Imprest Funds

Regulations & Guidance
Imprest Funds Policy Directive

NOTE:
The Imprest Policy Directive that follows (in HTML and PDF versions) is shown as it originally was published. Since its release, FMS has revised the TFM as promised in the second paragraph of the SUMMARY section to create a new Treasury Policy Directive covering Third Party Drafts.

TFM links in this Web site take the reader to the new Treasury Policy Directive on the use of Third Party Drafts: TFM Volume I, Part 4, Section 3000 (I TFM 4-3000), Third-Party Draft Procedures for Imprest Fund Disbursing Activities.


SUMMARY

This Policy Directive requires that federal agencies eliminate agency imprest funds, except for waived payments described below, by October 1, 2001.

The Financial Management Service (FMS) is eliminating Treasury Financial Manual (TFM), Volume I, Part 4, Section 3000, Imprest Fund Cash Held at Personal Risk by Disbursing Officers and Cashiers, and is replacing that TFM chapter with this Policy Directive. Section 3040.70 of the TFM covering Third Party Drafts will remain in effect until publication of a Treasury Policy Directive on the use of Third Party Drafts and other draft instruments.

This Policy Directive affects two FMS operating manuals, the TFM and the Manual of Procedures and Instructions for Cashiers (Cashier's Manual). The relevant policy sections of the TFM and the Cashier's Manual have been replaced by this Policy Directive. The operational guidance contained in the TFM will be merged into the Cashier's Manual.


BACKGROUND

Treasury is requiring agencies to eliminate agency imprest funds because they are labor intensive, require relatively more internal controls than noncash payment mechanisms, and the government does not earn interest on money held in these accounts.

The National Performance Review, Report on the Elimination of Imprest Funds in the federal government Through the Use of Electronic Commerce (hereinafter "Report") concluded that due to today's electronic technology advances, most imprest funds in the federal government could be closed. Further, the Report stated that doing so would save the government millions of dollars in operating costs by increasing operational efficiency and improving government service. The Report indicated that it is feasible and appropriate for government agencies to replace their imprest funds with a form of electronic funds transfer (EFT) or type of third party paper.

The Debt Collection Improvement Act of 1996 (DCIA) requires most federal payments to be made electronically as of January 2, 1999, except for tax refunds, subject to the authority of the Secretary of the Treasury to grant waivers. On September 25, 1998, Treasury published a final rule (31 CFR 208)  implementing the requirements of the DCIA. The EFT rule established the circumstances under which waivers from EFT are available and set forth the responsibilities of federal agencies and payment recipients under the regulation, among other requirements.


RESEARCH and ANALYSIS

FMS surveyed the federal agencies and bureaus that make the majority of federal payments on their use of imprest funds. In addition, FMS held several meetings of the EFT interagency policy workgroup to discuss broad agency imprest fund issues, and relied on the final recommendations of the imprest fund subgroup of the EFT workgroup.

The research indicated that many agencies continue to use imprest funds to make a variety of payments to all classes of payment recipients, such as employees, vendors, beneficiaries, and other individual payment recipients. Agencies reported that they also use imprest funds to satisfy mission-specific payment needs where payment by EFT or check is not possible. For example, mission-specific payments include emergency and payments to agency beneficiaries, and payments to individuals to whom the agency must provide untraceable payments--usually for national security or law enforcement actions. Agencies reported that small dollar payments are another area of significant imprest fund use.

In contrast, 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.


SECTION-BY-SECTION ANALYSIS

The availability of waivers, described in (a) - (f) below, should be determined by the agency responsible for making the payment. There is no requirement in the Policy Directive that Treasury approve the applicability of such waivers.

For all payments waived from the requirement that imprest funds not be used, EFT is the preferred payment mechanism. Agencies using cash for these payments should continue seeking electronic or other cost-effective means to make their payments.

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

Imprest funds may only be used when the EFT requirement has been waived. Therefore, an imprest fund payment must meet the requirement of (a) and one other waiver described in (b) through (f).


(b) Payments involve national security interests, military operations, or national disasters;

Several Department of Justice (Justice) bureaus commented that without this exemption, agency activities in these areas could be threatened or compromised.

(c) Payments are made in furtherance of a law enforcement action;

In addition to Justice bureaus and the Environmental Protection Agency, the EFT workgroup and the imprest fund subgroup commented that an exemption should be made to the imprest fund policy for payments made in furtherance of a law enforcement. Specifically, this exemption is provided for payment circumstances in which an agency must 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;

The EFT workgroup and the imprest fund subgroup recommended that the Policy Directive accommodate small dollar cash payments. Treasury agrees that occasionally agencies will need to make small cash payments to individuals with whom an agency has a mission-related relationship and to vendors that do not accept payment by EFT or check. Agencies may not split a payment greater than $25 into two or more smaller payments in order to meet this exemption.

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

The Departments of Justice and State commented that they are often required to do business in foreign countries that do not have the political, financial, or communications infrastructure to support any other payment mechanism other than cash;

(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;

The majority of agencies, the EFT workgroup, and the imprest fund subgroup agreed that agencies should have some discretion as to whether emergency or mission-critical payments should be made by cash if noncash methods where not feasible or possible.

This exemption is intended to provide some flexibility to agencies in determining conditions under which a form of payment other than cash would "seriously injure" the government. FMS intends for agencies to invoke the "serious injury" exemption only under those circumstances in which the agency has determined would negatively impact individual agency program objectives.

All federal agencies must eliminate agency imprest funds by October 1, 2001, except where provided under this directive.


AUTHORITY

Statutes: 31 U.S.C. 3321-3333

Regulations: 31 CFR 208, Management of Federal Agency Disbursements; Final Rule


SCOPE

This Policy Directive applies to all federal payments and, except where waived below, requires such payments to be made using noncash methods, preferably electronic funds transfer.


DEFINITION

Imprest Fund:
A fixed- or petty-cash fund in the form of currency or coin that has been advanced as Funds Held Outside of Treasury. Federal agencies are required to report their imprest funds in General Ledger Account 1120 - Imprest Funds on their annual financial statements.


WAIVERS

Imprest funds may only be used when:

 

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

(b) Payments involve national security interests, military operations, or national disasters;

(c) Payments are made in furtherance of a law enforcement action;

(d) The amount owed is less than $25;

(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.



SIGNATURE

Signed by Commissioner Richard L. Gregg
November 9, 1999

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   Last Updated:  March 14, 2014