Improving Electronic Funds Transfer for Vendor Payments

Office of the Chief Financial Officer

Debt Collection Improvement Act

• Requires Electronic Funds Transfer (EFT) for most Federal Payments

• Definition of EFT– Automated Clearing House (ACH)– Fedwire– Credit Card– Debit Card

Debt Collection Improvement Act

• 31 CFR Part 208, “Management of Agency Disbursements,” 9/25/98, establishes:– Waivers– Account Requirements– Agency Requirements– Withholding Payments– Electronic Transfer Account (ETA)

Waivers for Individuals

• Where an individual determines that EFT would impose a hardship due to– Physical or mental disability,– Geographic, language, or literacy barrier, or– Financial hardship

Waivers for All Recipients

• Where the political, financial, or communications infrastructure does not support payment by EFT in a foreign country;

• Where payment is to a recipient within an area designated by the President or an authorized agency administrator as a disaster area;

Waivers for All Recipients

• Where paying by EFT would jeopardize military or law enforcement operation or national security interests;

• Where an agency’s need for goods and services is of such unusual and compelling urgency that the Government would be seriously injured unless payment is made by a method other than EFT;

Waivers for All Recipients

• Where the agency does not expect more than one EFT payment within one year; or

• Where there is only one source of goods or services and the Government would be seriously injured unless payment is made by a method other than EFT.

Why All The Fuss?

• President’s Management Agenda / CFO Council Initiatives Scorecard System Require > 96% EFT Payment Rate for a “Green” Grade.

• EFT saves money, is faster, and improves cash management.

• Treasury advised us that EFT costs $.10; check costs $.73

• USDA January 2004 EFT Rate was 35%.– That’s “Red” and “Last” on the Government-Wide Metric

Tracking System.

– EFT Rates are currently “self-reported” by Departments.

Why?

• Benefits of Vendor Express to the Vendor:– Provides convenience and reduced administrative costs

by eliminating the check depositing process.

– Improves service to recipient by providing highly dependable, efficient and more timely payments.

– Increase security, by eliminating lost, forged, or stolen checks.

– Provides the vendor with funds on the payment date.

Why?

• Benefits of Vendor Express to the Government:– Eliminates checks printing, postage, and related

administrative costs.

– Streamlines operations by reducing paperwork and reconciliation.

– Provides effective way to comply with the Prompt Payment Act.

– Provides a complete audit trial and traceable payments that eliminates the research and replacement of lost checks.

Actions to Improve EFT

Identify Most Frequent Check Recipients & Solicit EFT Data

• Focused on a list of 2004 “Top 20” check recipients.– UPS

– Fed-Ex

– Telephone Vendors (SBC, Qwest, AT&T, Cellular One, Verizon, Sprint, Cingular, AllTel, Nextel, BellSouth).

– COD Administrative Payments Branch matching telephone vendors to TELE system to get EFT data.

• The “Top 20” vendors received approx. 40% of total 2004 check volumes.

Actions to Improve EFT

TOP 20 Starting EFT Data 2004 VEND Codes Found For Percent Checks W/O EFT VEND Codes Now EFT

Fed-Ex 20,145 21 19 90.48%SBC 21,934 12 11 91.67%Qwest 14,150 5 5 100.00%AT&T W/L 14,342 11 0 0.00%UPS 7,906 23 18 78.26%Cellular One 5,562 13 1 7.69%Verizon W/L 5,421 12 12 100.00%Sprint 5,024 10 10 100.00%Cingular W/L 4,930 17 17 100.00%AT&T 4,629 11 0 0.00%AllTel 4,457 9 4 44.44%Verizon 4,393 13 12 92.31%Nextel 3,411 6 6 100.00% Summary 163 115 70.55%

As of 4-11-05

Actions to Improve EFT

VENDOR Solicitation• Identified 19,000 different vendors who received check

payments in 2004.– Quick check of VEND indicated we had already obtained EFT

data for 3,000 of those vendors. – On 3-4 and 3-7 COD mailed 9,000+ letters to vendors soliciting

EFT data.• Results:• As of 4-11, have received EFT data for 1,536 of the recipients (17%).

