[Title 31 CFR ]
[Code of Federal Regulations (annual edition) - July 1, 2008 Edition]
[From the U.S. Government Printing Office]
[[Page i]]
31
Parts 200 to 499
Revised as of July 1, 2008
Money and Finance: Treasury
________________________
Containing a codification of documents of general
applicability and future effect
As of July 1, 2008
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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[[Page iii]]
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 523
Finding Aids:
Material Approved for Incorporation by Reference........ 535
Table of CFR Titles and Chapters........................ 537
Alphabetical List of Agencies Appearing in the CFR...... 557
List of CFR Sections Affected........................... 567
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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
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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
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collection request.
[[Page vi]]
Many agencies have begun publishing numerous OMB control numbers as
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What if the material incorporated by reference cannot be found? If
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[[Page vii]]
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July 1, 2008.
[[Page ix]]
THIS TITLE
Title 31--Money and Finance: Treasury is composed of three volumes.
The parts in these volumes are arranged in the following order: parts 0-
199, parts 200-499, and parts 500 to end. The contents of these volumes
represent all current regulations codified under this title of the CFR
as of July 1, 2008.
For this volume, Rob Sheehan was Chief Editor. The Code of Federal
Regulations publication program is under the direction of Michael L.
White, assisted by Ann Worley.
[[Page 1]]
TITLE 31--MONEY AND FINANCE: TREASURY
(This book contains parts 200 to 499)
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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
[[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................... 22
206 Management of Federal agency receipts,
disbursements, and operation of the Cash
Management Improvements Fund............ 38
208 Management of Federal agency disbursements.. 44
210 Federal Government participation in the
Automated Clearing House................ 48
211 Delivery of checks and warrants to addresses
outside the United States, its
territories and possessions............. 58
215 Withholding of District of Columbia, State,
city and county income or employment
taxes by Federal agencies............... 59
223 Surety companies doing business with the
United States........................... 64
224 Federal process agents of surety
corporations............................ 71
225 Acceptance of bonds secured by Government
obligations in lieu of bonds with
sureties................................ 72
226 Recognition of insurance covering Treasury
tax and loan depositaries............... 76
235 Issuance of settlement checks for forged
checks drawn on designated depositaries. 78
240 Indorsement and payment of checks drawn on
the United States Treasury.............. 79
245 Claims on account of Treasury checks........ 94
[[Page 6]]
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.............. 95
250 Payment on account of awards of the Foreign
Claims Settlement Commission of the
United States........................... 97
256 Obtaining payments from the judgment fund
and under private relief bills.......... 100
270 Availability of records..................... 105
281 Foreign exchange operations................. 106
285 Debt collection authorities under the Debt
Collection Improvement Act of 1996...... 108
SUBCHAPTER B--BUREAU OF THE PUBLIC DEBT
306 General regulations governing U.S.
securities.............................. 151
308 General regulations governing full-paid
interim certificates.................... 179
309 Issue and sale of Treasury bills............ 180
312 Federal savings and loan associations and
Federal credit unions as fiscal agents
of the United States.................... 183
315 Regulations governing U.S. Savings Bonds,
Series A, B, C, D, E, F, G, H, J, and K,
and U.S. Savings Notes.................. 184
316 Offering of United States Savings Bonds,
Series E................................ 210
317 Regulations governing agencies for issue of
United States Savings Bonds............. 217
321 Payments by banks and other financial
institutions of United States Savings
Bonds and United States Savings Notes
(Freedom Shares)........................ 222
323 Disclosure of records....................... 239
328 Restrictive endorsements of U.S. bearer
securities.............................. 241
330 Regulations governing payment under special
endorsement of United States Savings
Bonds and United States Savings Notes
(Freedom Shares)........................ 244
332 Offering of United States Savings Bonds,
Series H................................ 248
337 Supplemental regulations governing Federal
Housing Administration debentures....... 252
339 Exchange offering of United States Savings
Bonds, Series H......................... 255
340 Regulations governing the sale of Treasury
bonds through competitive bidding....... 258
341 Regulations governing United States
Retirement Plan Bonds................... 260
342 Offering of United States Savings Notes..... 270
[[Page 7]]
343 Regulations governing the offering of United
States Mortgage Guaranty Insurance
Company Tax and Loss Bonds.............. 275
344 U.S. Treasury securities--State and Local
Government Series....................... 278
345 Regulations governing 5 percent Treasury
Certificates of Indebtedness--R.E.A.
Series.................................. 302
346 Regulations governing United States
Individual Retirement Bonds............. 303
348 Regulations governing depositary
compensation securities................. 313
351 Offering of United States Savings Bonds,
Series EE............................... 314
352 Offering of United States Savings Bonds,
Series HH............................... 330
353 Regulations governing definitive United
States Savings Bonds, Series EE and HH.. 335
354 Regulations governing book-entry securities
of the Student Loan Marketing
Association (Sallie Mae)................ 362
355 Regulations governing fiscal agency checks.. 368
356 Sale and issue of marketable book-entry
Treasury bills, notes, and bonds
(Department of the Treasury Circular,
Public Debt Series No. 1-93)............ 370
357 Regulations governing book-entry treasury
bonds, notes and bills held in Legacy
Treasury Direct......................... 404
358 Regulations governing book-entry conversion
of bearer corpora and detached bearer
coupons Regulations governing book-entry
conversion of detached bearer coupons
and bearer corpora...................... 442
359 Offering of United States Savings Bonds,
Series I................................ 445
360 Regulations governing definitive United
States Savings Bonds, Series I.......... 458
361 Claims pursuant to the Government Losses in
Shipment Act............................ 477
362 Declaration of valuables under the
Government Losses in Shipment Act....... 480
363 Regulations governing securities held in
TreasuryDirect.......................... 480
370 Electronic transactions and funds transfers
relating to United States securities.... 509
375 Marketable treasury securities redemption
operations.............................. 516
380 Collateral acceptability and valuation...... 520
391 Waiver of interest, administrative costs,
and penalties........................... 521
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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)).
---------------------------------------------------------------------------
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 TT&L depositaries.
203.4 Financial institution eligibility for designation as a TT&L
depositary.
203.5 Designation of financial institutions as TT&L depositaries.
203.6 Obligations of TT&L depositaries.
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.
203.10 Electronic payment methods.
[[Page 12]]
203.11 Same-day reporting and payment mechanisms.
203.12 EFTPS interest assessments.
203.13 Appeal and dispute resolution.
Subpart C_PATAX
203.14 Scope of the subpart.
203.15 Tax deposits using FTD coupons.
203.16 Retainer and investor depositaries.
203.17 Collector depositaries.
Subpart D_Investment Program and Collateral Security Requirements for
TT&L Depositaries
203.18 Scope of the subpart.
203.19 Sources of balances.
203.20 Investment account requirements.
203.21 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: 72 FR 59181, Oct. 19, 2007, unless otherwise noted.
Subpart A_General Information
Sec. 203.1 Scope.
The regulations in this part govern the processing by financial
institutions of electronic and paper-based deposits and payments of
Federal taxes; the operation of the Treasury Tax and Loan (TT&L)
program; the designation of TT&L depositaries; and the operation of the
investment program. A financial institution may participate in the TT&L
program by participating in the investment program or by accepting
Federal tax payments, or both. A financial institution that accepts
Federal tax payments may do so through the paper tax system (PATAX), or
Electronic Federal Tax Payment System (EFTPS), or both. However, a
financial institution is not designated as a TT&L depositary if it only
processes EFTPS payments.
Sec. 203.2 Definitions.
Advice of credit (AOC) means the paper or electronic form
depositaries use to summarize and report Federal Tax Deposit (FTD)
coupon deposits to the Internal Revenue Service (IRS) and the Federal
Reserve Bank (FRB).
Automated Clearing House (ACH) credit entry means a credit
transaction originated by a financial institution, at the direction of
the taxpayer, in accordance with applicable ACH formats and applicable
laws, regulations, and procedural instructions.
ACH debit entry means a debit transaction originated by the Treasury
Financial Agent (TFA), at the direction of the taxpayer, in accordance
with applicable ACH formats and applicable laws, regulations, and
instructions.
Balance limit means the highest amount a depositary has stated it
will accept in its Treasury Investment Program (TIP) main account.
Borrower-In-Custody (BIC) collateral means an arrangement by which a
financial institution pledging collateral to secure special direct
investments and certain term investments is permitted to retain
possession of that collateral, subject to terms and conditions agreed
upon between the FRB and the financial institution.
Business day means any day on which a financial institution's FRB is
open.
Capacity means a TT&L depositary's ability to accept additional
investments in its TIP main account balance and/or its Special Direct
Investment (SDI) account balance. With respect to a TT&L depositary's
TIP main account balance, capacity means the balance limit or current
collateral value, whichever is lower, minus the total of: the
depositary's current TIP main account balance and any pending
investments, plus any pending withdrawals. With respect to an SDI
account balance, capacity means the dollar amount of collateral that the
depositary has pledged for SDIs under a BIC arrangement minus the total
of: the depositary's current SDI account balance and any pending
investments, plus any pending withdrawals.
Collector depositary means a TT&L depositary that accepts paper tax
payments from business customers and that may also process electronic
tax payments from customers, but that does not retain any such deposits
as investments or accept dynamic, direct, or special direct investments.
A collector depositary may accept term investments.
Direct investment means the Department of the Treasury's
(Treasury's) placement of funds with a TT&L depositary, which results in
an increase to
[[Page 13]]
the depositary's TIP main account balance and a credit to its reserve
account.
Dynamic investment means Treasury's placement of funds with a TT&L
depositary throughout the day, which results in an increase to the
depositary's TIP main account balance and a credit to its reserve
account.
Electronic Federal Tax Payment System (EFTPS) means the system
through which taxpayers remit Federal tax payments electronically.
Federal Reserve Bank (FRB) means the FRB of the district where the
financial institution is located, or such other FRB that may be
designated in an FRB operating circular, or such other FRB that may be
designated by the Treasury. A financial institution is deemed located in
the same district it would be deemed located for purposes of Regulation
D (12 CFR 204.3(b)(2)), even if the financial institution is not
otherwise subject to Regulation D.
Federal Tax Deposit (FTD) means a Federal tax deposit made using an
FTD coupon.
FTD coupon means a paper form supplied to a taxpayer by Treasury to
accompany deposits of Federal taxes made through PATAX.
Federal taxes means those Federal taxes or other payments specified
by the Secretary of the Treasury as eligible for payment through the
procedures described in this part.
Fedwire[reg]1 means the funds transfer system owned and operated by
the FRBs.
Fedwire[reg] 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.
Fedwire[reg] value transfer means a Federal tax payment made by a
financial institution using a Fedwire[reg] type 1000 message.
Financial institution means any bank, savings bank, savings
association, credit union, or similar institution.
Fiscal agent means the FRB acting as agent for Treasury.
Investment program is the all-inclusive name given to the programs
by which Treasury invests excess operating cash.
Investor depositary means a TT&L depositary that is authorized to
participate in the investment program by accepting funds from Treasury
via direct investments, special direct investments, dynamic investments,
or term investments. In addition, an investor depositary may accept
electronic or paper Federal tax payments from its business customers and
retain a portion of those tax deposits, depending on the capacity of its
TIP main account balance.
Paper Tax System (PATAX) means the paper-based system through which
taxpayers remit Federal tax payments by presenting an FTD coupon and
payment to a TT&L depositary.
Procedural instructions means the procedures contained in the
Treasury Financial Manual, Volume IV (IV TFM), other Treasury
instructions issued by Treasury or through Treasury's Financial Agents
and FRB operating circulars, and agreements issued consistent with this
part.
Recognized insurance coverage means the insurance provided by the
Federal Deposit Insurance Corporation, the National Credit Union
Administration, and insurance organizations specifically qualified by
the Secretary.
Reserve account means an account at an FRB with reserve or clearing
balances held by a financial institution or its designated correspondent
financial institution, if applicable.
Retainer depositary means a TT&L depositary that accepts electronic
and/or paper Federal tax payments from its business customers and
retains a portion of the Federal tax deposits in its TIP main account
balance, depending on its balance limit, account balance, and collateral
value. A retainer depositary may also accept term investments.
