[Title 31 CFR ]
[Code of Federal Regulations (annual edition) - July 1, 2002 Edition]
[From the U.S. Government Printing Office]
[[Page i]]
31
Part 200 to End
Revised as of July 1, 2002
Money and Finance: Treasury
Containing a codification of documents of general
applicability and future effect
As of July 1, 2002
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 475
Chapter V--Office of Foreign Assets Control,
Department of the Treasury 485
Chapter VI--Bureau of Engraving and Printing,
Department of the Treasury 1015
Chapter VII--Federal Law Enforcement Training
Center, Department of the Treasury 1021
Chapter VIII--Office of International Investment,
Department of the Treasury 1025
Chapter IX--Federal Claims Collection Standards
(Department of the Treasury--Department of Justice) 1051
Finding Aids:
Material Approved for Incorporation by Reference........ 1073
Table of CFR Titles and Chapters........................ 1075
Alphabetical List of Agencies Appearing in the CFR...... 1093
List of CFR Sections Affected........................... 1103
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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
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Federal agencies to display an OMB control number with their information
collection request.
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Many agencies have begun publishing numerous OMB control numbers as
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Provisions that become obsolete before the revision date stated on
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INCORPORATION BY REFERENCE
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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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the requirements of 1 CFR part 51 are met. Some of the elements on which
approval is based are:
(a) The incorporation will substantially reduce the volume of
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(b) The matter incorporated is in fact available to the extent
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process.
(c) The incorporating document is drafted and submitted for
publication in accordance with 1 CFR part 51.
Properly approved incorporations by reference in this volume are
listed in the Finding Aids at the end of this volume.
What if the material incorporated by reference cannot be found? If
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the revision dates of the 50 CFR titles.
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REPUBLICATION OF MATERIAL
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Director,
Office of the Federal Register.
July 1, 2002.
[[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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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
Cross References: Other regulations issued by the Department of the
Treasury appear in title 12, chapter I; title 19, chapter I; title 26,
chapter I; title 27, chapter I; title 31, chapter I; and title 48,
chapter 10.
[[Page 3]]
Subtitle B--Regulations Relating to Money and Finance (Continued)
[[Page 5]]
CHAPTER II--FISCAL SERVICE, DEPARTMENT OF THE TREASURY
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SUBCHAPTER A--FINANCIAL MANAGEMENT SERVICE
Part Page
202 Depositaries and financial agents of the
Federal Government...................... 9
203 Payment of Federal taxes and the Treasury
Tax and Loan Program.................... 11
204 [Reserved]
205 Rules and procedures for efficient Federal-
State funds transfers................... 23
206 Management of Federal agency receipts,
disbursements, and operation of the Cash
Management Improvements Fund............ 39
208 Management of Federal agency disbursements.. 45
210 Federal Government participation in the
Automated Clearing House................ 50
211 Delivery of checks and warrants to addresses
outside the United States, its
territories and possessions............. 59
215 Withholding of District of Columbia, State,
city and county income or employment
taxes by Federal agencies............... 61
223 Surety companies doing business with the
United States........................... 65
224 Federal process agents of surety companies.. 72
225 Acceptance of bonds secured by Government
obligations in lieu of bonds with
sureties................................ 74
226 Recognition of insurance covering Treasury
tax and loan depositaries............... 78
235 Issuance of settlement checks for forged
checks drawn on designated depositaries. 80
240 Indorsement and payment of checks drawn on
the United States Treasury.............. 81
245 Claims on account of Treasury checks........ 89
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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.............. 91
250 Payment on account of awards of the Foreign
Claims Settlement Commission of the
United States........................... 93
256 Payments under judgments and private relief
acts.................................... 96
270 Availability of records..................... 96
281 Foreign exchange operations................. 97
285 Debt collection authorities under the Debt
Collection Improvement Act of 1996...... 100
SUBCHAPTER B--BUREAU OF THE PUBLIC DEBT
306 General regulations governing U.S.
securities.............................. 131
308 General regulations governing full-paid
interim certificates.................... 159
309 Issue and sale of Treasury bills............ 159
312 Federal savings and loan associations and
Federal credit unions as fiscal agents
of the United States.................... 163
315 Regulations governing U.S. Savings Bonds,
Series A, B, C, D, E, F, G, H, J, and K,
and U.S. Savings Notes.................. 164
316 Offering of United States Savings Bonds,
Series E................................ 189
317 Regulations governing agencies for issue of
United States Savings Bonds............. 197
321 Payments by banks and other financial
institutions of United States Savings
Bonds and United States Savings Notes
(Freedom Shares)........................ 201
323 Disclosure of records....................... 218
328 Restrictive endorsements of U.S. bearer
securities.............................. 220
330 Regulations governing payment under special
endorsement of United States Savings
Bonds and United States Savings Notes
(Freedom Shares)........................ 223
332 Offering of United States Savings Bonds,
Series H................................ 227
337 Supplemental regulations governing Federal
Housing Administration debentures....... 230
339 Exchange offering of United States Savings
Bonds, Series H......................... 234
340 Regulations governing the sale of Treasury
bonds through competitive bidding....... 236
341 Regulations governing United States
Retirement Plan Bonds................... 239
342 Offering of United States Savings Notes..... 249
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343 Regulations governing the offering of United
States Mortgage Guaranty Insurance
Company Tax and Loss Bonds.............. 254
344 U.S. Treasury securities--State and Local
Government Series....................... 256
345 Regulations governing 5 percent Treasury
Certificates of Indebtedness-- R.E.A.
Series.................................. 282
346 Regulations governing United States
Individual Retirement Bonds............. 283
351 Offering of United States Savings Bonds,
Series EE............................... 293
352 Offering of United States Savings Bonds,
Series HH............................... 312
353 Regulations governing United States Savings
Bonds, Series EE and HH................. 317
354 Regulations governing book-entry securities
of the Student Loan Marketing
Association (Sallie Mae)................ 343
355 Regulations governing fiscal agency checks.. 349
356 Sale and issue of marketable book-entry
Treasury bills, notes, and bonds
(Department of the Treasury Circular,
Public Debt Series No. 1-93)............ 351
357 Regulations governing book-entry Treasury
bonds, notes and bills (Department of
the Treasury Circular, Public Debt
Series No. 2-86)........................ 391
358 Regulations governing book-entry conversion
of bearer corpora and detached bearer
couponsRegulations governing book-entry
conversion of detached bearer coupons
and bearer corpora...................... 428
359 Offering of United States Savings Bonds,
Series I................................ 431
360 Regulations governing United States Savings
Bonds, Series I......................... 440
361 Claims pursuant to the Government Losses in
Shipment Act............................ 458
362 Declaration of valuables under the
Government Losses in Shipment Act....... 461
370 Electronic transactions and funds transfers
relating to United States securities.... 462
375 Marketable treasury securities redemption
operations.............................. 468
380 Collateral acceptability and valuation...... 472
391 Waiver of interest, administrative costs,
and penalties........................... 473
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SUBCHAPTER A--FINANCIAL MANAGEMENT SERVICE
PART 202--DEPOSITARIES AND FINANCIAL AGENTS OF THE FEDERAL GOVERNMENT\1\ --Table of Contents
---------------------------------------------------------------------------
\1\ The regulations, which previously appeared in this part,
governing payment of checks drawn on the United States Treasury now
appear in revised form in part 240 of this chapter (Department Circular
21 (Second Revision)).
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Sec.
202.1 Scope of regulations.
202.2 Designations.
202.3 Authorization.
202.4 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:
[[Page 10]]
(i) The maintenance of official accounts in which balances will be
in excess of the applicable Federal or State insurance coverage;
(ii) The maintenance of accounts in the name of the United States
Treasury;
(iii) The acceptance of deposits for credit of the United States
Treasury;
(iv) The furnishing of bank drafts in exchange for collections.
(2) To obtain authorization to perform services, 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
[[Page 11]]
assign the securities. The resolution and power of attorney shall
conform to such terms and conditions as the Federal Reserve Banks shall
prescribe.
(e) Disposition of principal and interest payments of the pledged
securities after a depositary is declared insolvent--(1) General. In the
event of the depositary's insolvency or closure, or in the event of the
appointment of a receiver, conservator, liquidator, or other similar
officer to terminate its business, the depositary agrees that all
principal and interest payments on any security pledged to protect
public 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.
Subpart B--Electronic Federal Tax Payments
203.9 Scope of the subpart.
[[Page 12]]
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) Direct investment means placement of Treasury funds with a
depositary and a corresponding increase in a depositary's main note
balance.
(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 a taxpayer by the Treasury for use in the FTD system to
accompany deposits of Federal taxes. The current paper form is Form
8109.
[[Page 13]]
(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) Main note balance means an open-ended interest-bearing note
balance maintained at the FRB of the district.
(x) 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 interest-bearing note
balances maintained at the FRB of the district.
(y) 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.
(z) 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.
(aa) 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.
(bb) Same-day payment means the following ETA payment options:
(1) Direct Access transaction;
(2) Fedwire non-value transaction; and
(3) Fedwire value transfer.
(cc) Secretary means the Secretary of the Treasury, or the
Secretary's delegate.
(dd) Special direct investment means the placement of Treasury funds
with a depositary and a corresponding increase in a depositary's main
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).
(ee) 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.
(ff) Term investment option means the program available to financial
institutions that offers the ability to borrow excess Treasury operating
funds for a predetermined period of time.
(gg) Term note balance means an interest-bearing note balance
maintained at the FRB of the district for a predetermined period of
time.
(hh) Transaction trace number means an identifying number assigned
by the taxpayer's financial institution to each ACH credit transaction.
(ii) 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.
(jj) Treasury General Account (TGA) means an account maintained in
the
[[Page 14]]
name of the United States Treasury at an FRB.
(kk) 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.
(ll) 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.
(mm) Treasury Tax and Loan (TT&L) Program means the program for
collecting Federal taxes and investing the Government's excess operating
funds.
(nn) Treasury Tax and Loan (TT&L) rate of interest means the
interest charged on the main note balance. The TT&L rate of interest is
the rate prescribed by the Secretary taking into consideration
prevailing market interest rates. The rate and any rate changes will be
announced through a TT&L Special Notice to Depositaries and will be
published in the Federal Register and on a web site maintained by
Treasury's Financial Management Service at http://www.fms.treas.gov.
[63 FR 5650, Feb. 3, 1998, as amended at 67 FR 11575, Mar. 15, 2002]
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. In the
case of note option depositaries maintaining main note balances, the
authority shall permit the maintenance of a main note balance which is
payable on demand without previous notice of intended withdrawal.
[63 FR 5650, Feb. 3, 1998, as amended at 67 FR 11576, Mar. 15, 2002]
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.
[[Page 15]]
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.
(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.
[[Page 16]]
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 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
[[Page 17]]
by supplying the related IMAD number. Fedwire value transfers settle
immediately to the TGA and thus are not credited to a depositary's main
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.
(1) For a note option depositary using a Fedwire non-value
transaction, the tax payment amount will be credited to the depositary's
main 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 main 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.
[63 FR 5650, Feb. 3, 1998, as amended at 67 FR 11576, Mar. 15, 2002]
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
[[Page 18]]
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 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.
[[Page 19]]
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 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
[[Page 20]]
(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.
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 main 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 main 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 main note balance on the
business day following the receipt of the tax payment.
[67 FR 11576, Mar. 15, 2002]
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 main
note balances under the various payment methods; debiting main note
balances; maintaining term note balances; and pledging collateral
security.
[67 FR 11576, Mar. 15, 2002]
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;
(c) Direct investments and special direct investments pursuant to
subpart D of this part; and
(d) Other excess Treasury operating funds.
[63 FR 5650, Feb. 3, 1998, as amended at 67 FR 11576, Mar. 15, 2002]
[[Page 21]]
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 main 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 main 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 main 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 main 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) Main note balance withdrawals. The amount of the main note
balance shall be 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 main note balance 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 for its main note
balance 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 main
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 main 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 main note option depositary
that participates in direct investment shall set a maximum for its main
note 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, when credited to the main 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.
(f) Term investment option. Treasury may, from time to time, invest
excess operating funds in obligations of depositaries selecting the term
investment option. Such obligations shall be in the form of interest-
bearing notes payable upon a predetermined period of time not to exceed
90 days. Such notes shall bear interest at a rate prescribed by the
Secretary by auction or otherwise taking into consideration prevailing
market interest rates.
[63 FR 5650, Feb. 3, 1998, as amended at 67 FR 11576, Mar. 15, 2002]
[[Page 22]]
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--main note balance--(1) FTD deposits and EFTPS tax
payments. A depositary shall pledge collateral security in accordance
with the requirements of paragraphs (d)(1), (e), and (f) of this section
in an amount that is sufficient to cover the pre-established maximum
balance for the main note balance, 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 (d)(1), (e), and (f) of this
section to cover the total main 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 main note balance, the note option
depositary shall pledge collateral security, in accordance with the
requirements of paragraphs (d)(2) and (f) of this section, to cover 100
percent of the amount of the special direct investments to be received.
(b) Note option--term note balance. Each note option depositary
participating in the term investment program shall pledge, prior to the
time the term investment is placed, collateral in accordance with
paragraphs (d) (1), (e), and (f) of this section sufficient to cover the
total term note balance.
(c) Remittance option. Prior to crediting FTD deposits to the TT&L
account, a remittance option depositary shall pledge collateral security
in accordance with the requirements of paragraph (c)(1), (d), and (e) of
this section in an amount which is sufficient to cover the balance in
the TT&L account at the close of business each day, less recognized
insurance coverage.
