Management of Federal Agency Disbursements

SUMMARY: Chapter 10 of the Omnibus Consolidated Rescission and

Appropriations Act of 1996, Pub. L. 104-134, is the Debt Collection

Improvement Act of 1996 (the ``Act''). Section 31001(x) of the Act

amends 31 U.S.C. 3332 to require Federal agencies to convert from

checks to electronic funds transfer in two phases. Phase one affects

newly-eligible recipients of Federal payments. During phase one, which

begins on July 26, 1996, all recipients of Federal payments (other than

payments under the Internal Revenue Code of 1986) who become eligible

to receive those payments on or after July 26, 1996, must receive them

electronically unless the recipient certifies that the recipient does

not have an account at a financial institution or authorized payment

agent.

Phase two covers the conversion from checks to electronic funds

transfer for all Federal payments, except payments under the Internal

Revenue Code. The Act provides that, subject to the Secretary of the

Treasury's authority to grant waivers, all Federal payments made after

January 1, 1999, must be made by electronic funds transfer.

The Financial Management Service (the ``Service'') is adopting an

interim rule to implement Section 3332(e), as amended. The Service

invites public comments on the interim rule and on issues related to

implementation of the requirements that take effect on January 1, 1999.

This interim rule is designated as 31 CFR Part 208. The Service

anticipates that Part 208 will contain all provisions relating to the

management of Federal agency disbursements. Currently, 31 CFR Part 206

contains several provisions governing the timely collection and

disbursement of funds by Federal agencies. When regulations are issued,

sometime in 1997, to implement phase two, the Service will move those

portions of Part 206 that deal with Federal agency disbursements into

the new Part 208. In addition, all provisions relating to collections

by Federal agencies will be revised and consolidated into Part 206.

DATES: This rule is effective upon publication. Comments will be

received until November 25, 1996.

ADDRESSES: All comments should be addressed to Cynthia L. Johnson, Cash

Management Policy and Planning Division, Financial Management Service,

U.S. Department of the Treasury, Room 420, 401 14th Street S.W.,

Washington, D.C. 20227.

A copy of the interim rule is being made available for downloading

from the Financial Management Service home page at the following

address: http://www.ustreas.gov/treasury/bureaus/finman/.

FOR FURTHER INFORMATION CONTACT: Aurora Kassalow, Financial Program

Specialist, at (202) 874-5742; Cynthia L. Johnson, Director, Cash

Management Policy and Planning Division, at (202) 874-6657; Anne

Wallace, Attorney-Advisor, at (202) 874-6681.

SUPPLEMENTARY INFORMATION:

(1) Background

Section 31001 (x) of the Act amends 31 U.S.C. 3332 to require

Federal agencies to convert from paper-based payment methods to

electronic funds transfer in two phases under regulations prescribed by

the Secretary of the Treasury (the ``Secretary'').

Enactment of the electronic funds transfer legislation is an

important step in achieving Treasury's goal of an All-Electronic

Treasury. Treasury began using electronic funds transfer more than 20

years ago and, over the years, has expanded its use of electronic

payment methods for several reasons. First, the administrative cost of

making payments by electronic funds transfer is far less than making

payments by checks. Second, an electronic funds transfer is much safer

than a check; an electronic payment is rarely lost, stolen or damaged

and cannot be forged. However, on those few occasions when an

electronic funds transfer is mis-routed, it can be traced and quickly

rerouted to the recipient, usually within 24 hours. Third, the use of

electronic funds transfer will enable the Federal Government to provide

better service to recipients who claim their checks have been lost,

stolen, damaged, or delayed during delivery by improving response time

in tracing payments.

Current Federal law requires some recipients of Federal payments to

receive those payments electronically. Specifically, 31 U.S.C. 3332 (a)

through (d) require that Federal wage, salary, and retirement payments

to individuals who began to receive such payments after January 1,

1995, be paid by electronic funds transfer. In addition, 31 U.S.C. 3335

requires executive agencies to provide for the timely disbursement of

funds in accordance with regulations prescribed by the Secretary.

