Title 31 — Money and FinanceRelease 119-73
§6503 Intergovernmental financing
Title 31 › Subtitle SUBTITLE V— - GENERAL ASSISTANCE ADMINISTRATION › Chapter CHAPTER 65— - INTERGOVERNMENTAL COOPERATION › § 6503
Summary
The law requires federal agencies and States to cut down the time between when the U.S. Treasury sends program money and when the State actually pays people. Federal agency heads must plan transfers so delays are small. States must do the same when they get money. The Secretary must make an agreement with each State that explains how transfers will work, how the federal government will approve the State’s plan, how interest will be calculated and documented, and which State costs to consider. If there is no agreement, the Secretary will make rules that apply until one is made. States must pay interest to the United States on funds from the moment the money is put in the State’s account until the State pays it out. The interest rate is the average bond-equivalent rate of 13-week Treasury bills for the time involved. Interest paid to the U.S. goes to the Treasury, except when the money came from a trust fund the Secretary manages — then the interest goes back to that trust fund. For the Unemployment Trust Fund, interest equals the State’s actual interest earned minus bank costs. If a State pays benefits with its own money before federal money arrives, the federal government must pay the State interest for that time at the same 13-week T-bill rate, and those payments may be charged to the trust fund involved. The President’s budget must list interest amounts the government got and paid. States must return refunds or apply them to reduce what the federal government owes, and interest on refunds counts when settling interest. If the federal government pays someone on behalf of a State, that counts as a transfer. States do not have to use a separate bank account for federal money, but they must keep records, report to the federal agency, and allow audits. The Secretary will set standard ways to pay and offset interest, require annual payments, and make sure States and the federal government are treated the same. Federal agencies must give grants on time so transfers follow these rules.
Full Legal Text
Title 31, §6503
Money and Finance — Source: USLM XML via OLRC
(a)Consistent with program purposes and with regulations of the Secretary, and in accordance with an agreement under subsection (b) entered into by the Secretary and a State—
(1)the head of an executive agency (other than the Tennessee Valley Authority) carrying out a program shall schedule transfers of funds to the State under the program so as to minimize the time elapsing between transfer of funds from the United States Treasury and the issuance or redemption of checks, warrants, or payments by other means by a State; and
(2)the State shall minimize the time elapsing between transfer of funds from the United States Treasury and the issuance or redemption of checks, warrants, or payments by other means for program purposes.
(b)(1)The Secretary shall enter into an agreement with each State to which transfers of funds are made, which establishes procedures and requirements for implementing this section.
(2)An agreement under this subsection shall—
(A)specify procedures chosen by the State for carrying out transfers of funds under the agreement;
(B)describe the process by which the Federal Government shall review and approve the implementation of the procedures specified under subparagraph (A);
(C)establish the methods to be used for calculating and documenting payments of interest pursuant to this section; and
(D)specify those types of costs directly incurred by the State for interest calculations required under this section, and require the Secretary to consider those costs in computing payments under this section.
(3)The Secretary shall issue regulations establishing procedures and requirements for implementing this section with respect to a State with which no agreement is entered into by the Secretary under paragraph (1). Such regulations shall apply to a State until such time as the Secretary enters into an agreement with the State under paragraph (1).
(c)(1)The Secretary shall issue regulations that shall require a State, when not inconsistent with program purposes, to pay interest to the United States on funds from the time funds are deposited by the United States to the State’s account until the time that funds are paid out by the State in order to redeem checks or warrants or make payments by other means for program purposes. Except as provided under paragraph (3)(B) (relating to the Unemployment Trust Fund), the interest payable under this subsection shall be calculated at a rate equal to the average of the bond equivalent rates of 13-week Treasury bills auctioned during the period for which interest is calculated, as determined by the Secretary.
(2)Except as provided in paragraph (3), amounts received by the United States as payment of interest under this subsection shall be deposited in the Treasury and credited as miscellaneous receipts.
(3)(A)Amounts paid by a State under paragraph (1) as interest on funds paid to a State from a trust fund for which the Secretary is the trustee shall be credited to such trust fund.
