[Title 31 CFR ]
[Code of Federal Regulations (annual edition) - July 1, 2001 Edition]
[From the U.S. Government Printing Office]
[[Page i]]
31
Part 200 to End
Revised as of July 1, 2001
Money and Finance: Treasury
Containing a codification of documents of general
applicability and future effect
As of July 1, 2001
With Ancillaries
Published by
Office of the Federal Register
National Archives and Records
Administration
A Special Edition of the Federal Register
[[Page ii]]
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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 469
Chapter V--Office of Foreign Assets Control,
Department of the Treasury 479
Chapter VI--Bureau of Engraving and Printing,
Department of the Treasury 967
Chapter VII--Federal Law Enforcement Training
Center, Department of the Treasury 973
Chapter VIII--Office of International Investment,
Department of the Treasury 977
Chapter IX--Federal Claims Collection Standards
(Department of the Treasury--Department of Justice) 1003
Finding Aids:
Material Approved for Incorporation by Reference........ 1025
Table of CFR Titles and Chapters........................ 1027
Alphabetical List of Agencies Appearing in the CFR...... 1045
List of CFR Sections Affected........................... 1055
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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
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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
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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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This material, like any other properly issued regulation, has the force
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What is a proper incorporation by reference? The Director of the
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approval is based are:
(a) The incorporation will substantially reduce the volume of
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(b) The matter incorporated is in fact available to the extent
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(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
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the revision dates of the 50 CFR titles.
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REPUBLICATION OF MATERIAL
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Raymond A. Mosley,
Director,
Office of the Federal Register.
July 1, 2001.
[[Page ix]]
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, 2000.
A redesignation table for subtitle A--Office of the Secretary of the
Treasury appears in the Finding Aids section of the first volume.
[[Page x]]
[[Page 1]]
TITLE 31--MONEY AND FINANCE: TREASURY
(This book contains part 200 to end)
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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.
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
chapter ix--Federal Claims Collection Standards (Department
of the Treasury--Department of Justice)................... 900
[[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
Federal Government...................... 9
203 Payment of Federal taxes and the Treasury
Tax and Loan Program.................... 11
204 [Reserved]
205 Rules and procedures for funds transfers.... 23
206 Management of Federal agency receipts,
disbursements, and operation of the Cash
Management Improvements Fund............ 36
208 Management of Federal agency disbursements.. 42
210 Federal Government participation in the
Automated Clearing House................ 46
211 Delivery of checks and warrants to addresses
outside the United States, its
territories and possessions............. 54
215 Withholding of District of Columbia, State,
city and county income or employment
taxes by Federal agencies............... 55
223 Surety companies doing business with the
United States........................... 60
224 Federal process agents of surety companies.. 67
225 Acceptance of bonds secured by Government
obligations in lieu of bonds with
sureties................................ 68
226 Recognition of insurance covering Treasury
tax and loan depositaries............... 73
235 Issuance of settlement checks for forged
checks drawn on designated depositaries. 74
240 Indorsement and payment of checks drawn on
the United States Treasury.............. 75
245 Claims on account of Treasury checks........ 83
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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.............. 84
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.................................... 89
270 Availability of records..................... 90
281 Foreign exchange operations................. 91
285 Debt collection authorities under the Debt
Collection Improvement Act of 1996...... 93
SUBCHAPTER B--BUREAU OF THE PUBLIC DEBT
306 General regulations governing U.S.
securities.............................. 125
308 General regulations governing full-paid
interim certificates.................... 153
309 Issue and sale of Treasury bills............ 153
312 Federal savings and loan associations and
Federal credit unions as fiscal agents
of the United States.................... 157
315 Regulations governing U.S. Savings Bonds,
Series A, B, C, D, E, F, G, H, J, and K,
and U.S. Savings Notes.................. 158
316 Offering of United States Savings Bonds,
Series E................................ 183
317 Regulations governing agencies for issue of
United States Savings Bonds............. 191
321 Payments by banks and other financial
institutions of United States Savings
Bonds and United States Savings Notes
(Freedom Shares)........................ 195
323 Disclosure of records....................... 212
328 Restrictive endorsements of U.S. bearer
securities.............................. 214
330 Regulations governing payment under special
endorsement of United States Savings
Bonds and United States Savings Notes
(Freedom Shares)........................ 217
332 Offering of United States Savings Bonds,
Series H................................ 221
337 Supplemental regulations governing Federal
Housing Administration debentures....... 224
339 Exchange offering of United States Savings
Bonds, Series H......................... 228
340 Regulations governing the sale of Treasury
bonds through competitive bidding....... 230
341 Regulations governing United States
Retirement Plan Bonds................... 233
342 Offering of United States Savings Notes..... 243
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343 Regulations governing the offering of United
States Mortgage Guaranty Insurance
Company Tax and Loss Bonds.............. 248
344 U.S. Treasury securities--State and Local
Government Series....................... 251
345 Regulations governing 5 percent Treasury
Certificates of Indebtedness-- R.E.A.
Series.................................. 277
346 Regulations governing United States
Individual Retirement Bonds............. 278
351 Offering of United States Savings Bonds,
Series EE............................... 288
352 Offering of United States Savings Bonds,
Series HH............................... 307
353 Regulations governing United States Savings
Bonds, Series EE and HH................. 312
354 Regulations governing book-entry securities
of the Student Loan Marketing
Association (Sallie Mae)................ 338
355 Regulations governing fiscal agency checks.. 344
356 Sale and issue of marketable book-entry
Treasury bills, notes, and bonds
(Department of the Treasury Circular,
Public Debt Series No. 1-93)............ 346
357 Regulations governing book-entry Treasury
bonds, notes and bills (Department of
the Treasury Circular, Public Debt
Series No. 2-86)........................ 386
358 Regulations governing book-entry conversion
of bearer corpora and detached bearer
coupons................................. 422
359 Offering of United States Savings Bonds,
Series I................................ 425
360 Regulations governing United States Savings
Bonds, Series I......................... 434
361 Claims pursuant to the Government Losses in
Shipment Act............................ 452
362 Declaration of valuables under the
Government Losses in Shipment Act....... 455
370 Electronic transactions and funds transfers
relating to United States securities.... 456
375 Marketable treasury securities redemption
operations.............................. 463
380 Collateral acceptability and valuation...... 466
391 Waiver of interest, administrative costs,
and penalties........................... 467
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SUBCHAPTER A--FINANCIAL MANAGEMENT SERVICE
PART 202--DEPOSITARIES AND FINANCIAL AGENTS OF THE FEDERAL GOVERNMENT--Table of Contents
Sec.
202.1 Scope of regulations.
202.2 Designations.
202.3 Authorization.
202.4 Agreement of deposit.
202.5 Previously designated depositaries.
202.6 Collateral security.
202.7 Maintenance of balances within authorizations.
Authority: 12 U.S.C. 90, 265-266, 391, 1452(d), 1464(k), 1789a,
2013, 2122 and 3101-3102; 31 U.S.C. 3303 and 3336.
Sec. 202.1 Scope of regulations.
The regulations in this part govern the designation of Depositaries
and Financial Agents of the Federal Government (hereinafter referred to
as depositaries), and their authorization to accept deposits of public
money and to perform other services as may be required of them. Public
money includes, but is not 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 Federal taxes are
governed by the regulations in part 203 of this chapter.
[62 FR 45520, Aug. 27, 1997]
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) Financial institutions insured by the Federal Deposit Insurance
Corporation.
(2) Credit unions insured by the National Credit Union
Administration.
(3) 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,
United States branches of foreign banking corporations authorized by the
State in which they are located to transact commercial banking business,
and Federal branches of foreign banking corporations, 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.
[44 FR 53066, Sept. 11, 1979, as amended at 46 FR 28152, May 26, 1981;
62 FR 45521, Aug. 27, 1997]
Sec. 202.3 Authorization.
(a) To accept deposits covered by the appropriate Federal or State
insurer. 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 National Credit Union Administration, and by insurance
organizations specifically qualified by the Secretary of the Treasury.
(b) To perform other services. (1) The Secretary of the Treasury may
authorize a depositary to perform other services including, but not
limited to:
(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;
[[Page 10]]
(iv) The furnishing of bank drafts in exchange for collections.
(2) To obtain authorization to perform services, 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 the Financial Management Service and available
from Federal Reserve Banks), and
(ii) Pledge collateral security as provided for in Sec. 202.6.
[32 FR 14215, Oct. 13, 1967, as amended at 44 FR 53066, Sept. 11, 1979;
49 FR 47001, Nov. 30, 1984; 62 FR 45521, Aug. 27, 1997]
Sec. 202.4 Agreement of deposit.
A depositary which accepts a deposit under this part enters into an
agreement of deposit with the Treasury Department. The terms of this
agreement 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 Executive Order 11246, entitled
``Equal Employment Opportunity,'' as amended by Executive Orders 11375
and 12086, and regulations issued thereunder at 41 CFR chapter 60, as
amended.
(d) The requirements of section 503 of the Rehabilitation Act of
1973, as amended, and the regulations issued thereunder at 41 CFR part
60-741, requiring Federal contractors to take affirmative action to
employ and advance in employment qualified individuals with
disabilities.
(e) 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 and 61-250, requiring Federal contractors to take
affirmative action to employ and advance in employment qualified special
disabled and Vietnam Era veterans.
[44 FR 53067, Sept. 11, 1979, as amended at 62 FR 45521, Aug. 27, 1997]
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]
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. Types and valuations of acceptable
collateral security are addressed in 31 CFR part 380. For a current list
of acceptable classes of securities and instruments described in 31 CFR
part 380 and their valuations, see the Bureau of the Public Debt's web
site at www.publicdebt.treas.gov.
(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
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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 money 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, including those not arising out of the depositary
relationship.
(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 closed because of present or
prospective inability to meet the demands of its depositors or
shareholders.
[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; 62 FR 45521, Aug. 27, 1997; 65 FR
55428, Sept. 13, 2000]
Sec. 202.7 Maintenance of balances within authorizations.
(a) Federal Government agencies shall contact the Department of the
Treasury, Financial Management Service, 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 Cash
Management Policy and Planning Division, Federal Finance, Financial
Management Service, Department of the Treasury, Washington, DC 20227.
(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.
[44 FR 53067, Sept. 11, 1979, as amended at 49 FR 47001, Nov. 30, 1984;
62 FR 45521, Aug. 27, 1997]
PART 203--PAYMENT OF FEDERAL TAXES AND THE TREASURY TAX AND LOAN PROGRAM--Table of Contents
Subpart A--General Information
Sec.
203.1 Scope.
203.2 Definitions.
203.3 Financial institution eligibility for designation as a Treasury
Tax and Loan depositary.
203.4 Designation of financial institutions as Treasury Tax and Loan
depositaries.
203.5 Obligations of the depositary.
203.6 Compensation for services.
203.7 Termination of agreement or change of election or option.
203.8 Application of part and procedural instructions.
[[Page 12]]
Subpart B--Electronic Federal Tax Payments
203.9 Scope of the subpart.
203.10 Enrollment.
203.11 Electronic payment methods.
203.12 Future-day reporting and payment mechanisms.
203.13 Same-day reporting and payment mechanisms.
203.14 Electronic Federal Tax Payment System interest assessments.
203.15 Prohibited debits through the Automated Clearing House.
203.16 Appeal and dispute resolution.
Subpart C--Federal Tax Deposits.
203.17 Scope of the subpart.
203.18 Tax deposits using Federal Tax Deposit coupons.
203.19 Note option.
203.20 Remittance option.
Subpart D--Investment Program and Collateral Security Requirements for
Treasury Tax and Loan Depositaries
203.21 Scope of the subpart.
203.22 Sources of balances.
203.23 Note balance.
203.24 Collateral security requirements.
Authority: 12 U.S.C. 90, 265-266, 332, 391, 1452(d), 1464(k), 1767,
1789a, 2013, 2122, and 3102; 26 U.S.C. 6302; 31 U.S.C. 321, 323 and
3301-3304.
Source: 63 FR 5650, Feb. 3, 1998, unless otherwise noted.
Subpart A--General Information
Sec. 203.1 Scope.
The regulations in this part govern the processing of Federal tax
payments by financial institutions and the Federal Reserve Banks (FRB)
using electronic payment or paper methods; the designation of Treasury
Tax and Loan (TT&L) depositaries; and the operation of the Department of
the Treasury's (Treasury) investment program.
Sec. 203.2 Definitions.
As used in this part:
(a) Advice of credit means the Treasury form used in the Federal Tax
Deposit system that is supplied to depositaries to summarize and report
Federal tax deposits. The current form is Treasury Form 2284. Advice of
credit information also may be delivered electronically.
(b) Automated Clearing House (ACH) credit entry means a transaction
originated by a financial institution in accordance with applicable ACH
formats and applicable laws, regulations, and procedural instructions.
(c) Automated Clearing House (ACH) debit entry means a transaction
originated by a Treasury Financial Agent (TFA), in accordance with
applicable ACH formats and applicable laws, regulations, and
instructions.
(d) Business day means any day on which the FRB of the district is
open.
(e) Direct Access transaction means same-day Federal tax payment
information transmitted by a financial institution directly to the
Electronic Tax Application at an FRB using the Fedline Taxpayer Deposit
Application.
(f) Direct investment means placement of Treasury funds with a
depositary and a corresponding increase in a depositary's note balance.
(g) Electronic Federal Tax Payment System (EFTPS) means the system
through which taxpayers remit Federal tax payments electronically.
(h) Electronic Tax Application (ETA) means a sub-system of EFTPS
that receives, processes, and transmits same-day Federal tax payment
information for taxpayers. ETA activity is comprised of Fedwire value
transfers, Fedwire non-value transactions, and Direct Access
transactions.
(i) Electronic Tax Application (ETA) reference number means the
unique number assigned to each ETA transaction by an FRB.
(j) Federal funds rate means the Federal funds rate published weekly
by the Board of Governors of the Federal Reserve System.
(k) Federal Reserve account means an account with reserve or
clearing balances held by a financial institution at an FRB.
(l) Federal Reserve Bank of the district means the FRB that services
the geographical area in which the financial institution is located, or
such other FRB that may be designated in an FRB operating circular.
(m) Federal Tax Deposit (FTD) means a tax deposit or payment made
using an FTD coupon.
(n) Federal Tax Deposit coupon (FTD coupon) means a paper form
supplied to
[[Page 13]]
a taxpayer by the Treasury for use in the FTD system to accompany
deposits of Federal taxes. The current paper form is Form 8109.
(o) Federal Tax Deposit system (FTD system) means the paper-based
system through which taxpayers remit Federal tax payments by presenting
an FTD coupon and payment to a depositary or an FRB. The depositary
prepares an advice of credit summarizing all FTDs.
(p) Federal taxes means those Federal taxes or other payments
specified by the Secretary of the Treasury as eligible for payment
through the procedures prescribed in this part.
(q) Fedwire means the funds transfer system owned and operated by
the FRBs.
