Track interest earned on federal grant cash advances

Start with the recipient's award list and cash-advance records. Separate federal advances from reimbursement receipts, nonfederal grants and the organization's own funds. Record the recipient, award, bank account and periods during which federal cash remained on hand. Interest is easier to explain when the underlying cash population is already defined.

Section 200.305 treats payments for States separately from payments for other recipients and subrecipients. For the latter group, it generally requires interest-bearing accounts for advances, with specified exceptions. Check the applicable award and recipient rules before assuming the interest requirement or an exception applies to every account the organization holds.

List each interest credit, the period earned and the balance information used to attribute it. When an account mixes federal and other cash, preserve the reviewed allocation method and the underlying balance history. A year-end percentage based only on the closing balance may overlook a large federal advance held earlier in the year.

Reconcile the schedule's total interest to the bank and ledger, then identify the federal portion. Keep bank fees separate from interest earned unless the responsible reviewer establishes a permitted treatment. Explain later corrections and reversals rather than deleting them from the schedule. The record should show how an accountant could reproduce the attributed amount.

For recipients and subrecipients covered by section 200.305(b), the rule permits up to $500 a year of interest on federal funds to be retained for administrative expenses. Excess interest is returned annually to HHS Payment Management Services, including when the underlying award was paid through another system. Do not apply a separate $500 allowance to every grant or bank account.

Suppose the reviewed annual federal-interest total is $860 across three awards and no earlier retention or return has been recorded. A full permitted $500 administrative retention would leave $360 to return. Show the total, permitted retention used, previous returns and remaining amount. The example assumes the rule applies; it does not replace the recipient's award review.

HHS states that PMS stopped accepting paper checks on October 1, 2026. Use its current electronic payment instructions and confirm the required identifiers before sending a return. Obtain payment details directly from the official page through the organization's normal payment-approval process rather than copying banking instructions from an old spreadsheet.

Identify the remittance as interest and include the relevant grant information. PMS asks for its payee account numbers when the grants were paid through PMS, or the awarding agency when they were not. Keep interest and principal classifications explicit if a payment contains both. Returning unused principal can follow a different agency route from returning interest.

Retain the approved calculation, payment confirmation and any agency acknowledgment. Match the amount to the interest balance cleared in the ledger, and leave rejected or unallocated returns open for follow-up. Review why excess cash remained on hand: the interest schedule can reveal drawdowns that were poorly timed to program spending, which should inform the next cash request.