Guidance for Drawdown of Funds During EDCAPS/GAPS Transition

I. Reminders

All payment requests must be submitted by grant PR/Award Number. Requests may be submitted via the Internet at http://e-grants or by calling the GAPS Hot Line at 1-888-336-8930.

The GAPS payment systems will be unchanged after the conversion in relation to user activities. Thus, no new procedures are required for you to continue receiving funds under the ACH or FEDWIRE payment system that you currently use.

II. CMIA Procedures for States and Certain State Institutions of Higher Education

The following special procedures have been authorized by the U.S. Treasury, Financial Management Service (FMS). FMS will also advise State CMIA Coordinators of these procedures.

A. Grants to states subject to the CMIA

Consistent with the purposes of the CMIA, a state must minimize the time elapsing between the transfer of funds from the U.S. Treasury and the state's disbursement of those funds for program purposes. The CMIA Treasury-State Agreement (TSA) establishes the terms and conditions for the timing and drawdown of these funds. FMS has advised the Department that during this transition period states have three options.

(1) Estimate expenditures needed during the shutdown period, then draw down half of that estimate on the day that GAPS shuts down and the second half on the day GAPS becomes available again. This is the preferred funding technique and will produce an interest-neutral outcome for CMIA purposes.

(2) If the state's Treasury State Agreement (TSA) permits the early drawdown of funds (pre-issuance funding), the state may estimate expenditures needed during the shutdown period and draw down those estimated funds on January 11. This will result in an interest liability for the state for the period of time the funds are deposited into the state's account until the funds are paid out for program purposes (31 CFR 205.12).

(3) Use state funds during the shutdown period and draw down actual expenditures for the period of the shutdown on the day that GAPS becomes available again. This will result in a federal interest liability. FMS advises that this latter option is the least preferred alternative but is available to accommodate the situation where the selection of another option is administratively burdensome. Option (3) will result in the state using its funds during the transition period but not receiving CMIA interest compensation until the CMIA interest exchange in March of 2003 (31 CFR 205.13(e).

B. Institutions of higher education where assistance is subject to the CMIA

Some state institutions of higher education are considered part of the state and are subject to CMIA coverage. Because FMS views the Pell Grant program as covered by the CMIA, FMS permits states to include the Pell Grant program under a state's TSA if the program otherwise meets CMIA criteria. If the Pell Grant program is covered by a state's TSA, the institution should use one of the three options outlined in II. A. above in drawing Pell Grant funds.

C. Time line for processing payment requests for grants and the Pell Grant funds covered by the CMIA

III. Procedures for Grants and SFA Programs That Are Not Subject to the CMIA

A. If assistance to a state under a grant or Pell Grant program is not subject to the CMIA, please include in the last payment request for each grant or SFA program those funds needed to cover the immediate cash needs of that assistance during the entire period of unavailability before GAPS becomes unavailable.

B. If assistance is provided to any entity other than a state under a grant or SFA program, please include in the last payment request for each grant or program those funds needed to cover the immediate cash needs of that assistance during the entire period of unavailability before GAPS becomes unavailable.

Note: For Non-CMIA programs other than SFA programs, the regulations implementing OMB circulars A-102 and 110 (34 CFR 80.21(i) and 74.22(l)), require that interest earned between receipt of funds from ED and disbursement of those funds by the recipient must be held in interest bearing accounts (unless certain exceptions apply). Thus:

If a grant or assistance to a government other than an institution of higher education is not subject to the CMIA, the government may retain up to $100.00 per year to pay the administrative expenses of maintaining the account. All other interest must be remitted to this Department. Section 80.21(i).

For grants and assistance to all other recipients, the recipient may retain up to $250.00 to cover the administrative expenses of maintaining the account. All other interest must be remitted to the Department of Health and Human Services (HHS), which accepts these payments on behalf of the federal government. Section 74.22(l).

For SFA programs, interest rules are set forth at 34 CFR 668.166(c)

C. Here is the timeline for processing payment requests for grants and assistance to entities other than a state.

IV. Procedures for Institutions Receiving Funds on a Reimbursement Basis

Institutions, which anticipate funding needs during the January 11 through 21 shutdown period, must provide reimbursement documents to their respective reimbursement analysts by close of business on Friday, January 4. Please call the GAPS Payee Hot Line, 1-888-336-8930, with any questions.