(r) Fedwire non-value transaction means the same-day Federal tax
payment information transmitted by a financial institution to an FRB
using a Fedwire type 1090 message to authorize a payment.
(s) Fedwire value transfer means a Federal tax payment made by a
financial institution using a Fedwire type 1000 message.
(t) Financial institution means any bank, savings bank, savings and
loan association, credit union, or similar institution.
(u) Fiscal Agent means the Federal Reserve acting as agent for the
Treasury.
(v) Input Message Accountability Data (IMAD) means a unique number
assigned to each Fedwire transaction by the financial institution
sending the transaction to an FRB.
(w) Note option means that program available to a TT&L depositary
under which Treasury invests in obligations of the depositary. The
amount of such investments will be evidenced by an open-ended interest-
bearing note balance maintained at the FRB of the district.
(x) Procedural instructions means the procedures contained in the
Treasury Financial Manual, Volume IV (IV TFM), other Treasury
instructions issued through the TFAs, and FRB operating circulars issued
consistent with this part.
(y) Recognized insurance coverage means the insurance provided by
the Federal Deposit Insurance Corporation, the National Credit Union
Administration, and by insurance organizations specifically qualified by
the Secretary.
(z) Remittance option means that program available to a depositary
that processes FTD payments, under which the amount of deposits credited
by the depositary to the TT&L account will be withdrawn by the FRB for
deposit to the Treasury General Account on the day that the FRB receives
the advices of credit supporting such deposits.
(aa) Same-day payment means the following ETA payment options:
(1) Direct Access transaction;
(2) Fedwire non-value transaction; and
(3) Fedwire value transfer.
(bb) Secretary means the Secretary of the Treasury, or the
Secretary's delegate.
(cc) Special direct investment means the placement of Treasury funds
with a depositary and a corresponding increase in a depositary's note
balance, where the investment specifically is identified as a ``special
direct investment'' and may be secured by collateral retained in the
possession of the depositary pursuant to the terms of
Sec. 203.24(c)(2)(i).
(dd) Tax due date means the day on which a tax payment is due to
Treasury, as determined by statute and Internal Revenue Service (IRS)
regulations.
(ee) Transaction trace number means an identifying number assigned
by the taxpayer's financial institution to each ACH credit transaction.
(ff) Treasury Financial Agent (TFA) means a financial institution
designated as an agent of Treasury for processing EFTPS enrollments,
receiving EFTPS tax payment information, and originating ACH debit
entries on behalf of Treasury as authorized by the taxpayer.
(gg) Treasury General Account (TGA) means an account maintained in
the name of the United States Treasury at an FRB.
(hh) Treasury Tax and Loan (TT&L) account means the Treasury account
maintained by a depositary in which funds are credited by the depositary
after receiving and collateralizing FTDs.
[[Page 14]]
(ii) Treasury Tax and Loan depositary (depositary) means a financial
institution designated as a depositary by the FRB of the district for
the purpose of maintaining a TT&L account and/or note balance.
(jj) Treasury Tax and Loan (TT&L) Program means the program for
collecting Federal taxes and investing the Government's excess operating
funds.
(kk) Treasury Tax and Loan (TT&L) rate of interest means the Federal
funds rate less twenty-five basis points (i.e., \1/4\ of 1 percent).
Sec. 203.3 Financial institution eligibility for designation as a Treasury Tax and Loan depositary.
(a) To be designated as a TT&L depositary, a financial institution
shall be insured as a national banking association, state bank, savings
bank, savings and loan, building and loan, homestead association,
Federal home loan bank, credit union, trust company, or a U.S. branch of
a foreign banking corporation, the establishment of which has been
approved by the Comptroller of the Currency.
(b) A financial institution shall possess the authority to pledge
collateral to secure TT&L account balances and/or a note balance.
(c) In order to be designated as a TT&L depositary for the purposes
of processing tax deposits in the FTD system, a financial institution
shall possess under its charter either general or specific authority
permitting the maintenance of the TT&L account, the balance of which is
payable on demand without previous notice of intended withdrawal. In
addition, note option depositaries shall possess either general or
specific authority permitting the maintenance of a note balance, which
is payable on demand without previous notice of intended withdrawal.
Sec. 203.4 Designation of financial institutions as Treasury Tax and Loan depositaries.
(a) Parties to the agreement. To be designated as a TT&L depositary,
a financial institution shall enter into a depositary agreement with
Treasury's fiscal agent, the FRB. By entering into this agreement, the
financial institution agrees to be bound by this part, and procedural
instructions issued pursuant to this part.
(b)(1) Application procedures. An eligible financial institution
seeking designation as a depositary and, thereby, the authority to
maintain a TT&L account and/or a note balance shall file with the FRB,
Financial Management Service Form 458, ``Financial Institution Agreement
and Application for Designation as a TT&L Depositary,'' and Financial
Management Service Form 459, ``Resolution Authorizing the Financial
Institution Agreement and Application for Designation as a TT&L
Depositary,'' certified by its board of directors. Financial Management
Service Forms 458 and 459 are available upon request from the FRB of the
district.
(2) Depositaries processing tax payments in the FTD system are
required to elect either the remittance or the note option.
(c) Designation. Each financial institution satisfying the
eligibility requirements and the application procedures will receive
from the FRB notification of its specific designation as a TT&L
depositary. A financial institution is not authorized to maintain a TT&L
account or note balance until it has been designated as a TT&L
depositary by the FRB.
Sec. 203.5 Obligations of the depositary.
A depositary shall:
(a) Administer a note balance, if not participating in the FTD
System.
(b) Administer a TT&L account and, if applicable, a note balance, if
participating in the FTD System.
(c) 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 Orders 11375 and 12086 (3 CFR, 1966-1970
Comp., p. 684; 3 CFR, 1978 Comp. p. 230), and the regulations issued
thereunder at 41 CFR Chapter 60.
(d) Comply with the requirements of Section 503 of the
Rehabilitation Act of 1973, as amended, and the regulations issued
thereunder at 41 CFR part 60-741, requiring Federal contractors to take
affirmative action to employ and advance in employment qualified
individuals with disabilities.
[[Page 15]]
(e) 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 (3 CFR 1971-1975 Comp. p. 752), and the
regulations issued thereunder at 41 CFR parts 60-250 and 61-250,
requiring Federal contractors to take affirmative action to employ and
advance in employment qualified special disabled veterans and Vietnam-
era veterans.
Sec. 203.6 Compensation for services.
Except as provided in the procedural instructions, Treasury will not
compensate financial institutions for servicing and maintaining the TT&L
account, or for processing tax payments through the EFTPS or the FTD
system.
Sec. 203.7 Termination of agreement or change of election or option.
(a) Termination by Treasury. The Secretary may terminate the
agreement 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 or change of election or option by the depositary. A
depositary may terminate its depositary agreement, or change its option
or election, consistent with this part and the procedural instructions,
by submitting notice to that effect in writing to the FRB effective at a
prospective date set forth in the notice.
Sec. 203.8 Application of part and procedural instructions.
The terms of this part and procedural instructions issued pursuant
to this part shall be binding on financial institutions that process tax
payments and/or maintain a note balance under this part. By accepting or
originating Federal tax payments, the financial institution agrees to be
bound by this part and by procedural instructions issued pursuant to
this part.
Subpart B--Electronic Federal Tax Payments
Sec. 203.9 Scope of the subpart.
This subpart prescribes the rules by which financial institutions
shall process Federal tax payment transactions electronically. A
financial institution does not need to be designated as a TT&L
depositary in order to process electronic Federal tax payments. In
addition, a financial institution that does process electronic Federal
tax payments under this subpart does not thereby become a Federal
Government depositary and shall not advertise itself as one because of
that fact.
Sec. 203.10 Enrollment.
(a) General. Taxpayers shall complete an enrollment process with the
TFA prior to making their first electronic Federal tax payment.
(b) Enrollment forms. The TFA shall provide financial institutions
and taxpayers with enrollment forms upon request. The taxpayer is
responsible for completing the enrollment form, obtaining the
verifications required on the form, and returning the enrollment form to
the TFA.
(c) Verification. If the taxpayer elects the ACH debit entry method
of paying taxes, an authorized representative of the financial
institution shall verify the accuracy of the financial institution
routing number, taxpayer account number, and taxpayer account type at
the request of the taxpayer.
Sec. 203.11 Electronic payment methods.
(a) General. Electronic payment methods for Federal tax payments
available under this subpart include ACH debit entries, ACH credit
entries, and same-day payments. Any financial institution that is
capable of originating and/or receiving transactions for these payment
methods, by itself or through a correspondent financial institution, may
do so on behalf of a taxpayer.
(b) Conditions to making an electronic payment. Nothing contained in
this part shall affect the authority of financial institutions to enter
into contracts with their customers regarding the terms and conditions
for processing payments, provided that such terms and conditions are not
inconsistent with this subpart and applicable law governing the
particular transaction type.
(c) Payment of interest for time value of funds held. Treasury will
not pay interest on any payments erroneously paid
[[Page 16]]
to Treasury and subsequently refunded to the financial institution.
Sec. 203.12 Future-day reporting and payment mechanisms.
(a) General. A financial institution may receive an ACH debit entry,
originated by the TFA at the direction of the taxpayer; or, a financial
institution may originate an ACH credit entry, at the direction of the
taxpayer. Taxpayers will be credited for the actual amount received by
Treasury.
(b) ACH debit. A financial institution receiving an ACH debit entry
originated by the TFA shall, as applicable:
(1) Timely verify the account number and account type contained in
an ACH prenotification entry;
(2) Timely and properly return a prenotification entry that contains
an invalid account number or account type, or otherwise is erroneous or
unprocessable;
(3) Timely and accurately notify the TFA of incorrect information on
entries received, using a Notification of Change entry; and
(4) Timely and accurately return an entry not posted, including but
not limited to, a return or a contested dishonored return for acceptable
return reasons, as set forth in the procedural instructions.
(c) ACH credit. A financial institution originating an ACH credit
entry at the direction of a taxpayer shall:
(1) At the request of the taxpayer, originate either an ACH
prenotification containing the taxpayer's identification number or a
zero dollar ACH entry with the appropriate addenda record. Additional
format information is contained in the procedural instructions;
(2) Format the ACH credit entry in the ACH format approved by
Treasury for Federal tax payments;
(3) Originate an ACH credit entry by the appropriate deadline, as
specified by the FRB or Treasury, whichever is earlier, in order to meet
the tax due date specified by the taxpayer; and
(4) Provide the taxpayer, upon request, a transaction trace number,
or some other method to trace the tax payment.
(d) ACH credit reversals. Reversals may be initiated for a duplicate
or erroneous file or entry. No advance approval from, or notification
to, the IRS is required when originating an ACH credit reversal.
Documentation of reversals shall be made available as set forth in the
procedural instructions.
Sec. 203.13 Same-day reporting and payment mechanisms.
(a) General. A financial institution or its authorized correspondent
may initiate same-day reporting and payment transactions on behalf of
taxpayers. A same-day payment must be received by the FRB of the
district by the deadline established by the Treasury in the procedural
instructions. Taxpayers will be credited for the actual amount received
by Treasury.
(b) Fedwire value transfer. To initiate a Fedwire value tax payment,
the financial institution shall be a Fedwire participant and shall
comply with the FRB's Fedwire format for tax payments. The taxpayer's
financial institution shall provide the taxpayer, upon request, the IMAD
and the ETA reference numbers for a Fedwire value transfer. The
financial institution may obtain the ETA reference number for Fedwire
value transfers from its FRB by supplying the related IMAD number.
Fedwire value transfers settle immediately to the TGA and thus are not
credited to a depositary's note balance.
(c) Fedwire non-value transaction. By initiating a Fedwire non-value
transaction, a financial institution authorizes the FRB of the district
to debit its Federal Reserve account or, for a TT&L depositary, to debit
the Federal Reserve account of the depositary or its designated
correspondent financial institution, for the amount of the tax payment
specified in the transaction. To initiate a Fedwire non-value
transaction, the financial institution shall be a Fedwire participant
and shall comply with the FRB's Fedwire format for tax payments. The
taxpayer's financial institution shall provide the taxpayer, upon
request, the IMAD and ETA reference numbers for the Fedwire non-value
transaction. The financial institution may obtain the ETA reference
number for Fedwire non-value transactions from its FRB by supplying the
related IMAD number.
[[Page 17]]
(1) For a note option depositary using a Fedwire non-value
transaction, the tax payment amount will be credited to the depositary's
note balance on the day of the transaction.
(2) For a remittance option depositary using a Fedwire non-value
transaction, the tax payment amount will be debited from the Federal
Reserve account of the depositary or the depositary's designated
correspondent and credited to the TGA on the day of the transaction.
(3) For a non-TT&L depositary financial institution using a Fedwire
non-value transaction, the tax payment amount will be debited from the
financial institution's Federal Reserve account and credited to the TGA
on the day of the transaction.
(d) Direct Access transaction. By initiating a Direct Access
transaction, a financial institution authorizes the FRB of the district
to debit its Federal Reserve account or, for a TT&L depositary, to debit
the Federal Reserve account of the depositary or its designated
correspondent financial institution for the amount of the tax payment
specified in the transaction. The taxpayer's financial institution shall
provide the taxpayer, upon request, the ETA reference number for the
Direct Access transaction.
(1) For a note option depositary using a Direct Access transaction,
the tax payment amount will be credited to the depositary's note balance
on the day of the transaction.
(2) For a remittance option depositary or a non-TT&L depositary
financial institution using a Direct Access transaction, the tax payment
amount will be debited from the Federal Reserve account of the financial
institution or its designated correspondent financial institution, and
credited to the TGA on the day of the transaction.
(e) Cancellations and reversals. In addition to cancellations due to
insufficient funds in the financial institution's Federal Reserve
account, the FRB may reverse a same-day transaction:
(1) If the transaction:
(i) Is originated by a financial institution after the deadline
established by the Treasury in the procedural instructions;
(ii) Has an unenrolled taxpayer identification number; or
(iii) Does not meet the edit and format requirements set forth in
the procedural instructions; or,
(2) At the direction of the IRS, for the following reasons:
(i) Incorrect taxpayer name;
(ii) Overpayment; or
(iii) Unidentified payment; or,
(3) At the request of the financial institution that sent the same-
day transaction, if the request is made prior to the deadline
established by Treasury in the procedural instructions on the day the
payment was made.
(f) Other than as stated in paragraph (e) of this section, Treasury
is not obligated to reverse all or any part of a payment.
Sec. 203.14 Electronic Federal Tax Payment System interest assessments.
(a) Circumstances subject to interest assessments. Treasury may
assess interest on a financial institution in instances where a taxpayer
that failed to meet a tax due date proves to the IRS that the delivery
of tax payment instructions to the financial institution was timely and
that the taxpayer satisfied the conditions imposed by the financial
institution pursuant to Sec. 203.11(b). Treasury also may assess
interest where a financial institution failed to respond to an ACH
prenotification entry on an ACH debit as required in Sec. 203.12(b) or
failed to originate an ACH prenotification or zero dollar entry on an
ACH credit as described in Sec. 203.12(c) which then resulted in a late
payment.