(d) Deposits of securities. (1) Collateral security required under
paragraphs (a)(1), (2), (b), and (c) of this section shall be deposited
with the FRB of the district, or, where appropriate, 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
[[Page 23]]
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.
(e) 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.
(f) 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.
(g) 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 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; 67
FR 11577, Mar. 15, 2002]
PART 204 [RESERVED]
PART 205--RULES AND PROCEDURES FOR EFFICIENT FEDERAL-STATE FUNDS TRANSFERS--Table of Contents
Sec.
205.1 What Federal assistance programs are covered by this part?
205.2 What definitions apply to this part?
Subpart A--Rules Applicable to Federal Assistance Programs Included in a
Treasury-State Agreement
205.3 What Federal assistance programs are subject to this subpart A?
205.4 Are there any circumstances where a Federal assistance program
that meets the criteria of Sec. 205.3 would not be subject to
this subpart A?
205.5 What are the thresholds for major Federal assistance programs?
205.6 What is a Treasury-State agreement?
[[Page 24]]
205.7 Can a Treasury-State agreement be amended?
205.8 What if there is no Treasury-State agreement in effect?
205.9 What is included in a Treasury-State agreement?
205.10 How do you document funding techniques?
205.11 What requirements apply to funding techniques?
205.12 What funding techniques may be used?
205.13 How do you determine when State or Federal interest liability
accrues?
205.14 When does Federal interest liability accrue?
205.15 When does State interest liability accrue?
205.16 What special rules apply to Federal assistance programs and
projects funded by the Federal Highway Trust Fund?
205.17 Are funds transfers delayed by automated payment systems
restrictions based on the size and timing of the drawdown
request subject to this part?
205.18 Are administrative costs subject to this part?
205.19 How is interest calculated?
205.20 What is a clearance pattern?
205.21 When may clearance patterns be used?
205.22 How are accurate clearance patterns maintained?
205.23 What requirements apply to estimates?
205.24 How are accurate estimates maintained?
205.25 How does this part apply to certain Federal assistance programs
or funds?
205.26 What are the requirements for preparing Annual Reports?
205.27 How are Interest Calculation Costs calculated?
205.28 How are interest payments exchanged?
205.29 What are the State oversight and compliance responsibilities?
205.30 What are the Federal oversight and compliance responsibilities?
205.31 How does a State or Federal Program Agency appeal a
determination made by us and resolve disputes?
Subpart B--Rules Applicable to Federal Assistance Programs Not Included
in a Treasury-State Agreement
205.32 What Federal assistance programs are subject to this subpart B?
205.33 How are funds transfers processed?
205.34 What are the Federal oversight and compliance responsibilities?
205.35 What is the result of Federal Program Agency or State non-
compliance?
Subpart C [Reserved]
Authority: 5 U.S.C. 301; 31 U.S.C. 321, 3332, 3335, 6501, 6503.
Source: 67 FR 31885, May 10, 2002, unless otherwise noted.
Sec. 205.1 What Federal assistance programs are covered by this part?
(a) This part prescribes rules for transferring funds between the
Federal government and States for Federal assistance programs. This part
applies to:
(1) All States as defined in Sec. 205.2; and
(2) All Federal program agencies, except the Tennessee Valley
Authority (TVA) and its Federal assistance programs.
(b) Only programs listed in the Catalog of Federal Domestic
Assistance, as established by Chapter 61 of Title 31, United States Code
(U.S.C) are covered by this part.
(c) This part does not apply to:
(1) 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., 5 CFR Part 1315, and 48 CFR Part 32; or
(2) Direct loans from the Federal government to States.
Sec. 205.2 What definitions apply to this part?
For purposes of this part:
Administrative costs means expenses incurred by a State associated
with managing a Federal assistance program. This term includes indirect
costs.
Auditable means records must be retained to allow for calculations
outlined in the Treasury-State agreements to be reviewed and replicated
for compliance purposes. States must maintain these records to be
readily available, fully documented, and verifiable.
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 part, or that person's official designee as certified
in writing.
Business day means a day when Federal Reserve Banks are open.
Catalog of Federal Domestic Assistance (CFDA) means the government-
wide
[[Page 25]]
list of Federal assistance programs, projects, services, and activities
which provide assistance or benefits to the American public. The listing
includes financial and non-financial Federal assistance programs
administered by agencies of the Federal government.
Clearance pattern means a projection showing the daily amount
subtracted from a State's bank account each day after the State makes a
disbursement. For example, a State mailing out benefit checks may
project that the percentage of checks cashed each day will be 0% for the
first day, 10% for the second day, 80% on the third day, and 10% on the
fourth day following issuance. Clearance patterns are used to schedule
the transfer of funds with various funding techniques and to support
interest calculations.
Compensating balance means funds maintained in State bank accounts
and/or State Treasurer bank accounts to offset the costs of bank
services.
Current project cost means a cost for which the State has recorded a
liability on or after the day that the State last requested funds for
the project.
Day means a calendar day unless otherwise specified.
Default procedures means efficient cash management practices that we
prescribe for Federal funds transfers to a State if a Treasury-State
agreement is not in place.
Disburse means to issue a check or initiate an electronic funds
transfer payment, or to provide access to benefits through an electronic
benefits transfer.
Discretionary grant project means a project for which a Federal
Program Agency is authorized by law to exercise judgment in awarding a
grant and in selecting a grantee, generally through a competitive
process.
Dollar-weighted average day of clearance means the day when, on a
cumulative basis, 50 percent of funds have been paid out. To calculate
the dollar-weighted average day of clearance for a clearance pattern:
(1) For each day, multiply the percentage of dollars paid out that
day by the number of days that have elapsed since the payments were
issued. For example, on the first day payments were issued, multiply the
percentage of dollars paid out on that day by zero, since zero days have
elapsed. On the day after payments were issued, multiply the percentage
of dollars paid out on that day by one, since one day has elapsed; and
so forth.
(2) Total the results from paragraph (1) of this definition. Round
to the nearest whole number. This is the dollar-weighted average day of
clearance.
Draw down (verb) means a process in which a State requests and
receives Federal funds.
Drawdown (noun) means Federal funds requested and received by a
State.
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.
Estimate means a projection of the needs of a Federal Assistance
Program.
Federal assistance program means a program included in the Catalog
of Federal Domestic Assistance where funds are transferred from the
Federal government to a State. Federal assistance programs include
cooperative agreements, but do not include vendor payments or direct
loans.
Federal Program Agency means an executive agency as defined by 31
U.S.C. 102, except the Tennessee Valley Authority (TVA), that issues and
administers Federal assistance programs to States or cooperative
agreements with States.
Federal-State agreement means an agreement between a State and a
Federal Program Agency specifying terms and conditions for carrying out
a Federal assistance program or group of programs. This is different
than a Treasury-State agreement.
Financial management service (we or us) means the Bureau of the U.S.
Department of the Treasury responsible for implementation of this part.
Fiscal year means the twelve-month period that a State designates as
its budget year.
Grant means, for purposes of this part, a funds transfer by the
Federal
[[Page 26]]
government associated with a Federal assistance program listed in the
Catalog of Federal Domestic Assistance.
Indirect cost rate means a formula that identifies the amount of
indirect costs based on the amount of accrued direct costs. The
applicable indirect cost rate shall be described in the Treasury-State
agreement.
Indirect costs means costs a State incurs that are necessary to the
operation and performance of its Federal assistance programs, but that
are not readily identifiable with a particular project or Federal
assistance program.
Interest calculation costs means those costs a State incurs in
performing the actual calculation of interest liabilities, including
those costs a State incurs in developing and maintaining clearance
patterns in support of interest calculations.
Maintenance-of-effort means a requirement that a State spend at
least a specified amount of State funds for Federal assistance program
purposes.
Major Federal assistance program means a Federal assistance program
which receives Federal funding in excess of the dollar thresholds found
in Table A to Sec. 205.5.
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 Federal assistance
program purposes.
Pay out means to debit the State's bank account.
Pay out funds for Federal Assistance 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 that provides goods or services for the direct
benefit or use of the payor State entity or the Federal government to
further Federal assistance program goals.
Rebate means funds returned to a State by third parties after a
State has paid out those funds for Federal assistance program purposes.
Refund means funds that a State recovers that it previously paid out
for Federal assistance program purposes. Refunds include rebates
received from third parties.
Refund transaction means an entry to the record of a State bank
account representing a single deposit of refunds. A refund transaction
may consist of a single check or item, or a bundle of accumulated
checks.
Related banking costs means separately identified costs which are
necessary and customary for maintaining an account in a financial
institution, whether a commercial account or a State Treasurer account.
Investment service fees and fees for credit-related services are not
related banking costs.
Request for funds means a State's request for funds that the State
completes and submits in accordance with Federal Program Agency
guidelines.
Reverse flow program means a Federal assistance program, such as
Supplemental Security Income (SSI), for which the Federal government
makes payments to recipients on behalf of a State.
Revolving loan fund means a pool of program funds managed by a
State. States may loan funds from the pool to other entities in support
of Federal assistance program goals. Investment income is earned on the
funds that remain in the pool and on loans made from pool funds. A
Federal Program Agency may require that all income derived from a
revolving loan fund be used for Federal assistance program purposes.
Secretary means the Secretary of the United States Department of the
Treasury. We are 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, and the Virgin Islands. It
includes any agency, instrumentality, or fiscal agent of a State that is
legally and fiscally dependent on the State Executive, State Treasurer,
or State Comptroller.
[[Page 27]]
(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.
(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
assistance program, excluding private nonprofit community organizations.
(3) Local governments, Indian Tribal governments, institutions of
higher education, hospitals, and nonprofit organizations are excluded
from the definition of State.
Treasury-State agreement means a document describing the accepted
funding techniques and methods for calculating interest and identifying
the Federal assistance programs governed by this subpart A.
Trust fund for which the Secretary is the trustee means a trust fund
administered by the Secretary.
Vendor payment means a funds transfer by a Federal Program Agency to
a State to compensate the State for acting as a vendor on a Federal
contract.
We and Us means Financial Management Service.
Subpart A--Rules Applicable to Federal Assistance Programs Included in a
Treasury-State Agreement
Sec. 205.3 What Federal assistance programs are subject to this subpart A?
(a) Generally, this subpart prescribes the rules that apply to
Federal assistance programs which:
(1) Are listed in the Catalog of Federal Domestic Assistance;
(2) Meet the funding threshold for a major Federal assistance
program; and
(3) Are included in a Treasury-State agreement or default
procedures.
(b) Upon a State's request, we will make additional Federal
assistance programs subject to subpart A by lowering the funding
threshold in the Treasury-State agreement. All of a State's programs
that meet this lower threshold would be subject to this subpart A.
(c) We may make additional Federal assistance programs subject to
subpart A if a State or Federal Program Agency fails to comply with
subpart B of this part.
Sec. 205.4 Are there any circumstances where a Federal assistance program that meets the criteria of Sec. 205.3 would not be subject to this subpart A?
(a) A Federal assistance program that meets or exceeds the threshold
for major Federal assistance programs in a State is not subject to this
subpart A until it is included in a Treasury-State agreement or in
default procedures.
(b) We and a State may agree to exclude components of a major
Federal assistance program from interest calculations if the State
administers the program through several State agencies and meets the
following requirements:
(1) The dollar amount of the exempted cash flow does not exceed 5%
of the State's major Federal assistance program threshold and the total
amount excluded under a single program by all State agencies
administering the program does not exceed 10% of that Federal assistance
program's total expenditures;
(2) If less than the total amount of Federal assistance program
funding is subject to interest calculation procedures, the interest
liabilities should be pro-rated to 100% of the Federal assistance
program funding;
(3) A State may not use this exclusion if a Federal assistance
program is administered by only one State agency; and
(4) We may request Federal assistance program specific data on
funding levels to determine exemptions.
(c) We and a State may exclude a Federal assistance program from
this subpart A if the Federal assistance program has been discontinued
since the most recent Single Audit and the remaining funding is below
the threshold, or if the Federal assistance program is funded by an
award not limited to one fiscal year and the remaining Federal
assistance program funding is below the State's threshold.
Sec. 205.5 What are the thresholds for major Federal assistance programs?
(a) Table A of this section defines major Federal assistance
programs
[[Page 28]]
based on the dollar amount of an individual Federal assistance program
and the dollar amount of all Federal assistance being received by a
State for all Federal assistance programs including non-cash programs. A
State must locate the appropriate row in Column A based upon the total
amount of Federal assistance received. In that same row, a State must
apply the percentage from Column B to the dollar value of all its
Federal assistance programs to determine the State's threshold for major
Federal assistance programs. For example, if the total amount received
by a State for all Federal assistance programs is $50 million, then that
State's threshold for major Federal assistance programs is 6% of $50
million or $3 million. A State which receives more than $10 billion
under Federal assistance programs will have a minimum default threshold
of $60 million.
(b) To ensure adequate coverage of all State programs, a State must,
on an annual basis, compare its program coverage using the percentage
obtained from Table A to the program coverage which would result using a
percentage which is half of the percentage obtained from Table A. For
example, a State receiving $1 billion in Federal Assistance would use
Table A to learn that its threshold level would be .60 percent of $1
billion. A State would compare program coverage at .60 percent of $1
billion to program coverage at .30 percent of $1 billion.
(c) If the comparison conducted under paragraph (b) of this section
results in a reduction of program coverage that is greater than 10%, a
State must lower its threshold, or add programs, until the difference is
less than or equal to 10%.
(d) In accordance with Sec. 205.3(b), a State may lower its
threshold to include additional programs. All of a State's programs that
meet this lower threshold would be subject to this subpart A.
(e) Unless specified otherwise, major Federal assistance programs
must be determined from the most recent Single Audit data available.
Table A to Sec. 205.5
------------------------------------------------------------------------
Column B Major Federal
Column A Total amount of Federal Assistance Program means any
Assistance for all programs per State: Federal assistance program that
exceed these levels:
------------------------------------------------------------------------
Between zero and $100 million inclusive 6.00 percent of the total
amount of Federal assistance.
Over $100 million but less than or 0.60 percent of the total
equal to $10 billion. amount of Federal assistance.
Over $10 billion....................... The greater of 0.30 percent of
the total Federal assistance
of $60 million.
------------------------------------------------------------------------
Sec. 205.6 What is a Treasury-State agreement?
(a) A Treasury-State agreement documents the accepted funding
techniques and methods for calculating interest agreed upon by us and a
State and identifies the Federal assistance programs governed by this
subpart A. If anything in a Treasury-State agreement is inconsistent
with this subpart A, that part of the Treasury-State agreement will not
have any effect and this subpart A will govern.
(b) A Treasury-State agreement will be effective until terminated
unless we and a State agree to a specific termination date. We or a
State may terminate a Treasury-State agreement on 30 days written
notice.
Sec. 205.7 Can a Treasury-State agreement be amended?
(a) We or a State may amend a Treasury-State agreement at any time
if both we and the State agree in writing.
(b) The effective date of an amendment shall be the date both
parties agree to the amendment in writing unless otherwise agreed to by
both parties.
(c) We and a State must amend a Treasury-State agreement as needed
to change or clarify its language when the terms of the existing
agreement are either no longer correct or no longer applicable. A State
must notify us in writing within 30 days of the time the State becomes
aware of a change, describing the Federal assistance program change. The
notification must include a proposed amendment for our review and a
current list of all programs
[[Page 29]]
included in the Treasury-State agreement. Amendments may address, but
are not limited to:
(1) Additions or deletions of Federal assistance programs subject to
this subpart A;
(2) Changes in funding techniques; and
(3) Changes in clearance patterns.
(d) Additions or deletions to the list of Federal assistance
programs subject to this subpart A take effect when a Treasury-State
agreement is amended, unless otherwise agreed to by the parties.
(e) Federal assistance programs that are to be added to a Treasury-
State agreement are not subject to this subpart A until the Treasury-
State agreement is amended, except when a Federal assistance program
subject to this subpart A is being replaced by a Federal assistance
program governed by subpart B of this part, in which case the
replacement program is immediately subject to this subpart A.
(f) Notwithstanding any other provision of this section, if no
changes to the Treasury-State agreement are required, States must notify
us annually.
Sec. 205.8 What if there is no Treasury-State agreement in effect?
When a State does not have a Treasury-State agreement in effect, we
will prescribe default procedures to implement this subpart A. The
default procedures will prescribe efficient funds transfer procedures
consistent with State and Federal law and identify the covered Federal
assistance programs and designated funding techniques. When we and a
State reach agreement on some but not all Federal assistance programs
administered by the State, we and the State may enter into a Treasury-
State agreement for all programs on which we are in agreement and we may
prescribe default procedures governing those programs on which we are
unable to reach agreement.
Sec. 205.9 What is included in a Treasury-State agreement?
We will prescribe a uniform format for all Treasury-State
agreements. A Treasury-State agreement must include, but is not limited
to, the following:
(a) State agencies, instrumentalities, and fiscal agents that
administer the Federal assistance programs subject to this subpart A.
(b) Federal assistance programs subject to this subpart A,
consistent with Secs. 205.3 and 205.4. A State must use its most recent
Single Audit report as a basis for determining the funding thresholds
for major Federal assistance programs, unless otherwise specified in the
Treasury-State agreement. A State may use budget or appropriations data
for a more recent period instead of Single Audit data, if specified in
the Treasury-State agreement.
(c) Funding techniques to be applied to Federal assistance programs
subject to this subpart A.
(d) Methods the State will use to develop and maintain clearance
patterns and estimates, consistent with Sec. 205.11. The method must
include, at a minimum, a clear indication of:
(1) The data used;
(2) The sources of the data;
(3) The development process;
(4) For estimates, when and how the State will update the estimate
to reflect the most recent data available;
(5) For estimates, when and how the State will make adjustments, if
any, to reconcile the difference between the estimate and the State's
actual cash needs; and
(6) Any assumptions, standards, or conventions used in converting
the data into the clearance pattern or estimate.
(e) Federal Program Agency provisions requiring reconciliation of
estimates to actual outlays may be included in a Treasury-State
agreement. The supporting documentation must be retained by the State
for three years.
(f) States must include the results of the clearance pattern process
in the Treasury-State agreement for programs where the timing of
drawdowns is based on clearance patterns. For programs where the timing
of drawdowns is not based on clearance patterns, the results of the
clearance pattern process may be provided with the annual report
required under Sec. 205.26. The supporting documentation must be
retained by the State for three years.
[[Page 30]]
(g) Methods used by the State and Federal agencies to calculate
interest liabilities pursuant to this subpart A. The method must
include, but is not limited to, a clear indication of:
(1) The data used;
(2) The sources of the data;
(3) The calculation process; and
(4) Any assumptions, standards, or conventions used in converting
the data into the interest liability amounts.
(h) Treasury-State agreements must include language describing how a
State and Federal Program Agency will address a State request for
supplemental funding. This language must include, but is not limited to,
the following provisions:
(1) What constitutes a timely request for supplemental funds for
Federal assistance program purposes by a State; and
(2) What constitutes a timely transfer of supplemental funds for
Federal assistance program purposes from a Federal Program Agency to a
State.
Sec. 205.10 How do you document funding techniques?
The Treasury-State agreement must include a concise description for
each funding technique that a State will use. The description must
include the following:
(a) What constitutes a timely request for funds;
(b) How the State determines the amount of funds to request;
(c) What procedures are used to project or reconcile estimates with
actual and immediate cash needs;
(d) What constitutes the timely receipt of funds; and
(e) Whether a State or Federal interest liability accrues when the
funding technique, including any associated procedure for projection or
reconciliation, is properly applied.
Sec. 205.11 What requirements apply to funding techniques?
(a) A State and a Federal Program Agency must minimize the time
elapsing between the transfer of funds from the United States Treasury
and the State's payout of funds for Federal assistance program purposes,
whether the transfer occurs before or after the payout of funds.
(b) A State and a Federal Program Agency must limit the amount of
funds transferred to the minimum required to meet a State's actual and
immediate cash needs.
(c) A State must not draw down funds from its account in the
Unemployment Trust Fund (UTF) or from a Federal account in the UTF in
advance of actual immediate cash needs for any purpose including
maintaining a compensating balance.
(d) A Federal Program Agency must allow a State to submit requests
for funds daily. This requirement should not be construed as a change to
Federal Program Agency guidelines defining a properly completed request
for funds.
(e) In accordance with the electronic funds transfer provisions of
the Debt Collection Improvement Act of 1996 (31 U.S.C. 3332), a Federal
Program Agency must use electronic funds transfer methods to transfer
funds to States unless a waiver is available.
Sec. 205.12 What funding techniques may be used?
(a) We and a State may negotiate the use of mutually agreed upon
funding techniques. We may deny interest liability if a State does not
use a mutually agreed upon funding technique. Funding techniques should
be efficient and minimize the exchange of interest between States and
Federal agencies.
(b) We and a State may base our agreement on the sample funding
techniques listed in paragraphs (b)(1) through (b)(5) of this section,
or any other technique upon which both parties agree.
(1) Zero balance accounting means that a Federal Program Agency
transfers the actual amount of Federal funds to a State that are paid
out by the State each day.
(2) Projected clearance means that a Federal Program Agency
transfers to a State the projected amount of funds that the State pays
out each day. The projected amount paid out each day is determined by
applying a clearance pattern to the total amount the State will
disburse.
[[Page 31]]
(3) Average clearance means that a Federal Program Agency, on the
dollar-weighted average day of clearance of a disbursement, transfers to
a State a lump sum equal to the actual amount of funds that the State is
paying out. The dollar-weighted average day of clearance is the day
when, on a cumulative basis, 50 percent of the funds have been paid out.
The dollar-weighted average day of clearance is calculated from a
clearance pattern, consistent with Sec. 205.20.
(4) Cash advance (pre-issuance or post-issuance) funding means that
a Federal Program Agency transfers the actual amount of Federal funds to
a State that will be paid out by the State, in a lump sum, not more than
three business days prior to the day the State issues checks or
initiates EFT payments.
(5) Reimbursable funding means that a Federal Program Agency
transfers Federal funds to a State after that State has already paid out
the funds for Federal assistance program purposes.
Sec. 205.13 How do you determine when State or Federal interest liability accrues?
(a) State or Federal interest liability may or may not accrue when
mutually agreed to funding techniques are applied, depending on the
terms of the Treasury-State agreement.
(b) We and a State may agree in a Treasury-State agreement that no
State or Federal interest liability will accrue for indirect costs or
indirect allocated costs based on an indirect cost rate. This indirect
cost must be consistent with OMB Circular A-87 (For availability, see 5
CFR 1310.3.) and be in accordance with this subpart A. The indirect cost
rate may be a Statewide indirect cost rate or a public assistance cost
rate, where appropriate.
Sec. 205.14 When does Federal interest liability accrue?
(a) Federal interest liabilities may accrue in accordance with the
following provisions:
(1) The Federal Program Agency incurs interest liability if a State
pays out its own funds for Federal assistance 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 Federal assistance program
purposes to the day Federal funds are credited to a State bank account.
(2) If a State pays out its own funds for Federal assistance program
purposes without obligational authority, the Federal Program Agency will
incur an interest liability if obligational authority subsequently is
established. However, if the lack of obligational authority is the
result of the failure of the State to comply with a Federal Program
Agency requirement established by statute, regulation, or agreement,
interest liability may be denied. A Federal interest liability will
accrue from the day a State pays out its own funds for Federal
assistance program purposes to the day Federal funds are credited to a
State bank account.
(3) If a State pays out its own funds prior to the day a Federal
Program Agency officially notifies the State in writing that a
discretionary grant project is approved, the Federal Program Agency does
not incur an interest liability, notwithstanding any other provision of
this section.
(4) If a State pays out its own funds prior to the availability of
Federal funds authorized or appropriated for a future Federal fiscal
year, the Federal Program Agency does not incur an interest liability,
notwithstanding any other provision of this section.
(5) If a State fails to request funds timely as set forth in
Sec. 205.29, or otherwise fails to apply a funding technique properly,
we may deny any resulting Federal interest liability, notwithstanding
any other provision of this section.
(b) Federal Program Agency programs that have specific payment dates
set by the Federal Program Agency that create interest liabilities are
subject to this part.
(c) States must adhere to Federal Program Agency disbursement
schedules when requesting funds. Notwithstanding any other provision of
this section, we may deny a State's claim for Federal interest liability
for the period prior to a late drawdown request.
[[Page 32]]
States must time their funds drawdown so that it does not create Federal
interest liability. The drawdown request must allow the Federal Program
Agency sufficient time to meet its disbursement schedule. If the Federal
Program Agency does not make a timely payout in accordance with the
terms of the Treasury-State agreement, a State may submit a claim for
interest liability.
Sec. 205.15 When does State interest liability accrue?
(a) General rule. State interest liability may accrue if Federal
funds are received by a State prior to the day the State pays out the
funds for Federal assistance program purposes. State interest liability
accrues from the day Federal funds are credited to a State account to
the day the State pays out the Federal funds for Federal assistance
program purposes.
(b) Refunds. (1) A State incurs interest liability on refunds of
Federal funds from the day the refund is credited to a State account to
the day the refund is either paid out for Federal assistance program
purposes or credited to the Federal government.
(2) We and a State may agree, in a Treasury-State agreement, that a
State does not incur an interest liability on refunds in refund
transactions under $50,000.
(c) Exception to the general rule. A State does not incur an
interest liability to the Federal government if a Federal statute
requires the State to retain or use for Federal assistance program
purposes the interest earned on Federal funds, notwithstanding any other
provision in this section.
(d) Mandatory matching of Federal funds. In programs utilizing
mandatory matching of Federal funds with State funds, a State must not
arbitrarily assign its earliest costs to the Federal government. A State
incurs interest liabilities if it draws Federal funds in advance and/or
in excess of the required proportion of agreed upon levels of State
contributions in programs utilizing mandatory matching of Federal funds
with State funds.
Sec. 205.16 What special rules apply to Federal assistance programs and projects funded by the Federal Highway Trust Fund?
The following applies to Federal assistance programs and projects
funded out of the Federal Highway Trust Fund, notwithstanding any other
provision of this part:
(a) A State must request funds at least weekly for current project
costs, or Federal interest liability will not accrue prior to the day a
State submits a request for funds.
(b) 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 Program Agency will not incur an interest liability.
Sec. 205.17 Are funds transfers delayed by automated payment systems restrictions based on the size and timing of the drawdown request subject to this part?
Funds transfers delayed due to payment processes that automatically
reject drawdown requests that fall outside a pre-determined set of
parameters are subject to this part.
Sec. 205.18 Are administrative costs subject to this part?
(a) A State and FMS may agree, in a Treasury-State agreement, to the
following funding conventions for indirect costs and administrative
costs:
(1) The State will draw down a prorated amount of administrative
costs on the date of the State payday. For example, the State would draw
one-third of its quarterly administrative costs if payroll is monthly,
or one-sixth of its quarterly administrative costs 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 on each
drawdown by applying the indirect cost rate to the appropriate direct
costs on 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
[[Page 33]]
subsequent adjustments made pursuant to the actual allocation of costs.
