Dear County and District Superintendents, County and District Chief Business Officials, and Charter School Administrators:

Interest Earned on Federal Funds

The California Department of Education (CDE) is issuing this letter to remind local educational agency (LEA) fiscal officials of the federal administrative requirements for remitting interest earned on advances of federal program funds.

Title 2, Code of Federal Regulations, Section 200.305, requires grantees and sub‑grantees to remit interest earned on advances to the federal agency. Grantees or sub-grantees may retain interest amounts up to $500 per year for related administrative expenses.

LEAs should remit to the CDE only the interest earned on federal program advances administered by the CDE; interest earned on non-CDE administered program advances should be calculated separately and remitted to the Federal Treasury via the appropriate state or federal agency. In addition, the cash balances of federal reimbursement programs should be omitted in calculating federal interest due to the Federal Treasury.

The CDE monitors and updates the list of federally reimbursed programs that are typically excluded from the federal interest calculations on an ongoing basis, since funding criteria can change and opportunities for new funding periodically occur. This list was recently updated and is available on CDE’s website at https:‌//‌www.‌cde.‌ca.‌gov/‌fg‌/ac/co/‌reimbursableprograms.asp. However, the most effective way to determine if funding is a reimbursement or an advance is to refer to the Grant Award Notification (GAN) letter or similar document.

To assist LEAs in complying with the federal administrative requirements for interest earned on federal program advances, please see the CDE’s guidelines for calculating and remitting interest at http://www.cde.ca.gov/fg/ac/co/intfedfunds-calculating.asp. The CDE requires LEAs to calculate and report interest on a quarterly basis by email to cashmanagement@cde.ca.gov. The information must specify the amount of interest due or that no interest is due and include the following:

1. Documentation of the County Treasurer’s interest rates utilized in the interest calculations.
   
2. The LEA’s interest calculations. The calculations should be provided in Excel (new requirement) and must include the specific resource codes used in the calculation.
   
3. The County-District-School code and the time period(s) of the interest calculation (e.g., October 1, 2023 through December 31, 2023).
4. For the fourth quarter interest calculation only, include a copy of the check(s) submitted to the CDE’s Cashier’s Office as remittance of interest earned for the fiscal year. The CDE recommends LEAs wait until their last quarterly report of the fiscal year to remit interest.

Note that unless one of the following exceptions apply, all LEAs receiving advanced federal funds from CDE are required to place those funds in an interest-bearing account and submit a quarterly interest report even if no interest is due. LEAs that meet one of the below exceptions should submit an email to the CDE advising of the exception in lieu of the interest report.

• The non-Federal entity receives less than $250,000 in Federal awards per year.
  
• The best reasonably available interest-bearing account would not be expected to earn interest in excess of $500 per year on Federal cash balances.
  
• The depository would require an average or minimum balance so high that it would not be feasible within the expected Federal and non-Federal cash resources.
  
• A foreign government or banking system prohibits or precludes interest-bearing accounts.

Interest payments for the July 1, 2023 – June 30, 2024 period are due to the CDE by September 30, 2024. The CDE is responsible for ensuring that LEAs comply with federal administrative requirements. Therefore, if the LEA does not properly calculate and timely report and remit interest earned on federal funds, the CDE will be obligated to consider further action, which may include a monitoring review, audit, and/or the withholding of federal program funds.

Remittances must be sent to the following address:

California Department of Education

P.O. Box 515006

Sacramento, CA 95851

Attention: Cashier’s Office

In accordance with Title 2, Code of Federal Regulations, Section 200.305, interest remitted to CDE is immediately forwarded to the United States Department of Education and cannot be returned to the LEA. Therefore, please ensure your calculations and payments are accurate prior to submission.

If you have any questions or need assistance regarding the federal administrative requirements for interest earned on federal program advances, please contact the CDE, Audits and Investigations Division, at 916-322-2288, or by email at cashmanagement@cde.ca.gov.

Sincerely,

Alice M. Lee
Director, Audits and Investigations Division