Cash Management
Compliance
NORTH CAROLINA DEPARTMENT OF PUBLIC
INSTRUCTION
DI V I SI ON OF S CHOOL BU S I N ESS A DM I N ISTRATION
Financial and Business Services – Summer Conference July 23, 2015
Objectives
Attendees will gain an understanding of the following cash
management topics:
• Cash Management
– What is it?
• Cash Management Compliance
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–
–
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What is it?
Why is it required?
What is the Department’s responsibility?
What is the LEA’s responsibility?
• Cash Management best practices
• Cash Management reminders
Cash Management
What is cash management?
• Cash management is the process of requesting and receiving
funds from the federal government, and then disbursing those
funds to employees, vendors, and other payees.
• Cash management is governed by the Cash Management
Improvement Act (CMIA)
Cash Management Compliance
What is cash management compliance?
• The State and its sub-recipients must comply with the principles
of cash management; EDGAR 34 CFR § 80.21
• Fiscal compliance requirements on grant recipients:
– Three Day Rule, also known as the CMIA (Cash Management
Improvement Act)
– NC Treasury State Agreement (TSA)
• LEA’s requests for federal funds must be timed so that funds are
on deposit in the account with the State Treasurer no more than
three (3) business days prior to the date of the disbursement.
Cash Management Compliance
Funds Held More than 3 Days:
• Interest earned on any federal funds by a LEA is required to be
submitted at least quarterly to the federal agency (through the
Department).
• Effective with the Uniform Guidance, up to $500 per year may
be retained by the LEA for administrative expenses. It is the
responsibility of the LEA to document administrative expenses
claimed as an interest offset. (2 C.F.R. Part 200.305)
Cash Management Compliance
Calculating Interest for Funds Held More than 3 Days:
• The interest calculation is the amount of the reimbursement
times the annualized federal interest rate for the fiscal year
times the number of business days the funds were held until
delivery (less the allowable three days).
• Federal interest rates are located at
http://www.fms.treas.gov/cmia/index.html for the applicable July
1-June 30 fiscal year.
• If the United States Treasury has not established a current rate,
use the most recent rate.
Cash Management Compliance
Example: ABC School District delivered payroll checks in the
amount of $25,000 on July 29; however, they requested and
received reimbursement on June 22. This is in violation of
CMIA rules; therefore, the calculation of the interest is:
$ 25,000
X .0000033
X
25
$
2.06
Reimbursement
Most recent fiscal year annualized federal interest rate
Business days (28 total business days – 3 days allowed)
Interest due
CMIA applies to all federal funds.
Reference: 34 CFR 80.20-21
Cash Management Compliance
Proper coding within specific time lines may ensure
compliance with CMIA requirements. The LEA may choose
the following options for receiving/disbursing federal funds:
• Code in Advance
• Journal Voucher/Recode
• Request and Expend
Cash Management Options
Option 1 - Code in Advance:
• The LEA codes the expenditure as a federal program expense
using a project/source code.
• The LEA then submits a payment request for the expenditure.
• Once the LEA receives the disbursement/payment of federal
funds, no further action is needed since the expenditure has
already been coded in advance as a federal program expense.
Cash Management Options
Option 1: Code in Advance:
Step 1:
Incur expenditure and code to a federal account in General Ledger
x-xxxx-xxx-xxx
$15,000.00
10/10/14
Step 2:
Request and receive funds
Payment request
$15,000.00
11/21/14
Step 3:
No further action needed since federal funds have been tied to
expenditures in advance
Cash Management Options
Option 2 - Journal Voucher/Recode:
• The LEA should code the expenditure as a non-federal expense
or code to a general account code.
• The LEA will then submit a payment request for the expenditure.
Once the LEA receives the disbursement/payment of federal
funds, the LEA must Journal Voucher/Recode the expenditure
as a federal expense using a project/source code within three
business days of the receipt of funds.
• The LEA then submits a payment request for the expenditure.
Once the LEA receives the disbursement/payment of federal
funds, no further action is needed since the expenditure has
already been coded in advance as a federal program expense.
Cash Management Options
Option 2– Journal Voucher/Recode:
Step 1:
Incur expenditure and code to non-federal/general account in general
ledger
x-xxxx-xxx-xxx
$5,000.00
10/10/14
Step 2:
Receive federal funds
Federal payment amount
$5,000.00
11/21/14
Step 3:
Journal Voucher to Recode the Expenditure to Federal (“41”) Account
within 3 days of receipt
x-xxxx-xxx-xxx (non-federal account)
-$5,000.00
x-xxxx-xxx-xxx (federal account)
$5,000.00
11/23/14
Cash Management Options
Option 3 - Request and Expend:
• The LEA submits a payment request for the expenditure.
• Once the LEA receives the disbursement/payment of federal
funds, the LEA codes the expenditure as a federal expense
using a project/source code within three days of receipt of the
funds.
