Imprest Funds

Common Questions

• General Questions
• Waivers to the Directive
• Effect on Existing Guidance
• Best Practices
• Compliance

GENERAL QUESTIONS

Q1. What is an imprest fund?

A1. Imprest funds are fixed- or petty-cash funds in the form of currency or coin that have been advanced as Funds Held Outside of Treasury. Historically, agencies have used imprest funds to make a variety of payments to all classes of payment recipients. Agencies typically used imprest funds to reimburse employees for expenses, to make small purchases, to make emergency beneficiary payments, and to pay informants, among other uses.

Q2. What does the Imprest Fund Policy Directive require of federal agencies?

A2. The Imprest Fund Policy Directive required all federal agencies to eliminate agency imprest funds by October 1, 2001, except where provided under the Imprest Fund Policy Directive.

Q3. Why are agencies being required to eliminate imprest fund accounts?

A3. The Department of the Treasury (Treasury) requires agencies to eliminate imprest fund accounts as part of an overall plan to implement the requirements of the Debt Collection Improvement Act of 1996 (DCIA) of 1996 (DCIA) and the recommendations of the National Performance Review Report, Report on the Elimination of Imprest Funds in the federal government Through the Use of Electronic Commerce (NPR Report), issued January 1996. The DCIA requires federal agencies to make all payments electronically (other than payments under the Internal Revenue Code of 1986), except where a waiver is granted by the Secretary of the Treasury. The NPR Report recommended that agency imprest funds be eliminated because most federal payments could be made electronically and by other noncash alternatives. In addition, Treasury requires agencies to eliminate imprest funds because they are labor intensive and require relatively more internal controls than noncash payment mechanisms, and because the government does not earn interest on money held in these accounts.

WAIVERS

Q4. After October 1, 2001, under what circumstances are agencies allowed to make payments from an imprest fund?

A4. Agencies may make payments from an imprest fund after October 1, 2001, only if:

(a) A payment by electronic funds transfer (EFT) is waived in accordance with the provisions of 31 CFR 208, Management of Federal Agency Disbursements, at §208.4 Waivers; and

one of the following exceptions applies:

(b) Payments involving national security interests, military operations, or national disasters, such that agency activities could be threatened or compromised;

(c) Payments made in furtherance of a law enforcement action, where an agency would want to avoid leaving any trail that may jeopardize a particular operation or result in endangering the safety of an individual;

(d) The amount owed is less than $25. Agencies may not split a payment greater than $25 into two or more smaller payments in order to meet this exception;

(e) The political, financial, or communications infrastructure of a foreign country does not support payment by a noncash mechanism; or

(f) Payments are made in emergencies, or in mission-critical circumstances, that are of such an unusual and compelling urgency that the government would otherwise be seriously injured, unless payment is made by cash. This exemption is intended to provide agencies with some flexibility in determining the conditions under which a form of payment other than cash would "seriously injure" the government. Treasury intends for agencies to invoke the "serious injury" waiver only under those circumstances that the agency has determined would negatively impact individual agency program objectives.

Q5. Must an agency have an existing waiver from the Treasury EFT Rule at 31 CFR 208 before invoking an imprest fund waiver?

A5. Yes. In order for an agency to invoke an imprest fund waiver, the agency must also invoke a waiver from the Treasury EFT Rule. (See A4(a) above.)

Q6. How does an agency invoke a waiver from the Imprest Fund Policy Directive?

A6. Waivers from the Imprest Fund Policy Directive are determined by the agency making the payment. An agency that requires clarification on any waiver may direct inquiries to Imprest Inquiry. (Contact information also is provided at the end of this document and on the FMS Web site.)

EFFECT ON EXISTING GUIDANCE

Q7. What effect does the Imprest Fund Policy Directive have on existing imprest fund guidance?

A7. The Policy Directive replaces all of the existing policy guidance contained in the TFM and the Cashier's Manual. The Policy Directive is the only source of policy guidance on imprest funds. The operational guidance contained in the TFM has been merged into a new Cashier's Manual. The TFM Chapter on imprest funds, I TFM Chapter 4-3000, has been replaced and is now titled Third-Party Draft Procedures for Imprest Fund Disbursing Activities.

BEST PRACTICES

Q8. For agencies that have, or nearly have, eliminated their imprest funds, what "best practices" have they implemented?

A8. Several agencies with diverse missions have eliminated or nearly eliminated their use of imprest funds. For example, a large benefit agency has eliminated most of its imprest funds by using a combination of EFT payments and third-party draft payments. This agency uses third-party drafts to make most emergency and administrative payments that cannot be effectively made by EFT. The agency has guaranteed the acceptance of its third-party drafts by making agreements with financial institutions near each of the agency's offices. Another agency has nearly eliminated its imprest funds by using a combination of EFT and convenience checks.

Q9. What noncash payment mechanisms are available to agencies to use instead of imprest funds?

A9. The two noncash payment mechanisms available to agencies are EFT and Third Party Paper. EFT payment mechanisms include: Direct Deposit, Vendor Express, Government SmartPay Cards for Travel,
Fleet and Purchases, Automated Standard Application for Payments (ASAP), the stored value card (for a closed environment), Intra-governmental Payment and Collection System (IPAC), and the US Debit Card program. Third-Party Paper payment mechanisms are paper-based instruments, which include third-party drafts and purchase card convenience checks.

COMPLIANCE

Q10. What steps should an agency take to close an imprest fund?

A10. An agency may close an imprest fund by liquidating the fund through the return of cash and/or uncashed checks to the agency financial office. The financial office will deposit the funds with an SF 215 (Deposit Ticket) in order to credit the agency's Agency Location Code (ALC) number. The SF 215 deposit liquidation must also be reported by the financial office on an SF 224 (Statement of Transactions) using the "(41)" account symbol prefix for liquidation. (See Cashier's Manual, Replenishments and Liquidations.)

Q11. How will Treasury monitor the imprest fund activity of individual agencies?

A11. Treasury will monitor agency compliance with the Imprest Fund Policy Directive by reviewing each agency's annual financial statement, which requires agencies to report imprest funds in General Ledger Account 1120 - Imprest Funds.

Q12. Must imprest funds always be set at a fixed amount?

A12. Most funds are established at a fixed amount because it is easier to manage and standard internal controls are effective. However, certain funds operate within a predetermined range. Agencies may operate a fluctuating fund if it is not practicable to maintain an imprest fund. For example, some overseas imprest funds are funded by collections made in foreign currency. Rather than deposit those funds and have to repurchase foreign currency to replenish the fund, those funds are retained as imprest funds and used as payment for goods and services. In addition, some overseas funds require flexibility in the amount of the fund because, in some areas, cash is the only accepted payment method and needs are varied.