Same-day payment means a payment made by a Fedwire[reg] non-value
transaction or a Fedwire[reg] value transaction.
Secretary means the Secretary of the Treasury, or the Secretary's
delegate.
Special Direct Investment (SDI) means the placement by Treasury of
funds with an investor depositary secured by collateral pledged under a
BIC arrangement.
[[Page 14]]
SDI account balance means an open-ended, interest-bearing note
maintained on the books of the Treasury Support Center representing the
amount of SDIs held by an investor depositary and secured by collateral
pledged under a BIC arrangement.
Tax due date means the day on which a Federal tax payment is due to
Treasury, as determined by statute and IRS regulations.
Term Investments means Treasury's excess operating funds that have
been offered for a predetermined period of time and accepted by
depositaries participating in the Term Investment Option.
Term Investment Option (TIO) means the program available to
depositaries that offers the ability to borrow excess Treasury operating
funds for a predetermined period of time.
TIO account balance means an interest-bearing note maintained on the
books of the Treasury Support Center for a predetermined period of time.
Treasury Financial Agent (TFA) means a financial institution
designated as an agent of Treasury for processing EFTPS enrollments,
consolidating EFTPS tax payment information, and originating ACH debit
entries on behalf of Treasury as authorized by the taxpayer.
Treasury General Account (TGA) means an account maintained in the
name of the United States Treasury at an FRB.
Treasury Investment Program (TIP) means the automated system under
the TT&L program that receives tax collections, invests funds, and
monitors collateral pledged to secure public money.
TIP main account balance means an open-ended interest-bearing note
maintained on the books of the Treasury Support Center (TSC)
representing a retainer or investor depositary's current net amount of
(i) Federal tax deposits retained by the depositary and/or (ii) Treasury
investments made under the Direct investment program.
Treasury Support Center (TSC) means the office at the FRB that, as
Treasury's Fiscal agent, monitors collateral pledged to secure Treasury
funds, manages TT&L program participation for depositaries, and/or
carries on its books depositaries' TIP main account balances, SDI
account balances, and/or Term Investment Option (TIO) account balances.
Treasury Tax and Loan (TT&L) account means a record of transactions
on the books of a TT&L depositary reflecting paper tax deposits received
by the depositary.
TT&L depositary or depositary means a financial institution
designated as a depositary by Treasury or the FRB of St. Louis acting as
Treasury's Fiscal agent, for the purpose of participating in the
investment program and/or PATAX. There are three kinds of TT&L
depositaries: investor depositaries, retainer depositaries, and
collector depositaries.
TT&L program means the program for collecting Federal taxes and
investing the Government's excess operating funds.
TT&L rate of interest means the interest charged on the TIP main
account balance and the SDI account 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.
Sec. 203.3 TT&L depositaries.
A financial institution that participates in PATAX and/or the
investment program must be a TT&L depositary. There are three kinds of
TT&L depositaries. A collector depositary is a TT&L depositary that
accepts paper Federal tax payments and also may accept electronic
Federal tax payments, but does not accept direct investments or SDIs. A
retainer depositary is a TT&L depositary that accepts electronic and/or
paper Federal tax payments and retains a portion ofthe tax deposits in
its TIP main account balance. An investor depositary is a TT&L
depositary that accepts direct investments, SDIs, or dynamic investments
and may accept electronic and/or paper Federal tax payments and retain a
portion of those tax deposits. Collector, retainer, and investor
depositaries may
[[Page 15]]
accept term investments. Retainer and investor depositaries do not have
to participate in PATAX.
Sec. 203.4 Financial institution eligibility for designation as a TT&L depositary.
(a) To be designated as a TT&L depositary, a financial institution
must be insured as a national banking association, state bank, savings
bank, savings association, 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 must possess the authority to pledge
collateral to secure TT&L account balances, a TIP main account balance,
an SDI account balance, or a no account balance as applicable.
(c) In order to be designated as a TT&L depositary for the purposes
of processing Federal tax deposits through PATAX, a financial
institution must 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, investor depositaries and retainer depositaries
must possess either general or specific authority permitting the
maintenance of a TIP main account 27 balance or an SDI account balance.
Investor, retainer, and collector depositaries that accept term
investments must possess either general or specific authority permitting
the maintenance of a TIO account balance. In the case of investor and
retainer depositaries maintaining a TIP main account balance or an SDI
account balance, the authority must perm it the maintenance of a TIP
main account balance or an SDI account balance which is payable on
demand without previous notice of intended withdrawal.
Sec. 203.5 Designation of financial institutions as TT&L depositaries.
(a) Parties to the agreement. To be designated as a TT&L depositary,
a financial institution must enter into a depositary agreement with
Treasury or Treasury's Fiscal agent. By entering into this agreement,
the financial institution agrees to be bound by this part, and
procedural instructions issued pursuant to this part. Treasury will not
compensate depositaries for servicing and maintaining a TT&L account, or
for processing tax payments through EFTPS or PATAX, unless otherwise
provided for in procedural instructions.
(b) Application procedures. (1) An eligible financial institution
seeking designation as a TT&L depositary must file the forms specified
in the procedural instructions with the TSC. A TT&L depositary must
elect to be one or more of the following:
(i) A collector depositary;
(ii) A retainer depositary;
(iii) An investor depositary.
(2) A financial institution is not authorized to maintain a TT&L
account, TIP main account balance, SDI account balance, or TIO account
balance until the TSC designates it as a TT&L depository.
Sec. 203.6 Obligations of TT&L depositaries.
A TT&L depositary must:
(a) Administer a TIP main account balance, SDI account balance, or
TIO account balance, as applicable, if participating in the investment
program.
(b) Administer a TT&L account, if participating in PATAX.
(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.,
[[Page 16]]
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. 203.7 Termination of agreement or change of election or option.
(a) Termination by Treasury. The Secretary may terminate the
agreement of a TT&L 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
TT&L depositary may terminate its depositary agreement, or change its
option or election, consistent with this part and the procedural
instructions, by prior written notice to the TSC.
Sec. 203.8 Application of part and procedural instructions.
The terms of this part and the procedural instructions issued
pursuant to this part will be binding on financial institutions that
process Federal tax payments or maintain a TT&L account, TIP main
account balance, SDI account balance, or a TIO account 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 that financial institutions must
follow when they process electronic Federal tax payment transactions. A
financial institution is not required to be designated as a TT&L
depositary in order to process electronic Federal tax payments. In
addition, a financial institution does not become a TT&L depositary by
processing electronic Federal tax payments under this subpart and may
not represent itself as a TT&L depositary because it does so.
Sec. 203.10 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.
(b) Conditions to making an electronic payment. This part does not
affect the authority of financial institutions to enter into contracts
with their customers regarding the terms and conditions for processing
payments, as long as the terms and conditions of those contracts are not
inconsistent with this part and with any laws that apply to the
particular transactions.
(c) Payment of interest for time value of funds held. Treasury will
not pay interest on any payment that a financial institution erroneously
originates and that subsequently is refunded.
Sec. 203.11 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 by the
deadline established by Treasury in the procedural instructions.
(b) Fedwire[reg] non-value transaction. By initiating a Fedwire[reg]
non-value transaction, a financial institution authorizes the TSC to
debit its reserve account for the amount of the Federal tax payment
specified in the transaction.
(1) For an investor or retainer depositary using a Fedwire[supreg]
non-value transaction, the TSC will credit the Federal tax payment
amount, up to the depositary's available TIP main account balance
capacity, to the depositary's TIP main account balance on the day of the
transaction. Throughout the course of the day, the TSC will debit from
the depositary's reserve account, and credit to the TGA, any portion of
a tax payment amount that would exceed the institution's available TIP
main account balance capacity.
(2) For a collector depositary or a non-TT&L depositary financial
institution using a Fedwire[supreg] non-value transaction, the TSC will
debit the financial institution's reserve account for the
[[Page 17]]
Federal tax payment amount and credit that amount to the TGA on the day
of the transaction.
(c) Cancellations and reversals. In addition to cancellations due to
insufficient funds in the financial institution's 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 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 payment day
deadline established by Treasury in the procedural instructions.
(d) Other than as stated in paragraph (c) of this section, Treasury
is not obligated to reverse all or any part of a payment.
Sec. 203.12 EFTPS 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 Federal tax payment instructions to the financial institution was
timely and that the taxpayer satisfied the conditions imposed by the
financial institution pursuant to Sec. 203.10(b). Treasury also may
assess interest where a financial institution fails to respond to an ACH
prenotification entry on an ACH debit as required under part 210 of this
title, or fails to originate an ACH prenotification or zero dollar entry
on an ACH credit at a taxpayer's request, which then results in a late
payment.
(b) Calculation of interest assessment. Any interest assessed under
this section will be at the TT&L rate of interest. Treasury will assess
the interest from the day the taxpayer specified that its payment should
settle to the Treasury until the day Treasury receives the payment,
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 electronically under this subpart is
deemed to authorize the TSC to debit its reserve account for any
interest assessed under this section. Upon the direction of Treasury,
the TSC will debit the financial institution's reserve account for the
amount of the assessed interest.
(d) Circumstances not resulting in 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. 203.10(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. 203.13, that the taxpayer has not satisfied
the conditions and that the financial institution has not caused or
contributed to the delay.
(2) Treasury will not assess interest on a financial institution if
a taxpayer fails to meet a tax due date because the FRB or the TFA
caused a delay 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. 203.13, that it did not cause or contribute
to the delay.
Sec. 203.13 Appeal and dispute resolution.
(a) Contest. A financial institution may contest any interest
assessed under Sec. 203.12 or any late fees assessed under Sec.
203.17. To do so, the financial institution must submit information
[[Page 18]]
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 TSC debits the Federal reserve account of the financial
institution under Sec. 203.12 or Sec. 203.17. The Treasury officer or
Fiscal agent will make a decision to: Uphold, reverse, or modify the
assessment, or mandate other action.
(b) Appeal. The financial institution may appeal the decision
referenced in subsection (a) to Treasury as set forth in the procedural
instructions. No further administrative review of Treasury's decision is
available under this part.
(c) Recoveries. In the event of an over or under recovery of
interest, principal, or late fees, Treasury will instruct the TSC to
credit or debit the financial institution's reserve account.
Subpart C_PATAX
Sec. 203.14 Scope of the subpart.
This subpart applies to all TT&L depositaries that accept FTD
coupons and governs the acceptance and processing of those coupons.
Sec. 203.15 Tax deposits using FTD coupons.
A TT&L depositary processing FTD coupons may choose to be designated
as a retainer depositary, an investor depositary, or a collector
depositary. A TT&L depositary that accepts FTD coupons through any of
its offices that accept demand and/or savings deposits must:
(a) Accept from a taxpayer that presents an FTD coupon: 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. A TT&L 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.
(b) Place a stamp impression on the face of each FTD coupon in the
space provided. The stamp must reflect the date on which the TT&L
depositary received the tax deposit and the name and location of the
depositary. The IRS will determine whether the tax payment is on time by
referring to the date stamped on the FTD coupon.
(c) Forward, each day, to the IRS Service Center serving the
geographical area in which the TT&L depositary is located, the FTD
coupons for all FTD deposits received that day and a copy of the AOC
reflecting the total amount of all FTD coupons.
(d) Establish an adequate record of all FTD deposits prior to
transmitting them to 36 the IRS Service Center so that the TT&L
depositary will be able to identify deposits in the event the FTD
coupons are lost in shipment. To be adequate, the record must show, at a
minimum for each deposit, the date of the deposit, the taxpayer
identification number, the amount of the deposit, the tax period ending
date, the type of tax deposited, and the employer name. Alternatively,
the TT&L depositary may retain a copy of each FTD coupon forwarded to
the IRS Service Center.
(e) On the business day following receipt of an FTD coupon, submit
the AOC information electronically to the TSC.
(f) Not accept compensation from taxpayers for accepting FTDs and
handling them as required by this section.
Sec. 203.16 Retainer and investor depositaries.