(b) Notwithstanding any other provision of this part, no interest
liabilities will be incurred or calculated for indirect costs and
administrative costs, provided the funding conventions described in
paragraph (a) of this section are properly applied.
Sec. 205.19 How is interest calculated?
(a) A State must calculate Federal interest liabilities and State
interest liabilities for each Federal assistance program subject to this
subpart A.
(b) The interest rate for all interest liabilities for each Federal
assistance program subject to this subpart A is the annualized rate
equal to the average equivalent yields of 13-week Treasury Bills
auctioned during a State's fiscal year. We provide this rate to each
State.
(c) A State must calculate and report interest liabilities on the
basis of its fiscal year. A State must ensure that its interest
calculations are auditable and retain a record of the calculations.
(d) As set forth in Sec. 205.9, a Treasury-State agreement must
include the method a State uses to calculate and document interest
liabilities.
(e) A State may use actual data, a clearance pattern, or statistical
sampling to calculate interest. A clearance pattern used to calculate
interest must meet the standards of Sec. 205.20. If a State uses
statistical sampling to calculate interest, the State must sample
transactions separately for each Federal assistance program subject to
this subpart A. Each sample must be representative of the pool of
transactions and be of sufficient size to accurately represent the flow
of Federal funds under the Federal assistance program, including
seasonal or other periodic variations.
(f) For the first year in which a Federal assistance program is
covered in a Treasury-State agreement, funds transfers that occur prior
to the first day of the State's fiscal year must not be included in
interest calculations and are not subject to the interest liability
provisions of this part.
Sec. 205.20 What is a clearance pattern?
States use clearance patterns to project when funds are paid out,
given a known dollar amount and a known date of disbursement. A State
must ensure that clearance patterns meet the following standards:
(a) A clearance pattern must be auditable.
(b) A clearance pattern must accurately represent the flow of
Federal funds under the Federal assistance programs to which it is
applied.
(c) A clearance pattern must include seasonal or other periodic
variations in clearance activity.
(d) A clearance pattern must be based on at least three consecutive
months of disbursement data, unless additional data is required to
accurately represent the flow of Federal funds.
(e) If a State uses statistical sampling to develop a clearance
pattern, the sample size must be sufficient to ensure a 96 percent
confidence interval no more than plus or minus 0.25 weighted days above
or below the estimated mean.
(f) A clearance pattern must extend, at a minimum, until 99 percent
of the dollars in a disbursement have been paid out for Federal
assistance program purposes.
(g) We and a State may agree to other procedures, such as estimates
to project when funds are paid out when the dollar amount and/or the
timing of disbursements are not known.
Sec. 205.21 When may clearance patterns be used?
(a) A State may develop a clearance pattern for:
(1) An individual Federal assistance program;
(2) A logical group of Federal assistance programs that have the
same disbursement method and type of payee;
(3) A bank account;
(4) A specific type of payment, such as payroll or vendor payments;
or
(5) Anything that is agreed upon by us and a State. If a clearance
pattern is used for multiple Federal assistance programs, a State must
apply the clearance pattern separately to each Federal assistance
program when scheduling funds transfers or calculating interest.
[[Page 34]]
(b) As set forth in Sec. 205.9, a Treasury-State agreement must
include the method a State uses to develop and maintain clearance
patterns.
Sec. 205.22 How are accurate clearance patterns maintained?
(a) If a State has knowledge, at any time, that a clearance pattern
no longer reflects a Federal assistance program's actual clearance
activity, or if a Federal assistance program undergoes operational
changes that may affect clearance activity, the State must notify us,
develop a new clearance pattern, and certify that the new pattern
corresponds to the Federal assistance program's clearance activity.
Clearance patterns will remain in effect until a new clearance pattern
is certified.
(b) An authorized State official must certify that a clearance
pattern corresponds to the clearance activity of the Federal assistance
program to which it is applied. An authorized State official must re-
certify the accuracy of a clearance pattern at least every five years.
If a State develops a clearance pattern for a bank account or a specific
type of payment, or on another basis, as set forth in Sec. 205.21, we
may prescribe other requirements for re-certifying the accuracy of the
clearance pattern. A State can begin to use a new clearance pattern on
the date the new clearance pattern is certified.
Sec. 205.23 What requirements apply to estimates?
The following requirements apply when we and a State negotiate a
mutually agreed upon funds transfer procedure based on an estimate of
the State's immediate cash needs:
(a) The State must ensure that the estimate reasonably represents
the flow of Federal funds under the Federal assistance program or
program component to which the estimate applies. The estimate must take
into account seasonal or other periodic variations in activity
throughout the period for which the Federal funds are available.
(b) As set forth in Secs. 205.9 and 205.10, a Treasury-State
agreement must include the method a State uses to develop, maintain, and
document the estimate.
Sec. 205.24 How are accurate estimates maintained?
(a) If a State has knowledge that an estimate does not reasonably
correspond to the State's cash needs for a Federal assistance program or
program component, or if a Federal assistance program undergoes
operational changes that may affect cash needs, the State must
immediately notify us in writing. We and the State will amend the
funding technique provisions in the Treasury-State agreement or take
other mutually agreed upon corrective action.
(b) When estimates are properly updated and applied, a State or
Federal interest liability may or may not accrue, depending on the terms
of the Treasury-State agreement.
(c) We may require a State to justify in writing that it is not
feasible to use a more efficient basis for determining the amount of
funds to be transferred under the Federal assistance program or program
component to which an estimate is applied. We may prescribe requirements
for certifying the reasonableness of an estimate.
Sec. 205.25 How does this part apply to certain Federal assistance programs or funds?
(a) Special rules apply to certain Federal assistance programs or
funds described in this section. To the extent the provisions of this
section are inconsistent with other provisions of this part, this
section applies.
(b) A State's interest liability on funds withdrawn from its account
in the UTF equals the actual interest earned on such funds less the
related banking costs. Actual interest earned does not include non-cash
bank earnings. If funds withdrawn from the State account in the UTF are
commingled with other funds, a proportionate share of interest earnings
and banking costs must be allocated to the funds withdrawn from the
State account. Interest liabilities on funds withdrawn from a Federal
account in the UTF, except the Federal Unemployment Account, are
calculated in accordance with Sec. 205.19.
(c) Supplemental Security Income. (1) Except as provided in 42
U.S.C. 1382e(d), the Federal government incurs an interest liability
from the day State
[[Page 35]]
funds are credited to the Federal government's account to the day a
Federal Program Agency pays out the State funds for Federal assistance
program purposes. A State incurs an interest liability from the day a
Federal Program Agency pays out Federal funds for Federal assistance
program purposes to the day State funds are credited to the Federal
government's account.
(2) Interest liability must be calculated on the difference between
a State's monthly Supplemental Security Income payment and the State's
actual liability for the month.
(3) The Federal government will not incur interest liabilities on
refunds of State funds under the Supplemental Security Income Program.
(4) Administrative fees charged by the Social Security
Administration to States under the Supplemental Security Income program
are not subject to this part.
(5) Supplemental State payments made in conjunction with
Supplemental Security Income are not subject to this part.
(d) Funds collected under the Child Support Enforcement Program. (1)
Funds collected by States from absent parents pursuant to Title IV-D of
the Social Security Act are not subject to this part.
(2) Interest earned by States on undistributed collections must be
treated as Federal assistance program income under 45 CFR 304.50(b) and
is not subject to this part.
(3) Late payment fees collected by States from absent parents are
not subject to interest liabilities under this part and are not subject
to this part. However, such fees must be treated as Federal assistance
program income in accordance with 45 CFR 302.75(b)(6).
(e) A State that earns interest on Special Supplemental Food Program
for Women, Infants, and Children rebates is not subject to interest
liability if the funds earned are used for Federal assistance program
purposes.
(f) Revolving Loan Funds. (1) This part applies to any transfer of
funds from the Federal Program Agency to the State for the Revolving
Loan Fund.
(2) This part does not apply to interest a State earns on Revolving
Loan Funds when Federal Program Agency regulations require that all
interest earned on invested funds be used for Federal assistance program
purposes.
Sec. 205.26 What are the requirements for preparing Annual Reports?
(a) A State must submit to us an Annual Report accounting for State
and Federal interest liabilities of the State's most recently completed
fiscal year. Adjustments to the Annual Report must be limited to the two
State fiscal years prior to the State fiscal year covered by the report.
The authorized State official must certify the accuracy of a State's
Annual Report. A signed original of the Annual Report must be received
by December 31 of the year in which the State's fiscal year ends. We
will provide copies of Annual Reports to Federal agencies. We will
prescribe the format of the Annual Report, and may prescribe that the
Annual Report be submitted by electronic means.
(b) A State must submit a description and supporting documentation
for liability claims greater than $5,000. This information must include
the following:
(1) The amount of funds requested;
(2) The date the funds were requested;
(3) The date the funds were paid out for Federal assistance program
purposes;
(4) The date the funds were received by the State; and
(5) The date of award.
(c) A State claiming reimbursement of Interest Calculation Costs
must submit its claim with its Annual Report in accordance with
Sec. 205.27. An authorized State official must certify the accuracy of a
State's claim for Interest Calculation Costs.
Sec. 205.27 How are Interest Calculation Costs calculated?
(a) We will compensate a State annually for the costs of calculating
interest, including the cost of developing and maintaining clearance
patterns in support of interest calculations, pursuant to this subpart
A, subject to the conditions and limitations of this section.
(b) We may deny an interest calculation cost claim if a State does
not:
[[Page 36]]
(1) Have a Treasury-State agreement with us, as set forth in
Secs. 205.6 through 205.9;
(2) Submit timely a Treasury-State agreement, as set forth in
Secs. 205.6 through 205.9;
(3) Submit timely an updated list of Federal assistance programs
subject to this subpart A, as set forth in Secs. 205.6 through 205.9;
(4) Submit timely a claim for Interest Calculation Costs with its
Annual Report, as set forth in Sec. 205.26; or
(5) Submit timely its Annual Report, as set forth in Sec. 205.26.
(c) A State must maintain documentation to substantiate its claim
for Interest Calculation Costs. We may require a State to provide
documentation to support its interest calculation cost claims. We will
review all interest calculation cost claims for reasonableness. If we
determine that a cost claim is unreasonable, we will not reimburse a
State for that cost, notwithstanding any other provision of this
section.
(d) Eligibility and treatment of Interest Calculation Costs. (1)
Interest Calculation Costs do not include expenses for normal disbursing
services, such as processing checks or maintaining records for
accounting and reconciliation of cash accounts, or expenses for
upgrading or modernizing accounting systems.
(2) Interest Calculation Costs in excess of $50,000 in any year are
not eligible for reimbursement, unless a State can justify to us that
the State is unable to develop and maintain clearance patterns in
support of interest calculations, or perform the actual calculation of
interest, without incurring such costs. Supporting documentation must
accompany State requests for reimbursement in excess of $50,000.
(3) Interest Calculation Costs that a State incurs in fiscal years
prior to its most recently completed Annual Report are not eligible for
reimbursement.
(4) A State must not include Interest Calculation Costs in its
Statewide cost allocation plan, as defined and provided for in OMB
Circular A-87. All costs incurred by a State to implement this subpart
A, other than Interest Calculation Costs, are subject to the procedures
and principles of OMB Circular A-87.
(e) The payments from the Federal government to individual States to
offset Interest Calculation Costs incurred are funded from the aggregate
interest payments States make to the Federal government. The following
limitations apply:
(1) We will not reduce or adjust interest liabilities for Federal
assistance programs funded out of trust funds for which the Secretary is
trustee. These programs include, but are not limited to, Unemployment
Insurance Trust Fund (CFDA 17.225); Highway & Planning Trust Fund (CFDA
20.205); Airport Improvement Trust Fund (CFDA 20.106); Federal Transit
Capital Improvement Trust Fund (CFDA 20.500); Federal Transit Capital &
Operating Assistance Trust Fund (CFDA 20.507); and Social Security--
Disability Insurance Trust Fund (CFDA 96.001); and
(2) The aggregate payments from the Federal government to States to
offset Interest Calculation Costs will not be greater than the aggregate
interest payments States make to the Federal government.
Sec. 205.28 How are interest payments exchanged?
(a) We offset the adjusted total State interest liability and the
adjusted total Federal interest liability for each State to determine
the net interest payable to or from each specific State. The payment of
net interest and any Interest Calculation Costs, as set forth in
Sec. 205.27, for the most recently completed fiscal year must occur no
later than March 31. We will notify a State of the final net interest
liability. A State must submit a claim to receive payment.
(b) A State may appeal a decision by us on interest liabilities and
interest calculation cost claims in accordance with Sec. 205.31.
(c) If a State appeals the amount of interest payable in accordance
with the provisions of Sec. 205.31, payment must occur by March 31 for
any portions not subject to the appeal.
(d) The Federal government will not be liable for interest on any
payment of interest to a State.
[[Page 37]]
Sec. 205.29 What are the State oversight and compliance responsibilities?
(a) A State must designate an official representative with the
statutory or administrative authority to coordinate all interaction with
the Federal government concerning this subpart A, and must notify us in
writing of the representative's name and title. A State must notify us
immediately of any change in the official representative.
(b) A State must maintain records supporting interest calculations,
clearance patterns, Interest Calculation Costs, and other functions
directly pertinent to the implementation and administration of this
subpart A for audit purposes. A State must retain the records for each
fiscal year for three years from the date the State submits its Annual
Report, or until any pending dispute or action involving the records and
documents is completed, whichever is later. We, the Comptroller General,
and the Inspector General or other representative of a Federal Program
Agency must have the right of access to, and may require submission of,
all records for the purpose of verifying interest calculations,
clearance patterns, interest calculation cost claims, and the State's
accounting for Federal funds.
(c) A State's implementation of this subpart A is subject to audit
in accordance with 31 U.S.C. Chapter 75, ``Requirements for Single
Audits.''
(d) 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. 205.11, Sec. 205.12, or a Treasury-State agreement,
we may deny the State payment or credit for the resulting Federal
interest liability, notwithstanding any other provision of this part.
(e) If a State materially fails to comply with this subpart A, we
may, in addition to the action described in paragraph (d) of this
section, take one or more of the following actions, as appropriate under
the circumstances:
(1) Deny the reimbursement of all or a part of the State's interest
calculation cost claim;
(2) Send notification of the non-compliance to the affected Federal
Program Agency for appropriate action, including, where appropriate, a
determination regarding the impact of non-compliance on program funding;
(3) Request a Federal Program Agency or the General Accounting
Office to conduct an audit of the State to determine interest owed to
the Federal government, and to implement procedures to recover such
interest;
(4) Initiate a debt collection process to recover claims owed to the
United States; or
(5) Take other remedies legally available.
Sec. 205.30 What are the Federal oversight and compliance responsibilities?
(a) A Federal Program Agency must designate an official
representative to coordinate all interaction with us and the States
concerning this subpart A, and must notify us in writing of the
representative's name and title. A Federal Program Agency must notify us
immediately of any change in the official representative.
(b) A Federal Program Agency's implementation of this subpart A is
subject to review pursuant to procedural instructions that we issue.
(c) We will consult with Federal agencies as necessary and
appropriate before entering into or amending a Treasury-State agreement.
(d) We will distribute Annual Reports to Federal agencies, as set
forth in Sec. 205.26. Upon our request, a Federal Program Agency must
review a State's Annual Report for reasonableness and must report its
findings to us within 30 days.
(e) A Federal Program Agency must notify us in writing if the
program agency has knowledge, at any time, that:
(1) A State's clearance pattern does not correspond to a Federal
assistance program's clearance activity; or
(2) Corrective action needs to be taken by a State, us, or another
Federal Program Agency, with respect to the implementation of this
subpart. We will notify the State or Federal Program Agency as
appropriate in writing with a description of the Federal Program
Agency's assertion.
[[Page 38]]
(f) A Federal Program Agency must notify us in writing of new
Federal assistance programs listed in the Catalog of Federal Domestic
Assistance.
(g) If a Federal Program Agency causes an interest liability by
failing to comply with this subpart A, we may collect a charge from the
Federal Program Agency. A Federal interest liability resulting from
circumstances beyond the control of a Federal Program Agency does not
constitute noncompliance. We will determine the charge using the
following procedures:
(1) We will issue a Notice of Assessment to the Federal Program
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) To the maximum extent practicable, a Federal Program Agency must
pay a charge for noncompliance out of appropriations available for the
Federal Program Agency's operations and not from the Federal Program
Agency's program funds.
(3) If a Federal Program Agency does not pay a charge for
noncompliance within 45 days after receiving a Notice of Assessment, we
will debit the appropriate Federal Program Agency account.
(4) In the event a Federal Program Agency appeals a charge imposed
under the Notice of Assessment, we will defer the charge until we decide
the appeal. If we deny the appeal, the effective date of the charge may
be retroactive to the date indicated in the Notice of Assessment.
Sec. 205.31 How does a State or Federal Program Agency appeal a determination made by us and resolve disputes?
(a) This section documents the procedures for:
(1) A State to appeal the net interest charge that we have assessed;
(2) A State to appeal a determination we have made regarding the
State's claim for Interest Calculation Costs in accordance with
Sec. 205.27;
(3) A Federal Program Agency to appeal a charge for noncompliance
that we have assessed in accordance with Sec. 205.30; or
(4) A State or a Federal Program Agency to resolve other disputes
with us or between or among each other concerning the implementation of
this subpart A.
(b) A State or Federal Program Agency must submit a written petition
(Petition) to the Assistant Commissioner, Federal Finance, Financial
Management Service, (Assistant Commissioner), within 90 days of the date
of the notice of assessment or the event that initiated the appeal or
dispute. The Petition must include a concise factual statement, not to
exceed 15 pages, with supporting documentation in the appendices, of the
conditions forming the basis of the Petition and the action requested of
the Assistant Commissioner. In the case of a dispute, the party
submitting the petition to us must concurrently provide a copy of the
petition to the other concerned parties. The other concerned parties may
submit to the Assistant Commissioner a rebuttal within 90 days of the
date of the petition. The rebuttal must include a concise factual
statement, not to exceed 15 pages, with supporting documentation in the
appendices.
(c) The Assistant Commissioner will review the Petition, any
rebuttal, and all supporting documentation. As part of the review
process, the Assistant Commissioner may request to meet with any or all
parties and may request additional information.
(d) The Assistant Commissioner will issue a written decision within
the later of 120 days of the date of the Petition or the rebuttal, in
case of a dispute, or 120 days from receipt of any additional
information. The Assistant Commissioner's decision will be the final
program agency action on our part for purposes of judicial review
procedures under the Administrative Procedures Act, 5 U.S.C. 701-706
(APA), unless either the State or Federal Program Agency invokes the
provisions of the Administrative Dispute Resolution Act of 1990 (ADRA),
5 U.S.C. 581-593.
(e) Either a State or Federal Program Agency may seek to invoke the
provisions of the ADRA within 45 days after the date of the Assistant
Commissioner's written decision.
[[Page 39]]
(1) The party invoking the ADRA must notify the Assistant
Commissioner and any other concerned parties in writing. If all parties,
including the Assistant Commissioner, agree in writing, 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.
(2) If the party invoking the ADRA is unable to reach a satisfactory
resolution, the Assistant Commissioner's decision will be the final
agency action on our part for purposes of the judicial review procedures
under the APA.
(f) Any amount due as a result of an appeal or dispute must be paid
within 30 days of the date of the decision of the Assistant Commissioner
or the date of the resolution under the ADRA. If a State fails to pay,
the State will be subject to collection techniques under 31 U.S.C. 3701
et seq., including accrual of interest on outstanding balances and
administrative offset.
Subpart B--Rules Applicable to Federal Assistance Programs Not Included
in a Treasury-State Agreement
Sec. 205.32 What Federal assistance programs are subject to this subpart B?
This subpart B applies to all Federal assistance programs listed in
the Catalog of Federal Domestic Assistance that are not subject to
subpart A of this part.
Sec. 205.33 How are funds transfers processed?
(a) A State must minimize the time between the drawdown of Federal
funds from the Federal government and their disbursement for Federal
program purposes. A Federal Program Agency must limit a funds transfer
to a State to the minimum amounts needed by the State and must time the
disbursement to be in accord with the actual, immediate cash
requirements of the State in carrying out a Federal assistance program
or project. The timing and amount of funds transfers must be as close as
is administratively feasible to a State's actual cash outlay for direct
program costs and the proportionate share of any allowable indirect
costs. States should exercise sound cash management in funds transfers
to subgrantees in accordance with OMB Circular A-102 (For availability,
see 5 CFR 1310.3.).
(b) Neither a State nor the Federal government will incur an
interest liability under this part on the transfer of funds for a
Federal assistance program subject to this subpart B.
Sec. 205.34 What are the Federal oversight and compliance responsibilities?
(a) A Federal Program Agency must review the practices of States as
necessary to ensure compliance with this subpart B.
(b) A Federal Program Agency must notify us if a State demonstrates
an unwillingness or inability to comply with this subpart B.
(c) A Federal Program Agency must formulate procedural instructions
specifying the methods for carrying out the responsibilities of this
section.
Sec. 205.35 What is the result of Federal Program Agency or State non-compliance?
We may require a State and a Federal Program Agency to make the
affected Federal assistance programs subject to subpart A of this part,
consistent with Federal assistance program purposes and regulations,
notwithstanding any other provision of this part, if:
(a) A State demonstrates an unwillingness or inability to comply
with this subpart B; or
(b) A Federal Program Agency demonstrates an unwillingness or
inability to make Federal funds available to a State as needed to carry
out a Federal assistance program.
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.
[[Page 40]]
206.3 Billing policy and procedures.
206.4 Collection and payment mechanisms.
206.5 Collection and deposit procedure exceptions.
206.6 Cash management planning and review.
206.7 Compliance.
206.8 Appeals.
206.9 Charges.
206.10 Operation of and payments from the Cash Management Improvements
Fund.
Authority: 5 U.S.C. 301; 31 U.S.C. 321, 3301, 3302, 3321, 3327,
3328, 3332, 3335, 3720, and 6503.
Source: 59 FR 4538, Jan. 31, 1994, unless otherwise noted.
Sec. 206.1 Scope and application.
(a) This subpart applies to all Government departments and agencies
in the executive branch (except the Tennessee Valley Authority) and all
monies collected and disbursed by these departments and agencies. This
subpart does not apply to interagency transfers of funds, except that
agencies are to use the Treasury's On-Line Payment and Collection (OPAC)
system for interagency payments between executive agencies, when cost-
effective.
(b) Policies and guidelines are prescribed for promoting efficient,
effective cash management through improved billing, collection, deposit,
and payment of funds. These objectives seek to improve funds
availability and the efficiency and effectiveness with which funds are
transferred.
(c) Authority to implement this regulation has been delegated within
the Department of the Treasury (hereinafter, ``Treasury'') to the
Commissioner (hereinafter, ``the Commissioner'') of the Financial
Management Service (hereinafter, ``the Service).'' The Service maintains
the final authority as granted under the Deficit Reduction Act of 1984
to specify use of a particular method or mechanism of collection and
deposit and to recover costs that result from noncompliance. Authority
is also granted to the Service, under the Cash Management Improvement
Act of 1990, as amended by the Cash Management Improvement Act
Amendments of 1992, to provide for the timely disbursement of funds. An
agency will require the collection or disbursement of funds by the
agency via EFT as a provision of new contractual agreements or renewal
of existing contracts that impact agency collection or payment
mechanisms.
Sec. 206.2 Definitions.
For the purpose of this part, the following definitions apply:
Agency means any department, instrumentality, office, commission,
board, service, Government corporation, or other establishment in the
executive branch, except the Tennessee Valley Authority.
Billing means any of a variety of means by which the Government
places a demand for payment against an entity that is indebted to the
Government. The term encompasses invoices, notices, initial demand
letters, and other forms of notification.
Cash management means practices and techniques designed to
accelerate and control collections, ensure prompt deposit of receipts,
improve control over disbursement methods, and eliminate idle cash
balances. ``Cash Management Review Process'' means periodic examinations
of collection and disbursement cash flows to ensure that the most
effective mechanisms are used to process the funds.
Collection means the transfer of monies from a source outside the
Federal Government to an agency or to a financial institution acting as
an agent of the Government.
Collection mechanism means any one of a number of tools or systems
by which monies are transferred to the Government from a source outside
the Government.
Cutoff time means a time predesignated by a financial institution
beyond which transactions presented or actions requested will be
considered the next banking day's business.
Day means a calendar day unless otherwise specified.
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.
[[Page 41]]
Depositary means a bank or other financial institution that has been
authorized by the Treasury to receive monies for credit to the Treasury.
Disburse means the initiation of an Electronic Funds Transfer (EFT)
transaction or other methods of drawing funds from accounts maintained
by the Government.
Electronic funds transfer (EFT) means any transfer of funds, other
than a transaction originated by cash, check or similar paper
instrument, that is initiated through an electronic terminal, telephone,
computer, or magnetic tape, for the purpose of ordering, instructing, or
authorizing a financial institution to debit or credit an account. The
term includes, but is not limited to, Fed Wire transfers, Automated
Clearing House (ACH) transfers, transfers made at automatic teller
machines (ATM) and Point-of-Sale (POS) terminals (to include use of the
Government small purchase card), and other means of credit card
transactions.
Fund means the Cash Management Improvements Fund.
Monies (or ``receipts'') means EFT transactions, currency,
negotiable instruments, and/or demand deposits owed to or collected by
an agency.
Next-day deposit means a deposit made before the cutoff time on the
day following the day on which the funds were received by an agency. For
example, if an agency receives funds for deposit at 3 p.m. on Monday and
transmits the deposits to the depositary by 2 p.m. on Tuesday (the
depositary's next cutoff time), then next-day deposit requirements are
met.
Payment means a sum of money transferred to a recipient in
satisfaction of an obligation. A payment includes any Federal Government
benefit or nonbenefit payment.
(1) A benefit payment is a disbursement for a Federal Government
entitlement program or annuity. Benefit payments may be one-time or
recurring payments including, but not limited to, payments for Social
Security, Supplemental Security Income, Black Lung, Civil Service
Retirement, Railroad Retirement Board Retirement/Annuity, Department of
Veterans Affairs Compensation/Pension, Central Intelligence Agency
Annuity, Military Retirement Annuity, Coast Guard Retirement, and
Worker's Compensation.
(2) A nonbenefit payment is a Federal Government disbursement other
than a benefit payment. Nonbenefit payments may be one-time or recurring
payments including, but not limited to, payments for vendors, Internal
Revenue Service tax refunds, Federal salaries and allotments therefrom,
grants, travel disbursements and reimbursements, loans, principal and/or
interest related to U.S. savings bonds, notes, and other savings-type
securities, and payments of service fees to organizations qualified to
issue and/or redeem savings bonds.
Point-of-sale (POS) terminal means an automated credit card or debit
card transaction device.
