NATIONAL PROGRAM INSPECTION: 
EARNING INTEREST

ON FEDERAL FUNDS 
FOllOW-UP REPORT

January 1986 
Control Number P-09-86-00059 
REGION IX  OFFICE OF ANALYSIS AND INSPECTIONS 
SEATTLE  WA OFFICE  OFFICE OF INSPECTOR GENERAL 
DEP AR TMENT OF HEALTH AND HUMAN SERVICES  . ..  .. .. . . .. .  . . . .
. . . . 
EARNING INTEREST ON FEDERA FUNDS 
Phase II" Follow-Up Report 
TABLE OF CONTENTS 
Page 
INTRODUCTION TO FOLLOW-UP REPORT 
FINDINGS IN BRIEF 
RECOMNDATIONS 
PHASE II" STUDY:  PURPOSE AN APPROACH 
II: 
FINDINGS ON PHASE 
INTEREST SELDOM REPORTED 
USE OF INTEREST-BEARING ACCOUNTS 
DRAWDOWN PRACTICES AN "FLOAT" PERIODS 
II . . 
OVERAL FINDINGS--PHASE 
APPROACHES TO REFORM AN SAVINGS IMPLICATIONS  . 11 
ATTACHMNT:  PROPOSED REVISION TO OM CIRCULAR A-IIO  INTRODUCTION TO FOLLOW-UP REPORT

In August 1985, the HHS Office of Inspector General issued a national program
inspection report entitled "
Earning Interest on Federal Funds" (P-09-86-00055).
This report resulted from a study which sampled from 4,000 nonprofit grantees of
HHS, generally excluding universities, hospitals and state and local government
grantees.  now dubbed the "Phase I" report. 
This report is 
Since August 1985, the Office of Inspector General has completed a follow-up or
Phase II" study of selected university, hospital and local government grantees for 
the purpose of determining their similarity to the statistically valid sample of
other nonprofit grantees studied in Phase I of the program inspection. All
grantees studied were 
non-state grantees and, therefore, required to return any
interest earned on federal funds. 
In the meantime, in response to the Phase I report, the Office of Management
and Budget has published a proposed revision to Circular A-
Vol. 50,  30, 1985). This  ll 0 (Federal RegiIs)t,e rif
No. 210, October  revision (see Attachment 
finalized, will require nonprofit grantees (excluding local 
governments) to maintain
federal funds in interest-
bearing accounts and to remit earned interest to the 
federal government unless such interest totals less than $100 per year on all
federal funds received by a given grantee. 
This report of the Phase II study includes an analysis of the government-wide
fiscal impact of the 
proposed change to OM B Circular A-llO , as well as 
consideration of extending this policy to local government grantees not governed
by.OMB Circular A-llO.  FINDINGS IN BRIEF

HHS FINDINGS: 
Virtually no Phase II HHS grantees report or return interest to the federal 
government , compared to 4% of the Phase I grantees found to be doing so. 
Like Phase I grantees, about 80% of the Phase II grantees claim to be 
interest-bearing accounts. Phase II showed that 
keeping federal funds in non-
many grantees, especially large ones, are quite likely to be moving excess 
reporting "no interest 
federal funds into investment or other accounts while 
earned " due to a bifurcation of accounting and banking systems within their
organizations. Institution-specific audits would be required to verify this 
practice and its impact. 
Large grantees invariably base letter-of-credit drawdowns on checks written 
is at 
rather than funds exiting the bank, which means that there  least a 
6-day "float" period during which federal funds draw or could draw bank 
interest. 
Drawdown practices of local governments and hospitals appear similar to those 
of Phase I grantees, averaging once every three weeks. Universities typically 
draw down weekly. About one-quarter of the Phase II grantees admitted 
that their drawdowns routinely exceed the amount of funds disbursed for that 
period. 
dollars lost annually by grantee failure to 
A conservative estimate of federal 
earn or return interest on OHDS and PHS non-state grants is as follows: 
Phase I:  Nonprofits  $4. 25 million 
Phase II:  Local Governments/School 
Distr icts/Hospi tals  1.29 million 
Universities "float"  35 millon 
89 million 
However  institution-specific audits  especially of large grantees, would 
probably confirm much larger multi-year federal interest losses. Bank 
deregulation in 1986 may make interest potential much higher thereafter. 
GOVERNMENT-WIDE APPLICATIONS: 
Had the proposed revision to OMB Circular A-110 been in effect in FY 1985, 
interest returned to the federal government by nonprofit grantees (excluding 
local governments) would have been $13-15 million for that one year. 
Were the same rule extended to local government grantees by revision of 
OMB Circular A-102 , as well as OMB Circular A-llO, then the total amount
of interest returned annually on these federal funds would be over $41 
million.  ""  . .. '
RECOMMENDATIONS 
The proposed revision of OMB Circular A-110 should be finalized to require 
maintain federal funds in bank 
nonprofit grantees to  accounts which pay
interest. 
government grantees. 