(a) Credit to TIP main account balance. On the business day that the
TSC receives an AOC from a retainer or investor depositary, the TSC will
credit the depositary's TIP main account balance for the amount reported
on the AOC unless there isn't sufficient capacity. In that case, any
amount in excess of the capacity will be debited to the reserve account
and credited to the TGA.
(b) Late delivery of AOC. If an AOC does not arrive at the TSC
before the designated cutoff time for receipt, the TSC will credit the
amount of funds to the depositary's TIP main account balance as of the
date of receipt of the AOC. However, the date on which funds will begin
to earn interest for Treasury is the next business day after the AOC
date.
[[Page 19]]
Sec. 203.17 Collector depositaries.
(a) Debit to reserve account. On the business day that the TSC
receives an AOC from a collector depositary, the TSC will debit the
depositary's reserve account for the amount reported on the AOC and
credit that amount to Treasury's account.
(b) Late delivery of AOC. If an AOC does not arrive at the TSC
before the designated cutoff time on the first business day after the
AOC date, an FTD late fee in the form of interest at the TT&L rate of
interest will.be assessed for each day's delay in receipt of the AOC.
Upon the direction of Treasury, the TSC will debit the depositary's
reserve account for the amount of the late fee.
Subpart D_Investment Program and Collateral Security Requirements for
TT&L Depositaries
Sec. 203.18 Scope of the subpart.
This subpart governs the operation of the investment program,
including the rules that TT&L depositaries must follow in crediting and
debiting TIP main account balances, SDI account balances, and TIO
account balances, and pledging collateral security.
Sec. 203.19 Sources of balances.
A financial institution must be a collector depositary that accepts
term investments, an investor depositary, or a retainer depositary to
participate in the investment program. 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 depositary's TIP main
account balance pursuant to subpart C of this part;
(b) EFTPS ACH credit and debit transactions, Fedwire[reg] non-value
transactions, and Fedwire[reg] value transfers pursuant to subpart B of
this part;
(c) Direct investments, SDIs, dynamic investments, and term
investments pursuant to subpart D of this part; and
(d) Other excess Treasury operating funds.
Sec. 203.20 Investment account requirements.
(a) Additions. Treasury will invest funds in obligations of
collector depositaries that accept term investments, investor
depositaries, or retainer depositaries. Such obligations will be in the
form of open-ended interest-bearing notes, or in the case of term
investments, interest-bearing notes maintained for a predetermined
period of time, and additions and reductions will be reflected on the
books of the TSC.
(1) PATAX. The TSC will credit the TIP main account balance as
stated in Sec. 203.16(a) for an investor or retainer depositary
processing tax deposits through PATAX.
(2) EFTPS.
(i) ACH debit and ACH credit. The TSC will credit a depositary's TIP
main account balance, and credit the depositary's reserve account if
capacity exists, for the amount of EFTPS ACH debit and credit entries on
the day such entries settle.
(ii) Fedwire\[reg]\ value and non-value transactions. The TSC will
credit a depositary's TIP main account balance if capacity exists,
throughout the day on the day of settlement, for the amount of
Fedwire\[reg]\ value and non-value transactions. In the case of
Fedwire[reg] value transactions, the depositary's reserve account will
also be credited.
(b) Additional offerings. Other funds from Treasury may be offered
from time to time to depositaries participating in the investment
program through direct investments, SDIs, term investments, or other
investment programs.
(c) Withdrawals. The amount of a TIP main account balance or SDI
account balance is payable on demand without prior notice. The TSC will
make calls for payment at the direction of the Secretary. On behalf of
Treasury, the TSC will debit the depositary's reserve account on the day
specified in the call for payment.
(d) Interest. The TIP main account balance and the SDI account
balance bear interest at the TT&L rate of interest. Such interest is
payable by a charge to the depositary's reserve account in the manner
prescribed in the procedural instructions.
[[Page 20]]
(e) Balance limits--(1) Retainer and investor depositaries. A
retainer or investor depositary must establish an initial balance limit
for its TIP main account balance by providing notice to that effect in
writing to the TSC. The balance limit is the amount of funds for which a
retainer or investor depositary is willing to provide collateral in
accordance with Sec. 203.21(c)(1). The depositary must follow the
procedural instructions before reducing the established balance limit
unless the reduction results from a collateral revaluation as determined
by the FRB. That portion of any PATAX or EFTPS tax payment which, when
posted at the FRB, would cause the TIP main account balance to exceed
the balance limit specified by the depositary, will be withdrawn by the
FRB that day.
(2) Direct investments. An investor depositary that participates in
direct investments must set a balance limit for direct investment
purposes which is higher than the peak balance normally generated by the
depositary's PATAX and EFTPS tax payment inflow. The depositary must
follow the procedural instructions before reducing the established
balance limit.
(3) SDIs. SDIs are credited to the SDI account balance and are not
considered in setting the amount of the TIP main account balance limit
or in determining the amounts to be withdrawn where a depositary exceeds
its TIP main account balance limit.
(f) TIO. Treasury may, from time to time, invest excess operating
funds in obligations of depositaries awarded funds under TIO. Such
obligations will be in the form of interest-bearing notes payable upon a
predetermined period of time not to exceed 90 days. Such notes will bear
interest at a rate prescribed by the Secretary by auction or otherwise
taking into consideration prevailing market interest rates.
Sec. 203.21 Collateral security requirements.
Financial institutions that process EFTPS tax payments, but that are
not TT&L depositaries, have no collateral requirements under this part.
Financial institutions that are TT&L depositaries have collateral
security requirements, as follows:
(a) Investor and retainer depositaries--(1) PATAX and EFTPS tax
payments. Investor and retainer depositaries must pledge collateral
security in accordance with the requirements of paragraphs (c)(l), (d),
and (e) of this section in an amount that is sufficient to cover the TIP
main account balance and the balance in the TT&L account that exceeds
the recognized insurance coverage.
(2) Direct investments. An investor depositary is required to pledge
collateral in accordance with the requirements of paragraphs (c), (d),
and (e) of this section no later than the day before a direct investment
is placed. However, each investor depositary participating in same-day
direct investments must pledge, prior to the announcement, collateral up
to its balance limit to obtain the depositary's maximum portion of the
same-day direct investment.
(3) SDIs. The day before SDIs are credited to an investor
depositary's SDI account balance, the depositary must pledge collateral
security, in accordance with the requirements of paragraphs (c)(2), (d),
and (e) of this section, to cover the total of the SDIs to be received.
(4) TIO. Each depositary participating in the term investment
program must pledge, prior to the time the term investment is placed,
collateral in accordance with paragraphs (c)(1), (c)(2) for certain term
investments as determined by Treasury, (d), and (e) of this section
sufficient to cover the total TIO account balance.
(b) Collector depositaries. Prior to crediting FTD deposits to the
TT&L account, a collector depositary must pledge collateral security, in
accordance with the requirements of paragraphs (c)(1), (d), and (e) of
this section, in an amount which is sufficient to cover the balance in
the TT&L account that exceeds the recognized insurance coverage.
(c) Deposits of securities. (1) Collateral security required under
paragraphs (a)(1), (2), (4) (except as provided in subparagraph (2)
below), and (b) of this section must be deposited with the depositary's
FRB, or with a custodian or custodians within the United States
designated by the TSC or FRB, under
[[Page 21]]
terms and conditions prescribed by the TSC or FRB.
(2) A depositary pledging collateral security as required under
paragraph (a)(3) or paragraph (a)(4) (when permitted) of this section
must pledge the collateral under a written security agreement on a form
provided by the FRB. The collateral security pledged to satisfy the
requirements of paragraphs (a)(3) and (a)(4) (when permitted) of this
section may remain in the pledging depositary's possession provided that
the pledging is evidenced by advices of custody incorporated by
reference in the written security agreement. The depositary must provide
the written security agreement and all advices of custody covering
collateral security pledged under that agreement to the FRB. Collateral
security pledged under the agreement may not be substituted for or
released without the advance approval of the FRB, and any collateral
security subject to the security agreement will remain so subject until
an approved substitution is made. No substitution or release will be
approved until an advice of custody containing the description required
by the written security agreement is received by the FRB.
(3) Treasury's security interest in collateral security pledged by a
depositary in accordance with paragraphs (c)(2) of this section to
secure SDIs and certain term investments is perfected without Treasury
taking possession of the collateral security by filing or, absent
filing, for a period not to exceed 20 calendar days from the day of the
depositary's receipt of the special direct or term investment.
(d) Acceptable collateral. The types of securities that may be used
as collateral, and how those securities are valued, are set forth in 31
CFR part 380.
(e) Assignment of securities. By pledging acceptable securities
which are not negotiable without the depositary's endorsement or
assignment, a TT&L depositary, in lieu of placing its unqualified
endorsement on each security, appoints the FRB or its assigns as the
depositary's attorney-in-fact with full irrevocable power and authority
to endorse, assign or transfer the securities, and represents and
warrants that an appropriate resolution authorizing the granting of such
irrevocable power of attorney has been executed and adopted. The powers
of attorney so granted are coupled with an interest and are irrevocable,
and full power of substitution is granted to the assignee or holder.
(f) Effecting payments of principal and interest on securities or
instruments pledged as collateral--(1) General. Treasury, without notice
or demand, may sell or otherwise collect the proceeds of all or part of
the collateral, including additions, substitutions, interest, and
distribution of principal, and apply the proceeds to satisfy any claims
of the United States against the depositary, if any of the following
events occur:
(i) 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, if
applicable, its TIP main account balance, SDI account balance, or TIO
account balance;
(ii) The depositary fails to pay when due amounts owed to the United
States or the United States Treasury;
(iii) The depositary otherwise violates or fails to perform any of
the terms of this part or any of the procedural instructions entered
into hereunder; or
(iv) The depositary is closed for business by regulatory action or
by proper corporate action, or a receiver, conservator, liquidator, or
any other officer is appointed for the depositary. All principal and
interest payments on any security pledged to protect the TIP main
account balance, the SDI account balance, the TIO account balance or the
TT&L account, as applicable, due as of the date of the insolvency or
closure or thereafter becoming due, will be held separate and apart from
any other assets and will 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) will, as soon as possible, remit to
the FRB, as Fiscal agent, each payment of principal and/or interest
received by it with respect to collateral pledged pursuant to this
section. The
[[Page 22]]
remittance will be made 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 Treasury is entitled to any payment
associated with that pledged security, must make each payment of
principal and/or interest due with respect to such security directly to
the FRB, 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.
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?
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
[[Page 23]]
(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 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.
[[Page 24]]
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 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.
[[Page 25]]
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.
(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
[[Page 26]]
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 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.
------------------------------------------------------------------------
[[Page 27]]
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 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 Sec. Sec. 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.
[[Page 28]]
(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.
(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
[[Page 29]]
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.
(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
[[Page 30]]
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. 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
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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 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
[[Page 32]]
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.
(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 Sec. Sec. 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
[[Page 33]]
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 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
[[Page 34]]
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:
(1) Have a Treasury-State agreement with us, as set forth in
Sec. Sec. 205.6 through 205.9;
(2) Submit timely a Treasury-State agreement, as set forth in
Sec. Sec. 205.6 through 205.9;
(3) Submit timely an updated list of Federal assistance programs
subject to this subpart A, as set forth in Sec. Sec. 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
[[Page 35]]
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.
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.
[[Page 36]]
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.
(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
[[Page 37]]
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.
(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
[[Page 38]]
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.
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.
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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.
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.
[[Page 40]]
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 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.
[[Page 41]]
(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 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
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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 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
[[Page 43]]
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 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
[[Page 44]]
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.
208.11 Accounts for disaster victims.
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.
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
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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.
(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
[[Page 46]]
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 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.
[[Page 47]]
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 Sec. Sec. 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 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.
Sec. 208.11 Accounts for disaster victims.
