The Cash Management Improvement Act of 1990 (CMIA) is a federal regulation created for the purpose of ensuring “greater efficiency, effectiveness, and equity in the exchange of funds between the Federal Government and the States.” The main intent of CMIA is for states to draw in federal funds exactly when they are needed and for federal programs to be "interest-neutral".
- Efficiency – minimizing the time between the transfer of funds to the State and the payout of those funds for program purposes. (i.e. The State should draw in funds on the exact day that they are paid out – or when they leave the State’s bank.)
- Effectiveness – ensuring funds will be available when requested. The TSA, also called the CMIA agreement, specifies how and when funds will be transferred under major Federal assistance programs.
- Equity – compensating the party that is “out-of-pocket” when funding a Federal program. In general, interest is due to the State if it must use its own funds for program purposes when there is valid obligational authority. Conversely, interest is payable by the State if it holds Federal funds in its account prior to disbursement for program purposes.
Prior to the enactment of CMIA, many states frequently drew in federal funds prior to their expenditure, thus causing the federal government to lose interest revenue. Conversely, federal funds were also often not available to states, causing states to advance their own funds for federal purposes and to lose interest revenue. The intent of CMIA is that, to the extent possible, programs will be interest-neutral, resulting in no interest gained or lost by either federal or state governments.
CMIA regulations require each state to enter into a Treasury-State Agreement (TSA) with the US Treasury and to submit an annual interest report. The TSA is a means of quantifying drawdown procedures and interest calculation techniques for all of Vermont’s major programs. The annual interest report is compiled in December each year which results in an exchange of interest with the US Treasury for CMIA programs. The basis for the interest report is the terms of the TSA. Essentially, if the terms are not followed, an interest liability is created.
WHICH PROGRAMS ARE REGULATED BY CMIA?
All programs listed in SAM (those programs that have been assigned a CFDA #) fall under the rules of the Cash Management Improvement Act. CMIA does not, however, apply the same rules to all programs. It puts programs into one of two categories: Major or Non-major.
- Major programs (those that equal or exceed 6% of the State's total federal expenditures) must be covered in the Treasury-State Agreement. These programs are also subject to inclusion in the Annual Interest Report.
- Non-major programs are those that fall below the major program threshold. These programs are subject to the rules in Subpart B of 31 CFR 205. These programs are not required to be covered in the TSA and interest liabilities are not calculated, but States and Federal program agencies are responsible for minimizing the time between the transfer and payout of funds.
Non-major programs are also subject to the requirements of Finance and Management Policy #2-Cash Management Policy for Federal Funds.
The following are the State of Vermont's recent approved Treasury-State Agreements: