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B-222191 1 (1986-10-23)

handle is hein.gao/gaobadpiy0001 and id is 1 raw text is: United States Generl Accounting Office 557 Q asington, D.C. 20548 Offce of the General Counsel B-222191 October 23, 1986 Marsha Bonham, Treasurer County of Cochise P.O. Box 1778 Bisbee, Arizona 85603 Dear Ms. Bonham: This letter is in response to your inquiry about whether Fed- eral funds awarded to states and subsequently subgranted to counties and school districts can be commingled with other funds. You express concern that there may be a borrowing of Federal funds to cover shortages in other school district operatioas -as a-result'of such, co'4mmingling, 1 so you 4sk whether .ederal funds given to these subgrantees can be invested and earn interest for the subgrantee. The Federal Government regulates grant funds through the grant agreement, program legislation, and agency regula- tions. Also, there is general legislation pertaining to grant funds. Pertinent to your question, Section 202 pthe Intergovernmental Cooperation Act, 31 U.S.C. S 6503(b), pro- vides that states are not required to deposit grant money in separate bank accounts, although they must be able to account for all Federal funds. Section 203 of that act requires the Federal departments and agencies responsible for administer- ing the programs to schedule fund tranfers so as to minimize the time elapsing between transfer of the money from the Treasury and the disbursement by a state. This provision is further explained by Treasury Circular 1075. Section 203 also provides that states shall not be held accountable for interest earned on advances of funds pending their disbursement for program purposes. The general rule is that interest earned by grantees on advances of grant funds must be paid over to the United States, but this exception for states is based on the expectation that tightly scheduled fund transfers will significantly reduce the amount of funds held pending disbursement by states, thus making the amount of interest earned relatively small. We do note, since it is one of your concerns, that our Office has concluded that,

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