Treasury may establish and administer accounts at any financial
institution designated as a financial agent for disaster victims in
order to allow for the delivery by electronic funds transfer of one or
more Federal payments. Such accounts may be established upon terms and
conditions that the Secretary considers appropriate or necessary in
light of the circumstances. Treasury may deliver payments to these
accounts notwithstanding any other payment instructions from the
recipient and without regard to the requirements of Sec. Sec. 208.4,
208.6, and 208.7 of this part and 31 CFR 210.5. For purposes of this
section, ``disaster victim'' means an individual or entity located
within an emergency area, or an individual or entity that has relocated
or been displaced from an emergency area as a result of a major disaster
or emergency. ``Emergency area'' means a geographical area in which
there exists an emergency or disaster declared by the President pursuant
to the National Emergencies Act (50 U.S.C. 1601 et seq.) or the Robert
T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5121
et seq.). The maintenance of accounts and the provision of account-
related services under this section shall constitute reasonable duties
of a financial agent of the United States.
[71 FR 44585, Aug. 7, 2006]
Sec. 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:
[[Page 48]]
(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.
Sec. 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 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.
[[Page 49]]
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 18, 2005, as published in Parts II, III, and IV of
the ``2005 ACH Rules: A Complete Guide to Rules & Regulations Governing
the ACH Network'':
(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; 2.2.1.12; Appendix Eight and Appendix Eleven
(governing the enforcement of the ACH Rules, including self-audit
requirements);
(4) ACH Rules 2.2.1.10; 2.6; and 4.8 (governing the reclamation of
benefit payments);
(5) ACH Rule 9.3 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);
(6) ACH Rule 2.10.2.3 (requiring that originating depository
financial institutions (ODFIs) establish exposure limits for Originators
of Internet-initiated debit entries); and
(7) ACH Rule 2.11.3 (requiring reporting regarding unauthorized
Telephone-initiated 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.
[[Page 50]]
(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.
(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
[[Page 51]]
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; 68 FR 33829, June
5, 2003; 70 FR 67366, Nov. 7, 2005]
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 18, 2005, as published
in Parts II, III, and IV of the ``2005 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 ``2005 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, NW., Suite 700, Washington, DC
20002; and the Financial Management Service, 401 14th Street, SW., Room
401, Washington, DC 20227.
(2) Any amendment to the applicable ACH Rules that takes effect
after March 18, 2005, 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; 68 FR 33830, June
5, 2003; 69 FR 18803, Apr. 9, 2004; 70 FR 67367, Nov. 7, 2005]
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;
[[Page 52]]
(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.
(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 8.7.2,
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
[[Page 53]]
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
3.5 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 3.12 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.--An agency may originate an Accounts Receivable (ARC) entry
using a check drawn on a consumer account that is received via the mail
or at a dropbox, or that is delivered in person in circumstances in
which the agency cannot contemporaneously image and return the check.
The notice and authorization requirements of ACH Rules 2.1.4 and 3.7.1
shall be met for an ARC 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 originate an ACH
debit using a business check that is received via the mail or at a
dropbox, or that is delivered in person in circumstances in which the
agency cannot contemporaneously image and return the check. 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 to this part. For purposes of ACH
Rules 3.12 and 4.1.1, authorization shall
(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 3.5 if
the agency has complied with the disclosure requirements of paragraph
(g) or (h), as appropriate. For purposes of ACH Rule 3.12 and 4.1.1,
authorization shall consist of a copy of
[[Page 54]]
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; 69
FR 13189, Mar. 19, 2004; 70 FR 67367, Nov. 7, 2005]
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 8.7.2, 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 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.
(d) Notice of misdirected payment. If an RDFI becomes aware that an
agency
[[Page 55]]
has originated an ACH credit entry to an account that is not owned by
the payee whose name appears in the ACH payment information, the RDFI
shall promptly notify the agency. An RDFI that originates a Notification
of Change (NOC) entry with the correct account and/or Routing and
Transit Number information, or returns the original ACH credit entry to
the agency with an appropriate return reason code, shall be deemed to
have satisfied this requirement.
[64 FR 17487, Apr. 9, 1999, as amended at 69 FR 13189, Mar. 19, 2004; 70
FR 67367, Nov. 7, 2005]
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 becomes aware 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 issuing payments to the
recipient, the RDFI shall immediately notify the agency of the death or
incapacity. The proper use of the R15 or R14 return reason code shall be
deemed to constitute such notice.
(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 request for a
reclamation must do so within 120 calendar days after the date that the
agency first has actual or constructive knowledge of the death or legal
incapacity of a recipient or the death of a beneficiary. An agency may
not reclaim any post-death or post-incapacity payment made more than six
years prior to the date of the notice of reclamation; provided, however,
that if the account balance at the time the RDFI receives the notice of
reclamation exceeds the total amount of 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
post-death or post-incapacity 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 to act on the notice (not to exceed one
business day).
(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 provide advice of the debit to the RDFI.
[64 FR 17487, Apr. 9, 1999, as amended at 69 FR 13189, Mar. 19, 2004]
[[Page 56]]
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) In cases involving the reclamation of Social Security Federal
Old-Age, Survivors, and Disability Insurance benefit payments, or
benefit payments certified by the Railroad Retirement Board or the
Department of Veterans' Affairs, provide the name and last known address
of the following person(s):
(A) The recipient and any co-owner(s) of the recipient's account;
(B) All other person(s) authorized to withdraw funds from the
recipient's account; and
(C) All 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.
[64 FR 17487, Apr. 9, 1999, as amended at 69 FR 13189, Mar. 19, 2004]
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
[[Page 57]]
to recover any portion of the outstanding total from any party.
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 directed 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.
[64 FR 17487, Apr. 9, 1999, as amended at 69 FR 13189, Mar. 19, 2004]
Sec. 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]
Sec. 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
[[Page 58]]
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 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]
Sec. Appendix C to Part 210--Standard Disclosure for Accounts Receivable
Conversion--Notice
Notice to Customers Making Payment by Check
If you send us a check, it will be converted into an electronic
funds transfer (EFT). This means we will copy your check and use the
account information on it to electronically debit your account for the
amount of the check. The debit from your account will usually occur
within 24 hours, and will be shown on your regular account statement.
You will not receive your original check back. We will destroy your
original check, but we will keep the copy of it. If the EFT cannot be
processed for technical reasons, you authorize us to process the copy in
place of your original check. If the EFT cannot be completed because of
insufficient funds, we may try to make the transfer up to 2 times
[and we will charge you a one-time fee of $--, which we will also
collect by EFT].
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.
[69 FR 13189, Mar. 19, 2004]
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.
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.
[[Page 59]]
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]
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 Procedures for entering into a Withholding Agreement.
215.4 Relationship of Withholding Agreement to prior agreements.
Subpart C_Withholding Agreement
215.5 In general.
215.6 Parties.
215.7 Compliance by agencies.
215.8 Withholding certificates.
215.9 Change of legal residence by members of the Armed Forces.
[[Page 60]]
215.10 Agency withholding procedures.
215.11 Miscellaneous provisions.
215.12 Supersession, amendment and termination provisions.
Authority: 5 U.S.C. 5516, 5517, 5520; E.O. 11997, 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 Withholding Agreement which
the Secretary will enter into with any State, city or county which
qualifies to have the tax withheld.
[71 FR 2150, Jan. 13, 2006]
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.
(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.
[[Page 61]]
(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 (1) individuals in active duty
status (as defined in 10 U.S.C. 101(d)(1)) in regular and reserve
components of the Army, Navy, Air Force, Marine Corps, and Coast Guard,
and (2) 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. 10147.
(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 or his designee.
(m) State means a State, territory, possession, or commonwealth of
the United States, or the District of Columbia.
(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; 71 FR 2150, Jan. 13, 2006]
Subpart B_Procedures
Sec. 215.3 Procedures for entering into a Withholding Agreement.
(a) Subpart C of this part is the Withholding Agreement which the
Secretary will enter into with a State, city or county. A State, city or
county which does not have an existing withholding agreement with the
Secretary and wishes to enter into such an agreement shall indicate in a
letter its consent to be bound by the provisions of Subpart C. The
letter shall be sent to the Secretary by addressing the request to:
Assistant Commissioner, Federal Finance, Financial Management Service,
Department of the Treasury, 401 14th Street, SW., Washington, DC 20227.
The letter shall 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 Secretary will, by letter, notify the
State, city or county:
(1) That a Withholding Agreement has been entered into as of the
date of the Secretary's letter, or
[[Page 62]]
(2) That a Withholding Agreement cannot be entered into with the
State, city or county and the reason for that determination.
(c) The withholding of the State, city or county income or
employment tax shall commence within 90 days after the effective date of
the agreement.
[71 FR 2150, Jan. 13, 2006]
Sec. 215.4 Relationship of Withholding Agreement to prior agreements.
Jurisdictions which requested from Treasury an agreement other than
the Withholding Agreement set forth in Subpart C (formerly known as the
Standard Agreement) within 90 days after July 1, 1977, which request
Treasury subsequently approved, will continue to be governed by such
agreement. For all other jurisdictions, the Withholding Agreement set
forth in Subpart C replaced all prior agreements between the Secretary
and a taxing jurisdiction for the withholding of income or employment
taxes from the compensation of Federal employees, and any jurisdiction
which was a party to a prior agreement is presumed to have consented to
be bound by the Withholding Agreement set forth in Subpart C.
[71 FR 2150, Jan. 13, 2006]
Subpart C_Withholding Agreement
Sec. 215.5 In general.
This subpart is the text of the Withholding Agreement between the
Secretary and the State, city or county. The terms used in this
agreement are defined in Sec. 215.2 of this part.
[42 FR 33731, July 1, 1977. Redesignated and amended at 71 FR 2150, Jan.
13, 2006]
Sec. 215.6 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).
[42 FR 33731, July 1, 1977. Redesignated at 71 FR 2150, Jan. 13, 2006]
Sec. 215.7 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.
Redesignated at 71 FR 2150, Jan. 13, 2006]
Sec. 215.8 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
[[Page 63]]
of completed certificates shall be provided to the taxing authority by
agencies upon request.
[42 FR 33731, July 1, 1977. Redesignated at 71 FR 2150, Jan. 13, 2006]
Sec. 215.9 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.
[42 FR 33731, July 1, 1977. Redesignated at 71 FR 2150, Jan. 13, 2006]
Sec. 215.10 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:
(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.
[42 FR 33731, July 1, 1977. Redesignated at 71 FR 2150, Jan. 13, 2006]
Sec. 215.11 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
[[Page 64]]
(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.
Redesignated at 71 FR 2150, Jan. 13, 2006]
Sec. 215.12 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.
[42 FR 33731, July 1, 1977. Redesignated at 71 FR 2150, Jan. 13, 2006]
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.
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
[[Page 65]]
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 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]
[[Page 66]]
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 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
[[Page 67]]
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 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
[[Page 68]]
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 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
[[Page 69]]
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]
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
[[Page 70]]
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 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 and 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);
[[Page 71]]
(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 CORPORATIONS--Table of Contents
Sec.
224.1 What does this part cover?
224.2 Definitions.
224.3 When may a surety corporation provide a bond without appointing a
process agent?
224.4 When must a surety corporation appoint a process agent?
224.5 Who may a surety corporation appoint to be a process agent?
224.6 Where can I find a sample power of attorney form?
224.7 Where can I find a list of United States district court offices?
224.8 When must a surety corporation appoint a new process agent?
Authority: 31 U.S.C. 9306 and 9307.
Source: 71 FR 60848, Oct. 7 2006, unless otherwise noted.
Sec. 224.1 What does this part cover?
This part provides guidance on when a surety corporation must
appoint a service of process agent and how the surety corporation
complies with this requirement.
Sec. 224.2 Definitions.
For purposes of this regulation:
(a) Principal means the person or entity required to provide a
surety bond.
(b) Process agent means a resident agent for service of process.
(c) State means a State, the District of Columbia, or a territory or
possession of the United States.
Sec. 224.3 When may a surety corporation provide a bond without appointing a process agent?
A surety corporation may provide a bond without appointing a process
agent when the State where the bond is filed, the State where the
principal resides, and the State where the surety corporation is
incorporated are the same.
Sec. 224.4 When must a surety corporation appoint a process agent?
