Management of Federal Agency Receipts, Disbursements, and Operation of Cash Management Improvements Fund; Rule DEPARTMENT OF THE TREASURY

SUMMARY: This document revises collection and deposit regulations

requiring timely methods, principally Electronic Funds Transfer (EFT),

for the collection and deposit of funds as authorized by section 2652

of the Deficit Reduction Act of 1984. This document also incorporates

revisions, authorized by the Cash Management Improvement Act of 1990

(CMIA 90) and the Cash Management Improvement Act Amendments of 1992

(CMIA 92), that require executive agencies to use effective, efficient

disbursement mechanisms, principally EFT, in the delivery of payments.

An agency's failure to comply may result in a charge equal to the cost

of such non-compliance to the Treasury's General Fund.

EFFECTIVE DATE: March 2, 1994.

ADDRESSES: Cash Management Policy and Planning Division, Financial

Management Service, U.S. Department of the Treasury, room 511, Liberty

Center, 401 14th Street SW., Washington, DC 20227.

FOR FURTHER INFORMATION CONTACT: John Galligan (202) 874-6935

(Director, Cash Management Policy and Planning Division); Donald Clark

(202) 874-6657 (Program Specialist); or Randall Lewis (202) 874-6680

(Principal Attorney).

SUPPLEMENTARY INFORMATION:

Authority

This regulation is authorized by section 2652 of the Deficit

Reduction Act of 1984, Pub. L. 98-369, 98 Stat. 494 (1984), codified at

31 U.S.C. 3720, as amended; section 4 of the Cash Management

Improvement Act of 1990, Pub. L. 101-453, 104 Stat. 1058 (1990),

codified at 31 U.S.C. 3335; the Cash Management Improvement Act

Amendments of 1992, Pub. L. 102-589, 106 Stat. 5133 (1992); and

additional authority found at 5 U.S.C. 301, 31 U.S.C. 321, 31 U.S.C.

3301, 31 U.S.C. 3302, 31 U.S.C. 3321, 31 U.S.C. 3327, 31 U.S.C. 3328,

and 31 U.S.C. 3332. Regulations governing Federal payments by the

Automated Clearing House method of EFT appear in 31 CFR part 210 and 31

CFR part 370. Additional agency guidance for the use of EFT is

published in the Treasury Financial Manual.

Background

Prior to passage of CMIA 90, part 206 of CFR title 31 (Management

of Federal Agency Receipts and Operation of the Cash Management

Improvements Fund) reflected exclusively the requirements of section

2652 of the Deficit Reduction Act of 1984 (DRA 84). Pursuant to the

authorities vested in the Secretary of the Treasury in DRA 84, and

given the technological and cost-effective breakthroughs in the

collection of funds such as pre-authorized debit and credit/debit cards

in the years since its passage into law, this Part prescribes that

executive agencies shall collect and deposit monies to the Treasury via

EFT, when cost effective, when practicable, and when consistent with

existing statutes.

CMIA 90 and the CMIA 92 expand the cash management regulatory role

of the Secretary of the Treasury (hereinafter, ``Secretary'') to

include the disbursement of funds. As outlined in the preamble to the

Notice of Proposed Rulemaking (NPRM) published August 5, 1993, it is

envisioned that the policy of the Secretary will be that all executive

branch collections will be made by EFT and all executive branch

payments will be disbursed by EFT, to the maximum extent possible, when

cost-effective, practicable, and consistent with current statutory

authority. Further, it is consistent with the policy outlined in the

Vice President's report dated September 7, 1993, ``From Red Tape To

Results: Creating A Government That Works Better and Costs Less.'' The

policy calls for the Federal Government to use EFT to pay and reimburse

expenses for all Federal employees, to handle all interagency payments,

to make payments to State and local governments, to pay for purchases

from the private sector, and to make all payments to private

individuals. EFT allows Federal agencies to meet program objectives

with convenience, security, and reliability for recipients and payers.

In addition, by permitting greater control over the timing of

collections and payments, EFT improves cash management and supports

agency efforts to comply fully with Office of Management and Budget

directives and guidelines which implement the Prompt Payment Act. EFT

reduces processing costs and paperwork and makes possible the

electronic interface between issuer and receiver accounting systems.