As amended by the Act, section 3332 is broader than existing law in

several respects. First, the definition of Federal payments in the new

Sec. 3332 (j)(3) covers all payments other than payments under the

Internal Revenue Code. Second, the definition of Federal agency in the

new section 3332 (j)(2) includes all departments, agencies, and

instrumentalities of the United States Government, and corporations

owned or controlled by the Government of the United States.

As amended, section 3332 contains several provisions to facilitate

the transition from cash and checks to electronic funds transfer. In

phase one, the head of each agency is directed to waive the electronic

funds transfer requirement if the recipient certifies in writing that

the recipient does not have an account with a financial institution or

authorized payment agent. In phase two, which begins on January 1,

1999, the Secretary is authorized to waive the electronic funds

transfer requirement for individuals or classes of individuals for whom

compliance imposes a hardship; for certain categories of checks; and in

other circumstances deemed necessary.

The Service intends to move quickly to implement the amendments to

31 U.S.C. 3332. In addition to adopting this interim rule, the Service

plans to launch an extensive educational campaign to inform agencies,

individuals, businesses, and the financial services industry about the

provisions of the Act. The Service also will promote electronic funds

transfer through increased marketing of Direct Deposit and other

electronic payment options. Direct Deposit involves the transfer of

funds from an agency to a recipient's account at a financial

institution by means of the Automated Clearing House system. Direct

Deposit is a safe, convenient, and economical method of making

payments. A major challenge is reaching the millions of individuals,

and some small businesses, that do not have an account at a financial

institution. The Service looks forward to working with consumers and

small businesses, as well as Federal agencies and the financial

services industry, to meet this challenge.

The Service recently began working with the financial services

industry on a marketing initiative called Direct Deposit Too. Direct

Deposit Too involves the establishment of a simple, low-cost account at

a financial

[[Page 39255]]

institution, such as an account that is accessible only through a

plastic card used at automated teller machines and point-of-sale

terminals.

In addition, the Service will work with agencies to implement other

provisions of the Act. Specifically, section 31001 (y) of the Act

amends 31 U.S.C. 3325 by adding a new subsection (d) which requires the

head of each executive agency to include the Tax Identification Number

(TIN) of each person receiving a payment in the certified voucher

submitted to the disbursing official. This provision of the Act became

effective April 26, 1996, the date the Act was signed into law.

Treasury Financial Management Bulletin 95-10, which was issued on

August 18, 1995, currently directs Federal agencies to provide the TIN

when requesting the Service to make disbursement to vendors and Federal

employees. The Service will amend Bulletin 95-10 in the near future in

accordance with the provisions of section 3325 (d).

The Service is planning to meet with agencies to explain the

requirements of the Act and the interim rule and to identify issues

that need to be resolved. The Service also will form a task force of

Federal agencies to obtain information that will be used in formulating

a final rule and provide guidance to agencies on how to reach those

individuals and small businesses who face barriers in converting to

electronic funds transfer.

(2) Discussion

A. Section by Section Analysis of Interim Rule Implementing the July

26, 1996, Requirements

Section 208.1 Scope and Applicability

This section provides that Part 208 applies to all payments made by

agencies and requires such payments to be made by electronic funds

transfer, unless a waiver is granted. This section also provides that

Part 208 does not apply to payments under the Internal Revenue Code of

1986.

Section 208.2 Definitions

31 U.S.C. 3332(j)(2), as added by section 31001(x) of the Act,

defines Federal agency as ``(A) an agency (as defined in section 101 of

this Title); and (B) a Government corporation (as defined in section

103 of Title 5).'' Section 101 of Title 31 provides that ``agency''

means a department, agency, or instrumentality of the United States

Government. Section 103 of Title 5 defines Government corporation as a

corporation owned or controlled by the Government of the United States.

The definition of agency in Sec. 208.2(a) restates the statutory

definition without change.

