination. For purposes of this paragraph, a
depositary is insolvent when, voluntarily or by action of competent
authority, it is closed because of present or prospective inability to
meet the demands of its depositors or shareholders.
Subpart E--Miscellaneous Provisions
Sec. 203.15 Termination of contract.
(a) Termination by the Treasury. The Secretary of the Treasury may
terminate the contract of a depositary at any time upon notice to that
effect to that depositary effective on the date set forth in the notice.
(b) Termination by the depositary. A depositary may terminate its
depositary contract by submitting notice to that effect in writing to
the Federal Reserve Bank of the district effective at a prospective date
set forth in the notice.
Sec. 203.16 Implementing instructions.
A Federal Reserve Bank is authorized to issue instructions
consistent with these regulations for carrying out the requirements of
this part that shall be binding upon depositaries located in its
district.
Sec. 203.17 Effective date.
This revision of this part is proposed to be effective on August 2,
1993.
PART 204 [RESERVED]
PART 205--RULES AND PROCEDURES FOR FUNDS TRANSFERS--Table of Contents
Sec.
205.1 Purpose.
205.2 Scope of part.
205.3 Definitions.
[[Page 20]]
Subpart A--Negotiation of Intergovernmental Agreements for Financing
Federal Assistance Programs--Interest Liabilities on Intergovernmental
Funds Transfers
205.4 Scope of subpart.
205.5 [Reserved]
205.6 Funding techniques.
205.7 Requesting and transferring funds.
205.8 Clearance patterns.
205.9 Treasury-State agreements.
205.10 Funding of indirect costs and administrative cost grants.
205.11 Federal interest liabilities.
205.12 State interest liabilities.
205.13 Interest calculation.
205.14 Direct costs of implementation.
205.15 Annual reports.
205.16 Interest payment.
205.17 Compliance and oversight.
205.18 Appeals and dispute resolution.
Appendix A to Subpart A of Part 205--Definition of Major Federal
Assistance Program
Subpart B--Potential Liabilities on Intergovernmental Funds Transfers
Included in the Catalog of Federal Domestic Assistance but Otherwise
Generally Excluded From Subpart A
205.19 Scope of subpart.
205.20 Cash advances.
205.21 Federal agency oversight responsibilities.
205.22 State noncompliance.
205.23 Failure to make funds available.
Subpart C [Reserved]
Authority: 5 U.S.C. 301; 31 U.S.C. 321, 3335, 6501, 6503.
Source: 57 FR 60676, Dec. 21, 1992, unless otherwise noted.
Sec. 205.1 Purpose.
Subparts A and B of this part implement the Cash Management
Improvement Act and prescribe rules and procedures for the transfer of
funds between the Federal Government and the States for Federal grant
and other programs. Subpart C of this part is reserved and, if issued,
may implement other authorities and govern transactions outside the
scope of subparts A and B.
Sec. 205.2 Scope of part.
(a) Subparts A and B apply to programs listed in the Catalog of
Federal Domestic Assistance, Pursuant to chapter 61 of title 31, United
States Code.
(b) This part does not generally apply to direct loan programs.
(c) This part does not apply to payments made to States acting as
vendors on Federal contracts, which are subject to the Prompt Payment
Act of 1982, as amended, 31 U.S.C. 3901 et seq., Office of Management
and Budget (OMB) Circular A-125 ``Prompt Payment,'' and 48 CFR part 32.
(d) This part does not apply to the Tennessee Valley Authority (TVA)
or programs administered by the TVA.
Sec. 205.3 Definitions.
For the purpose of this part:
Administrative cost grant means a grant exclusively for
administrative expenses under a program with separate grant awards for
benefit payments and administrative expenses.
Auditable means the sources of data and information for a
calculation are readily available, fully documented, and verifiable,
such that the calculation can be replicated and proven to comply with
all pertinent standards.
Authorized State official means a person with the authority under
the laws of a State to make commitments on behalf of the State for the
purposes of this regulation, or that person's official designee as
certified in writing.
Check means a negotiable demand draft or warrant.
Clearance pattern means a frequency distribution showing the
proportion of a total amount disbursed that is debited against the
payor's bank account each day after the disbursement.
Current project cost means a cost for which the liability has been
recorded on or after the day on which a State last requested funds for
the project.
Day means a calendar day unless otherwise specified.
Disburse means to issue a check or initiate an electronic funds
transfer payment.
Discretionary grant project means a project for which a Federal
agency is statutorily authorized to exercise judgment in awarding a
grant and in selecting a grantee, generally through a competitive
process.
[[Page 21]]
Drawdown means a process whereby a State requests and receives
Federal funds.
Electronic funds transfer (EFT) means, in the context of Federal
payments to States, the delivery of funds through wire transfer or the
Automated Clearing House.
Equivalent rate means auction average equivalent yield, also known
as the auction average investment rate of 13-week Treasury bills.
Federal agency means an executive agency as defined by section 102
of title 31, United States Code, exclusive of the TVA.
Federal-State agreement means an agreement between a State and a
Federal program agency specifying terms and conditions for carrying out
a program or group of programs, but does not mean a Treasury-State
Agreement described in Sec. 205.9.
Fiscal year means, unless otherwise indicated, a State's budget year
ending in the specified calendar year.
Issue checks means to release or distribute checks to the payees.
Major Federal assistance program is defined in appendix A to subpart
A of this part.
Obligational authority means the existence of a definite commitment
on the part of the Federal Government to provide appropriated funds to a
State to carry out specified programs, whether the commitment is
executed before or after a State pays out funds for program purposes.
This term means that an obligation to a State has been executed and does
not refer to the amount of budgetary resources available.
Pay out means to debit the payor's bank account.
Pay out funds for program purposes means, in the context of State
payments, to debit a State account for the purpose of making a payment
to:
(1) A person or entity that is not considered part of the State
pursuant to the definition of ``State'' in this section, or
(2) A State entity for the procurement of goods or services for the
direct benefit or use of the payor State entity or the Federal
Government.
Program means the range of activities encompassed under, and
classified by, a Catalog of Federal Domestic Assistance number (CFDA ).
Refund means a recovery of funds previously paid out for program
purposes.
Related banking costs means stand-alone, non-credit services which
are considered necessary and/or customary for sustaining an account in a
financial institution, whether in commercial financial institutions or
State Treasurer accounts. Investment service fees are not related
banking costs.
Request for funds means a solicitation for funds that is completed
and submitted in accordance with Federal agency guidelines.
Secretary means the Secretary of the United States Department of the
Treasury. The Financial Management Service (FMS) is the Secretary's
representative in all matters concerning this part, unless otherwise
specified.
State means a State of the United States, the District of Columbia,
the Commonwealth of Puerto Rico, the Commonwealth of the Northern
Mariana Islands, American Samoa, Guam, the Virgin Islands, and an
agency, instrumentality, or fiscal agent of a State so defined, but does
not mean a local government or an Indian tribal government.
(1) A State agency or instrumentality is any organization of the
primary government of the State financial reporting entity, as defined
by Generally Accepted Accounting Principles, excluding institutions of
higher education, hospitals, and nonprofit organizations.
(2) A fiscal agent of a State is an entity that pays, collects, or
holds Federal funds on behalf of the State in furtherance of a Federal
program, excluding private nonprofit community organizations.
Trust fund for which the Secretary is the trustee means a trust fund
administered by the Secretary.
[57 FR 60676, Dec. 21, 1992, as amended at 59 FR 28262, June 1, 1994]
[[Page 22]]
Subpart A--Negotiation of Intergovernmental Agreements for Financing
Federal Assistance Programs--Interest Liabilities on Intergovernmental
Funds Transfers
Sec. 205.4 Scope of subpart.
(a) Initial programs. From the later of July 1, 1993, or the first
day of a State's 1994 fiscal year, to the end of a State's 1994 fiscal
year, this subpart applies, at a minimum, to the following programs,
provided they meet the threshold for major Federal assistance programs
in the State:
Alcohol and Drug Abuse and Mental Health Services Block Grant (CFDA
93.992);
Chapter 1 Programs--Local Educational Agencies (CFDA 84.010);
Child Support Enforcement (CFDA 93.023);
Family Support Payments to States (CFDA 93.020);
Foster Care--Title IV-E (CFDA 93.658);
Highway Planning and Construction (CFDA 20.205);
Job Opportunities and Basic Skills Training (CFDA 93.021)
Job Training Partnership Act (CFDA 17.250);
Low-Income Home Energy Assistance (CFDA 93.028);
Medical Assistance Program (CFDA 93.778);
National School Lunch Program (CFDA 10.555);
Nutrition Assistance for Puerto Rico (CFDA 10.566).
Pell Grant Program (CFDA 84.063);
Rehabilitation Services--Basic Support (CFDA 84.126);
Social Services Block Grant (CFDA 93.667);
Special Education--State Grants (CFDA 84.027);
Special Supplemental Food Program for Women, Infants, and Children (CFDA
10.557);
State Administration Matching Grants--Food Stamp Program (CFDA 10.561);
Supplemental Security Income (CFDA 93.807);
Unemployment Insurance (CFDA 17.225);
(b) Threshold of materiality. From the later of July 1, 1994, or the
beginning of a State's 1995 fiscal year, and thereafter, this subpart
applies, at a minimum, to all programs that meet the threshold for major
Federal assistance programs in a State.
(c) Determining major Federal assistance programs. Unless otherwise
specified in a Treasury-State Agreement, major Federal assistance
programs will be determined from the most recent Single Audit data
available from the U.S. Bureau of the Census and, if necessary, other
data from the most recent fiscal year for which funding can be
documented.
(d) Covering additional programs. A State and the FMS may agree, in
a Treasury-State Agreement, to cover additional programs under this
subpart. However, the FMS has unilateral authority to require a State
and a Federal agency to cover additional programs under this subpart if
a State or a Federal agency fails to comply with subpart B of this part,
as set forth in Secs. 205.22 and 205.23.
(e) Programs not covered by this subpart. Programs in the Catalog of
Federal Domestic Assistance that are not covered by this subpart are
subject to subpart B of this part.
(f) Grace period for colleges and universities. Unless otherwise
specified in a Treasury-State Agreement, this subpart does not apply to
a State institution of higher education prior to a State's 1995 fiscal
year, notwithstanding any other provision of this section.
[57 FR 60676, Dec. 21, 1992, as amended at 59 FR 51855, Oct. 13, 1994]
Sec. 205.5 [Reserved]
Sec. 205.6 Funding techniques.
(a) Zero balance accounting. Zero balance accounting is a method of
transferring Federal funds to a State based on the actual amount of
funds that are paid out by the State each day after a disbursement.
Neither the Federal Government nor a State will incur an interest
liability when this funding technique is properly applied.
(b) Estimated clearance. Estimated clearance is a method of
transferring Federal funds to a State based on the estimated amount of
funds that are
[[Page 23]]
paid out by the State each day after a disbursement. Neither the Federal
Government nor a State will incur an interest liability when this
funding technique is properly applied.
Example: A State mails $1 million in checks to benefit recipients
under a Federally funded program. The State has developed the following
clearance pattern for the program, based on when checks historically
have been presented for payment:
------------------------------------------------------------------------
Percentage
Day of dollars
paid out
------------------------------------------------------------------------
0 (checks mailed).......................................... 0
1.......................................................... 0
2.......................................................... 0
3.......................................................... 0
4.......................................................... 40
5.......................................................... 30
6.......................................................... 15
7.......................................................... 10
8.......................................................... 5
------------------------------------------------------------------------
On Day 3, the State requests 40 percent of the funds disbursed, or
$400,000, and the Federal agency deposits funds in the State account on
Day 4 to coincide with the expected presentment of 40 percent of the
total disbursement. On Day 4, the State requests 30 percent of the funds
to pay for checks presented on Day 5, and so on. Furthermore, if the
State draws down $400,000 to pay for checks presented on Day 4, neither
the State nor the Federal Government will incur an interest liability if
the amount of checks actually presented is more or less than $400,000.
Over the long term, the amounts drawn down and the amounts of checks
presented for payment will converge to the historical clearance pattern.
(c) Pre-issuance funding. Pre-issuance funding is a method of
transferring Federal funds to a State prior to the day the State issues
checks or initiates EFT payments. When this funding technique is
applied, a State will incur an interest liability to the Federal
Government from the day Federal funds are credited to a State account to
the day the State pays out the funds for programs purposes.
Example: Three business days before a State issues $1 million in
checks, it requests $1 million from a Federal agency, which deposits the
funds in a State account the next day. The State has developed the
following clearance pattern, based on when the State's checks
historically have been presented for payment:
------------------------------------------------------------------------
Percent of
Day dollars
paid out
------------------------------------------------------------------------
0 (funds deposited)........................................ 0
1.......................................................... 0
2 (checks issued).......................................... 0
3.......................................................... 0
4.......................................................... 0
5.......................................................... 40
6.......................................................... 30
7.......................................................... 15
8.......................................................... 10
9.......................................................... 5
------------------------------------------------------------------------
The State will owe the Federal Government 5 days of interest on 40
percent of the funds, or $400,000, since that amount will be paid out
for checks presented 5 days after Federal funds are deposited in a State
account. The State will owe 6 days of interest on 30 percent of the
funds, or $300,000, 7 days of interest on 15 percent of the funds, and
so on.
(d) Average clearance. Average clearance is a method of transferring
funds to a State based on the dollar-weighted average number of days
required for funds to be paid out by the State after a disbursement.
Neither the Federal Government nor a State will incur an interest
liability when this funding technique is properly applied.
Example: A State mails $1 million in checks to contractors for a
Federally funded program. The State has developed the following
clearance pattern, based on when checks historically have been presented
for payment, and has determined the average day of clearance, weighted
by dollar amount, to be 5 days after checks are issued:
------------------------------------------------------------------------
Percent
of Factor (day
Day dollars x
paid out percentage)
------------------------------------------------------------------------
0 (checks issued)................................ 0
1................................................ 0
2................................................ 0
3................................................ 0
4................................................ 40 1.60
5................................................ 30 1.50
6................................................ 15 0.90
7................................................ 10 0.70
8................................................ 5 0.40
Average day of clearance......................... ........ 5.10
------------------------------------------------------------------------
The State requests $1 million on day 4 and receives that amount on day
5, which is the dollar-weighted average number of days required for
checks to be presented at the State's bank, and neither the State nor
the Federal Government incurs an interest liability.
(1) In determining a dollar-weighted average day of clearance,
fractions of days are rounded to the nearest whole number.
[[Page 24]]
(2) The standards and maintenance requirements for clearance
patterns, as set forth in Sec. 205.8, apply for average day of clearance
calculations.
(e) Reimbursable funding. Reimbursable funding is a method of
transferring Federal funds to a State after the State has paid out its
own funds for program purposes. After June 30, 1994, reimbursable
funding is prohibited, except where mandated by Federal law.
Sec. 205.7 Requesting and transferring funds.
(a) Electronic funds transfer. To the maximum extent practicable, a
Federal agency shall use EFT for transfers of funds to a State.
(b) Minimizing the time between transfer and payment. A State and a
Federal agency shall minimize the time elapsing between the transfer of
funds from the United States Treasury and the pay out of funds for
program purposes by a State, whether the transfer occurs before or after
the pay out.
(c) Procedures for funding techniques. Unless otherwise specified in
a Treasury-State Agreement, a State and a Federal agency shall adhere to
the following procedures for each funding technique:
(1) Zero balance accounting. A State shall request funds the same
day it pays out funds for program purposes, and a Federal agency shall
deposit funds in a State account the same day it receives a request for
funds.
(2) Estimated clearance. A State shall request funds 1 business day
prior to the day it expects to pay out funds, in accordance with a
clearance pattern, and a Federal agency shall deposit funds in a State
account the next business day after receiving a request for funds.
(3) Average clearance. A State shall request funds 1 business day
prior to the dollar-weighted average number of days required for funds
to be paid out after a disbursement, and a Federal agency shall deposit
funds in a State account the next business day after receiving a request
for funds.
(4) Pre-issuance funding. A State shall request funds not more than
3 business days prior to the day on which it makes a disbursement, and a
Federal agency shall deposit funds in a State account the next business
day after receiving a request for funds.
(5) Reimbursable funding. A State shall request funds only after it
has paid out its own funds for programs purposes, and a Federal agency
shall deposit funds in a State account the next business day after
receiving a request for funds.
(d) Limiting the amount transferred. Consistent with a funding
technique and with funds transfer procedures in a Treasury-State
Agreement, a State and a Federal agency shall limit the amount of funds
transferred to a State to the minimum required to meet a State's actual,
immediate cash needs.
(e) Frequency of requests for funds. A Federal agency shall allow a
State to submit requests for funds, or bills, as often as daily.
However, this requirement shall not be construed to change Federal
agency guidelines defining a properly completed request for funds.
(f) Prohibition of reimbursable funding requirements. A Federal
agency may not require a State to use reimbursable funding, unless
mandated by Federal law.
Sec. 205.8 Clearance patterns.
(a) Use and basis of development. When required by a funding
technique, a clearance pattern will be used to schedule the transfer of
funds to a State and to support the calculation of interest. A State
may:
(1) Develop a separate clearance pattern for an individual program;
or
(2) Develop a composite clearance pattern for a logical group of
programs that have the same disbursement method and that reasonably can
be expected to have comparable clearance activity. A composite clearance
pattern for a group of programs must be applied separately to each
program in the group when scheduling funds transfers or calculating
interest; or
(3) Develop a clearance pattern on another basis that is agreed upon
by the FMS.
(b) Standards for clearance patterns. A State shall ensure that a
clearance pattern accurately represents the flow of Federal funds and
that a clearance pattern reflects seasonal or other periodic variations
in clearance activity. A
[[Page 25]]
State shall ensure that a clearance pattern is auditable.
(c) Maintaining clearance patterns. (1) If a State has actual or
constructive knowledge, at any time, that a clearance pattern does not
correspond to a program's clearance activity, or if a program undergoes
operational changes that may affect clearance activity, the State shall:
(i) Immediately notify the FMS in writing of the program requiring a
new clearance pattern, and
(ii) Develop a new clearance pattern and certify that it corresponds
to a program's clearance activity.
(2) If a Federal agency has actual or constructive knowledge, at any
time, that a State's clearance pattern does not correspond to a
program's clearance activity, the agency shall notify the FMS in writing
of the State and the program. The FMS shall immediately notify the State
of the programs, and the State shall either:
(i) Develop a new clearance pattern and certify that it corresponds
to a program's clearance activity, or
(ii) Re-certify the accuracy of the existing clearance pattern.
(d) Certification for accuracy. An authorized State official shall
certify that a clearance pattern corresponds to a program's clearance
activity. If a State develops a clearance pattern for a program or a
group of programs, as set forth in paragraphs (a)(1) and (a)(2) of this
section, an authorized State official shall re-certify the accuracy of
the clearance pattern at least every 5 years. If a State develops a
clearance pattern on another basis, as set forth in paragraph (a)(3) of
this section, the FMS may prescribe requirements for re-certifying the
accuracy of the clearance pattern.
Sec. 205.9 Treasury-State agreements.
(a) Purpose. A State may enter into a Treasury-State Agreement with
the FMS to set forth terms and conditions for implementing this subpart.
(b) Components. A Treasury-State Agreement pursuant to this subpart
must include, but will not be limited to, the following:
(1) Programs. Consistent with Sec. 205.4, a Treasury-State Agreement
must indicate the programs subject to this subpart.
(2) Funding techniques. A Treasury-State Agreement must indicate the
funding techniques to be applied to the programs subject to this
subpart, in accordance with the following:
(i) Zero Balance Accounting, Estimated Clearance, and Pre-Issuance
Funding are techniques available for selection by a State, subject to
the approval of the FMS.
(ii) A State may request approval to use the Average Clearance
funding technique, but must provide the FMS with adequate justification
for its use in lieu of Estimated Clearance.
(iii) Reimbursable funding is available for selection by a State,
subject to the approval of the FMS, only for a program for which the
State used reimbursable funding prior to the later of July 1, 1993, or
the first day of a State's 1994 fiscal year. However, reimbursable
funding is not available for selection by a State for the programs
listed in Sec. 205.4(a).
(iv) A State and the FMS may negotiate the use of other mutually
agreed upon funds transfer procedures.
(v) A State may apply more than one funding technique or funds
transfer procedure to a program with multiple cash flows.
(3) Interest calculation method. Consistent with Sec. 205.13, a
Treasury-State Agreement must indicate the method a State will use to
calculate and document interest liabilities pursuant to this subpart.
(4) Clearance pattern method. Consistent with Sec. 205.8, a
Treasury-State Agreement must indicate the method and standards a State
will use to develop and maintain clearance patterns pursuant to this
subpart.
(5) Direct costs. Consistent with Sec. 205.14, a Treasury-State
Agreement must specify the types of direct costs a State expects to
incur.
(6) Reverse flow programs. Consistent with Secs. 205.8 and 205.13,
with respect to programs for which the Federal Government makes payments
on behalf of a State, a Treasury-State Agreement must indicate the
methods a Federal agency will use to calculate and document interest
liabilities and to develop
[[Page 26]]
and maintain clearance patterns pursuant to this subpart.
(c) Consultation with Federal agencies. The FMS will consult with
Federal program agencies as necessary and appropriate when negotiating a
Treasury-State Agreement.
(d) Amendment. A Treasury-State Agreement may be amended by the
mutual written consent of the State and the FMS.
(e) Five-year expiration. A Treasury-State Agreement expires if it
is not amended for 5 years.
(f) Default provisions for a State without a Treasury-State
Agreement. With respect to a State that does not have a Treasury-State
Agreement in effect after the later of June 30, 1993, or the last day of
the State's 1993 fiscal year, the following apply:
(1) The FMS shall prescribe funds transfer procedures to be used by
the State and the Federal agency in implementing this subpart,
consistent with Federal and State law.
(2) The FMS shall prescribe the method for calculating interest
liabilities pursuant to this subpart.
Sec. 205.10 Funding of indirect costs and administrative cost grants.
(a) A State and the FMS may agree, in a Treasury-State Agreement, to
the following funding conventions for indirect costs and administrative
cost grants:
(1) The State will draw down a prorated amount of an administrative
cost grant on the date of the State payday. For example, the State would
draw one-third of a quarterly administrative cost grant if payroll is
monthly, or one-sixth of a quarterly administrative cost grant if
payroll is semi-monthly.
(2) If an indirect cost rate is applied to a program, the State will
include a proportionate share of the indirect cost allowance in each
drawdown by applying the indirect cost rate to the appropriate direct
costs of each drawdown.
(3) If costs must be allocated to various programs pursuant to a
labor distribution or other system under an approved cost allocation
plan, the State will draw down funds to meet cash outlay requirements
based on the most recent, certified cost allocations, with subsequent
adjustments pursuant to the actual allocation of costs.
(b) A State and the FMS may agree, in a Treasury-State Agreement,
that no interest liabilities will be incurred or calculated for indirect
costs and administrative cost grants, notwithstanding any other
provision of this subpart.
Sec. 205.11 Federal interest liabilities.
(a) General. The Federal Government will incur an interest liability
to a State if the State pays out its own funds for program purposes with
valid obligational authority under Federal law, Federal regulation, or
Federal-State agreement. A Federal interest liability will accrue from
the day a State pays out its own funds for program purposes to the day
Federal funds are credited to a State account.
(b) Late appropriations. If a State pays out its own funds for
program purposes due to delay in passage of a Federal appropriations
act, the Federal Government will incur an interest liability if an
appropriations act, as enacted, covers the period of the State's
expenditure and permits payment for expenses already incurred by the
State.
(c) Lack of obligational authority other than occurring through late
appropriations. If a State pays out its own funds for program purposes
without obligational authority, the Federal Government will incur an
interest liability if the lack of obligational authority is not the
result of limitation, reduction, or termination of the program and where
obligational authority is subsequently established to permit payment for
the State's expenditure.
(d) Federal Highway Trust Fund. The following applies to programs
and projects funded out of the Federal Highway Trust Fund,
notwithstanding any other provision of this section:
(1) If a State does not request funds at least weekly for current
project costs, a Federal interest liability will not accrue prior to the
day a State submits a request for funds.
(2) If a State pays out its own funds in the absence of a project
agreement or in excess of the Federal obligation in a project agreement,
the Federal Government will not incur an interest liability.
[[Page 27]]
(e) Discretionary grant project approval. If a State pays out its
own funds prior to the earlier of:
(1) The day a Federal agency officially notifies the State in
writing that a discretionary grant project has been approved, or
(2) The date that a Federal agency is otherwise obligated in law to
pay the discretionary grant project to the State, the Federal Government
will not incur an interest liability, notwithstanding any other
provision of this section.
(f) Authorizations and appropriations for future years. If a State
pays out its own funds prior to the availability of Federal funds that
have been authorized or appropriated for a future Federal fiscal year,
the Federal Government will not incur an interest liability,
notwithstanding any other provision of this section.
(g) Reverse flow programs. With respect to programs for which the
Federal Government makes payments on behalf of a State, such as
Supplemental Security Income, the Federal Government will incur an
interest liability if State funds are in a Federal Government account
prior to the day a Federal agency pays out funds for program purposes. A
Federal interest liability will accrue from the day State funds are
credited to the Federal Government's account to the day the Federal
agency pays out the State funds for program purposes.
Sec. 205.12 State interest liabilities.
(a) General. A State will incur an interest liability to the Federal
Government if Federal funds are in a State account prior to the day the
State pays out funds for program purposes. A State interest liability
will accrue from the day Federal funds are credited to a State account
to the day the State pays out the Federal funds for program purposes.
(b) Refunds. A State will incur an interest liability to the Federal
Government on a refund transaction of Federal funds. A State interest
liability will accrue from the day the refund is credited to a State
account to the day the refund is either paid out for program purposes or
credited to a Federal Government account. However, a State may adopt a
transaction threshold not exceeding $10,000, below which the State will
not incur an interest liability on a refund transaction.
(c) Reverse flow programs. With respect to programs for which the
Federal Government makes payments on behalf of a State, such as
Supplemental Security Income, a State will incur an interest liability
to the Federal Government if a Federal agency pays out Federal funds for
program purposes on behalf of the State. A State interest liability will
accrue from the day the Federal agency pays out Federal funds for
program purposes to the day State funds are credited to the Federal
Government's account.
(d) Exception. Notwithstanding any other provision in this section,
a State will not incur an interest liability to the Federal Government
if Federal law requires that the interest a State earns on Federal funds
must be retained by the State or used for program purposes. This
exception shall not be construed to exempt a program from any other
provision of this subpart.
Sec. 205.13 Interest calculation.
(a) State responsibilities. A State shall calculate Federal interest
liabilities and State interest liabilities for each program subject to
this subpart, except as provided for in paragraph (b) of this section.
(b) Reverse flow programs. A Federal agency shall calculate Federal
interest liabilities and State interest liabilities for a program
subject to this subpart for which the Federal agency makes payments on
behalf of a State, such as Supplemental Security Income.
(c) Start date. Interest liabilities begin accruing the later of
July 1, 1993, or the first day of a State's 1994 fiscal year.
