[Code of Federal Regulations]
[Title 31, Volume 2]
[Revised as of July 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 31CFR205.14]

[Page 31-32]
 
                  TITLE 31--MONEY AND FINANCE: TREASURY
 
         CHAPTER II--FISCAL SERVICE, DEPARTMENT OF THE TREASURY
 
PART 205--RULES AND PROCEDURES FOR EFFICIENT FEDERAL-STATE FUNDS TRANSFERS--Table of Contents
 
Subpart A--Rules Applicable to Federal Assistance Programs Included in a 
                        Treasury-State Agreement
 
Sec. 205.14  When does Federal interest liability accrue?

    (a) Federal interest liabilities may accrue in accordance with the 
following provisions:
    (1) The Federal Program Agency incurs interest liability if a State 
pays out its own funds for Federal assistance program purposes with 
valid obligational authority under Federal law, Federal regulation, or 
Federal-State agreement. A Federal interest liability will accrue from 
the day a State pays out its own funds for Federal assistance program 
purposes to the day Federal funds are credited to a State bank account.
    (2) If a State pays out its own funds for Federal assistance program 
purposes without obligational authority, the Federal Program Agency will 
incur an interest liability if obligational authority subsequently is 
established. However, if the lack of obligational authority is the 
result of the failure of the State to comply with a Federal Program 
Agency requirement established by statute, regulation, or agreement, 
interest liability may be denied. A Federal interest liability will 
accrue from the day a State pays out its own funds for Federal 
assistance program purposes to the day Federal funds are credited to a 
State bank account.
    (3) If a State pays out its own funds prior to the day a Federal 
Program Agency officially notifies the State in writing that a 
discretionary grant project is approved, the Federal Program Agency does 
not incur an interest liability, notwithstanding any other provision of 
this section.
    (4) If a State pays out its own funds prior to the availability of 
Federal funds authorized or appropriated for a future Federal fiscal 
year, the Federal Program Agency does not incur an interest liability, 
notwithstanding any other provision of this section.
    (5) If a State fails to request funds timely as set forth in 
Sec. 205.29, or otherwise fails to apply a funding technique properly, 
we may deny any resulting Federal interest liability, notwithstanding 
any other provision of this section.
    (b) Federal Program Agency programs that have specific payment dates 
set by the Federal Program Agency that create interest liabilities are 
subject to this part.
    (c) States must adhere to Federal Program Agency disbursement 
schedules when requesting funds. Notwithstanding any other provision of 
this section, we may deny a State's claim for Federal interest liability 
for the period prior to a late drawdown request.

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States must time their funds drawdown so that it does not create Federal 
interest liability. The drawdown request must allow the Federal Program 
Agency sufficient time to meet its disbursement schedule. If the Federal 
Program Agency does not make a timely payout in accordance with the 
terms of the Treasury-State agreement, a State may submit a claim for 
interest liability.