The Cash Management Improvement Act of 1990 (CMIA) was passed to improve the transfer of Federal funds between the Federal government and the States, Territories, and the District of Columbia. Prior to its passage, there were two recurring intergovernmental problems that needed attention:
- States were drawing Federal funds in advance of need.
- The Federal government was providing late grant awards to States.
Therefore, CMIA was enacted to achieve the following objectives:
- Efficiency - To minimize the time between the transfer of funds to the States and the payout for program purposes.
- Effectiveness - To ensure that Federal funds are available when requested.
- Equity - To assess an interest liability to the Federal government and/or the States to compensate for the lost value of funds.
Annual Treasury-State Agreement
Annual Treasury-State Agreement (effective with the beginning of the State's fiscal year, July 1), which includes:
- Covered programs - All Federal funds transfers to the State are covered. However, only major assistance programs (large-dollar programs that exceed a calculated expenditure threshold) are included in the Treasury-State Agreement (TSA), which specifies how the Federal funds transfers will take place. For non-major assistance programs (programs that are below the expenditure threshold), the State is required to minimize the time between the drawdown of Federal funds from the Federal government and their disbursement for Federal program purposes.
- Funding techniques - For each program component (payment type), the process of how and when Federal funds transfers to the State take place.
- Interest calculation methodologies - For each funding technique, the process of how and when State or Federal interest accrues. Usually interest liabilities occur when Federal funds are drawn early or when Federal funds are received late.
- Clearance pattern methodologies - For each program component with warrant or EFT (Electronic Fund Transfer) payments, a projection of when the payments will clear the State's bank. Clearance patterns are generated separately for warrants and EFTs, except for payroll where the two types of payments are combined. Warrant clearance patterns are generated using historical cashed warrant data. The clearance pattern for an EFT is zero days. Based on a clearance pattern, funding techniques for warrant and EFT payments are developed.
- Projected reimbursement for direct costs - The types of interest calculation costs the State expects to incur during the fiscal year. Interest calculation costs are the costs of calculating interest, including the cost of developing and maintaining clearance patterns in support of interest calculations.
Annual reports (submitted by December 31 of each year) for the State's most recently completed fiscal year, which report on:
- Federal interest liabilities - The State must submit a description and supporting documentation for program liability claims greater than $5,000.
- State interest liabilities
- State direct cost claims - State interest calculation costs incurred.
Annual Interest Exchange
Annual interest exchange (accomplished no later than March 31 of each year) for the State's most recently completed fiscal year, to disburse:
- Federal and State interest liabilities - The Financial Management Service (The Bureau of the U.S. Department of the Treasury) offsets the approved total State interest liability with the approved total Federal interest liability to determine the net interest payable due to or from the State.
- Approved direct cost payments to the State - The amount of State interest calculation costs approved by the Financial Management Service. Normally, interest calculation costs in excess of $50,000 are not eligible for reimbursement, unless they can be justified by the State.