32.411
Agreement for special account at a financial institution
FAR 32.411 mandates a standardized agreement to safeguard government advance payments by requiring their deposit in a special, controlled account with strict oversight and reporting requirements.
Overview
FAR 32.411 prescribes the required form and content for an agreement establishing a special account at a financial institution when advance payments are made to a contractor. This agreement ensures that government-advanced funds are segregated from the contractor’s general funds and are subject to specific controls and oversight. The regulation outlines the roles and responsibilities of the government, contractor, and financial institution, including the government’s lien on the account, procedures for deposit and withdrawal, access to records, and notification requirements in the event of legal actions affecting the account.
Key Rules
- Use of Standard Agreement Form
- Contracting officers must use the prescribed agreement format when establishing a special account for advance payments.
- Account Segregation and Designation
- Advanced funds must be deposited in a separate, designated special account at an eligible financial institution.
- Government Lien and Oversight
- The government holds a paramount lien on the account and has access to related records for six years after account closure.
- Financial Institution Responsibilities
- The financial institution must follow written directions from the government and notify the administering office of any legal actions affecting the account.
- Interest Rate Reporting
- The financial institution must report its prime interest rate monthly, unless the advance payments are interest-free.
Responsibilities
- Contracting Officers: Ensure the agreement is executed in the prescribed form and monitor compliance.
- Contractors: Deposit advance payments only in the designated special account and comply with all agreement terms.
- Agencies: Oversee the administration of the account and ensure access to records.
Practical Implications
- This section protects government funds by requiring segregation and oversight of advance payments.
- It clarifies the roles of all parties and ensures transparency and accountability in handling government-advanced funds.
- Common pitfalls include failure to use the correct agreement form, improper account setup, or inadequate record-keeping.