A surety corporation must appoint a process agent when either the
State where the bond is filed or the State where the principal resides
is different from the State where the surety corporation is
incorporated. In such a case, the surety corporation must appoint a
process agent in each such State that is different from the State where
the surety is incorporated.
Sec. 224.5 Who may a surety corporation appoint to be a process agent?
A surety corporation may appoint either of the following as process
agent--(a) An official of the State who is authorized or appointed under
the law of that jurisdiction to receive service of process on the surety
corporation; or
(b) An individual who resides in the jurisdiction of the district
court for the district in which a surety bond is filed and who is
appointed by the surety corporation by means of a power of attorney. A
certified copy of the power of attorney must be filed with the clerk of
the district court for the district in which a surety bond is to be
provided. In addition, the surety corporation
[[Page 72]]
must provide the clerk of the United States District Court at the main
office in each judicial district with the required number of
authenticated copies of the power of attorney for each divisional office
of the court within that judicial district.
Sec. 224.6 Where can I find a sample power of attorney form?
The Surety Bond Branch provides a sample form on its Web page
located at: http://www.fms.treas.gov/c570. While use of the sample form
is not required, any power of attorney provided should be substantially
the same as the sample form.
Sec. 224.7 Where can I find a list of United States district court offices?
A list of the divisional offices of the court in each judicial
district may be obtained from the Federal Judiciary, U.S. Courts Web
page at http://www.uscourts.gov, or by mail by writing to: Office of
Public Affairs, Administrative Office of the U.S. Courts, Washington, DC
20544.
Sec. 224.8 When must a surety corporation appoint a new process agent?
The surety corporation must immediately appoint a new process agent
whenever the authority of a process agent is terminated by reason of
revocation, disability, removal from the district, or any other cause.
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.
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
[[Page 73]]
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
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
[[Page 74]]
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. 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
[[Page 75]]
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;
(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
[[Page 76]]
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.
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
[[Page 77]]
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 Sec. Sec. 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 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
[[Page 78]]
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 Sec. Sec. 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
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]
[[Page 79]]
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 Electronic checks and substitute checks.
240.4 Presentment guarantees.
240.5 Limitations on payment; cancellation and distribution of proceeds
of checks.
240.6 Provisional credit; first examination; declination; final payment.
240.7 Declination protest.
240.8 Reclamation of amounts of paid checks.
240.9 Reclamation procedures; reclamation protests.
240.10 Offset.
240.11 Treasury Check Offset.
240.12 Processing of checks.
Indorsement of Checks
240.13 Indorsement by payees.
240.14 Checks issued to incompetent payees.
240.15 Checks issued to deceased payees.
240.16 Checks issued to minor payees.
240.17 Powers of attorney.
240.18 Lack of authority to shift liability.
240.19 Reservation of rights.
Appendix A to Part 240--Optional Forms for Powers of Attorney and Their
Application
Authority: 5 U.S.C. 301; 12 U.S.C. 391; 31 U.S.C. 321, 3327, 3328,
3331, 3334, 3343, 3711, 3712, 3716, 3717; 332 U.S. 234 (1947); 318 U.S.
363 (1943).
Source: 69 FR 61568, Oct. 19, 2004, unless otherwise noted.
General Provisions
Sec. 240.1 Scope of regulations.
(a) 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 based on claims
arising from the breach of presentment guarantees by presenting banks
and other indorsers of Treasury checks when checks bearing material
defects or alterations or forged disbursing officer (drawer) signatures
are presented for payment and are paid.
(b) Standards contained in this regulation supersede existing
Federal common law to the extent that they are inconsistent with Federal
common law rules relating to counterfeit checks. Under the provisions of
this regulation, the risk of loss on certain counterfeit checks is
placed on presenting banks and other indorsers unless Treasury fails to
timely reclaim on a check payment in accordance with 31 U.S.C. 3712(a)
and Sec. 240.8 of this regulation. Treasury will reclaim on counterfeit
checks that are deemed paid under Sec. 240.6(d) of this regulation when
a presenting bank or other indorser fails to make all reasonable efforts
to ensure that a check is an authentic Treasury check.
(c) Nothing in this regulation supercedes the rights or obligations
of Treasury or any other person that are set forth in Regulation CC, 12
CFR part 229, with respect to substitute checks, as defined therein.
[[Page 80]]
Sec. 240.2 Definitions.
(a) Administrative offset or offset, for purposes of this section,
has the same meaning as defined in 31 U.S.C. 3701(a)(1) and 31 CFR part
285.
(b) Agency means any agency, department, instrumentality, office,
commission, board, service, or other establishment of the United States
authorized to issue Treasury checks or for which checks drawn on the
United States Treasury are issued.
(c) Certifying agency means an agency authorizing the issuance of a
payment by a disbursing official in accordance with 31 U.S.C. 3325.
(d) Check or checks means an original check or checks; an electronic
check or checks; or a substitute check or checks.
(e) Check payment means the amount paid to a presenting bank by a
Federal Reserve Bank.
(f) Counterfeit check means a document that purports to be an
authentic check drawn on the United States Treasury, but in fact is not
an authentic check.
(g) Days means calendar days. For purposes of computation, the last
day of the period will be included unless it is a Saturday, Sunday, or
Federal holiday; the first day is not included. For example, if a
reclamation was issued on July 1, the 90 day protest period under Sec.
240.9(b) would begin on July 2. If the 90th day fell on a Saturday,
Sunday or Federal holiday, the protest would be accepted if received on
the next business day.
(h) Declination means the process by which Treasury refuses to make
final payment on a check, i.e., declines payment, by instructing a
Federal Reserve Bank to reverse its provisional credit to a presenting
bank.
(i) Declination date means the date on which the declination is
issued by Treasury.
(j) Disbursing official means an official, including an official of
the Department of the Treasury, the Department of Defense, any
Government corporation (as defined in 31 U.S.C. 9101), or any official
of the United States designated by the Secretary of the Treasury,
authorized to disburse public money pursuant to 31 U.S.C. 3321 or
another law.
(k) Drawer's signature means the signature of a disbursing official
placed on the front of a Treasury check as the drawer of the check.
(l) Electronic check means an electronic image of a check drawn on
the United States Treasury, together with information describing that
check, that meets the technical requirements for sending electronic
items to a Federal Reserve Bank as set forth in the Federal Reserve
Banks' operating circulars.
(m) Federal Reserve Bank means a Federal Reserve Bank (FRB) or a
branch of a Federal Reserve Bank.
(n) Federal Reserve Processing Center means a Federal Reserve Bank
center that images Treasury checks for archiving check information and
transmitting such information to Treasury.
(o) 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 depositary
institution (as defined in such Act) (12 U.S.C. 1811 et seq.) or is
eligible to apply to become an insured depositary institution under the
Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.); and
[[Page 81]]
(6) Any financial institution outside of the United States if it has
been designated by the Secretary of the Treasury as a depositary of
public money and has been permitted to charge checks to the General
Account of the United States Treasury.
(p) First examination means Treasury's initial review of a check
that has been presented for payment. The initial review procedures,
which establish the authenticity and integrity of a check presented to
Treasury for payment, may include reconciliation; retrieval and
inspection of the check or the best available image thereof; and other
procedures Treasury deems appropriate to specific circumstances.
(q) Forged or unauthorized drawer's signature means a drawer's
signature that has been placed on the front of a Treasury check by a
person other than:
(1) A disbursing official; or
(2) A person authorized to sign on behalf of a disbursing official.
(r) Forged or unauthorized indorsement means:
(1) An indorsement of the payee's name by another person who is not
authorized to sign for the payee; or
(2) An indorsement of the payee's name made by another person who
has been authorized by the payee, but who has not indorsed the check in
accordance with Sec. 240.4 and Sec. Sec. 240.13 through 240.17; or
(3) An indorsement added by a financial institution where the
financial institution had no authority to supply the indorsement; or
(4) A check bearing an altered payee name that is indorsed using the
payee name as altered.
(s) Guarantor means a financial institution that presents a check
for payment and any prior indorser(s) of a check.
(t) Material defect or alteration means:
(1) The counterfeiting of a check; or
(2) Any physical change on a check, including, but not limited to, a
change in the amount, date, payee name, or other identifying information
printed on the front or back of the check (but not including a forged or
unauthorized drawer's signature); or
(3) Any forged or unauthorized indorsement appearing on the back of
the check.
(u) Minor means the term minor as defined under applicable State
law.
(v) Monthly statement means a statement prepared by Treasury which
includes the following information regarding each outstanding
reclamation:
(1) The reclamation date;
(2) The reclamation number;
(3) Check identifying information; and
(4) The balance due, including interest, penalties, and
administrative costs.
(w) Original check means the first paper check drawn on the United
States Treasury with respect to a particular payment transaction.
(x) Payee means the person that the certifying agency designated to
receive payment pursuant to 31 U.S.C. 3528.
(y) Person means an individual, institution, including a financial
institution, or any other type of entity; the singular includes the
plural.
(z) 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
Treasury's General Account and present them to Treasury for payment
through a designated Federal Reserve Bank.
(aa) Provisional credit means the initial credit provided to a
presenting bank by a Federal Reserve Bank. Provisional credit may be
reversed by Treasury until the completion of first examination or final
payment is deemed made pursuant to Sec. 240.6(d).
(bb) Reasonable efforts means, at a minimum, verifying the existence
of the Treasury watermark on an original check. Based upon the facts at
hand, including whether a check is an original check, a substitute check
or an electronic check, reasonable efforts may require the verification
of other security features.
(cc) Reclamation means a demand for the amount of a check for which
Treasury has requested an immediate refund.
(dd) Reclamation date means the date on which a reclamation is
issued by Treasury. Normally, demands are sent
[[Page 82]]
to presenting banks or other indorsers within two business days of the
reclamation date.
(ee) Reclamation debt means the amount owed as a result of
Treasury's demand for refund of a check payment, and includes interest,
penalties and administrative costs assessed in accordance with Sec.
240.8.
(ff) Reclamation debtor means a presenting bank or other indorser of
a check from whom Treasury has demanded a refund in accordance with
Sec. Sec. 240.8 and 240.9. The reclamation debtor does not include a
presenting bank or other indorser who may be liable for a reclamation
debt, but from which Treasury has not demanded a refund.
(gg) Recurring benefit payment includes but is not limited to a
payment of money for any Federal Government entitlement program or
annuity.
(hh) Substitute check means a paper reproduction of a check drawn on
the United States Treasury that meets the definitional requirements set
forth at 12 CFR 229.2(aaa).
(ii) Treasury means the United States Department of the Treasury, or
when authorized, an agent designated by the Secretary of the Treasury or
his delegee.
(jj) Treasury Check Offset means the collection of an amount owed by
a presenting bank in accordance with 31 U.S.C. 3712(e).
(kk) Truncate means to remove a paper check from the forward
collection or return process and send to a recipient, in lieu of such
paper check, a substitute check or an electronic check.
(ll) U.S. securities means securities of the United States and
securities of Federal agencies and Government corporations for which
Treasury acts as the transfer agent.
(mm) Writing includes electronic communications when specifically
authorized by Treasury in implementing instructions.
Sec. 240.3 Electronic checks and substitute checks.
(a) Legal equivalence of electronic checks. An electronic check for
which a presenting bank has provided the guarantees described in Sec.
240.4 is the legal equivalent of an original or substitute check for
purposes of this part if the electronic check accurately represents all
of the information on the front and back of the check that the
presenting bank truncated. If a financial institution presents an
electronic check for payment and the check is subject to return,
Treasury may effect the return using an electronic check, but this part
does not create any right for the presenting bank to return the check to
the payee or any other person using an electronic check.
(b) Safekeeping of original checks. Any financial institution that
creates a substitute check or electronic check shall prevent
unauthorized access to the original or substitute check that was
truncated by storing the check, until it is destroyed, in a manner
consistent with federal banking agency guidelines for safeguarding
customer information.
Sec. 240.4 Presentment guarantees.
The guarantors of a check presented to the Treasury for payment are
deemed to guarantee to the Treasury all of the following:
(a) Indorsements. That all prior indorsements are genuine, whether
or not an express guarantee 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 to the
Treasury, in addition to other guarantees, that the person who so
indorsed had unqualified capacity and authority to indorse the check on
behalf of the payee.