Section 3332(j)(2), as added by the Act, does not distinguish

between agencies whose disbursements are made by the Department of the

Treasury and those agencies with delegated or statutory disbursing

authority, known as Non-Treasury Disbursing Offices (NTDOs). The

Service believes that both types of agencies are subject to section

3332(e), as amended, and to Part 208. Further, in the opinion of the

Service, the source of an entity's funds is not relevant in determining

coverage under the Act: entities whose funds are derived from

assessments or fees are covered by Part 208 to the same extent as

entities using appropriated funds.

Section 3332(j)(3) provides that ``Federal payments'' includes

``benefit payments,'' but does not define the latter term. The Service

has added a definition of benefit payment in Sec. 208.2(b). This

definition is substantially similar to the definition of benefit

payment in 31 CFR 210.2.

The definition of ``electronic funds transfer'' in Sec. 208.2(c) is

based on the definition of this term in Sec. 3332(j)(1), as added by

the Act. The Act's definition of electronic funds transfer is similar

to the definition of ``electronic fund transfer'' in the Electronic

Fund Transfer Act (the ``EFTA;'' 15 U.S.C. 1693). However, the Service

has added the phrase ``includes, but is not limited to'' in the

definition of electronic funds transfer in the interim rule to signal

its intention to interpret ``electronic funds transfer'' broadly so as

to accommodate the use by the Federal Government of a wide range of

payment methods--existing and emerging--that offer convenience, safety,

and efficiency over paper-based methods. For example, under this

definition a credit card transaction is an electronic payment.

The term ``Federal payment'' is defined in Sec. 208.2(d) of the

interim rule. The Service believes that all payments made by an entity

covered by section 3332(e), as amended, are subject to the requirement

to use electronic funds transfer. This requirement applies whether the

payment is recurring or non-recurring.

The specific payments enumerated in the definition of Federal

payment in section 3332(j)(3) are merely illustrative of the payments

covered by section 3332(e), as amended. The definition of Federal

payment in Sec. 208.2(d) restates the statutory definition and, in

order to clarify the broad scope of this term, provides examples of

payments typically made by agencies. The category of Federal salary,

wage, and retirement payments includes, but is not limited to, thrift

savings distributions, military wage and salary payments, Central

Intelligence Agency annuities, military annuities, and Coast Guard

retirement payments. The category of vendor payments includes any

payment for goods or services. The category of expense reimbursement

includes, but is not limited to, travel and expense disbursements and

cash advances. Benefit payments, as defined in Sec. 208.2(b), includes,

but is not limited to, payments for Social Security, Supplemental

Security Income, Black Lung, Railroad Retirement Board Retirement and

Annuity, Department of Veterans Affairs Compensation and Pension, and

Worker's Compensation. The category of miscellaneous payments includes,

but is not limited to, interagency payments, grants, loans, fees,

principal, interest, and discounts related to U.S. transferable and

non-transferable securities, refunds, and payments related to Federal

insurance or guarantee programs for loans. The term ``Federal payment''

does not include payments under the Internal Revenue Code of 1986.

The term ``financial institution'' is not defined in section

31001(x) of the Act. The Service has added a definition of financial

institution in Sec. 208.2(e). The definition in the interim rule, which

is identical to the definition of financial institution found in 31 CFR

Part 210, is intended to cover all depository institutions regardless

of the form of their organization or the nature of their charter.

The Service also has added a definition of the term ``payment'' in

Sec. 208.2(f) which is based on the definition of the same term found

in 31 CFR Part 210.

Section 208.3 Agency Responsibilities

Section 208.3(a) implements section 3332(e), as amended, which

supersedes 31 U.S.C. 3332 (a) through (d) (Federal wage, salary, and

retirement payments) and 38 U.S.C. 5120 (a) and (d) (Veterans

benefits); and thus requires all Federal payments to a recipient who

becomes eligible for that type of payment starting on July 26, 1996, to

be made by electronic funds transfer.