OMB Circular A-102 should also be revised to apply the same policy to local"
HHS Regulation 45 CFR 74 should be revised and enforced in accordance with 
OMB Circular changes; but regardless of such changes  HHS program officials
should actively encourage and monitor use of interest-
bearing accounts and
the reporting and return of interest earned. Contract auditors should be 
explicitly instructed to identify interest earned on federal funds. 
HHS/OIG Office of Audit should undertake audits of selected large grantees

especially universities, with respect to interest earned on federal funds. 
Prefer ably, HHS should conduct uni versi ty audits as the "cognizant agent" for
all federal agencies. Ideally, such audits might be done under PCIE auspices
and might involve interdepartmental teams of auditors.  --.
- ' .-,:,,.
"PHASE II" STUDY:  PURPOSE AND APPROACH 
The National Program Inspection "Earning Interest on Federal Grant Funds, 
(August 1985) was based upon a statistical sample selected from about 4,000 non-
PHS. 
state grantees of OHDS and  These were grantees judged to be more 
appropriate for a mail survey approach than another unsampled group of over 
000 grantees. This latter group excluded from the universe sampled included all 
governments and school districts. 
hospitals, colleges, universities, local 
The key findings of the August 1985 Inspection were as follows: 
Of about 4,000 nonprofit grantees of the Office of Human Development 
Services (OHDS) and the Public Health Service (PHS) who were studied in 
80% do not earn interest on federal funds kept in banks, 16% earn 
Phase  I, 
i4nte%re ste buat rdon no t arepnordt o r rreteurtn aunyr ton t he ifendertale groveernsmentt .an d o.nly

Some 94% of all grantees elect to commingle their federal grant funds in 
bank accounts with nonfederal funds. The mean average daily balance in 
these accounts is $65,831 , of which the federal share is $20 129, or about 
31%. 
The amount of federal funds lost by these nonprofit grantees who fail to
collect or return interest is $4 250 000 per year. However, this amount may 
be significantly higher due to bank deregulation in 1986, when banks may 
competitively pay more than 5-1/4% interest. 
About 80% of these same nonprofit grantees are also losing an additional 
$8 million per year in interest on nonfederal funds kept in non-interest
bearing accounts. Again, this loss may be higher after bank deregulation. 
If it is assumed (or later proven) that these findings are also representative 
of the 9,000 to 10 000 other grantees of OHDS and PHS who are required to 
return interest but 
were not sampled in this study (including private hospitals 
and colleges, school districts, local governments and other grantees), then the 
totals over $13 million per year in 
lost interest  federal funds, plus about 
$25 million per year in nonfederal funds. 
Phase II" of this study  was designed to shed further light on the last finding, 
the  private 
issue as to whether  university, local government, school district and 
hospital grantees have  the same interest practices as the other non-state 
grantees. 
From the FY 1984 grants lists of OHDS and PHS, we selected (non-randomly) a 
grantees. Our intent was to  including (a) private 
group of 30  select grantees 
universities/colleges  (b) local governments/school districts, and (c) private 
local government hospitals/medical centers. We sought to avoid concentration of 
these grantees in one state or geographic area, and we wanted to have between 
10  cash reports we could obtain from 
grantees for each type whose  HHS 
payment centers. 
The sample finally selected and the grantees contacted include 8 hospitals with a 
quarterly drawdown of about $10 million, 10 local government or school district 
entities with a quarterly drawdown of about $17 millon , and 12 universities with 
quarterly drawdown of about $133 millon in HHS funds. These 30 grantees 
therefore, draw approximately $150 million per quarter or $600 millon per year  in HHS dollars. These 30 grantees represent less than 5% of the non-state 
grantees of OHDS and PHS, but nevertheless draw more than 15% of the federal 
grantees under those programs nationwide. 
dollars going to all non-state 
This Phase II sample, in dollar terms, is more than twice as large as the 
statistically valid sample of grantees drawn in Phase I: $600 millon (compared 
to $253 million) even though it includes only 30 grantees (compared with the 
Phase I final sample of 432 grantees). 
Phase I  Phase II 
Grantees  432 
Annual HHS $  $253m  $600m 
Sample  Random  Non-random 
Universe of Grantees  4000  8000 
Uni verse of HHS $  $1.6 Billion  $2. 2 Billion 
I. 
Our approach to grantees in Phase II was by telephone only, and far less rigorous 
than the approach in Phase  No bank records were reviewed in Phase II. 
Rather , the respondent's answers are taken at face value on issues actually 
I: i.
verified in Phase  e., whether the bank accounts used for federal funds are 
interest-bearing or not. 
The grantee official  II was ordinarily the financial officer 
contacted in Phase 
who signs the quarterly federal cash transactions report (PMS 272) on which is 
certified the amount of interest earned on the federal funds. Frequently, 
however, it was necessary to talk with other persons in the organization to learn 
organizations. 
the nature of the bank accounts used by these  FINDINGS OF PHASE II 
Reported 
Interest Seldom 
grantees sampled in Phase II reported any interest earned in the 
Only one of the  this 
quarter reviewed. Moreover, all respondents confirmed that  is the usual 
stated flatly, "We never report any interest on federal funds. 
pattern. Most 
The one grantee sampled who had reported interest, Case Western University, said 
that this instance was actually the only time in recent memory that interest on 
were so far 
HHS funds had been reported. For this quarter project disbursements 
below estimates that the financial manager felt it was incumbent to report 
interest. In retrospect, he regretted having done so because that quarterly 
inquiries from the HHS Payment Management Center as to why he 
report brought 
had drawn so much extra federal cash. The lesson he learned, he said, was that 
your drawdowns scrutinized. 
reporting interest is a sure way to get 
virtually never report interest
In sum, it appears that the Phase 
II grantees  interest may
HHS funds,  and that the Phase I estimate that 4% of grantees report 

