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Questions and Answers Regarding the OMB Circular A-110 Requirement for Interest-Bearing Account

To transmit to the Native American Grantees answers to questions regarding the recent revision to the OMB Circular A-110.


All Native American JTPA Grantees


PAUL A. MAYRAND HERBERT FELLMAN Director Chief Office of Special Targeted Division of Indian and Native Programs American Programs


August 14, 1987

Expiration Date
Rescissions:    None.
Text :
Reference. DINAP Bulletin No. 86-29 and the revision to OMB Circular A-110, Attachment I, paragraph 8, "Payment Requirements". Background. The proposed revision to OMB Circular A-110 was finalized on January 16, 1987. All Native American grantees subject to OMB Circular A-110 must maintain advances of Federal funds in an interest-bearing account. DINAP Bulletin 86-29 informed recipients of the effective date of the new A-110 requirement and requested grantees to submit any questions concerning this requirement to the Department of Labor/ Employment and Training Administration (DOL/ETA). Questions and Answers. Following are the questions received from the recipients and DOL/ETA's response. a. What happens when the bank subtracts service charges from the total interest earned? Answer: Reasonable service charges are an allowable cost and should be paid from the administrative portion of the recipient's grant. The amount of interest to be remitted to DOL is determined by the total interest earned not the net interest (total interest minus service charge). b. What if State and/or Federal law prohibits non-profits from maintaining interest-bearing accounts? Answer: Neither OMB nor DOL is aware of any Federal laws which prohibit non-profits from maintaining interest-bearing accounts. If a State has such a law/regulation, a copy of the law or regulation should be submitted to ETA where a decision whether to waive the requirement will be made. c. What if the only available interest-bearing account requires a minimum balance? Answer: If this is the only type of interest-bearing account available in the area, a minimum balance account may be maintained. d. If a State is a sub of a non-profit, what governs -- A-102 or A-110? Answer: If a State is a sub of a non-profit, the State is subject to the requirements of A-102. e. Has OMB notified the banking community of the new A-110 requirement? Answer: The banking community was not specifically notified by OMB. Publication in the Federal Register is considered adequate notification. f. If a grantee is on a reimbursement basis of funding, is the interest-bearing account requirement applicable? Answer: The A-110 requirement does not apply to the reimbursable grantees because there are no advances of Federal funds. g. Does the interest-bearing account requirement flow through to subs? Answer: Yes. The provisions of A-110 shall be applied to subrecipients performing substantive work under the grants that are passed through or awarded by the primary recipient (except for States). h. If interest is earned in excess of $100, is the grantee required to remit the entire amount (including the $100) or just the amount over $100 (grantees retain $100 or less)? Answer: It is required that all interest in excess of $100 a year be remitted to DOL. If the grantee earns $101 of interest on Federal funds in a year, $1 will be remitted, and the remaining $100 will be retained by the grantee. i. Can Federal agencies waive the interest-bearing account requirement? Answer: Generally, agencies would not waive the interest-bearing account requirement; but under exceptional circumstances a waiver can be granted, e.g., if there is a State law prohibiting non-profits from maintaining an interest-bearing account. j. Can a grantee maintain an interest-bearing account for receiving advances of Federal funds, transfer the funds to a non-interest-bearing checking account from which disbursements are made? Answer: If Federal funds are transferred to a non-interestbearing checking account on the same day that disbursements occur, such a transaction is acceptable. However, if the disbursement from the non-interestbearing account occurs on a later date, this type of system would not be acceptable because advances of Federal funds must be maintained in an interest-bearing account until disbursed for program purposes. k. Does the A-110 requirement necessitate a separate bank account for JTPA? Answer: No. It would not be necessary to maintain advances of Federal funds in a separate interest-bearing account as long as the general account is interest bearing. The interest earned on outstanding balances of Federal funds in the general account should be pro-rated among the Federal agencies advancing the funds. The proration should be determined by each Federal agency's pro-rata share of the balance of advanced funds earning interest. The methodology used to arrive at the prorated distribution of interest should be based on sound allocation principles and all documentation should be retained for audit purposes. l. What are the sanctions available against those recipients who fail to comply with the interest-bearing account requirement? Answer: Recipients who fail to maintain advances of Federal funds in an interest-bearing account are subject to being funded on a reimbursable basis.

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