(B)Notwithstanding any other provision of this section, amounts of interest paid by a State, on funds drawn from its account in the Unemployment Trust Fund, shall be deposited into that account and shall consist of actual interest earnings by the State, less related banking costs incurred by the State, for the period for which interest is calculated.
(d)(1)If a State disburses its own funds for program purposes in accordance with Federal law, Federal regulation, or Federal-State agreement, the State shall be entitled to interest from the time the State’s funds are paid out to redeem checks or warrants, or make payments by other means, until the Federal funds are deposited to the State’s bank account. The Secretary shall pay, out of any money in the Treasury not otherwise appropriated, such amounts as may be necessary for interest owed to a State under this subsection. Such interest shall be calculated, at a rate equal to the average of the bond equivalent rates of 13-week Treasury bills auctioned during the period for which interest is calculated, as determined by the Secretary.
(2)If interest is paid under this subsection as a result of a State disbursing its own funds before receiving payment from a trust fund for which the Secretary of the Treasury is the trustee, such interest shall be charged against such trust fund.
(e)The budget submitted by the President under section 1105 of this title for a fiscal year shall include a statement specifying, for the most recently completed fiscal year, amounts of interest accrued to the Federal Government under subsection (c) and amounts of interest paid to States under subsection (d).
(f)If a State receives refunds of funds disbursed by the State under a Federal program, the State shall return those refunds to the Federal executive agency administering the program or apply those refunds to reduce the amount of funds owed by the Federal Government to the State under such program. Interest earned on such refunds shall be considered when setting overall interest obligations between the State and the Federal Government as required by this section.
(g)If the Federal Government makes a payment to a recipient under a Federal program, and a portion of the payment is an amount which the Federal Government is paying to such recipient on behalf of a State, such amount shall be considered to be a transfer of funds between the Federal Government and the State for purposes of this section.
(h)A State may not be required by a law or regulation of the United States to deposit funds received by it in a separate bank account. However, a State shall account for funds made available to the State as United States Government funds in the accounts of the State. The head of the State agency concerned shall make periodic authenticated reports to the head of the appropriate Federal executive agency on the status and the application of the funds, the liabilities and obligations on hand, and other information required by the head of the executive agency. Records related to the funds received by the State shall be made available to the head of the executive agency, the Inspector General of the executive agency, and the Comptroller General for necessary audits.
(i)The Secretary shall prescribe methods for the payment of interest under this section between the Federal Government and the States, including provisions for offsetting amounts owed by the respective parties. Such methods of payment shall require payment of interest on an annual basis and shall provide for comparable treatment in manner, technique, and timing for both the States and the Federal Government.
(j)Consistent with Federal program purposes and regulations of the Director of the Office of Management and Budget, the head of a Federal executive agency carrying out a program shall execute grant awards to States on a timely basis to assure the availability of funds to accomplish transfers in compliance with subsection (a) of this section.
Legislative History
Notes & Related Subsidiaries
Historical and Revision Notes
Revised SectionSource (U.S. Code)Source (Statutes at Large) 6503(a)42:4213.Oct. 16, 1968, Pub. L. 90–577, §§ 202, 203, 82 Stat. 1101. 6503(b)42:4212. In the section, the words “executive agency” are substituted for “Federal departments and agencies” because of the definition in section 102 and 6501(3) of the revised title. In subsection (a), the word “money” is substituted for “funds” for consistency in the section. The words “so as” and “United States” are omitted as surplus. The words “before or after” are substituted for “prior to or subsequent to” for consistency. The words “subsequent to such transfer of funds” are omitted as unnecessary the second time they are used. In subsection (b), the words “apart from other funds administered by the state”, “properly”, “In each case”, and “examination” are omitted as unnecessary. The word “money” is substituted for “all federal grant-in-aid funds” for consistency in the section. The words “United States Government grant money” are substituted for “Federal funds” for consistency in the revised title. The word “make” is substituted for “render”, the word “periodic” is substituted for “regular”, and the word “information” is substituted for “facts”, for clarity. The words “or any of their duly authorized representatives” are omitted as unnecessary. The words “Records shall be made available to . . . for auditing” are substituted for “shall have access for the purpose of audit and examination to any books, documents, papers, and records” for consistency in the revised title and with other titles of the United States Code.