be too high for the whole population of non-state grantees.

on 
This means that Phase II grantees either (a) earn interest  federal funds 
(b) do not earn interest on federal funds, either because 
wthitehsoeut f ruenpdosr tianrge  int oort  kept in interest-bearing accounts or because grantee 
federal funds on hand. We wil explore
disbursements always equal or exceed the

each of these possibilities in turn. 
Use of Interest-Bearing Accounts 
interest 
In Phase I, we viewed actual bank statements which indicated that no 
was being paid to the holders of those accounts in 80% of the cases. In Phase 
based solely upon the 
no bank statements were viewed; Phase II findings are 
statements of the grantees contacted.

federal 
Roughly the same percentage of Phase II grantees indicated that the 
why large amounts 
funds go into non-inter est-bearing accounts. Queried as to 
would be held in such accounts, grantees commonly responded that it is the 
interest on the federal funds because they 
organization s policy to avoid earning 
return the money 
believe that it is not allowed, or because they would have toi nterest would 
anyhow, or because accounting for the federal share of 
burdensome. 
However , several university respondents mentioned that the operating accounts 
federal letter-of-credit funds go are "kept at a low balance" or 
into which 
frequently emptied into any institutional operating account or investment account 
which does draw interest. 
the universities contacted  as many of the larger local 
gWiotvhe ranlmle nt and hospital grantees, aas  patwteellrn of  bifurcation  between the 
banking/investment function was clear ly evident. In 
accounting function and the 
fact, many of the very officials  sign  the quarterly federal cash management 
who 
reports indicating "no interest  did not know whether the bank accounts 
used were interest-bearing or noeatrne;d"   they referred us to the "treasurer s office" or 
had to make a secondary inquiry themselves to answer this question. They 
their 
routinely base their official quarterly affirmation of "no interest earned" on  actual bank statements. In 
drawdown and accounting system rather than on the 
other words, these reporting officials often don t know what's happening with the 
actual bank account. 
The Treasury Department Fiscal Manual (TFM 2080. 30) and HHS grants 
management regulations (45 CFR 74.91) stipulate that letter-of-credit funds should 
be drawn only in amounts needed for "immediate disbursement." We verified that 
is defined by grantees as the writing of checks or 
in every case, "disbursement" 
running the payroll"--not as the actual exit of funds from the 
vgoraunchteeer ss,  boarn "k account.  cases of the larger Phase II grantees, the 
In most  cash 
management report 
accounting office which completes the quarter ly 
(PMS 272) has neither actual knowledge of the bank events nor any system to 
bank account.
track the actual exit of federal grant funds from the 