(b) Alterations. That the check has not been materially altered.
(c) Drawer's signature. That the guarantors have no knowledge that
the signature of the drawer is forged or unauthorized.
(d) Authenticity. That the guarantors have made all reasonable
efforts to ensure that a check is an authentic Treasury check, not a
counterfeit check.
(e) Electronic check. If the check is an electronic check, that--
(1) The check accurately represents all of the information on the
front and back of the original or substitute check that was truncated
and meets the technical requirements for sending
[[Page 83]]
electronic items to a Federal Reserve Bank as set forth in the Federal
Reserve Banks' operating circulars;
(2) Treasury will not receive presentment of, or otherwise be
charged for, the electronic check, the original check, or a substitute
check (or a paper or electronic reproduction of any of the foregoing)
such that Treasury will be asked to make payment based on a check it
already has paid; and
(3) Treasury's receipt of the electronic check instead of the
original or substitute check will not result in the loss of Treasury's
ability to determine whether the check contains a material defect or
alteration.
(f) Substitute check. If the check is a substitute check, that the
guarantors make the warranties set forth at 12 CFR 229.52(a)(1) and (2)
and the indemnity set forth at 12 CFR 229.53.
Sec. 240.5 Limitations on payment; cancellation and distribution of proceeds of checks.
(a) Limitations on payment. (1) Treasury shall not be required to
pay any check that is not negotiated to a financial institution within
12 months after the date on which the check was issued.
(2) All checks 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 checks. The legend, or the inadvertent lack thereof, does
not limit, or otherwise affect, the rights of Treasury under the law.
(b) Cancellation and distribution of proceeds of checks. (1) Any
check that has not been paid and remains outstanding for more than 12
months after the issue date will be canceled by Treasury.
(2) The proceeds from checks canceled pursuant to paragraph (b)(1)
of this section will be returned to the payment certifying or
authorizing agency for ultimate credit to the appropriation or fund
account initially charged for the payment.
(3) On a monthly basis, Treasury will provide to each agency that
authorizes the issuance of checks a list of those checks issued for such
agency which were canceled during the preceding month pursuant to
paragraph (b)(1) of this section.
Sec. 240.6 Provisional credit; first examination; declination; final payment.
(a) Any credit issued by a Federal Reserve Bank to a financial
institution shall be a provisional credit until Treasury completes first
examination of the check, or as provided in paragraph (d) of this
section.
(b) Treasury shall have the right as a drawee to complete first
examination of checks presented for payment, to reconcile checks, and,
when appropriate, to make a declination on any check.
(c) Treasury will decline payment on a check when first examination
by Treasury establishes that:
(1) The check has a material defect or alteration;
(2) The check bears a forged or unauthorized drawer's signature;
(3) Treasury has already received presentment of, and made payment
on, a substitute check, electronic check or original check relating to
the check being presented, such that Treasury is being requested to make
payment on a check it has already paid;
(4) In the case of an electronic check, Treasury cannot determine
whether the check contains a material defect or alteration without
examining the original check or a better quality image of the check and
Treasury is on notice of a question of law or fact about whether the
check is properly payable; or
(5) In the case of a substitute check, Treasury has a warranty or
indemnity claim arising under 12 CFR 229.52 or 229.53.
(d) Treasury shall have a reasonable amount of time to complete
first examination. However, except as provided in paragraph (e) of this
section, if Treasury has not declined payment on a check within 60 days
after the check is presented to a Federal Reserve Processing Center for
payment, Treasury will be deemed to have made final payment on the
check.
(e) Notwithstanding the provisions of paragraph (d) of this section,
in accordance with 31 U.S.C. 3328(a)(2), if, upon presentment for
payment, Treasury is on notice of a question of law or fact about
whether a check is properly payable, Treasury may defer final payment
until the question is settled.
[[Page 84]]
(f) If a Federal Reserve Bank debits a financial institution's
reserve account as a result of an erroneous declination, Treasury will
promptly refund the amount of the payment.
Sec. 240.7 Declination protest.
(a) Who may protest. Only a presenting bank may protest the
declination of a check that it has presented to a Federal Reserve Bank
for payment.
(b) Basis for protest. Where Treasury, in accordance with Sec.
240.6, has made a declination of a check presented for payment and a
Federal Reserve Bank has reversed its provisional credit to the
presenting bank, the presenting bank may file a protest challenging the
factual basis for such declination. Protests may be filed challenging
the following determinations:
(1) Counterfeit checks. The presenting bank may offer evidence that
the check is not a counterfeit.
(2) Altered checks. The presenting bank may offer evidence that the
check is not altered.
(3) Checks bearing forged or unauthorized drawer's signatures. The
presenting bank may offer evidence that the drawer's signature was
authentic or was authorized.
(4) Checks bearing a forged or unauthorized indorsement. The
presenting bank may offer evidence that an indorsement on the back of
the check was not forged or was otherwise authorized in accordance with
the requirements of Sec. Sec. 240.13 through 240.17.
(5) Prior presentment. The presenting bank may offer evidence that
the check or a paper or electronic representation thereof has not
already been presented to, and paid by, Treasury.
(6) Adequacy of substitute check or electronic check. The presenting
bank may offer an original check or a copy of the check that is
sufficient to support a determination that the check does not contain a
material defect or alteration.
(c) Procedures for filing a protest. A declination protest must be
in writing, and must be sent to: Department of the Treasury, Financial
Management Service, Branch Manager, Financial Processing Division, Check
Reconciliation Branch, Room 700-A, 3700 East-West Highway, Hyattsville,
MD 20782, or to such other address as Treasury may publish in the
Treasury Financial Manual, which can be found at http://
www.fms.treas.gov. Treasury will not consider any protest unless it is
received within 90 days from the declination date.
(d) Review of a declination protest. The Director, Financial
Processing Division, or an authorized designee, will make every effort
to decide any protest properly submitted under this section within 60
days, and will notify the presenting bank of Treasury's decision. In
those cases where it is not possible to render a decision within 60
days, the Director, Financial Processing Division, or an authorized
designee, will notify the presenting bank of the delay. Neither the
Director, Financial Processing Division, nor an authorized designee,
will have any involvement in the decision to deny payment of a check
under Sec. 240.6 of this part.
(1) If, based on the evidence provided, the Director of the
Financial Processing Division, or an authorized designee, finds that the
presenting bank has met, by a preponderance of the evidence, the
criteria in paragraph (b) of this section, Treasury will reverse its
decision to decline payment on the check by directing a Federal Reserve
Bank to provide credit in the amount of the check to the presenting
bank.
(2) If, based on the evidence provided, the Director of the
Financial Processing Division, or an authorized designee, finds that the
presenting bank has failed to meet, by a preponderance of the evidence,
the criteria in paragraph (b) of this section, the declination will not
be reversed.
Sec. 240.8 Reclamation of amounts of paid checks.
(a) If, after making final payment in accordance with Sec. 240.6,
Treasury determines that any guarantor has breached a presentment
guarantee listed in Sec. 240.4, the guarantor shall be liable to
Treasury for the full amount of the check payment. Treasury may reclaim
the amount of the check payment from any such guarantor prior to:
(1) The end of the 1-year period beginning on the date that a check
is processed for payment by a Federal Reserve Processing Center; or
[[Page 85]]
(2) The expiration of the 180-day period beginning on the close of
the period described in paragraph (a)(1) of this section if a timely
claim under 31 U.S.C. 3702 is presented to the certifying agency.
(b) Treasury will not reclaim on a check that bears a forged or
unauthorized drawer's signature unless it has evidence that the
reclamation debtor had knowledge of the forged or unauthorized drawer's
signature.
(c) Treasury will not reclaim on a counterfeit check unless the
reclamation debtor has failed to make all reasonable efforts to ensure
that a check is an authentic check and not a counterfeit check. Guidance
on the key security features found on U.S. Treasury checks is available
on the FMS website at: http://www.fms.treas.gov/checkclaims/check--
security--new.pdf. Institutions may contact the FMS Questioned Documents
Branch at (202) 874-7640 for additional information about these security
features or to request training.
(d) Reclamation debts are due to be paid upon receipt of the
reclamation by the reclamation debtor. Interest, penalties, and
administrative costs associated with unpaid balances will accrue as
follows:
(1) Interest. Treasury will assess interest on the unpaid principal
of the reclamation debt beginning on the 61st day following the
reclamation date, and will calculate interest based on the rate
published annually by Treasury in accordance with 31 U.S.C. 3717.
Interest will continue to accrue until the full amount of the
reclamation is paid or Treasury determines that payment is not required.
(2) Penalties. Treasury will assess a penalty beginning on the 91st
day following the reclamation date. The penalty will be assessed in
accordance with 31 U.S.C. 3717 on the unpaid principal of the
reclamation debt, and will continue to accrue until the full amount of
the reclamation debt is paid or Treasury determines that payment is not
required.
(3) Administrative costs. Treasury will assess administrative costs
associated with the unpaid reclamation debt beginning on the 61st day
following the reclamation date. Administrative costs will continue to
accrue until the full amount of the reclamation debt is paid or Treasury
determines that payment is not required.
(e) If Treasury is unable to fully collect a reclamation debt from a
reclamation debtor, after pursuing all appropriate means of collection
(including, but not limited to, administrative offset in accordance with
Sec. 240.10 and Treasury Check Offset in accordance with Sec. 240.11),
Treasury will discharge the unpaid reclamation debt. See 31 CFR 903.5
(Discharge of indebtedness; reporting requirements). Treasury or the
certifying agency will report the amount of the unpaid reclamation debt
to the Internal Revenue Service in accordance with the requirements of
26 U.S.C. 6050P and 26 CFR 1.6050P-1.
Sec. 240.9 Reclamation procedures; reclamation protests.
(a) Reclamation procedures. (1) Treasury will send a ``REQUEST FOR
REFUND (CHECK RECLAMATION)'' to the reclamation debtor in accordance
with Sec. 240.8(a). This request will advise the reclamation debtor of
the amount demanded and the reason for the demand. Treasury will make
follow-up demands by sending at least three monthly statements to the
reclamation debtor. Monthly statements will identify any unpaid
reclamation debts (as defined at Sec. 240.2) and will contain or be
accompanied by notice to the reclamation debtor that:
(i) If the reclamation debt is not paid within 120 days of the
reclamation date, Treasury intends to collect the debt through
administrative offset in accordance with Sec. 240.10;
(ii) If the administrative offset is unsuccessful, Treasury intends
to collect the debt through Treasury Check Offset in accordance with
Sec. 240.11;
(iii) The reclamation debtor has an opportunity to inspect and copy
Treasury's records with respect to the reclamation debt;
(iv) The reclamation debtor may, by filing a protest in accordance
with Sec. 240.9(b), request Treasury to review its decision that the
reclamation debtor is liable for the reclamation debt; and
(v) The reclamation debtor has an opportunity to enter into a
written
[[Page 86]]
agreement with Treasury for the repayment of the reclamation debt. A
request for a repayment agreement must be accompanied by documentary
proof that satisfies Treasury that the reclamation debtor is unable to
repay the entire amount owed when due.
(2) Requests by a reclamation debtor for an appointment to inspect
and copy Treasury's records with respect to a reclamation debt and
requests to enter into repayment agreements must be sent in writing to:
Department of the Treasury, Financial Management Service, Financial
Processing Division, Reclamation Branch, Room 700D, PO Box 1849,
Hyattsville, MD 20788, or to such other address as Treasury may publish
in the Treasury Financial Manual, which can be found at http://
www.fms.treas.gov.
(3) If a reclamation debt remains unpaid for 90 days after the
reclamation date and if there is no unresolved protest associated with
the reclamation debt, the monthly statement will be annotated with a
notice that the reclamation debtor has until the next billing date to
make payment on the reclamation debt or Treasury will proceed to collect
the reclamation debt through offset in accordance with Sec. 240.10 and
Treasury Check Offset in accordance with Sec. 240.11.