The Secretary continues to acknowledge that there will be specific

exceptions for which the use of EFT will not be required. The

Secretary's policy is to use EFT whenever it is cost-effective,

practicable, and consistent with current statutory authority. Many

commenters described specific existing examples of collection or

payment cash flows that did not meet one, or more, of these tests. For

example, it has been suggested that delivering payments by EFT is not

practicable for: (1) Vendor payments to companies whose banks do not

pass on to them the information identifying the reason for the payment,

and (2) Salary or benefit payments to recipients who have no

established bank account. Several commenters said that program agencies

should be allowed the discretion to determine when not to require EFT

for specific cash flows. To provide the clearest guidance and to

clarify the policy for requiring EFT, the Financial Management Service

has inserted more specific language regarding when EFT will be required

for specific cash flows within the body of the rule. This language

reflects the approach that was contemplated in the preamble of the NPRM

for inclusion in the Treasury Financial Manual.

Comments on the Proposed Rule

The Financial Management Service (hereinafter, ``the Service'')

received a total of 60 comments on the August 5, 1993, NPRM from 18

commenters: 17 from Federal agency officials and one from a private

citizen.

The following is a discussion of the significant and most

frequently commented-upon issues:

All commenters expressed strong support for the goal of expanding

the use of EFT for collecting and disbursing Federal funds. Two

commenters expressed complete support for the NPRM, as written. Several

commenters noted the importance of potential improvements of economy

and efficiency that will accompany this paperless approach.

Authority: Five agencies questioned the Service's authority to

regulate all disbursements pursuant to section 4 of the CMIA 90, as

amended, and as codified at 31 U.S.C. 3335. Two other agencies

questioned the Service's authority to regulate all collections under

section 2652 of the Deficit Reduction Act of 1984 (DRA 84), as amended,

and as codified at 31 U.S.C. 3720. The Service has reviewed the

statutory language and legislative history of CMIA and DRA 84 in light

of the concerns raised by agencies, and remains confident of its

authority under these statutes. The plain language of 31 U.S.C. 3335

and 3720 unambiguously provide the Secretary with authority to

promulgate this regulation.

As was stated in the preamble to the NPRM published on August 5,

1993 (58 FR 41902), it is not the intent of the Service to require the

use of EFT techniques when it is not cost-effective, when it is not

practicable, or when it is not consistent with other statutes. We have

reinforced this policy by specifically including these policies within

the language of part 206.

We thank those agencies that responded to our invitation for

comments regarding specific statutory barriers to achieving an all-EFT

environment. As stated in the preamble to the NPRM, these barriers will

be considered when the Service and agencies evaluate specific cash

flows to determine which ones should be converted to EFT.

Implementation Barriers: Fifteen comments related to existing

barriers that agencies will encounter when attempting to implement EFT

in collecting or disbursing Federal funds. Five of those commenters

noted the inability of some banks and vendors to receive and transmit

adequate accompanying data necessary to identify the source and purpose

of EFT funds transfers. Five commenters also noted that it may not be

cost-effective to make or receive nonrecurring, small-dollar payments

via EFT. One commenter noted the inability to make payments via EFT to

recipients who have no established bank account. Another commenter

noted that some service providers such as public utilities may refuse

to accept EFT payments.

The Service acknowledges that all of these may be legitimate

barriers and will consider them in the implementation of EFT conversion

initiatives. All of the above-mentioned barriers to Governmentwide use

of EFT, as well as many others, have been identified by interagency

work groups established under guidance of the Chief Financial Officers

Council Operations Group. The Service is working with these groups to

eliminate these and other impediments to EFT and to foster

Governmentwide use of EFT. Treasury applauds the progressive efforts of

agencies, such as the Federal Transit Administration, that require

vendors to accept EFT payment as a condition of acceptance of

contracts, the Department of Defense and Department of Veterans

Affairs, which require EFT for employee salary payments, and the

General Services Administration and Department of Agriculture which

modified payment systems so that payments made by EFT are available to

recipients no later than those made by check.

One commenter included a request that the Service work with

agencies to evaluate cash flows and identify candidates for EFT

transfer. The Service will continue working with agencies through the

periodic cash management review and annual cash management

certification processes to achieve conversion to EFT mechanisms

whenever cost-effective, practicable, and consistent with existing

statutes.

One commenter recommended postponing implementation of the Final

Rule until all barriers are eliminated. The Service believes that it is

possible to achieve immediate progress in implementing EFT mechanisms

for some cash flows in which no barriers exist and to concurrently work

to eliminate barriers where they do exist.