(d) Interest rate. The interest rate for all interest liabilities
pursuant to this subpart is the annualized rate equal to the average
equivalent yields of 13-week Treasury Bills auctioned during a State's
fiscal year, except as provided for in paragraph (i) of this section.
The FMS will provide this rate to each State.
(e) Interest calculation method and standards. A State shall
calculate and report interest liabilities on the basis
[[Page 28]]
of its fiscal year. A State shall ensure that its interest calculations
are auditable. As set forth in Sec. 205.9, a Treasury-State Agreement
must include the method a State will use to calculate and document
interest liabilities pursuant to this subpart.
(f) Statistical sampling. If a State uses statistical sampling to
calculate interest, the State must randomly sample transactions for each
program subject to this subpart to ensure, at a minimum, a 95 percent
confidence interval subject to a .3 dollar-weighted day bound of error
estimate.
(g) Transactions prior to a State's 1994 fiscal year. A State shall
not include in an interest calculation a transaction in which either the
transfer of funds to the State or the pay out of funds for program
purposes by the State occurs prior to the later of July 1, 1993, or the
first day of the State's 1994 fiscal year.
(h) Funds withdrawn from a State account in the Unemployment Trust
Fund (UTF). A State shall account for the actual interest earnings and
the related banking costs attributable to funds withdrawn from the
State's account in the UTF.
(1) If funds withdrawn from the several accounts in the UTF are
commingled in the State's Unemployment Insurance benefit payment
account, the funds withdrawn from the State's account must be allocated
a pro rata share of the actual interest earnings and related banking
costs of the benefit payment account. Funds withdrawn from the State's
account in the UTF that are included in investment pools must be
allocated a pro rata share of interest earnings of the investment pool.
(2) Notwithstanding any other provision of this subpart, a State's
interest liability on funds withdrawn from its account in the UTF
consists of the actual interest earnings less the related banking costs
of such funds, and shall be deposited in the State's account in the UTF.
(3) This paragraph (h) does not apply to funds withdrawn from the
Federal Employees Compensation Account and the Extended Unemployment
Compensation Account in the UTF.
Sec. 205.14 Direct costs of implementation.
(a) Definition. Direct costs of implementing this subpart are those
costs necessary for the development and maintenance of clearance
patterns and those costs necessary to perform the actual calculation of
interest liabilities. Direct costs do not include expenses incurred for
upgrading or modernizing of accounting systems.
(b) Reimbursement of direct costs. A State will be compensated
annually for the direct costs of implementing this subpart, subject to
the following conditions and limitations.
(1) Treasury-State Agreement. A State must have a Treasury-State
Agreement with the FMS, as set forth in Sec. 205.9.
(2) Direct cost claim. A State must submit a claim for direct costs
with its Annual Report, as set forth in Sec. 205.15(c).
(3) Documentation. A State must maintain documentation to
substantiate its claim for direct costs.
(4) Eligibility of costs. Direct costs in excess of $50,000 in any
year are not eligible for reimbursement, unless a State can justify to
the FMS that it would be unable to develop clearance patterns or perform
the actual calculation of interest without incurring such costs.
(5) Costs incurred in prior years. Direct costs incurred prior to a
State's most recently completed fiscal year are not eligible for
reimbursement, excepting costs incurred prior to the first day of a
State's 1994 fiscal year and claimed for reimbursement with the State's
first Annual Report submitted pursuant to this subpart.
(6) Costs incurred prior to July 22, 1991. Direct costs incurred
prior to July 22, 1991, are not eligible for reimbursement, unless a
State makes separate application for such costs, with adequate
justification and documentation.
(7) Review by the FMS. The FMS will review all direct cost claims
for reasonableness. Unreasonable cost claims, as determined by the FMS,
will not be reimbursed, notwithstanding any other provision of this
section.
(8) Method of reimbursement. The FMS will effect direct cost
reimbursement by reducing the State interest liability
[[Page 29]]
and adjusting the Federal interest liability for each State, to the
extent allowed by the following limitations:
(i) Interest liabilities for programs funded out of trust funds for
which the Secretary is trustee may not be reduced or adjusted; and
(ii) The aggregate Federal interest liability for all States may not
increase.
(c) Application of cost principles. A State shall not include direct
costs of implementing this subpart, as defined in paragraph (a) of this
section, in the development of its Statewide cost allocation plan, as
provided for in OMB Circular A-87. All other costs incurred by a State
to implement this subpart are subject to the procedures and principles
of OMB Circular A-87.
(d) Sunset review. By July 1, 1996, the FMS will review the policies
in this section to determine their effectiveness.
Sec. 205.15 Annual reports.
(a) A State shall submit an Annual Report to the FMS by December 31
accounting for the interest liabilities of the State's most recently
completed fiscal year. The format of the Annual Report will be
prescribed by the FMS and will include, at a minimum, the following:
(1) The Federal interest liability for each program subject to this
subpart;
(2) The State interest liability for each program subject to this
subpart, with the State interest liability on refunds for each program
reported separately;
(3) The total Federal interest liability for all programs subject to
this subpart;
(4) The total State interest liability for all programs subject to
this subpart;
(5) The net total interest owed by the State or the Federal
Government;
(6) For information purposes, not for the calculation of interest,
the actual interest earnings on and the related banking costs for funds
drawn from the State's account in the UTF.
(b) A State shall submit its Annual Report both in hard copy and
either on computer diskette or by other electronic means prescribed by
the FMS.
(c) A State may submit as part of its Annual Report a claim for
reimbursement of the direct costs of implementing this subpart, in
accordance with Sec. 205.14. An authorized State official shall certify
the accuracy of a State's direct cost claim.
(d) An authorized State official shall certify the accuracy of a
State's Annual Report.
(e) Reverse flow programs. With respect to a program for which the
Federal Government makes payments on behalf of a State, a Federal agency
shall provide an interest report to a State by December 1 for the
State's most recently completed fiscal year. The interest report will
include the State interest liability and the Federal interest liability
for the program, including the Federal interest liability on refund
transactions of $10,000 or more. The Federal agency shall certify the
accuracy of the interest report. A State shall incorporate the interest
report in its Annual Report.
(f) The FMS will distribute Annual Reports to Federal agencies.
Sec. 205.16 Interest payment.
(a) Adjusted interest liabilities. The FMS will adjust a State's
total interest liability and the Federal Government's total interest
liability to a State to effect direct cost reimbursement, as set forth
in Sec. 205.14(b)(8).
(b) Net interest payment. The adjusted total State interest
liability and the adjusted total Federal interest liability for each
State will be offset to determine the net interest payable to or from a
State. The payment of net interest to or from a State for its most
recently completed fiscal year will occur no later than March 1.
(c) Disputed amounts. If the amount of interest payable is disputed
according to the provisions of Sec. 205.18, payment must occur for any
undisputed portions. The interest in dispute must be paid within 14 days
of receipt of the decision by the Assistant Commissioner, Federal
Finance, as set forth in Sec. 205.18.
Sec. 205.17 Compliance and oversight.
(a) State coordinator. A State shall designate an official
representative with the statutory or administrative authority to
coordinate all interaction with the Federal Government concerning this
subpart, and shall notify the
[[Page 30]]
FMS of the representative's name and title in writing.
(b) Federal agency coordinator. A Federal Agency shall designate an
official representative to coordinate all interaction with the FMS and
the States concerning this subpart, and shall notify the FMS of the
representative's name and title in writing.
(c) Recordkeeping. A State shall maintain records supporting
interest calculations, clearance patterns, direct costs, and other
functions directly pertinent to the implementation and administration of
this subpart.
(d) Record retention. A State shall retain the records related to
implementation of this subpart of each fiscal year for 3 years from the
date the State submits its Annual Report, or until any dispute or action
involving the records and documents is completed, whichever is later.
(e) Availability of records. The FMS, the Comptroller General, and a
Federal agency shall have the right of access to all records for the
purpose of verifying interest calculations, clearance patterns, direct
cost claims, and the State's accounting for Federal funds.
(f) Records for reverse flow programs. With respect to programs for
which the Federal Government makes payment on behalf of a State, a
Federal agency shall maintain records supporting interest calculations
and clearance patterns. A Federal agency shall retain such records for 3
years from the date the Federal agency submits its interest calculations
to a State, as set forth in Sec. 205.15(e), or until any dispute or
action involving the records is completed, whichever is later. The FMS,
the Comptroller General, and a State shall have the right of access to
all records for the purpose of verifying interest calculations,
clearance patterns, and the Federal agency's accounting for State funds.
(g) State audits. A State's implementation of this subpart is
subject to audit in accordance with chapter 75 of title 31, United
States Code, ``Requirements for Single Audits.''
(h) Federal agency compliance reviews. A Federal agency's
implementation of this subpart is subject to review pursuant to
procedural instructions issued by the FMS.
(i) Reviewing Annual Reports. The FMS will distribute Annual Reports
to Federal agencies, as set forth in Sec. 205.15(f). Upon request by the
FMS, a Federal agency shall review a State's Annual Report for accuracy
and reasonableness and shall report its findings to the FMS.
(j) Federal agency noncompliance. If a Federal agency egregiously or
repeatedly causes Federal interest liabilities or fails to comply with
this subpart, the FMS may collect a charge from the Federal agency in an
amount the FMS determines to be the cost to the general fund of the
Treasury caused by such noncompliance, in accordance with the following:
(1) The FMS will issue a Notice of Assessment to the Federal agency,
indicating the nature of the noncompliance, the amount of the charge,
the manner in which it was calculated, and the right to file an appeal.
(2) A charge for noncompliance, to the maximum extent practicable,
will be paid out of appropriations available for the Federal agency's
operations and will not be paid from amounts available for funding the
programs of the Federal agency.
(3) If a Federal agency does not pay a charge for noncompliance
within 45 days after receiving a Notice of Assessment, the FMS will
debit the appropriate Federal agency account.
(4) A Federal interest liability resulting from circumstances beyond
the control of a Federal agency does not constitute noncompliance.
(k) State noncompliance. If a State materially fails to comply with
this subpart, the FMS may take one or more of the following actions, as
appropriate in the circumstances:
(1) Request a Federal agency or the General Accounting Office to
conduct an audit of the State to determine interest owed to the Federal
Government, and implement procedures to recover such interest; or
(2) Deny the reimbursement of all or a part of the State's direct
cost claim; or
(3) Take other remedies legally available.
[[Page 31]]
(l) Failure to request funds. If a State repeatedly or deliberately
fails to request funds in accordance with the procedures established for
its funding techniques, as set forth in Sec. 205.7 or in a Treasury-
State Agreement, the FMS may deny the State payment or credit for any
resultant Federal interest liability, notwithstanding any other
provision of this part.
Sec. 205.18 Appeals and dispute resolution.
(a) Appeal by a Federal agency. A Federal agency may appeal any
charge assessed by the FMS for noncompliance by submitting an appeal in
writing to the Assistant Commissioner, Federal Finance (hereinafter
Assistant Commissioner), of the FMS, within 45 days of the date of the
Notice of Assessment. The appeal shall include a concise factual
statement of the conditions leading to the Notice of Assessment, the
basis of the appeal, and the action requested by the agency. In the
event of an appeal, the charge imposed under the Notice of Assessment
will be deferred pending the results of the appeal.
(1) Appeal review process. The Assistant Commissioner will review
the Notice of Assessment, any documentation supporting the Notice, and
the written appeal from the agency. If based on this review, the
Assistant Commissioner finds that additional information is required,
the Assistant Commissioner may request to meet with the agency, as well
as other parties selected by the Assistant Commissioner, as part of the
review process.
(2) Decision. The Assistant Commissioner will issue a written
decision within 30 days of receipt of the appeal. The Assistant
Commissioner may unilaterally extend this period for an additional 30
days if required. The decision of the Assistant Commissioner whether to
uphold the Notice of Assessment, to overturn the Notice, or to mandate
some other action will be stated in the written decision. Other actions
mandated may include a reduced charge, a deferral of the charge, an
alternate solution to cash management improvement, or any combination
thereof. The basis of the decision, the amount of the charge and the
effective date of the charge will be stated in the written decision. The
effective date of the charge may be retroactive to the date indicated in
the Notice of Assessment.
(b) Resolution of disputes. If a dispute arises from the
implementation or administration of this subpart, the following
resolution mechanism is available:
(1) The aggrieved party may submit a written appeal to the Assistant
Commissioner. The aggrieved party shall concurrently serve a copy of the
written appeal to the other concerned parties.
(2) Within 30 days of the submission of the written appeal, the
aggrieved party shall submit to the Assistant Commissioner a written
statement not exceeding 15 pages, with supporting documentation in
appendices, that articulates the dispute, the aggrieved party's
position, and the relief sought. The aggrieved party shall concurrently
serve its statement upon the other concerned parties.
(3) Within 30 days of receipt of the aggrieved party's statement,
the responding party may submit a response statement not exceeding 15
pages, with supporting documentation in appendices, to the Assistant
Commissioner. The responding party shall concurrently serve its response
statement to the other concerned parties.
(4) The Assistant Commissioner will issue a written decision within
30 days after the period for the submission of the response statement.
The Assistant Commissioner may unilaterally extend the deadline for
issuing a decision by 30 days if required. The Assistant Commissioner's
decision shall be the final agency action on the part of the FMS for the
purposes of judicial review procedures under the Administrative
Procedures Act, 5 U.S.C. 701-706, unless either party invokes the
provisions of the Administrative Dispute Resolution Act of 1990, 5
U.S.C. 581-593 (ADRA), in accordance with the following.
(i) Either party may seek to invoke the assistance of a neutral
party appointed under the provisions of the ADRA within 30 days of
receipt of the Assistant Commissioner written decision. The party
invoking the ADRA shall notify both the Assistant Commissioner and the
responding party in
[[Page 32]]
writing. With the written mutual consent of the parties and the
Assistant Commissioner, a neutral party appointed under the provisions
of the ADRA may assist in resolving the dispute through the use of
alternate means of dispute resolution as defined in the ADRA.
(ii) If the party invoking the ADRA is unable to reach a
satisfactory resolution of the problem using the ADRA, the Assistant
Commissioner's decision shall be the final agency action on the part of
the FMS for purposes of the judicial review procedures under the
Administrative Procedure Act, 5 U.S.C. 701-706.
[57 FR 60676, Dec. 21, 1992; 58 FR 4460, Jan. 14, 1993]
Appendix A to Subpart A of Part 205--Definition of Major Federal
Assistance Program
Major Federal Assistance Program, for State governments having
Federal assistance expenditures between $100,000 and $100,000,000 means
any program for which Federal expenditures during the applicable year
exceed the larger of $300,000, or 3 percent of such total expenditures.
Where total expenditures during the applicable year exceed $100,000,000,
the following criteria apply:
------------------------------------------------------------------------
Total expenditure of Federal financial assistance for all Major
programs Federal
------------------------------------------------------------ Assistance
Program
means any
But less program
More than than that
(billion) exceeds
(million)
------------------------------------------------------------------------
$100 million.................................. $1 $3
1 billion..................................... 2 4
2 billion..................................... 3 7
3 billion..................................... 4 10
4 billion..................................... 5 13
5 billion..................................... 6 16
6 billion..................................... 7 19
Over 7 billion................................ ........... 20
------------------------------------------------------------------------
Subpart B--Potential Liabilities on Intergovernmental Funds Transfers
Included in the Catalog of Federal Domestic Assistance but Otherwise
Generally Excluded From Subpart A
Sec. 205.19 Scope of subpart.
This subpart applies to programs in the Catalog of Federal Domestic
Assistance that are not subject to subpart A.
Sec. 205.20 Cash advances.
(a) Cash advances to a State shall be limited to the minimum amounts
needed and shall be timed to be in accord only with the actual,
immediate cash requirements of the State in carrying out a program or
project. The timing and amount of cash advances shall be as close as is
administratively feasible to the actual cash outlay by the State for
direct program costs and the proportionate share of any allowable
indirect costs.
(b) Neither a State nor the Federal Government will incur an
interest liability on the transfer of funds for a program subject to
this Subpart.
Sec. 205.21 Federal agency oversight responsibilities.
(a) A Federal agency shall review the practices of States as
necessary to ensure compliance with this Subpart. A Federal agency shall
notify the FMS if a State demonstrates an unwillingness or inability to
comply with this Subpart.
(b) A Federal agency shall formulate procedural instructions
specifying the methods for carrying out the responsibilities of this
section.
Sec. 205.22 State noncompliance.
If a State demonstrates an unwillingness or inability to comply with
this Subpart, the FMS may require the State and a Federal agency to
cover additional programs under subpart A of this part, notwithstanding
any other provision of this part.
Sec. 205.23 Failure to make funds available.
Consistent with program purposes and regulations, if a Federal
agency demonstrates an unwillingness or inability to make Federal funds
available to a State as needed to carry out a program, the FMS may
require the State and the Federal agency to cover additional programs
under subpart A of this part, notwithstanding any other provision of
this part.
[[Page 33]]
Subpart C [Reserved]
PART 206--MANAGEMENT OF FEDERAL AGENCY RECEIPTS, DISBURSEMENTS, AND OPERATION OF THE CASH MANAGEMENT IMPROVEMENTS FUND--Table of Contents
Sec.
206.1 Scope and application.
206.2 Definitions.
206.3 Billing policy and procedures.
206.4 Collection and payment mechanisms.
206.5 Collection and deposit procedure exceptions.
206.6 Cash management planning and review.
206.7 Compliance.
206.8 Appeals.
206.9 Charges.
206.10 Operation of and payments from the Cash Management Improvements
Fund.
Authority: 5 U.S.C. 301; 31 U.S.C. 321, 3301, 3302, 3321, 3327,
3328, 3332, 3335, 3720, and 6503.
Source: 59 FR 4538, Jan. 31, 1994, unless otherwise noted.
Sec. 206.1 Scope and application.
(a) This subpart applies to all Government departments and agencies
in the executive branch (except the Tennessee Valley Authority) and all
monies collected and disbursed by these departments and agencies. This
subpart does not apply to interagency transfers of funds, except that
agencies are to use the Treasury's On-Line Payment and Collection (OPAC)
system for interagency payments between executive agencies, when cost-
effective.
(b) Policies and guidelines are prescribed for promoting efficient,
effective cash management through improved billing, collection, deposit,
and payment of funds. These objectives seek to improve funds
availability and the efficiency and effectiveness with which funds are
transferred.
(c) Authority to implement this regulation has been delegated within
the Department of the Treasury (hereinafter, ``Treasury'') to the
Commissioner (hereinafter, ``the Commissioner'') of the Financial
Management Service (hereinafter, ``the Service).'' The Service maintains
the final authority as granted under the Deficit Reduction Act of 1984
to specify use of a particular method or mechanism of collection and
deposit and to recover costs that result from noncompliance. Authority
is also granted to the Service, under the Cash Management Improvement
Act of 1990, as amended by the Cash Management Improvement Act
Amendments of 1992, to provide for the timely disbursement of funds. An
agency will require the collection or disbursement of funds by the
agency via EFT as a provision of new contractual agreements or renewal
of existing contracts that impact agency collection or payment
mechanisms.
Sec. 206.2 Definitions.
For the purpose of this part, the following definitions apply:
Agency means any department, instrumentality, office, commission,
board, service, Government corporation, or other establishment in the
executive branch, except the Tennessee Valley Authority.
Billing means any of a variety of means by which the Government
places a demand for payment against an entity that is indebted to the
Government. The term encompasses invoices, notices, initial demand
letters, and other forms of notification.
Cash management means practices and techniques designed to
accelerate and control collections, ensure prompt deposit of receipts,
improve control over disbursement methods, and eliminate idle cash
balances. ``Cash Management Review Process'' means periodic examinations
of collection and disbursement cash flows to ensure that the most
effective mechanisms are used to process the funds.
Collection means the transfer of monies from a source outside the
Federal Government to an agency or to a financial institution acting as
an agent of the Government.
Collection mechanism means any one of a number of tools or systems
by which monies are transferred to the Government from a source outside
the Government.
Cutoff time means a time predesignated by a financial institution
beyond which transactions presented or actions requested will be
considered the next banking day's business.
Day means a calendar day unless otherwise specified.
[[Page 34]]
Deposit means as a noun, money that is being or has been presented
for credit to the Treasury. Deposits can be made by an agency or
directly by the remitter. All such transfers are effected through a
Federal Reserve Bank or other financial institution. As a verb, deposit
means the act of presenting monies for credit to the Treasury by an
official of an agency.
Depositary means a bank or other financial institution that has been
authorized by the Treasury to receive monies for credit to the Treasury.
Disburse means the initiation of an Electronic Funds Transfer (EFT)
transaction or other methods of drawing funds from accounts maintained
by the Government.
Electronic funds transfer (EFT) means any transfer of funds, other
than a transaction originated by cash, check or similar paper
instrument, that is initiated through an electronic terminal, telephone,
computer, or magnetic tape, for the purpose of ordering, instructing, or
authorizing a financial institution to debit or credit an account. The
term includes, but is not limited to, Fed Wire transfers, Automated
Clearing House (ACH) transfers, transfers made at automatic teller
machines (ATM) and Point-of-Sale (POS) terminals (to include use of the
Government small purchase card), and other means of credit card
transactions.
Fund means the Cash Management Improvements Fund.
Monies (or ``receipts'') means EFT transactions, currency,
negotiable instruments, and/or demand deposits owed to or collected by
an agency.
Next-day deposit means a deposit made before the cutoff time on the
day following the day on which the funds were received by an agency. For
example, if an agency receives funds for deposit at 3 p.m. on Monday and
transmits the deposits to the depositary by 2 p.m. on Tuesday (the
depositary's next cutoff time), then next-day deposit requirements are
met.
Payment means a sum of money transferred to a recipient in
satisfaction of an obligation. A payment includes any Federal Government
benefit or nonbenefit payment.
(1) A benefit payment is a disbursement for a Federal Government
entitlement program or annuity. Benefit payments may be one-time or
recurring payments including, but not limited to, payments for Social
Security, Supplemental Security Income, Black Lung, Civil Service
Retirement, Railroad Retirement Board Retirement/Annuity, Department of
Veterans Affairs Compensation/Pension, Central Intelligence Agency
Annuity, Military Retirement Annuity, Coast Guard Retirement, and
Worker's Compensation.
(2) A nonbenefit payment is a Federal Government disbursement other
than a benefit payment. Nonbenefit payments may be one-time or recurring
payments including, but not limited to, payments for vendors, Internal
Revenue Service tax refunds, Federal salaries and allotments therefrom,
grants, travel disbursements and reimbursements, loans, principal and/or
interest related to U.S. savings bonds, notes, and other savings-type
securities, and payments of service fees to organizations qualified to
issue and/or redeem savings bonds.
Point-of-sale (POS) terminal means an automated credit card or debit
card transaction device.
Presumed EFT means that agencies will presume that new payment
recipients will elect EFT as the means of payment delivery. Enrollment
forms for use in establishing routine payments will be designed with
this approach in mind, to obtain the required written consent of the
recipient.
Recipient means a person, corporation, or other public or private
entity receiving benefit or nonbenefit payments from the Government.
Same-day deposit means a deposit made before the cutoff time on the
day on which the funds were received by an agency. For example, if an
agency receives funds for deposit at 10 a.m. on Monday and transmits the
deposits by 2 p.m. on Monday (the depositary's cutoff time), then a
same-day deposit has been achieved.
Service means the Financial Management Service, Department of the
Treasury.
Treasury Financial Manual (TFM) means the manual issued by the
Service containing procedures to be observed by all Government
departments
[[Page 35]]
and agencies in relation to central accounting, financial reporting, and
other Governmentwide fiscal responsibilities of the Department of the
Treasury. Volume I, Chapter 6-8000 (I TFM 6-8000) contains agency cash
management procedures to be followed pertaining to these regulations.
Copies of the TFM are available free to Government agencies. Others who
are interested in ordering a copy may call (202) 208-1819 or write the
Directives Management Branch, Financial Management Service, Department
of the Treasury, Liberty Center (UCP-741), Washington, DC 20227 for
further information.
Sec. 206.3 Billing policy and procedures.
The billing process is considered an integral part of an effective
cash management collection program. In those situations where bills are
required and the failure to bill would affect the cash flow, bills will
be prepared and transmitted within 5 business days after goods have been
shipped or released, services have been rendered, or payment is
otherwise due. An agency may prepare and transmit bills later than the
5-day timeframe if it can demonstrate that it is cost-effective to do
so. In addition, the bill must include the terms and dates of payments,
and late payment provisions, if applicable. Terms and dates of payments
will be consistent with industry practices. I TFM 6-8000 describes
detailed billing policies, procedures, and industry standards for
agencies.
Sec. 206.4 Collection and payment mechanisms.
(a) All funds are to be collected and disbursed by EFT when cost-
effective, practicable, and consistent with current statutory authority.
(b) Collections and payments will be made by EFT when cost-
effective, practicable, and consistent with current statutory authority.
When consistent with these criteria, specific cash flows will utilize
EFT as follows:
(1) Fees/fines. EFT will be adopted as the presumed method of
collecting fees and fines, especially when these collection cash flows
are recurring or of large dollar amounts.
(2) Tax collections. EFT will be adopted as the primary method for
collecting taxes. EFT mechanisms may include ACH credit or debit cards.
(3) Salary payment. Presumed EFT will be adopted as the method for
paying employees, and entrance enrollment forms for establishing regular
payments will be designed to use this approach.
(4) Vendor and miscellaneous payments. Each department and agency
will exercise its authority under the Federal Acquisition Regulation to
require that all contractors are paid by EFT, unless a determination is
made that it is not in the best interest of the Federal Government to do
so. EFT will be adopted as the standard method of payment for all
Federal program payments originated by agencies or their agents.
(5) Benefit payments. EFT will be presented to new beneficiaries as
the presumed method for receiving benefits. EFT payment methods, such as
Electronic Benefit Transfer, will be adopted and implemented to make EFT
accessible to all benefit recipients.
(c)(1) Selection of the best collection and payment mechanism is a
joint responsibility of an agency and the Service. An agency has
responsibility for conducting cash management reviews; gathering volume
and dollar data relative to the operation of the systems; and funding
any implementation and operational costs above those normally funded by
Treasury. The Service is the required approval authority when an agency
desires to convert from one collection mechanism to another. The
Service's written approval is required prior to an agency entering into
new contractual agreements or renewing existing contracts for agency
collections or payments systems. Agencies will follow guidelines for the
cost-effective usage of collection and payment mechanisms, published in
the TFM, Volume I, Part 6-8000, in their selection and recommendation to
the Service of an appropriate funds transfer mechanism. The agency will
provide the Service with a recommended mechanism for any new or modified
cash flows. The Service will review the recommendations, approve a
mechanism, and assist with implementation.
[[Page 36]]
(2) If an agency proposes a collection or payment mechanism other
than EFT, it may be required to provide a cost-benefit analysis to
justify its use. Cost/benefit analyses must include, at a minimum, known
or estimated agency personnel costs, costs of procurement, recurring
operational costs, equipment and system implementation and maintenance
costs, costs to payment recipients, and costs to remitters. Agencies
should consult with Treasury to determine the need to include interest
costs associated with float in their computations of benefits and costs.
