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Professionals U.S. Department of Education

Citations: (R)668.164 AsOfDate: 12/1/94

Sec. 668.164 Maintaining funds. (a) General. (1) Other than for funds an institution receives under the FFEL programs, an institution must maintain a bank account that meets the requirements under paragraphs (b) or (c) of this section into which the Secretary transfers or the institution deposits Federal funds that the institution receives from the title IV, HEA programs. Except as provided in paragraph (e) of this section, an institution is not required to maintain a separate account for title IV, HEA program funds. (2)(i) An institution must-(A) Notify the bank of the accounts that contain Federal funds and retain a record of that notice in its recordkeeping system; or (B) Ensure that the name of the account discloses clearly that Federal funds are maintained in that account; and (ii) File with the appropriate State or municipal government entity a UCC-1 statement disclosing that the account contains federal funds and maintain a copy of that statement in its records. (b) Interest-bearing account. (1) Notwithstanding any other requirements in this section, an institution that participates in the Federal Perkins Loan Program must maintain-(i) An interest-bearing account that is-(A) Federally insured; or (B) Secured by collateral of value reasonably equivalent to the amount of title IV, HEA program funds in the account; or (ii) An investment account consisting predominately of low-risk income-producing securities, such as obligations issued or guaranteed by the United States. (2) Except as provided in paragraph (c) of this section, for any award year, an institution must maintain an account that meets the requirements in paragraphs (b)(1)(i) or (ii) of this section. If an institution maintains Federal funds in an investment account as provided in paragraph (b)(1)(ii) of this section, the institution must maintain sufficient liquidity in that account to make required disbursements to students. (c) Non-interest-bearing account. (1) For any award year, an institution is not required to maintain an interest-bearing account if-(i) In the prior award year, the institution drew down less than $3 million from the title IV, HEA programs; (ii) For the total amount of title IV, HEA program funds that the institution drew down in the prior award year and maintained in an interest-bearing account, the institution earned less than $250 in interest on those funds; or (iii) For the total amount of title IV, HEA program funds that the institution draws down during the award year, the institution demonstrates by its cash management practices that it would not earn

over $250 in interest by maintaining those funds in an interest-bearing account. (2) An institution's non-interest-bearing account must be-(i) Federally insured; or (ii) Secured by collateral of value reasonably equivalent to the amount of title IV, HEA program funds in the account. (d) Interest earnings. Except as provided in paragraphs (d)(1) and (2) of this section, an institution must remit at least annually to the Secretary the interest or investment revenue earned on title IV, HEA program funds maintained in an interest-bearing or investment account. (1) Pursuant to 34 CFR Part 674, an institution must retain for the purposes of the Federal Perkins Loan Program all interest or investment revenue earned on Federal Perkins Loan Program funds maintained in an interest-bearing or investment account. (2) Other than interest or investment revenue earned on Federal Perkins Loan Program funds, an institution may retain for administrative expense up to $250 per year of the interest or investment revenue earned on title IV, HEA program funds maintained in an interest-bearing or investment account. (e) Separate account. The Secretary may require an institution to maintain title IV, HEA program funds, including the funds an institution maintains for purposes of the Federal Perkins Loan Program, in a separate bank account that contains no other funds if the Secretary determines that-(1) The institution's accounting and internal control systems do not-(i) Identify the cash balances of title IV, HEA program funds maintained in the institution's bank account as readily as if those funds were maintained for each program in a separate account; or (ii) Identify adequately the interest or investment revenue earned on title IV, HEA program funds maintained in its bank account; (2) The institution's financial records-(i) Are not maintained on a current basis; (ii) Do not reflect accurately all title IV, HEA program transactions; or (iii) Are not reconciled at least monthly; or (3) The institution has otherwise failed to comply with the recordkeeping and reporting requirements in subpart B of this part or in the regulations that govern each title IV, HEA program in which the institution participates. (f) Standard of conduct. An institution must exercise the level of care and diligence required of a fiduciary with regard to maintaining and investing Federal funds. (Authority: 20 U.S.C. 1094)