Cash Management Options
Option 3 – Request and Expend:
Step 1:
Request and receive funds (based on obligation)
Payment request
$5,000.00
11/21/14
Step 2:
Incur expenditure and code to Federal Account within 3 Days
x-xxxx-xxx-xxx
$5,000.00
11/23/14
Cash Management Best Practices
The LEA should ensure the following when making funds requests:
• Cash requests should only include amounts already expended
and/or amounts that will be expended within three business
days of receipt of funds.
• The expenditure period end date represents three business
days with the funds requirement date (FRD) being day one.
Amounts included on cash requests must be expended and
coded to a federal account by this date in order to be in
compliance with CMIA.
• The LEA should make cash requests based on actual
expenditures in the general ledger not budgeted amounts.
Cash Management Reminders
Reminders:
• The LEA must ensure that expenditures coded as federal in the
general ledger match the payment request amounts or the LEA
risks requesting overpayments and subsequently violates CMIA.
• If a Journal Voucher is completed for payroll, the LEA must
ensure all staff completes the appropriate time and effort
paperwork (Time Certification or Personnel Activity Report
(PAR)) or the LEA may violate OMB Circular requirements
Cash Management Reminders
Reminders:
• If the Journal Voucher is completed for equipment, the LEA
must ensure all inventory requirements are met if the
expenditure meets the applicable thresholds or the LEA may
violate EDGAR requirements.
• If the Journal Voucher is completed for purchased services, the
LEA must ensure all procurement guidelines were followed or
the LEA may violate EDGAR requirements.
Cash Management Compliance Monitoring
Purpose: To verify that the LEA is properly calculating and remitting
interest earned on unspent federal advances for the following
programs (34 CFR 80.21[i]):
• Title I, Part A
• Title I, Part C
• Title II, Part A
• Title III
• Title IV
Cash Management Compliance Monitoring
Documentation to Review:
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•
•
•
•
•
•
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CMMS Reports
Cash Balance Report
Chart of Accounts
General Ledger
Bank statements
Interest Remittances (date and amount)
LEA Interest Calculation
LEA Interest Calculation Methodology
Cash Management Compliance Monitoring
Deficiencies and Corrective Action:
• The district/LEA must calculate interest earnings and, if
applicable, pay interest from local funding sources to the federal
agency (through the Department).
• The district/LEA must create a process/procedure to ensure
future compliance.
Cash Management Monitoring
System
• What is the Cash
Management Monitoring
System (CMMS)?
– CMMS is an online
system that went live on
March 28, 2013
– CMMS was developed by
DPI to assist LEAs with
monitoring cash
management
compliance.
Cash Management Monitoring System
(continued)
• What are the benefits of CMMS?
– Allows for cash management compliance self-monitoring by
the LEA and monitoring by DPI, Federal agencies, etc.
– Provides two key reports that can be used to determine if an
LEA has disbursed 100% of a requested federal draw within
three (3) business days of the cash receipt date
• Audit Compliances Report
• Daily Report (Summary)
CMMS KEY REPORTS
Audit Compliances Report
CMMS KEY REPORTS
AUDIT COMPLIANCE REPORT:
• Displays each receipt of federal funds per the funds
requirement date (FRD)
• Displays daily expenditure activity for the three business
 Expectation - cash received on the day prior to the FRD should be
fully disbursed by the end of the 3rd business day. Any unexpended
balance on the 4th day is an instance of noncompliance with the
Three Day Rule.
CMMS KEY REPORTS
Daily Report (Summary)
CMMS KEY REPORTS
DAILY REPORT (SUMMARY)
• Provides data regarding daily beginning balance, total revenues
and expenditures, ending balance and any out of compliance
amounts for that day
 Expectation - Monitor these reports to ensure compliance with
the Three Day Rule and to avoid audit exceptions
CMMS Exercise
Non-Compliant with 3 day rule
Cash Management Monitoring System
(continued)
How to subscribe to CMMS?
• CMMS Link https://schools.nc.gov/cmms
• To subscribe you must have a valid NCID and password.
– To obtain an NCID contact the NCID administrator for your
LEA or Charter School.
– To locate your administrator, go to:
www.ncid.its.state.nc.us/LEAListing.asp
Cash Management Monitoring System
(concluded)
• If you have questions regarding
Cash Management Monitoring
or the Cash Management
Monitoring System (CMMS),
please contact Karen Frazier:
– Karen.Frazier@dpi.nc.gov
– Telephone: 919-807-3738
Questions?
Contact Information
• Kathy Cooper, Section Chief, Monitoring and Compliance;
Kathy.Cooper@dpi.nc.nc.gov; (919)807-3364
• Karen Frazier, Fiscal Monitor; Karen.Frazier@dpi.nc.gov;
(919)807-3738
• Pam Hill, Fiscal Monitor: Pamela.Hill@dpi.nc.gov;
(919)807-3682
• Gene Bruton, Accountant; Gene.Bruton@dpi.nc.gov;
(919)807-3726