(d) An agency will require the collection of funds by the agency to
be made via EFT and the disbursement of funds by the agency to be made
via EFT as a provision of new contractual agreements or renewal of
existing contracts that impact agency collection or payment mechanisms,
when cost-effective, practicable, and consistent with current statutory
authority.
Sec. 206.5 Collection and deposit procedure exceptions.
(a) The following collection and deposit timeframe requirements are
to be followed in exception cases where EFT mechanisms are not utilized:
(1) An agency will achieve same-day deposit of monies. Where same
day deposit is not cost-effective or is impracticable, next day deposit
of monies must be achieved except in those cases covered by I TFM 6-
8000.
(2) Deposits will be made at a time of the day prior to the
depositary's specified cutoff time, but as late as possible in order to
maximize daily deposit amounts.
(3) When cost-beneficial to the Government, an agency may make
multiple deposits.
(b) Any additional exceptions to the above policies are listed in I
TFM 6-8000.
Sec. 206.6 Cash management planning and review.
(a) An agency shall periodically perform cash management reviews to
identify areas needing improvement.
(b) As part of its cash management review process, an agency is
expected to document cash flows in order to provide an overview of its
cash management activities and to identify areas that will yield savings
after cash management initiatives are implemented. The Service will
evaluate an agency's EFT policy and application, to include mitigating
circumstances that may prevent the use of EFT, as part of the cash
management reviews.
(c) An agency's cash management reviews will provide the basis for
identification of improvements and preparation of cash flow reports for
submission to the Service as prescribed by I TFM 6-8000. That Chapter
provides requirements for an agency in performing periodic cash
management reviews, identifying improvements, and preparing cash flow
reports. In addition, the Chapter describes the timing and content of
periodic reports that must be submitted by an agency to the Service on
progress made in implementing cash management initiatives and associated
savings.
(d) The Service will periodically review an agency's cash management
program to ensure that adequate progress is being made to improve
overall cash management at an agency. As part of its oversight
authority, the Service may visit an agency and review all or specific
cash management activities of an agency. An agency will be notified in
advance of the Service's review and will be required to provide the
Service with documentation of the agency cash management review within
the timeframes required by I TFM 6-8000.
Sec. 206.7 Compliance.
(a) The Service will monitor agency cash management performance.
Part of the monitoring process will include establishing implementation
end dates for conversion to, or expansion of, EFT mechanisms, as well as
the identification of mitigating circumstances that may prevent the use
of EFT.
(b) In cases where an agency fails to meet a scheduled date within
its control, or where an agency converts to a less cost-effective
transfer mechanism without prior, written Service approval as determined
in accordance with Sec. 206.4(c), the Service will send a formal Notice
of Deficiency to an agency's designated cash management official.
[[Page 37]]
A separate Notice will be sent for each initiative.
(1) Collections cash flows. For collections cash flows, the Notice
of Deficiency will include the nature of the deficiency, the amount of
the proposed charge, the method of calculation, the right to file an
appeal, and the date the charge will be imposed in the absence of an
appeal. The amount of the charge will be equal to the cost of such
noncompliance to the Treasury's General Fund.
(2) Payments cash flows. [Reserved]
Sec. 206.8 Appeals.
(a) An agency that chooses to file an appeal must submit the appeal
in writing to the Commissioner within 45 days of the date of the Notice
of Deficiency. In the event of an appeal, the charge imposed under
Notice of Deficiency will be deferred pending the results of the appeal.
If an appeal is not submitted (i.e., received by the Commissioner)
within 45 days, the amount indicated in the Notice of Deficiency will be
charged per Sec. 206.9(a).
(b) The appeal will contain the elements and follow the submission
procedures specified in I TFM 6-8000. The appeal will include the
background leading to the Notice of Deficiency, the basis of the appeal,
and the action requested by an agency. An agency should state its
disagreements with the Notice of Deficiency which may include cost-
benefit factors, the amount of the charge, and other items.
(c) An agency must state what action it requests in its appeal. An
agency may request that the Notice of Deficiency be completely
overturned for cost-benefit or other considerations. Alternatively, an
agency may request a reduced charge, deferral of the charge, an
alternative solution to cash management improvement, or a combination of
these actions.
(d) Appeals Board. The Commissioner will refer the appeal to an
Appeals Board. The Appeals Board will consist of three members--two
permanent members and one temporary member. The permanent members will
be the Deputy Chief Financial Officer, Department of the Treasury, and
the Assistant Commissioner, Federal Finance, of the Service. The
temporary board member will be a cash management official from an agency
other than the agency appealing the Notice of Deficiency. The Board will
be convened on an as-needed basis. The order of agency assignment to the
Board will be published by Treasury in Volume I, Chapter 6-8000 of the
TFM. The Deputy Chief Financial Officer, Department of the Treasury, the
Assistant Commissioner, Federal Finance, and the designated agency cash
management official may delegate their responsibility to a staff
subordinate having sufficient experience in cash management matters. The
Assistant Commissioner's designee may be from any area other than that
which issued the Notice of Deficiency.
(e) Appeal review process. The Appeals Board will review the Notice
of Deficiency, any additional information submitted by the Service, and
the written appeal from an agency. Based on this review, the Board may
decide additional investigation is required. The Board may request an
agency and/or the Service to meet with the Board as part of the review
process.
(f) Appeal finding. A written majority decision will be rendered by
the Appeals Board within 30 days of receipt of the appeal. The Board may
extend this period for an additional period, not to exceed 30 days, if
required. The Appeals Board will notify the Commissioner and the agency
of the decision. The decision of the Board whether to uphold the Notice
of Deficiency, to overturn the Notice of Deficiency, or to mandate some
other action will be stated in the finding. Other action mandated may
include a reduced charge, a deferral of the charge, an alternate
solution to cash management improvement, or a combination of these
actions. The basis of the decision, the amount of the charge, and the
effective date of the charge will be stated in the finding. The
effective date of the charge may be retroactive to the date indicated in
the Notice of Deficiency.
(g) Any terms related to charge deferral shall be stated; the
Service and an agency will be required to submit evidence of compliance
to such terms at a future specified date. At this future time, the
Appeals Board will review the evidence of compliance. Based
[[Page 38]]
on this evidence, the Board will decide whether to impose a charge.
Sec. 206.9 Charges.
(a) Within 30 days of the effective date of the charge or the
appeals decision, an agency must submit appropriate accounting
information to the Service's Assistant Commissioner, Federal Finance.
The charge will be calculated following procedures outlined in I TFM 6-
8000, and will be assessed for each month that noncompliance continues.
(b) Collection noncompliance. In the case of cash management
collection noncompliance, an agency will absorb the charge from amounts
appropriated or otherwise made available to carry out the program to
which the collections relate. Charges collected from an executive agency
in the case of cash management collection noncompliance will be
deposited in the Cash Management Improvements Fund as outlined in
Sec. 206.10.
(c) Payment noncompliance. [Reserved]
(d) If an agency does not voluntarily pay the charge assessed under
Sec. 206.9(a), the Service will debit the appropriate account
automatically. By failing to pay voluntarily the charges as required by
the Deficit Reduction Act of 1984, an agency will be deemed to authorize
the automatic debit to its account.
(e) The Commissioner will formally terminate the charge when the
Commissioner has determined that an agency has complied. In addition, on
an annual basis, the Commissioner will review an agency's performance
and calculation of the charge, and will notify an agency in writing of
any changes to the amount being charged.
Sec. 206.10 Operation of and payments from the Cash Management Improvements Fund.
(a) The Cash Management Improvements Fund (Fund) will be operated as
a revolving fund by the Service. Charges assessed under Sec. 206.9(a)
for cash management collection noncompliance will be deposited into the
Fund according to the Deficit Reduction Act of 1984. The Service will
also disburse any payments from the Fund based on projects selected by a
project selection and approval committee.
(b) Committee composition. The committee will consist of three
members--two permanent members and one temporary member. The permanent
members will be the Commissioner and the Assistant Commissioner, Federal
Finance, of the Service. The temporary committee member will be a cash
management official from an agency other than an agency being considered
for funds. The order of agency assignment to the Committee will be
published in a TFM Bulletin, when funds are first deposited to the Fund.
Decisions of the project selection and approval committee cannot be
appealed. Agencies will be notified of any available amounts in the Fund
and requirements to apply for such monies through a TFM bulletin.
(c) As provided by 31 U.S.C. 3720, sums in the Fund will be
available without fiscal year limitation for the payment of expenses
incurred in developing improved methods of collection and deposit and
the expenses incurred in carrying out collections and deposits using
such methods, including the costs of personal services and the costs of
the lease or purchase of equipment and operating facilities.
(d) In addition to all reports required by law and regulation, for
each fiscal year during which there is a balance in Fund, the Service
will prepare and publish, by the 60th day following the close of the
fiscal year, a full report on payments, receipts, disbursements,
balances of the Fund, and full disclosure on projects financed by the
Fund.
PART 208--FEDERAL AGENCY DISBURSEMENTS--Table of Contents
Sec.
208.1 Scope and application.
208.2 Definitions.
208.3 Agency responsibilities.
208.4 Recipient responsibilities.
Appendix A to Part 208--Model Certification
Authority: 5 U.S.C. 301; 31 U.S.C. 321, 3301, 3302, 3321, 3325,
3327, 3328, 3332, 3335, and 6503.
Source: 61 FR 39258, July 26, 1996, unless otherwise noted.
Sec. 208.1 Scope and application.
This part applies to all Federal payments made by an agency and
requires
[[Page 39]]
such payments to be made by electronic funds transfer, unless a waiver
is granted. This part does not apply to payments under the Internal
Revenue Code of 1986.
Sec. 208.2 Definitions.
(a) Agency means any department, agency, or instrumentality of the
United States Government, or a corporation owned or controlled by the
Government of the United States.
(b) Benefit payment means a payment for a Federal Government
entitlement program or for an annuity (other than a Federal retirement
payment), including, but not limited to, payments for Social Security,
Supplemental Security Income, Black Lung, Railroad Retirement Board
Retirement and Annuity, Department of Veterans Affairs Compensation and
Pension, and Worker's Compensation.
(c) Electronic funds transfer means any transfer of funds, other
than a transaction originated by cash, check, or similar paper
instrument, that is initiated through an electronic terminal, telephone,
computer, or magnetic tape, for the purpose of ordering, instructing, or
authorizing a financial institution to debit or credit an account. The
term includes, but is not limited to, Automated Clearing House
transfers, Fedwire transfers, and transfers made at automated teller
machines and point-of-sale terminals.
(d) Federal payment means any payment made by an agency.
(1) The term includes, but not is limited to:
(i) Federal wage, salary, and retirement payments;
(ii) Vendor and expense reimbursement payments;
(iii) Benefit payments; and
(iv) Miscellaneous payments, including but is not limited to,
interagency payments, grants, loans, fees, principal, interest, and
discounts related to U.S. transferable and non-transferable securities,
overpayment reimbursements, and payments under Federal insurance or
guarantee programs for loans.
(2) The term ``Federal payment'' does not apply to payments under
the Internal Revenue Code of 1986.
(e) Financial institution means any bank, savings bank, savings and
loan association, credit union, or similar institution.
(f) Payment means a sum of money transferred to a recipient in
satisfaction of an obligation.
Sec. 208.3 Agency responsibilities.
(a) Paying by electronic funds transfer. Subject to Sec. 208.3 (b),
and notwithstanding any other provision of law, all Federal payments
made by an agency to a recipient who becomes eligible for the payment on
or after July 26, 1996, shall be made by electronic funds transfer. For
purposes of this subsection, ``becomes eligible for'' means:
(1) In the case of benefit payments, the recipient applies for that
type of benefit on or after July 26, 1996;
(2) In the case of Federal wage or salary payments, the recipient
has a date of entry on duty with the agency on or after July 26, 1996;
(3) In the case of Federal retirement payments, a recipient applies
for retirement from an agency on or after July 26, 1996;
(4) In the case of vendor payments, the payment is made under a
contract or purchase order resulting from a solicitation issued on or
after July 26, 1996;
(5) In the case of grants, an application is filed or renewed on or
after July 26, 1996; and
(6) For all other Federal payments, as determined by the agency.
(b) Waiver. The head of an agency shall waive the application of
subsection 208.3 (a) only upon receipt of written certification that the
recipient does not have an account with a financial institution or an
authorized payment agent.
(c) Agency implementation plan. If the head of an agency determines
that the agency cannot make a Federal payment or class of Federal
payment in accordance with Sec. 208.3 (a) due to the inability of the
agency's system to make the payment(s) by electronic funds transfer,
then the agency shall notify the Service immediately in writing and
shall submit an implementation plan to the Service no later than January
1, 1997. The plan shall:
[[Page 40]]
(1) Identify the specific type of payment(s) that cannot be made by
electronic funds transfer;
(2) Describe the system problem that prevents the agency from making
the payment(s) by electronic funds transfer; and
(3) Outline a proposed solution and provide a time table for solving
the problem.
Sec. 208.4 Recipient responsibilities.
Each recipient of a Federal payment shall designate a financial
institution or authorized payment agent through which a Federal payment
may be made or certify in writing that such recipient does not have an
account with a financial institution or an authorized payment agent; and
provide the agency with the information requested by the agency in order
to effect the payment.
Appendix A to Part 208--Model Certification
This appendix contains model language which may be used to qualify
for a waiver under Sec. 208.3(b). Use of the model language is optional.
An agency may customize the model language by making appropriate
changes.
Any payment that we make to you will be made by electronic funds
transfer unless you certify in writing that you do not have an account
with a financial institution or an authorized payment agent.
I certify that I do not have an account with a financial institution
or an authorized payment agent.
_______________________________________________________________________
Signature
_______________________________________________________________________
PART 210--FEDERAL PAYMENTS THROUGH FINANCIAL INSTITUTIONS BY THE AUTOMATED CLEARING HOUSE METHOD--Table of Contents
Subpart A--General
Sec.
210.1 Scope of regulations.
210.2 Definitions.
210.3 Policy for payments by the Automated Clearing House method.
210.4 Recipients.
210.5 The Federal Government.
210.6 Federal Reserve Banks.
210.7 Financial institutions.
210.8 Prenotification.
210.9 Timeliness of action.
210.10 Liability of, and acquittance to, the United States.
210.11 Fraud.
Subpart B--Repayment of Benefit Payments
210.12 Death or legal incapacity of recipients or death of
beneficiaries.
210.13 Collection procedures.
210.14 Notice to Account Owners of collection action.
210.15 Erroneous death information.
Subpart C--Discretionary Salary Allotments
210.16 General.
210.17 Criteria and standards.
210.18 Method of payment.
Authority: 5 U.S.C. 5525; 12 U.S.C. 391; 31 U.S.C. 321; and other
provisions of law.
Source: 52 FR 2406, Jan. 22, 1987, unless otherwise noted.
Subpart A--General
Sec. 210.1 Scope of regulations.
This part governs Federal Government payments (benefit and
nonbenefit) made by the Automated Clearing House (ACH) Method through
Federal Reserve Banks, and financial institutions to recipients
maintaining accounts at financial institutions. It describes the
procedures to be used, defines the obligations and responsibilities of
the participants in ACH payments, and states terms of a contract between
the Federal Government and those participants. It also prescribes the
liabilities of financial institutions to the Federal Government arising
from payments to deceased or incompetent recipients, and deceased
beneficiaries of Federal benefit payments. Regulations promulgated by
the Bureau of the Public Debt governing Treasury Direct payments made by
the ACH Method for principal and interest on Government securities can
be found at part 357 of this title; regulations promulgated by the
Bureau of the Public Debt governing State and Local Government series
payments made by the ACH for principal and interest on Government
securities can be found at part 344 of this title.
[54 FR 20569, May 12, 1989]
[[Page 41]]
Sec. 210.2 Definitions.
As used in this part, unless the context otherwise requires:
Account, recipient's account, designated account and appropriate
account mean the account specified by a recipient or beneficiary into
which payments under this part shall be deposited. These terms also
include an account on which the financial institutions has, after
execution of an enrollment, made changes to the account number of the
type of account as authorized by Sec. 210.4(f).
Automated Clearing House (ACH) means a payment mechanism through
which participating institutions exchange funds electronically.
Allotment means a recurring specified deduction from pay of an
employee for a legal purpose authorized by an employee to be paid to a
recipient.
Allotter means the employee from whose pay an allotment is made.
Banking day means that part of any business day on which an office
of a financiaI institution is open to the public for carrying out its
banking functions.
Beneficiary means a person other than a recipient who is entitled to
receive the benefit of all or part of a benefit payment from the Federal
Government.
Benefit Payment is a payment of money for any Federal Government
entitlement program or annuity. It can be either a one-time or recurring
payment. These payments include, but are not limited to, the following
nine:
(1) Social Security.
(2) Supplemental Security Income.
(3) Black Lung.
(4) Civil Service Retirement.
(5) Railroad Retirement Board Retirement/Annuity.
(6) Veterans Administration Compensation/Pension.
(7) Central Intelligence Agency Annuity.
(8) Military Retirement Annuity.
(9) Coast Guard Retirement.
Business day means any day other than a Saturday, Sunday or legal
holiday.
Discretionary allotment means an amount that a Federal Government
employee is permitted, by the employing Federal agency, to direct
voluntarily to be deducted from his or her net salary amount and paid to
a recipient. The aggregate amount of discretionary allotments may not
exceed the net pay due the employee for each pay period after all
deductions required by law are subtracted.
Employee means an employee of a Federal Government agency, unless
otherwise provided.
Federal Reserve Bank means any Federal Reserve District Head Office,
branch, or regional check processing center that processes ACH payments
for the Federal Government.
Financial Institution means any bank, savings bank, savings and loan
association, credit union, or similar institution.
Nonbenefit Payment means any Federal Government payment other than a
benefit payment. Nonbenefit payments can be one-time or recurring
payments, including but not limited to: vendor payments, Internal
Revenue Service tax refunds, Federal Government salary payments, and
allotments therefrom, grants, travel disbursements and reimbursements,
loans, and payments of principal and/or interest related to United
States savings bonds, notes, and other savings-type securities, and
payments of service fees to organizations qualified to issue and/or
redeem savings bonds.
Outstanding Total means the sum of all benefit payments received
pursuant to an enrollment, after death or legal incapacity, minus any
amount returned to or recovered by the Federal Government.
Payment means a sum of money which is transferred to a recipient in
satisfaction of an obligation. A payment includes any Federal Government
benefit, or nonbenefit payment.
Payment Date means the date specified in the payment instruction for
a payment. It is the date on which the funds specified in the payment
instruction are to be available for withdrawal from the recipient's
account with the financial institution specified by the recipient, and
on which the funds are to be made available to the financial institution
by the Federal Reserve Bank with which the financial institution
maintains or utilizes an account. If the payment date is not a business
[[Page 42]]
day for the financial institution receiving a payment, or for the
Federal Reserve Bank from which it received such payment, then the next
succeeding business day for both shall be deemed to be the payment date.
Payment instruction means an order issued by the Federal Government
for the payment of money under this part. A payment instruction may be
contained on:
(1) A letter, memorandum, telegram, bill, invoice, computer printout
or similar record, or
(2) Any form of nonverbal communication, registered upon magnetic
tape, disc or any other medium designed to capture and contain in
durable form conventional signals used to electronically communicate
messages.
Prenotification means a zero dollar ACH payment instruction. It is
used to ensure that, before actual payment instructions are sent through
a Federal Reserve Bank, the financial institution will be able to credit
payments accurately to the designated account. A prenotification, if
used, will precede the relevant first dollar payment instruction by at
least ten (10) days and is constructed from a recipient's enrollment to
receive an ACH payment.
Program Agency means an agency of the Federal Government responsible
for determining and initiating a payment to be made, and includes any
department, agency, independent establishment, board, office,
commission, or other establishment in the executive, legislative, or
judicial branches of the Federal Government and any wholly-owned or -
controlled Federal Government corporation.
Recipient means a person, corporation, or other public or private
entity which is authorized by a program agency to receive benefit or
nonbenefit payments from the Federal Government. Recipient includes a
natural person or entity authorized by a program agency to receive
benefit or nonbenefit payments from the Federal Government.
[52 FR 2406, Jan. 22, 1987, as amended at 54 FR 20569, May 12, 1989]
Sec. 210.3 Policy for payments by the Automated Clearing House method.
Once an ACH enrollment has been completed, all payments covered by
that enrollment shall be made by the ACH method unless the United States
Department of the Treasury (hereafter referred to as Treasury)
determines that conditions exist that make payment by check or other
means more appropriate.
Sec. 210.4 Recipients.
(a) In order for a recipient to receive a payment by the ACH method,
the recipient shall designate the desired financial institution and
account identification at that financial institution using an enrollment
procedure prescribed by the Financial Management Service for such
payments. The title of the account so designated shall include the name
of the recipient.
(b) In executing an enrollment, a recipient:
(1) Agrees to the provisions of this part; and
(2) Authorizes the termination of any inconsistent previously
executed enrollment or inconsistent payment instructions.
(c) Once an ACH enrollment has been effected, it shall remain in
effect until it is terminated by one of the following events:
(1) A request from the recipient to the program agency to terminate
the enrollment;
(2) A change in the title of an account which removes the name of
the recipient, removes or adds the name of a beneficiary, or alters the
interest of the beneficiary;
(3) The death or legal incapacity of a recipient, or the death of
the beneficiary of a benefit payment; or
(4) The closing of the account.
Upon the occurrence of any of the foregoing events, except the death of
the recipient or beneficiary, the recipient or representative payee
shall execute a new enrollment before further payments may be credited
to that account.
(5) The closing of a financial institution, whether voluntarily or
involuntarily, without successor.
(d) A recipient who wishes to change the account or financial
institution to which payment is directed shall execute a new enrollment.
(e) A recipient of a benefit payment made under this part may
request only that the full amount of the payment be
[[Page 43]]
credited to one account on the books of a financial institution. Except
as authorized by law or other regulations, the procedures set forth in
this part shall not be used to effect an assignment of a payment.
(f) A financial institution may change the account numbers or, at
the request of the recipient, the type of the recipient's account
without executing a new enrollment provided no change is made to the
title of the account or the interest of the recipient or beneficiary in
the account. These changes must be communicated to the appropriate
program agency or agencies in accordance with implementing instructions
issued by the Federal Government.
[52 FR 2406, Jan. 22, 1987, as amended at 54 FR 20570, May 12, 1989]
Sec. 210.5 The Federal Government.
(a) The Federal agencies that perform disbursing functions will, in
accordance with the provisions of this part, issue and direct payment
instructions to the Federal Reserve Bank on whose books the financial
institution named therein maintains or utilizes an account in sufficient
time for the Federal Reserve Bank to carry out its responsibilities
under this part.
(b) Procedural instructions will be issued by the Financial
Management Service for the guidance of program agencies, Federal
agencies that perform disbursing functions, Federal Reserve Banks, and
financial institutions in the implementation of these regulations.
Sec. 210.6 Federal Reserve Banks.
(a) Each Federal Reserve Bank as Fiscal Agent of the United States
shall receive payment instructions from the Federal Government and shall
make available and pay to financial institutions amounts specified in
these payment instructions, and shall otherwise carry out the procedures
and conduct the operations contemplated under this part. Each Federal
Reserve Bank may issue operating circulars (sometimes referred to as
operating letters or bulletins) not inconsistent with this part,
governing the details of its handling of payments under this part and
containing such provisions as are required and permitted by this part.
(b) The Federal Government by its action of issuing and sending any
payment instruction contained in the media specified in Sec. 210.2(k)
shall be deemed to authorize the Federal Reserve Banks to:
(1) Pay the amount specified in the payment instruction to the debit
of the general account of the Treasury on the payment date; and
(2) Handle and act upon the payment instruction.
(c) Upon receipt of a payment instruction, a Federal Reserve Bank,
either directly or through another Federal Reserve Bank, correspondent
financial institution or service provider, shall deliver or make
available to the financial institution identified in the payment
instruction the information contained in the payment instruction no
later than the opening of business on the payment date on a medium as
prescribed by the Federal Reserve Bank.
(d) A financial institution by its action in maintaining or
utilizing an account at a Federal Reserve Bank shall be deemed to
authorize that Federal Reserve Bank to credit the amount of the payment
to the account of the financial institution on its books, or the account
of its designated correspondent maintaining an account with the Federal
Reserve Bank.
(e) A Federal Reserve Bank receiving a payment instruction from the
Federal Government shall make the amount specified in the payment
instruction available to the financial institution, referred to in
paragraph (d) of this section, on the payment date. In the case of a
Federal Government benefit or salary payment, the amount of the payment
shall be made available by the opening of business on the payment date.
(f) Each Federal Reserve Bank shall be responsible only to the
Treasury and shall not be liable to any other party for any loss
resulting from the Federal Reserve Bank's action under this section.
[52 FR 2406, Jan. 22, 1987, as amended at 54 FR 20570, May 12, 1989; 58
FR 21636, Apr. 22, 1993]
[[Page 44]]
Sec. 210.7 Financial institutions.
(a) A financial institution's execution of actions required of it in
connection with an enrollment shall constitute its agreement to the
terms of this part with respect to each payment received by it pursuant
to the enrollment. Regardless of whether it has executed an enrollment,
a financial institution's acceptance and handling of a payment issued
pursuant to this part shall constitute its agreement to the provisions
of this part.
(b) A financial institution in executing an enrollment shall be
responsible for:
(1) The completeness and accuracy of the data provided by it with
respect to the enrollment, and
(2) Verifying that the account number entered by the recipient
during enrollment corresponds to an account bearing the name of the
recipient.
(c) A financial institution wishing to terminate an enrollment shall
do so by giving written notice to the recipient. The termination shall
become effective 30 days after the financial institution has sent the
notice to the recipient. However, terminations for reasons of fraud
shall be effective immediately.
(d) A financial institution receiving a nonbenefit (except Federal
salary) payment instruction under this part shall credit the amount of
the payment to the designated account of the recipient on its books, and
it shall make the amount available on the payment date. In the case of a
Federal Government salary or benefit payment instruction, the financial
institution shall make the amount of the payment available for
withdrawal not later than the opening of business on the payment date.
Available in this paragraph means accessible through any means of access
provided by a financial institution to its customers for the recipients'
type of account, for example, automated teller machines owned by the
financial institution, or automatic transfers from the recipient's
account. If the payments or any related information received by the
financial institution from a Federal Reserve Bank do not balance; are
incomplete; are clearly erroneous on their face; or are incapable of
being processed, the financial institution, after assuring itself that
neither it nor any of its agents are responsible, shall immediately
notify the Federal Reserve Bank in order that it may deliver corrected
information to the financial institution.
(e) A financial institution receiving a payment under this part
shall credit the amount of the payment to the account specified in the
payment instruction. If the financial institution is unable to credit
the amount of the payment to the account indicated in the payment
instruction because, for example, such an account does not exist on its
books, or because in processing the payment it has reason to believe the
account indicated in the payment instruction is not the account
designated by the recipient, it shall either:
(1) Return the payment to the Federal Reserve Bank with a statement
identifying the reason therefor; or
(2) Credit the amount of the payment to the account designated by
the recipient.