The Service is sensitive to the administrative burden that

compliance with the Act may impose on agencies. Therefore, in several

instances which are discussed below, the Service has interpreted the

Act's requirements in a manner designed to facilitate compliance.

Section 3332(e), as amended, provides that all Federal payments to

a recipient who becomes eligible for ``that type of

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payment'' on or after July 26 must be made by electronic funds

transfer. Section 208.3(a) of the interim rule provides that payments

made to a recipient who becomes eligible for ``the payment'' on or

after July 26 must be made electronically. The Service made this change

to make clear that the payments that must be made electronically are

only those for which the recipient becomes eligible on or after the

trigger date of July 26, and not payments of the same type made by the

paying agency for which the recipient became eligible prior to July 26.

For example, if a recipient currently receives an interest payment, by

check, on a Government security purchased before July 26 and, after

July 26, the recipient purchases another Government security from the

same agency, the interim rule requires the agency to pay interest on

the security purchased after July 26 by electronic funds transfer. The

agency would not be required to convert from check to electronic funds

transfer the interest payment on the security purchased prior to July

26.

Since the phrase ``becomes eligible for'' is not defined in section

3332(j), and this phrase may have different meanings in the context of

different types of payments, the Service has divided Federal payments

into six categories and defined eligibility in the context of each

class of payment. The interim rule is designed to minimize the burden

of compliance by defining the triggering date for determining

eligibility for receiving an electronic payment, as the time at which

the agency and the recipient have direct contact, either to obtain the

routing transit number, account number, and any other information the

agency needs to make payments electronically or, alternatively, to give

the recipient the opportunity to certify that the recipient does not

have an account and thus qualifies for a waiver.

Under Sec. 208.3(a)(1), all individuals who apply for benefit

payments starting on July 26, 1996, are subject to the mandatory

electronic funds transfer requirement. The Service chose the date of

application rather than, for example, the date on which an individual

attains a specified age, because the application process affords the

agency an opportunity to have contact with the recipient. The agency

can obtain account information during the application process and those

recipients who do not have accounts can certify to that fact.

Section 208.3(a)(2) addresses eligibility in the context of Federal

wage and salary payments. The interim rule provides that a recipient

who has a date of entry on duty with an agency on or after July 26,

1996, must receive wage and salary payments by electronic funds

transfer, unless the recipient certifies that he or she does not have

an account at a financial institution. Thus, an individual who begins

working for an agency, transfers from one agency to another, or resumes

Federal service after a break in employment on or after July 26, must

receive such payments by electronic funds transfer, unless the

recipient certifies that he or she does not have an account with a

financial institution or authorized payment agent.

Currently, 31 U.S.C. 3332 (a) through (d) provide that Federal

wage, salary, and retirement payments paid to individuals who began to

receive such payments after January 1, 1995, must be paid by electronic

funds transfer unless the recipient made a written request for another

form of payment. In addition, section 3332(c)(1) authorized the

Secretary to grant waivers for a group of recipients upon a request by

the head of an agency. These provisions remain effective until July 26,

1996, when they are superseded by section 3332(e), as amended, and the

interim rule. Consequently, Federal employees and retirees who become

eligible to receive payments on or after July 26, 1996, must certify

that they do not have an account at a financial institution or

authorized payment agent in order to qualify for a waiver.

Section 208.3(a)(3) of the interim rule provides that, in the case

of Federal retirement payments, ``becomes eligible for'' means a

recipient applies for retirement from an agency on or after July 26,

1996. There may be special circumstances in which a recipient applies

for retirement from an agency on or after July 26, while at the same

time the recipient is already receiving retirement payments from a

previous agency. In this circumstance, the recipient would be required

to receive retirement payments from the second agency electronically.

Section 208.3(a)(4) addresses vendor payments. Under the interim

rule, payments made under a contract or purchase order resulting from a

solicitation issued on or after July 26, 1996, must be made

electronically. This requirement applies to all contracts and purchase

orders for goods and service whether or not they are covered by the

Federal Acquisition Regulation. The interim rule does not require an

agency to convert payments for contracts or purchase orders executed

prior to July 26 to electronic funds transfer.