Editorial Notes
Amendments
1990—Pub. L. 101–453 amended section generally, substituting provisions relating to intergovernmental financing for provisions relating to transfer and deposit requirements.
Statutory Notes and Related Subsidiaries
Effective Date
of 1990 Amendment Pub. L. 101–453, § 5(e), Oct. 24, 1990, 104 Stat. 1061, as amended by Pub. L. 102–589, § 2(2)(C), Nov. 10, 1992, 106 Stat. 5133, provided that: “The
Amendments
made by this section [amending this section and section 6501 of this title] shall take effect on the date of enactment of this Act [Oct. 24, 1990], except that subsections (c) and (d) of section 6503 of title 31, United States Code, as added by subsection (b) of this section (relating to payments of interest between the Federal Government and State governments), shall take effect on
July 1, 1993 or the first day of a State’s fiscal year beginning in 1993, whichever is later.” Treatment of Compensation or Reimbursement Paid Pursuant to Other Laws Pub. L. 107–273, div. A, title II, § 204(f), Nov. 2, 2002, 116 Stat. 1776, as amended by Pub. L. 109–162, title XI, § 1151(a), (b), Jan. 5, 2006, 119 Stat. 3112, provided that: “No compensation or reimbursement paid pursuant to the Southwest Border Prosecutor Initiative (as carried out pursuant to paragraph (3) (117 Stat. 64) under the heading relating to Community Oriented Policing Services of the Department of Justice Appropriations Act, 2003 (title I of division B of Public Law 108–7), or as carried out pursuant to any subsequent authority) or section 501(a) of Public Law 99–603 [8 U.S.C. 1365(a)] (100 Stat. 3443) or section 241(i) of the Act of
June 27, 1952 [8 U.S.C. 1231(i)] (ch. 477) shall be subject to sections [sic] 3335(b) or 6503(d) of title 31, United States Code, and no funds available to the Attorney General may be used to pay any assessment made pursuant to such sections [sic] 3335(b) or 6503 with respect to any such compensation or reimbursement.” Agreements With States Pub. L. 101–453, § 5(d), Oct. 24, 1990, 104 Stat. 1061, as amended by Pub. L. 102–589, § 2(2)(A), (B), Nov. 10, 1992, 106 Stat. 5133, provided that: “(1) Secretary’s efforts to enter agreements.—The Secretary of the Treasury shall make all reasonable efforts to enter into an agreement with each State under section 6503(b) of title 31, United States Code, as added by this section (relating to procedures and requirements for transfers of funds between executive agencies and States), by
July 1, 1993 or the first day of a State’s fiscal year beginning in 1993, whichever is later. “(2)
Effective Date
of
Regulations
.—
Regulations
issued by the Secretary of the Treasury under subsection (b)(3) of section 6503 of title 31, United States Code, as added by the [this] section (relating to procedures and requirements for transfers of funds involving States not entering agreements), shall take effect on July 1, 1993 or the first day of a State’s fiscal year beginning in 1993, whichever is later.” GAO Report Pub. L. 101–453, § 6, Oct. 24, 1990, 104 Stat. 1062, as amended by Pub. L. 102–589, § 2(3), Nov. 10, 1992, 106 Stat. 5133, which directed Comptroller General, five years after Oct. 24, 1990, to submit an audit of the implementation of
Amendments
made by section 5 of Pub. L. 101–453 (which amended this section and section 6501 of this title) and to submit a report to Congress describing results of that audit, was repealed by Pub. L. 104–316, title I, § 115(i), Oct. 19, 1996, 110 Stat. 3835.
Reference
Citations & Metadata
Citation
31 U.S.C. § 6503
Title 31 — Money and Finance
Last Updated
Apr 6, 2026
Release point: 119-73