(b) Calculation of interest assessment. Any interest assessed under
this section will be at the TT&L rate. The interest will be assessed
from the day the taxpayer specified that its payment should settle to
the Treasury until the receipt of the payment by Treasury, subject to
the following limitations: For ACH debit transactions, interest will be
limited to no more than seven calendar days; for ACH credit and same-day
transactions, interest will be limited to no more than 45 calendar days.
The limitation of liability in this paragraph does not apply to any
interest assessment in which there is an indication of fraud, the
presentation of a false claim, or misrepresentation or
[[Page 18]]
embezzlement on the part of the financial institution or any employee or
agent of the financial institution.
(c) Authorization to assess interest. A financial institution that
processes Federal tax payments made by electronic payment methods under
this subpart is deemed to authorize the FRB to debit its Federal Reserve
account or the account of its designated correspondent financial
institution for any interest assessed under this section. Upon the
direction of Treasury, the FRB shall debit the Federal Reserve account
of the financial institution or the account of its designated
correspondent financial institution for the amount of the assessed
interest.
(d) Circumstances not subject to the assessment of interest. (1)
Treasury will not assess interest on a taxpayer's financial institution
if a taxpayer fails to meet a tax due date because the taxpayer has not
satisfied conditions imposed by the financial institution pursuant to
Sec. 203.11(b) and the financial institution has not contributed to the
delay. The burden is on the financial institution to establish, pursuant
to the procedures in Sec. 203.16, that the taxpayer has not satisfied
the conditions and that the financial institution has not contributed to
the delay.
(2) Treasury will not assess interest on a financial institution if
the delay causing the interest assessment is due to the FRB or the TFA
and the financial institution did not contribute to the delay. The
burden is on the financial institution to establish, pursuant to the
procedures in Sec. 203.16, that it did not cause or contribute to the
delay.
Sec. 203.15 Prohibited debits through the Automated Clearing House.
(a) General. The Treasury has instituted operational safeguards to
scrutinize all entries that remove funds from the TGA. In the event
funds are removed from the TGA without authority, this section sets
forth the liability of financial institutions originating such entries.
Accordingly, a financial institution shall not originate an ACH
transaction to debit the TGA without the prior written permission of
Treasury. Unauthorized entries under this section do not include
reversal entries of previously initiated ACH credits authorized in
Sec. 203.12(d).
(b) Liability. A financial institution that originates an
unauthorized ACH entry that debits the TGA shall be liable to Treasury
for the amount of the transaction and shall be liable for interest
charges as specified in paragraph (d) of this section.
(c) Authorization to recover principal and assess interest charge.
By initiating unauthorized debits to the TGA through the ACH, a
financial institution is deemed to authorize the FRB to debit its
Federal Reserve account or the account of its designated correspondent
financial institution for any principal and, if applicable, an interest
charge assessed by Treasury under this section.
(d) Interest charge calculation. The interest charge shall be at a
rate equal to the Federal funds rate plus two percent. The interest
charge shall be assessed for each calendar day from the day the TGA was
debited to the day the TGA is recredited with the full amount of
principal due.
Sec. 203.16 Appeal and dispute resolution.
(a) Contest. A financial institution may contest any interest
assessed under Sec. 203.14, any principal or interest assessed under
Sec. 203.15, or any late fees assessed under Sec. 203.20. The financial
institution shall submit information supporting its position and the
relief sought. The information must be received, in writing, by the
Treasury officer or fiscal agent identified in the procedural
instructions, no later than 90 calendar days after the date the FRB
debits the reserve account of the financial institution under
Secs. 203.14, 203.15, or 203.20. The Treasury officer or fiscal agent
will: uphold the assessment, or reverse the assessment, or modify the
assessment, or mandate other action.
(b) Appeal. The financial institution may appeal the decision to
Treasury as set forth in the procedural instructions. No further
administrative review of the Treasury's decision is available under this
Part.
(c) Recoveries. In the event of an over or under recovery of either
interest, principal, or late fees, Treasury will instruct the FRB to
credit or debit the
[[Page 19]]
Federal Reserve account of the financial institution or its designated
correspondent financial institution, as appropriate.
Subpart C--Federal Tax Deposits
Sec. 203.17 Scope of the subpart.
This subpart applies to all depositaries that accept FTD coupons and
governs the acceptance and processing of those coupons.
Sec. 203.18 Tax deposits using Federal Tax Deposit coupons.
(a) FTD coupons. A depositary that accepts FTD coupons, through any
of its offices that accept demand and/or savings deposits, shall:
(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 an FTD coupon 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 at its option and absorbs for its own account any float and
other costs involved.
(2) Issue a counter receipt when requested to do so by a taxpayer
that makes an FTD deposit over the counter.
(3) Place a stamp impression on the face of each FTD coupon in the
space provided. 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 stamped by the depositary on the FTD coupon.
(4) Credit, on the date of receipt, all FTD deposits to the TT&L
account and administer that account pursuant to the provisions of this
part.
(5) Forward, each day, to the IRS Center servicing the geographical
area in which the depositary is located, the FTD coupons for all FTD
deposits received that day. The FTD coupons shall be accompanied by an
advice of credit reflecting the total amount of all FTD coupons.
(6) Establish an adequate record of all FTD deposits prior to
transmittal to the IRS Center so that the depositary will be able to
identify deposits in the event tax deposit coupons are lost in shipment.
For tracking purposes, a record shall be made of each FTD deposit
showing, at a minimum, the date of deposit, the taxpayer identification
number, and the amount of the deposit. The depositary's copy of the
advice of credit may be used to provide the necessary information if
individual deposits are listed separately, showing date, taxpayer
identification number, and amount.
(7) Deliver its advices of credit to the FRB by the cutoff hour
designated by the FRB for receipt of advices.
(8) Not accept compensation from taxpayers for accepting FTDs and
handling them as required by this section.
(b) FTD deposits with Federal Reserve Banks. An FRB shall:
(1) Accept an FTD directly from a taxpayer when such tax deposit is:
(i) Mailed or delivered by a taxpayer; and
(ii) Provided in the form of cash or a check or postal money order
payable to the order of that FRB; and,
(iii) Accompanied by an FTD coupon on which the amount of the tax
deposit has been properly entered in the space provided.
(2) Issue a counter receipt, when requested to do so by a taxpayer
that makes an FTD over the counter; and,
(3) Place, in the space provided on the face of each FTD coupon
accepted directly from a taxpayer, a stamp impression reflecting the
name of the FRB and the date on which the tax deposit will be credited
to the TGA. Timeliness of the Federal tax payment will be determined by
this date. However, if a deposit is mailed to an FRB, it shall be
subject to the ``Timely mailing treated as timely filing and paying''
clause of the Internal Revenue Code, 26 U.S.C. 7502; and,
(4) Credit the TGA with the amount of the tax payment;
(i) On the date the payment is received, if payment is made in cash;
or,
(ii) On the date the proceeds of the tax payment are collected, if
payment is made by postal money order or check.
[[Page 20]]
Sec. 203.19 Note option.
(a) Late delivery of advices of credit. If an advice of credit does
not arrive at the FRB before the designated cutoff hour for receipt of
such advices, the FRB will post the funds to the note balance as of the
next business day after the date on the advice of credit. This is the
date on which funds will begin to earn interest for Treasury.
(b) Transfer of funds from TT&L account to the note balance. For a
depositary selecting the note option, funds equivalent to the amount of
deposits credited by a depositary to the TT&L account shall be withdrawn
by the depositary and credited to the note balance on the business day
following the receipt of the tax payment.
Sec. 203.20 Remittance option.
(a) FTD late fee. If an advice of credit does not arrive at the FRB
before the designated cutoff hour for receipt of such advices, an FTD
late fee in the form of interest at the TT&L rate will be assessed for
each day's delay in receipt of such advice. Upon the direction of
Treasury, the FRB shall debit the Federal Reserve account of the
financial institution or the account of its designated correspondent
financial institution for the amount of the late fee.
(b) Withdrawals. For a depositary selecting the Remittance Option,
the amount of deposits credited by a depositary to the TT&L account will
be withdrawn upon receipt by the FRB of the advices of credit. The FRB
will charge the depositary's Federal Reserve account or the account of
the depositary's designated correspondent financial institution.
Subpart D--Investment Program and Collateral Security Requirements for
Treasury Tax and Loan Depositaries
Sec. 203.21 Scope of the subpart.
This subpart provides rules for TT&L depositaries on crediting note
balances under the various payment methods; debiting note balances; and
pledging collateral security.
Sec. 203.22 Sources of balances.
Depositaries electing to participate in the investment program can
receive Treasury's investments in obligations of the depositary from the
following sources:
(a) FTDs that have been credited to the TT&L account pursuant to
subpart C of this part;
(b) EFTPS ACH credit and debit transactions, Fedwire non-value
transactions, and Direct Access transactions pursuant to subpart B of
this part; and
(c) Direct investments and special direct investments pursuant to
subpart D of this part.
Sec. 203.23 Note balance.
(a) Additions. Treasury will invest funds in obligations of
depositaries selecting the note option. Such obligations shall be in the
form of open-ended, interest-bearing notes; and additions and reductions
will be reflected on the books of the FRB of the district.
(1) FTD system. A depositary processing tax deposits using the FTD
system and electing the note option shall debit the TT&L account and
credit its note balance as stated in Sec. 203.19(b).
(2) EFTPS--(i) ACH debit and ACH credit. A note option depositary
processing EFTPS ACH debit entries and/or ACH credit entries shall
credit its note balance for the value of the transactions on the date
that an exchange of funds is reflected on the books of the Federal
Reserve Bank of the district. Financial institutions may refer to the
procedural instructions for information on how to ascertain the amount
of the credit to the note balance.
(ii) Fedwire non-value and Direct Access. A note option depositary
processing Fedwire non-value and/or Direct Access transactions pursuant
to subpart B of this part shall credit its note balance and debit its
customer's account for the value of the transactions on the date ETA
receives and processes the transactions.
(b) Other additions. Other funds from Treasury may be offered from
time to time to certain note option depositaries through direct
investments, special direct investments, or other investment programs.
(c) Note balance withdrawals. The amount of the note balance shall
be
[[Page 21]]
payable on demand without prior notice. Calls for payment on the note
will be by direction of the Secretary through the FRBs. On behalf of
Treasury, the FRB shall charge the reserve account of the depositary or
the depositary's designated correspondent on the day specified in the
call for payment.
(d) Interest. A note shall bear interest at the TT&L rate. Such
interest is payable by a charge to the Federal Reserve account of the
depositary or its designated correspondent in the manner prescribed in
the procedural instructions.
(e) Maximum balance--(1) Note option depositaries. A depositary
selecting the note option shall establish a maximum balance for its note
by providing notice to that effect in writing to the FRB of the
district. The maximum balance is the amount of funds for which a note
option depositary is willing to provide collateral in accordance with
Sec. 203.24(c)(1). The depositary shall provide the advance notice
required in the procedural instructions before reducing the established
maximum balance unless it is a reduction resulting from a collateral re-
evaluation as determined by the depositary's FRB. That portion of any
advice of credit or EFTPS tax payment, which, when posted at the FRB,
would cause the note balance to exceed the maximum balance amount
specified by the depositary, will be withdrawn by the FRB that day.
(2) Direct investment depositaries. A note option depositary that
participates in direct investment shall set a maximum balance for direct
investment purposes which is higher than its peak balance normally
generated by the depositary's advices of credit and EFTPS tax payment
inflow. The direct investment note option depositary shall provide the
advance notice required in the procedural instructions before reducing
the established maximum balance.
(3) Special direct investment depositaries. Special direct
investments, while credited to the note balance, shall not be considered
in setting the amount of the maximum balance or in determining the
amounts to be withdrawn where a depositary's maximum balance is
exceeded.
Sec. 203.24 Collateral security requirements.
Financial institutions that process EFTPS tax payments, but are not
TT&L depositaries, have no collateral requirements under this part.
Financial institutions that are note option depositaries or remittance
option depositaries have collateral security requirements, as follows:
(a) Note option--(1) FTD deposits and EFTPS tax payments. A
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 pre-established maximum balance
for the note, and, if applicable, the closing balance in the TT&L
account which exceeds recognized insurance coverage. Depositaries shall
pledge collateral for the full amount of the maximum balance at the time
the maximum balance is established. If the depositary maintains a TT&L
account, the depositary shall pledge collateral security before
crediting deposits to the TT&L account.
(2) Direct investments. A note option depositary that participates
in direct investment is not required to pledge collateral continuously
in the amount of the pre-established maximum balance. However, each note
option depositary participating in direct investment shall pledge, no
later than the day the direct investment is placed, the additional
collateral in accordance with paragraphs (c)(1), (d), and (e) of this
section to cover the total note balance including those funds received
through direct investment. If a direct investment depositary has a
history of frequent collateral deficiencies, it shall fully
collateralize its maximum balance at all times.
(3) Special direct investments. Before special direct investments
are credited to a depositary's note balance, the note option depositary
shall pledge collateral security, in accordance with the requirements of
paragraphs (c)(2) and (e) of this section, to cover 100 percent of the
amount of the special direct investments to be received.
(b) Remittance option. Prior to crediting FTD deposits to the TT&L
account, a remittance option depositary
[[Page 22]]
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 balance in the TT&L account at the close of
business each day, less recognized insurance coverage.
(c) Deposits of securities. (1) Collateral security required under
paragraphs (a)(1), (2), and (b) of this section shall be deposited with
the FRB of the district, or with a custodian or custodians within the
United States designated by the FRB, under terms and conditions
prescribed by the FRB.
(2)(i) Collateral security required under paragraph (a)(3) of this
section shall be pledged under a written security agreement on a form
provided by the FRB of the district. The collateral security pledged to
satisfy the requirements of paragraph (a)(3) 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
FRB of the district. Collateral security pledged under the agreement
shall not be substituted for or released without the advance approval of
the FRB 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 FRB of the district.
(ii) Treasury's security interest in collateral security pledged by
a depositary in accordance with paragraph (c)(2)(i) of this section to
secure special direct investments is perfected without Treasury taking
possession of the collateral security for a period not to exceed 21
calendar days from the day of the depositary's receipt of the special
direct investment.
(d) Acceptable securities. Types and valuations of acceptable
collateral security are addressed in 31 CFR part 380. For a current list
of acceptable classes of securities and instruments described in 31 CFR
part 380 and their valuations, see the Bureau of the Public Debt's web
site at www.publicdebt.treas.gov.
(e) Assignment of securities. A TT&L depositary that pledges
acceptable 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 FRB to assign the securities. The
resolution and power of attorney shall conform to such terms and
conditions as the FRB shall prescribe.