Presumed EFT means that agencies will presume that new payment
recipients will elect EFT as the means of payment delivery. Enrollment
forms for use in establishing routine payments will be designed with
this approach in mind, to obtain the required written consent of the
recipient.
Recipient means a person, corporation, or other public or private
entity receiving benefit or nonbenefit payments from the Government.
Same-day deposit means a deposit made before the cutoff time on the
day on which the funds were received by an agency. For example, if an
agency receives funds for deposit at 10 a.m. on Monday and transmits the
deposits by 2 p.m. on Monday (the depositary's cutoff time), then a
same-day deposit has been achieved.
Service means the Financial Management Service, Department of the
Treasury.
Treasury Financial Manual (TFM) means the manual issued by the
Service containing procedures to be observed by all Government
departments 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
[[Page 42]]
interested in ordering a copy may call (202) 208-1819 or write the
Directives Management Branch, Financial Management Service, Department
of the Treasury, Liberty Center (UCP-741), Washington, DC 20227 for
further information.
Sec. 206.3 Billing policy and procedures.
The billing process is considered an integral part of an effective
cash management collection program. In those situations where bills are
required and the failure to bill would affect the cash flow, bills will
be prepared and transmitted within 5 business days after goods have been
shipped or released, services have been rendered, or payment is
otherwise due. An agency may prepare and transmit bills later than the
5-day timeframe if it can demonstrate that it is cost-effective to do
so. In addition, the bill must include the terms and dates of payments,
and late payment provisions, if applicable. Terms and dates of payments
will be consistent with industry practices. I TFM 6-8000 describes
detailed billing policies, procedures, and industry standards for
agencies.
Sec. 206.4 Collection and payment mechanisms.
(a) All funds are to be collected and disbursed by EFT when cost-
effective, practicable, and consistent with current statutory authority.
(b) Collections and payments will be made by EFT when cost-
effective, practicable, and consistent with current statutory authority.
When consistent with these criteria, specific cash flows will utilize
EFT as follows:
(1) Fees/fines. EFT will be adopted as the presumed method of
collecting fees and fines, especially when these collection cash flows
are recurring or of large dollar amounts.
(2) Tax collections. EFT will be adopted as the primary method for
collecting taxes. EFT mechanisms may include ACH credit or debit cards.
(3) Salary payment. Presumed EFT will be adopted as the method for
paying employees, and entrance enrollment forms for establishing regular
payments will be designed to use this approach.
(4) Vendor and miscellaneous payments. Each department and agency
will exercise its authority under the Federal Acquisition Regulation to
require that all contractors are paid by EFT, unless a determination is
made that it is not in the best interest of the Federal Government to do
so. EFT will be adopted as the standard method of payment for all
Federal program payments originated by agencies or their agents.
(5) Benefit payments. EFT will be presented to new beneficiaries as
the presumed method for receiving benefits. EFT payment methods, such as
Electronic Benefit Transfer, will be adopted and implemented to make EFT
accessible to all benefit recipients.
(c)(1) Selection of the best collection and payment mechanism is a
joint responsibility of an agency and the Service. An agency has
responsibility for conducting cash management reviews; gathering volume
and dollar data relative to the operation of the systems; and funding
any implementation and operational costs above those normally funded by
Treasury. The Service is the required approval authority when an agency
desires to convert from one collection mechanism to another. The
Service's written approval is required prior to an agency entering into
new contractual agreements or renewing existing contracts for agency
collections or payments systems. Agencies will follow guidelines for the
cost-effective usage of collection and payment mechanisms, published in
the TFM, Volume I, Part 6-8000, in their selection and recommendation to
the Service of an appropriate funds transfer mechanism. The agency will
provide the Service with a recommended mechanism for any new or modified
cash flows. The Service will review the recommendations, approve a
mechanism, and assist with implementation.
(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
[[Page 43]]
and maintenance costs, costs to payment recipients, and costs to
remitters. Agencies should consult with Treasury to determine the need
to include interest costs associated with float in their computations of
benefits and costs.
(d) An agency will require the collection of funds by the agency to
be made via EFT and the disbursement of funds by the agency to be made
via EFT as a provision of new contractual agreements or renewal of
existing contracts that impact agency collection or payment mechanisms,
when cost-effective, practicable, and consistent with current statutory
authority.
Sec. 206.5 Collection and deposit procedure exceptions.
(a) The following collection and deposit timeframe requirements are
to be followed in exception cases where EFT mechanisms are not utilized:
(1) An agency will achieve same-day deposit of monies. Where same
day deposit is not cost-effective or is impracticable, next day deposit
of monies must be achieved except in those cases covered by I TFM 6-
8000.
(2) Deposits will be made at a time of the day prior to the
depositary's specified cutoff time, but as late as possible in order to
maximize daily deposit amounts.
(3) When cost-beneficial to the Government, an agency may make
multiple deposits.
(b) Any additional exceptions to the above policies are listed in I
TFM 6-8000.
Sec. 206.6 Cash management planning and review.
(a) An agency shall periodically perform cash management reviews to
identify areas needing improvement.
(b) As part of its cash management review process, an agency is
expected to document cash flows in order to provide an overview of its
cash management activities and to identify areas that will yield savings
after cash management initiatives are implemented. The Service will
evaluate an agency's EFT policy and application, to include mitigating
circumstances that may prevent the use of EFT, as part of the cash
management reviews.
(c) An agency's cash management reviews will provide the basis for
identification of improvements and preparation of cash flow reports for
submission to the Service as prescribed by I TFM 6-8000. That Chapter
provides requirements for an agency in performing periodic cash
management reviews, identifying improvements, and preparing cash flow
reports. In addition, the Chapter describes the timing and content of
periodic reports that must be submitted by an agency to the Service on
progress made in implementing cash management initiatives and associated
savings.
(d) The Service will periodically review an agency's cash management
program to ensure that adequate progress is being made to improve
overall cash management at an agency. As part of its oversight
authority, the Service may visit an agency and review all or specific
cash management activities of an agency. An agency will be notified in
advance of the Service's review and will be required to provide the
Service with documentation of the agency cash management review within
the timeframes required by I TFM 6-8000.
Sec. 206.7 Compliance.
(a) The Service will monitor agency cash management performance.
Part of the monitoring process will include establishing implementation
end dates for conversion to, or expansion of, EFT mechanisms, as well as
the identification of mitigating circumstances that may prevent the use
of EFT.
(b) In cases where an agency fails to meet a scheduled date within
its control, or where an agency converts to a less cost-effective
transfer mechanism without prior, written Service approval as determined
in accordance with Sec. 206.4(c), the Service will send a formal Notice
of Deficiency to an agency's designated cash management official. 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
[[Page 44]]
of an appeal. The amount of the charge will be equal to the cost of such
noncompliance to the Treasury's General Fund.
(2) Payments cash flows. [Reserved]
Sec. 206.8 Appeals.
(a) An agency that chooses to file an appeal must submit the appeal
in writing to the Commissioner within 45 days of the date of the Notice
of Deficiency. In the event of an appeal, the charge imposed under
Notice of Deficiency will be deferred pending the results of the appeal.
If an appeal is not submitted (i.e., received by the Commissioner)
within 45 days, the amount indicated in the Notice of Deficiency will be
charged per Sec. 206.9(a).
(b) The appeal will contain the elements and follow the submission
procedures specified in I TFM 6-8000. The appeal will include the
background leading to the Notice of Deficiency, the basis of the appeal,
and the action requested by an agency. An agency should state its
disagreements with the Notice of Deficiency which may include cost-
benefit factors, the amount of the charge, and other items.
(c) An agency must state what action it requests in its appeal. An
agency may request that the Notice of Deficiency be completely
overturned for cost-benefit or other considerations. Alternatively, an
agency may request a reduced charge, deferral of the charge, an
alternative solution to cash management improvement, or a combination of
these actions.
(d) Appeals Board. The Commissioner will refer the appeal to an
Appeals Board. The Appeals Board will consist of three members--two
permanent members and one temporary member. The permanent members will
be the Deputy Chief Financial Officer, Department of the Treasury, and
the Assistant Commissioner, Federal Finance, of the Service. The
temporary board member will be a cash management official from an agency
other than the agency appealing the Notice of Deficiency. The Board will
be convened on an as-needed basis. The order of agency assignment to the
Board will be published by Treasury in Volume I, Chapter 6-8000 of the
TFM. The Deputy Chief Financial Officer, Department of the Treasury, the
Assistant Commissioner, Federal Finance, and the designated agency cash
management official may delegate their responsibility to a staff
subordinate having sufficient experience in cash management matters. The
Assistant Commissioner's designee may be from any area other than that
which issued the Notice of Deficiency.
(e) Appeal review process. The Appeals Board will review the Notice
of Deficiency, any additional information submitted by the Service, and
the written appeal from an agency. Based on this review, the Board may
decide additional investigation is required. The Board may request an
agency and/or the Service to meet with the Board as part of the review
process.
(f) Appeal finding. A written majority decision will be rendered by
the Appeals Board within 30 days of receipt of the appeal. The Board may
extend this period for an additional period, not to exceed 30 days, if
required. The Appeals Board will notify the Commissioner and the agency
of the decision. The decision of the Board whether to uphold the Notice
of Deficiency, to overturn the Notice of Deficiency, or to mandate some
other action will be stated in the finding. Other action mandated may
include a reduced charge, a deferral of the charge, an alternate
solution to cash management improvement, or a combination of these
actions. The basis of the decision, the amount of the charge, and the
effective date of the charge will be stated in the finding. The
effective date of the charge may be retroactive to the date indicated in
the Notice of Deficiency.
(g) Any terms related to charge deferral shall be stated; the
Service and an agency will be required to submit evidence of compliance
to such terms at a future specified date. At this future time, the
Appeals Board will review the evidence of compliance. Based 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
[[Page 45]]
Service's Assistant Commissioner, Federal Finance. The charge will be
calculated following procedures outlined in I TFM 6-8000, and will be
assessed for each month that noncompliance continues.
(b) Collection noncompliance. In the case of cash management
collection noncompliance, an agency will absorb the charge from amounts
appropriated or otherwise made available to carry out the program to
which the collections relate. Charges collected from an executive agency
in the case of cash management collection noncompliance will be
deposited in the Cash Management Improvements Fund as outlined in
Sec. 206.10.
(c) Payment noncompliance. [Reserved]
(d) If an agency does not voluntarily pay the charge assessed under
Sec. 206.9(a), the Service will debit the appropriate account
automatically. By failing to pay voluntarily the charges as required by
the Deficit Reduction Act of 1984, an agency will be deemed to authorize
the automatic debit to its account.
(e) The Commissioner will formally terminate the charge when the
Commissioner has determined that an agency has complied. In addition, on
an annual basis, the Commissioner will review an agency's performance
and calculation of the charge, and will notify an agency in writing of
any changes to the amount being charged.
Sec. 206.10 Operation of and payments from the Cash Management Improvements Fund.
(a) The Cash Management Improvements Fund (Fund) will be operated as
a revolving fund by the Service. Charges assessed under Sec. 206.9(a)
for cash management collection noncompliance will be deposited into the
Fund according to the Deficit Reduction Act of 1984. The Service will
also disburse any payments from the Fund based on projects selected by a
project selection and approval committee.
(b) Committee composition. The committee will consist of three
members--two permanent members and one temporary member. The permanent
members will be the Commissioner and the Assistant Commissioner, Federal
Finance, of the Service. The temporary committee member will be a cash
management official from an agency other than an agency being considered
for funds. The order of agency assignment to the Committee will be
published in a TFM Bulletin, when funds are first deposited to the Fund.
Decisions of the project selection and approval committee cannot be
appealed. Agencies will be notified of any available amounts in the Fund
and requirements to apply for such monies through a TFM bulletin.
(c) As provided by 31 U.S.C. 3720, sums in the Fund will be
available without fiscal year limitation for the payment of expenses
incurred in developing improved methods of collection and deposit and
the expenses incurred in carrying out collections and deposits using
such methods, including the costs of personal services and the costs of
the lease or purchase of equipment and operating facilities.
(d) In addition to all reports required by law and regulation, for
each fiscal year during which there is a balance in Fund, the Service
will prepare and publish, by the 60th day following the close of the
fiscal year, a full report on payments, receipts, disbursements,
balances of the Fund, and full disclosure on projects financed by the
Fund.
PART 208--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 ETA\SM\.
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 ETA\SM\ Becomes
Available
Appendix B to Part 208--Model Disclosure for Use After ETA\SM\ 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.
[[Page 46]]
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
ETA\SM\ 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, 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) ETA\SM\ 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.
[[Page 47]]
(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.
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 ETA\SM\ under
Sec. 208.5, until such date as the Secretary determines that the ETA\SM\
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
[[Page 48]]
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 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
[[Page 49]]
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 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
[[Page 50]]
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.
Appendix A to Part 210--Standard Disclosure for Point-of-Purchase
Conversion--Posted Notice
Appendix B to Part 210--Standard Disclosure for Point-of-Purchase
Conversion--Brochure or Pamphlet
Appendix C to Part 210--Standard Disclosure for Lockbox Conversion--
Notice
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.
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 March 15, 2002, as published in Parts II, III, and IV of
the ``2002 ACH Rules: A Complete Guide to Rules & Regulations Governing
the ACH Network,'' 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
[[Page 51]]
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);
and
(6) ACH Rule 2.10.2.2 (requiring that originating depository
financial institutions (ODFIs) establish exposure limits for Originators
of Internet-initiated debit entries).
(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 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.
