August 10, 1987
Subject: A-110 Revision Regarding Deposits of Federal Funds in Interest Bearing Accounts
This Memo cancels and supersedes C& G Memo No. 87-13 (June 9, 1987) on the referenced subject. Palmer Marcantonio at the Office of Management and Budget's Financial Management Division has clarified the language used in the February 10, 1987, Notice which revised Attachment I to OMB Circular A-110. Enclosure I is a copy of the Federal Register Notice and Enclosure 2 is a copy of the clarification dated April 26, 1987, from Mr. Marcantonio to John Grim/SBA.
Dave Dorinson in General Counsel's office has stated (See Enclosure 3) that OMB's interpretation is correct. Please note that, although Dorinson refers to grants and contracts, the scope of this A-110 change is limited to grants and cooperative agreements. Accordingly, we are advising campuses that the University is subject to the provisions in A-110 Attachment I regarding deposits of advances of federal grant funds in interest bearing accounts. Grants and cooperative agreements containing agency implementations of this provision may be accepted.
The Corporate Accounting Office--Office of the President will shortly be issuing guidance to campus accounting officers on how to implement the new A-110 regulation.
Refer: Bill Sellers
Subject Index: 06
Organization Index: F-005
Cancel: No. 87-13
David F. Mears
University Contracts and Grants
cc: Don Alter
Mr. John H. Grim Chief, Grants Branch Office of Procurement and
Grants Management Small Business Administration Washington, D.C. 20416
Dear Mr. Grim:
This is in reply to your letter of February 19, 1987, concerning a recent revision to Circular A-110, "Uniform requirements for grants and other agreements with universities, hospitals, and other nonprofit organizations."
You requested clarification as to whether State universities would be accountable for interest earned on Federal advances of assistance funds. The answer to this question depends upon the nature and terms governing the assistance provided to these institutions.
As indicated in both Circular A-102 and Circular A-110, interest earned by a recipient of Federal assistance on an advance of Federal funds belongs to the United States rather than the recipient, unless specifically exempted by a statutory provision. One such exemption is found in the Intergovernmental Cooperation Act of 1968, which provides that a "State is not accountable for interest earned on grant money pending its disbursement." 31 U.S.C. 6503(a). To qualify for this treatment, a State university must meet two requirements: first, that it is a "State" for these purposes and second, that the Federal financial assistance received meets the definition of a "grant" under this Act. If both are in fact satisfied, then a State university would not be held accountable for interest earned on grant funds pending their disbursement.
As used in the intergovernmental Cooperation Act, the term "State" is defined to include "an agency or instrumentality of a State. ..." 31 U.S.C. 6501(8).
The Act defines the term "grant" much more narrowly than that term is used in Circular A-110. In relevant part, the Act States that a "grant" means:
...money, or property provided instead of money, that is paid or provided by the United States Government under a fixed annual or total .authorization, to a State, ...under a plan or program administered by a State...that is subject to approval by a executive agency, if the authorization (1) requires the State...to expend non-Government money as a condition of receiving money or property from the United States Government; or (2) specifies directly, or establishes by means of a formula, the amount that may be provided to the State . . . or the amount to be allotted for use in each State . . .[31 U.S.C. 6501(4)(A)]
The statute excludes from this definition, any payments under research and development contracts or grants which are awarded directly and on similar terms to all qualifying organizations whether public or private. 31 U.S.C. 6501(4)(C).
Thus, it is necessary to review each class or category of Federal assistance provided to a State university to determine whether it falls within the definition of a grant, so as to qualify for the exemption provided under the Intergovernmental Cooperation Act. Since much of the Federal assistance received by State universities does not meet the Act's narrow definition, the exemption would not apply and State universities would be accountable for interest earned on Federal advances.
You also asked why State universities were excluded from the coverage of Circular A-102, "Uniform requirements for Grants to State and local governments." These institutions are covered by the administrative requirements for universities in Circular A-110, in order to keep the coverage for all universities, public and private, under the. same Circular. Since the provisions of the two circulars are almost identical, the administration of grants under either circular would be about the same.
If you have any additional questions, please let me know.
Palmer A. Marcantonio
Acting Deputy Associate Director
for Financial Management
590 UNIVERSITY HALL
BERKELEY - EXTENSION 2-2822
Please Refer to File No.
August 5, 1987
CONTRACTS AND GRANTS OFFICER WILLIAM K. SELLERS
Re: Intergovernmental Cooperation Act of 1968 -Accountability for Interest Earned on Advances of Federal Funds - Research Contracts or Grants
Your memorandum of July 29, 1987, requests confirmation of the opinion expressed by Palmer A. Marcantonio, Acting Deputy Associate Director for Financial Management, Office of Management and Budget, in his letter of April 26, 1987, to John H. Grim, Chief, Grants Branch, Office of Procurement and Grants Management, Small Business Administration, that under the Intergovernmental Cooperation Act of 1968 and OMB Circular A-110, state universities are accountable for interest earned on federal advances under research and development contracts or grants.
Mr. Marcantonio's opinion is correct. The only exception to the University's being liable for interest earned on advances is an advance received by the University on "grant-in-aid"/l funds that are transferred to the University under the Intergovernmental Cooperation Act of 1968. (31 U.S.C. Sections 6501 et seq.) The Act covers grants to the states for development assistance.. The Act defines the term "grant" to exclude "a payment under a research and development procurement contract or grant awarded directly and on similar terms to all qualifying organizations." (31 U.S.C. 6501(4)(C)(vi).) Accordingly, the University is liable for interest earned on advances received under research contracts or grants. Although it might be asserted that some research contracts are entered into only after negotiation and thus are not included in the "research contract or grant" exception, the apparent intent of Congress is to limit the interest accountability obligation to traditional grant-in-aid programs. The Office of Management and Budget in Circular A-110 has so interpreted the requirements of the Act. As OMB is the federal agency authorized to administer and implement the Act, the federal courts would, in all likelihood, give great weight to OMB's interpretation. (NLRB v. Boeing Co. (1973) 412 U.S. 67 [36 L.Ed.2d 752, 93 S.Ct. 1952]; Trafficants v. Metropolitan Life Ins. Co. (1972) 409 U.S. 205 [34 L.Ed.2d 415, 93 S.Ct. 364]; United States v. Pennsylvania Industrial Chem. Corp. (1973) 411 U.S. 655 [36 L.Ed.2d 567, 93 S.Ct. 1804]; Federal Maritime Bd. v. Isbrandtsen Co. (1958) 356 U.S. 481 [2 L.Ed.2d 926, 78 S.Ct. 851]; Federal Maritime Commission v. Seatrain Lines (1973) 411 U.S. 726 [36 L.Ed.2d 620, 93 S.Ct. 1773].)
Please let me know if you have any questions or wish to discuss this matter further.
David A. Dorinson
R. W. Brady
D. F. Mears
1/The Intergovernmental Cooperation Act of 1968, when originally enacted, utilized the term "grant-in-aid." When revised and recodified in 1982 as part of a restatement of laws related to money and finance in one comprehensive title (Title 31, U.S.C.; Pub. L. No. 97-258 (Sept. 13, 1982) 96 Stat. 1007), the term "grant" was substituted for "grant" or "grant-in-aid" for consistency and to have only one defined term in the chapter. (31 U.S.C.A. 6501, Explanatory Notes.)