(f) Effecting payments of principal and interest on securities
pledged as collateral--(1) General. If the depositary fails to pay, when
due, the whole or any part of the funds received by it for credit to the
TT&L account, and/or if applicable, its note balance; or otherwise
violates or fails to perform any of the terms of this part, or fails to
pay when due amounts owed to the United States or the United States
Treasury; or if the depositary is closed for business by regulatory
action or by proper corporate action, or in the event that a receiver,
conservator, liquidator or any other officer is appointed; then the
Treasury, without notice or demand, may sell, or otherwise collect the
proceeds of all or part of the collateral, including additions and
substitutions; and apply the proceeds, to satisfy any claims of the
United States against the depositary. All principal and interest
payments on any security pledged to protect the note balance (if
applicable) and/or the TT&L account (if applicable), 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 FRB of the district,
as fiscal agent of
[[Page 23]]
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, upon notification that the Treasury is entitled to any payment
associated with that pledged security, shall make each payment of
principal and/or interest due with respect to such security directly to
the FRB 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
avoids both termination from the program under Sec. 203.7; and also,
those circumstances identified in paragraph (f)(1) which may lead to the
collection of the proceeds of collateral or the waiver is otherwise
terminated by Treasury.
[63 FR 5650, Feb. 3, 1998, as amended at 65 FR 55429, Sept. 13, 2000]
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.
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 to 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
[[Page 24]]
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.
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
[[Page 25]]
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]
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
[[Page 26]]
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 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
[[Page 27]]
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.
(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
[[Page 28]]
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 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
[[Page 29]]
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 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
[[Page 30]]
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.
(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
[[Page 31]]
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 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.
[[Page 32]]
(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 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.
[[Page 33]]
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 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
[[Page 34]]
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.
(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
[[Page 35]]
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 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 to Part 205--Definition of Major Federal
Assistance Program
Beginning with State fiscal year 2000, ``Major Federal Assistance
Program'' for State governments is defined by the following criteria:
----------------------------------------------------------------------------------------------------------------
Total expenditure of Federal financial
assistance for all programs Major Federal assistance program means any program that exceeds
----------------------------------------------------------------------------------------------------------------
Between $300,000 and $100 million inclusive.. $300,000 or 3 percent of such total expenditures.
Over $100 million but less than or equal to $3 million or 0.30 percent of such total expenditures.
$1 billion.
Over $1 billion but less than or equal to $2 $4 million or 0.30 percent of such total expenditures.
billion.
Over $2 billion but less than or equal to $3 $7 million or 0.30 percent of such total expenditures.
billion.
Over $3 billion but less than or equal to $4 $10 million or 0.30 percent of such total expenditures.
billion.
Over $4 billion but less than or equal to $5 $13 million or 0.30 percent of such total expenditures.
billion.
Over $5 billion but less than or equal to $6 $16 million or 0.30 percent of such total expenditures.
billion.
Over $6 billion but less than or equal to $7 $19 million or 0.30 percent of such total expenditures.
billion.
Over $7 billion but less than or equal to $10 $20 million or 0.30 percent of such total expenditures.
billion.
Over $10 billion............................. $30 million or 0.15 percent of such total expenditures.
----------------------------------------------------------------------------------------------------------------
[64 FR 24243, May 5, 1999]
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.
[[Page 36]]
(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.
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:
[[Page 37]]
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.
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
[[Page 38]]
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 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
[[Page 39]]
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.
(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
[[Page 40]]
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. 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
[[Page 41]]
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 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
[[Page 42]]
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--MANAGEMENT OF FEDERAL AGENCY DISBURSEMENTS--Table of Contents
Sec.
208.1 Scope and application.
208.2 Definitions.
208.3 Payment by electronic funds transfer.
208.4 Waivers.
208.5 Availability of the ETASM.
208.6 General account requirements.
208.7 Agency responsibilities.
208.8 Recipient responsibilities.
208.9 Compliance.
208.10 Reservation of rights.
Appendix A to Part 208--Model Disclosure for Use Until ETASM
Becomes Available
Appendix B to Part 208--Model Disclosure for Use After ETASM
Becomes Available
Authority: 5 U.S.C. 301; 12 U.S.C. 90, 265, 266, 1767, 1789a; 31
U.S.C. 321, 3122, 3301, 3302, 3303, 3321, 3325, 3327, 3328, 3332, 3335,
3336, 6503; Pub. L. 104-208, 110 Stat. 3009.
Source: 63 FR 51502, Sept. 25, 1998, unless otherwise noted.
Sec. 208.1 Scope and application.
This part applies to all Federal payments made by an agency and,
except as specified in Sec. 208.4, requires such payments to be made by
electronic funds transfer. This part does not apply to payments under
the Internal Revenue Code of 1986 (26 U.S.C.).
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) Authorized payment agent means any individual or entity that is
appointed or otherwise selected as a representative payee or fiduciary,
under regulations of the Social Security Administration, the Department
of Veterans Affairs, the Railroad Retirement Board, or other agency
making Federal payments, to act on behalf of an individual entitled to a
Federal payment.
(c) Disbursement means, in the context of electronic benefits
transfer, the performance of the following duties by a Financial Agent
acting as agent of the United States:
(1) The establishment of an account for the recipient that meets the
requirements of the Federal Deposit Insurance Corporation or the
National Credit Union Administration Board for deposit or share
insurance;
(2) The maintenance of such an account;
(3) The receipt of Federal payments through the Automated Clearing
House system or other electronic means and crediting of Federal payments
to the account; and (4) The provision of access to funds in the account
on the terms specified by Treasury.
(d) Electronic benefits transfer (EBT) means the provision of
Federal benefit, wage, salary, and retirement payments electronically,
through disbursement by a financial institution acting as a Financial
Agent. For purposes of this part, EBT includes disbursement through an
ETASM and through a Federal/State EBT program.
(e) 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,
[[Page 43]]
Fedwire transfers, and transfers made at automated teller machines and
point-of-sale terminals. For purposes of this part only, the term
electronic funds transfer includes a credit card transaction.
(f) ETASM means the Treasury-designated electronic
transfer account made available by a Federally-insured financial
institution acting as a Financial Agent in accordance with Sec. 208.5 of
this part.
(g) Federal payment means any payment made by an agency.
(1) The term includes, but is not limited to:
(i) Federal wage, salary, and retirement payments;
(ii) Vendor and expense reimbursement payments;
(iii) Benefit payments; and
(iv) Miscellaneous payments including, but not limited to:
interagency payments; grants; loans; fees; principal, interest, and
other payments related to U.S. marketable and nonmarketable securities;
overpayment reimbursements; and payments under Federal insurance or
guarantee programs for loans.
(2) For purposes of this part only, the term ``Federal payment''
does not apply to payments under the Internal Revenue Code of 1986 (26
U.S.C.).
(h) Federal/State EBT program means any program that provides access
to Federal benefit, wage, salary, and retirement payments and to State-
administered benefits through a single delivery system and in which
Treasury designates a Financial Agent to disburse the Federal payments.
(i) Federally-insured financial institution means any financial
institution, the deposits of which are insured by the Federal Deposit
Insurance Corporation under 12 U.S.C. Chapter 16 or, in the case of a
credit union, the member accounts of which are insured by the National
Credit Union Share Insurance Fund under 12 U.S.C. Chapter 14, Subchapter
II.
(j) Financial Agent means a financial institution that has been
designated by Treasury as a Financial Agent for the provision of EBT
services under any provision of Federal law, including 12 U.S.C. 90,
265, 266, 1767, and 1789a, and 31 U.S.C. 3122 and 3303, as amended by
the Omnibus Consolidated Appropriations Act, 1997, Section 664, Public
Law 104-208.
(k) Financial institution means:
(1) Any insured bank as defined in section 3 of the Federal Deposit
Insurance Act (12 U.S.C. 1813) or any bank which is eligible to make
application to become an insured bank under section 5 of such Act (12
U.S.C. 1815);
(2) Any mutual savings bank as defined in section 3 of the Federal
Deposit Insurance Act (12 U.S.C. 1813) or any bank which is eligible to
make application to become an insured bank under section 5 of such Act
(12 U.S.C. 1815);
(3) Any savings bank as defined in section 3 of the Federal Deposit
Insurance Act (12 U.S.C. 1813) or any bank which is eligible to make
application to become an insured bank under section 5 of such Act (12
U.S.C. 1815);
(4) Any insured credit union as defined in section 101 of the
Federal Credit Union Act (12 U.S.C. 1752) or any credit union which is
eligible to make application to become an insured credit union under
section 201 of such Act (12 U.S.C. 1781);
(5) Any savings association as defined in section 3 of the Federal
Deposit Insurance Act (12 U.S.C. 1813) which is an insured depository
institution (as defined in such Act) (12 U.S.C. 1811 et seq.) or is
eligible to apply to become an insured depository institution under the
Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.); and
(6) Any agency or branch of a foreign bank as defined in section
1(b) of the International Banking Act, as amended (12 U.S.C. 3101).
(l) Individual means a natural person.
(m) Recipient means an individual, corporation, or other public or
private entity that is authorized to receive a Federal payment from an
agency.
(n) Secretary means Secretary of the Treasury.
(o) Treasury means the United States Department of the Treasury.
[[Page 44]]
Sec. 208.3 Payment by electronic funds transfer.
Subject to Sec. 208.4, and notwithstanding any other provision of
law, effective January 2, 1999, all Federal payments made by an agency
shall be made by electronic funds transfer.
Sec. 208.4 Waivers.
Payment by electronic funds transfer is not required in the
following cases:
(a) Where an individual determines, in his or her sole discretion,
that payment by electronic funds transfer would impose a hardship due to
a physical or mental disability or a geographic, language, or literacy
barrier, or would impose a financial hardship. In addition, the
requirement to receive payment by electronic funds transfer is
automatically waived for all individuals who do not have an account with
a financial institution and who are eligible to open an ETASM
under Sec. 208.5, until such date as the Secretary determines that the
ETASM is available;
(b) Where the political, financial, or communications infrastructure
in a foreign country does not support payment by electronic funds
transfer;
(c) Where the payment is to a recipient within an area designated by
the President or an authorized agency administrator as a disaster area.
This waiver is limited to payments made within 120 days after the
disaster is declared;
(d) Where either:
(1) A military operation is designated by the Secretary of Defense
in which uniformed services undertake military actions against an enemy,
or
(2) A call or order to, or retention on, active duty of members of
the uniformed services is made during a war or national emergency
declared by the President or Congress;
(e) Where a threat may be posed to national security, the life or
physical safety of any individual may be endangered, or a law
enforcement action may be compromised;
(f) Where the agency does not expect to make more than one payment
to the same recipient within a one-year period, i.e., the payment is
non-recurring, and the cost of making the payment via electronic funds
transfer exceeds the cost of making the payment by check; and
(g) Where an agency's need for goods and services is of such unusual
and compelling urgency that the Government would be seriously injured
unless payment is made by a method other than electronic funds transfer;
or, where there is only one source for goods or services and the
Government would be seriously injured unless payment is made by a method
other than electronic funds transfer.
Sec. 208.5 Availability of the ETA SM.
An individual who receives a Federal benefit, wage, salary, or
retirement payment shall be eligible to open an ETA SM at any
Federally-insured financial institution that offers ETAs SM.
Any Federally-insured financial institution shall be eligible, but not
required, to offer ETAs SM as Treasury's Financial Agent. A
Federally-insured financial institution that elects to offer ETAs
SM shall, upon entering into an ETA SM Financial
Agency Agreement with the Treasury, be designated as Treasury's
Financial Agent for the offering of the account pursuant to Public Law
104-208. Treasury shall make publicly available required attributes for
ETAs SM and any ETA SM offered by a Federally-
insured financial institution shall comply with such requirements. The
offering of an ETA SM shall constitute the provision of EBT
services within the meaning of Public Law 104-208.
Sec. 208.6 General account requirements.
(a) All Federal payments made by electronic funds transfer,
including those made through an ETA SM, shall be deposited
into an account at a financial institution. For all payments other than
vendor payments, the account at the financial institution shall be in
the name of the recipient, except as provided in paragraph (b) of this
section.
(b)(1) Where an authorized payment agent has been selected, the
Federal payment shall be deposited into an account titled in accordance
with the regulations governing the authorized payment agent.
(2) Where a Federal payment is to be deposited into an investment
account
[[Page 45]]
established through a securities broker or dealer registered with the
Securities and Exchange Commission under the Securities Exchange Act of
1934, or an investment account established through an investment company
registered under the Investment Company Act of 1940 or its transfer
agent, such payment may be deposited into an account designated by such
broker or dealer, investment company, or transfer agent.
Sec. 208.7 Agency responsibilities.
(a) An agency shall disclose to each individual who is eligible to
receive a Federal benefit, wage, salary, or retirement payment and who
is not already receiving payment by electronic funds transfer the
individual's rights and obligations under Secs. 208.3, 208.4(a) and
208.5 of this part, unless payment by electronic funds transfer is not
required pursuant to any provision of subsections (b) through (g) of
Sec. 208.4.
(1) Prior to the date the ETA SM becomes available, the
disclosure shall be in a form substantially similar to the model
disclosure set forth in appendix A of this part.
(2) On and after the date the ETA SM becomes available,
the disclosure shall be in a form substantially similar to the model
disclosure set forth in appendix B of this part.
(b) An agency shall put into place procedures that allow recipients
to indicate that the recipient elects to have payment deposited by
electronic funds transfer to an account held by the recipient at a
financial institution. In addition, an agency may put into place
procedures to request that individuals who are invoking a hardship
waiver under Sec. 208.4(a) indicate, in writing or orally, that a
hardship waiver has been invoked. However, an agency may not delay or
withhold payment if a recipient does not respond to such a request.
Sec. 208.8 Recipient responsibilities.
Each recipient who is required to receive payment by electronic
funds transfer and who has an account with a financial institution must,
within the time frame specified by the agency making the payment,
designate a financial institution through which the payment may be made
and provide the agency with the information requested by the agency in
order to effect payment by electronic funds transfer.
Sec. 208.9 Compliance.
(a) Treasury will monitor agencies' compliance with this part.
Treasury may require agencies to provide information about their
progress in converting payments to electronic funds transfer.
(b) If an agency fails to make payment by electronic funds transfer,
as prescribed under this part, Treasury may assess a charge to the
agency pursuant to 31 U.S.C. 3335.
Sec. 208.10 Reservation of rights.
The Secretary reserves the right, in the Secretary's discretion, to
waive any provision(s) of this regulation in any case or class of cases.
Appendix A to Part 208--Model Disclosure for Use Until ETA SM
Becomes Available
The Debt Collection Improvement Act of 1996 requires that most
Federal payments be made by electronic funds transfer after January 2,
1999.
If you are currently receiving your Federal payment by check or you
have just become eligible to begin receiving a Federal payment, you have
several choices:
(1) Receive your payment by Direct Deposit through the financial
institution of your choice.