This in itself does not prove that these grantees are earning interest on federal 
funds , but it does explain how the large institutions could routinely be reporting 
no interest earned" when, in fact, their cash management office (separate from 
accounting) may indeed be investing excess cash routinely. 
In sum, most Phase II grantees, like Phase I grantees, are reportedly putting their 
non-interest  bank accounts, but there is a strong possibility
federal funds into 

routinely switched over to investment or interest accounts 
that excess funds are 
by those officials who report "no interest 
possibly without knowledge or control 
earned" to the federal government. It is therefore possible that interest is being 
accounting 
earned on federal funds remaining in the bank--whether or not the 
question is whether such 
office lists them as "disbursed.  The second half of the 
actually present in the bank accounts. This raises the 
excess federal cash is 
' drawdown practices and the rate at which checks, once 
issue of the grantees
written, cause funds to actually exit the bank accounts. 
Drawdown Practices and "Float" Periods 
grantees averaged payments about once per month (for those paid by 
Phase I 
treasury check) and about once every three weeks (for letter-of-credit grantees). 
similar.  hospitals 
Phase II grantees appeared quite  Local governments and 
, with few 
routinely draw on their letter-of-credit either once or twice per month
exceptions. Universities show a prevailng practice of weekly drawdowns, with a 
few  less frequently. It was common for Phase II grantees to 
drawing more or 
primarily in relation to their bi-weekly or monthly 
mention that they try to draw 
weekly "accounts receivable" runs. 
payrolls, or their 
down in 
In Phase II, 17 of the 30 grantees stated that they normally try to draw 
(defined as check or 
advance of disbursement or to coincide with disbursement 
said their federal funds accounts tend to run 
payroll writing). Eight of these 
lower balances than their disbursements, five said that they ran about par, and 
four said that their federal fund balances are usually higher than their 
disbursements. 
draw down only after disbursement has 
Thirteen of the 30 grantees said that they 
occurred (checks or payroll have been written), and these  invariably claimed that 
their federal fund balances were lower than their disbursements most of the time. 
Some of these, however, draw down immediately after running their payroll or 
federal letter-of-credit funds may routinely reach 
accounts receivable, so that the  or 
via electronic fund transfer before most of the checks  payroll 
the bank 
withdrawals get there.  This raises the question of the "float" period--the time between the grantees 
writing of a check and the corresponding exit of funds from the grantee s bank 
account. Phase II respondents estimated anywhere from 3 to 30 days as their 
normal "float" period on warrants, with a prevailing estimate of about 7 days. 
Payroll payments sometimes go directly into employee s personal accounts (and 
. therefore exit the grantee s account) almost immediately if the employees have 
Phase II  considerably on direct
agreed to "direct deposit.
 respondents varied 
more than half of their

deposit practices; but only about one-third indicated that 
employees were on direct payroll deposit, with lower levealss o f direct deposit for 
other persons paid from federal grant funds, such  sub-contract staff. 
Assuming that half the federal funds go for payroll and that one-third of payroll 
is5  dxi r.e 3c3t  +d e7p)os iotr,  atbhoeu ta voenraeg ed aflyo.a tI tp eisr itohde roeff osreev ecno ndsaeyrsv awtoiuvled,  wbee  rbeedliuecveed,  btyo  
estimate the overall average grantee "float" period at six days. 
This means that the average federal grant dollar probably sits in the bank for six 
(the time the check or payroll is written), assuming that 
days after disbursement 
the federal dollar is there at the time of disbursement. 
In summary, Phase II grantee responses indicate that about half are drawing down 
their federal funds on a par with their disbursement rates, about a quarter at a 
disbursement rates, and about a quarter at a rate lower 
rate higher than their  rates. 
than their disbursement  Only an individual audit of drawdowns and 
pattern for each grantee.

