August 9, 2019

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 is currently in the process of updating the list of federally reimbursed programs that are typically excluded from the federal interest calculations. Please note that this list changes on an ongoing basis. Therefore, the most effective way to determine if the funding is a reimbursement or an advance is to refer to the funding notification letter. This will ensure that your calculations include the appropriate resources and the reimbursement programs are not included when calculating interest earned.

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 reporting period and amount of interest due, or zero, if no interest is due. Please also include the following:

1. Documentation of the County Treasurer’s interest rates utilized in the interest calculations;
2. The LEA’s interest calculations, including the specific resource codes; and
3. The County-District-School code and the time period(s) of the interest calculation (e.g., October 1, 2017 through December 31, 2017).

The CDE is responsible for ensuring that LEAs are in compliance with federal administrative requirements. Therefore, if the LEA does not properly calculate, 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. 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,

Kimberly A. Tarvin, CPA
Director, Audits and Investigations Division

KAT:ac