The Government makes payments electronically through a program
called Direct Deposit. Direct Deposit is a safe, convenient, and
reliable way to receive your Federal payment through a financial
institution. (A financial institution can be a bank, credit union,
savings bank, or thrift.) Many financial institutions offer basic, low-
cost accounts in addition to full-service checking or savings accounts.
(2) Do nothing now and wait for a basic, low-cost account, called an
ETA SM, to become available.
If you do not have an account with a financial institution, you do
not need to do anything now. In the future a low-cost account, called an
ETA SM, will be available at many financial institutions.
Like Direct Deposit, the ETA SM (which stands for electronic
transfer account) is a safe, convenient, and reliable way to receive
your Federal payment through a financial institution. You are eligible
to open this account, at a low monthly fee, if you receive a Federal
benefit, wage, salary, or retirement payment. [Agency name] will contact
you and let you know
[[Page 46]]
when the ETA SM is available and which financial institutions
in your area offer the account.
(3) Continue to receive a check.
If receiving your payment electronically would cause you a hardship
because you have a physical or mental disability, or because of a
geographic, language, or literacy barrier, you may receive your payment
by check. In addition, if receiving your payment electronically would
cause you a financial hardship because it would cost you more than
receiving your payment by check, you may receive your payment by check.
Please call [agency name] at [agency customer service number] if you
would like more information on Direct Deposit, the ETA SM, or
hardship waivers.
Appendix B to Part 208--Model Disclosure for Use After ETA SM
Becomes Available
The Debt Collection Improvement Act of 1996 requires that most
Federal payments be made by electronic funds transfer after January 2,
1999.
If you are currently receiving your Federal payment by check or you
have just become eligible to begin receiving a Federal payment, you have
several choices:
(1) Receive your payment by Direct Deposit through the financial
institution of your choice.
The Government makes payments electronically through a program
called Direct Deposit. Direct Deposit is a safe, convenient, and
reliable way to receive your Federal payment through a financial
institution. (A financial institution can be a bank, credit union,
savings bank, or thrift.) Many financial institutions offer basic, low-
cost accounts in addition to full-service checking or savings accounts.
(2) Receive your payment through a basic, low-cost account called an
ETA SM.
If you receive a Federal benefit, wage, salary, or retirement
payment, you are eligible to open an ETA SM. This account is
available for a low monthly fee at many financial institutions. Like
Direct Deposit, the ETA SM (which stands for electronic
transfer account) is a safe, convenient, and reliable way to receive
your Federal payment through a financial institution. Please call the
customer service number listed below to find out which financial
institutions in your area offer the ETA SM.
(3) Continue to receive a check.
If receiving your payment electronically would cause you a hardship
because you have a physical or mental disability, or because of a
geographic, language, or literacy barrier, you may receive your payment
by check. In addition, if receiving your payment electronically would
cause you a financial hardship because it would cost you more than
receiving your payment by check, you may receive your payment by check.
Please call [agency name] at [agency customer service number] if you
would like more information on Direct Deposit, the ETA SM, or
hardship waivers.
PART 210--FEDERAL GOVERNMENT PARTICIPATION IN THE AUTOMATED CLEARING HOUSE--Table of Contents
Sec.
210.1 Scope; relation to other regulations.
210.2 Definitions.
210.3 Governing law.
Subpart A--General
210.4 Authorizations and revocations of authorizations.
210.5 Account requirements for Federal payments.
210.6 Agencies.
210.7 Federal Reserve Banks.
210.8 Financial institutions.
Subpart B--Reclamation of Benefit Payments
210.9 Parties to the reclamation.
210.10 RDFI liability.
210.11 Limited liability.
210.12 RDFI's rights of recovery.
210.13 Notice to account owners.
210.14 Erroneous death information.
Authority: 5 U.S.C. 5525; 12 U.S.C. 391; 31 U.S.C. 321, 3301, 3302,
3321, 3332, 3335, and 3720.
Source: 64 FR 17487, Apr. 9, 1999, unless otherwise noted.
Sec. 210.1 Scope; relation to other regulations.
This part governs all entries and entry data originated or received
by an agency through the Automated Clearing House (ACH) network, except
as provided in paragraphs (a) and (b) of this section. This part also
governs reclamations of benefit payments.
(a) Federal tax payments received by the Federal Government through
the ACH system that are governed by part 203 of this title shall not be
subject to any provision of this part that is inconsistent with part
203.
(b) ACH credit or debit entries for the purchase of, or payment of
principal and interest on, United States securities that are governed by
part 370 of this title shall not be subject to any provision of this
part that is inconsistent with part 370.
[[Page 47]]
Sec. 210.2 Definitions.
For purposes of this part, the following definitions apply. Any term
that is not defined in this part shall have the meaning set forth in the
ACH Rules.
(a) ACH Rules means the Operating Rules and the Operating Guidelines
published by NACHA--The Electronic Payments Association (NACHA), a
national association of regional member clearing house associations, ACH
Operators and participating financial institutions located in the United
States.
(b) Actual or constructive knowledge, when used in reference to an
RDFI's knowledge of the death or legal incapacity of a recipient or
death of a beneficiary, means that the RDFI received information, by
whatever means, of the death or incapacity and has had a reasonable
opportunity to act on such information or that the RDFI would have
learned of the death or incapacity if it had followed commercially
reasonable business practices.
(c) 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. The term agency does not include a
Federal Reserve Bank.
(d) Applicable ACH Rules means the ACH Rules with an effective date
on or before September 14, 2001, as published in Parts II, III, and IV
of the ``2001 ACH Rules: A Complete Guide to Rules & Regulations
Governing the ACH Network,'' (see Sec. 210.3(b)), except:
(1) ACH Rule 1.1 (limiting the applicability of the ACH Rules to
members of an ACH association);
(2) ACH Rule 1.2.2 (governing claims for compensation);
(3) ACH Rule 1.2.4; 2.2.1.10; Appendix Eight and Appendix Eleven
(governing the enforcement of the ACH Rules, including self-audit
requirements);
(4) ACH Rules 2.2.1.8; 2.6; and 4.7 (governing the reclamation of
benefit payments);
(5) ACH Rule 8.3 and Appendix Two (requiring that a credit entry be
originated no more than two banking days before the settlement date of
the entry--see definition of ``Effective Entry Date'' in Appendix Two);
(6) 2.1.4; 2.9; 3.6; 7.6.3; and 7.7.3 (governing PPD accounts
receivable truncated check debit entries); and
(7) ACH Rule 2.10 and 3.8 (governing Internet-initiated entries) and
Appendix Two (definition of WEB entry).
(e) Authorized payment agent means any individual or entity that is
appointed or otherwise selected as a representative payee or fiduciary,
under regulations of the Social Security Administration, the Department
of Veterans Affairs, the Railroad Retirement Board, or other agency
making Federal payments, to act on behalf of an individual entitled to a
Federal payment.
(f) Automated Clearing House or ACH means a funds transfer system
governed by the ACH Rules which provides for the interbank clearing of
electronic entries for participating financial institutions.
(g) Beneficiary means a natural person other than a recipient who is
entitled to receive the benefit of all or part of a benefit payment.
(h) Benefit payment is a payment for a Federal entitlement program
or for an annuity, including, but not limited to, payments for Social
Security, Supplemental Security Income, Black Lung, Civil Service
Retirement, Railroad Retirement annuity and Railroad Unemployment and
Sickness benefits, Department of Veterans Affairs Compensation and
Pension, and Worker's Compensation.
(i) Federal payment means any payment made by an agency. The term
includes, but is not limited to:
(1) Federal wage, salary, and retirement payments;
(2) Vendor and expense reimbursement payments;
(3) Benefit payments; and
(4) Miscellaneous payments including, but not limited to,
interagency payments; grants; loans; fees; principal, interest, and
other payments related to United States marketable and nonmarketable
securities; overpayment reimbursements; and payments under Federal
insurance or guarantee programs for loans.
(j)(1) Financial institution means:
(i) Any insured bank as defined in section 3 of the Federal Deposit
Insurance Act (12 U.S.C. 1813) or any bank which is eligible to apply to
become an
[[Page 48]]
insured bank under section 5 of such Act (12 U.S.C. 1815);
(ii) Any mutual savings bank as defined in section 3 of the Federal
Deposit Insurance Act (12 U.S.C. 1813) or any bank which is eligible to
apply to become an insured bank under section 5 of such Act (12 U.S.C.
1815);
(iii) Any savings bank as defined in section 3 of the Federal
Deposit Insurance Act (12 U.S.C. 1813) or any bank which is eligible to
apply to become an insured bank under section 5 of such Act (12 U.S.C.
1815);
(iv) Any insured credit union as defined in section 101 of the
Federal Credit Union Act (12 U.S.C. 1752) or any credit union which is
eligible to apply to become an insured credit union pursuant to section
201 of such Act (12 U.S.C. 1781);
(v) Any savings association as defined in section 3 of the Federal
Deposit Insurance Act (12 U.S.C. 1813) which is an insured depository
institution as defined in such Act (12 U.S.C. 1811 et seq.) or is
eligible to apply to become an insured depository institution under the
Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.); and
(vi) Any agency or branch of a foreign bank as defined in section
1(b) of the International Banking Act, as amended (12 U.S.C. 3101).
(2) In this part, a financial institution may be referred to as an
Originating Depository Financial Institution (ODFI) if it transmits
entries to its ACH Operator for transmittal to a Receiving Depository
Financial Institution (RDFI), or it may be referred to as an RDFI if it
receives entries from its ACH Operator for debit or credit to the
accounts of its customers.
(k) Government entry means an ACH credit or debit entry or entry
data originated or received by an agency.
(l) Green Book means the manual issued by the Service which provides
financial institutions with procedures and guidelines for processing
Government entries.
(m) Notice of reclamation means notice sent by electronic, paper, or
other means by the Federal Government to an RDFI which identifies the
benefit payments that should have been returned by the RDFI because of
the death or legal incapacity of a recipient or death of a beneficiary.
(n) Outstanding total means the sum of all benefit payments received
by an RDFI from an agency after the death or legal incapacity of a
recipient or the death of a beneficiary, minus any amount returned to,
or recovered by, the Federal Government.
(o) Recipient means a natural person, corporation, or other public
or private entity that is authorized to receive a Federal payment from
an agency.
(p) Service means the Financial Management Service, Department of
the Treasury.
(q) Treasury means the United States Department of the Treasury.
(r) Treasury Financial Manual means the manual issued by the Service
containing procedures to be observed by all agencies and Federal Reserve
Banks with respect to central accounting, financial reporting, and other
Federal Government-wide fiscal responsibilities of the Treasury.
[64 FR 17478, Apr. 9, 1999, as amended at 65 FR 18869, Apr. 7, 2000; 66
FR 10580, Feb. 16, 2001]
Sec. 210.3 Governing law.
(a) Federal law. The rights and obligations of the United States and
the Federal Reserve Banks with respect to all Government entries, and
the rights of any person or recipient against the United States and the
Federal Reserve Banks in connection with any Government entry, are
governed by this part, which has the force and effect of Federal law.
(b) Incorporation by reference--applicable ACH Rules. (1) This part
incorporates by reference the applicable ACH Rules, including rule
changes with an effective date on or before September 14, 2001, as
published in Parts II, III, and IV of the ``2001 ACH Rules: A Complete
Guide to Rules & Regulations Governing the ACH Network.'' The Director
of the Federal Register approves this incorporation by reference in
accordance with 5 U.S.C. 552(a) and 1 CFR part 51. Copies of the ``2001
ACH Rules'' are available from NACHA--The Electronic Payments
Association, 13665 Dulles Technology Drive, Suite 300, Herndon, Virginia
[[Page 49]]
20171. Copies also are available for public inspection at the Office of
the Federal Register, 800 North Capitol Street, NW., Suite 700,
Washington, DC; and the Financial Management Service, 401 14th Street,
SW., Room 420, Washington, DC 20227.
(2) Any amendment to the applicable ACH Rules that takes effect
after September 14, 2001, shall not apply to Government entries unless
the Service expressly accepts such amendment by publishing notice of
acceptance of the amendment to this part in the Federal Register. An
amendment to the ACH Rules that is accepted by the Service shall apply
to Government entries on the effective date of the rulemaking specified
by the Service in the Federal Register notice expressly accepting such
amendment.
(c) Application of this part. Any person or entity that originates
or receives a Government entry agrees to be bound by this part and to
comply with all instructions and procedures issued by the Service under
this part, including the Treasury Financial Manual and the Green Book.
The Treasury Financial Manual is available for downloading at the
Service's web site at http://www.fms.treas.gov/ or by calling (202) 874-
9940 or writing the Directives Management Branch, Financial Management
Service, Department of the Treasury, 3700 East West Highway, Room 500C,
Hyattsville, MD 20782. The Green Book is available for downloading at
the Service's web site at http://www.fms.treas.gov/fmsnews.html or by
calling (202) 874-6540 or writing the Product Promotion Division,
Financial Management Service, Department of the Treasury, 401 14th
Street, SW., Room 309, Washington, DC 20227.
[64 FR 17478, Apr. 9, 1999, as amended at 65 FR 18869, Apr. 7, 2000; 66
FR 10580, Feb. 16, 2001]
Subpart A--General
Sec. 210.4 Authorizations and revocations of authorizations.
(a) Requirements for authorization. Each debit and credit entry
subject to this part shall be authorized in accordance with the
applicable ACH Rules and the following additional requirements:
(1) The agency or the RDFI that accepts the recipient's
authorization shall verify the identity of the recipient and, in the
case of a written authorization requiring the recipient's signature, the
validity of the recipient's signature.
(2) Unless authorized in writing, or similarly authenticated, by an
agency, no person or entity shall initiate or transmit a debit entry to
that agency, other than a reversal of a credit entry previously sent to
the agency.
(b) Terms of authorizations. By executing an authorization for an
agency to initiate entries, a recipient agrees:
(1) To the provisions of this part;
(2) To provide accurate information;
(3) To verify the recipient's identity to the satisfaction of the
RDFI or agency, whichever has accepted the authorization;
(4) That any new authorization inconsistent with a previous
authorization shall supersede the previous authorization; and
(5) That the Federal Government may reverse any duplicate or
erroneous entry or file as provided in Sec. 210.6(f) of this part.
(c) Termination and revocation of authorizations. An authorization
shall remain valid until it is terminated or revoked by:
(1) With respect to a recipient of benefit payments, a change in the
recipient's ownership of the deposit account as reflected in the deposit
account records, including the removal of the name of the recipient, the
addition of a power of attorney, or any action which alters the interest
of the recipient;
(2) The death or legal incapacity of a recipient of benefit payments
or the death of a beneficiary;
(3) The closing of the recipient's account at the RDFI by the
recipient or by the RDFI. With respect to a recipient of benefit
payments, if an RDFI closes an account to which benefit payments
currently are being sent, it shall provide 30 calendar days written
notice to the recipient prior to closing the account, except in cases of
fraud; or
(4) The RDFI's insolvency, closure by any state or Federal
regulatory authority or by corporate action, or the
[[Page 50]]
appointment of a receiver, conservator, or liquidator for the RDFI. In
any such event, the authorization shall remain valid if a successor is
named. The Federal Government may temporarily transfer authorizations to
a consenting RDFI. The transfer is valid until either a new
authorization is executed by the recipient, or 120 calendar days have
elapsed since the insolvency, closure, or appointment, whichever occurs
first.