Setting Standards for EFT: One commenter questioned why language in

the preamble of the NPRM states that agencies will set their own

standards, but the last sentence of section 206.4(b) states that the

Service will work jointly with the agency to set timetables for

converting cash flows to EFT. Based on agency comments, the Service

wishes to make a very clear distinction between the setting of agency

standards for EFT attainment, on the one hand, and setting conversion

timetables and issuing Notices of Deficiency for non-compliance with

the provisions of 31 CFR Part 206, on the other hand. Overall

``standards,'' or ``goals,'' of EFT attainment are numerical

percentages agencies may establish as benchmarks to measure success in

attaining EFT. These standards/goals are not addressed in this rule and

do not relate to the conversion timetables or issuance of Notices of

Deficiency. Instead, this Rule describes the process whereby the

Service will work jointly with agencies to evaluate individual cash

flows, identify candidates for EFT conversion, and negotiate timetables

for those conversions, as described in sections 206.4(b) and 206.6.

Billing Policy and Procedures: NPRM Sec. 206.3 Billing Policy and

Procedures (Final Rule Sec. 206.3 Billing Policy and Procedures). One

commenter disagreed with the inclusion in this section of a billing

standard of 5 business days. The commenter suggested that separate

billing standards be established within each agency for every

application. The Rule currently reads: ``An agency may prepare and

transmit bills later than the 5-day timeframe, if it can demonstrate

that it is cost-effective to do so.'' The Rule remains unchanged and

will accommodate agency variations, when proven to be cost-effective.

Consult Further with other Entities Before Publishing Rule: Two

commenters suggested that more consultation with entities outside

Government is warranted before publishing the Final Rule. The Service

disagrees. The Service met with Federal agencies during the 9 months

prior to publication of the NPRM and incorporated agency comments into

the NPRM. Non-governmental entities were afforded the opportunity to

respond to the NPRM, published for public comment on August 5, 1993.

Further, the Service has ongoing dialogue with financial institutions

that participate in Treasury's various financial networks and the

Service hosts an interagency work group created to develop

Governmentwide Electronic Data Interchange standards in close

consultation with the financial institution community and associations.

Another commenter recommended consulting with the ``Small Business

Community,'' by way of the Small Business Administration (SBA). The SBA

has been involved with the effort to expand EFT, as a participant of

the EFT Vendor Payment Work Group, operating under the auspices of the

Chief Financial Officers Council Operations Group. The Work Group is

developing better means of expanding EFT payments and was specifically

invited to review the NPRM and submit comments.

Promote Use of the Government Small Purchase Card: (Final Rule

Sec. 206.2 Definitions) Two commenters recommended that the Service

promote use of the Government Small Purchase Card as a tool for

streamlining the procurement and payment process for many purchases.

The Final Rule includes reference to the Small Purchase Card within the

definition of EFT. The Service will continue to promote the use of the

Government Small Purchase Card as an EFT application, whenever cost-

effective.

Exceptions to EFT Policy: One commenter noted an inconsistency

between the NPRM preamble and Secs. 206.4(b) and (d). The preamble of

the NPRM lists three exceptions for use of EFT applications: (1) Not

cost-effective, (2) not practicable, and (3) not consistent with

current statutory authority. The commenter noted that language in

Sec. 206.4 only recognized the first two of these exception situations.

The Service agrees and has revised the wording in Secs. 206.4(b) and

(d) to include, ``not consistent with current statutory authority.''

Another commenter suggested that an application should be exempted

if the use of EFT would undermine accomplishment of program objectives.

The Service acknowledges that such concerns are covered by the ``when

practicable'' exception of Sec. 206.4(b). If a Federal agency

demonstrates that the use of EFT, in and of itself, would undermine

program objectives, the Service would exempt specific cash flows.

Cost-benefit Analysis: Four comments related to possible

requirements for agencies to submit cost-benefit analyses in support of

using mechanisms other than EFT. One commenter expressed concern that

obtaining Treasury approval of non-EFT mechanisms was intrusive upon

agencies' management prerogatives. Section 206.4(c) states that an

agency may be required to provide a cost-benefit analysis when

proposing the use of a collection or payment mechanism other than EFT.

Where the inefficiency or impracticality of EFT is evident, a cost-

benefit analysis may not be required. One commenter suggested that it

may be counterproductive to require a cost-benefit analysis if an

agency uses lockbox or other Treasury-approved mechanism. The Service

initiated the lockbox network in 1983, when it was considered the most

efficient mechanism for collecting and depositing funds. In the

intervening 10 years, technological advances have made other

mechanisms, such as EFT, pre-authorized debit, more cost effective.

Therefore, a lockbox may no longer qualify as more effective than EFT.

Two commenters stated a concern that cost-benefit analyses should

include all costs. For example, they suggest that requiring vendors to

accept payment by EFT could potentially narrow the field of bidders and

result in higher prices. Demonstratably higher prices and other

additional agency costs, such as those needed to obtain and maintain

bank account information necessary for EFT transmission, should be

included in cost-benefit analyses. The Service will consider this

comment when revising the Treasury Financial Manual and will direct

that cost-benefit analyses will include all relevant costs.