A credit to any other account by a financial institution shall
constitute a breach of its warranty made by reason of paragraph (i) of
this section.
(f) A financial institution shall immediately return to the Federal
Government through the Federal Reserve Bank any payment received by the
financial institution:
(1) After termination of the enrollment pursuant to Sec. 210.4(c)(2)
and before the execution of a new enrollment;
(2) After termination of the enrollment pursuant to Sec. 210.7(c)
has become effective;
(3) After the financial institution learns of the death or legal
incapacity of the recipient, or the death of the beneficiary, of a
benefit payment, regardless of whether or not notice has been received
from the Federal Government; or
(4) After the closing of the recipient's account.
(g) A financial institution to which a payment is sent under this
part does not thereby become a Federal Government depositary and shall
not advertise itself as one because of that fact.
(h) If any change in account numbers permitted by Sec. 210.4(f) is
made by a financial institution, the financial institution shall be
liable to the recipient
[[Page 45]]
for any lost or late payment caused by the financial institution's
actions in processing the change.
(i) Each financial institution by its action of handling a payment
under this part shall be deemed to warrant to the Federal Government
that it has handled the payment in accordance with the requirements of
this part. In addition to the liability which may be imposed pursuant to
Sec. 210.11, if the foregoing warranty is breached, the financial
institution shall be liable to the Federal Government for any loss
sustained by the Federal Government, but only to the extent that the
loss was the result of the breach. Except as provided in this section
Secs. 210.10(b) and 210.11, a financial institution shall not be liable
under this part to any party for its handling of a payment.
[52 FR 2406, Jan. 22, 1987, as amended at 54 FR 20570, May 12, 1989]
Sec. 210.8 Prenotification.
(a) Regardless of whether it has participated in an enrollment, a
financial institution's acceptance and handling of a prenotification or
a payment issued pursuant to this part shall constitute its agreement to
the provisions of this part.
(b) At the discretion of the Service, a prenotification may be
originated for any ACH payment.
(c) The financial institution shall respond to the prenotification
message by midnight of the banking day following the banking day of
receipt of such prenotification if the information contained in the
message does not agree with the corresponding record of the financial
institution, or if for any reason the financial institution will not be
able to credit the payment in accordance with this part.
(d) If a financial institution does not respond to a prenotification
message within the specified time period, the financial institution
shall be deemed to have accepted the prenotification and to have
warranted to the Federal Government that it shall make the payment
available on time to the account specified in the prenotification.
[54 FR 20570, May 12, 1989]
Sec. 210.9 Timeliness of action.
If, because of circumstances beyond its control, action by the
Federal Government, a Federal Reserve Bank, or a financial institution
is delayed beyond the time prescribed for the action (including the
payment date) by this part, by the operating circulars of the Federal
Reserve Banks, or by applicable law, the time within which the action
shall be completed shall be extended for such time after the cause of
the delay ceases to operate as shall be necessary to take or complete
the action, provided the Federal Government, the Federal Reserve Bank,
or the financial institution exercises such diligence as the
circumstances require.
[52 FR 2406, Jan. 22, 1987, redesignated at 54 FR 20570, May 12, 1989]
Sec. 210.10 Liability of, and acquittance to, the United States.
(a) The United States shall be liable to a recipient for the failure
to credit the proper amount of a payment to the appropriate account of
the recipient as required by this part. This liability shall be limited
to the amount of the payment.
(b) The United States shall be liable to the financial institution,
up to the amount of the payment, for a loss sustained by the financial
institution as a result of its crediting the amount of the payment to
the account specified in the payment instruction, if the financial
institution has handled the payment in accordance with this part. The
foregoing does not extend to benefit payments received by the financial
institution after the death or legal incapacity of the recipient or
death of the beneficiary, in which event Sec. 210.11 shall govern.
(c) The crediting of the amount of a payment to the appropriate
account of a recipient on the books of the appropriate financial
institution shall constitute a full acquittance to the United States for
the amount of the payment.
[52 FR 2406, Jan. 22, 1987. Redesignated at 54 FR 20570, May 12, 1989]
Sec. 210.11 Fraud.
(a) The False Claims Act, 31 U.S.C. 3729, et seq., provides for the
recovery of damages and a civil penalty from any
[[Page 46]]
person who knowingly presents to the Federal Government, or causes to be
presented, a false or fraudulent claim for payment, or uses a false
record or statement in connection with such a claim. In addition,
criminal penalties are provided in 18 U.S.C. 1001 for knowingly making
false or fraudulent statements or representations to agencies of the
Federal Government, and in 18 U.S.C. 1002 for knowingly possessing false
documents for the purpose of enabling another to receive a payment from
the Federal Government. These provisions are in addition to the Federal
Government's remedies under common law.
(b) A financial institution shall verify the identity of any person
who initiates and executes an enrollment through such financial
institution. The Federal Government shall verify the identity of any
person who presents an enrollment to the Federal Government without
prior review or execution by a financial institution. A financial
institution that executes an enrollment in which the recipient's or
beneficiary's signature is forged or other information is falsified
shall be liable to the Federal Government for all payments made in
reliance thereon, except for the case where the beneficiary was deceased
at the time the recipient executed the enrollment and if the financial
institution had no knowledge of the beneficiary's death. However, once
the financial institution has provided written or electronic notice to
the program agency that a payment certified by the program agency has
not been received by the correct recipient or beneficiary, it shall not
be liable for any payments based on the forged, false, or fraudulent
information which are certified for payment after the date such written
or electronic notice is received by the program agency.
[52 FR 2406, Jan. 22, 1987. Redesignated and amended at 54 FR 20570, May
12, 1989; 54 FR 50618, Dec. 8, 1989]
Subpart B--Repayment of Benefit Payments
Source: 52 FR 2406, Jan. 22, 1987, unless otherwise noted.
Redesignated at 54 FR 50618, Dec. 8, 1989.
Sec. 210.12 Death or legal incapacity of recipients or death of beneficiaries.
(a) A financial institution shall be liable to the Federal
Government for the total amount of all benefit payments received after
the death or legal incapacity of the recipient or the death of the
beneficiary, except as provided in paragraph (f) of this section.
However, a financial institution may limit its liability if the
financial institution did not have knowledge of the death or legal
incapacity at the time of the deposit or withdrawal of any of the
benefit payments made after the death or legal incapacity, and if it
fulfills the requirements of this section and those of Secs. 210.12 and
210.13.
(b) Except as provided in paragraph (f) of this section, if
limitation of liability is available to a financial institution under
this part, the amount of its liability shall be:
(1) An amount equal to the amount in the recipient's or
beneficiary's account as defined in Sec. 210.12(b)(2)(i), plus.
(2) An amount equal to the benefit payments received by the
financial institution within 45 days after the death or legal incapacity
of the recipient or the death of the beneficiary; Provided, that the
financial institution will be liable only for the 45-day amount to the
extent described in Sec. 210.12(d).
(c) Although a financial institution shall be liable for an amount
equal to the amount in the recipient's or beneficiary's account, plus
the amount of benefit payments received within 45 days after the death
or legal incapacity of the recipient or the beneficiary, this part does
not authorize or direct a financial institution to debit the account of
any customer, living or deceased, including that of the recipient or
beneficiary, for the financial institution's liability to the Federal
Government under this part. The amount in the recipient's or
beneficiary's account is only a measure of the financial institution's
liability. Nothing in this part shall be construed to affect any right a
financial institution may have under State law or the financial
institution's contract with a customer to recover from the customer's
account an amount returned to the Federal Government in compliance with
this part.
[[Page 47]]
(d) A financial institution shall be deemed to have knowledge of the
death or legal incapacity of the recipient or beneficiary when it is
brought to the attention of a financial institution employee who handles
benefits payments, or when it would have been brought to that person's
attention if the financial institution had exercised due diligence. The
financial institution will be considered to have exercised due diligence
only if it maintains procedures under which, once it learns of the death
of a depositor, it determines whether its deceased depositor is a
recipient or beneficiary of benefit payments under this part, and
immediately communicates such information to the appropriate employees,
and it complies with such procedures. This obligation does not impose a
duty on a financial institution to learn of the deaths of its customers
by searching obituaries or any other means, unless it does so for
purposes other than its participation in the payment system governed by
this part.
(e) A financial institution that fails to comply timely with the
collection procedures set forth in Sec. 210.12 or the Notice to Account
Owners requirement of Sec. 210.13 may not limit its liability in
accordance with paragraph (a) of this section.
(f) A financial institution will not be liable under this part for
benefit payments made after the death of a beneficiary if the
beneficiary was deceased at the time the recipient executed an
enrollment and if the financial institution had no knowledge of the
beneficiary's death.
Sec. 210.13 Collection procedures.
The amount for which the financial institution is liable under
Sec. 210.11 shall be collected as follows:
(a) For each type of benefit payment, the Federal Government will
send a Notice of Reclamation to the financial institution. The Notice of
Reclamation will identify benefit payments sent to the financial
institution for credit to the account of a recipient or beneficiary
which should have been returned by the financial institution because of
the death or legal incapacity of a recipient or the death of a
beneficiary.
(b) Upon receipt of the Notice of Reclamation, the financial
institution must do one of the following:
(1) If the financial institution had knowledge of the death or legal
incapacity and did not immediately return to the Federal Government all
benefit payments received after it acquired that knowledge, the
financial institution shall immediatelly return to the Federal
Government an amount equal to the outstanding total of benefit payments
listed on the notice that it received after it learned of the death.
With respect to any benefit payments received prior to learning of the
death that have not been returned, the financial institution shall
certify on the Notice of Reclamation the date it learned of the death
and follow the procedure in paragraph (b)(2) of this section.
(2) If the financial institution had no knowledge of the death or
legal incapacity at the time any benefit payments made after the death
or legal incapacity were credited to the recipient's or beneficiary's
account, an appropriate official of the financial institution shall
certify on the Notice of Reclamation that it had no knowledge of the
death or legal incapacity and fully complete the Notice of Reclamation
in accordance with its instructions and do the following:
(i) The financial institution shall return to the Federal Government
both the executed Notice of Reclamation and an amount equal to the
amount in the account or the outstanding total, whichever is less. The
amount in the account is the balance when the financial institution has
received the Notice of Reclamation and has had a reasonable time to take
action based on its receipts, plus any additions to the account balance
made before the financial institution returns the completed Notice of
Reclamation to the Federal Government. For the purposes of this
paragraph, action is taken within a reasonable time if it is taken not
later than the close of business day following the receipt of the Notice
of Reclamation.
(ii) If the amount returned is less than the amount requested in the
notice, the financial institution shall include with the Notice of
Reclamation the name and the most current address
[[Page 48]]
on its records of any person(s) who withdrew funds from the account
after the death or legal incapacity. If the financial institution is
unable to supply the name(s) of the withdrawer(s), it shall provide the
names and most current addresses on its records of any co-owners of the
account or other persons authorized to withdraw. If it is unable to
supply the names or addresses of the withdrawers or co-owners, it shall
state the reason for its inability on the Notice of Reclamation.
(3) If the Federal Government issues a second or subsequent Notice
of Reclamation for the same type of payment for the same recipient or
beneficiary, the financial institution shall be liable with respect to
such second or subsequent Notice only for an amount equal to the amount
in the account at the time it receives a second or subsequent Notice of
Reclamation, plus any further additions to the account balance up to the
date it returns these subsequent Notices of Reclamation. For a second or
subsequent Notice of Reclamation for the same type of payment for the
same recipient or beneficiary, the financial institution shall not be
liable for an amount in excess of the amount determined under the first
sentence of this paragraph, attributable to benefit payments received
within 45 days after the death or legal incapacity if it complied
properly and timely to the first Notice of Reclamation.
(c) If the Federal Government does not receive a response to the
Notice of Reclamation within 30 days, it will issue a follow-up to
ensure that the original Notice of Reclamation was received. If the
Federal Government does not receive from the financial institution the
fully completed and properly executed Notice of Reclamation along with
the amount due under Sec. 210.11(b)(1) within 60 days of the issue date
of the original Notice of Reclamation, the financial institution shall
be liable for the outstanding total listed on the Notice of Reclamation.
Following the sixtieth day after the date of the original Notice of
Reclamation, the Federal Government will instruct the appropriate
Federal Reserve Bank to debit the account utilized by the financial
institution for receipt of benefit payments in the amount of the
outstanding total. By receiving benefit payments under this part, the
financial institution is deemed to authorize this debit. The Federal
Reserve Bank will provide advice of the debit to the financial
institution.
(d) After the financial institution has paid to the Federal
Government an amount equal to the amount in the recipient's account as
provided in Sec. 210.11(b)(1), if the program agency is unable to
collect the entire outstanding total from the withdrawer(s), the
financial institution shall be liable for an additional amount equal to
the benefit payment received by it within 45 days after the death or
legal incapacity, or the balance of the outstanding total, whichever is
less. The Federal Government will instruct the appropriate Federal
Reserve Bank to debit the account utilized by the financial institution
for receipt of benefit payments in the amount of the outstanding total.
By receiving benefit payments under this part, the financial institution
is deemed to authorize this debit. The Federal Reserve Bank will provide
advice of the debit to the financial institution.
(e) Immediately upon learning of the death or legal incapacity
regardless of whether there has been notification from the Federal
Government, the financial institution shall return to the Federal
Government any further benefit payments it receives and notify the
Federal Government that it has learned of the death or legal incapacity
in order that the above collection procedures can be commenced. See
Sec. 210.7(f)(3).
Sec. 210.14 Notice to Account Owners of collection action.
(a) Upon receipt by a financial institution of the Notice of
Reclamation as described in Sec. 210.12(a), the financial institution
shall immediately mail to the current address(es) of the account
owner(s) of record a copy of the Notice to Account Owners included with
the Notice of Reclamation.
(b) The financial institution shall indicate with the Notice to
Account Owners any action it has taken or intends to take with respect
to the recipient's or beneficiary's account in
[[Page 49]]
connection with the Federal Government's collection action against the
financial institution.
(c) The financial institution is not authorized by this part to
debit the account of any party or to deposit any funds from any account
in a suspense account or escrow account or the equivalent. If such
action is taken, it must be under authority of State law or the
financial institution's contract with its depositor(s).
(d) The financial institution's liability under this part is not
affected by any action taken by it to recover from any party the amount
of the financial institution's liability to the Federal Government.
(e) Failure to mail the Notice to Account Owners, or failure to
certify on the Notice of Reclamation that it has done so, shall result
in the forfeiture by the financial institution of its ability under this
part to limit its liability. See Sec. 210.11(e).
Sec. 210.15 Erroneous death information.
(a) In the event that the financial institution is advised that the
Federal Government's information that the recipient or beneficiary is
deceased is incorrect, or that the date of death is incorrect, the
financial institution shall certify the correct information to the
Federal Government by one of the following means:
(1) Certify on the ``Notice of Reclamation'' that the person whose
name is reflected on the notice is alive, or that the date of death is
incorrect, and that the financial institution took prudent measures to
assure that the person was alive or that the date of death was
erroneous. Prudent measures to assure that the person was alive include,
but are not limited to, the named person providing the financial
institution adequate identification, or obtaining through a third person
a signed, dated and notarized statement from the named person. Prudent
measures to assure the correct date of death include obtaining a death
certificate.
(2) If there is any question regarding the sufficiency of the
evidence presented to demonstrate that the date or fact of death is
incorrect, the individual presenting the evidence should be referred by
the financial institution to the agency making the payment, e.g., the
Social Security Administration or the Veterans Administration. The
agency will certify in writing to the financial institution the
corrected information. The financial institution shall then return the
agency's certification with the Notice of Reclamation.
(b) If the Federal Government's informaion that the recipient or
beneficiary is deceased is in error, the financial institution shall be
relieved of its liability, and shall no longer be subject to collection
procedures under this part, if an accurate certification in accordance
with paragraph (a) of this section is received by the Federal
Government, on or with a properly completed Notice of Reclamation,
within 60 days of the date of the original Notice of Reclamation to the
financial institution.
(c) If the date of the death on the Notice of Reclamation is in
error, the financial institution shall be relieved of an appropriate
part of its liability if an accurate certification in accordance with
paragraph (a) of this section is received by the Federal Government, on
or with properly completed Notice of Reclamation, within 60 days of the
date of the original Notice of Reclamation to the financial institution.
In that event, the financial institution shall adjust the outstanding
total on the Notice of Reclamation to exclude benefit payments made
before the corrected date of death. The financial institution shall
include an explanation of the adjustment with the Notice of Reclamation.
If correction of an error relating to the date of death shown on the
Notice of Reclamation would result in additional payments being due to
the Federal Government, the financial institution shall so notify the
Federal Government when it returns the Notice of Reclamation.
(d) If after the financial institution has returned to the Federal
Government a completed Notice of Reclamation and had made payment of its
liability, the financial institution learns that the fact of death or
date of death was in error, it should bring the information to the
attention of the agency which made the benefit payments, e.g., the
Social Security Administration or the Railraod Retirement Board. The
[[Page 50]]
agency will refund to the financial institution, without interest, the
appropriate amount of funds paid by the financial institution pursuant
to Sec. 210.12, including funds debited from its Federal Reserve account
under Sec. 210.12 (c) or (d).
[52 FR 2406, Jan. 22, 1987; 52 FR 3917, Feb. 6, 1987. Redesignated at 54
FR 50618, Dec. 8, 1989]
Subpart C--Discretionary Salary Allotments
Source: 54 FR 20571, May 12, 1989, unless otherwise noted.
Sec. 210.16 General.
This subpart applies only to discretionary allotments. This
regulation does not supersede, and shall not be used to circumvent, the
requirements of particular statutes, Executive orders or other executive
branch regulations; for example, see Office of Personnel Management
regulations at 5 CFR part 550, subpart C implementing 5 U.S.C. 5525.
Savings allotments are governed under the regulations at 31 CFR part
209.
Sec. 210.17 Criteria and standards.
(a) Discretionary allotments may be made for any purpose determined
appropriate by the head of an agency and which are consistent with
subchapter III of chapter 55 of title 5, United States Code, and part
550, subpart C of chapter 1 of title 5, Code of Federal Regulations.
(b) Discretionary allotment payments shall be made in accordance
with the schedule established by the program agency, provided such
allotment payments are not issued until the related earnings have
accrued.
Sec. 210.18 Method of payment.
(a) Payment of discretionary allotments shall be made following the
policy and procedures outlined in 31 CFR part 210, subpart A.
(b) Discretionary allotments shall be made available by the allotter
to the recipient on the payment date in accordance with Sec. 210.7(d).
PART 211--DELIVERY OF CHECKS AND WARRANTS TO ADDRESSES OUTSIDE THE UNITED STATES, ITS TERRITORIES AND POSSESSIONS--Table of Contents
Sec.
211.1 Withholding delivery of checks.
211.2 Claims for the release of withheld checks or for the proceeds
thereof.
211.3 Exceptions.
211.4 Implementing instructions.
Authority: 5 U.S.C. 301; 31 U.S.C. 321 and 3329.
Sec. 211.1 Withholding delivery of checks.
(a) It is hereby determined that postal, transportation or banking
facilities in general or local conditions in the Republic of Cuba,
Democratic Kampuchea, and the Democratic People's Republic of Korea
(North Korea) are such that there is not a reasonable assurance that a
payee in those areas will actually receive checks or warrants drawn
against funds of the United States, or agencies or instrumentalities
thereof, and be able to negotiate the same for full value.
(b) A check or warrant intended for delivery in any of the areas
named in paragraph (a) of this section shall be withheld unless the
check or warrant is specifically released by the Secretary of the
Treasury.
(c) Before a check or warrant drawn against funds blocked pursuant
to the provisions of Executive Order No. 8389 (3 CFR, 1943 Cum. Supp.),
as amended, and which remain blocked under the proviso clause of General
License No. 101 of the Foreign Funds Control Regulations (31 CFR
520.101) may be released, it will be necessary for a license authorizing
the release to be issued by the Department of the Treasury, Office of
Foreign Assets Control, pursuant to E.O. 8389, as amended. In this
regard, attention is also directed to the following regulations issued
by the Secretary of the Treasury:
(1) The Foreign Assets Control Regulations issued on December 17,
1950 (31 CFR part 500), pursuant to Executive Order 9193 (3 CFR, 1943
Cum. Supp.), which prohibit transactions involving payments to nationals
of the Democratic People's Republic of Korea (North Korea), the
Socialist Republic of Vietnam, and Democratic
[[Page 51]]
Kampuchea, except to the extent that any such payments have been
authorized by appropriate license,
(2) The Cuban Assets Control Regulations issued on July 8, 1963 (31
CFR part 515), pursuant to the same authority, which prohibit similar
transactions with nationals of Cuba unless licensed, and
(3) The Iranian Assets Control Regulations issued on November 14,
1979 (31 CFR part 535), as amended on April 17, 1980, pursuant to
Executive Orders 12170 and 12211, which prohibit transactions in
property of the Iranian Government or its instrumentalities and
transfers of funds to persons in Iran, except as authorized by
appropriate license.
(d) Powers of attorney for the receipt or collection of checks or
warrants or for the proceeds of checks or warrants included within the
determination of the Secretary of the Treasury set forth in paragraph
(a) of this section will not be recognized.
[41 FR 15847, Apr. 15, 1976, as amended at 44 FR 51568, Sept. 4, 1979;
45 FR 47678, July 16, 1980; 61 FR 41739, Aug. 12, 1996]
Sec. 211.2 Claims for the release of withheld checks or for the proceeds thereof.
Claims for the release of checks or warrants withheld from delivery
or for the proceeds thereof, shall be filed with the administrative
agency which would have originally authorized such issuance, e.g.,
claims arising out of checks or warrants representing payments under
laws administered by the Department of Veterans Affairs shall be filed
with the Secretary of Veterans Affairs, Department of Veterans Affairs,
Washington, DC 20420.
[61 FR 41739, Aug. 12, 1996]
Sec. 211.3 Exceptions.
The regulations of this part do not apply to payments to foreign
governments, nor to checks or warrants issued in payment of salaries or
wages, or for goods or services purchased by the Government of the
United States in foreign countries, unless such payments are subject to
the Foreign Funds Control Regulations (31 CFR part 520), the Foreign
Assets Control Regulations (31 CFR part 500), the Cuban Assets Control
Regulations (31 CFR part 515), or the Iranian Assets Control Regulations
(31 CFR part 535).
[45 FR 47678, July 16, 1980]
Sec. 211.4 Implementing instructions.
Implementing instructions will be issued in Part IV, ``Disbursing,''
of the Treasury Fiscal Requirements Manual for Guidance of Departments
and Agencies.
[41 FR 15847, Apr. 15, 1976]
PART 215--WITHHOLDING OF DISTRICT OF COLUMBIA, STATE, CITY AND COUNTY INCOME OR EMPLOYMENT TAXES BY FEDERAL AGENCIES--Table of Contents
Subpart A--General Information
Sec.
215.1 Scope of part.
215.2 Definitions.
Subpart B--Procedures
215.3 Relationship of Standard Agreement to existing agreements.
215.4 Procedures for entering into a Standard Agreement.
215.5 Procedures for an agreement other than a Standard Agreement.
Subpart C--Standard Agreement
215.6 In general.
215.7 Parties.
215.8 Compliance by agencies.
215.9 Withholding certificates.
215.10 Change of legal residence by members of the Armed Forces.
215.11 Agency withholding procedures.
215.12 Miscellaneous provisions.
215.13 Supersession, amendment and termination provisions.
Authority: 5 U.S.C. 5516, 5517, and 5520 and section 4 of Executive
Order 11997, June 22, 1977 (42 FR 31759).
Source: 42 FR 33731, July 1, 1977, unless otherwise noted.
Subpart A--General Information
Sec. 215.1 Scope of part.
This part relates to agreements between the Secretary of the
Treasury and States (including the District of Columbia), cities or
counties for withholding of State, city or county income
[[Page 52]]
or employment taxes from the compensation of civilian Federal employees,
and for the withholding of State income taxes from the compensation of
members of the Armed Forces. Subpart A contains general information and
definitions. Subpart B prescribes the procedures to be followed in
entering into an agreement for the withholding of State, city or county
income or employment taxes. Subpart C is the Standard Agreement which
the Secretary will enter into with any State, city or county which
qualifies to have tax withheld. Requests for deviations from this
Standard Agreement will be agreed to by the Secretary only if the State,
city or county's unique circumstances require it.
Sec. 215.2 Definitions.
As used in this part:
(a) Agency means each of the executive agencies and military
departments (as defined in 5 U.S.C. 105 and 102, respectively) and the
United States Postal Service; and in addition, for city or county
withholding purposes only, all elements of the judicial branch.
(b) City means any unit of general local government.
(1) Which:
(A) Is classified as a municipality by the United States Bureau of
the Census, or
(B) Is a town or township which, in the determination of the
Secretary of the Treasury,
(i) Possesses powers and performs functions comparable to those
associated with municipalities,
(ii) Is closely settled, and
(iii) Contains within its boundaries no incorporated places as
defined by the United States Bureau of the Census; and
(2) Within the political boundaries of which five hundred or more
persons are regularly employed by all agencies of the Federal
Government.
(c) City income or employment taxes means any form of tax for which,
under a city ordinance:
(1) Collection is provided by imposing on employers generally the
duty of withholding sums from the pay of employees and making returns of
the sums to a designated city officer, department, or instrumentality;
and
(2) The duty to withhold generally is imposed on the payment of
compensation earned within the jurisdiction of the city in the case of
employees whose regular place of employment is within such jurisdiction.
Whether the tax is described as an income, wage, payroll, earnings,
occupational license, or otherwise, is immaterial.
(d) Compensation as applied to employees of an agency and members of
the Armed Forces means wages as defined in 26 U.S.C. 3401(a) and
regulations issued thereunder.
(e) County means any unit of local general Government which is
classified as a county by the Bureau of the Census and within the
political boundaries of which 500 or more persons are regularly employed
by all agencies of the Federal Government.
(f) County income or employment taxes means any form of tax for
which, under a county ordinance:
(1) Collection is provided by imposing on employers generally the
duty of withholding sums from the pay of employees and making returns of
the sums to a designated county officer, department, or instrumentality;
and
(2) The duty to withhold generally is imposed on the payment of
compensation earned within the jurisdiction of the country in the case
of employees whose regular place of employment is within such
jurisdiction. Whether the tax is described as an income, wage, payroll,
earnings, occupational license, or otherwise, is immaterial.
(g) District of Columbia income tax means the income tax imposed
under 47 District of Columbia Code, chapter 15, subchapter II.
(h)(1) Employees for the purpose of State income tax withholding,
means all employees of an agency, other than members of the armed
forces. For city and county income or employment tax withholding, it
means:
(i) Employees of an agency;
(ii) Members of the National Guard, participating in exercises or
performing duty under 32 U.S.C. 502; or
(iii) Members of the Ready Reserve, participating in scheduled
drills or training periods, or serving on active duty for training under
10 U.S.C. 270(a).
[[Page 53]]
The term does not include retired personnel, pensioners, annuitants, or
similar beneficiaries of the Federal Government, who are not performing
active civilian service or persons receiving remuneration for services
on a contract-fee basis.
