Cash Management Improvement Act of 1990.

• Author: Bruebaker, Gary
• Position: Includes related article

The CMIA exemplifies how state and finance officials and their federal counterparts can work together to increase overall efficiency and reduce costs relating to the transfer of nearly $150 billion in funds between the federal and state governments.

In 1983, under the general auspices of the National Association of State Auditors, Comptrollers and Treasurers (NASACT), a federal-state task force was appointed to review the equity question of how federally funded programs were being managed in terms of the actual receipt and expenditure of program funds. The 12-member task force comprised six senior officials from the federal government, including Treasury, Office of Management and Budget, Health and Human Services, and others, and six state officials, including state controllers, treasurers and program agencies. The early deliberations of this group resulted in a June 1983 Memorandum of Understanding, the provisions of which reflected the goodwill by all parties to find an equitable approach to intergovernmental cash management.

As the task force continued to examine the exchange of funds between federal government agencies and their state counterparts, pilot tests were conducted in 1984-85 to review new transfer procedures and interest calculations. In 1990, after seven years of study, debate, argument and negotiation by the task force, Congress passed the Cash Management Improvement Act (Pub L No. 101-453).

Legislated Equity

The announced purpose of the Cash Management Improvement Act of 1990 (CMIA) is to streamline the transfer of nearly $150 billion in funds between the federal and state governments. The act requires that interest be paid by one party to the other if funds are received late or if funds are withdrawn too early. Although its purpose is not to determine who is at fault and to keep score by means of calculating and exchanging interest, that is a fundamental provision of the act. Keeping score was seen as a necessary evil in order to ensure that both sides worked hard at what was the driving principle behind the legislation: to ensure greater efficiency, effectiveness and especially equity in the exchange of funds between the federal government and the states, insofar as federally assisted programs are concerned. The start date for implementation of the CMIA is October 24, 1992.

The Transfer Processes

The task force examined various methods by which federal funds could be transferred and tracked between the federal agencies and the states. The particular method selected, which can vary among the states, and further among state programs, will determine the extent of the interest calculation and exchange. The method selected will be negotiable, to some extent, within the individual U.S. Treasury/state agreements. While states can presumably submit their own plans relative to the federal funds transfer...