Section 208.3(a)(5) of the interim rule provides that, in the case

of grants, eligibility is determined by reference to the date on which

a grant application is filed or renewed.

Section 208.3(a)(6) is a catch-all provision that applies to all

other Federal payments, such as expense reimbursements and interest,

not addressed in subsections (1) through (5). The Service expects

agencies to fashion eligibility rules that are consistent with the

spirit of the Act.

Section 208.3(b) provides that, for a recipient who becomes

eligible to receive a Federal payment on or after July 26, the head of

each agency must waive the requirement to be paid by electronic funds

transfer if the recipient certifies in writing that the recipient does

not have an account with a financial institution or authorized payment

agent. The Appendix contains a model that may be used to make such a

certification. The use of this model is optional; an agency may

customize the model as needed.

The Service recognizes, however, that agencies may encounter

obstacles in converting to electronic funds transfer. Section 208.3(c)

provides that, if the head of an agency determines that the agency

cannot make a Federal payment or class of Federal payment in accordance

with Sec. 208.3(a) due to the inability of the agency's system to make

the payment(s) by electronic funds transfer, then the agency shall

notify the Service immediately in writing and shall submit an

implementation plan to the Service no later than January 1, 1997. The

plan shall:

(1) Identify the specific type of payment(s) that cannot be made by

electronic funds transfer;

(2) Describe the system problem that prevents the agency from

making the payment(s) by electronic funds transfer; and

(3) Outline a proposed solution and provide a time table for

solving the problem.

Nothing in Part 208 should be construed to prevent an agency from

continuing to make payments while the agency's plan is being developed,

reviewed, and implemented. The Service will work with agencies to

develop and implement the plan and provide any assistance the agency

may need.

Section 208.4 Recipient Responsibilities

Section 208.4 implements sections 3332(e) (2) and (g) as amended by

the Act and provides that (1) a recipient of a Federal payment must

designate a financial institution or authorized payment agent through

which a Federal payment may be made or certify in

[[Page 39257]]

writing that the recipient does not have an account with a financial

institution or authorized payment agent; and (2) provide the agency

with the information requested by the agency in order to effect the

payment.

B. Regulations to Implement the January 1, 1999, Requirements

During the next two years, Treasury will work with agencies, the

financial services industry, and representatives of individuals and the

vendor community, to meet the challenge of delivering all Federal

payments by electronic funds transfer. Efforts will include intensive

marketing of Treasury's existing Direct Deposit program for individuals

and businesses; new products such as Direct Deposit Too; and services

such as Electronic Benefit Transfer (EBT). The Service will continue to

develop, test, and implement innovative forms of electronic payment

mechanisms. The Service also plans to hold forums at which the public,

the financial service industry, Federal agencies, and other interested

parties will be invited to share their views regarding implementation

of the requirements that take effect on January 1, 1999.

In order to assess the current capabilities of agencies and to

assess their future needs, the Service requests agencies to submit an

implementation plan that addresses the points listed below. Agencies

subject to the Chief Financial Officers Act of 1990 (31 U.S.C. 901)

must submit the plan by January 1, 1997. All other agencies must submit

the plan by July 1, 1997. The plan must:

(1) List the types of Federal payments the agency currently makes

by check, especially those payments that the agency believes would be

difficult to convert to electronic funds transfer;

(2) Describe the obstacles the agency has encountered, or expects

to encounter, in converting payments made by check to electronic funds

transfer. The Service invites comment on the cost-effectiveness of

converting small dollar cash and check payments and non-recurring

payments to electronic funds transfer;

(3) Provide suggestions for removing the obstacles for each type of

payment and the electronic payment methods that could be used;

(4) Provide a timetable for the orderly and systematic conversion

of check payments to electronic funds transfer; and

(5) Identify the assistance each agency anticipates it will need in

order to convert payments currently made by check to electronic funds

transfer.