(2) Employees for purposes of District of Columbia income tax
withholding, means employees as defined in 47 District of Columbia Code
1551c(z).
(i) Members of the Armed Forces means all individuals in active duty
status (as defined in 10 U.S.C. 101(22)) in regular and reserve
components of the Army, Navy, Air Force, Marine Corps, and Coast Guard,
including members of the National Guard while participating in exercises
or performing duty under 32 U.S.C. 502, and members of the Ready Reserve
while participating in scheduled drills or training periods or serving
on active duty for training under 10 U.S.C. 270(a).
(j) Ordinance means an ordinance, order, resolution, or similar
instrument which is duly adopted and approved by a city or county in
accordance with the constitution and statutes of the state in which it
is located and which has the force of law within such city or county.
(k) Regular place of Federal employment means the official duty
station, or other place, where an employee actually and normally (i.e.,
other than in a travel or temporary duty status) performs services,
irrespective of residence.
(l) Secretary means Secretary of the Treasury and Fiscal Assistant
Secretary or his designee.
(m) State means a State of the United States or the District of
Columbia, unless otherwise specified.
(n) State income tax means any form of tax for which, under a State
status:
(1) Collection is provided, either by imposing on employers
generally the duty of withholding sums from the compensation of
employees and making returns of such sums to the State or by granting to
employers generally the authority to withhold sums from the compensation
of employees, if any employee voluntarily elects to have such sums
withheld; and
(2) The duty to withhold generally is imposed, or the authority to
withhold generally is granted, with respect to the compensation of
employees who are residents of such State.
[42 FR 33731, July 1, 1977, as amended at 55 FR 3590, Feb. 2, 1990; 55
FR 7494, Mar. 2, 1990]
Subpart B--Procedures
Sec. 215.3 Relationship of Standard Agreement to existing agreements.
(a) Subpart C of this part is the Standard Agreement which the
Secretary will enter into with a State, city or county. This Standard
Agreement replaces all prior agreements between the Secretary and the
State or city covering the withholding of income or employment taxes
from the compensation of Federal employees. The Standard Agreement is
essentially the same as the prior agreements. A State of city which
currently is a party to an agreement with the Secretary covering the
withholding of income or employment taxes from the compensation of
Federal employees does not need to apply for a new agreement under this
part. A State or city currently a party to an agreement will be presumed
to have consented to be bound by the terms of the Standard Agreement
(subpart C). If a State or city, which is currently a party, does not
want to be bound by the Standard Agreement, it shall notify the Fiscal
Assistant Secretary, Department of the Treasury, Washington, DC 20220,
in writing over the signature of an officer authorized to bind
contractually the State or city within 90 days of the effective date of
this part. The procedures of Sec. 215.5 shall be followed by a State or
city which proposes to be bound by an agreement other than the Standard
Agreement.
(b) The effective date for the replacement of existing State or city
Standard Agreements by the Standard Agreement appearing as subpart C of
this part is the effective date of this part. For current other-than-
Standard-Agreements, it is 120 days after the effective date of this
part unless an earlier effective date is specifically agreed to or a new
agreement which is other than the Standard Agreement of subpart C, is
entered into as provided in this subpart.
[[Page 54]]
Sec. 215.4 Procedures for entering into a Standard Agreement.
(a) A State, city or county which does not have an existing
agreement and wishes to enter into a Standard Agreement shall indicate
in a letter its agreement to be bound by the provisions of subpart C.
The letter shall be addressed to the Fiscal Assistant Secretary,
Department of the Treasury, Washington, DC 20220, and be signed by an
officer authorized to bind contractually the State, city or county.
Copies of all applicable State laws, city or county ordinances and
implementing regulations, instructions, and forms shall be enclosed. The
letter shall also indicate the title and address of the official whom
Federal agencies may contact to obtain forms and other information
necessary to implement withholding.
(b) Within 120 days of the receipt of the letter from the State,
city or county official, the Fiscal Assistant Secretary will, by letter,
notify the State, city or county:
(1) That the Standard Agreement has been entered into as of the date
of the Fiscal Assistant Secretary's letter, or
(2) That an agreement cannot be entered into with the State, city or
county and the reasons for that determination.
The withholding of the State, city or county income or employment tax
shall commence within 90 days after the effective date of the agreement.
Sec. 215.5 Procedures for an agreement other than a Standard Agreement.
(a) If a State, city or county proposes an agreement which varies
from the Standard Agreement, the State, city or county shall follow the
procedure in Sec. 215.4(a), except that its letter shall indicate which
provisions of the Standard Agreement are not acceptable and the basis
therefor, and propose substitute provisions.
(b) Within 60 days of the receipt of the letter from the State, city
or county official, the Fiscal Assistant Secretary will notify the
State, city or county which substitute provisions may be included in the
agreement. The State, city or county shall, by letter, notify the Fiscal
Assistant Secretary if it accepts such an agreement. When accepted by
the State, city or county the effective date of that agreement shall be
the date such acceptance letter is received by the Fiscal Assistant
Secretary. The withholding of the State, city or county income or
employment tax shall commence within 90 days after the effective date of
the agreement.
Subpart C--Standard Agreement
Sec. 215.6 In general.
This subpart is the text of the Standard Agreement between the
Secretary and the State, city or county. The terms used in this
agreement are defined in Sec. 215.2 of this part.
Sec. 215.7 Parties.
The parties to this agreement are the Secretary and the State, city
or county which has entered into this agreement pursuant to 5 U.S.C.
5516, 5517, or 5520 and Executive Order 11997 (June 22, 1977).
Sec. 215.8 Compliance by agencies.
(a) In the case of an agreement with a State, the head of each
agency is required to withhold State income taxes from the compensation
of:
(1) Employees of such agency who are subject to such taxes and whose
regular place of Federal employment is within the State, and
(2) Members of the Armed Forces who are subject to such taxes and
who are legal residents of the State.
The foregoing is also applicable with respect to a State whose statutes
permit but do not require withholding by employers, provided the
employee voluntarily elects to have such tax withheld.
(b) In the case of an agreement with a city or county, the head of
each agency is required to withhold city or county income or employment
taxes from the compensation of any employee of the agency who is subject
to the tax, and
(1) Whose regular place of Federal employment is within the city or
county, or
(2) Is a resident of the city or county.
[[Page 55]]
(c) In withholding taxes, the head of each agency, except as
otherwise provided in this agreement, shall comply with the withholding
provisions of the State, city or county income or employment tax
statute, regulations, procedural instructions and reciprocal agreements
related thereto.
(Pub. L. 95-365, 92 Stat. 599 (5 U.S.C. 5520))
[42 FR 33731, July 1, 1977, as amended at 44 FR 4670, Jan. 23, 1979]
Sec. 215.9 Withholding certificates.
Each agency may require employees or members of the Armed Forces
under its jurisdiction to complete a withholding certificate in order to
calculate the amount to be withheld. The agency shall use the
withholding certificate which the State, city or county has prescribed.
Where the State, city or county has not prescribed a certificate, the
agency may use a certificate approved by the Department of the Treasury.
The agency may rely on the information in the certificate. Copies of
completed certificates shall be provided to the taxing authority by
agencies upon request.
Sec. 215.10 Change of legal residence by members of the Armed Forces.
(a) In determining the legal residence of a member of the Armed
Forces for tax withholding purposes, the head of an agency at all times
may rely on the agency's current records, which may include a
certificate of legal residence. The form of the certificate of legal
residence shall be approved by the Department of the Treasury. A change
of legal residence of a member of the Armed Forces shall become
effective for tax withholding purposes only after a member of the Armed
Forces completes a certificate indicating a new legal residence and
delivers it to the agency.
(b) Heads of agencies shall notify the State of prior legal
residence of the member of the Armed Forces involved on a monthly basis
concerning the change of the member's legal residence. The notification
shall include the name, social security number, current mailing address
and the new legal residence of such member of the Armed Forces. The
effective date of the change in legal residence shall also be included
in the notification.
Sec. 215.11 Agency withholding procedures.
(a) State income tax shall be withheld only on the entire
compensation of Federal employees and members of the Armed Forces.
Nonresident employees, who under the State income tax law are required
to allocate at least three-fourths of their compensation to the State,
shall be subject to withholding on their entire compensation.
Nonresident employees, who under the State income tax law are required
to allocate less than three-fourths of their compensation to the State,
may elect to:
(1) Have State income tax withheld on their entire compensation, or
(2) Have no income tax withheld on their compensation.
(b) In calculating the amount to be withheld from an employee's or a
member's compensation, each agency shall use the method prescribed by
the State income tax statute or city or county ordinance or a method
which produces approximately the tax required to be withheld:
(1) By the State income tax statute from the compensation of each
employee or member of the Armed Forces subject to such income tax, or
(2) By the city or county ordinance from the compensation of each
employee subject to such income or employment tax.
(c) Where it is the practice of a Federal agency under Federal tax
withholding procedure to make returns and payment of the tax on an
estimated basis, subject to later adjustment based on audited figures,
this practice may be applied with respect to the State, city of county
income or employment tax where the agency has made appropriate
arrangements with the State, city or county income tax authorities.
(d) Copies of Federal Form W-2, ``Wage and Tax Statement'', may be
used for reporting withheld taxes to the State, city or county.
(e) Withholding shall not be required on wages earned but unpaid at
the date of an employee's or member's death.
[[Page 56]]
(f) Withholding of District of Columbia income tax shall not apply
to pay of employees who are not residents of the District of Columbia as
defined in 47 District of Columbia Code, chapter 15, subchapter II.
Sec. 215.12 Miscellaneous provisions.
Nothing in this agreement shall be deemed:
(a) To require collection by agencies of the United States of
delinquent tax liabilities of Federal employees or members of the Armed
Forces, or
(b) To consent to the application of any provision of law of the
State, city or county which has the effect of:
(1) Imposing more burdensome requirements upon the United States
than it imposes on other employers, or
(2) Subjecting the United States or any of its officers or employees
to any penalty or liability, or
(c) To consent to procedures for withholding, filing of returns, and
payment of the withheld taxes to a State, city or county that do not
conform to the usual fiscal practices of agencies, or
(d) To permit withholding of a city or county tax from the pay of a
Federal employee who is not a resident of, or whose regular place of
Federal employment is not within, the State in which the city or county
is located, unless the employee consents to the withholding, or
(e) To permit the withholding of city or county income or employment
taxes from the pay of members of the Armed Forces of the United States,
or
(f) To allow agencies to accept compensation from a State, city or
county for services performed in withholding of State or city or county
income or employment taxes.
(Pub. L. 95-365, 92 Stat. 599 (5 U.S.C. 5520))
[42 FR 33731, July 1, 1977, as amended at 44 FR 4670, Jan. 23, 1979]
Sec. 215.13 Supersession, amendment and termination provisions.
(a) This agreement supersedes any prior agreement between the
Secretary of the Treasury and a State or city pursuant to 5 U.S.C. 5516,
5517, or 5520.
(b) This agreement shall be subject to any amendment of 5 U.S.C.
5516, 5517, 5520 or Executive Order 11997, and any rules and regulations
issued prusuant to them and amendments thereto.
(c) This agreement may be terminated as to a specific State or city
or county which is a party to this agreement by providing written notice
to that effect to the Secretary at least 90 days prior to the proposed
termination.
PART 223--SURETY COMPANIES DOING BUSINESS WITH THE UNITED STATES--Table of Contents
Sec.
223.1 Certificate of authority.
223.2 Application for certificate of authority.
223.3 Issuance of certificates of authority.
223.4 Deposits.
223.5 Business.
223.6 Requirements applicable to surety companies.
223.7 Investment of capital and assets.
223.8 Financial reports.
223.9 Valuation of assets and liabilities.
223.10 Limitation of risk.
223.11 Limitation of risk: Protective methods.
223.12 Recognition as reinsurer.
223.13 Full penalty of the obligation regarded as the liability;
exceptions.
223.14 Schedules of single risks.
223.15 Paid up capital and surplus for Treasury rating purposes; how
determined.
223.16 List of certificate holding companies.
223.17 Revocation.
223.18 Performance of agency obligations.
223.19 Informal hearing on agency complaints.
223.20 Final decisions.
223.21 Reinstatement.
223.22 Fees for services of the Treasury Department.
Authority: 80 Stat. 379; 5 U.S.C. 301; 6 U.S.C. 8.
Sec. 223.1 Certificate of authority.
The regulations in this part will govern the issuance by the
Secretary of the Treasury of certificates of authority to bonding
companies to do business with the United States as sureties on, or
reinsurers of, recognizances, stipulations, bonds, and undertakings,
hereinafter sometimes called obligations, under the provisions of the
Act of July 30, 1947 (61 Stat. 646, as amended; 6 U.S.C. 6-13), and the
acceptance of such obligations from such companies
[[Page 57]]
so long as they continue to hold said certificates of authority.
[28 FR 1039, Feb. 2, 1963, as amended at 40 FR 6499, Feb. 12, 1975; 40
FR 8335, Feb. 27, 1975]
Sec. 223.2 Application for certificate of authority.
Every company wishing to apply for a certificate of authority shall
address the Assistant Commissioner, Comptroller, Financial Management
Service, U.S. Department of Treasury, Washington, DC 20226, who will
notify the company of the data which the Secretary of the Treasury
determines from time to time to be necessary to make application. In
accord with 6 U.S.C. 8 the data will include a copy of the applicant's
charter or articles of incorporation and a statement, signed and sworn
to by its president and secretary, showing its assets and liabilities. A
fee shall be transmitted with the application in accordance with the
provisions of Sec. 223.22(a)(i).
[34 FR 20188, Dec. 24, 1969, as amended at 37 FR 1232, Jan. 27, 1972; 40
FR 6499, Feb. 12, 1975; 43 FR 12678, Mar. 27, 1978; 49 FR 47002, Nov.
30, 1984]
Sec. 223.3 Issuance of certificates of authority.
(a) If, from the evidence submitted in the manner and form herein
required, subject to the guidelines referred to in Sec. 223.9 the
Secretary of the Treasury shall be satisfied that such company has
authority under its charter or articles of incorporation to do the
business provided for by the Act referred to in Sec. 223.1, and if the
Secretary of the Treasury shall be satisfied from such company's
financial statement and from any further evidence or information he may
require, and from such examination of the company, at its own expense,
as he may cause to be made, that such company has a capital fully paid
up in cash of not less than $250,000, is solvent and financially and
otherwise qualified to do the business provided for in said Act, and is
able to keep and perform its contracts, he will, subject to the further
conditions herein contained, issue a certificate of authority to such
company, under the seal of the Treasury Department, to qualify as surety
on obligations permitted or required by the laws of the United States to
be given with one or more sureties, for a term expiring on the last day
of June next following. The certificate of authority shall be renewed
annually on the first day of July, so long as the company remains
qualified under the law and the regulations in this part, and transmits
to the Assistant Commissioner, Comptroller by March 1 each year the fee
in accordance with the provisions of Sec. 223.22(a)(3).
(b) If a company meets the requirements for a certificate of
authority as an acceptable surety on Federal bonds in all respects
except that it is a United States branch of a company not incorporated
under the laws of the United States or of any State, or it is limited by
its articles of incorporation or corporate charter to reinsure business
only, it may be issued a certificate of authority as a reinsuring
company on Federal bonds. The fees for initial application and renewal
of a certificate as a reinsuring company shall be the same as the fees
for a certificate of authority as an acceptable surety on Federal bonds.
[33 FR 8390, June 6, 1968, as amended at 34 FR 20188, Dec. 24, 1969; 37
FR 1232, Jan. 27, 1972; 40 FR 6499 Feb. 12, 1975; 40 FR 8335, Feb. 27,
1975; 42 FR 8637, Feb. 11, 1977; 43 FR 12678, Mar. 27, 1978; 43 FR
39089, Sept. 1, 1978; 49 FR 47002, Nov. 30, 1984]
Sec. 223.4 Deposits.
No such company will be granted authority to do business under the
provisions of the act referred to in Sec. 223.1 unless it shall have and
maintain on deposit with the Insurance Commissioner. or other proper
financial officer, of the State in which it is incorporated, or of any
other State of the United States, for the protection of claimants,
including all its policyholders in the United States, legal investments
having a current market value of not less than $100,000.
[36 FR 9630, May 27, 1971]
Sec. 223.5 Business.
(a) The company must engage in the business of suretyship whether or
not also making contracts in other classes of insurance, but shall not
be engaged in any type or class of business not authorized by its
charter or the laws of
[[Page 58]]
the State in which the company is incorporated. It must be the intention
of the company to engage actively in the execution of surety bonds in
favor of the United States.
(b) No bond is acceptable if it has been executed (signed and/or
otherwise validated) by a company or its agent in a State where it has
not obtained that State's license to do surety business. Although a
company must be licensed in the State or other area in which it executes
a bond, it need not be licensed in the State or other area in which the
principal resides or where the contract is to be performed. The term
other area includes the Canal Zone, District of Columbia, Guam, Puerto
Rico, and the Virgin Islands.
[40 FR 6499, Feb. 12, 1975]
Sec. 223.6 Requirements applicable to surety companies.
Every company now or hereafter authorized to do business under the
act of Congress referred to in Sec. 223.1 shall be subject to the
regulations contained in this part.
[38 FR 22779, Aug. 24, 1973]
Sec. 223.7 Investment of capital and assets.
The cash capital and other funds of every such company must be
safely invested in accordance with the laws of the State in which it is
incorporated and will be valued on the basis set forth in Sec. 223.9.
The Secretary of the Treasury will periodically issue instructions for
the guidance of companies with respect to investments and other matters.
These guidelines may be updated from time to time to meet changing
conditions in the industry.
[42 FR 8637, Feb. 11, 1977]
Sec. 223.8 Financial reports.
(a) Every such company will be required to file with the Assistant
Commissioner, Comptroller on or before the last day of January of each
year, a statement of its financial condition made up as of the close of
the preceding calendar year upon the annual statement blank adopted by
the National Association of Insurance Commissioners, signed and sworn to
by its president and secretary.
On or before the last days of April, July and October of each year,
every such company shall file a financial statement with the Assistant
Commissioner, Comptroller as of the last day of the preceding month. A
form is prescribed by the Treasury for this purpose. The quarterly
statement form of the National Association of Insurance Commissioners
when modified to conform to the Treasury's requirements, may be
substituted for the Treasury's form. The quarterly statement will be
signed and sworn to by the company's president and secretary or their
authorized designees.
(b) Every such company shall furnish such other exhibits or
information, and in such manner as the Secretary of the Treasury may at
any time require.
[10 FR 2348, Mar. 1, 1945, as amended at 42 FR 8637, Feb. 11, 1977; 49
FR 47002, Nov. 30, 1984]
Sec. 223.9 Valuation of assets and liabilities.
In determining the financial condition of every such company, its
assets and liabilities will be computed in accordance with the
guidelines contained in the Treasury's current Annual Letter to
Executive Heads of Surety Companies. However, the Secretary of the
Treasury may value the assets and liabilities of such companies in his
discretion. Credit will be allowed for reinsurance in all classes of
risks if the reinsuring company holds a certificate of authority from
the Secretary of the Treasury, or has been recognized as an admitted
reinsurer in accord with Sec. 223.12.
[42 FR 8637, Feb. 11, 1977]
Sec. 223.10 Limitation of risk.
Except as provided in Sec. 223.11, no company holding a certificate
of authority shall underwrite any risk on any bond or policy on behalf
of any individual, firm, association, or corporation, whether or not the
United States is interested as a party thereto, the amount of which is
greater than 10 percent of the paid-up capital and surplus of such
company, as determined by the Secretary of the Treasury. That figure is
hereinafter referred to as the underwriting limitation.
[34 FR 20188, Dec. 24, 1969]
[[Page 59]]
Sec. 223.11 Limitation of risk: Protective methods.
The limitation of risk prescribed in Sec. 223.10 may be complied
with by the following methods:
(a) Coinsurance. Two or more companies may underwrite a risk on any
bond or policy, the amount of which does not exceed their aggregate
underwriting limitations. Each company shall limit its liability upon
the face of the bond or policy, to a definite specified amount which
shall be within its underwriting limitation.
(b) Reinsurance. (1) In respect to bonds running to the United
States, liability in excess of the underwriting limitation shall be
reinsured within 45 days from the date of execution and delivery of the
bond with one or more companies holding a certificate of authority from
the Secretary of the Treasury. Such reinsurance shall not be in excess
of the underwriting limitation of the reinsuring company. Where
reinsurance is contemplated, Federal agencies may accept a bond from the
direct writing company in satisfaction of the total bond requirement
even though it may exceed the direct writing company's underwriting
limitation. Within the 45 day period, the direct writing company shall
furnish to the Federal agency any necessary reinsurance agreements.
However, a Federal agency may, at its discretion, require that
reinsurance be obtained within a lesser period than 45 days, and may
require completely executed reinsurance agreements in hand before making
a final determination that any bond is acceptable. Reinsurance may
protect bonds required to be furnished to the United States by the
Miller Act (40 U.S.C. 270a through 270d) covering contracts for the
construction, alteration, or repair of any public building or public
work of the United States, as well as other types of Federal bonds. Use
of reinsurance or coinsurance to protect such bonds is at the discretion
of the direct writing company. Reinsurance shall be executed on
reinsurance agreement forms (Standard Form 273 for Miller Act
Performance bonds (formerly form No. TFS 6317), Standard Form 274 for
Miller Act Payment bonds (formerly form No. TFS 6318), and Standard Form
275 for other types of Federal bonds (formerly form No. TFS 6319)).
Federal bond-approving officers may obtain the forms by submitting a
requisition in FEDSTRIP/MILSTRIP format to the General Services
Administration regional office providing support to the requesting
Government organization. In addition, the forms are available to
authorized sureties and reinsurers from the Superintendent of Documents,
Government Printing Office, Stop: SSMC, Washington, DC 20402.
(2) In respect to risks covered by bonds or policies not running to
the United States, liability in excess of the underwriting limitation
shall be reinsured within 45 days from the date of execution and
delivery of the bond or policy with:
(i) One or more companies holding a certificate of authority from
the Secretary of the Treasury as an acceptable surety on Federal bonds
or one or more companies holding a certificate of authority as an
acceptable reinsuring company on such bonds, or
(ii) One or more companies recognized as an admitted reinsurer in
accord with Sec. 223.12, or
(iii) A pool, association, etc., to the extent that it is composed
of such companies, or
(iv) An instrumentality or agency of the United States which is
permitted by Federal law or regulation to execute reinsurance contracts.
(3) No certificate-holding company may cede to a reinsuring company
recognized under Sec. 223.12 any risk in excess of 10 percent of the
latter company's paid-up capital and surplus.
(c) Other methods. In respect to all risks other than Miller Act
performance and payment bonds running to the United States, which must
be coinsured or reinsured in accord with paragraph (a) or (b)(1) of this
section respectively, the excess liability may otherwise be protected:
(1) By the deposit with the company in pledge, or by conveyance to
it in trust for its protection, of assets admitted by the Treasury the
current market value of which is at least equal to the liability in
excess of its underwriting limitation, or
(2) If such obligation was incurred on behalf of or on account of a
fiduciary
[[Page 60]]
holding property in a trust capacity, by a joint control agreement which
provides that the whole or a sufficient portion of the property so held
may not be disposed of or pledged in any way without the consent of the
insuring company.
[34 FR 20188, Dec. 24, 1969, as amended at 40 FR 6499, Feb. 12, 1975; 41
FR 10605, Mar. 12, 1976; 42 FR 8637, Feb. 11, 1977; 43 FR 39089, Sept.
1, 1978]
Sec. 223.12 Recognition as reinsurer.
(a) Application by U.S. company. Any company organized under the
laws of the United States or of any State thereof, wishing to apply for
recognition as an admitted reinsurer (except on excess risks running to
the United States) of surety companies doing business with the United
States, shall file the following data with the Assistant Comptroller for
Auditing and shall transmit therewith the fee in accordance with the
provisions of Sec. 223.22(a)(2):
(1) A certified copy of its charter or articles of incorporation,
and
(2) A certified copy of a license from any State in which it has
been authorized to do business, and
(3) A copy of the latest available report of its examination by a
State Insurance Department, and
(4) A statement of its financial condition, as of the close of the
preceding calendar year, on the annual statement form of the National
Association of Insurance Commissioners, signed and sworn to by two
qualified officers of the company, showing that it has a capital stock
paid up in cash of not less than $250,000, in the case of a stock
insurance company, or has net assets of not less than $500,000 over and
above all liabilities, in the case of a mutual insurance company, and
(5) Such other evidence as the Secretary of the Treasury may
determine necessary to establish that it is solvent and able to keep and
perform its contracts.
(b) Application by a U.S. branch. A U.S. branch of an alien company
applying for such recognition shall file the following data with the
Assistant Commissioner, Comptroller and shall transmit therewith the fee
in accordance with the provisions of Sec. 223.22(a)(2):
(1) The submissions listed in paragraphs (a) (1) through (5) of this
section, except that the financial statement of such branch shall show
that it has net assets of not less than $250,000 over and above all
liabilities, and
(2) Evidence satisfactory to the Secretary of the Treasury to
establish that it has on deposit in the United States not less than
$250,000 available to its policyholders and creditors in the United
States.
(c) Financial reports. Each company recognized as an admitted
reinsurer shall file with the Assistant Commissioner, Comptroller on or
before the first day of March of each year its financial statement and
such additional evidence as the Secretary of the Treasury determines
necessary to establish that the requirements of this section are being
met. A fee shall be transmitted with the foregoing data, in accordance
with the provisions of Sec. 223.22(a)(4).
[34 FR 20189, Dec. 24, 1969, as amended at 37 FR 1232, Jan. 27, 1972; 40
FR 6499, Feb. 12, 1975; 43 FR 12678, Mar. 27, 1978; 49 FR 47002, Nov.
30, 1984]
Sec. 223.13 Full penalty of the obligation regarded as the liability; exceptions.
In determining the limitation prescribed in this part, the full
penalty of the obligation will be regarded as the liability, and no
offset will be allowed on account of any estimate of risk which is less
than such full penalty, except in the following cases:
(a) Appeal bonds; in which case the liability will be regarded as
the amount of the judgment appealed from, plus 10 percent of said amount
to cover interest and costs.
(b) Bonds of executors, administrators, trustees, guardians, and
other fiduciaries, where the penalty of the bond or other obligation is
fixed in excess of the estimated value of the estate; in which cases the
estimated value of the estate, upon which the penalty of the bond was
fixed, will be regarded as the liability.
(c) Credit will also be allowed for indemnifying agreements executed
by sole heirs or beneficiaries of an estate releasing the surety from
liability.
[[Page 61]]
(d) Contract bonds given in excess of the amount of the contract; in
which cases the amount of the contract will be regarded as the
liability.
(e) Bonds for banks or trust companies as principals, conditioned to
repay moneys on deposit, whereby any law or decree of a court, the
amount to be deposited shall be less than the penalty of the bond; in
which cases the maximum amount on deposit at any one time will be
regarded as the liability.
[Dept. Circ. 297, July 5, 1922]
Sec. 223.14 Schedules of single risks.