Sec. 210.5 Account requirements for Federal payments.
(a) Notwithstanding ACH Rules 2.1.2, 4.1.3, and Appendix Two,
section 2.2 (listing general ledger and loan accounts as permissible
transaction codes), an ACH credit entry representing a Federal payment
other than a vendor payment shall be deposited into a deposit account at
a financial institution. For all payments other than vendor payments,
the account at the financial institution shall be in the name of the
recipient, except as provided in paragraph (b) of this section.
(b)(1) Where an authorized payment agent has been selected, the
Federal payment shall be deposited into an account titled in accordance
with the regulations governing the authorized payment agent.
(2) Where a Federal payment is to be deposited into an investment
account established through a securities broker or dealer registered
with the Securities and Exchange Commission under the Securities
Exchange Act of 1934, or an investment account established through an
investment company registered under the Investment Company Act of 1940
or its transfer agent, such payment may be deposited into an account
designated by such broker or dealer, investment company, or transfer
agent.
(3) The Secretary of the Treasury may waive the requirements of
paragraph (a) of this section in any case or class of cases.
[64 FR 17478, Apr. 9, 1999, as amended at 65 FR 18869, Apr. 7, 2000]
Sec. 210.6 Agencies.
Notwithstanding ACH Rules 2.2.3, 2.4.5, 2.5.2, 4.2, and 7.7.2,
agencies shall be subject to the obligations and liabilities set forth
in this section in connection with Government entries.
(a) Receiving entries. An agency may receive ACH debit or credit
entries only with the prior written authorization of the Service.
(b) Liability to a recipient. An agency will be liable to the
recipient for any loss sustained by the recipient as a result of the
agency's failure to originate a credit or debit entry in accordance with
this part. The agency's liability shall be limited to the amount of the
entry(ies).
(c) Liability to an originator. An agency will be liable to an
originator or an ODFI for any loss sustained by the originator or ODFI
as a result of the agency's failure to credit an ACH entry to the
agency's account in accordance with this part. The agency's liability
shall be limited to the amount of the entry(ies).
(d) Liability to an RDFI or ACH association. Except as otherwise
provided in this part, an agency will be liable to an RDFI for losses
sustained in processing duplicate or erroneous credit and debit entries
originated by the agency. An agency's liability shall be limited to the
amount of the entry(ies), and shall be reduced by the amount of the loss
resulting from the failure of the RDFI to exercise due diligence and
follow standard commercial practices in processing the entry(ies). This
section does not apply to credits received by an RDFI after the death or
legal incapacity of a recipient of benefit payments or the death of a
beneficiary as governed by Subpart B of this part. An agency shall not
be liable to any ACH association.
(e) Acquittance of the agency. The final crediting of the amount of
an entry to a recipient's account shall constitute full acquittance of
the Federal Government.
(f) Reversals. An agency may reverse any duplicate or erroneous
entry, and the Federal Government may reverse any duplicate or erroneous
file. In initiating a reversal, an agency shall certify to the Service
that the reversal complies with applicable law related to the recovery
of the underlying payment. An agency that reverses an entry shall
indemnify the RDFI as provided in the applicable ACH Rules, but the
[[Page 51]]
agency's liability shall be limited to the amount of the entry. If the
Federal Government reverses a file, the Federal Government shall
indemnify the RDFI as provided in the applicable ACH Rules, but the
extent of such liability shall be limited to the amount of the entries
comprising the duplicate or erroneous file. Reversals under this section
shall comply with the time limitations set forth in the applicable ACH
Rules.
Sec. 210.7 Federal Reserve Banks.
(a) Fiscal Agents. Each Federal Reserve Bank serves as Fiscal Agent
of the Treasury in carrying out its duties as the Federal Government's
ACH Operator under this part. As Fiscal Agent, each Federal Reserve Bank
shall be responsible only to the Treasury and not to any other party for
any loss resulting from the Federal Reserve Bank's action,
notwithstanding Section 11.5 and Article 8 of the ACH Rules. Each
Federal Reserve Bank may issue operating circulars not inconsistent with
this part which shall be binding on financial institutions.
(b) Routing numbers. All routing numbers issued by a Federal Reserve
Bank to an agency require the prior approval of the Service.
Sec. 210.8 Financial institutions.
(a) Status as a Treasury depositary. The origination or receipt of
an entry subject to this part does not render a financial institution a
Treasury depositary. A financial institution shall not advertise itself
as a Treasury depositary on such basis.
(b) Liability. Notwithstanding ACH Rules 2.2.3, 2.4.5, 2.5.2, 4.2,
and 7.7.2, if the Federal Government sustains a loss as a result of a
financial institution's failure to handle an entry in accordance with
this part, the financial institution shall be liable to the Federal
Government for the loss, up to the amount of the entry, except as
otherwise provided in this section. A financial institution shall not be
liable to any third party for any loss or damage resulting directly or
indirectly from an agency's error or omission in originating an entry.
Nothing in this section shall affect any obligation or liability of a
financial institution under Regulation E, 12 CFR part 205, or the
Electronic Funds Transfer Act, 12 U.S.C. 1693 et seq.
(1) An ODFI that transmits a debit entry to an agency without the
prior written or similarly authenticated authorization of the agency,
shall be liable to the Federal Government for the amount of the
transaction, plus interest. The Service may collect such funds using
procedures established in the applicable ACH Rules or by instructing a
Federal Reserve Bank to debit the ODFI's account at the Federal Reserve
Bank or the account of its designated correspondent. The interest charge
shall be at a rate equal to the Federal funds rate plus two percent, and
shall be assessed for each calendar day, from the day the Treasury
General Account (TGA) was debited to the day the TGA is recredited with
the full amount due.
(2) An RDFI that accepts an authorization in violation of
Sec. 210.4(a) shall be liable to the Federal Government for all credits
or debits made in reliance on the authorization. An RDFI that transmits
to an agency an authorization containing an incorrect account number
shall be liable to the Federal Government for any resulting loss, up to
the amount of the payment(s) made on the basis of the incorrect number.
If an agency determines, after appropriate investigation, that a loss
has occurred because an RDFI transmitted an authorization or
notification of change containing an incorrect account number, the
agency may instruct the Service to direct a Federal Reserve Bank to
debit the RDFI's account for the amount of the payment(s) made on the
basis of the incorrect number. The agency shall notify the RDFI of the
results of its investigation and provide the RDFI with a reasonable
opportunity to respond before initiating such a debit.
(c) Acquittance of the financial institution. The final crediting of
the correct amount of an entry received and processed by the Federal
Reserve Bank and posted to the TGA shall constitute full acquittance of
the ODFI and the originator for the amount of the entry. Full
acquittance shall not occur if the entries do not balance, are
incomplete, are incorrect, or are incapable of being
[[Page 52]]
processed. In the case of funds collected by an agency through
origination of a debit entry, full acquittance shall not occur until the
underlying payment becomes final.
Subpart B--Reclamation of Benefit Payments
Sec. 210.9 Parties to the reclamation.
(a) Agreement of RDFI. An RDFI's acceptance of a benefit payment
pursuant to this part shall constitute its agreement to this subpart. By
accepting a benefit payment subject to this part, the RDFI authorizes
the debiting of the Federal Reserve Bank account utilized by the RDFI in
accordance with the provisions of Sec. 210.10(e).
(b) The Federal Government. In processing reclamations pursuant to
this subpart, the Service shall act pursuant to the direction of the
agency that certified the benefit payment(s) being reclaimed.
Sec. 210.10 RDFI liability.
(a) Full liability. An RDFI shall be liable to the Federal
Government for the total amount of all benefit payments received after
the death or legal incapacity of a recipient or the death of a
beneficiary unless the RDFI has the right to limit its liability under
Sec. 210.11 of this part. An RDFI shall return any benefit payments
received after the RDFI learns of the death or legal incapacity of a
recipient or the death of a beneficiary, regardless of the manner in
which the RDFI discovers such information. If the RDFI learns of the
death or legal incapacity of a recipient or death of a beneficiary from
a source other than notice from the agency, the RDFI shall immediately
notify the agency of the death or incapacity.
(b) Notice of reclamation. Upon receipt of a notice of reclamation,
an RDFI shall provide the information required by the notice of
reclamation and return the amount specified in the notice of reclamation
in a timely manner.
(c) Exception to liability rule. An RDFI shall not be liable for
post-death benefit payments sent to a recipient acting as a
representative payee or fiduciary on behalf of a beneficiary, if the
beneficiary was deceased at the time the authorization was executed and
the RDFI did not have actual or constructive knowledge of the death of
the beneficiary.
(d) Time limits. An agency that initiates a reclamation must do so
within 120 calendar days after the date that the agency receives notice
of the death or legal incapacity of a recipient or death of a
beneficiary. An agency shall not reclaim any post-death or post-
incapacity payment(s) made more than six years prior to the most recent
payment made by the agency to the recipient's account; provided,
however, that if the account balance at the time the RDFI receives the
notice of reclamation exceeds the total amount of all post-death or
post-incapacity payments made by the agency during such six-year period,
this limitation shall not apply and the RDFI shall be liable for the
total amount of all payments made, up to the amount in the account at
the time the RDFI receives the notice of reclamation and has had a
reasonable opportunity (not to exceed one business day) to act on the
notice.
(e) Debit of RDFI's account. If an RDFI does not return the full
amount of the outstanding total or any other amount for which the RDFI
is liable under this subpart in a timely manner, the Federal Government
will collect the amount outstanding by instructing the appropriate
Federal Reserve Bank to debit the account utilized by the RDFI. The
Federal Reserve Bank will provide advice of the debit to the RDFI.
Sec. 210.11 Limited liability.
(a) Right to limit its liability. If an RDFI does not have actual or
constructive knowledge of the death or legal incapacity of a recipient
or the death of a beneficiary at the time it receives one or more
benefit payments on behalf of the recipient, the RDFI's liability to the
agency for those payments shall be limited to:
(1) An amount equal to: (i) The amount in the account at the time
the RDFI receives the notice of reclamation and has had a reasonable
opportunity (not to exceed one business day) to act on the notice, plus
any additional benefit payments made to the account by the agency before
the RDFI
[[Page 53]]
responds in full to the notice of reclamation, or
(ii) The outstanding total, whichever is less; plus
(2) If the agency is unable to collect the entire outstanding total,
an additional amount equal to:
(i) The benefit payments received by the RDFI from the agency within
45 days after the death or legal incapacity of the recipient or death of
the beneficiary, or
(ii) The balance of the outstanding total, whichever is less.
(b) Qualification for limited liability. In order to limit its
liability as provided in this section, an RDFI shall:
(1) Certify that at the time the benefit payments were credited to
or withdrawn from the account, the RDFI had no actual or constructive
knowledge of the death or legal incapacity of the recipient or death of
the beneficiary;
(2) Certify the date the RDFI first had actual or constructive
knowledge of the death or legal incapacity of the recipient or death of
the beneficiary, regardless of how and where such information was
obtained;
(3)(i) Provide the name, address, and any other relevant information
of the following person(s):
(A) Co-owner(s) of the recipient's account;
(B) Other person(s) authorized to withdraw funds from the
recipient's account; and
(C) Person(s) who withdrew funds from the recipient's account after
the death or legal incapacity of the recipient or death of the
beneficiary.
(ii) If persons are not identified for any of these subcategories,
the RDFI must certify that no such information is available and why no
such information is available; and
(4) Fully and accurately complete all certifications on the notice
of reclamation and comply with the requirements of this part.
(c) Payment of limited liability amount. If the RDFI qualifies for
limited liability under this subpart, it shall immediately return to the
Federal Government the amount specified in Sec. 210.11(a)(1). The agency
will then attempt to collect the amount of the outstanding total not
returned by the RDFI. If the agency is unable to collect that amount,
the Federal Government will instruct the appropriate Federal Reserve
Bank to debit the account utilized by the RDFI at that Federal Reserve
Bank for the amount specified in Sec. 210.11(a)(2).
(d) Violation of subpart B. An RDFI that fails to comply with any
provision of this subpart in a timely and accurate manner, including but
not limited to the certification requirements at Sec. 210.11(b) and the
notice requirements at Sec. 210.13, shall be liable to the Federal
Government for any loss resulting from its act or omission. Any such
liability shall be in addition to the amount(s) for which the RDFI is
liable under Sec. 210.10 or Sec. 210.11, as applicable.
Sec. 210.12 RDFI's rights of recovery.
(a) Matters between the RDFI and its customer. This subpart does not
authorize or direct an RDFI to debit or otherwise affect the account of
a recipient. Nothing in this subpart shall be construed to affect the
right an RDFI has under state law or the RDFI's contract with a
recipient to recover any amount from the recipient's account.
(b) Liability unaffected. The liability of the RDFI under this
subpart is not affected by actions taken by the RDFI to recover any
portion of the outstanding total from any party.
Sec. 210.13 Notice to account owners.
Provision of notice by RDFI. Upon receipt by an RDFI of a notice of
reclamation, the RDFI immediately shall mail to the last known address
of the account owner(s) or otherwise provide to the account owner(s) a
copy of any notice required by the Service to be provided to account
owners as specified in the Green Book. Proof that this notice was sent
may be required by the Service.
Sec. 210.14 Erroneous death information.
(a) Notification of error to the agency. If, after the RDFI responds
fully to the notice of reclamation, the RDFI learns that the recipient
or beneficiary is not dead or legally incapacitated or that the date of
death is incorrect, the RDFI shall inform the agency that certified the
underlying payment(s) and direct the Service to reclaim the funds in
dispute.
[[Page 54]]
(b) Resolution of dispute. The agency that certified the underlying
payment(s) and directed the Service to reclaim the funds will attempt to
resolve the dispute with the RDFI in a timely manner. If the agency
determines that the reclamation was improper, in whole or in part, the
agency shall notify the RDFI and shall return the amount of the
improperly reclaimed funds to the RDFI. Upon certification by the agency
of an improper reclamation, the Service may instruct the appropriate
Federal Reserve Bank to credit the account utilized by the RDFI at the
Federal Reserve Bank in the amount of the improperly reclaimed funds.
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 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
[[Page 55]]
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 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,
[[Page 56]]
(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).
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.
[[Page 57]]
(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.
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.
[[Page 58]]
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.
(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.
[[Page 59]]
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.
(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
[[Page 60]]
(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 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
[[Page 61]]
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 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
[[Page 62]]
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]
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
[[Page 63]]
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 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
[[Page 64]]
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.
