Research Administration Office

University of California

Memo Operating Guidance

No. 87-13

June 9, 1987

Subject: A-110 Revision Regarding Deposits of Federal Funds in Interest Bearing Accounts

Pursuant to a February 10, 1987, revision to OMB Circular A-110, federal agencies have begun to make changes in their grant rules to require grantees to maintain advances of federal funds in interest bearing accounts and to remit any interest earned over $100 back to the sponsoring agency. Enclosure I to this C& G Memo is a copy of the Federal Register publication of the A-110 change.

As an instrumentality of the State of California, the University is not subject to the terms of this A-110 revision. In cases where written acceptance of grant terms containing a provision regarding remitting of interest is required by the granting agency, C& G Officers should inform the agency of this exemption. Suggested language is contained in a letter dated April 28, 1987, that Don Alter sent to Kenneth Foster at NSF. Enclosure 2 is a copy of this letter and the cover memo that was distributed to Accounting Officers. Enclosure 3 is a copy of the General Counsel opinion referenced in that cover memo.

Refer: Bill Sellers (415) 642-3045 8-582-3045

Subject Index: 06

Organization Index: F-005

David F. Mears

University Contracts and Grants Coordinator

Enclosures


May 5, 1987

ACCOUNTING OFFICERS

Subject: Revision of A-110 Requiring Deposit of Federal Funds in Interest Bearing Accounts and the Intergovernmental Cooperation Act of 1968

As you are all aware the Office of Management and Budget recently amended Circular A-110 to require recipients of advances on federal grants to deposit those advances in interest bearing accounts. Additionally, the recipients are to remit the interest earned to the issuing agency at least quarterly. The revision to A-110 provides an exemption to the above requirements for universities which qualify as an instrumentality of the state for purposes of the Intergovernmental Cooperation Act. The General Counsel's opinion is that the University would qualify for exemption under the Intergovernmental Cooperation Act.

Many of you have recently received notification from the National Science Foundation ("NSF") that they will begin implementation of the new requirements immediately. I have enclosed a copy of a letter which was recently sent to the NSF outlining the University's position that it is exempted from the new requirements of A-110 since the University is an instrumentality of the state as defined in the Intergovernmental Cooperation Act. You should prepare similar letters to all federal agencies which notify you of their intent to implement the new requirements of A-110.

If you have any questions, please give me a call.

cc:

Senior Vice President Brady Associate Vice President Pastrone Chancellors

Director Mears

Contracts and Grants Officer Sellers Extramural Funds Supervisors

Senior Accountant Sheets


April 28, 1987

Mr. Kenneth B. Foster

Director

Division of Financial Management

National Science Foundation

1800 G Street, NW

Washington, DC 20550

Dear Mr. Foster:

We have received your March 18, 1987, Notice regarding a new A-110 requirement to deposit cash advances into interest bearing accounts. This new requirement was published in the Federal Register on February 10, 1987. As stated at 52FR4241, pursuant to the Intergovernmental Cooperation Act of 1968, state universities that are instrumentalities of a state are not subject to the revision.

Please be advised that, for the purposes of the Intergovernmental Cooperation Act of 1968, the University of California is an instrumentality of the State of California and therefore is not subject to the new paragraph 8 of Attachment I to OMB Circular A-110.

Sincerely,

Donald L. Alter

Director--Corporate Accounting

cc:

Coordinator Mears

Director Selby

Accounting Officers

Contracts and Grants Officers


OFFICE OF THE GENERAL COUNSEL

590 UNIVERSITY HALL

BERKELEY - EXTENSION 2-2822

Please Refer to File No.

March 13, 1987

CONTRACTS AND GRANTS OFFICER WILLIAM K. SELLERS Business and Finance

Re:

Revision of OMB Circular A-110 - Deposit of Federal Funds in Interest Bearing Accounts - Applicability to the University - Intergovernmental Cooperation Act of 1968

Your memorandum of March 3, 1987, requests confirmation of the opinion expressed by Associate: Counsel Aletha R. Titmus to Vice President John A. Perkins in her memorandum to him of June 6, 1977, that the University could successfully assert that for purposes of the Intergovernmental Cooperation Act of 1968, the University is a part of the state or an instrumentality of the state.

The Office of Management and Budget has revised Circular A-110' requiring recipients of federal funds to deposit advances in interest bearing accounts and remit the interest to the federal agencies providing the funds, and in the Federal Register notice of the revision, OMB stated:

"Section 203 of the Intergovernmental Cooperation Act of 1968; 42 U.S.C. 34213 (1976) provides that States and their instrumentalities generally are not accountable for interest earned on grant-in-aid funds. Therefore, State universities that are instrumentalities of a State would not be subject to the proposed revision." (52 Fed. Reg. 4240-4241 (Feb. 10, 1987).)

I concur with Aletha's opinion that the University could successfully assert that for the purposes of the Intergovernmental

Cooperation Act of 1968 and OMB Circular A-110, the University .is a part of the state or an instrumentality thereof.

The corporation has been variously described, but included among those characterizations are "a constitutional department or function of the state government" (Williams v. Wheeler (1913) 23 Cal.App. 619,622); "a state institution" (Estate of Purington (1926) 199 Cal. 661, 666); "a branch of the state itself" (Pennington v. Bonelli (1936) 15 Cal.App.2d 316, 321); and "a statewide administrative agency" (Ishimatsu v. Regents of University of California (1968) 266 Cal.App.2d 854, 864).

The United States Supreme Court in Hamilton v. University of California (1934) 293 U.S. 245, 257 [79 L.Ed. 343] held that for the purposes of a jurisdictional statute granting the Supreme Court the right of review of state court decisions on state statutes challenged as repugnant to the federal Constitution, regulations of The Regents were "statutes of the state, as the University was a constitutional department or function of state government. (Citing Williams v. Wheeler, 23 Cal.App. at p. 623, and Wallace v. University of California (1925) 75 Cal.App. 274, 277.)

In light of these authorities, it is my opinion that the University would be able to successfully assert that it is the state or an instrumentality thereof for the purposes of the Intergovernmental Cooperation Act of 1968 and OMB Circular A-110.

Please let me know if I may be of further assistance.

David A. Dorinson

University Counsel

cc:

R. W. Brady

D. F. Mears