disbursements could definitely determine this 
However , all grantees  define "disbursement" as checks written rather than as 
Even allowing for employees paid via direct deposit, it is 
funds exiting the bank. 
days after 
estimated that federal  funds remain in the bank an average of six 
"disbursement. 
(a) could be earned or (b) is being earned on at least 
Therefore, interest either 
plus  any funds drawn down in advance of 
the six-day "float" of federal money, 

the date of "disbursement" by some grantees. But the government is receiving 
interest. 
the benefit of none of this actual or potential 
Overall Findings--Phase II 
The Phase I report found that $4.25 millon is lost annually in interest not earned 
and/or not returned on federal funds to one group of non-state grantees. This 
was based on actual bank statements and federal cash reports of these grantees. 
The report estimated that an additional $8.  millon may be lost annually in 
if all other non-state grantees are like the Phase I group
federal interest 

Phase II is able to verify some of the similarities of grantees to the Phase 
beyond an additional 
sample, but unable to fully substantiate the potential savings 
$2. 64 millon. The Phase II estimate, therefore, is that overall, at least $6. 
million per year is being lost in interest not earned or not returned by OHDS and 
PHS non-state grantees. 
Specifically, the Phase II study sampled from a universe of over 9,000 grantees 
whose FY 1984 grants totaled some $2 169 millon. Of this amount, some $1, 485 
million went to private university/college grantees, and the other $684 million 
governments and hospitals. 
primarily to local  Phase II 
the  discussions with the sampled grwantitehes  indicate that they closely resemble
grantees sampled in Phase I  respect to drawdown rates and 
accounting/banking practices. Based upon an average drawdown rate of once 
every three weeks, these grantees are estimated to have an average daily bank 
balance of 3.4% of their annual grant amounts. This represents approximately the 
expected" pattern for such grantees, although Phase I grantees were found to be 
carrying higher balances in many cases. We, therefore, consider a conservative 
estimate for annual lost interest among this group to be: 
Local Governments/School Districts/Hospitals: 
$684 million x 3. 4% x 5. $1,288,382 
54%* = 	
Annual Lost Federal Interest 
Universities and colleges, by contrast, were found in the Phase II study to be less 
similar to other grantees in some respects. Their drawdown pattern is more
frequent (usually weekly), and their average federal dollar volume per grantee is 
probably much higher. Using the same formula as above, we could estimate their 
expected" average daily bank balance to be 1 % of their annual grants, based 
upon weekly drawdowns. 
However , the Phase II discussions revealed that university drawdowns are usually 
based upon a bifurcated accounting/banking system which clearly misses the 
"float" period  is written and the time funds 
between the time a check  exit the
bank. 
Estimating this at 6 days  at least 6/365 or 1.644% of the federal grant 
funds are in grantees' banks on the average day, even if letter-of-credit 
drawdowns coincide perfectly with "disbursements" as defined by the universities. 
Therefore, we estimate, for: 
Colleges: 
Uni versi ties/ 
$1485 million x 1.644% x 5. $1,352 502 
54% = 
Annual Lost Federal Interest 
federal funds being lost in 
In summary, the estimate of  uncollected or unreported 
interest on federal OHDS and PHS grants funds is: 
Phase I:  Nonprofits  $4. 25 millon 
Phase II:  Local Governments/School 
Distr icts/Hospi tals  1. 29 million 
"f loat"  35 million 
Uni versi ties 
89 million 
* 5-1/4% interest rate compounded monthly.  1984 grant totals of these two
This is a conservative estimate based upon 
 FY  individual and specific 
agencies. However, OIG inspection staff believe that 
audits of grantees on the interest issue would reveal much larger average daily 
and that some of the larger grantees
II, 
wbaloanucels dth an btheos e fesotimuatnedd i n tPhoase  
be already earning interest via investment of the excess 
, we would expect such audits 
federal cash. Since this is not a new phenomenon
year failure to return interest owed to the federal government. 
to uncover multi-
, bank deregulation may put banks into 
It should also be remembered that in 1986
heavier competition on interest offered, so that rates higher than 5-1/4% may 
some investments made from 
fact, it is quite likely that 
become commonplace. 
 In  rate.
"floated" federal funds may already exceed that  APPROACHES TO REFORM AND SAVINGS IMPLICATIONS