(4) If Treasury determines that a reclamation has been made in
error, Treasury will abandon the reclamation. If Treasury already has
collected the amount of the reclamation from the reclamation debtor,
Treasury will promptly refund to the reclamation debtor the amount of
its payment. Treasury may refund the amount either by applying the
amount to another reclamation debt owed by the reclamation debtor in
accordance with this Part or other applicable law, or by returning the
amount to the reclamation debtor.
(b) Reclamation protests--(1) Who may protest. Only a reclamation
debtor may protest a reclamation.
(2) Basis for protest. Where Treasury, in accordance with Sec.
240.8 and paragraph (a) of this section, reclaims the amount of a check
payment, the reclamation debtor may file a protest challenging such
reclamation. Protests may be filed challenging the following
determinations:
(i) Counterfeit checks. The reclamation debtor may offer evidence
that it made all reasonable efforts to ensure that a check is authentic.
The reclamation debtor must include evidence that the check was examined
for a watermark as required under Sec. Sec. 240.2(bb) and 240.4.
Depending on the circumstances, FMS may require evidence that the
reclamation debtor also examined the check for evidence of additional
security features as described in guidance provided by Treasury or on
Treasury's behalf.
(ii) Altered checks. The reclamation debtor may offer evidence that
the check is not altered.
(iii) Checks bearing forged or unauthorized drawer's signatures. The
reclamation debtor may offer evidence that the reclamation debtor did
not have knowledge of the forged or unauthorized drawer's signature.
(iv) Checks bearing a forged or unauthorized indorsement. The
reclamation debtor may offer evidence that the indorsement was not
forged or was otherwise authorized in accordance with the requirements
of Sec. Sec. 240.13 through 240.17.
(v) Prior presentment. The presenting bank may offer evidence that
the check or a paper or electronic representation thereof has not
already been presented to, and paid by, Treasury.
(vi) Adequacy of substitute check or electronic check. The
presenting bank may offer an original check or a copy of the check that
is sufficient to support a determination that the check does not contain
a material defect or alteration.
(3) Procedures for filing a protest. A reclamation protest must be
in writing, and must be sent to: Department of the Treasury, Financial
Management Service, Financial Processing Division, Reclamation Branch,
Room 700D, P.O. Box 1849, Hyattsville, MD 20788, or to such other
address as Treasury may publish in the Treasury Financial Manual, which
can be found at http://www.fms.treas.gov.
(i) The reclamation protest must include supporting documentation
(including, but not limited to, affidavits,
[[Page 87]]
account agreements, and signature cards) for the purpose of establishing
that the reclamation debtor is not liable for the reclamation debt.
(ii) Treasury will not consider reclamation protests received more
than 90 days after the reclamation date.
(iii) Treasury may, at its discretion, consider information received
from a guarantor other than the reclamation debtor. However, in so
doing, Treasury does not waive any of its rights under this part, nor
does Treasury grant rights to any guarantor that are not otherwise
provided in this part.
(4) Review of a reclamation protest. The Director, Financial
Processing Division, or an authorized designee, will make every effort
to decide any protest properly submitted under this section within 60
days, and will notify the reclamation debtor of Treasury's decision. In
those cases where it is not possible to render a decision within 60
days, the Director, Financial Processing Division, or an authorized
designee, will notify the reclamation debtor of the delay. Neither the
Director, Financial Processing Division, nor an authorized designee,
will have any involvement in the process of making determinations under
Sec. 240.8(a) of this part or sending a ``REQUEST FOR REFUND (CHECK
RECLAMATION)'' under Sec. 240.9(a) of this part.
(i) Treasury will refrain from the collection activities identified
in Sec. Sec. 240.10 and 240.11 while a timely protest is being
considered. However, interest, penalties, and administrative costs will
continue to accrue and will be added to the reclamation debt until a
final determination on the protest has been made.
(ii) If, based on the evidence provided, the Director of the
Financial Processing Division, or an authorized designee, finds that the
reclamation debtor has met, by a preponderance of the evidence, the
criteria in paragraph (b)(2) of this section, Treasury will notify the
reclamation debtor, in writing, of his or her decision to terminate
collection and will refund any amounts previously collected for the
reclamation debt. Treasury may refund the amount either by applying the
amount to another reclamation debt owed by the reclamation debtor in
accordance with this Part or other applicable law, or by returning the
amount to the reclamation debtor.
(iii) If the Director, Financial Processing Division, or an
authorized designee, finds, by a preponderance of the evidence, that the
reclamation debtor is liable for the reclamation debt, Treasury will
notify the reclamation debtor, in writing, of his or her decision. If
the reclamation debtor has not paid the reclamation in full, the
reclamation debtor must pay any outstanding amounts in full within 30
days from the date of Treasury's decision. If the reclamation debtor
fails to pay the reclamation debt in full within that time frame,
Treasury will proceed to collect the reclamation debt through offset in
accordance with Sec. Sec. 240.10 and 240.11.
(5) Effect of protest decision. The notice provided to the
reclamation debtor under paragraph (b)(4)(iii) of this section shall
serve as the final agency determination under the Administrative
Procedure Act (5 U.S.C. 701, et seq.). No civil suit may be filed until
the reclamation debtor has filed a protest under this section, and
Treasury has provided notice of its final determination.
Sec. 240.10 Offset.
(a) If a reclamation debt remains unpaid for 120 days after the
reclamation date, Treasury will refer the reclamation debt, if eligible,
to Treasury's centralized offset program (see 31 CFR part 285) or
another Federal agency for offset in accordance with 31 U.S.C. 3716.
Prior to making a referral for offset, Treasury, in accordance with
Sec. 240.9(a)(3), will send at least one monthly statement to the
reclamation debtor informing the reclamation debtor that Treasury
intends to collect the reclamation debt by administrative offset and
Treasury Check Offset.
(b) If a reclamation debtor wishes to make payment on a reclamation
debt referred for offset, the reclamation debtor should contact Treasury
at the address listed in Sec. 240.9(b) to resolve the debt and avoid
offset.
(c) If Treasury is unable to collect a reclamation debt by use of
the offset described in paragraph (a) of this section, Treasury shall
take such action
[[Page 88]]
against the reclamation debtor as may be necessary to protect the
interests of the United States, including, but not limited to, Treasury
Check Offset in accordance with Sec. 240.11, or referral to the
Department of Justice.
(d) If Treasury effects offset under this section and it is later
determined that the reclamation debtor already had paid the amount of
the reclamation debt, or that a reclamation debtor which had timely
filed a protest was not liable for the amount of the reclamation,
Treasury will promptly refund to the reclamation debtor the amount of
its payment. Treasury may refund the amount either by applying the
amount to another reclamation debt owed by the reclamation debtor in
accordance with this Part or other applicable law, or by returning the
amount to the reclamation debtor.
Sec. 240.11 Treasury Check Offset.
(a) If Treasury is unable to effect collection pursuant to
Sec. Sec. 240.8, 240.9, or 240.10, of this part, Treasury will collect
the amount of the reclamation debt through Treasury Check Offset.
Treasury Check Offset occurs when, at the direction of the Treasury, a
Federal Reserve Bank withholds, that is, offsets, credit from a
presenting bank. The amount of credit offset is applied to the
reclamation debt owed by the presenting bank. 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 reclamation debt in full,
or that a presenting bank was not liable for the amount of the
reclamation debt, Treasury will promptly refund to the presenting bank
the amount of its overpayment. 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
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.
Sec. 240.12 Processing of checks.
(a) Federal Reserve Banks. (1) Federal Reserve Banks must cash
checks for Government disbursing officials when such checks are drawn by
the disbursing officials to their own order, except that payment of such
checks must be refused if:
(i) A check bears a material defect or alteration;
(ii) A check was issued more than one year prior to the date of
presentment; or
(iii) The Federal Reserve Bank has been notified by Treasury, in
accordance with Sec. 240.15(c), that a check was issued to a deceased
payee.
(2) Federal Reserve Banks are not required to cash checks presented
directly to them by the general public.
(3) As a depositary 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 provisional credit therefore in accordance with
their current Time Schedules and charge the amount of the checks cashed
or otherwise received to the General Account of the United States
Treasury, subject to first examination and payment by Treasury;
(iii) Forward payment records and requested checks to Treasury; and
(iv) Release the original checks and substitute checks to a
designated Regional Records Services Facility upon notification from
Treasury.
(4) If a check is to be declined under Sec. 240.6, Treasury will
provide the Federal Reserve Bank with notice of declination upon the
completion of first examination. Federal Reserve Banks must give
immediate credit therefor to Treasury's General Account, thereby
[[Page 89]]
reversing the previous charge to the General Account for such check.
(5) Treasury authorizes each Federal Reserve Bank to release a copy
of the check to the presenting bank when payment is declined.
(b) Treasury General Account (TGA) designated depositaries outside
the United States. (1) Financial institutions outside the United States
designated by Treasury as depositaries of public money in accordance
with 31 U.S.C. 3303 and permitted to charge checks to the General
Account of the United States Treasury in accordance with Treasury
implementing instructions shall be governed by the operating
instructions contained in the letter of authorization to them from
Treasury and are, as presenting banks, subject to the provisions of
Sec. Sec. 240.4, 240.8, and 240.9.
(2) If a check is to be declined under Sec. 240.6, Treasury will
provide the presenting bank with notice of declination upon the
completion of first examination and will provide the presenting bank
with a copy or image of the check. Such presenting bank must give
immediate credit therefore to the General Account of the United States
Treasury, thereby reversing the previous charge to the Account for such
check. Treasury authorizes the designated Federal Reserve Bank to return
to such presenting bank the original check when payment is declined in
accordance with Sec. 240.5(a) or Sec. 240.15(c).
(3) To ensure complete recovery of the amount due, reclamation
refunds require payment in United States dollars with checks drawn on or
payable through United States financial institutions located in the
United States. Reclamation refunds initiated by financial institutions
outside of the United States must be sent through their headquarters or
U.S. correspondent financial institution only. The payments should be
accompanied by documentation identifying the check that was the subject
of the reclamation (such as a copy of the reclamation notice or the
current monthly statement). Reclamation refunds shall not be deposited
to Treasury's General Account.
(4) Additional information relating to designated depositaries
outside the United States may be found in Volume VI, Chapter 2000, of
the Treasury Financial Manual, which can be found at http://
www.fms.treas.gov.
Indorsement of Checks
Sec. 240.13 Indorsement by payees.
(a) General requirements. Checks shall be indorsed by the named
payee or by another on behalf of such named payee as set forth in this
part.
(b) Acceptable indorsements. (1) A check is properly indorsed when:
(i) The check is indorsed by the payee in a form recognized by
general principles of law and commercial usage for negotiation, transfer
or collection of negotiable instruments.
(ii) The check is indorsed by another on behalf of the named payee,
and sufficiently indicates that the indorser has indorsed the check on
behalf of the payee 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,
Sec. Sec. 240.14, 240.15, and 240.17(f) specify the addition of an
indication in specified situations of the actual capacity in which the
person other than the named payee is indorsing.
(iii) Absent a signature, the check is indorsed ``for collection''
or ``for deposit only to the credit of the within named payee or
payees.'' The presenting bank shall be deemed to guarantee good title to
checks without signatures to all subsequent indorsers and to Treasury.
(iv) The check is indorsed by a financial institution under the
payee's authorization.
(2) Indorsement of checks by a duly authorized fiduciary or
representative. The individual or institution accepting a check from a
person other than the named payee is responsible for determining whether
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 Treasury in the event of a dispute.
[[Page 90]]
(3) 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 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 instructions. XYZ [Name of financial institution].'' 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, under the payee's 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.
(4) Indorsement of checks drawn in favor of financial institutions.
All checks drawn in favor of a financial institution, for credit to the
account of a person designating payment so to be made, must be indorsed
in the name of the financial institution as payee in the usual manner.
However, no check drawn in favor of a financial institution for credit
to the account of a payee may be negotiated by the financial institution
after the death of the payee.
(c) Unacceptable indorsements. (1) A check is not properly indorsed
when the check is signed or otherwise is indorsed by a person without
the payee's consent or authorization.