During the months of January, April, July, and October of each year
every company will be required to report to the Secretary of the
Treasury every obligation which it has assumed during the 3 months
immediately preceding, the penal sum of which is greater than 10 percent
of its paid up capital and surplus, together with a full statement of
the facts which tend to bring it within the provisions of this part, on
a form suitable for the purpose.
[Dept. Circ. 297, July 5, 1922]
Sec. 223.15 Paid up capital and surplus for Treasury rating purposes; how determined.
The amount of paid up capital and surplus of any such company shall
be determined on an insurance accounting basis under the regulations in
this part, from the company's financial statements and other
information, or by such examination of the company at its own expense as
the Secretary of the Treasury may deem necessary or proper.
[42 FR 8637, Feb. 11, 1977]
Sec. 223.16 List of certificate holding companies.
A list of qualified companies is published annually as of July 1 in
Department Circular No. 570, Companies Holding Certificates of Authority
as Acceptable Sureties on Federal Bonds and as Acceptable Reinsuring
Companies, with information as to underwriting limitations, areas in
which licensed to transact surety business and other details. If the
Secretary of the Treasury shall take any exceptions to the annual
financial statement submitted by a company, he shall, before issuing
Department Circular 570, give a company due notice of such exceptions.
Copies of the Circular are available from the Assistant Commissioner,
Comptroller upon request. Selection of a particular qualified company
from among all companies holding certificates of authority is
discretionary with the principal required to furnish bond.
[34 FR 20189, Dec. 24, 1969, as amended at 40 FR 6499, Feb. 12, 1975; 42
FR 8637, Feb. 11, 1977; 49 FR 47002, Nov. 30, 1984]
Sec. 223.17 Revocation.
Whenever it appears that a company is not complying with the
requirements of 6 U.S.C. 6-13 and of the regulations in this part, the
Secretary of the Treasury will:
(a) In all cases notify the company of the facts or conduct which
indicate such failure, and provide opportunity to the company to
respond, and
(b) In those cases where the public interest in the constant
financial stability of such a company allows, also provide opportunity
to the company to demonstrate or achieve compliance with those
requirements. The Secretary shall revoke a company's certificate of
authority with advice to it if:
(1) The company does not respond satisfactorily to his notification
of noncompliance, or
(2) The company, provided an opportunity to demonstrate or achieve
compliance, fails to do so.
[34 FR 20189, Dec. 24, 1969. Redesignated at 38 FR 22779, Aug. 24, 1973,
as amended at 42 FR 8637, Feb. 11, 1977]
Sec. 223.18 Performance of agency obligations.
(a) Every company shall promptly honor its bonds naming the United
States or one of its agencies or instrumentalities as obligee. If an
agency's demand upon a company on behalf of the agency or laborers,
materialmen, or suppliers (on payment bonds), for payment of a claim
against it is not settled to the agency's satisfaction, and the agency's
review of the situation thereafter establishes that the default is clear
and the company's refusal to pay is not based on adequate
[[Page 62]]
grounds, the agency may make a report to the Secretary of the Treasury,
including a copy of the subject bond, the basis for the claim against
the company, a chronological resume of efforts to obtain payment, a
statement of all reasons offered for non-payment, and a statement of the
agency's views on the matter.
(b) On receipt of such report from the Federal agency the Secretary
will, if the circumstances warrant, notify the company concerned that
the agency report may demonstrate that the company is not keeping and
performing its contracts and that, in the absence of satisfactory
explanation, the company's default may preclude the renewal of the
company's certificate of authority, or warrant prompt revocation of the
existing certificate. This notice will provide opportunity to the
company to demonstrate its qualification for a continuance of the
certificate of authority.
[34 FR 20189, Dec. 24, 1969. Redesignated at 38 FR 22779, Aug. 24, 1973,
as amended at 42 FR 8638, Feb. 11, 1977]
Sec. 223.19 Informal hearing on agency complaints.
(a) Request for informal hearing. If a company determines that the
opportunity to make known its views, as provided for under
Sec. 223.18(b), is inadequate, it may, within 20 business days of the
date of the notice required by Sec. 223.18(b), request, in writing, that
the Secretary of the Treasury convene an informal hearing.
(b) Purpose. As soon as possible after a written request for an
informal hearing is received, the Secretary of the Treasury shall
convene an informal hearing, at such time and place as he deems
appropriate, for the purpose of determining whether revocation of the
company's certificate of authority is justified.
(c) Notice. The company shall be advised, in writing, of the time
and place of the informal hearing and shall be directed to bring all
documents, records and other information as it may find necessary and
relevant to substantiate its refusal to settle the claims made against
it by the Federal agency making the report under Sec. 223.18(a).
(d) Conduct of hearings. The hearing shall be conducted by a hearing
officer appointed by the Secretary. The company may be represented by
counsel and shall have a fair opportunity to present any relevant
material and to examine the agency's evidence. Formal rules of evidence
will not apply at the informal hearing.
(e) Report. Within 30 days after the informal hearing, the hearing
officer shall make a written report to the Secretary setting forth his
findings, the basis for his findings, and his recommendations. A copy of
the report shall be sent to the company.
[38 FR 22779, Aug. 24, 1973]
Sec. 223.20 Final decisions.
If, after review of the case file, it is the judgment of the
Secretary that the complaint was unfounded, the Secretary shall dismiss
the complaint by the Federal agency concerned and shall so notify the
company. If, however, it is the judgment of the Secretary that the
company has not fulfilled its obligations to the complainant agency, he
shall notify the company of the facts or conduct which indicate such
failure and allow the company 20 business days from the date of such
notification to demonstrate or achieve compliance. If no showing of
compliance is made within the period allowed, the Secretary shall either
preclude renewal of a company's certificate of authority or revoke it
without further notice.
[38 FR 22779, Aug. 24, 1973, as amended at 42 FR 8638, Feb. 11, 1977]
Sec. 223.21 Reinstatement.
If, after one year from the date of the expiration or the revocation
of the certificate of authority, under Sec. 223.20 a company can show
that the basis for the non-renewal or revocation has been eliminated and
that it can comply with the requirements of 6 U.S.C. 6-13 and the
regulations in this part, a new certificate of authority shall be issued
without prejudice.
[38 FR 22779, Aug. 24, 1973, as amended at 42 FR 8638, Feb. 11, 1977]
[[Page 63]]
Sec. 223.22 Fees for services of the Treasury Department.
(a) Fees shall be imposed an collected, for the services listed in
paragraphs (a) (1) through (4) of this section which are performed by
the Treasury Department, regardless of whether the action requested is
granted or denied. The payee of the check or other instrument shall be
the Financial Management Service, Treasury Department. The amount of the
fee will be based on which of the following categories of service is
requested:
(1) Examination of a company's application for a certificate of
authority as an acceptable surety on Federal bonds or for a certificate
of authority as an acceptable reinsuring company on such bonds (see
Sec. 223.2);
(2) Examination of a company's application for recognition as an
admitted reinsurer (except on excess risks running to the United States)
of surety companies doing business with the United States (see
Sec. 223.12(a) and (b));
(3) Determination of a company's continuing qualifications for
annual renewal of its certificate of authority (see Sec. 223.3); or
(4) Determination of a company's continuing qualifications for
annual renewal of its authority as an admitted reinsurer (see
Sec. 223.12(c)).
(b) In a given year a uniform fee will be collected from every
company requesting a particular category of service, e.g., determination
of a company's continuing qualifications for annual renewal of its
certificate of authority. However, the Treasury Department reserves the
right to redetermine the amounts of fees annually. Fees are determined
in accordance with Office of Management and Budget Circular A-25, as
amended.
(c) Specific fee information may be obtained from the Assistant
Commissioner, Comptroller at the address shown in Sec. 223.2. In
addition, a notice of the amount of a fee referred to in Sec. 223.22(a)
(1) through (4) will be published in the Federal Register as each change
in such fee is made.
[43 FR 12678, Mar. 27, 1978, as amended at 49 FR 47001 and 47002, Nov.
30, 1984]
PART 224--FEDERAL PROCESS AGENTS OF SURETY COMPANIES--Table of Contents
Sec.
224.1 Statutory provision.
224.2 Appointment of process agents.
224.3 Powers of attorney appointing process agents; with whom filed.
224.4 Power of attorney; form.
224.5 Process agents; termination of authority.
224.6 United States district courts; location of divisional offices.
Authority: 31 U.S.C. 9306.
Sec. 224.1 Statutory provision.
The rules and regulations in this part are prescribed for carrying
into effect 31 U.S.C. 9306.
[61 FR 26840, May 29, 1996]
Sec. 224.2 Appointment of process agents.
(a) Generally. Companies should especially note that the law
prohibits the doing of business under the provisions of this act beyond
the State under whose laws it was incorporated and in which its
principal office is located until an agent is appointed to accept
Federal process on behalf of the company. An agent for the service of
Federal process should be appointed:
(1) In the district where the principal resides;
(2) In the district where the obligation is to be undertaken and
performed; and
(3) Also in the District of Columbia where the bond is returnable
and filed.
The appointment of process agents pursuant to a local State statute is
not compliance with the Federal law. Although one and the same agent may
serve under both the State and Federal appointments, he must,
nevertheless, be especially designated to accept Federal process. It
should also be noted that the agent so designated must reside within the
jurisdiction of the court for the judicial district wherein such
suretyship is to be undertaken, and must be citizen of the State,
Territory, or District of Columbia in which such court is held.
Consequently an agent residing in the northern district of New York
could not at the same time serve as the company's Federal
[[Page 64]]
process agent for the southern district of that State.
(b) Agent required in District of Columbia. Every company must,
immediately upon receipt of its initial authority from the Secretary of
the Treasury, appoint a suitable person resident in the District of
Columbia on whom may be served all lawful process issued by the Federal
Courts in said district. This appointment is required whether or not the
company contemplates the writing of bonds in favor of the United States
to be undertaken within the District of Columbia.
(c) Agent not required in State of incorporation where principal
office is located. The law does not require the appointment of Federal
process agents for the State under whose laws the company is
incorporated, and in which its principal office is located.
[17 FR 2605, Mar. 26, 1952]
Sec. 224.3 Powers of attorney appointing process agents; with whom filed.
The clerk of the United States district court at the main office in
each judicial district must be furnished with a sufficient number of
authenticated copies of the power of attorney appointing an agent for
the service of process to enable him to file a copy in his office, and
at each other place where a divisional office of the court is located
within the judicial district for which the process agent has been
appointed. Such copies may be authenticated at the home office of the
company by its officers duly authorized, and sworn to before an officer
legally authorized to administer oaths. Where the charter of bylaws of
the corporation do not confer authority on its executive officers to
give such powers of attorney the authenticated copy filed with the clerk
of the court must be accompanied by a certified copy of the resolution
duly adopted by its board of directors or other governing body showing
that the officer making the appointment had authority to do so.
[17 FR 2606, Mar. 26, 1952]
Sec. 224.4 Power of attorney; form.
In making such appointments a power of attorney should be used
substantially in the following form:
Know all men by these presents, that the -------------------- a
corporation existing under and by virtue of the laws of the State of --
------------------ and having its principal office at ------------------
--, desiring to comply with section 9306 of Title 31, United States
Code, hereby constitutes and appoints ----------, of ------------------
--, its true and lawful attorney and agent in and for the --------------
------ judicial district of --------------------, upon whom all lawful
process in any action or proceeding against the company in said district
may be served in like manner and with the same effect as if the company
existed therein, and who is authorized to enter an appearance in its
behalf.
In witness whereof the said company, pursuant to proper authority of
its board of directors or other governing body, has caused these
presents to be subscribed by its ------------ president and its
corporate seal to be affixed hereto this ------ day of ------------,
a.d. 19--
[Corporate Seal] --------------------------
President,
State of --------------------
County of --------------------, ss:
On this ------------ day of ------------, a.d. 19--, before me
appeared --------------------, president of the --------------------
Company, with whom I am personally acquainted, who being duly sworn,
says that he is -------------------- president of the ------------------
-- Company; that he knows the corporate seal of the company; that the
seal affixed to the foregoing instrument is such corporate seal; that it
was affixed by order of the board of directors or other governing body
of said company, and that he signed said instrument as --------------
president of said company by like authority.
[Notarial Seal]
[Dept. Cir. Ltr. 4, Nov. 15, 1930, as amended at 49 FR 14340, Apr. 11,
1984]
Sec. 224.5 Process agents; termination of authority.
Whenever the authority of a process agent is terminated by reason of
revocation, disability, removal from the district, or any other cause,
it shall be the duty of the company to immediately make a new
appointment.
[40 FR 51194, Nov. 4, 1975. Redesignated at 61 FR 26840, May 29, 1996]
Sec. 224.6 United States district courts; location of divisional offices.
A list of the divisional offices of the court in each judicial
district where powers of attorney should be filed may be obtained from
the Surety Bond
[[Page 65]]
Branch, Financial Management Service, Department of the Treasury, 3700
East-West Highway, Room 6F04, Hyattsville, MD 20782.
[61 FR 26840, May 29, 1996]
PART 225--ACCEPTANCE OF BONDS, NOTES, OR OTHER OBLIGATIONS ISSUED OR GUARANTEED BY THE UNITED STATES AS SECURITY IN LIEU OF SURETY OR SURETIES ON PENAL BONDS1
--Table of Contents
---------------------------------------------------------------------------
1 The forms mentioned in this part may be obtained from
Financial Management Service, U.S. Treasury Department, Washington, DC
20226.
---------------------------------------------------------------------------
Sec.
225.1 Bond-approving officers; definition.
225.2 Bonds or notes acceptable as security; power to sell.
225.3 Obligor must be owner; registration.
225.4 Risk of loss; receipt.
225.5 Application of proceeds in case of default; forms.
225.6 Facts to be determined by bond-approving officers.
225.7 Substitutions.
225.8 Authorized depositaries; withdrawal.
225.9 Risk of loss or destruction.
225.10 Delivery to the depositary.
225.11 Payment of interest to obligor; coupons.
225.12 Return to obligor of security.
225.13 Return to obligor; risk of loss.
225.14 Withdrawal.
225.15 Receipt for return.
225.16 Penal bonds; form to be used with bonds or notes as security.
225.17 Penal bonds; existing practice or duties of administrative
offices in handling not modified.
225.20 All Government bond-approving officers governed by the
provisions of this part.
225.21 Other authority to take bonds and notes not affected by this
part.
225.22 Conversion to book-entry Treasury securities.
Authority: Sec. 15, 61 Stat. 650; 6 U.S.C. 15.
Source: Department Circular 154, Revised, Feb. 6, 1935, unless
otherwise noted.
Sec. 225.1 Bond-approving officers; definition.
The term bond-approving officers as used in this part means the head
of an executive department or Government establishment or an officer
designated either by law or regulation to approve penal bonds. The
Treasury of the United States assumes no responsibility or liability on
account of the acts of bond-approving officers. The term bond-approving
officer shall be deemed to include the officer's successors in office.
Sec. 225.2 Bonds or notes acceptable as security; power to sell.
Any individual, partnership, or corporation required by the laws of
the United States or regulations made pursuant thereto to furnish any
recognizance stipulation, bond, guaranty, or undertaking (hereinafter
called penal bond), with surety or sureties, may, in lieu of such surety
or sureties, deposit as security with the official having authority to
approve such penal bond (hereinafter called the bond-approving officer),
United States bonds, Treasury notes, or other public debt obligations of
the United States or obligations which are unconditionally guaranteed as
to both interest and principal by the United States (all of which
classes of obligations are hereinafter called bonds or notes), in a sum
equal at their par value to the amount of the penal bond required to be
furnished, together with an irrevocable power of attorney and agreement
in the form prescribed, authorizing the bond-approving officer to
collect or sell, assign and transfer such bonds or notes so deposited in
case of any default in the performance of any of the conditions or
stipulations of such penal bond. The acceptance of such bonds or notes
in lieu of surety or sureties required by law shall have the same force
and effect as individual or corporate sureties, or certified checks,
bank drafts, post-office money orders, or cash, for the penalty or
amount of such penal bond. The term par value as applied in this part to
bonds or notes not issued on a discount basis means the stated dollar
amount thereof; i.e., the denominational amount, such as $100, $500, and
$1,000; and as applied to bonds or notes issued on a discount basis
means the dollar amount which the holder is entitled to receive at
maturity or the next following date of redemption at the option of the
holder, whichever amount is less. In order to avoid the frequent
substitution of bonds or notes, bond-approving officers will not receive
a bond or note which
[[Page 66]]
matures or, at the option of the holder, may be redeemed within 30 days
of the date of deposit; and any bond-approving officer may refuse to
receive bonds or notes which mature or, at the option of the holder, may
be redeemed within a year of the date of deposit, in cases where he
rules that deposit of such bonds or notes might lead to frequent
substitutions.
Sec. 225.3 Obligor must be owner; registration.
The individual, partnership, or corporation required to furnish any
penal bond, who deposits bonds or notes as security in lieu of surety or
sureties in accordance with the provisions of this part, must be the
owner of the bonds or notes deposited, and is hereinafter called the
obligor. Bonds or notes may be deposited with bond-approving officers
pursuant to the provisions of this part in either coupon or registered
form. Coupon bonds or notes shall have attached thereto all coupons
unmatured at the date of such deposit, and all matured coupons should be
detached. Registered bonds or notes must be registered in the name of
the obligor. They need not be assigned, and must not be assigned to the
bond-approving officer. Bonds registered in the name of the obligor may,
however, bear assignment in blank or to the Secretary of the Treasury
for exchange for coupon bonds.
Sec. 225.4 Risk of loss; receipt.
The bonds or notes to be deposited must in every case be delivered
to the bond-approving officer at the obligor's risk and expense. Coupon
bonds or notes and registered bonds or notes assigned in blank or for
exchange for coupon bonds or notes cannot safely be forwarded by
registered mail unless insured by the obligor against risk of loss in
transit. Registered bonds or notes, unless assigned in blank or for
exchange for coupon bonds or notes, need not be so insured when
forwarded by registered mail, unless the obligor so elects. The bond-
approving officer shall issue a receipt in duplicate, substantially in
Form A, for the bonds or notes so deposited, the original of the receipt
to be given to the obligor and the duplicate to be retained by the bond-
approving officer for his files.
Sec. 225.5 Application of proceeds in case of default; forms.
At the time of the deposit of any bonds or notes with a bond-
approving officer in accordance with the provisions of this part, the
obligor shall deliver to the bond-approving officer a duly executed
power of attorney and agreement, in favor of the bond-approving officer,
authorizing such officer to collect or sell, assign, and transfer, such
bonds or notes so deposited in case of any default in the performance of
any of the conditions or stipulations of the penal bond, and to apply
the proceeds of such sale or collection, in whole or in part, to the
satisfaction of any damages, demands, or deficiency arising by reason of
such default. The power of attorney and agreement shall not be revocable
by the obligor; and, in the case of an individual, shall be
substantially in Form C, in the case of a partnership, substantially in
Form D, and in the case of a corporation, substantially in Form E.
Sec. 225.6 Facts to be determined by bond-approving officers.
In connection with the acceptance of bonds or notes hereunder as
security in lieu of surety or sureties, bond-approving officers must
satisfy themselves as to the ownership of the bonds or notes deposited
and the sufficiency of the power of attorney and agreement, and in the
case of registered bonds or notes, as to the regularity to the
assignments as well, and, in general, that the deposit is made in
conformity with the provisions of this part.
Sec. 225.7 Substitutions.
Any obligor who deposits bonds or notes in accordance with the
provisions of this part may upon written application to and with the
approval of the bond-approving officer, substitute for the bonds or
notes so deposited:
(a) Other bonds or notes in a sum equal at their par value to not
less than the par amount of the bonds or notes to be withdrawn, upon
compliance with all the provisions of this part applicable to an
original deposit of
[[Page 67]]
bonds or notes in lieu of surety or sureties, or
(b) A penal bond with surety or sureties or such other security as
may be allowed by law. The bonds or notes withdrawn shall be returned in
the manner hereinafter provided for the return of bonds and notes
deposited.
Sec. 225.8 Authorized depositaries; withdrawal.
Bonds or notes deposited with bond-approving officers as security in
accordance with the provisions of this part and such other bonds or
notes as may be substituted therefor from time to time as such security,
may be deposited by bond-approving officers with a Federal Reserve Bank
or Branch having the requisite facilities, or other depository duly
designated for that purpose by the Secretary of the Treasury.
Provided, however, That bond-approving officers shall deposit with the
United States Treasury all bonds or notes received by them in the
District of Columbia pursuant to the provisions of this part.
Depositaries of public moneys are not authorized to act as depositaries
for bonds or notes accepted under this part, unless specifically
designated for that purpose by the Secretary of the Treasury. Any
authorized depositary receiving deposits of bonds or notes from bond-
approving officers in accordance with this part shall give receipt
therefor in duplicate, describing the bonds or notes so deposited,
substantially in Form B, the original to be delivered to the bond-
approving officer and the duplicate to be retained by the depositary for
its own files. The bond-approving officer will hold the original receipt
subject to the instructions of his administrative superior. Bonds or
notes so deposited with an authorized depositary may be withdrawn only
by or on the written order of the bond-approving officer. Bonds or notes
accepted by or on behalf of any United States court, under this part may
also be deposited as aforesaid under a duly authenticated order of the
court, and bonds or notes so deposited may be withdrawn only by or on
the duly authenticated order of such court.
[Dept. Circ. 154, Feb. 6, 1935, as amended at 39 FR 32911, Sept. 12,
1974]
Sec. 225.9 Risk of loss or destruction.
Bonds or notes accepted by bond-approving officers from obligors
under this part and not deposited by them with authorized depositaries,
will be held at the risk of the respective bond-approving officers,
subject to such regulations and instructions as may be prescribed for
their guidance by their respective administrative superiors. Coupon
bonds or notes and registered bonds or notes assigned in blank or for
exchange for coupon bonds or notes are in effect bearer obligations and
must be kept in safe custody; registered bonds or notes not assigned in
blank or for exchange for coupon bonds or notes must also be kept in
safe custody, but in the event of loss or destruction may be replaced
upon compliance with the provisions of law and the regulations of the
Treasury Department applicable thereto.
Sec. 225.10 Delivery to the depositary.
Bond-approving officers desiring to deposit bonds or notes received
by them with authorized depositaries must deliver such bonds or notes to
the depositary, without risk or expense to the depositary. Coupon bonds
or notes and registered bonds or notes assigned in blank or for exchange
for coupon bonds or notes cannot safely be shipped by registered mail
unless covered by insurance. Registered bonds or notes not assigned in
blank or for exchange for coupon bonds or notes may be forwarded by
registered mail uninsured.
Sec. 225.11 Payment of interest to obligor; coupons.
The obligor shall be entitled to receive the interest accruing upon
bonds or notes deposited in accordance with this part, in the absence of
any default in the performance of any of the conditions or stipulations
of the penal bond. The interest on any registered bonds or notes which
the obligor is entitled to receive hereunder will be paid by check in
regular course to the registered holder. The coupons for any interest on
coupon bonds or notes which the obligor is entitled to receive hereunder
will, upon written application from the obligor to the bond-approving
officer, be detached, as they mature, from the bonds or notes deposited
and forwarded
[[Page 68]]
to the obligor at the obligor's risk and expense, either by the bond-
approving officer or upon his written order by the depositary with which
the bonds or notes may be deposited, or, at the direction of the bond-
approving officer, collected by the depositary and check therefor
forwarded to the obligor. In the absence of written application therefor
by the obligor, coupons for interest on coupon bonds or notes to which
the obligor may be entitled under this part shall remain attached to the
bonds or notes deposited, subject to the provisions of this part.
Sec. 225.12 Return to obligor of security.
(a) Generally. As soon as security for the performance of the penal
bond is no longer necessary, the bonds or notes deposited in lieu of
surety or sureties on such penal bond, together with the power of
attorney and agreement accompanying such bonds or notes, shall be
returned to the obligor by the bond-approving officer, without
application therefor from the obligor. The determination of the question
whether security is any longer necessary for the performance of the
penal bond shall rest with the bond-approving officer.
(b) Miller Act payment bonds. If a person who supplied labor or
material to a contractor, required by the Miller Act, as amended (40
U.S.C. 270a-d), to give a payment bond to the United States, files with
the Comptroller General the application and affidavit provided for in
that Act after a default in the performance of a contract covered by
that Act, the bond-approving officer shall not return to the contractor-
obligor the deposited bonds, notes or any surplus proceeds thereof until
the expiration of the time within which such a person may commence suit
on the payment bond as provided in the Act, i.e., 1 year after the day
on which the last of the labor was performed or material supplied by
that person. If suit is instituted within that time, the bond-approving
officer shall hold such bonds, notes or proceeds subject to the order of
the court having jurisdiction of the suit. If suit is not instituted
within that time but the bond-approving officer is on notice of a claim
against the contractor-obligor on the basis of his payment bond, the
bond-approving officer shall determine the time at which, and the
evidence of settlement of the claim upon which, he will release the
bonds, notes or proceeds.
(c) Claim of United States unaffected. Nothing in this section shall
affect or impair the priority of any claim of the United States against
bonds or notes deposited, or any right or remedy granted by the Miller
Act or by this part to the United States for default upon any obligation
of a penal bond.
[34 FR 17953, Nov. 6, 1969]
Sec. 225.13 Return to obligor; risk of loss.
Bonds or notes to be returned to the obligor will be forwarded at
the obligor's risk and expense, either by the bond-approving officer, or
upon his written order by the depositary with which the bonds or notes
may be deposited, and unless delivered direct to the obligor, will be
forwarded, in the absence of other written instructions and remittance
to cover expenses, by express, collect, except that registered bonds or
notes not assigned in blank or for exchange for coupon bonds or notes
may be forwarded by registered mail, uninsured.
Sec. 225.14 Withdrawal.
Any obligor who desires to withdraw a portion only of the bonds or
notes deposited, by reason of reduction in liability under the penal
bond, shall make written application for such withdrawal to the bond-
approving officer, who shall, if he approve such application, return
such portion of the bonds or notes to the obligor.
Sec. 225.15 Receipt for return.
Upon the complete or partial return to the obligor of bonds or notes
deposited as security under the provisions of this part, the bond-
approving officer shall require from the obligor a receipt in duplicate,
substantially in Form G, and shall further require the obligor, in case
of complete return, to surrender the original receipt on Form A.
Sec. 225.16 Penal bonds; form to be used with bonds or notes as security.
Penal bonds on which bonds or notes are accepted as security in lieu
of surety or sureties may be substantially in
[[Page 69]]
Form F. Administrative officers of the Government may, however, use
other forms of penal bonds appropriate to the work of their respective
offices: Provided, That upon the execution of the penal bond the
principal shall indorse on the face thereof and sign the following
statement:
The securities described in the annexed schedule are hereby pledged
as security for the performance and fulfillment of the foregoing
undertaking in accordance with 6 U.S.C. 15, and 31 CFR part 225.
--------------------------------
Principal on the above bond
[Dept. Circ. 154, Rev., Feb. 6, 1935, as amended at 34 FR 9928, June 27,
1969; 34 FR 17953, Nov. 6, 1969]
Sec. 225.17 Penal bonds; existing practice or duties of administrative offices in handling not modified.