The Phase I report recommended that OMB Circular A-110 and HHS 
require non-profit grantees to 
Administrative Regulation 45 CFR 
74 be revised to 
interest earned thereby 
use interest-bearing accounts for federal funds, and that 
be monitored and audited appropriately. 
The Phase II study confirms the need for these changes, as well as their 
universities. Specifically, mandated use of 
applicability to grantees like 
interest-bearing accounts would maankde a ny interest earned on excess drawdown or 
' detectable  auditable, regardless of bifurcated
"float" easily

accounting/banking systems. Since federal funds would be required to go into 
interest 
interest-bearing accounts, the federal claim to at least a portion of the 
accruing in such accounts would be evident, as would the federal expectation 
that interest be accounted for and returned. The interest audit trail would 
established in the bank records. In fact, the simplest approach would probably be 
for these grantees to establish a separate "federal holding account" in which 
interest would be all federal. 
already happening with some federal 
This is not only possible, but is in fact 
funds. Four institutions have current agreements with the U.S. Navy Office of 
the Comptroller that they will keep Navy funds in a segregated special account 
on which interest is earned and reported. The institutions are: 
Harvard University 
Duke University 
North Carolina State 
Uni versi ty 
Hudson Institute 
These  special contract provisions between the Navy 
arrangements are by 
institutions. The Navy office began this system out 
Comptroller s Office and the 
of  flexibility for grantees/contractors, which 
dissatisfaction with letter-of-credit 
and  well as lost 
allowed early drawdown  inadequate performance controls, as 
interest. The Navy office pointed out to us, however, that it would be rather 
inefficient for each federal department dealing with a large university to 
negotiate a separate bank account for its funds; rather , a single federal account 
s bank might make more sense. 
in the university 
For colleges and universities, the single federal holding account approach fits 
well with the "cognizant agency" audit approach established under OMB Circular 
88, in which one federal agency is responsible for overseeing the audit for all 
federal funding agencies.

In fact, since HHS is the "cognizant agency" under A-88 for over 98% of the 
colleges and universities in the country, it would be possible to do selected 
interest earned  universities on a multi-federal-agency basis 
audits of  in large 
on all federal funds. Any dollars recovered would 
e., auditing interest earned 
revert directly to the Treasury as unappropriated funds (rather than to the 
individual federal programs). This approach was recommended by PCIE member 
(NASA-OIG) in response to the Phase I report. 
OMB Circular A-110 will require all 
If finally approved, the proposed revision to 
grantees and contractors subject to this circular to deposit federal funds in 
interest-bearing accounts and to return any interest earned thereby to the federal 
government unless the total interest on all federal funds amounts to less than 
$100 per year. This policy would apply to all non-governmental grantees  and other nonprofit organizations. 
including colleges and universities, hospitals 
OMB Circular A-I02 and 
State and local government grantees are covered under

exempted from returning interest 
states (but not local government grantees) are 
by the Intergovernmental Cooperation Act.

The Phase I study found that only 4% of the grantees sampled were earning and 
returning bank interest on the federal grant funds, and that these were the 
federal 
smaller grantees receiving about .5% (one half of one percent) of the 
grant dollars. A sample less oriented toward the smaller grantees would most 
likely have shown the total interest returned to be insignificant. 
FY 1984 
In response to OM B Bulletin 85-18, federal agencies reported that in 
approximately $102 billion in federal grants to the following types 
they awarded 
of organizations: 
States  $80 606,497,000 
956,089,000
Local Governments

092,000 000
Other Grantees

Generally, OMB Circular A-110 covers the "Other Grantees" identified above. 
federal grants to 
However, in cases where local governments pass through 
110 as 
nonprofit agencies directly, those nonprofit grantees are governed by A-
between $7 and $8 billion in grant awards 
well. A conservative estimate is that 
110 policy. 
in FY 1984 were governed by A-
federal funds and grantees followed the same pattern 
If it is assumed thiant  ththee sHeH S/OIG sample, then some 3.4% of these funds were in 
as that indicated  the 
grantee bank accounts on the average day and would have earned interest at 
annualized rate of 5.54% (5-1/4% compounded monthly), had the new A-lID policy 
been in effect in FY 1984. 
interest on federal funds under 
Under the proposed rule, grantees earning total this interest. The HHS sample 
$100 per year would not be required to return 
grant 
limit would normally exclude grantees whose entire federal 
showed that this 
was  000 for the year. However, only .68% (less than seven-tenths of 
under $60,
in the sample went to such small grantees, so 
one percent) of the grant funds 
that the rest, or 99.32% of the grant funds would have been subject to the 
requirement to return interest earned. 
interest returned to the federal government 
Thus, our analysis indicates that the 
in FY 1984, had the new policy been in effect , would have been between $13 
and $15 milion, as calculated below: 
(High)  $8 billion x 3.4% x 5.54% x 99.32% = $14. 96 millon