[[Page 52]]
(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; 67 FR 17902, Apr. 11, 2002]
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 March 15, 2002, as published
in Parts II, III, and IV of the ``2002 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 ``2002 ACH Rules''
are available from NACHA--The Electronic Payments Association, 13665
Dulles Technology Drive, Suite 300, Herndon, Virginia 20171. Copies also
are available for public inspection at the Office of the Federal
Register, 800 North Capitol Street, N.W., Suite 700, Washington, D.C.
(2) Any amendment to the applicable ACH Rules that takes effect
after March 15, 2002, 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; 67 FR 17903, Apr. 11, 2002]
[[Page 53]]
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 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.
[[Page 54]]
(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
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.
(g) Point-of-purchase debit entries. An agency may convert to an ACH
debit entry a check drawn on a consumer or business account and
presented at a point-of-purchase. Agencies shall use the Point-of-
Purchase (POP) Standard Entry Class (SEC) code for entries to consumer
accounts and the Cash Concentration or Disbursement (CCD) SEC code for
entries to business accounts. The requirements of ACH Rules 2.1.2 and
3.4 shall be met for such an entry if the Receiver presents the check at
a location where the agency has posted a conspicuous notice at the
point-of-purchase containing the disclosure set forth at appendix A to
this part and makes available to the Receiver, in a form that the
Receiver can retain, the disclosure set forth at appendix B to this
part. For purposes of ACH Rules 3.10 and 4.1.1, authorization shall
consist of a copy of the notice and a copy of the Receiver's source
document.
(h) Accounts receivable check conversion. (1) Conversion of consumer
checks. The notice and authorization requirements of ACH Rules 2.1.4 and
3.6.1 shall be met for an accounts receivable entry only if an agency
has provided the Receiver with the disclosure set forth at appendix C to
this part.
(2) Conversion of business checks. An agency may convert to an ACH
debit a check drawn on a business account
[[Page 55]]
that is received via mail or at a dropbox location if the agency has
provided the Receiver with the disclosure set forth at appendix C. The
agency shall use the CCD SEC code for such entries, which shall be
deemed to meet the requirements of ACH Rule 2.1.2 if the agency has
provided the disclosure set forth at appendix C. For purposes of ACH
Rules 3.10 and 4.1.1, authorization shall consist of a copy of the
notice and a copy of the Receiver's source document.
(i) Returned item service fee. An agency may originate an ACH debit
entry to collect a one-time service fee in connection with an ACH debit
entry originated pursuant to paragraph (g) or (h) of this section that
is returned due to insufficient funds. An entry originated pursuant to
this paragraph shall meet the requirements of ACH Rules 2.1.2 and 3.4 if
the agency has complied with the disclosure requirements of paragraph
(g) or (h), as appropriate. For purposes of ACH Rule 3.10 and 4.1.1,
authorization shall consist of a copy of the notice provided under
paragraph (g) or (h), as applicable, and a copy of the Receiver's source
document.
[64 FR 17487, Apr. 9, 1999, as amended at 67 FR 17903, Apr. 11, 2002]
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
[[Page 56]]
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 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
[[Page 57]]
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 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.
[[Page 58]]
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.
(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.
Appendix A to Part 210--Standard Disclosure for Point-of-Purchase
Conversion--Posted Notice
Notice to Customers Presenting Checks
Conversion of Checks--If you are presenting a check to the cashier,
your check will be converted into an electronic fund transfer. When you
hand your completed, signed check to the cashier, your check will be
copied. The account information from your check will be used to make an
electronic fund transfer from your account in the amount of the check.
The cashier will void the check and return it to you.
Insufficient Funds--The electronic fund transfer from your account
will usually occur within 24 hours, which is faster than a check is
normally processed. Do not present a check to the cashier unless there
are sufficient funds available in your checking account. If the
electronic fund transfer cannot be completed because of insufficient
funds, we may try to make the transfer up to two more times [and we will
charge you a one-time fee of $ ------, which we will also collect by
electronic fund transfer].
Authorization--By reading this notice and handing your check to the
cashier, you authorize the conversion of your check into an electronic
fund transfer. If the electronic fund transfer cannot be processed for
technical reasons, you authorize us to process the copy of your original
check.
More Information--A pamphlet with more information about this
process, including information about your rights under Federal law, is
available from the cashier. [You may also call ------ or visit our
Internet site at ------ for detailed information.]
Note: This notice must be conspicuous. This means that the notice
should be printed on a sign that is prominently posted at the location
where checks are presented to a cashier, in such a way that it is
clearly visible from several feet away to customers waiting to present
checks.
[67 FR 17903, Apr. 11, 2002]
Appendix B to Part 210--Standard Disclosure for Point-of-Purchase
Conversion--Brochure or Pamphlet
What is point-of-purchase check conversion? Point-of-purchase check
conversion is the process of converting checks that customers present to
cashiers into electronic fund transfers. ``Electronic fund transfer'' is
the term used to refer to the process in which we electronically
instruct your financial institution to transfer funds from your account
to our account, rather than processing your check. When you hand a check
to the cashier, your check is copied and the account information from
your check is used to make an electronic fund transfer from your
account. The cashier voids your check and returns it to you. By
presenting your check at a location where a sign notifies you that your
check will be converted, you authorize the conversion of your check into
an electronic fund transfer in this manner.
How quickly will funds be transferred from my account? The
electronic fund transfer from your account will usually occur within 24
hours, which is faster than a check is normally processed. Therefore,
you should be sure that there are sufficient funds available in your
checking account when you present your check. If the electronic fund
transfer cannot be completed because there are insufficient funds in
your account, we may try to
[[Page 59]]
make the transfer up to two more times [and we will impose a one-time
fee of $------ against your account, which we will also collect by
electronic fund transfer].
Will the electronic fund transfer appear on my account statement?
The electronic fund transfer from your account will be on the account
statement that you receive from your financial institution. However, the
transfer may be in a different place on your statement than the place
where your checks normally appear. For example, it may appear under
``other withdrawals'' or ``other transactions.'' The electronic fund
transfer should be identified on your statement as ``[insert].''
What if there is a problem with the electronic fund transfer? You
should contact your financial institution immediately if you believe
that the electronic fund transfer reported on your account statement was
not properly authorized or is otherwise incorrect. Consumers have
protections under a Federal law called the Electronic Fund Transfer Act
for an unauthorized or incorrect electronic fund transfer.
What if the electronic fund transfer cannot be processed? In rare
instances, an electronic fund transfer cannot be processed for reasons
other than insufficient funds. In these cases, we will process the copy
of your original check. Different rights apply to the processing of the
copy of the check than apply to an electronic fund transfer.
[More detailed information about this process is available on our
Internet site at ------ or by calling ------.]
Note: This disclosure must be conspicuous. This means that it should
be printed in reasonably large typeface. If this disclosure is combined
with other information, it should be set off by contrasting color, by
surrounding it with a box, or by using other means to ensure that it is
prominently featured.
[67 FR 17903, Apr. 11, 2002]
Appendix C to Part 210--Standard Disclosure for Lockbox Conversion--
Notice
Notice to Customers Making Payment by Check
Authorization to Convert Your Check--If you send us a check to make
your payment, your check will be converted into an electronic fund
transfer. ``Electronic fund transfer'' is the term used to refer to the
process in which we electronically instruct your financial institution
to transfer funds from your account to our account, rather than
processing your check. By sending your completed, signed check to us,
you authorize us to copy your check and to use the account information
from your check to make an electronic fund transfer from your account
for the same amount as the check. If the electronic fund transfer cannot
be processed for technical reasons, you authorize us to process the copy
of your check.
Insufficient Funds--The electronic fund transfer from your account
will usually occur within 24 hours, which is faster than a check is
normally processed. Therefore, make sure there are sufficient funds
available in your checking account when you send us your check. If the
electronic fund transfer cannot be completed because of insufficient
funds, we may try to make the transfer up to two times [and we will
charge you a one-time fee of $------, which we will also collect by
electronic fund transfer].
Transaction Information--The electronic fund transfer from your
account will be on the account statement you receive from your financial
institution. However, the transfer may be in a different place on your
statement than the place where your checks normally appear. For example,
it may appear under ``other withdrawals'' or ``other transactions.'' You
will not receive your original check back from your financial
institution. For security reasons, we will destroy your original check,
but we will keep a copy of the check for recordkeeping purposes.
Your Rights--You should contact your financial institution
immediately if you believe that the electronic fund transfer reported on
your account statement was not properly authorized or is otherwise
incorrect. Consumers have protections under a Federal law called the
Electronic Fund Transfer Act for an unauthorized or incorrect electronic
fund transfer.
Note: This disclosure must be conspicuous. This means that it should
be printed in reasonably large typeface. If this disclosure is combined
with other information, it should be set off by contrasting color, by
surrounding it with a box, or by using other means to ensure that it is
prominently featured.
[67 FR 17903, Apr. 11, 2002]
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.
[[Page 60]]
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 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; 66 FR 63623,
Dec. 10, 2001]
Sec. 211.2 Claims for the release of withheld checks or for the proceeds thereof.
Claims for the release of checks or warrants withheld from delivery
or for the proceeds thereof, shall be filed with the administrative
agency which would have originally authorized such issuance, e.g.,
claims arising out of checks or warrants representing payments under
laws administered by the Department of Veterans Affairs shall be filed
with the Secretary of Veterans Affairs, Department of Veterans Affairs,
Washington, DC 20420.
[61 FR 41739, Aug. 12, 1996]
Sec. 211.3 Exceptions.
The regulations of this part do not apply to payments to foreign
governments, nor to checks or warrants issued in payment of salaries or
wages, or for goods or services purchased by the Government of the
United States in foreign countries, unless such payments are subject to
the Foreign Funds Control Regulations (31 CFR part 520), the Foreign
Assets Control Regulations (31 CFR part 500), the Cuban Assets Control
Regulations (31 CFR part 515), or the Iranian Assets Control Regulations
(31 CFR part 535).
[45 FR 47678, July 16, 1980]
Sec. 211.4 Implementing instructions.
Implementing instructions will be issued in Part IV, ``Disbursing,''
of the Treasury Fiscal Requirements Manual for Guidance of Departments
and Agencies.
[41 FR 15847, Apr. 15, 1976]
[[Page 61]]
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,
(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.
[[Page 62]]
(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.
(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
[[Page 63]]
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.
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
[[Page 64]]
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. 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:
[[Page 65]]
(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
(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.
[[Page 66]]
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 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
[[Page 67]]
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 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
[[Page 68]]
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 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
[[Page 69]]
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 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
[[Page 70]]
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 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]
[[Page 71]]
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 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
[[Page 72]]
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 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.
[[Page 73]]
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 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.
[[Page 74]]
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 ----------, ad.
19--
[Corporate Seal] --------------------------
President,
State of ------------------
County of --------------------, ss:
On this ------------ day of ------------, ad. 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 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.
[[Page 75]]
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.
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
[[Page 76]]
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.
(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.
[[Page 77]]
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 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;
[[Page 78]]
(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 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.
[[Page 79]]
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 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
[[Page 80]]
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.
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
[[Page 81]]
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 Treasury Check Offset.
240.10 Processing of checks.
240.11 Release of original checks.
Indorsement of Checks
240.12 Indorsement by payees.
240.13 Checks issued to incompetent payees.
240.14 Checks issued to deceased payees.
240.15 Checks issued to minor payees in certain cases.
240.16 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, 3331, 3343,
3711, 3712, 3716, 3717; 332 U.S. 234 (1947); 318 U.S. 363 (1943).
Source: 54 FR 35642, Aug. 29, 1989, unless otherwise noted.
General Provisions
Sec. 240.1 Scope of regulations.
The regulations in this part prescribe the requirements for
indorsement and the conditions for payment of checks drawn on the United
States Treasury. These regulations also establish procedures for
collection of amounts due the United States Treasury because of payments
on checks bearing forged or other unauthorized indorsements or other
material defects or alterations.
Sec. 240.2 Definitions.
(a) Certifying agency means an agency for whom a Treasury disbursing
officer or a non-Treasury disbursing officer makes payment in accordance
with 31 U.S.C. 3325. The responsibilities of a certifying official are
set forth at 31 U.S.C. 3528.
(b) Check or Checks means a check or checks drawn on the United
States Treasury.
(c) Check payment means the amount paid to a presenting bank in
accordance with Sec. 240.9(a)(3) of this part.
(d) Commissioner means the Commissioner of the Financial Management
Service, Department of the Treasury, 401 14th Street SW., Washington, DC
20227.
(e) Days means calendar days.
(f) Financial institution means any bank, savings bank, savings and
loan association, Federal or State chartered credit union, or similar
institution.
(g) Item means a reference in a monthly interest billing statement
to a check for the amount of which Treasury has demanded refund from a
presenting bank.
(h) Monthly interest billing statement means a statement prepared by
Treasury and sent to a presenting bank
[[Page 82]]
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 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
[[Page 83]]
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.
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 in accordance with Sec. 240.8 if the reclamation is not paid
within 120 days of the reclamation date, and if administrative offset is
unsuccessful, that Treasury intends to collect the debt through Treasury
Check Offset in accordance with Sec. 240.9;
[[Page 84]]
(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, Financial Processing Division,
Reclamation Branch, Room 700-D, P.O. Box 1849, Hyattsville, MD 20788.
(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 presenting
bank's favor, would show that the presenting bank is not liable, to:
Department of the Treasury, Financial Management Service, Financial
Processing Division, Reclamation Branch, Room 700-D, P.O. Box 1849,
Hyattsville, MD 20788. The Director, Financial Processing Division, who
has supervisory authority over the Reclamation Branch, or his/her
authorized subordinate, shall consider and decide any protest properly
submitted under this paragraph. Neither the Director, Financial
Processing Division, nor any of his/her 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 or
Sec. 240.9 while a timely protest is being considered. Unresolved
protested items will be appropriately annotated on the monthly summary
of debt 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.