Nothing contained in this part shall be construed as modifying the
existing practice or duties of administrative offices in handling penal
bonds, except to the extent made necessary under the terms of this part
by reason of the acceptance of bonds or notes as security in lieu of
surety or sureties thereon.
Sec. 225.20 All Government bond-approving officers governed by the provisions of this part.
Bond-approving officers of other departments and establishments of
the Government accepting bonds or notes in lieu of surety or sureties
under the provisions of 6 U.S.C. 15, shall be governed by the provisions
of this part. This part may be modified or amended only upon the
approval of the Secretary of the Treasury.
[Dept. Circ. 154, Rev., Feb. 6, 1935, as amended at 34 FR 9928, June 27,
1969]
Sec. 225.21 Other authority to take bonds and notes not affected by this part.
Nothing contained in this part shall affect the authority of courts
over the security when bonds or notes are taken as security in judicial
proceedings, or the authority of any administrative officer of the
United States to receive United States bonds or notes for security in
cases authorized by provisions of law other than 6 U.S.C. 15.
[Dept. Circ. 154, Rev., Feb. 6, 1935, as amended at 34 FR 9928, June 27,
1969]
Sec. 225.22 Conversion to book-entry Treasury securities.
Treasury bonds, notes, certificates of indebtedness, or bills
deposited with a Federal Reserve bank or branch bank under this part may
be converted into book-entry Treasury securities in accordance with
subpart O of part 306 of this chapter, and the pertinent provisions of
that subpart shall apply to such Treasury securities.
[34 FR 9928, June 27, 1969, as amended at 36 FR 2507, Feb. 5, 1971]
PART 226--RECOGNITION OF INSURANCE COVERING TREASURY TAX AND LOAN DEPOSITARIES--Table of Contents
Sec.
226.1 Scope.
226.2 General.
226.3 Application--termination.
226.4 Adequacy of security--how computed.
226.5 Examinations.
226.6 Financial reports.
226.7 Effective date.
Authority: Secs. 2 and 3, Pub. L. 95-147. 91 Stat. 1227 (31 U.S.C.
1038).
Source: 43 FR 18972, May 2, 1978, unless otherwise noted.
Sec. 226.1 Scope.
The regulations in this part apply to insurance covering public
money of the United States held by banks, savings banks, savings and
loan associations, building and loan associations, homestead
associations, or credit unions designated as Treasury tax and loan
depositaries under 31 CFR part 203. Approval of the adequacy of the
insurance coverage provided to Treasury tax and loan funds shall be
governed by the regulations contained herein, which will be supplemented
by guidelines issued by the Treasury and updated from time to time to
meet changing conditions in the industry.
Sec. 226.2 General.
(a) Deposit or account insurance provided by the Federal Deposit
Insurance Corporation, the Federal Savings and Loan Insurance
Corporation, and the National Credit Union Share Insurance Fund, is
hereby recognized. Deposits or accounts which are insured by a State or
agency thereof, or by a corporation
[[Page 70]]
chartered by a State for the sole purpose of insuring deposits or
accounts of financial institutions eligible to be Treasury tax and loan
depositaries (hereinafter referred to as Insurance Arrangement), shall
be approved as provided herein. Such approval constitutes recognition
for the purpose of reducing the amount of collateral required of a tax
and loan depositary by the amount of recognized insurance coverage
pursuant to 31 CFR 203.15.
(b) Generally, these regulations and their associated guidelines
require that an organization providing insurance maintain a corpus of
sufficient value and liquidity, and/or that it have sufficient State
borrowing authority, in relation to its liabilities and total insured
savings (or deposits) to provide adequate security to the Government's
deposits and that adequate monitoring of the financial condition of the
insured institutions is conducted.
Sec. 226.3 Application--termination.
(a) Every Insurance Organization applying for recognition as a
qualified insurer of financial institutions designated as Treasury tax
and loan depositaries shall address a written request to the Assistant
Commissioner, Comptroller, Financial Management Service, Department of
the Treasury, Washington, DC 20226, who will notify the applicant of the
data which is necessary to make application. If the Secretary of the
Treasury is satisfied that:
(1) One or more institutions insured by the applicant otherwise meet
the Secretary's requirements for designation as a Treasury tax and loan
depositary or Federal tax depositary,
(2) The insurance provided by the applicant covers public money of
the United States, and
(3) The insurance coverage provided affords adequate security to the
Government's deposits, the Secretary shall recognize the applicant as a
qualified insurer of financial institutions designated as Treasury tax
and loan depositaries.
(b) If and when the Secretary of the Treasury determines that a
qualified insurance organization's financial condition is such that it
no longer provides adequate security or that it is not complying with
the regulations of this part, the Secretary will notify the Insurance
Organization of the facts or conduct which cause him to make such
determination, and in those cases where the safety of the Government's
funds allows, provide the Insurance Organization with an opportunity to
correct the deficiency. When any deficiency has not been corrected to
his satisfaction or, where the safety of Government funds makes
immediate revocation imperative, the Secretary will revoke the
recognition previously granted.
Note: For a delegation of authority to perform the functions
described in Secs. 226.3 and 226.4, see 44 FR 19406 of the Federal
Register of April 3, 1979.
[43 FR 18972, May 2, 1978, as amended at 44 FR 19406, Apr. 3, 1979; 49
FR 47002, Nov. 30, 1984]
Sec. 226.4 Adequacy of security--how computed.
(a) In qualifying Insurance Organizations, the Treasury will use a
ratio (equity (net worth) of the insurance organization divided by
insured accounts or deposits) to determine if the security is adequate.
The ratio will be computed as determined by the Treasury, and is
required to equal 0.0045 or greater for an Insurance Organization to be
recognized (i.e., net worth is required to equal 0.45 of 1 percent of
insured accounts or deposits).
(b) If, in the judgment of the Secretary of the Treasury, any of the
Insurance Organization's assets which cannot be liquidated promptly or
are subject to restriction, encumbrance, or discredit, all or part of
the value of such assets may be deducted from equity in making the
computation. The Secretary of the Treasury may value the assets and
liabilities in his discretion.
(c) An Insurance Organization's unqualified borrowing authority from
its sponsoring State will be added to its equity in making the
computation because such authority is equivalent to additional
capitalization. An Insurance Organization's commercial borrowing
authority and its reinsurance will be disregarded in making the
computation, because these are not adequate substitutes for
undercapitalization.
[[Page 71]]
Note: For a delegation of authority to perform the functions
described in Secs. 226.3 and 226.4, see 44 FR 19406 of the Federal
Register of April 3, 1979.
[43 FR 18972, May 2, 1978, as amended at 44 FR 19406, Apr. 3, 1979]
Sec. 226.5 Examinations.
(a) Examinations by State regulatory authorities or audits by CPA
firms of Insurance Organizations shall be performed in accordance with,
and at intervals prescribed by, State regulatory procedures. Copies of
the reports shall be submitted to the Treasury.
(b) Examinations by State regulatory authorities or audits by CPA
firms of insured financial institutions shall be performed in accordance
with, and at intervals prescribed by, State regulatory procedures. In
addition, an adequate monitoring system shall be employed to detect
those institutions with financial problems.
Sec. 226.6 Financial reports.
Financial reports of Insurance Organizations shall be submitted to
the Treasury at the same intervals they are submitted to State
regulatory authorities. However, they need not be submitted more
frequently than quarterly but, as a minimum, shall be submitted
annually. The Treasury may prescribe the format of such reports.
Sec. 226.7 Effective date.
The provisions of this part become effective November 2, 1978.
[43 FR 47506, Oct. 16, 1978]
PART 235--ISSUANCE OF SETTLEMENT CHECKS FOR FORGED CHECKS DRAWN ON DESIGNATED DEPOSITARIES--Table of Contents
Sec.
235.1 Scope of regulations.
235.2 Definition.
235.3 Settlement of claims.
235.4 Check Forgery Insurance Fund.
235.5 Reclamation amounts.
235.6 Implementing instructions.
Authority: 31 U.S.C. 3343.
Source: 40 FR 6785, Feb. 14, 1975, unless otherwise noted.
Sec. 235.1 Scope of regulations.
This part governs the issuance of settlement checks for checks drawn
on designated depositaries of the United States by accountable officers
of the United States, that have been negotiated and paid on a forged or
unauthorized indorsement.
[40 FR 6785, Feb. 14, 1975, as amended at 54 FR 35642, Aug. 29, 1989]
Sec. 235.2 Definition.
Accountable Officers of the United States, as used in these
regulations, means disbursing officers authorized by the Secretary of
the Treasury to maintain official accounts of the United States in
depositary banks located in the United States, its territories, and
foreign countries, and to draw checks thereon in dollars or in foreign
currencies.
Sec. 235.3 Settlement of claims.
Upon receipt of a claim by a payee or special indorsee on a check
determined to have been paid on a forged indorsement under conditions
satisfying the provisions set forth in 31 U.S.C. 3343, accountable
officers of the United States, with respect to a check drawn on
designated depositaries of the United States, in dollars or in foreign
currency, shall cause to be issued a settlement check in the appropriate
currency to the payee or special indorsee.
[40 FR 6785, Feb. 14, 1975, as amended at 49 FR 47001, 47002, Nov. 30,
1984; 54 FR 35642, Aug. 29, 1989]
Sec. 235.4 Check Forgery Insurance Fund.
The Check Forgery Insurance Fund, established pursuant to 31 U.S.C.
3343, shall be available for use by the Commissioner, Financial
Management Service, and accountable officers of the United States for
the purpose of providing funding for settlements made to a payee or
special indorsee pursuant to these regulations.
[40 FR 6785, Feb. 14, 1975, as amended at 49 FR 47001, 47002, Nov. 30,
1984]
Sec. 235.5 Reclamation amounts.
Amounts received by way of reclamation on forged checks shall be
deposited to the credit of the Check Forgery
[[Page 72]]
Insurance Fund or to the appropriate foreign currency fund or other
account charged for the settlement payment.
Sec. 235.6 Implementing instructions.
Procedural instructions implementing these regulations will be
issued by the Commissioner of the Financial Management Service in volume
I, part 4 of the Treasury Financial Manual.
[54 FR 35642, Aug. 29, 1989]
PART 240--INDORSEMENT AND PAYMENT OF CHECKS DRAWN ON THE UNITED STATES TREASURY--Table of Contents
General Provisions
Sec.
240.1 Scope of regulations.
240.2 Definitions.
240.3 Limitations on payment.
240.4 Cancellation and distribution of proceeds of checks.
240.5 Guaranty of indorsements.
240.6 Reclamation of amounts of paid checks.
240.7 Demand and protest.
240.8 Offset.
240.9 Processing of checks.
240.10 Release of original checks.
Indorsement of Checks
240.11 Indorsement by payees.
240.12 Checks issued to incompetent payees.
240.13 Checks issued to deceased payees.
240.14 Checks issued to minor payees in certain cases.
240.15 Powers of attorney.
Appendix A to Part 240--Standard Forms for Power of Attorney and Their
Application
Authority: 5 U.S.C. 301; 12 U.S.C. 391; 31 U.S.C. 3328; 31 U.S.C.
3331; 31 U.S.C. 3343; 31 U.S.C. 3711; 31 U.S.C. 3716; 31 U.S.C. 3717;
332 U.S. 234 (1947); 318 U.S. 363 (1943).
Source: 54 FR 35642, Aug. 29, 1989, unless otherwise noted.
General Provisions
Sec. 240.1 Scope of regulations.
The regulations in this part prescribe the requirements for
indorsement and the conditions for payment of checks drawn on the United
States Treasury. These regulations also establish procedures for
collection of amounts due the United States Treasury because of payments
on checks bearing forged or other unauthorized indorsements or other
material defects or alterations.
Sec. 240.2 Definitions.
(a) Certifying agency means an agency for whom a Treasury disbursing
officer or a non-Treasury disbursing officer makes payment in accordance
with 31 U.S.C. 3325. The responsibilities of a certifying official are
set forth at 31 U.S.C. 3528.
(b) Check or Checks means a check or checks drawn on the United
States Treasury.
(c) Check payment means the amount paid to a presenting bank in
accordance with Sec. 240.9(a)(3) of this part.
(d) Commissioner means the Commissioner of the Financial Management
Service, Department of the Treasury, 401 14th Street SW., Washington, DC
20227.
(e) Days means calendar days.
(f) Financial institution means any bank, savings bank, savings and
loan association, Federal or State chartered credit union, or similar
institution.
(g) Item means a reference in a monthly interest billing statement
to a check for the amount of which Treasury has demanded refund from a
presenting bank.
(h) Monthly interest billing statement means a statement prepared by
Treasury and sent to a presenting bank which includes the following
information regarding each outstanding demand for refund:
(1) The reclamation date;
(2) The reclamation number;
(3) Check identifying information; and
(4) The balance due, including interest.
(i) Person or persons means an individual or individuals, or an
institution or institutions including all forms of financial
institutions.
(j) Presenting bank means:
(1) A financial institution which, either directly or through a
correspondent banking relationship, presents checks to and receives
provisional credit from a Federal Reserve Bank; or
(2) A depositary which is authorized to charge checks directly to
the General Account of the United States Treasury and present them to
Treasury
[[Page 73]]
for payment through a designated Federal Reserve Bank.
(k) Protest means a presenting bank's written statement and any
supporting documentation tending to prove that it is not liable for
refund of the reclamation balance.
(l) Reclamation means a demand by Treasury for refund of the amount
of a check payment.
(m) Reclamation date means the date on which a demand for refund was
prepared. Normally, demands are sent to presenting banks within two
working days of the reclamation date.
(n) Treasury means the United States Treasury.
(o) U.S. securities means securities of the United States and
securities of Federal agencies and wholly or partially government-owned
corporations for which the Treasury acts as the transfer agent.
(p) Unauthorized indorsement means:
(1) An indorsement made by a person other than the payee, except as
authorized by and in accordance with Sec. 204.5 and Secs. 240.11 through
240.15;
(2) An indorsement by a financial institution under circumstances in
which the financial institution breaches the guaranty required of it by
31 CFR 209.9(a) (See, 31 CFR 209.8); or
(3) A missing indorsement where the depositary bank had no authority
to supply the indorsement.
Sec. 240.3 Limitations on payment.
(a) As a general rule,
(1) The Commissioner shall not be required to pay a Treasury check
issued on or after October 1, 1989 unless it is negotiated to a
financial institution within 12 months after the date on which the check
was issued; and
(2) The Commissioner shall not be required to pay a Treasury check
issued before October 1, 1989 unless it is negotiated to a financial
institution no later than October 1, 1990.
(b) All checks drawn on the United States Treasury and issued on or
after October 1, 1989 shall bear a legend, stating ``Void After One
Year.'' The legend is notice to payees and indorsers of a general
limitation on the payment of Treasury checks. The legend, or the
inadvertent lack thereof, does not limit, or otherwise affect, the
rights of the Commissioner under the law.
(c) The Treasury shall have the usual right of a drawee to examine
checks presented for payment and refuse payment of any checks. The
Treasury shall have a reasonable time to make such examination.
(d) Checks shall be deemed to be paid by the United States Treasury
only after first examination has been fully completed.
(e) If the Treasury is on notice of a question of law or fact about
whether a Treasury check is properly payable when the check is presented
for payment, the Commissioner may defer payment until the Comptroller
General settles the question.
Sec. 240.4 Cancellation and distribution of proceeds of checks.
(a) Checks issued on or after October 1, 1989. (1) Any check issued
on or after October 1, 1989 that has not been paid and remains
outstanding for more than 12 months shall be cancelled by the
Commissioner.
(2) The proceeds from checks cancelled pursuant to paragraph (a) of
this section shall be returned to the agency which authorized the
issuance of the check and credited to the appropriation or fund account
initially charged for the payment.
(3) Beginning January 1, 1991, and monthly thereafter, the
Commissioner shall provide to each agency that authorizes the issuance
of Treasury checks a list of those checks issued for such agency which
were cancelled during the preceding month pursuant to paragraph (a) of
this section.
(b) Checks issued before October 1, 1989. (1) Any check issued
before October 1, 1989 that has not been paid and remains outstanding
for more than 12 months shall be cancelled by the Commissioner no later
than April 1, 1991.
(2) The proceeds from checks cancelled pursuant to paragraph (b) of
this section shall be applied as required by 31 U.S.C. 3334.
Sec. 240.5 Guaranty of indorsements.
The presenting bank and the indorsers of a check presented to the
Treasury for payment are deemed to guarantee to the Treasury that all
[[Page 74]]
prior indorsements are genuine, whether or not an express guaranty is
placed on the check. When the first indorsement has been made by one
other than the payee personally, the presenting bank and the indorsers
are deemed to guarantee the Treasury, in addition to other warranties,
that the person who so indorsed had unqualified capacity and authority
to indorse the check on behalf of the payee.
Sec. 240.6 Reclamation of amounts of paid checks.
(a) If, after a check has been paid by Treasury, it is found to:
(1) Bear a forged or unauthorized indorsement; or
(2) Contain any other material defect or alteration which was not
discovered upon first examination, then, upon demand by the Treasury in
accordance with the procedures specified in Sec. 240.7 of this part, the
presenting bank or other indorser shall refund the amount of the check
payment.
(b) Interest on any unpaid item shall commence to accrue on the
sixty-first day after the reclamation date. Interest shall be calculated
at the rate set from time to time for purposes of 31 U.S.C. 323.
Interest shall continue to accrue until the amount demanded is paid or
the reclamation is abandoned by Treasury.
(c) In addition to its right to recover interest, Treasury shall
have the right to recover such other applicable charges (e.g.,
administrative collection costs, late payment penalties) as may be
authorized or required by law.
(d) If the Treasury determines that a check has been paid over a
forged or unauthorized indorsement, the Commissioner may reclaim the
amount of the check from the presenting bank or any other indorser that
breached its guarantee of indorsement prior to:
(1) The end of the one-year period beginning on the date of payment;
or
(2) The expiration of the 180-day period beginning on the close of
the period described in paragraph (d)(1) of this section if a timely
claim under 31 U.S.C. 3702 is presented to the agency which authorized
the issuance of the check.
Sec. 240.7 Demand and protest.
(a) For all reclamations an initial demand for refund of the amount
of a check payment will be made by sending a ``Request for Refund
(Reclamation),'' to the presenting bank or any other indorser. This
Request shall advise the presenting bank of the amount demanded and the
reason for the demand. Treasury will make follow-up demands by including
each unpaid item on at least three monthly interest billing statements
sent to the presenting bank. Monthly interest billing statements will
identify any unpaid reclamation demands and will also show the amount of
any accrued interest for each outstanding reclamation. Any discrepancies
should be brought to Treasury's attention immediately at the address
listed in paragraph (b) of this section. Monthly interest billing
statements will contain or be accompanied by notice to the bank:
(1) That Treasury intends to collect the debt through administrative
offset if the reclamation is not paid within 120 days of the reclamation
date;
(2) That the bank has an opportunity to inspect and copy Treasury's
records with respect to the reclamation;
(3) That the bank may, by filing a protest, request Treasury to
review its decision that the bank is liable for the reclamation; and
(4) That the bank has an opportunity to enter into a written
agreement with Treasury for the repayment of the amount of the
reclamation. A request for a payment agreement must be accompanied by
proof that satisfies the Treasury that the requesting bank is unable to
repay the entire amount owed at the time that it is due.
(b) Requests for an appointment to inspect and copy Treasury's
records with respect to a reclamation and requests to enter into
repayment agreements should be sent in writing to: Department of the
Treasury, Financial Management Service, Operations Division, Reclamation
Branch, Room 700-D, 3700 East-West Highway, Hyattsville, MD 20782.
(c)(1) If a presenting bank wishes to contest its liability for the
principal amount demanded, it shall send a protest, i.e., a written
statement and copies of all documentary evidence (e.g.,
[[Page 75]]
affidavits, account agreements, signature cards) and other written
information raising a question of law or fact which, if resolved in the
bank's favor, would show that the bank is not liable, to: Department of
the Treasury, Financial Management Service, Operations Division,
Reclamation Branch Room 700-D, 3700 East-West Highway, Hyattsville, MD
20782.
The Director, Operations Division, who has supervisory authority over
the Reclamation Branch, or his authorized subordinate, shall consider
and decide any protest properly submitted under this paragraph. Neither
the Director, Operations Division, nor any of his subordinates, shall
have any involvement in the process of making findings or demands under
Sec. 240.6(a). In order to be considered, and to be timely, a protest
must be received not later than 90 days after the reclamation date.
Treasury will refrain from collection in accordance with Sec. 240.8
while a timely protest is being considered. Unresolved protested items
will be appropriately annotated on the monthly interest billing
statement.
(2) If Treasury accepts the protest, the presenting bank shall be
notified in writing that efforts to collect the item and any accrued
interest have been abandoned.
(3) If the evidence sent by the presenting bank does not satisfy
Treasury that refund of the amount demanded is not required under
Sec. 240.6(a), Treasury will notify the presenting bank in writing of
its decision that the bank is liable for the amount demanded and the
reasons for its decision. If the presenting bank fails to send the
amount demanded within 30 days of the date of Treasury's decision,
Treasury shall proceed to collect the amount owed in accordance with
Sec. 240.8, provided that no offset shall be taken sooner than 120 days
after the reclamation date.
(4) If an item, and/or accrued interest relating to that item
remains unpaid for 90 days after the reclamation date and if there is no
unresolved protest associated with the item, the monthly interest
billing statement will be annotated with a notice that the presenting
bank has until the next billing date to make payment on the item or be
subject to offset thereon.
Sec. 240.8 Offset.
(a) If an item, and/or accrued interest relating to that item,
remains unpaid for 120 days after the reclamation date and the
presenting bank has been sent at least one monthly interest billing
statement informing it that Treasury intends to collect that item by
offset, Treasury may refer the matter to any Federal agency and request
that agency to offset the indebtedness and other applicable charges
against amounts otherwise owed by the Federal agency to the presenting
bank. Monthly interest billing statements will be annotated to identify
those specific items that are to be referred to an agency for offset.
(b) If a bank wishes to make payment on an item referred to an
agency for offset, it should contact Treasury at the address listed in
Sec. 240.7(b) to reduce the possibility of a double collection. If an
agency to which an indebtedness is referred in accordance with this
paragraph is unable to effect offset in whole or in part, Treasury may
then refer the debt to any other agency and request offset in accordance
with this paragraph. Treasury designates each agency acting under this
paragraph as its designee for the sole purpose of effecting offset. No
such designee shall be liable to any party for any loss resulting from
its action under this paragraph.
(c) If Treasury is unable to collect an amount owed by use of the
offset described in paragraph (a) of this section, Treasury shall take
such action against the presenting bank as may be necessary to protect
the interests of the United States, including referral to the Department
of Justice.
(d) If Treasury effects offset under this section and it is later
determined that the presenting bank paid the amount of the reclamation
and accrued interest thereon, or that a presenting bank which had timely
filed a protest was not liable for the amount of the reclamation,
Treasury shall promptly refund to the presenting bank the amount of its
payment.
Sec. 240.9 Processing of checks.
(a) Federal Reserve Banks. (1) Federal Reserve Banks shall cash
checks for Government disbursing officers when
[[Page 76]]
such checks are drawn by the disbursing officers to their own order.
Payment of such checks shall not be refused except for alteration or
counterfeiting of the check, or forged signature of the drawer.
(2) Federal Reserve Banks shall not be expected to cash Government
checks presented directly to them by the general public.
(3) As a depository of public funds, each Federal Reserve Bank
shall:
(i) Receive checks from its member banks, nonmember clearing banks,
or other depositors, when indorsed by such banks or depositors who
guarantee all prior indorsements thereon;
(ii) Give immediate credit therefore in accordance with their
current Time Schedules and charge the amount of the checks cashed or
otherwise received to the account of the Treasury, subject to
examination and payment by the United States Treasury;
(iii) Forward payment records and copies of checks to Treasury; and
(iv) Release the original checks to a designated Federal Records
Center upon notification from Treasury. The Treasury shall return to the
forwarding Federal Reserve Bank a photocopy of any check the payment of
which is refused upon first examination. Federal Reserve Banks shall
give immediate credit therefor in the United States Treasury's account,
thereby reversing the previous charge to the account for such check. The
Treasury authorizes each Federal Reserve Bank to release the original
check to the endorser when payment is refused in accordance with
Sec. 240.3(a).
(b) Depositaries outside of the mainland of the United States. Banks
outside of the mainland of the United States designated as depositaries
of public money and permitted to charge checks to the General Account of
the United States Treasury shall be governed by the operating
instructions contained in the letter of authorization to them from
Treasury and shall assume the obligations of presenting banks set forth
in Secs. 240.5 and 240.6. Checks charged to the General Account of the
United States Treasury along with the supporting credit voucher shall be
shipped to the Federal Reserve Bank of Richmond. The Treasury shall
return to the presenting depositary bank a photocopy of any check the
payment of which is refused upon first examination. The depositary bank
shall give immediate credit therefor in the General Account of the
United States Treasury, thereby reversing the previous charge to the
Account for such check. Treasury authorizes the Federal Reserve Bank of
Richmond to return to the presenting depositary bank the original check
when payment is refused in accordance with Sec. 240.3(a).
Sec. 240.10 Release of original checks.
An original check may be released to a responsible indorser upon
receipt of a properly authorized request showing the reason it is
required and that the request is in conformity with all applicable law
including the Privacy Act.
Indorsement of Checks
Sec. 240.11 Indorsement by payees.
(a) General requirements. Checks shall be indorsed by the payee or
payees named, or by another on behalf of such payees as set forth in
this part.
(b) Checks indorsed by the payee or payees named. When a check is
indorsed by the payee or payees named, the forms of indorsement shall
conform to those recognized by general principles of law and commercial
usage for negotiation, transfer or collection of negotiable instruments.
(c) Checks indorsed by another on behalf of the named payee or
payees--(1) Acceptable indorsement. The only acceptable indorsement of a
check by another on behalf of the named payee or payees (except when a
check is indorsed by a financial institution under the payee's or
payees' authorization) is one which indicates that the person indorsing
is doing so on behalf of the named payee or payees. Such an acceptable
indorsement shall include the signature of the indorser and sufficient
wording to indicate that the indorser is indorsing on behalf of the
named payee or payees, pursuant to authority expressly conferred by or
under law or other regulation. An example would be: ``John Jones by Mary
Jones.'' This example states the minimum indication acceptable. However,
Secs. 240.12(a)(1),
[[Page 77]]
240.13(a)(1), and 240.15(d) specify the addition of an indication in
specified situations of the actual capacity in which the person other
than the named payee is indorsing. Checks indorsed ``for collection'' or
``for deposit only to the credit of the within named payee or payees,''
are acceptable without any signature. However, in the absence of a
signature, the presenting bank will be deemed to guarantee its good
title to such checks to all subsequent indorsers and to Treasury.
(2) Unacceptable indorsement. The indorsement by another on behalf
of the named payee or payees, which consists of the name(s) of the
payee(s), whether as purported signature(s) or otherwise, and not the
signature of the person other than named payee or payees indorsing the
check, regardless of the relationship between the indorser and the named
payee or payees, will be rebuttably presumed to be a forgery and is
unacceptable. The indorsement by a person who purports to indorse for
the named payee(s) with an indorsement consisting of the name(s) of the
payee(s), whether as purported signature(s) or otherwise, and the
indorsing person's signature and no indication of the indorsing person's
representative capacity, will create a rebuttable presumption that the
indorsing person was not authorized to indorse for the named payee(s).
In these circumstances it is the responsibility of the individual or
institution accepting a check from a person other than the named
payee(s) to determine that such person is authorized and has the
capacity to indorse and negotiate the check. Evidence of the basis for
such a determination may be required by the Treasury in the event of a
dispute.
(d) Indorsement of checks by a financial institution under the
payee's authorization. When a check is credited by a financial
institution to the payee's account under the payee's or payees'
authorization, the financial institution may use an indorsement
substantially as follows: ``Credit to the account of the within-named
payee in accordance with the payee's or payees' instructions. XYZ.'' A
financial institution using this form of indorsement will be deemed to
guarantee to all subsequent indorsers and to the Treasury that it is
acting as an attorney-in-fact for the payee or payees, under the payee's
or payees' authorization, and that this authority is currently in force
and has neither lapsed nor been revoked either in fact or by the death
or incapacity of the payee or payees.
(e) Indorsement of checks drawn in favor of financial institutions.
All checks drawn in favor of financial institutions, for credit to the
accounts of persons designated payment so to be made, shall be indorsed
in the name of the financial institutions as payee in the usual manner.
Financial institutions receiving and indorsing such checks shall comply
fully with part 209 of this chapter.
(f) Social Security benefit checks issued jointly to individuals of
the same family. A social security benefit check issued jointly to 2 or
more individuals of the same family shall, upon the death of 1 of the
joint payees prior to the negotiation of such check, be returned to the
Social Security District Office or the Treasury Regional Financial
Center. Payment of the check to the surviving payee or payees may be
authorized by placing on the face of the check a stamped legend signed
by an official of the Social Security Administration or the Treasury
Regional Financial Center, redesignating such survivor or survivors as
the payee or payees of the check. A check bearing such stamped legend,
signed as herein prescribed, may be indorsed and negotiated by the
person or persons named as if such check originally had been drawn
payable to such person or persons.
Sec. 240.12 Checks issued to incompetent payees.
(a) Classes of checks which may be indorsed by guardian or
fiduciary. Where the payee of a check of any class listed in
Sec. 240.13(a) has been declared incompetent:
(1) If a check is indorsed by a legal guardian or other fiduciary,
such legal guardian or fiduciary shall include, as a part of the
indorsement, an indication of the capacity in which the legal guardian
or fiduciary is indorsing. An example would be: ``John Jones by Mary
Jones, guardian of John Jones.'' When a check indorsed in this fashion
is presented for payment by a bank, it
[[Page 78]]
will be paid by the Treasury without submission to the Treasury of
documentary proof of the authority of the guardian or other fiduciary,
with the understanding that evidence of such claimed authority to
indorse may be required by the Treasury in the event of a dispute.
(2) If a guardian has not been or will not be appointed, and if the
check:
(i) Was issued in payment of goods and services, tax refunds or
redemption of currency, it shall be forwarded for advice to the
certifying agency; or
(ii) Was issued in payment of principal or interest on U.S.
securities, it shall be forwarded to the Bureau of the Public Debt,
Division of Securities Accounts, Accounts Maintenance Branch,
Washington, DC 20239.
(b) Classes of checks which may not be indorsed by guardian or
fiduciary. Where the payee of a check of any other class has been
declared incompetent, the check shall not be indorsed by a guardian or
other fiduciary. The check shall be returned to the Government agency
which certified the payment, with information as to the incompetency of
the payee and submission of documentary evidence showing the appointment
of the guardian or other explanation in order that a replacement check,
and others to be issued subsequently, may be drawn in favor of the
guardian.
[54 FR 35642, Aug. 29, 1989, as amended at 54 FR 46728, Nov. 7, 1989]
Sec. 240.13 Checks issued to deceased payees.
(a)(1) Classes of checks which may be indorsed by an executor or
administrator. Checks issued for the classes of payments indicated
below, the right to which under law does not terminate with the death of
the payee, when indorsed by an executor or administrator, shall include,
as part of the indorsement, an indication of the capacity in which the
executor or administrator is indorsing. An example would be: ``John
Jones by Mary Jones, executor of the estate of John Jones.'' Such
checks, when presented for payment by a bank, will be paid by the
Treasury without the submission of documentary proof of the authority of
the executor or administrator, with the understanding that evidence of
such claimed authority to indorse may be required by the Treasury in the
event of a dispute. The classes of payments to which this subsection
refers are:
(i) Payments for the redemption of currencies or for principal or
interest on U.S. securities;
(ii) Payments for tax refunds; and
(iii) Payments for goods and services.
(2) If an executor has not been appointed, persons claiming as
owners shall return the checks for appropriate handling to the
Government agency that certified the payment. If there is doubt as to
whether the proceeds of the check or checks pass to the estate of the
deceased payee, the checks shall be handled in accordance with paragraph
(b) of this section.
(b) Classes of checks which may not be indorsed by an executor or
administrator. Checks issued for classes of payment other than those
specified in paragraph (a) of this section may not be negotiated after
the death of the payee, but must be returned to the Government agency
that certified the payment for determination whether, under applicable
laws, payment is due and to whom it may be made.
Sec. 240.14 Checks issued to minor payees in certain cases.
Checks issued to minors in payment of principal or interest on U.S.
securities may be indorsed by either parent with whom the minor resides,
or, if the minor does not reside with either parent, by the person who
furnishes his chief support. The parent or other person indorsing in
behalf of the minor shall present with the check his signed statement
giving the minor's age, stating that the payee either resides with the
parent or receives his chief support from the person indorsing in his
behalf, and that the proceeds of the checks will be used for the minor's
benefit.
Sec. 240.15 Powers of attorney.
(a) Specific powers of attorney. Any check may be negotiated under a
specific power of attorney executed after the issuance of the check and
describing it in full.
(b) General powers of attorney. Checks issued for the following
classes of payments may be negotiated under a general power of attorney
in favor of an
[[Page 79]]
individual, financial institution or other entity:
(1) Payments for the redemption of currencies or for principal or
interest on U.S. securities.
(2) Payments for tax refunds, but subject to the limitations
concerning the mailing of Internal Revenue refund checks contained in 26
CFR 601.506(b).
(3) Payments for goods and services.
(c) Special powers of attorney. Under discussions of the Comptroller
General of the United States, classes of checks other than those
specified in paragraph (b) of this section may be negotiated under a
special power of attorney which names a financial institution as
attorney-in-fact, and recites that it is not given to carry into effect
an assignment of the right to receive payment, either to the attorney-
in-fact or to any other person.
(d) Proof of authority. Checks indorsed by an attorney-in-fact shall
include, as part of the indorsement, an indication of the capacity in
which the attorney-in-fact is indorsing. An example would be: ``John
Jones by Paul Smith, attorney-in-fact for John Jones.'' Such checks when
presented for payment by a bank, will be paid by the Treasury without
the submission of documentary proof of the claimed authority, with the
understanding that evidence of such claimed authority to indorse may be
required by the Treasury in the event of a dispute.
(e) Revocation of powers of attorney. Powers of attorney are revoked
by the death of the grantor and may also be revoked by notice from the
grantor to the parties known, or reasonably expected, to be acting on
the power of attorney. Notice of revocation to the Treasury will not
ordinarily serve to revoke the power.
(f) Acknowledgment of powers of attorney. Where desirable or where
required by foreign, state or local law, powers of attorney shall be
acknowledged before a notary public or other officer authorized by law
to administer oaths generally.
(g) Seal or certificate of attesting officers. Where acknowledgment
of powers of attorney is desirable or required pursuant to paragraph (f)
of this section, seals of attesting officers shall be impressed or
stamped upon the power of attorney form, or the power of attorney shall
be accompanied by a certificate from an appropriate official showing
that the officer was in commission on the date of acknowledgment.
(h) Forms. Power of attorney forms issued under this part are listed
in the appendix to this part. They may be obtained from the Financial
Management Service, Property and Supply Section, Ardmore East Business
Center, 3361-L 75th Avenue, Landover, MD 20785.
Appendix A to Part 240--Standard Forms for Power of Attorney and Their
Application
Standard Form 231. A general power of attorney on this form may be
executed by an individual, firm, or sole owner, for checks drawn on the
United States Treasury, in payment: (1) For redemption of currencies or
for principal or interest on U.S. securities, (2) for tax refunds, and
(3) for goods and services.
Standard Form 232. A specific power of attorney on this form, which
must be executed after the issuance of the check, describing the check
in full, may be used to authorize the indorsement of any class of check
drawn on the United States Treasury.
Standard Form 233. A special power of attorney on this form naming a
financial organization as attorney-in-fact and reciting that it is not
given to carry into effect an assignment of the right to receive
payment, either to the attorney-in-fact or to any other person, may be
used for classes of payments other than those shown under Standard Form
231.
Standard Form 234-5. A general power of attorney may be executed by
a corporation for the classes of payment listed under Standard Form 231.
Standard Form 236-7. A specific power of attorney may be executed on
this form by a corporation to cover a specific check for any class of
payment.
PART 245--CLAIMS ON ACCOUNT OF TREASURY CHECKS--Table of Contents
Sec.
245.1 Introductory.
245.2 Definitions.
245.3 Time limit for check claims.
245.4 Advice of nonreceipt or loss.
245.5 Recertification of payment.
245.6 Claim by an indorser.
245.7 Check status inquiry.
245.8 Receipt or recovery of original check.
245.9 Procedural instructions.
245.10 Performance of functions of the Commissioner.
[[Page 80]]
Authority: R.S. 3646, as amended; 31 U.S.C. 3328; 31 U.S.C. 3331.
Source: 54 FR 35647, Aug. 29, 1989, unless otherwise noted.
Sec. 245.1 Introductory.
This part governs the issuance of replacement checks for checks
drawn on the United States Treasury, when
(a) The original check has been lost, stolen, destroyed or mutilated
or defaced to such an extent that it is rendered non-negotiable;
(b) The original check has been negotiated and paid on a forged or
unauthorized indorsement, and
(c) The original check has been cancelled pursuant to Sec. 204.4 of
this chapter.
Sec. 245.2 Definitions.
For purposes of this part:
(a) Agency means each authority of the United States for which the
Treasury of the United States issues checks or for which checks drawn on
the Treasury of the United States are issued.
(b) Check means a check drawn on the United States Treasury.
(c) Certifying Agency means an agency for whom a Treasury disbursing
officer or a non-Treasury disbursing officer makes payment in accordance
with 31 U.S.C. 3325. The responsibilities of a certifying official are
set forth at 31 U.S.C. 3528.
(d) Commissioner means the Commissioner of the Financial Management
Service, Department of the Treasury, 401 14th Street, SW., Washington,
DC 20227.
(e) Person means an individual, a partnership, a corporation, a
labor organization, a government or a subdivision or instrumentality
thereof, and any other entity to which a check may be issued.
(f) Replacement check means a check issued pursuant to the
recertification of payment by a certifying official.
(g) Secretary means the Secretary of the Treasury.
Sec. 245.3 Time limit for check claims.
(a) Any claim on account of a Treasury check must be presented to
the agency that authorized the issuance of such check within one year
after the date of issuance of the check or within one year after October
1, 1989, whichever is later.
(b) Any claim by an indorser under Sec. 245.6 will be considered
timely if presented to the Commissioner within one year after the date
of issuance of the check or within one year after October 1, 1989,
whichever is later.
(c) Nothing in this subsection affects the underlying obligation of
the United States, or any agency thereof, for which a Treasury check was
issued.
Sec. 245.4 Advice of nonreceipt or loss.
(a) In the event of the nonreceipt, loss or destruction of a check
drawn on the United States Treasury, or the mutilation or defacement of
such a check to an exent which renders it nonnegotiable, the claimant
should immediately notify the agency that authorized the issuance of
such check, describing the check, stating the purpose for which it was
issued and giving, if possible, its date, amount, Treasury symbol and
number.
(b) In cases involving mutiliated or defaced checks, the claimant
should enclose the mutilated or defaced check with his communication to
the agency.
Sec. 245.5 Recertification of payment.
Upon receipt of a claim concerning the nonreceipt, loss,
destruction, mutilation or defacement of a check, or the cancellation of
a check pursuant to Sec. 240.4 of this chapter, the certifying agency
may certify a new payment.
Sec. 245.6 Claim by an indorser.
When one or more Treasury checks are lost, stolen or destroyed in a
single incident while in the possession of a person to whom the checks
have been negotiated by the payee, and if the checks have not been paid,
the Commissioner may issue a replacement check to the person to whom the
checks had been negotiated.
Sec. 245.7 Check status inquiry.
The Commissioner will provide the status and a copy of the check if
available, upon request, to the agency which authorized the issuance of
the check.
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Sec. 245.8 Receipt or recovery of original check.
(a) If the original check is received or recovered by the claimant
after he has requested the agency to issue a replacement check, but
before a replacement check has been received, he should immediately
advise the agency and hold such check until receipt of instructions with
respect to the negotiability of such check.
(b) If the original check is received or recovered by the claimant
after a replacement check has been received by him, the original shall
not be cashed, but shall be forwarded immediately to the agency that
authorized the issuance of such check. Under no circumstances should
both the original and replacement checks be cashed.
Sec. 245.9 Procedural instructions.
The Commissioner of the Financial Management Service may issue
procedural instructions, implementing these regulations, in Volume I,
Part 4 of the Treasury Financial Manual.
Sec. 245.10 Performance of functions of the Commissioner.
The Commissioner of the Financial Management Services may authorize
any officer of the Treasury Department to perform any of his functions
under this part and to redelegate such authority within such limits as
the Commissioner may prescribe.
(Approved by the Office of Management and Budget under control number
1510-0058)
PART 247--REGULATIONS GOVERNING FEDSELECT CHECKS--Table of Contents
Sec.
247.1 Applicability.
247.2 Governing law.
247.3 Definitions.
247.4 Federal Reserve Banks.
247.5 Federal agencies and termination of services.
247.6 Banks.
247.7 Certification and internal agency control.
247.8 Presentment.
247.9 Notice, non-receipt, theft, loss or destruction; late
presentment.
247.10 Losses and accountability.
247.11 Debt collection.
247.12 Funds for losses.
247.13 Additional requirements.
247.14 Waiver of regulations.
247.15 Supplements, amendments or revisions.
Authority: 31 U.S.C. 3321, 3325 and 3327; 12 U.S.C. 391.
Source: 60 FR 25993, May 16, 1995, unless otherwise noted.
Sec. 247.1 Applicability.
The regulations in this part prescribe the rights and liabilities of
the United States, the Federal Reserve Banks, banks, and others on
FedSelect checks. These regulations apply to FedSelect checks issued on
behalf of the United States for payments in connection with United
States obligations. FedSelect checks are issued by Federal agencies on
Federal Reserve Bank check stock. FedSelect checks are drawn on the
payor Federal Reserve Bank in its banking capacity. The drawer of a
FedSelect check is the United States; the drawee is a Federal Reserve
Bank. Therefore, a FedSelect check shall not be deemed to be drawn on
the United States nor shall the Federal Reserve Bank be deemed its
drawer.
Sec. 247.2 Governing law.
Except as otherwise provided by statute or this part, the
regulations governing checks drawn on the United States or on designated
depositaries of the United States (e.g., 31 CFR parts 235, 240, 245, and
248) are inapplicable to FedSelect checks. As to definitions and other
matters not specifically covered in this part, FedSelect checks are
governed by Regulation J of the Board of Governors of the Federal
Reserve System, 12 CFR part 210 (``Regulation J''), Regulation CC of the
Board of Governors of the Federal Reserve System, 12 CFR part 229
(``Regulation CC''), and to the extent not otherwise inconsistent with
this part, with Regulation J, and with Regulation CC, FedSelect checks
will be governed by the Uniform Commercial Code, as adopted by Illinois
(``UCC''), as all three may from time to time be revised. Such matters
include, but are not limited to, rules regarding general presentment and
transfer warranties, indorsement, and final payment.
Sec. 247.3 Definitions.
For the purpose of this part:
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Agency means a department, agency, or instrumentality in the
executive branch of the United States Government.
Bank means an entity described in Regulation CC of the Federal
Reserve System, 12 CFR 229.2(e), as may be amended from time to time.
Department means the United States Department of the Treasury.
FedSelect check means a check drawn upon a Reserve Bank with the
designation ``FedSelect'' printed on the check.
Payee means the person to whom a FedSelect check is payable.
Payor Reserve Bank means the Reserve Bank on which a FedSelect check
is drawn.
Presenting bank means a bank which sends a FedSelect check directly
to a Reserve Bank for payment or collection.
Reserve Bank or Federal Reserve Bank means any one of the twelve
Federal Reserve Banks.
Sec. 247.4 Federal Reserve Banks.
(a) Where FedSelect checks are issued on Reserve Bank check stock
and drawn on the payor Reserve Bank in its banking capacity, the payor
Reserve Bank shall perform certain functions as fiscal agent of the
United States in the issuing, processing and final payment of FedSelect
checks. A payor Reserve Bank shall act as fiscal agent of the United
States on FedSelect checks only when authorized to do so by a Memorandum
of Understanding between the Financial Management Service, U.S.
Department of the Treasury (FMS), and the payor Reserve Bank.
(b) As authorized by a Memorandum of Understanding between a payor
Reserve Bank and the FMS and in accordance with this part, the payor
Reserve Bank shall settle with a presenting bank for the amount
specified in a FedSelect check upon presentment of the FedSelect check
through normal banking channels. Each payor Reserve Bank may issue
operating circulars, letters or bulletins not inconsistent with this
part governing details of its handling of payments under this part.
Sec. 247.5 Federal agencies and termination of services.
(a) Agencies may issue FedSelect checks in payment for United States
obligations.
(b) Issuance of a FedSelect check by an agency in payment of an
obligation shall constitute an agreement between the issuing agency and
the FMS. The issuing agency shall adhere to the terms of the agreement,
including those relating to fees for services provided by the FMS, as
expressed in this part and in the Treasury Financial Manual, Volume I,
Part 4, Chapter 3500 (I TFM 4-3500), entitled ``Issuance Of FedSelect
Checks By Federal Agencies.''
(c) In addition to the provisions of this part, agencies issuing
FedSelect checks shall adhere to instructions, contained in I TFM 4-
3500, regarding items such as procedures for opening and closing
FedSelect accounts with the FMS, procedures for the adjustment of agency
FedSelect accounts where losses are the responsibility of the agency,
procedures for the adjustment of agency FedSelect accounts in cases of
termination of FedSelect services by the FMS, and performance
requirements in the issuance of FedSelect checks.
(d) When an agency fails to adhere to the provisions of this part or
to the instructions contained in I TFM 4-3500, the FMS, at its
discretion, may terminate the services of FedSelect checks. The FMS
shall provide the agency with prior notification of the date on which
services will be terminated.
Sec. 247.6 Banks.
(a) A bank's acceptance of a FedSelect check issued pursuant to this
part shall constitute its agreement to the provisions of this part.
(b) Each bank by its action of handling a FedSelect check shall be
deemed to warrant to the Federal Government that it has handled the
FedSelect check in accordance with the requirements of this part.
Sec. 247.7 Certification and internal agency control.
(a) A FedSelect check is not a check drawn on the United States
Treasury. However, where the drawer of a
[[Page 83]]
FedSelect check is the United States, the requirements and procedures
for disbursing and certifying activities under 31 U.S.C. 3321, 3527 and
3528 apply to agency accountable officers issuing FedSelect checks.
(b) FedSelect checks shall be drawn by an individual who is duly
authorized by the agency, and shall be certified by a certifying
officer.
(c) When an agency issues a FedSelect check in payment of a United
States obligation, such agency certifies the issuance of the payment
contemporaneous to the issuance of the FedSelect check. Therefore, where
FedSelect checks are issued through an automated system, certification
occurs through the on-line data transfer between the agency issuing a
FedSelect check and the FMS.
(d) Agencies shall ensure that there are proper internal controls
over the issuance of FedSelect checks, including payment authorization,
check issuance, and reconciliations. Payment authorization is the
process by which vouchers or invoices are approved for payment by
individuals designated to do so by the head of the agency, or their
designees. Check issuance is the physical issuance of a FedSelect check
in payment of a duly approved voucher or invoice. Reconciliation is the
process by which amounts authorized for payment are verified against
amounts of checks issued.
Sec. 247.8 Presentment.
(a) Presentment of FedSelect checks must be made to the payor
Reserve Bank. FedSelect checks must be presented through normal banking
channels.
(b) FedSelect checks will have a standard period of payability of 90
days.
(c) FedSelect checks shall bear a pre-printed legend, ``Void After
90 Days.''
(d) When an outstanding FedSelect check reaches its stale-date, a
cancellation indicator will be placed against it and its status
reflected as cancelled due to stale-dating. A payor Reserve Bank will
return unpaid a FedSelect check negotiated to the depositary bank more
than the number of days stated on the FedSelect check after the date on
which the FedSelect check was issued. A FedSelect check which has
reached its stale-date before being negotiated to a depositary bank
should be marked ``void'' on the face of the check and sent to the
issuing agency or the FMS. The issuance of another FedSelect check or
other form of payment, to replace a lost, stolen, or destroyed FedSelect
check must be made in accordance with Sec. 247.9.
Sec. 247.9 Notice, non-receipt, theft, loss or destruction; late presentment.
(a) If an agency has notice that a FedSelect check is not received
by the payee within a reasonable time after a payment is due, or that a
FedSelect check is lost, stolen or destroyed, the agency must request to
the FMS that a stop payment order be placed on that item. The notice may
be given by telephone or facsimile, but if it is given by telephone,
such notice must be confirmed in writing before another payment is
issued. The notification must contain sufficient information to identify
the account and/or the obligation to which the payment is related.
Payment on a FedSelect check is stopped if the notice of non-receipt,
loss, theft, or destruction is received from the agency at such time and
in such manner as to afford the payor Reserve Bank and the FMS a
reasonable opportunity to act on it prior to final payment, as provided
by applicable law. Once a stop payment order has been placed against an
outstanding FedSelect check, such stop payment order will not be
removed.
(b) The agency that issued the FedSelect check will issue another
FedSelect check to replace a lost, stolen or destroyed FedSelect check,
or other form of payment, at its discretion. Items an agency may require
before issuing another FedSelect check include:
(1) Written confirmation that the original FedSelect check was lost,
stolen, or destroyed;
(2) Confirmation from the FMS that the original FedSelect check is
unpaid;
(3) A determination that recovery of the original FedSelect check is
unlikely; and
(4) An indemnification agreement executed by the payee and/or
indorsee.
[[Page 84]]
(c) If a payor Reserve Bank returns unpaid a FedSelect check solely
as a result of Sec. 247.8(d), the agency that issued the original
FedSelect check may issue, at its discretion, another FedSelect check,
or other form of payment, to a payee or holder upon surrender of the
original FedSelect check and execution of such indemnification agreement
as may be required by the agency.
(d) Upon verification of the existence of a forged or unauthorized
indorsement on a FedSelect check which has been finally paid, the agency
that issued the original FedSelect check may issue, at its discretion,
another FedSelect check or other form of payment to the person entitled.
Disputes as to any continuing obligations for payment remain between the
agency that issued the payment and the payee. Prior to the issuance of
another FedSelect check, the payee or indorsee of the original FedSelect
check may be required to execute an affidavit asserting that the payee
or indorsee was in no way involved in the fraudulent or unauthorized
indorsement of the original FedSelect check, in addition to any
indemnification agreement required by the agency.
(e) In the case of a FedSelect check payable to the order of two or
more persons, the requirements of this section apply to all designated
payees.
Sec. 247.10 Losses and accountability.
(a) Agencies will be accountable for all losses arising out of
agency activity related to the issuance of FedSelect checks. Such
activities include negligence, fraud perpetrated by an employee or agent
of the agency, and fraud perpetrated by a service-provider or vendor
receiving a FedSelect check as payment.
(b) If an agency had notice that a FedSelect check was not received
by the payee within a reasonable time after a payment is due, or that a
FedSelect check is lost, stolen or destroyed, and the agency failed to
request to the FMS that a stop payment order be placed on that item
pursuant to Sec. 247.9(a), the agency will be accountable for any loss
occurring as a result of the failure to request stop payment in a timely
fashion.
(c) Losses caused by the fault or negligence of the FMS will be the
accountability of the FMS. Such losses include failure to adhere to a
request by an agency to place a stop payment order on an item in
accordance with Sec. 247.9(a).
(d) The FMS will be accountable for losses caused by third-parties,
including losses caused by alteration, counterfeit and forgery of the
payee indorsement, unless such losses occur as described in paragraphs
(a) and (b) of this section.
Sec. 247.11 Debt collection.
(a) Agencies are responsible for collection procedures on all
improperly paid items arising under the circumstances described in
paragraphs (a) and (b) of Sec. 247.10. However, excepting cases of
fraud, an agency should write off a debt and refer it to the FMS for
collection if it is not resolved within 90 days after the item was paid.
When the FMS collects on the debt, the funds will be returned to the
agency minus an administrative fee for the collection, in accordance
with rules set forth in I TFM 4-3500. Accountability for a debt remains
with the agency in accordance with Sec. 247.10.
(b) The FMS is responsible for collection procedures on all
improperly paid items arising under the circumstances described in
paragraphs (c) and (d) of Sec. 247.10. With all such items, the FMS will
make an initial demand for refund of the amount of a check payment to
the presenting bank or any other debtor. This demand shall advise the
presenting bank or debtor of the amount demanded and the reason for the
demand. All delinquent debts will be subject to interest, penalties and
administrative fees in accordance with the Federal Claims Collections
Standards. Any discrepancies should be brought to the attention of the
FMS.
Sec. 247.12 Funds for losses.
(a) If collection efforts by the FMS for debts arising under
paragraphs (c) and (d) of Sec. 247.10 are unsuccessful, sources of funds
for the payment of such losses include FMS appropriations, to the extent
available, funds collected from reimbursement fees for services provided
by the FMS pursuant
[[Page 85]]
to Sec. 247.5(b), and other available sources.
(b) Reimbursement fees paid by agencies to the FMS for FedSelect
check services will be retained for payment of uncollectible losses,
consistent with all applicable laws.
Sec. 247.13 Additional requirements.
In any case or any class of cases arising under these regulations,
the FMS or the agency that issued the FedSelect check may require such
additional evidence of loss, improper indorsement or entitlement to a
replacement as may be necessary for the protection of the interests of
the United States.
Sec. 247.14 Waiver of regulations.
The FMS reserves the right to waive any provision(s) of these
regulations in any case or class of cases for the convenience of the
United States or in order to relieve any person(s) of unnecessary
hardship, if such action is not inconsistent with law, does not impair
any existing rights, and the FMS is satisfied that such action will not
subject the United States to any substantial expense or liability.