The Service will use this information to assess the requirements

for converting from cash and checks to electronic funds transfer

payments for each payment type and determine what assistance agencies

need in order to meet the January 1999 implementation date.

As noted above, where the head of the agency determines that the

agency cannot make a Federal payment or class of Federal payment in

accordance with Sec. 208.3(a) due to the inability of the agency's

system to make the payment(s) by electronic funds transfer, then the

agency must notify the Service immediately in writing and must submit a

plan in accordance with Sec. 208.3(c).

The Service would like to work with the financial services industry

to expand and enhance existing electronic payment methods and, where

necessary, develop new ones so as to facilitate the transition from

checks to electronic funds transfer. The industry is invited to:

(1) Discuss the capability to process electronic payments and to

provide the payment information customers need, especially for vendor

payments; and

(2) Provide suggestions regarding improvements to the electronic

payment methods currently available and ideas for new electronic

payment methods to meet the needs of recipients who receive checks.

Members of the public are specifically invited to comment on the

following:

(1) Obstacles to receiving payments electronically, such as

geographical barriers and physical, mental, educational, or language

barriers;

(2) The availability of banking services, especially for the

segment of the public that is currently unbanked;

(3) Suggestions for improving the electronic payment methods

currently available and ideas for new types of electronic payment

methods;

(4) Suggestions for implementing the provisions relating to the use

of an authorized payment agent for receipt of a Federal payment by

means of electronic funds transfer, including qualifications for

serving as an authorized payment agent and any limitations on the terms

of the contractual relationship between the recipient and the

authorized payment agent; and

(5) The needs of unbanked recipients when selecting an electronic

payment method or a financial institution.

Section 3332(i)(2), as added by section 31001 (x) of the Act,

provides that regulations issued by the Secretary shall ensure that

individuals who are required to have an account at a financial

institution because of the application of section 3332(f)(1) will have

access to such an account at a reasonable cost. Further, the Secretary

is directed to ensure that such individuals are given the same consumer

protections with respect to the account as other account holders at the

same financial institution. All interested parties are invited to

comment on these provisions.

Section 3332(f)(2) authorizes the Secretary to waive the electronic

funds transfer requirement for individuals or classes of individuals

for whom compliance poses a hardship, for classifications or types of

checks or in other circumstances as may be necessary. The Service

invites comment regarding these requirements.

In response to a Congressional request, the Service will study: (1)

the socioeconomic and demographic characteristics of those recipients

who currently receive checks to determine how best to increase

electronic payment usage; and (2) the adequacy of consumer protections

available to those individuals who will be required to obtain an

account with a financial institution.

Special Analyses

The Service is promulgating the interim rule without opportunity

for prior public comment pursuant to the Administrative Procedure Act

(the ``APA''), 5 U.S.C. 553, because the Service has determined, for

the following reasons, that a comment period would be impracticable and

contrary to the public interest. As noted above, until passage of the

Act, only recipients of Federal wage, salary, and retirement payments

were required to receive those payments by electronic funds transfer.

However, 31 U.S.C. 3332 (e), as amended, requires recipients who become

eligible for Federal payments on or after July 26, 1996, to receive

such payments electronically. Therefore, recipients such as vendors

doing business with agencies and benefit recipients may not be aware of

the impact of the law. In addition, the law requiring agencies to

disburse Federal funds expeditiously, 31 U.S.C. 3335, applies only to

agencies in the executive branch, whereas the amended section 3332 (e)

applies to departments, agencies, and instrumentalities of the United

States Government and to corporations owned or controlled by the

Government of the United States.

