Improving Electronic Funds Transfer for Vendor Payments

1. Improving Electronic Funds Transfer for Vendor Payments Office of the Chief Financial Officer

2. 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

3. 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)

4. 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

5. 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;

6. 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;

7. 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.

8. 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.

9. 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.

10. 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.

11. 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.

12. Actions to Improve EFT TOP 20 Starting EFT Data 2004 VEND Codes Found For Percent ChecksW/O EFTVEND CodesNow 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

13. 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?”

14. 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.

15. 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.

16. 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.

17. 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.

18. 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.”

19. 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.

20. 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)

21. 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