Consider Agency Staff Time Required to Prepare Reports: One

commenter expressed concern over additional agency burden required to

prepare reports for the Service, as outlined in Sec. 206.6(c). The

review and reporting necessary to implement this regulation, as

described in Sec. 206.6(c), is already in place and has been operating

successfully since 1985. It includes the periodic complete cash

management reviews and the annual cash management certifications

already performed jointly by the agency and the Service.

Appeals Process: Three comments were received addressing the

appeals process. Two commenters felt that the Appeals Board was not

objective, because two members are from the Service and one member is

from outside the Service.

The authority to assess agencies with penalties for failure to use

efficient mechanisms to make payments or collections is vested solely

with Treasury through statutes. The language of 31 U.S.C. 3335 and 31

U.S.C. 3720(a) places the authority to impose and collect charges for

noncompliance with the Secretary, and the appeals process is within the

discretion of the Secretary. However, in consideration of the comments

that the Appeals Board should be represented by individuals with broad

and varied experience, the composition of the Appeals Board has been

altered in the Final Rule to include only one member from the Service.

The Appeals Board will consist of two permanent members--the Deputy

Chief Financial Officer, Department of the Treasury, and the Assistant

Commissioner for Federal Finance of the Service. The temporary member

of the Appeals Board will be a cash management official of an agency

other than the agency appealing the Notice of Deficiency.

Penalties: Seven comments addressed the use of penalties. Four

comments expressed preference for positive inducements to encourage EFT

use, rather than penalties. The Deficit Reduction Act of 1984, required

agencies to pay charges for failure to comply with scheduled

conversions of collections cash flows to improved mechanisms.

Procedures implementing those requirements have been in effect since

1985. The procedures in this Rule regarding the use of penalties for

payments noncompliance closely reflect those existing procedures for

collections. The CMIA 90/92 statutes provide specifically for

assessment of penalties, when agencies fail to use the most efficient

funds transfer mechanisms. The CMIA statutes do not provide for the use

of positive inducements. However, to allow for time to review agency

concerns questioning when and how to assess penalties against agencies

that fail to meet scheduled implementation dates for conversion to

efficient payment mechanisms, Treasury will defer issuing regulations

to implement the provision of the CMIA 90/92 giving Treasury the

authority to assess such penalties. Therefore, references to penalties

in this rule pertain solely to collection cash flows.

Regulatory Analysis

It is hereby certified that this regulation will not have a

significant economic impact on a substantial number of small entities.

Accordingly, a regulatory flexibility analysis is not required. The

Regulatory Flexibility Act defines small entities to include certain

nonprofit, for-profit, and Governmental entities. Revisions made

pursuant to CMIA 90 only will impact executive agencies, entities not

encompassed by that definition. The flexibility incorporated into the

revisions to deposit and collection provisions has been included in

order to avoid the imposition of EFT in those situations where

significant costs or impracticality preclude its effective use and,

therefore, will not result in a significant economic impact on a

substantial number of small entities.

It has been determined that this document is not a significant

regulatory action as defined in E.O. 12866. Therefore, an assessment of

anticipated benefits, costs, and regulatory alternatives is not

required.

List of Subjects in 31 CFR Part 206

Accounting, Banks, Banking, Electronic funds transfer.

Authority and Issuance

For the reasons set out in the preamble, it is proposed to revise

title 31, part 206 of the Code of Federal Regulations to read as

follows:

PART 206--MANAGEMENT OF FEDERAL AGENCY RECEIPTS, DISBURSEMENTS, AND

OPERATION OF THE CASH MANAGEMENT IMPROVEMENTS FUND

Sec.

206.1 Scope and application.

206.2 Definitions.

206.3 Billing policy and procedures.

206.4 Collection and payment mechanisms.

206.5 Collection and deposit procedure exceptions.

206.6 Cash management planning and review.

206.7 Compliance.

206.8 Appeals.

206.9 Charges.

206.10 Operation of and payments from the Cash Management

Improvements Fund.

Authority: 5 U.S.C. 301; 31 U.S.C. 321, 3301, 3302, 3321, 3327,

3328, 3332, 3335, 3720, and 6503.

Sec. 206.1 Scope and application.

(a) This subpart applies to all Government departments and agencies

in the executive branch (except the Tennessee Valley Authority) and all

monies collected and disbursed by these departments and agencies. This

subpart does not apply to interagency transfers of funds, except that

agencies are to use the Treasury's On-Line Payment and Collection

(OPAC) system for interagency payments between executive agencies, when

cost-effective.

(b) Policies and guidelines are prescribed for promoting efficient,

effective cash management through improved billing, collection,

deposit, and payment of funds. These objectives seek to improve funds

availability and the efficiency and effectiveness with which funds are

transferred.

(c) Authority to implement this regulation has been delegated

within the Department of the Treasury (hereinafter, ``Treasury'') to

the Commissioner (hereinafter, ``the Commissioner'') of the Financial

Management Service (hereinafter, ``the Service).'' The Service

maintains the final authority as granted under the Deficit Reduction

Act of 1984 to specify use of a particular method or mechanism of

collection and deposit and to recover costs that result from

noncompliance. Authority is also granted to the Service, under the Cash

Management Improvement Act of 1990, as amended by the Cash Management

Improvement Act Amendments of 1992, to provide for the timely

disbursement of funds. An agency will require the collection or

disbursement of funds by the agency via EFT as a provision of new

contractual agreements or renewal of existing contracts that impact

agency collection or payment mechanisms.

Sec. 206.2 Definitions.

For the purpose of this part, the following definitions apply:

Agency means any department, instrumentality, office, commission,

board, service, Government corporation, or other establishment in the

executive branch, except the Tennessee Valley Authority.

Billing means any of a variety of means by which the Government

places a demand for payment against an entity that is indebted to the

Government. The term encompasses invoices, notices, initial demand

letters, and other forms of notification.

Cash management means practices and techniques designed to

accelerate and control collections, ensure prompt deposit of receipts,

improve control over disbursement methods, and eliminate idle cash

balances. ``Cash Management Review Process'' means periodic

examinations of collection and disbursement cash flows to ensure that

the most effective mechanisms are used to process the funds.

Collection means the transfer of monies from a source outside the

Federal Government to an agency or to a financial institution acting as

an agent of the Government.

Collection mechanism means any one of a number of tools or systems

by which monies are transferred to the Government from a source outside

the Government.

Cutoff time means a time predesignated by a financial institution

beyond which transactions presented or actions requested will be

considered the next banking day's business.

Day means a calendar day unless otherwise specified.

Deposit means as a noun, money that is being or has been presented

for credit to the Treasury. Deposits can be made by an agency or

directly by the remitter. All such transfers are effected through a

Federal Reserve Bank or other financial institution. As a verb, deposit

means the act of presenting monies for credit to the Treasury by an

official of an agency.

Depositary means a bank or other financial institution that has

been authorized by the Treasury to receive monies for credit to the

Treasury.

Disburse means the initiation of an Electronic Funds Transfer (EFT)

transaction or other methods of drawing funds from accounts maintained

by the Government.

Electronic funds transfer (EFT) means any transfer of funds, other

than a transaction originated by cash, check or similar paper

instrument, that is initiated through an electronic terminal,

telephone, computer, or magnetic tape, for the purpose of ordering,

instructing, or authorizing a financial institution to debit or credit

an account. The term includes, but is not limited to, Fed Wire

transfers, Automated Clearing House (ACH) transfers, transfers made at

automatic teller machines (ATM) and Point-of-Sale (POS) terminals (to

include use of the Government small purchase card), and other means of

credit card transactions.

Fund means the Cash Management Improvements Fund.

Monies (or ``receipts'') means EFT transactions, currency,

negotiable instruments, and/or demand deposits owed to or collected by

an agency.

Next-day deposit means a deposit made before the cutoff time on the

day following the day on which the funds were received by an agency.

For example, if an agency receives funds for deposit at 3 p.m. on

Monday and transmits the deposits to the depositary by 2 p.m. on

Tuesday (the depositary's next cutoff time), then next-day deposit

requirements are met.

Payment means a sum of money transferred to a recipient in

satisfaction of an obligation. A payment includes any Federal

Government benefit or nonbenefit payment.

(1) A benefit payment is a disbursement for a Federal Government

entitlement program or annuity. Benefit payments may be one-time or

recurring payments including, but not limited to, payments for Social

Security, Supplemental Security Income, Black Lung, Civil Service

Retirement, Railroad Retirement Board Retirement/Annuity, Department of

Veterans Affairs Compensation/Pension, Central Intelligence Agency

Annuity, Military Retirement Annuity, Coast Guard Retirement, and

Worker's Compensation.

(2) A nonbenefit payment is a Federal Government disbursement other

than a benefit payment. Nonbenefit payments may be one-time or

recurring payments including, but not limited to, payments for vendors,

Internal Revenue Service tax refunds, Federal salaries and allotments

therefrom, grants, travel disbursements and reimbursements, loans,

principal and/or interest related to U.S. savings bonds, notes, and

other savings-type securities, and payments of service fees to

organizations qualified to issue and/or redeem savings bonds.

Point-of-sale (POS) terminal means an automated credit card or

debit card transaction device.

Presumed EFT means that agencies will presume that new payment

recipients will elect EFT as the means of payment delivery. Enrollment

forms for use in establishing routine payments will be designed with

this approach in mind, to obtain the required written consent of the

recipient.

Recipient means a person, corporation, or other public or private

entity receiving benefit or nonbenefit payments from the Government.

Same-day deposit means a deposit made before the cutoff time on the

day on which the funds were received by an agency. For example, if an

agency receives funds for deposit at 10 a.m. on Monday and transmits

the deposits by 2 p.m. on Monday (the depositary's cutoff time), then a

same-day deposit has been achieved.

Service means the Financial Management Service, Department of the

Treasury.

Treasury Financial Manual (TFM) means the manual issued by the

Service containing procedures to be observed by all Government

departments and agencies in relation to central accounting, financial

reporting, and other Governmentwide fiscal responsibilities of the

Department of the Treasury. Volume I, Chapter 6-8000 P(I TFM 6-8000)

contains agency cash management procedures to be followed pertaining to

these regulations.

Copies of the TFM are available free to Government agencies. Others

who are interested in ordering a copy may call (202) 208-1819 or write

the Directives Management Branch, Financial Management Service,

Department of the Treasury, Liberty Center (UCP-741), Washington, DC

20227 for further information.

Sec. 206.3 Billing policy and procedures.

The billing process is considered an integral part of an effective

cash management collection program. In those situations where bills are

required and the failure to bill would affect the cash flow, bills will

be prepared and transmitted within 5 business days after goods have

been shipped or released, services have been rendered, or payment is

otherwise due. An agency may prepare and transmit bills later than the

5-day timeframe if it can demonstrate that it is cost-effective to do

so. In addition, the bill must include the terms and dates of payments,

and late payment provisions, if applicable. Terms and dates of payments

will be consistent with industry practices. PI TFM 6-8000 describes

detailed billing policies, procedures, and industry standards for

agencies.

Sec. 206.4 Collection and payment mechanisms.

(a) All funds are to be collected and disbursed by EFT when cost-

effective, practicable, and consistent with current statutory

authority.

(b) Collections and payments will be made by EFT when cost-

effective, practicable, and consistent with current statutory

authority. When consistent with these criteria, specific cash flows

will utilize EFT as follows:

(1) Fees/Fines: EFT will be adopted as the presumed method of

collecting fees and fines, especially when these collection cash flows

are recurring or of large dollar amounts.

(2) Tax Collections: EFT will be adopted as the primary method for

collecting taxes. EFT mechanisms may include ACH credit or debit cards.

(3) Salary Payment: Presumed EFT will be adopted as the method for

paying employees, and entrance enrollment forms for establishing

regular payments will be designed to use this approach.

(4) Vendor and Miscellaneous Payments: Each department and agency

will exercise its authority under the Federal Acquisition Regulation to

require that all contractors are paid by EFT, unless a determination is

made that it is not in the best interest of the Federal Government to

do so. EFT will be adopted as the standard method of payment for all

Federal program payments originated by agencies or their agents.

(5) Benefit Payments: EFT will be presented to new beneficiaries as

the presumed method for receiving benefits. EFT payment methods, such

as Electronic Benefit Transfer, will be adopted and implemented to make

EFT accessible to all benefit recipients.

(c) (1) Selection of the best collection and payment mechanism is a

joint responsibility of an agency and the Service. An agency has

responsibility for conducting cash management reviews; gathering volume

and dollar data relative to the operation of the systems; and funding

any implementation and operational costs above those normally funded by

Treasury. The Service is the required approval authority when an agency

desires to convert from one collection mechanism to another. The

Service's written approval is required prior to an agency entering into

new contractual agreements or renewing existing contracts for agency

collections or payments systems. Agencies will follow guidelines for

the cost-effective usage of collection and payment mechanisms,

published in the TFM, Volume I, Part 6-8000, in their selection and

recommendation to the Service of an appropriate funds transfer

mechanism. The agency will provide the Service with a recommended

mechanism for any new or modified cash flows. The Service will review

the recommendations, approve a mechanism, and assist with

implementation.

(2) If an agency proposes a collection or payment mechanism other

than EFT, it may be required to provide a cost-benefit analysis to

justify its use. Cost/benefit analyses must include, at a minimum,

known or estimated agency personnel costs, costs of procurement,

recurring operational costs, equipment and system implementation and

maintenance costs, costs to payment recipients, and costs to remitters.