(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
[[Page 65]]
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 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
[[Page 66]]
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]
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
[[Page 67]]
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 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
[[Page 68]]
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 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 SECURED BY GOVERNMENT OBLIGATIONS IN LIEU OF BONDS WITH SURETIES--Table of Contents
Sec.
225.1 Scope.
225.2 Definitions.
225.3 Pledge of Government obligations in lieu of a bond with surety or
sureties.
225.4 Pledge of book-entry Government obligations.
225.5 Pledge of definitive Government obligations.
225.6 Payment of interest.
225.7 Custodian duties and responsibilities.
225.8 Bond official duties and responsibilities.
225.9 Return of Government obligations to obligor.
225.10 Other agency practices and authorities.
225.11 Courts.
Authority: 12 U.S.C. 391; 31 U.S.C. 321, 9301 and 9303.
Source: 64 FR 4763, Jan. 29, 1999, unless otherwise noted.
Sec. 225.1 Scope.
The regulation in this part applies to Government agencies accepting
bonds secured by Government obligations in lieu of bonds with sureties.
The Financial Management Service (FMS) is the representative of the
Secretary of the Treasury (Secretary) in all matters
[[Page 69]]
concerning this part unless otherwise specified. The Commissioner of the
FMS may issue procedural instructions implementing this regulation.
Sec. 225.2 Definitions.
For purposes of this part:
Agency means a department, agency, or instrumentality of the United
States Government.
Authenticate instructions means to verify that the instructions
received are from a bond official.
Bearer means that ownership of a Government obligation is not
recorded. Title to such an obligation passes by delivery without
endorsement and without notice. A bearer obligation is payable on its
face to the holder at either maturity or call.
Bond means an executed written instrument, which guarantees the
fulfillment of an obligation to the United States and sets forth the
terms, conditions, and stipulations of the obligation.
Bond official means an agency official having authority under
Federal law or regulation to approve a bond with surety or sureties and
to approve a bond secured by Government obligations.
Book-entry means that the issuance and maintenance of a Government
obligation is represented by an accounting entry or electronic record
and not by a certificate.
Custodian means a Federal Reserve Bank or an entity within the
United States designated by such Federal Reserve Bank under terms and
conditions prescribed by such Federal Reserve Bank, a depositary
specifically designated by the Secretary of the Treasury for purposes of
this part, or such other entities as the Secretary of the Treasury may
designate for purposes of this part.
Definitive means that a Government obligation is issued in engraved
or printed form.
Depositary includes, but is not limited to:
(1) Any insured bank as defined in section 3 of the Federal Deposit
Insurance Act (12 U.S.C. 1813) or any bank which is eligible to make
application to become an insured bank under section 5 of such Act (12
U.S.C. 1815);
(2) Any mutual savings bank as defined in section 3 of the Federal
Deposit Insurance Act (12 U.S.C. 1813) or any bank which is eligible to
make application to become an insured bank under section 5 of such Act
(12 U.S.C. 1815);
(3) Any savings bank as defined in section 3 of the Federal Deposit
Insurance Act (12 U.S.C. 1813) or any bank which is eligible to make
application to become an insured bank under section 5 of such Act (12
U.S.C. 1815);
(4) Any insured credit union as defined in section 101 of the
Federal Credit Union Act (12 U.S.C. 1752) or any credit union which is
eligible to make application to become an insured credit union under
section 201 of such Act (12 U.S.C. 1781);
(5) Any savings association as defined in section 3 of the Federal
Deposit Insurance Act (12 U.S.C. 1813) which is an insured depository
institution (as defined in such Act) (12 U.S.C. 1811 et seq.) or is
eligible to apply to become an insured depository institution under the
Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.); and
(6) Any agency or branch of a foreign bank as defined in section
1(b) of the International Banking Act, as amended (12 U.S.C. 3101).
Federal Reserve means a Federal Reserve Bank and its branches.
Government obligation means a public debt obligation of the United
States Government and an obligation whose principal and interest is
unconditionally guaranteed by the United States Government.
Obligor includes, but is not limited to, an individual, a trust, an
estate, a partnership, a corporation, and a sole proprietor.
Officer authorized to certify assignment means the individual
identified as a certifying individual at part 306, subpart F of this
title.
Person means an individual, a trust, an estate, a partnership, and a
corporation.
Pledge means a transfer of security interest in a Government
obligation to a bond official's agency as collateral in lieu of a bond
with a surety or sureties.
[[Page 70]]
Procedural instructions means the Treasury Financial Manual, as
amended, published by the Financial Management Service.
Registered means that ownership of a definitive Government
obligation is listed in the issuer's records, and that the obligation is
payable at maturity or call to the person in whose name the obligation
is inscribed or to that person's assignee.
Secretary means the Secretary of the Treasury.
Sec. 225.3 Pledge of Government obligations in lieu of a bond with surety or sureties.
(a) General. An obligor required by Federal law or regulation to
furnish a bond with surety or sureties may give in lieu thereof to a
bond official any security acceptable under 31 U.S.C. 9301, as amended.
The Secretary will designate classes of Government obligations
acceptable under this part.
(b) Bond. The bond, at a minimum, shall irrevocably authorize the
bond official to collect, sell, assign, or transfer such Government
obligations and any interest retained therefrom in the event of the
obligor's default in performing any of the terms, conditions, or
stipulations of such bond. Unless otherwise provided by law, the bond
shall authorize the bond official to apply the proceeds from the sale,
assignment, or transfer of such Government obligations, in whole or in
part, to satisfy any costs incurred by the United States related to the
default, and to apply any excess proceeds to satisfy any other claim of
the United States against the obligor. The bond shall not include any
obligations on custodians which are inconsistent with, or in addition
to, the obligations in this part. The bond will provide that the bond
official may retain any interest accruing upon any Government
obligations, or direct that such interest be retained by the custodian.
(c) Amount of Government obligations. The obligor shall pledge to
the bond official Government obligations valued as required by 31 U.S.C.
9303, as amended.
(d) Avoiding frequent substitutions. To avoid the frequent
substitution of Government obligations, the bond official may reject
Government obligations which mature, or are redeemable, within one year
from the date they are pledged to the bond official.
(e) Acceptable Government obligations. Types and valuations of
acceptable collateral security are addressed in 31 CFR part 380. For a
current list of acceptable classes of securities and instruments
described in 31 CFR part 380 and their valuations, see the Bureau of the
Public Debt's web site at www.publicdebt.treas.gov.
[64 FR 4763, Jan. 29, 1999, as amended at 65 FR 55430, Sept. 13, 2000]
Sec. 225.4 Pledge of book-entry Government obligations.
(a) General. Except as otherwise provided by the Secretary in
procedural instructions, an obligor, or a depositary acting as agent or
sub-agent for the obligor, or the bond official, shall arrange a pledge
pursuant to the prior agreement and approval of the bond official, of
book-entry Government obligations. The Government obligations must be
transferred to an account for the benefit of the bond official. The
custodian holding the Government obligations is not required to
establish that the agreement and approval of the bond official has been
obtained prior to such a transfer.
(b) Receipt. Upon the transfer of Government obligations to an
account for the benefit of the bond official, the custodian will
promptly issue a receipt or an activity statement, or both, to the bond
official and to the obligor or a depositary acting as agent or sub-agent
for the obligor.
(c) Effect of the transfer. Book-entry Government obligations
credited to an account for the benefit of the bond official shall have
the effect as provided in part 357 of this title, or in other applicable
regulations.
Sec. 225.5 Pledge of definitive Government obligations.
(a) Type and assignment. Definitive Government obligations may be in
bearer or registered form, and shall be owned by the obligor.
(1) Bearer Government obligations. The obligor shall pledge bearer
Government obligations to the bond official with all unmatured interest
coupons attached.
[[Page 71]]
(2) Registered Government obligations; assignment. The obligor shall
pledge registered Government obligations in the obligor's name to the
bond official by assignment in accordance with subpart F of part 306 of
this title and other codified procedures for issuers that apply to
assignment of the registered Government obligations, except that, when
so authorized under such procedures, all assignments shall be made in
blank.
(b) Delivery to bond official; receipt. All deliveries of definitive
Government obligations from the obligor to the bond official under this
part shall be made at the risk and expense of the obligor. Upon receipt
of definitive Government obligations, the bond official will issue the
obligor a receipt.
(c) Risk of loss; safekeeping. All definitive Government obligations
held by the bond official will be held at the risk of the bond official.
The bond official will keep safe all definitive Government obligations
and may place them with a custodian.
(d) Delivery to custodian; receipt. If the bond official is in
receipt of definitive Government obligations, and then places those
obligations with a custodian, the expense and risk of loss in delivery
will rest with the bond official. Upon the placement of definitive
Government obligations with a custodian, the custodian will issue the
bond official a receipt. All definitive Government obligations held by
the custodian will be held at the risk of the custodian.
(e) Conversion to book-entry. (1) Treasury bonds, notes,
certificates of indebtedness, or bills deposited with a Federal Reserve
Bank under this part may be converted into book-entry Treasury
obligations in accordance with part 306 of this title, and the pertinent
provisions of that part shall apply to such Treasury obligations.
(2) When converting definitive Government obligations to book-entry
form, a Federal Reserve Bank will act pursuant to, and in accordance
with, book-entry procedures for issuers that apply to the definitive
Government obligations pledged to the bond official's agency, including
those set forth in part 306 of this title.
Sec. 225.6 Payment of interest.
(a) General. Except as otherwise provided in this section and
Sec. 225.7(b), interest accruing upon Government obligations pledged to
a bond official's agency in accordance with this part will be remitted
to the obligor or a depositary acting as agent or sub-agent for the
obligor.
(b) Default. If the bond official determines that the obligor has
defaulted, the bond official will retain any interest accruing upon
Government obligations pledged to the bond official's agency or direct
the custodian, in accordance with this part, to retain such interest.
Unless otherwise provided by law, such interest will be available to
satisfy any costs incurred by the United States related to the default,
and any excess proceeds will be available to satisfy any other claim of
the United States against the obligor.
Sec. 225.7 Custodian duties and responsibilities.
(a) General. A custodian shall authenticate instructions received
from a bond official and shall act in accordance with such authenticated
instructions. The custodian assumes no liability and is without
liability of any kind for acting in accordance with such authenticated
instructions, except for the custodian's failure to exercise ordinary
care. By providing a bond secured by Government obligations in lieu of a
bond with surety or sureties, an obligor agrees not to hold either the
custodian or the Secretary liable or responsible for the actions or
inactions of a bond official or for carrying out a bond official's
authenticated instructions.
(b) Interest. Absent authenticated instructions from the bond
official to retain interest, interest received by the custodian on
Government obligations pledged to the bond official's agency in
accordance with this part will be remitted in the regular course of
business to the obligor or to a depositary acting as agent or sub-agent
for the obligor.
(c) Principal. Absent authenticated instructions from the bond
official to retain the proceeds of matured Government obligations, a
custodian will release to the obligor proceeds from matured Government
obligations only if
[[Page 72]]
the obligor has deposited Government obligations acceptable under 31
U.S.C. 9301, as amended, in substitution for those which have matured.
(d) Liquidation of Government obligations. A custodian will collect,
sell, assign, or transfer Government obligations, including any interest
therefrom, only in accordance with a bond official's authenticated
instructions.
(e) Application of proceeds of liquidated Government obligations. A
custodian will apply the proceeds from the collection, sale, assignment,
or transfer of Government obligations only in accordance with a bond
official's authenticated instructions.
Sec. 225.8 Bond official duties and responsibilities.
The bond official's duties and responsibilities are as follows:
(a) Approving the bond secured by Government obligations after
determining its sufficiency;
(b) Verifying ownership of any registered definitive Government
obligations given, and ensuring that those Government obligations are
properly assigned;
(c) Approving establishment of a book-entry account for the benefit
of the bond official;
(d) Providing the custodian, when appropriate, with clear and
concise instructions;
(e) Taking all reasonable and appropriate steps to ensure that all
procedures or transactions conform with the provisions of this part; and
(f) Notifying the Secretary of the Treasury, or his designee, upon
an obligor's default, and, unless otherwise provided by law, applying
any part of the proceeds in excess of the amount required to assure
payment of any costs incurred by the United States related to the
default to satisfy any claim of the United States against the obligor.
Sec. 225.9 Return of Government obligations to obligor.
(a) General. Except as provided in paragraph (b) of this section or
as otherwise provided in this part, the bond official will return the
Government obligations, and any interest retained therefrom, to the
obligor, without written application from the obligor, when the bond
official determines that the Government obligations are no longer
required under the terms of the bond.
(b) Miller Act payment bonds. The bond official will not return
Government obligations to an obligor who has furnished to the bond
official a payment bond if:
(1) A person, who supplied the obligor with labor or materials and
whom the obligor has not paid, files with the United States Government
the application and affidavit provided for in the Miller Act (Act), as
amended (40 U.S.C. 270a-270d), and the time provided in the Act for the
person to commence suit against the obligor on the payment bond has not
expired; or
(2) A person commences a suit against the obligor within the time
provided for in the Act, in which case the bond official will hold the
Government obligations subject to the order of the court having
jurisdiction of the suit; or
(3) The bond official has actual knowledge of a claim against the
obligor on the basis of the payment bond, in which case the bond
official may return the Government obligations to the obligor when the
bond official deems it appropriate.
(c) Claim of the United States unaffected. Nothing in this section
shall affect or impair the priority of any claim of the United States
against Government obligations, or any right or remedy granted by the
Miller Act or by this part to the United States in the event of an
obligor's default on any term, condition, or stipulation of a bond.
(d) Return of definitive Government obligations; risk of loss.
Definitive Government obligations to be returned to the obligor will be
forwarded at the obligor's risk and expense, either by the bond
official, or by a custodian upon receipt of a bond official's
authenticated instructions.
Sec. 225.10 Other agency practices and authorities.
(a) Agency practices. Nothing in this part shall be construed as
modifying the existing practices or duties of agencies in handling
bonds, except to the
[[Page 73]]
extent made necessary under the terms of this part by reason of the
acceptance of bonds secured by Government obligations.
(b) Agency authorities. Nothing contained in this part shall affect
the authority of agencies to receive Government obligations for security
in cases authorized by other provisions of law.
Sec. 225.11 Courts.
Nothing contained in this part shall affect the authority of a court
over a Government obligation given as security in a civil action.
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 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
[[Page 74]]
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.
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.
[[Page 75]]
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 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
[[Page 76]]
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 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
[[Page 77]]
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
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.
[[Page 78]]
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., 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.
[[Page 79]]
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 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.
[[Page 80]]
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), 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
[[Page 81]]
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 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
[[Page 82]]
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 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
[[Page 83]]
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.
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
[[Page 84]]
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.
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 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--Table of Contents
Sec.