$7 billon x 3.4% x 5.54% x 99.32% = $13. 10 millon

(Low) 
Were this same rule extended to local government grantees by revision of OMB 
OMB Circular A-liD , then the total amount of interest 
Circular A-I02 as well as  calculated below: .
returned annually would be over $41 millon, as 

09 billon) x 3.4% x 5.54% x 99.32% = $41.25 millon. 
($14.96 bilion + $7. .,.. 
.... ...
..  .. 
Attachment 
Vol so.  Wedne8day. October  Notice8  45183
Federa1 Regster 
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 chanp that poliC' brm  nIlCJ 
Hier Education. HOlpltall. and Other  &ranteel to maitain  rr8l0l
Nonprofit OranitioDL" The revi.ion  braelancceol o r FederaF faeddl.  The 
would  .e recipienta to hold  ttl1 an  caeh wfDot 
requi 
Federal fudi in accunta tht pay
 ye be cllbmd imedateI upon 
mterest.
 receipt. Therre. It Ie prsed tht
PO AnINORno COACT  when calh il .vailablbe nit rehio ud be 
Palmer A. Marcntonio. Financial
 depOIUepdr oipn oIdnt tahlt.t  th foUow 
M&Dsement Divi.ion (20) 3g  393.
 11 il 
paragr  . be aded to Attach 1 
De led: Oeober 11.  Pa)'ment RequilMt.." 01 Ciar A
Jo 
J.  Fino/  UD. 
Deputy AMag Djl8r fo  Repiml8 8b 8I8i F8d fu . 
Nono,me1MJt.  at  !Dllrel'''-
inlere.: bearna ICCout& 
Ofca or  aD Budt  IUch Iccount. .btaUllt  bpe rremoitt etdb to the 
Federlr 
fCInoisrrtc iGutulratiaro tAns, - aol1nfD dH.  iA'gVhgne1irf o'Eerdnmutl cl oU, twiuoijtnrhe. 
l1ents  Wdbhrepe rcertmteed   Iftlu' eIdn.r  ethf etrI hIa  IMe.0eVp0 uetHai  c qt0m'.1"c  i. t etp!ahP1   Na!rD 
ab.n 
HO$pitol,. an Oter Nonprofit
 bali.. In  to  1100 .

6I DI &a 

)'ar 011 al , 
OAranZOQtiOM  nm.ttec 
Ofce or Wament and  Wamet 8J ..dp
The OfCt of 
Budaet. 
AC Prd ren  Ift  ha., al yet. made DO  ecilion with 
to the  relpect to the propo1ed revi.ion. Al 
p'"anyimoernmt  pRoleiqeul 1omf
eCtia aforr  GAr-antao .and  imnatekree sthteedir  pvarite l kInl oenwc ourapd to

AgmentJ with IDtitution of Hier  rot PU WO'n COAC 
Education. HOlpita. and Oter Palmer A. WatD.niivoi.  oFmi"8 ""81 
Nonprfit Oran1:cm.  Manlaemett 
18.  1h0D. 
IUII  Manasement and Budaet. WI 
oTbpl DtOytice  ofecn ometenretl ted  C. ZO. (20) 
ppraoePlO laend  reion to OtMo S Cinar oAn a  Commentl ahuld beA rle eveodm wJi.tI
110. "Uniorm Reuienta for Grantl  1.h0 odwlYds  bore  tIh\sm DiOttteiCdt .i n
 duplte. 
ed Agents with IDtitutiODI of  1W PU 1WH 
Hier  an Oter  (F Dc. 
Education. HOIp.tal.  reion  IL CI 

Nonprofit OrantiOD." Tb 
wed .f-u  tb ndpieota to bold
Fed  tbt pa,
lDerlt

The reviion Ie baad 01 a

Inctor 
nCm.endatin by th 
Deent 
Genera1 (1G).  of Health and 
Humn Serven. Tpb IeG tmqade an audit 
10 det.nn wht  beri 
we U8 intert  fu. 
Fan te-l 
deita of Federl 
8ccunta (M 
nelG reviewed a18t UJO nonprofit 
tee of the Ofce or Human 
Developm8D &erv ed Ib Public