Cash Management Improvement Act (CMIA)

Background and History of CMIA

The following events lead up to the passage of the Cash Management Improvement Act of 1990 (CMIA):

1968:   Intergovernmental Cooperation Act passes, allowing States to earn interest on Federal funds prior to their disbursement from States' accounts.

1979:   U.S. Department of Health and Human Services implements a funding technique called delay of draw, requiring States to draw down Federal funds based upon check clearance patterns.

States have mixed response to delay of draw. Some States object, citing State constitutional and statutory restrictions requiring funds to be on deposit in the State's account before checks are released.

1983:   Joint State/Federal Cash Management Reform Task Force formed to set aside differences by building a foundation of mutual trust and cooperation.

The Task Force's first objective is to endorse an overall concept - NO WINNERS OR LOSERS DURING FUNDS EXCHANGE FOR JOINT STATE/FEDERAL PROGRAMS. To achieve this goal, interest exchanges are minimized. In cases where interest has to be exchanged, the Task Force attempts to prescribe specific funding techniques for exchanging funds with the use of pilots to test the reciprocal interest approach. The technique, pre-issuance funding, allows States to draw down Federal funds in accordance with their immediate cash needs and in compliance with any statutory or constitutional requirements. The Financial Management Service (FMS) takes the lead role for this pilot test.

1984:   Virginia, Indiana, California, and Wisconsin each begin a 6-month pilot of various funding techniques best suited to a State's existing accounting and processing system. Each pilot is slightly different in the manner Federal funds are tracked and interest is calculated.

The pilot tests prove different funding techniques can be used to track Federal funds and calculate interest--all without incurring significant startup and ongoing costs. Further, the use of reciprocal interest promotes efficiency, effectiveness, and equity. In addition, the pilots enable States to focus on and correct internal cash management practices and make procedural and system improvements.

1986, 1988, 1989:   CMIA is introduced but did not pass in Congress.

1990:   CMIA enacted. FMS is charged with promulgating implementing regulations.

1992: FMS issues final CMIA regulations (31 CFR 205) on September 24, effective October 24, 1992, implementing the Cash Management Improvement Act of 1990.

1993: First CMIA Treasury-State Agreements negotiated in July.

1994: In December, first CMIA Annual Reports are submitted by States for State fiscal year 1994.

1995: In March, first CMIA interest exchange occurs based on the Treasury-State Agreement and the Annual Report for 1994.

1999: FMS introduces the Internet-based Cash Management Improvement Act System (CMIAS) for the collection and review of Annual Report information, eliminating the paper-intensive Annual Report reporting and review process.

2002: On May 10, FMS issues new CMIA regulations (31 CFR 205), effective June 24, 2002.

2003: On June 10, 2003, FMS deployed the Internet-based Cash Management Improvement Act System (CMIAS) TSA Module for the transmission, review and negotiation of Treasury-State Agreements.