(2) Failure to include the signature of the person signing the check
as required by paragraph (b)(1)(ii) of this section will create a
rebuttable presumption that the indorsement is a forgery and is
unacceptable.
(3) Failure to include sufficient indication of the indorser's
authority to act on behalf of the payee as required by paragraph
(b)(1)(ii) of this section will create a rebuttable presumption that the
indorsing person is not authorized to indorse a check for the payee.
Sec. 240.14 Checks issued to incompetent payees.
(a) Handling of checks when a guardian or other fiduciary has been
appointed. (1) A guardian appointed in accordance with applicable State
law, or a fiduciary appointed in accordance with other applicable law,
may indorse checks issued for the following classes of payments the
right to which under law does not terminate with the death of the payee:
payments for the redemption of currencies or for principal and/or
interest on U.S. securities; payments for tax refunds; and payments for
goods and services.
(i) A guardian or other fiduciary indorsing any such check on behalf
of an incompetent payee, must include, as part of the indorsement, an
indication of the capacity in which the guardian or fiduciary is
indorsing. An example would be: ``John Jones by Mary Jones, guardian of
John Jones.''
(ii) When a check indorsed in this fashion is presented for payment
by a financial institution, it will be paid by Treasury without
submission 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 Treasury in the event of a
dispute.
(2) A guardian or other fiduciary may not indorse a check issued for
any class of payment other than one specified in paragraph (a)(1) of
this section. When a check other than one specified in paragraph (a)(1)
of this section is received by a guardian or other fiduciary, the check
must be returned to the certifying agency with information as to the
incompetence of the payee and documentary evidence showing the
appointment of the guardian or other fiduciary in order that a
replacement check, and future checks, may be drawn in favor of the
guardian or other fiduciary.
(b) Handling of checks when a guardian or other fiduciary has not
been appointed. If a guardian or other fiduciary has not been appointed,
all checks issued to an incompetent payee must be returned to the
certifying agency for determination as to whether, under applicable law,
payment is due and to whom it may be made.
(c) Handling of certain checks by an attorney-in-fact.
Notwithstanding paragraph (a)(2) of this section, if a check was issued
for a class of payments the right to which under law terminates
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upon the death of the beneficiary, such as a recurring benefit payment
or annuity, the check may be negotiated under a durable special power of
attorney or springing durable special power of attorney subject to the
restrictions enumerated in Sec. 240.17. After the end of the six-month
period provided in Sec. Sec. 240.17(d) and (e), such checks must be
handled in accordance with paragraph (a)(2) of this section.
Sec. 240.15 Checks issued to deceased payees.
(a) Handling of checks when an executor or administrator has been
appointed. (1) An executor or administrator of an estate that has been
appointed in accordance with applicable State law may indorse checks
issued for the following classes of payments the right to which under
law does not terminate with the death of the payee: payments for the
redemption of currencies or for principal and/or interest on U.S.
securities; payments for tax refunds; and payments for goods and
services.
(i) An executor or administrator indorsing any such check must
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.''
(ii) When a check indorsed in this fashion is presented for payment
by a financial institution, it will be paid by 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 Treasury in the event of a
dispute.
(2) An executor or administrator of an estate may not indorse a
check issued for any class of payment other than one specified in
paragraph (a)(1) of this section. Other checks, such as recurring
benefit payments and annuity payments, may not be negotiated after the
death of the payee. Such checks must be returned to the certifying
agency for determination as to whether, under applicable law, payment is
due and to whom it may be made.
(b) Handling of checks when an executor or administrator has not
been appointed. If an executor or administrator has not been appointed,
all checks issued to a deceased payee must be returned to the certifying
agency for determination as to whether, under applicable law, payment is
due and to whom it may be made.
(c) Handling of checks when a certifying agency learns, after the
issuance of a recurring benefit payment check, that the payee died prior
to the date of issuance. (1) A recurring benefit payment check, issued
after a payee's death, is not payable. As a consequence, when a
certifying agency learns that a payee has died, the certifying agency
must give immediate notice to Treasury, as prescribed at Volume I, Part
4, Chapter 7000 of the Treasury Financial Manual, which can be found at
http://www.fms.treas.gov. Upon receipt of such notice from a certifying
agency, Treasury will instruct the Federal Reserve Bank to refuse
payment of the check upon presentment. Upon receipt of such instruction
from Treasury, the Federal Reserve Bank will make every appropriate
effort to intercept the check. If the check is successfully intercepted,
the Federal Reserve Bank will refuse payment, and will return the check
unpaid to the presenting bank with an annotation that the payee is
deceased. If a financial institution learns that a date of death
triggering action under this section is erroneous, the financial
institution must advise the payee to contact the payment certifying
agency.
(2) Nothing in this section shall limit the right of Treasury to
institute reclamation proceedings under the provisions of Sec. Sec.
240.8 and 240.9 with respect to a check issued to a deceased payee that
has been negotiated and paid over a forged or unauthorized indorsement.
Sec. 240.16 Checks issued to minor payees.
(a) Checks in payment of principal and/or interest on U.S.
securities that are issued to minors may be indorsed by:
(1) Either parent with whom the minor resides; or
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(2) If the minor does not reside with either parent, by the person
who furnishes the minor's chief support.
(b) The parent or other person indorsing on behalf of the minor must
present with the check the indorser's signed statement giving the
minor's age, and stating that the payee either resides with the parent
or receives his or her chief support from the person indorsing on the
minor's behalf and that the proceeds of the check will be used for the
minor's benefit.
Sec. 240.17 Powers of attorney.
(a) Specific powers of attorney. Any check may be negotiated under a
specific power of attorney executed in accordance with applicable State
or Federal law after the issuance of the check and describing the check
in full (check serial and symbol numbers, date of issue, amount, and
name of payee).
(b) General powers of attorney. Checks may be negotiated under a
general power of attorney executed, in accordance with applicable State
or Federal law, in favor of a person for the following classes of
payments:
(1) Payments for the redemption of currencies or for principal and/
or interest on U.S. securities;
(2) Payments for tax refunds, but subject to the limitations
concerning the mailing of Internal Revenue refund checks contained in 26
CFR 601.506(c); and
(3) Payments for goods and services.
(c) Special powers of attorney. Checks issued for classes of
payments other than those specified in paragraph (b) of this section,
such as a recurring benefit payment, may be negotiated under a special
power of attorney executed in accordance with applicable State or
Federal law, which describes the purpose for which the checks are
issued, names a person as attorney-in-fact, and recites that the special
power of attorney is not given to carry into effect an assignment of the
right to receive such payment, either to the attorney-in-fact or to any
other person.
(d) Durable special powers of attorney. A durable special power of
attorney is a special power of attorney that continues despite the
principal's later incompetency, and is created by the principal's use of
words explicitly stating such intent. Classes of checks other than those
specified in paragraph (b) of this section may be negotiated under a
durable special power of attorney executed in accordance with applicable
State or Federal law, which describes the purpose for which the checks
are issued, names a person as attorney-in-fact, and recites that the
special power of attorney is not given to carry into effect an
assignment of the right to receive such payment, either to the attorney-
in-fact or to any other person. For the purpose of negotiating Treasury
checks, durable special powers of attorney are effective only during the
six-month period following a determination that the named payee is
incompetent.
(e) Springing durable special powers of attorney. A springing
durable special power of attorney is similar to a durable power of
attorney except that its terms do not become effective until the
principal's subsequent incompetence. As with a durable special power of
attorney, a springing durable special power of attorney is created by
the principal's use of language explicitly stating that its terms become
effective at such time as the principal is determined to be incompetent.
Classes of checks other than those specified in paragraph (b) of this
section may be negotiated under a springing durable special power of
attorney executed in accordance with applicable State or Federal law,
which describes the purpose for which the checks are issued, names a
person as attorney-in-fact, and recites that the springing durable
special power of attorney 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. For the purpose of negotiating Treasury
checks, springing durable special powers of attorney are effective only
during the six-month period following a determination that the named
payee is incompetent.
(f) Proof of authority. Checks indorsed by an attorney-in-fact must
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
[[Page 93]]
a financial institution, will be paid by 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
Treasury in the event of a dispute.
(g) Revocation of powers of attorney. Notwithstanding any other law,
for purposes of negotiating Treasury checks, all powers of attorney are
deemed revoked by the death of the principal and may also be deemed
revoked by notice from the principal to the parties known, or reasonably
expected, to be acting on the power of attorney.
(h) Optional use forms. Optional use power of attorney forms are
listed in the appendix to this part. These forms are available on the
FMS website at: http://www.fms.treas.gov/ checkclaims/ regulations.html.
Sec. 240.18 Lack of authority to shift liability.
(a) This part neither authorizes nor directs a financial institution
to debit the account of any person or to deposit any funds from any
account into a suspense account or escrow account or the equivalent.
Nothing in this part shall be construed to affect a financial
institution's contract with its depositor(s) under authority of state
law.
(b) A financial institution's liability under this part is not
affected by any action taken by it to recover from any person the amount
of the financial institution's liability to the Treasury.
Sec. 240.19 Reservation of rights.
The Secretary of the Treasury reserves the right, in the Secretary's
discretion, to waive any provision(s) of this regulation not otherwise
required by law.
Sec. Appendix A to Part 240--Optional Forms for Powers of Attorney and
Their Application
FMS Form 231--General Power of Attorney (Individual). This general
power of attorney form may be executed by an individual, unincorporated
partnership, 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.
FMS Form 232--Specific Power of Attorney (Individual). This specific
power of attorney form may be executed by an individual, unincorporated
partnership, or sole owner to authorize the indorsement of any class of
check drawn on the United States Treasury. To be valid, the form must be
executed after the issuance of the check and must describe the check in
full, including the check serial and symbol numbers, date of issue,
amount, and name of the payee.
FMS Form 233--Special Power of Attorney (Individual). This special
power of attorney form may be executed by an individual, unincorporated
partnership, or sole owner, to authorize the indorsement of payments
other than those listed under FMS Form 231, such as recurring benefit
payments. It may name any person (as the term person is defined in 31
CFR part 240) as attorney-in-fact, but must describe the purpose for
which the checks are issued and recite 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. A special power of attorney is
not effective for purposes of negotiating checks issued after the payee
is determined to be incompetent, unless the payee has indicated that the
special power of attorney is to: (1) Remain effective following a
determination that the principal is incompetent (a durable special power
of attorney); or (2) become effective following a determination that the
principal is incompetent (a springing durable special power of
attorney). In no instance may a special power of attorney be used as the
basis for negotiation of a check drawn on the United States Treasury
more than six months after a determination that the principal is
incompetent.
FMS Form 234--Specific Power of Attorney (Corporation). This general
power of attorney form may be executed by a corporation to authorize the
indorsement by an attorney-in-fact for the classes of payments listed
under FMS Form 231. When authority is given to an officer of the
corporation to execute a power of attorney authorizing a third person to
indorse and collect checks drawn on the United States Treasury in the
name of the corporation, the power of attorney on FMS Form 234 should be
accompanied by FMS Form 235 (Resolution by Corporation Conferring
Authority Upon an Officer to Execute a Power of Attorney for the
Collection of Checks Drawn on the Treasurer of the United States),
executed by the officer authorized herein to execute such a power.
FMS Form 236--Specific Power of Attorney (Corporation). This
specific power of attorney form may be executed by a corporation to
authorize the indorsement by an attorney-in-fact of any class of check
drawn on the United States Treasury. To be valid, the form must be
executed after the issuance of the check and must describe the check in
[[Page 94]]
full, including the check serial and symbol numbers, date of issue,
amount, and name of the payee. When authority is given to an officer of
the corporation to execute a power of attorney authorizing a third
person to indorse and collect checks drawn on the United States Treasury
in the name of the corporation, the power of attorney on FMS Form 236
should be accompanied by FMS Form 235 (Resolution by Corporation
Conferring Authority Upon an Officer to Execute a Power of Attorney for
the Collection of Checks Drawn on the Treasurer of the United States),
executed by the officer authorized herein to execute such a power.
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.
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
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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.