Replies have also allowed deactivation of 120 vendor accounts. Replies continue to roll in.

• NOTE: Many “waivered” vendors have supplied EFT data in reply to this effort. Indication that waivers were not needed.

First question to vendor must be: “What is your Bank Account?”

Actions to Improve EFT

VENDOR Solicitation• OCFO will consider deactivation of VEND record

for non-responders who do not posses a valid waiver.– Could cause payment rejects and inquiries.– If adopted, agencies will be provided listing prior to

deactivation.

• Still analyzing 6,400 of the 19,000 in attempt to find EFT on CCR or “related” VEND records prior to doing a mailout to these vendors.

Actions to Improve EFT

Agency Assistance• COD has provided worksheets to each agency CFO

detailing vendors, identified to the agency, without EFT.

– Agency help is needed in making contact with their vendors

to obtain EFT data.

– Instructions and forms were also provided to CFOs for getting the EFT data back to COD.

Actions to Improve EFT

Check Inserts• COD has worked with Treasury to do a “stuffer” (check

insert).

• Treasury will place the stuffer in the envelope of every non-employee USDA check recipient for a period of a month. Depending on response, may repeat the process over several months.

• Stuffer provides vendor an explanation of our effort and a form for supplying EFT data back to COD.

EFT Improvement Initiatives

Where are we?• Waivers, though allowable by DCIA, detract from our

ability to get to “green.”– 03-05 VEND Stats

Active Vendors Excluding Employees: 342,872 100.00%

Less: Vendors with EFT 144,440 42.13%Vendors without EFT 198,432 57.87%Vendors with Waivers 75,917 38.26%

– Treasury is considering reviewing “green” requirements to allow for agencies having high volumes of waivered vendors. No guarantee on a break though!

– Treasury also considering calculating stats versus allowing “self-reporting.” Ensures stats are consistently calculated.

EFT Improvement Initiatives

Where are We?• January 2004 EFT rate = 35%• March 2005 EFT rates by agency are:

– AMS 65% FSA 67%– APHIS 64% FSIS 57%– ARS 60% GIPSA 54%– CSREES 80% NASS 56%– DASO 72% NRCS 61%– ERS 80% OIG 54%– FAS 76% RD 64%– FNS 66% RMA 77%– FS 53%

• March 2005 Overall = 59%• Still “RED”. Shows improvement but not near the 96% currently needed

for “green.”

EFT Improvement Initiatives

Where are we going?• As stated, 79% of the VEND adds in 03-05 contained EFT data.

Going in right direction but means 21% of the adds requested a waiver.

• Continue to seek EFT data for Top 20.

• Continue to process replies to vendor letter mailout.

• Process replies to Treasury “Stuffer.”

• Agencies work listings provided to CFOs and provide EFT data to COD.

• Agencies enforce stricter policy over granting of waivers.

First question to vendor: “What is your Bank Account?”

• Make decision on de-activation of VEND codes without EFT.

EFT Improvement Initiatives

• Thanks for your efforts thus far toward EFT Improvement.

• Agencies Play a HUGE ROLE in Improving EFT.– Agencies are first contact with vendor. Battle Cry must

be:

“Ask and Limit.”

(Ask The Vendor For EFT Data and Limit Waivers)

Contact Information

• Contacts: CTGPD Policy Group– Dale Theurer, Team Leader 202-720-1167

– Aaron Prose, Staff Accountant 202-720-1558

• Contacts: COD Table Maintenance Group– Darrell Kennedy, Supervisor 504-426-5345

– Eddie Malter, Lead Accountant 504-426-5362

– Julia Murphy, Accountant 504-426-5445

– Kirt Ulfers, Branch Chief 504-426-5350