Agencies should consult with Treasury to determine the need to include

interest costs associated with float in their computations of benefits

and costs.

(d) An agency will require the collection of funds by the agency to

be made via EFT and the disbursement of funds by the agency to be made

via EFT as a provision of new contractual agreements or renewal of

existing contracts that impact agency collection or payment mechanisms,

when cost-effective, practicable, and consistent with current statutory

authority.

Sec. 206.5 Collection and deposit procedure exceptions.

(a) The following collection and deposit timeframe requirements are

to be followed in exception cases where EFT mechanisms are not

utilized:

(1) An agency will achieve same-day deposit of monies. Where same

day deposit is not cost-effective or is impracticable, next day deposit

of monies must be achieved except in those cases covered by I TFM 6-

8000.

(2) Deposits will be made at a time of the day prior to the

depositary's specified cutoff time, but as late as possible in order to

maximize daily deposit amounts.

(3) When cost-beneficial to the Government, an agency may make

multiple deposits.

(b) Any additional exceptions to the above policies are listed in I

TFM 6-8000.

Sec. 206.6 Cash management planning and review.

(a) An agency shall periodically perform cash management reviews to

identify areas needing improvement.

(b) As part of its cash management review process, an agency is

expected to document cash flows in order to provide an overview of its

cash management activities and to identify areas that will yield

savings after cash management initiatives are implemented. The Service

will evaluate an agency's EFT policy and application, to include

mitigating circumstances that may prevent the use of EFT, as part of

the cash management reviews.

(c) An agency's cash management reviews will provide the basis for

identification of improvements and preparation of cash flow reports for

submission to the Service as prescribed by I TFM 6-8000. That Chapter

provides requirements for an agency in performing periodic cash

management reviews, identifying improvements, and preparing cash flow

reports. In addition, the Chapter describes the timing and content of

periodic reports that must be submitted by an agency to the Service on

progress made in implementing cash management initiatives and

associated savings.

(d) The Service will periodically review an agency's cash

management program to ensure that adequate progress is being made to

improve overall cash management at an agency. As part of its oversight

authority, the Service may visit an agency and review all or specific

cash management activities of an agency. An agency will be notified in

advance of the Service's review and will be required to provide the

Service with documentation of the agency cash management review within

the timeframes required by I TFM 6-8000.

Sec. 206.7 Compliance.

(a) The Service will monitor agency cash management performance.

Part of the monitoring process will include establishing implementation

end dates for conversion to, or expansion of, EFT mechanisms, as well

as the identification of mitigating circumstances that may prevent the

use of EFT.

(b) In cases where an agency fails to meet a scheduled date within

its control, or where an agency converts to a less cost-effective

transfer mechanism without prior, written Service approval as

determined in accordance with Sec. 206.4(c), the Service will send a

formal Notice of Deficiency to an agency's designated cash management

official. A separate Notice will be sent for each initiative.

(1) Collections cash flows. For collections cash flows, the Notice

of Deficiency will include the nature of the deficiency, the amount of

the proposed charge, the method of calculation, the right to file an

appeal, and the date the charge will be imposed in the absence of an

appeal. The amount of the charge will be equal to the cost of such

noncompliance to the Treasury's General Fund.

(2) Payments cash flows. [Reserved]

Sec. 206.8 Appeals.

(a) An agency that chooses to file an appeal must submit the appeal

in writing to the Commissioner within 45 days of the date of the Notice

of Deficiency. In the event of an appeal, the charge imposed under

Notice of Deficiency will be deferred pending the results of the

appeal. If an appeal is not submitted (i.e., received by the

Commissioner) within 45 days, the amount indicated in the Notice of

Deficiency will be charged per Sec. 206.9(a).

(b) The appeal will contain the elements and follow the submission

procedures specified in I TFM 6-8000. The appeal will include the

background leading to the Notice of Deficiency, the basis of the

appeal, and the action requested by an agency. An agency should state

its disagreements with the Notice of Deficiency which may include cost-

benefit factors, the amount of the charge, and other items.

(c) An agency must state what action it requests in its appeal. An

agency may request that the Notice of Deficiency be completely

overturned for cost-benefit or other considerations. Alternatively, an

agency may request a reduced charge, deferral of the charge, an

alternative solution to cash management improvement, or a combination

of these actions.