248.1 Introductory.
Delegation of Authority
248.2 Delegation of authority to issue substitute checks.
[[Page 85]]
Action To Be Taken By Claimants
248.3 Advice of nonreceipt or loss.
248.4 Undertaking of indemnity.
248.5 Exception to requirement of undertaking of indemnity Form 2244.
248.6 Recovery of original check.
248.7 Claims requiring settlement action.
248.8 Inquiries.
248.9 Amendments and waivers.
Authority: 31 U.S.C. 3331.
Source: 25 FR 10869, Nov. 16, 1960, unless otherwise noted.
Redesignated at 39 FR 20969, June 17, 1974.
Sec. 248.1 Introductory.
This part governs the issuance of substitutes for checks of the
United States drawn on United States dollar or foreign currency
accounts, maintained with designated depositaries in foreign countries
or territories or possessions of the United States. Checks of the United
States drawn on such depositaries are hereafter referred to as
``depositary checks.''
[54 FR 35647, Aug. 29, 1989]
Delegation of Authority
Sec. 248.2 Delegation of authority to issue substitute checks.
Pursuant to authority contained in section 3646 of the Revised
Statutes, as amended, and subject to such procedural requirements as may
be prescribed by the Treasury Department, there is hereby delegated to
heads of departments and agencies whose disbursing officers issue
depositary checks, authority to authorize officers or employees of their
respective departments or agencies to issue substitutes of such checks,
prior to the close of the fiscal year next following the fiscal year in
which the checks are issued, and to receive and approve undertakings to
indemnify the United States in such cases. The Commissioner of the
Financial Management Service, Treasury Department, is hereby delegated
authority to issue substitutes of depositary checks drawn by the
Director, Operations Group, Treasury Department, or by officers
disbursing under delegation from the Director, Operations Group, and to
receive and approve undertakings of indemnity in such cases. The
authority delegated to the Commissioner of the Financial Management
Service may be redelegated by him to such disbursing officers.
[39 FR 20969, June 17, 1974, as amended at 49 FR 47001, 47002, Nov. 30,
1984]
Action To Be Taken by Claimants
Sec. 248.3 Advice of nonreceipt or loss.
The payee or owner of a depositary check which is not received, or
which has been lost, stolen, destroyed or mutilated or defaced to such
an extent that it is rendered non-negotiable, should immediately notify
the disbursing officer who issued such check or the administrative
agency exercising jurisdiction over such disbursing officer, over his
signature and current address, giving information as to the
circumstances of the loss, theft or destruction of the check and whether
it was endorsed, and also requesting that payment of the check be
stopped. A claimant who is one other than the payee of the check, should
present a statement in support of his ownership of the check. If the
check has been mutilated or defaced, it should be forwarded to the
issuing disbursing officer with request for the issuance of a
substitute.
Sec. 248.4 Undertaking of indemnity.
(a) If the check is found to be outstanding and unpaid and it
appears that the proceeds are due the claimant, the disbursing officer
will request the claimant to execute an undertaking of indemnity, Form
2244, in a penal sum equal to the amount of the check (or checks).
(b) Except in the circumstances set forth below, a corporate surety
authorized by the Secretary of the Treasury to act as an acceptable
surety on bonds in favor of the United States or two responsible
individual sureties will be required on the undertaking of indemnity. It
will be the responsibility of the claimant in a foreign country to
secure a certification as to the financial sufficiency of the individual
sureties executed by one of the persons listed in, and in the manner
prescribed by, the instruction appearing under the Certificate as to
Sureties on the face of Form 2244.
[[Page 86]]
(c) Where the amount of the original check (or checks) is $200 or
less, or the equivalent in foreign currency, one financially responsible
individual surety may be accepted.
(d) Unless it is determined that the requirement of sureties is
essential in the public interest, sureties will not be required under
the following circumstances:
(1) If the officer authorized to issue a substitute check is
satisfied that the loss, theft, destruction, mutilation or defacement of
the original check occurred without fault of the owner or holder and
while the check was in the custody or control of the United States or of
a person duly authorized as an agent of the United States when
performing services in connection with an official function of the
United States;
(2) If substantially the entire check is presented and surrendered
by the owner or holder and the disbursing officer is satisfied as to the
identity of the check presented and that any missing portions are not
sufficient to form the basis of a valid claim against the United States;
(3) If the owner or holder is the United States or an officer or
employee thereof in his official capacity, a State, the District of
Columbia, a territory or possession of the United States, a municipal
corporation or political subdivision of any of the foregoing, a
corporation the entire capital of which is owned by the United States, a
foreign government or agency thereof, a foreign central bank, or a
Federal Reserve Bank.
Sec. 248.5 Exception to requirement of undertaking of indemnity Form 2244.
Notwithstanding the provisions of Sec. 248.4, if in any case
involving a financially responsible claimant it is impracticable to
obtain the execution of Standard Form 2244, with or without sureties,
the officer or employee responsible for handling the claim, in his
discretion, may accept an undertaking of indemnity in the form of a
written statement or letter, substantially as follows:
In consideration of the issuance of a substitute check in lieu of_______
(Check description)
and the payment of the substitute check, the undersigned undertakes and
agrees to save harmless and indemnify the United States of America, its
officers and agents, of and from any and all liability, loss, expense,
claim, and demand whatsoever, arising in any manner by reason of or on
account of said original check (or checks) or the stoppage or payment
thereof, or the issue or payment of the substitute check (or checks), to
replace the same.
The undertaking of indemnity should be appropriately witnessed, and if
it is executed on behalf of a corporation or other business
organization, the individual executing the same should furnish proof of
this authority to so act. In appropriate cases, a foreign language
translation of the foregoing letter of indemnity may be accepted.
[25 FR 10869, Nov. 16, 1960. Redesignated at 39 FR 20969, June 17, 1974,
as amended at 54 FR 35648, Aug. 29, 1989]
Sec. 248.6 Recovery of original check.
(a) If the claimant recovers an original check after he has
furnished advice of non-receipt but before receipt of a substitute
check, he should immediately notify the disbursing officer or agency
concerned and hold the check until receipt of advice from the disbursing
officer or agency concerned regarding the negotiability of such original
check.
(b) In the event the substitute check has been received prior to the
recovery of the original check, the original check should be returned
immediately to the disbursing officer.
(c) Under no circumstances should the claimant attempt to cash both
the original and substitute check.
Sec. 248.7 Claims requiring settlement action.
There are certain types of claims on which the disbursing officer
will not be authorized to take final action. These include:
(a) Claims on original checks which have been outstanding more than
one full fiscal year following the fiscal year in which the checks were
issued, and
(b) Claims involving doubtful questions of law and fact.
[[Page 87]]
In such cases the disbursing officer will obtain information and
supporting papers, including an undertaking of indemnity, from the
claimant and transmit such data to the Claims Division, General
Accounting Office, for settlement action.
Sec. 248.8 Inquiries.
Claimants should direct any inquiries regarding the application of
these regulations to the department or agency or disbursing officer
concerned.
Sec. 248.9 Amendments and waivers.
The Treasury Department may waive, withdraw or amend at any time or
from time to time any or all of the foregoing regulations.
PART 250--PAYMENT ON ACCOUNT OF AWARDS OF THE FOREIGN CLAIMS SETTLEMENT COMMISSION OF THE UNITED STATES--Table of Contents
Sec.
250.1 Scope of regulations.
250.2 Forms.
250.3 Voucher applications.
250.4 Payment on awards.
250.5 Manner of payment.
250.6 Powers of attorney.
250.7 Additional evidence.
Authority: Sec. 7, 64 Stat. 16, sec. 310, 69 Stat. 573, sec. 413, 72
Stat. 530, sec. 213, 76 Stat. 1111; 22 U.S.C. 1626, 1641i, 1642l, 50
U.S.C. App. 2017l.
Sec. 250.1 Scope of regulations.
The regulations in this part govern payment by the Department of the
Treasury on awards made and certified to the Secretary of the Treasury
by the Foreign Claims Settlement Commission under the International
Claims Settlement Act of 1949, as amended (22 U.S.C. 1621 et seq.), and
Title II of the War Claims Act of 1948 (50 U.S.C. App. 2017 et seq.).
[34 FR 1897, Feb. 8, 1969]
Sec. 250.2 Forms.
The forms referred to in Secs. 250.3 and 250.4 shall be used in
connection with the payment of awards hereunder. Voucher applications
for all payments will be mailed to awardees by the Financial Management
Service, Treasury Department, Hyattsville, MD 20782, without request
therefor by awardees.
[31 FR 9418, July 9, 1966, as amended at 49 FR 47001, Nov. 30, 1984; 58
FR 4578, Jan. 15, 1993]
Sec. 250.3 Voucher applications.
(a) Execution of voucher by person named. No payment of any part of
the amount due on account of an award will be made unless a voucher
application therefor properly executed (preferably in ink or indelible
pencil) is received by the Treasury Department. A voucher application
for each payment on account of an award must be signed by each person
whose name appears on such voucher application as payee exactly as his
name appears thereon, with the following two exceptions:
(1) If only the name of the payee, and not his identity, has
changed, the payee shall sign the voucher application with his changed
name and return it to the Financial Management Service, Treasury
Department, Hyattsville, MD 20782; the voucher application shall be
accompanied by an explanatory affidavit and appropriate supporting
documents, e.g., a copy of a marriage certificate or court order of
change of name.
(2) If the identity of the payee has changed, paragraph (b) of this
section shall apply. A signature by mark (X) must be witnessed by two
persons; the signature and address of each must appear on the voucher
application. In the case of a corporation the voucher application must
be signed by an appropriate officer thereof having authority to do so,
whose authority to sign on behalf of the corporation must be duly
certified to thereon over the seal of the corporation.
(b) Execution of voucher by other person. If the person named in the
voucher application as payee is no longer the proper person to receive
the payment by reason of assignment, incompetency or death, or of
termination of a partnership or corporation named, the voucher shall be
executed by the person entitled to payment as provided in
[[Page 88]]
Sec. 250.4 and returned to the Credit Accounting Branch with the
relevant information and the appropriate supporting documents required
by that section.
[31 FR 9418, July 9, 1966, as amended at 49 FR 47001, Nov. 30, 1984; 58
FR 4578, Jan. 15, 1993]
Sec. 250.4 Payment on awards.
Payment will be made only to the person or persons on behalf of whom
the award is made, except in the following circumstances:
(a) If such person is incompetent, payment will be made to his
guardian, committee, or other equivalent legal representative. The law
of the residence of the incompetent will determine whether the legal
representative must be court appointed. If court appointment is
required, the legal representative shall submit a certificate of the
clerk of the appointing court, under its seal, dated within 6 months of
the date of the voucher application for payment, showing that his
appointment is in full force and effect. If court appointment is not
required, the legal representative shall submit a notarized statement
showing:
(1) His relationship to the incompetent;
(2) The name and address of the person having care and custody of
the incompetent;
(3) That any money received will be applied to the use and benefit
of the incompetent, and
(4) That there was no appointment of a guardian or committee.
(b) If such person is deceased, payment will be made to his legal
representative.
(1) If any payment to be made is not over $1,000 and there is no
qualified executor or administrator, the legal representative will be
the person found by the Comptroller General to be entitled thereto,
without the necessity of compliance with the requirements of law with
respect to the administration of estates, upon execution and submission
of Standard Form No. 1055 to the Financial Management Service for
transmittal to the Comptroller General. That form is available from the
Credit Accounting Branch.
(2) In all other cases, the term legal representative shall include
court-appointed or statutory administrators or executors, and successors
in interest of the decedent, e.g., his legatees or heirs as determined
by an appropriate court or by the law of his residence. If
administration of the decedent's estate is closed, the legal
representative shall submit a copy of the appropriate court's final
order of distribution or other pertinent order, identifying the
distributees and their addresses. If administration continues and the
legal representative is court-appointed, he shall submit a certificate
of the clerk of the appointing court, under its seal, dated within 6
months of the date of the voucher application for payment, showing that
such appointment is in full force and effect. If the legal
representative is not court-appointed, he shall submit evidence
sufficient to prove his interest and authority to apply for payment. If
that evidence is a copy of the decedent's will, it shall show on its
face or by attachments thereto that it has been offered for probate, and
that the appropriate court has affixed its seal and attached its
certification of authenticity that the will is in fact the decedent's
last will and testament.
(c)-(d) [Reserved]
(e) In the case of a partnership or corporation, the existence of
which has been terminated, if a receiver or trustee has been duly
appointed by a court of competent jurisdiction in the United States and
has not been discharged prior to the date of payment, payment will be
made to such receiver or trustee in accordance with the order of the
court. In the event a receiver or trustee duly appointed by a court of
competent jurisdiction in the United States makes an assignment of the
claim or any part thereof with respect to which an award is made, or
makes an assignment of such award or any part thereof, payment will be
made to the assignee as his interest may appear. In the latter
circumstance, certified copies of the court orders showing the authority
of the receiver or trustee to make the assignment shall be submitted
with the assignment. No particular form of assignment is prescribed, but
the original assignment must be submitted to, and will be retained by
the Treasury Department.
[[Page 89]]
(f) In the case of a partnership or corporation, the existence of
which has been terminated, if no receiver or trustee has been duly
appointed by a court of competent jurisdiction in the United States, or
if such a receiver or trustee has been discharged prior to the date of
payment without having made an assignment, payment may be made to the
person or persons found by the Comptroller General of the United States
to be entitled thereto. In this circumstance, the person or persons
claiming payment shall submit to the Financial Management Service,
Treasury Department, Hyattsville, MD 20782, such documentary evidence as
is appropriate to show his or their right to the payment.
(g) In the case of an assignment of an award or any part thereof
which is made in writing and duly acknowledged and filed after such
award is certified to the Secretary of the Treasury, payment may in the
discretion of the Secretary of the Treasury be made to the assignee as
his interest may appear. No particular form of assignment is prescribed,
but the original assignment must be submitted to, and will be retained
by the Treasury Department.
[31 FR 9418, July 9, 1966, as amended at 34 FR 1897, Feb. 8, 1969; 49 FR
47001, Nov. 30, 1984; 58 FR 4578, Jan. 15, 1993]
Sec. 250.5 Manner of payment.
Payment will be made by check drawn on the United States Treasury.
Checks will be mailed to the payee at the address indicated on the
voucher application, unless subsequent to the issue of the voucher
application the Treasury Department receives a written request from the
payee to deliver the check to him at some other address. Where the award
has been entered in favor of more than one person, only one check will
be drawn in making payment unless the payees specify the share of each
and request separate checks.
[31 FR 9418, July 9, 1966]
Sec. 250.6 Powers of attorney.
No power of attorney to sign a voucher application will be
recognized but a power of attorney executed subsequent to the
certification of an award to the Secretary of the Treasury to receive,
endorse and collect a check given in payment on an award may be
recognized. An appropriate form for such a power of attorney may be
obtained from the Financial Management Service, Treasury Department,
Hyattsville, MD 20782.
[31 FR 9418, July 9, 1966, as amended at 49 FR 47001, Nov. 30, 1984; 58
FR 4578, Jan. 15, 1993]