In addition, since the Act was passed, the Service has received

numerous requests for guidance from affected agencies. Many of the

questions relate to the meaning of the phrase ``becomes eligible for,''

which determines the applicability of section 3332. As noted above,

this phrase has different

[[Page 39258]]

meanings in the context of different types of payments. The Service

believes that, absent an implementing regulation, there will be

substantial confusion and noncompliance. Since the interim rule

provides critical guidance which will facilitate compliance, the

Service believes that it is in the public interest to issue the interim

rule without opportunity for prior public comment.

The public is invited to submit comments on the interim rule. As

noted above, within the next twelve months, the Service expects to

publish a Notice of Proposed Rulemaking to implement the provisions of

section 3332 that take effect in January 1999. Therefore, there will be

an opportunity to take into account any comments received on the

interim rule.

The Service has determined that good cause exists to make the

interim rule effective upon publication without providing the 30 day

period between publication and the effective date contemplated by the

APA, 5 U.S.C. 553 (d). The purpose of a delayed effective date is to

afford persons affected by a rule a reasonable time to prepare for

compliance. However, in this case, both agencies and recipients of

Federal payments must comply with the Act when it takes effect on July

26, 1996, and, as noted above, there may be considerable confusion

concerning its application. Inasmuch as the interim rule provides

important clarification that is expected to facilitate compliance with

the new law, the Service believes that good cause exists to make the

rule effective upon publication.

Since the interim rule is being issued without prior notice and

public procedure pursuant to the APA, the collection of information

contained in the interim rule has been reviewed under the requirements

of the Paperwork Reduction Act (44 U.S.C. 3507 (j)) and, pending

receipt and evaluation of public comments, approved by the Office of

Management and Budget (OMB) under control number 1510-0066. An agency

may not conduct or sponsor, and a person is not required to respond to,

a collection of information unless it displays a valid control number

assigned by the Office of Management and Budget.

Comments concerning the collection of information should be

directed to the Office of Management and Budget, Attention: Desk

Officer for the Department of the Treasury, Financial Management

Service, Office of Information and Regulatory Affairs, Washington, D.C.

20503, with copies to Jacqueline Perry, Public Reports Clearance

Officer, Financial Management Service, 3361 75th Avenue, Landover,

Maryland 20785. Any such comments should be submitted not later than

September 24, 1996. Comments are specifically requested concerning:

Whether the proposed collection of information is necessary for the

proper performance of the functions of the Service, including whether

the information will have practical utility;

The accuracy of the estimated burden associated with the proposed

collection of information (see below);

How the quality, utility, and clarity of the information to be

collected may be enhanced; and

How the burden of complying with the proposed collection of

information may be minimized, including through the application of

automated collection techniques and other forms of information

technology.

The collection of information in this regulation is in Sec. 208.4.

The information (name of financial institution, account number and

routing transit number or certification that the recipient does not

have an account with a financial institution) is required to enable an

agency to pay the recipient of a Federal payment by electronic funds

transfer. The collection of information is mandatory. 31 U.S.C. 3332

(g), as amended, requires recipients of Federal payments to ``provide

to the Federal agency that makes or authorizes the payments information

necessary for the recipient to receive electronic funds transfer

payments.'' The likely respondents are individuals who are employed by

the Service on or after July 26, 1996; existing employees of the

Service who become eligible to receive, for example, travel

reimbursement payments on or after July 26, 1996; individuals who apply

for retirement from the Service on or after July 26, 1996; and

individuals and businesses that become eligible to receive a vendor

payment from the Service on or after July 26, 1996.

The estimated total annual reporting burden is 325 hours. The

estimated burden hours per respondent is 0.25 hours. The estimated

number of respondents is 1,300. These figures represent the burden

imposed by the Service. The reporting burden imposed by other agencies

will be addressed by those agencies.

Although it has been determined that the interim rule is a

significant regulatory action as defined in E.O. 12866, the Office of

Management and Budget (OMB) has waived the preparation of a Regulatory

Assessment. One substantive change was made to the regulation

subsequent to its submission to OMB. At the suggestion of OMB, the

Service added Sec. 208.3 (c), which requires that an agency notify the

Service immediately in writing if it determines that it is unable to

make a payment or class of payments by electronic funds transfer due to

the inability of the agency's system to make the payment(s)

electronically.