(d) Appeals Board. The Commissioner will refer the appeal to an

Appeals Board. The Appeals Board will consist of three members--two

permanent members and one temporary member. The permanent members will

be the Deputy Chief Financial Officer, Department of the Treasury, and

the Assistant Commissioner, Federal Finance, of the Service. The

temporary board member will be a cash management official from an

agency other than the agency appealing the Notice of Deficiency. The

Board will be convened on an as-needed basis. The order of agency

assignment to the Board will be published by Treasury in Volume I,

Chapter 6-8000 of the TFM. The Deputy Chief Financial Officer,

Department of the Treasury, the Assistant Commissioner, Federal

Finance, and the designated agency cash management official may

delegate their responsibility to a staff subordinate having sufficient

experience in cash management matters. The Assistant Commissioner's

designee may be from any area other than that which issued the Notice

of Deficiency.

(e) Appeal review process. The Appeals Board will review the Notice

of Deficiency, any additional information submitted by the Service, and

the written appeal from an agency. Based on this review, the Board may

decide additional investigation is required. The Board may request an

agency and/or the Service to meet with the Board as part of the review

process.

(f) Appeal finding. A written majority decision will be rendered by

the Appeals Board within 30 days of receipt of the appeal. The Board

may extend this period for an additional period, not to exceed 30 days,

if required. The Appeals Board will notify the Commissioner and the

agency of the decision. The decision of the Board whether to uphold the

Notice of Deficiency, to overturn the Notice of Deficiency, or to

mandate some other action will be stated in the finding. Other action

mandated may include a reduced charge, a deferral of the charge, an

alternate solution to cash management improvement, or a combination of

these actions. The basis of the decision, the amount of the charge, and

the effective date of the charge will be stated in the finding. The

effective date of the charge may be retroactive to the date indicated

in the Notice of Deficiency.

(g) Any terms related to charge deferral shall be stated; the

Service and an agency will be required to submit evidence of compliance

to such terms at a future specified date. At this future time, the

Appeals Board will review the evidence of compliance. Based on this

evidence, the Board will decide whether to impose a charge.

Sec. 206.9 Charges.

(a) Within 30 days of the effective date of the charge or the

appeals decision, an agency must submit appropriate accounting

information to the Service's Assistant Commissioner, Federal Finance.

The charge will be calculated following procedures outlined in I TFM 6-

8000, and will be assessed for each month that noncompliance continues.

(b) Collection noncompliance. In the case of cash management

collection noncompliance, an agency will absorb the charge from amounts

appropriated or otherwise made available to carry out the program to

which the collections relate. Charges collected from an executive

agency in the case of cash management collection noncompliance will be

deposited in the Cash Management Improvements Fund as outlined in

Sec. 206.10.

(c) Payment noncompliance. [Reserved]

(d) If an agency does not voluntarily pay the charge assessed under

Sec. 206.9(a), the Service will debit the appropriate account

automatically. By failing to pay voluntarily the charges as required by

the Deficit Reduction Act of 1984, an agency will be deemed to

authorize the automatic debit to its account.

(e) The Commissioner will formally terminate the charge when the

Commissioner has determined that an agency has complied. In addition,

on an annual basis, the Commissioner will review an agency's

performance and calculation of the charge, and will notify an agency in

writing of any changes to the amount being charged.

Sec. 206.10 Operation of and payments from the Cash Management

Improvements Fund.

(a) The Cash Management Improvements Fund (Fund) will be operated

as a revolving fund by the Service. Charges assessed under

Sec. 206.9(a) for cash management collection noncompliance will be

deposited into the Fund according to the Deficit Reduction Act of 1984.

The Service will also disburse any payments from the Fund based on

projects selected by a project selection and approval committee.

(b) Committee composition. The committee will consist of three

members--two permanent members and one temporary member. The permanent

members will be the Commissioner and the Assistant Commissioner,

Federal Finance, of the Service. The temporary committee member will be

a cash management official from an agency other than an agency being

considered for funds. The order of agency assignment to the Committee

will be published in a TFM Bulletin, when funds are first deposited to

the Fund. Decisions of the project selection and approval committee

cannot be appealed. Agencies will be notified of any available amounts

in the Fund and requirements to apply for such monies through a TFM

bulletin.

(c) As provided by 31 U.S.C. 3720, sums in the Fund will be

available without fiscal year limitation for the payment of expenses

incurred in developing improved methods of collection and deposit and

the expenses incurred in carrying out collections and deposits using

such methods, including the costs of personal services and the costs of

the lease or purchase of equipment and operating facilities.

(d) In addition to all reports required by law and regulation, for

each fiscal year during which there is a balance in Fund, the Service

will prepare and publish, by the 60th day following the close of the

fiscal year, a full report on payments, receipts, disbursements,

balances of the Fund, and full disclosure on projects financed by the

Fund.

Russell D. Morris,

Commissioner.

[FR Doc. 94-1980 Filed 1-28-94; 8:45 am]

BILLING CODE 4810-35-P