[54 FR 35642, Aug. 29, 1989, as amended at 67 FR 36518, May 24, 2002]
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
[[Page 85]]
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 Treasury Check Offset in
accordance with Sec. 240.9 or 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.
[54 FR 35642, Aug. 29, 1989, as amended at 67 FR 36518, May 24, 2002]
Sec. 240.9 Treasury Check Offset.
(a) If Treasury is unable to effect collection pursuant to
Sec. 240.7 or Sec. 240.8 of this part, it will collect the principal
amount of the reclamation, accrued interest, penalty, and administrative
costs through Treasury Check Offset. Treasury Check Offset occurs when,
at the direction of Treasury, a Federal Reserve Bank withholds, that is,
offsets, credit from a presenting bank (e.g., a financial institution
presenting a Treasury check for ultimate charge to the account of the
United States Treasury). The amount of credit offset is applied to the
principal amount of the reclamation, accrued interest, penalties, and
administrative costs owed by the presenting bank. As provided by the
provisions of 31 U.S.C. 3712(e), by presenting Treasury checks for
payment, the presenting bank is deemed to authorize Treasury Check
Offset.
(b) If Treasury effects offset under this section and it is later
determined that the presenting bank paid the principal amount of the
reclamation and accrued interest, penalties, and administrative costs
thereon, or that a presenting bank was not liable for the amount of the
reclamation, Treasury will promptly refund to the presenting bank the
amount of its payment. Treasury may refund the amount either by applying
the amount to another reclamation debt in accordance with this Part or
other applicable law, or by returning the amount to the presenting bank.
(c) Treasury Check Offset is used for the purpose of collecting debt
owed by a presenting bank to the Federal Government. As a consequence,
presenting banks shall not be able to use the fact that Treasury checks
presented for payment have not been paid as the basis for a claim
against Treasury, a Federal Reserve Bank, or other persons or entities,
including payees or other indorsers of checks, for the amount of the
credit offset pursuant to 31 U.S.C. 3712(e) and this section.
(d) This section does not apply to a claim based upon a reclamation
that has been outstanding for more than 10 years from the date of
delinquency.
[67 FR 36518, May 24, 2002]
Sec. 240.10 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
[[Page 86]]
the checks cashed or otherwise received to the account of the Treasury,
subject to examination and payment by the United States Treasury;
(iii) Forward payment records and copies of checks to Treasury; and
(iv) Release the original checks to a designated Federal Records
Center upon notification from Treasury. The Treasury shall return to the
forwarding Federal Reserve Bank a photocopy of any check the payment of
which is refused upon first examination. Federal Reserve Banks shall
give immediate credit therefor in the United States Treasury's account,
thereby reversing the previous charge to the account for such check. The
Treasury authorizes each Federal Reserve Bank to release the original
check to the endorser when payment is refused in accordance with
Sec. 240.3(a).
(b) Depositaries outside of the mainland of the United States. Banks
outside of the mainland of the United States designated as depositaries
of public money and permitted to charge checks to the General Account of
the United States Treasury shall be governed by the operating
instructions contained in the letter of authorization to them from
Treasury and shall assume the obligations of presenting banks set forth
in Secs. 240.5 and 240.6. Checks charged to the General Account of the
United States Treasury along with the supporting credit voucher shall be
shipped to the Federal Reserve Bank of Richmond. The Treasury shall
return to the presenting depositary bank a photocopy of any check the
payment of which is refused upon first examination. The depositary bank
shall give immediate credit therefor in the General Account of the
United States Treasury, thereby reversing the previous charge to the
Account for such check. Treasury authorizes the Federal Reserve Bank of
Richmond to return to the presenting depositary bank the original check
when payment is refused in accordance with Sec. 240.3(a).
[54 FR 35642, Aug. 29, 1989. Redesignated at 67 FR 36518, May 24, 2002]
Sec. 240.11 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.
[54 FR 35642, Aug. 29, 1989. Redesignated at 67 FR 36518, May 24, 2002]
Indorsement of Checks
Sec. 240.12 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),
[[Page 87]]
whether as purported signature(s) or otherwise, and not the signature of
the person other than named payee or payees indorsing the check,
regardless of the relationship between the indorser and the named payee
or payees, will be rebuttably presumed to be a forgery and is
unacceptable. The indorsement by a person who purports to indorse for
the named payee(s) with an indorsement consisting of the name(s) of the
payee(s), whether as purported signature(s) or otherwise, and the
indorsing person's signature and no indication of the indorsing person's
representative capacity, will create a rebuttable presumption that the
indorsing person was not authorized to indorse for the named payee(s).
In these circumstances it is the responsibility of the individual or
institution accepting a check from a person other than the named
payee(s) to determine that such person is authorized and has the
capacity to indorse and negotiate the check. Evidence of the basis for
such a determination may be required by the Treasury in the event of a
dispute.
(d) Indorsement of checks by a financial institution under the
payee's authorization. When a check is credited by a financial
institution to the payee's account under the payee's or payees'
authorization, the financial institution may use an indorsement
substantially as follows: ``Credit to the account of the within-named
payee in accordance with the payee's or payees' instructions. XYZ.'' A
financial institution using this form of indorsement will be deemed to
guarantee to all subsequent indorsers and to the Treasury that it is
acting as an attorney-in-fact for the payee or payees, under the payee's
or payees' authorization, and that this authority is currently in force
and has neither lapsed nor been revoked either in fact or by the death
or incapacity of the payee or payees.
(e) Indorsement of checks drawn in favor of financial institutions.
All checks drawn in favor of financial institutions, for credit to the
accounts of persons designated payment so to be made, shall be indorsed
in the name of the financial institutions as payee in the usual manner.
Financial institutions receiving and indorsing such checks shall comply
fully with part 209 of this chapter.
(f) Social Security benefit checks issued jointly to individuals of
the same family. A social security benefit check issued jointly to 2 or
more individuals of the same family shall, upon the death of 1 of the
joint payees prior to the negotiation of such check, be returned to the
Social Security District Office or the Treasury Regional Financial
Center. Payment of the check to the surviving payee or payees may be
authorized by placing on the face of the check a stamped legend signed
by an official of the Social Security Administration or the Treasury
Regional Financial Center, redesignating such survivor or survivors as
the payee or payees of the check. A check bearing such stamped legend,
signed as herein prescribed, may be indorsed and negotiated by the
person or persons named as if such check originally had been drawn
payable to such person or persons.
[54 FR 35642, Aug. 29, 1989. Redesignated at 67 FR 36518, May 24, 2002]
Sec. 240.13 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
[[Page 88]]
(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 Customer Service, P.O. Box 426, Parkersburg, WV 26106.
(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.
Redesignated and amended at 67 FR 36518, May 24, 2002]
Sec. 240.14 Checks issued to deceased payees.
(a)(1) Classes of checks which may be indorsed by an executor or
administrator. Checks issued for the classes of payments indicated
below, the right to which under law does not terminate with the death of
the payee, when indorsed by an executor or administrator, shall include,
as part of the indorsement, an indication of the capacity in which the
executor or administrator is indorsing. An example would be: ``John
Jones by Mary Jones, executor of the estate of John Jones.'' Such
checks, when presented for payment by a bank, will be paid by the
Treasury without the submission of documentary proof of the authority of
the executor or administrator, with the understanding that evidence of
such claimed authority to indorse may be required by the Treasury in the
event of a dispute. The classes of payments to which this subsection
refers are:
(i) Payments for the redemption of currencies or for principal or
interest on U.S. securities;
(ii) Payments for tax refunds; and
(iii) Payments for goods and services.
(2) If an executor has not been appointed, persons claiming as
owners shall return the checks for appropriate handling to the
Government agency that certified the payment. If there is doubt as to
whether the proceeds of the check or checks pass to the estate of the
deceased payee, the checks shall be handled in accordance with paragraph
(b) of this section.
(b) Classes of checks which may not be indorsed by an executor or
administrator. Checks issued for classes of payment other than those
specified in paragraph (a) of this section may not be negotiated after
the death of the payee, but must be returned to the Government agency
that certified the payment for determination whether, under applicable
laws, payment is due and to whom it may be made.
[54 FR 35642, Aug. 29, 1989. Redesignated at 67 FR 36518, May 24, 2002]
Sec. 240.15 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.
[54 FR 35642, Aug. 29, 1989. Redesignated at 67 FR 36518, May 24, 2002]
Sec. 240.16 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
[[Page 89]]
the mailing of Internal Revenue refund checks contained in 26 CFR
601.506(b).
(3) Payments for goods and services.
(c) Special powers of attorney. Under discussions of the Comptroller
General of the United States, classes of checks other than those
specified in paragraph (b) of this section may be negotiated under a
special power of attorney which names a financial institution as
attorney-in-fact, and recites that it is not given to carry into effect
an assignment of the right to receive payment, either to the attorney-
in-fact or to any other person.
(d) Proof of authority. Checks indorsed by an attorney-in-fact shall
include, as part of the indorsement, an indication of the capacity in
which the attorney-in-fact is indorsing. An example would be: ``John
Jones by Paul Smith, attorney-in-fact for John Jones.'' Such checks when
presented for payment by a bank, will be paid by the Treasury without
the submission of documentary proof of the claimed authority, with the
understanding that evidence of such claimed authority to indorse may be
required by the Treasury in the event of a dispute.
(e) Revocation of powers of attorney. Powers of attorney are revoked
by the death of the grantor and may also be revoked by notice from the
grantor to the parties known, or reasonably expected, to be acting on
the power of attorney. Notice of revocation to the Treasury will not
ordinarily serve to revoke the power.
(f) Acknowledgment of powers of attorney. Where desirable or where
required by foreign, state or local law, powers of attorney shall be
acknowledged before a notary public or other officer authorized by law
to administer oaths generally.
(g) Seal or certificate of attesting officers. Where acknowledgment
of powers of attorney is desirable or required pursuant to paragraph (f)
of this section, seals of attesting officers shall be impressed or
stamped upon the power of attorney form, or the power of attorney shall
be accompanied by a certificate from an appropriate official showing
that the officer was in commission on the date of acknowledgment.
(h) Forms. Power of attorney forms issued under this part are listed
in the appendix to this part. They may be obtained from the Financial
Management Service, Property and Supply Section, Ardmore East Business
Center, 3361-L 75th Avenue, Landover, MD 20785.
[54 FR 35642, Aug. 29, 1989. Redesignated at 67 FR 36518, May 24, 2002]
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.
[[Page 90]]
Sec. 245.1 Introductory.
This part governs the issuance of replacement checks for checks
drawn on the United States Treasury, when
(a) The original check has been lost, stolen, destroyed or mutilated
or defaced to such an extent that it is rendered non-negotiable;
(b) The original check has been negotiated and paid on a forged or
unauthorized indorsement, and
(c) The original check has been cancelled pursuant to Sec. 204.4 of
this chapter.
Sec. 245.2 Definitions.
For purposes of this part:
(a) Agency means each authority of the United States for which the
Treasury of the United States issues checks or for which checks drawn on
the Treasury of the United States are issued.
(b) Check means a check drawn on the United States Treasury.
(c) Certifying Agency means an agency for whom a Treasury disbursing
officer or a non-Treasury disbursing officer makes payment in accordance
with 31 U.S.C. 3325. The responsibilities of a certifying official are
set forth at 31 U.S.C. 3528.
(d) Commissioner means the Commissioner of the Financial Management
Service, Department of the Treasury, 401 14th Street, SW., Washington,
DC 20227.
(e) Person means an individual, a partnership, a corporation, a
labor organization, a government or a subdivision or instrumentality
thereof, and any other entity to which a check may be issued.
(f) Replacement check means a check issued pursuant to the
recertification of payment by a certifying official.
(g) Secretary means the Secretary of the Treasury.
Sec. 245.3 Time limit for check claims.
(a) Any claim on account of a Treasury check must be presented to
the agency that authorized the issuance of such check within one year
after the date of issuance of the check or within one year after October
1, 1989, whichever is later.
(b) Any claim by an indorser under Sec. 245.6 will be considered
timely if presented to the Commissioner within one year after the date
of issuance of the check or within one year after October 1, 1989,
whichever is later.
(c) Nothing in this subsection affects the underlying obligation of
the United States, or any agency thereof, for which a Treasury check was
issued.
Sec. 245.4 Advice of nonreceipt or loss.
(a) In the event of the nonreceipt, loss or destruction of a check
drawn on the United States Treasury, or the mutilation or defacement of
such a check to an exent which renders it nonnegotiable, the claimant
should immediately notify the agency that authorized the issuance of
such check, describing the check, stating the purpose for which it was
issued and giving, if possible, its date, amount, Treasury symbol and
number.
(b) In cases involving mutiliated or defaced checks, the claimant
should enclose the mutilated or defaced check with his communication to
the agency.
Sec. 245.5 Recertification of payment.
Upon receipt of a claim concerning the nonreceipt, loss,
destruction, mutilation or defacement of a check, or the cancellation of
a check pursuant to Sec. 240.4 of this chapter, the certifying agency
may certify a new payment.
Sec. 245.6 Claim by an indorser.
When one or more Treasury checks are lost, stolen or destroyed in a
single incident while in the possession of a person to whom the checks
have been negotiated by the payee, and if the checks have not been paid,
the Commissioner may issue a replacement check to the person to whom the
checks had been negotiated.
Sec. 245.7 Check status inquiry.
The Commissioner will provide the status and a copy of the check if
available, upon request, to the agency which authorized the issuance of
the check.
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
[[Page 91]]
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.
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