List of Subjects in 31 CFR Part 208

Accounting, Banks, Banking, Electronic Funds Transfer.

Authority and Issuance

For the reasons set out in the preamble, Part 208 of Title 31 is

added to read as follows:

PART 208--FEDERAL AGENCY DISBURSEMENTS

Sec.

208.1 Scope and application.

208.2 Definitions.

208.3 Agency responsibilities.

208.4 Recipient responsibilities.

Appendix A to Part 31--Model certification

Authority: 5 U.S.C. 301; 31 U.S.C. 321, 3301, 3302, 3321, 3325,

3327, 3328, 3332, 3335, and 6503.

Sec. 208.1 Scope and application.

This part applies to all Federal payments made by an agency and

requires such payments to be made by electronic funds transfer, unless

a waiver is granted. This part does not apply to payments under the

Internal Revenue Code of 1986.

Sec. 208.2 Definitions.

(a) Agency means any department, agency, or instrumentality of the

United States Government, or a corporation owned or controlled by the

Government of the United States.

(b) Benefit payment means a payment for a Federal Government

entitlement program or for an annuity (other than a Federal retirement

payment), including, but not limited to, payments for Social Security,

Supplemental Security Income, Black Lung, Railroad Retirement Board

Retirement and Annuity, Department of Veterans Affairs Compensation and

Pension, and Worker's Compensation.

(c) Electronic funds transfer 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, Automated

Clearing House transfers, Fedwire transfers, and transfers made at

[[Page 39259]]

automated teller machines and point-of-sale terminals.

(d) Federal payment means any payment made by an agency.

(1) The term includes, but not is limited to:

(i) Federal wage, salary, and retirement payments;

(ii) Vendor and expense reimbursement payments;

(iii) Benefit payments; and

(iv) Miscellaneous payments, including but is not limited to,

interagency payments, grants, loans, fees, principal, interest, and

discounts related to U.S. transferable and non-transferable securities,

overpayment reimbursements, and payments under Federal insurance or

guarantee programs for loans.

(2) The term ``Federal payment'' does not apply to payments under

the Internal Revenue Code of 1986.

(e) Financial institution means any bank, savings bank, savings and

loan association, credit union, or similar institution.

(f) Payment means a sum of money transferred to a recipient in

satisfaction of an obligation.

Sec. 208.3 Agency responsibilities.

(a) Paying by electronic funds transfer. Subject to Sec. 208.3 (b),

and notwithstanding any other provision of law, all Federal payments

made by an agency to a recipient who becomes eligible for the payment

on or after July 26, 1996, shall be made by electronic funds transfer.

For purposes of this subsection, ``becomes eligible for'' means:

(1) In the case of benefit payments, the recipient applies for that

type of benefit on or after July 26, 1996;

(2) In the case of Federal wage or salary payments, the recipient

has a date of entry on duty with the agency on or after July 26, 1996;

(3) In the case of Federal retirement payments, a recipient applies

for retirement from an agency on or after July 26, 1996;

(4) In the case of vendor payments, the payment is made under a

contract or purchase order resulting from a solicitation issued on or

after July 26, 1996;

(5) In the case of grants, an application is filed or renewed on or

after July 26, 1996; and

(6) For all other Federal payments, as determined by the agency.

(b) Waiver. The head of an agency shall waive the application of

subsection 208.3 (a) only upon receipt of written certification that

the recipient does not have an account with a financial institution or

an authorized payment agent.

(c) Agency implementation plan. If the head of an agency determines

that the agency cannot make a Federal payment or class of Federal

payment in accordance with Sec. 208.3 (a) due to the inability of the

agency's system to make the payment(s) by electronic funds transfer,

then the agency shall notify the Service immediately in writing and

shall submit an implementation plan to the Service no later than

January 1, 1997. The plan shall:

(1) Identify the specific type of payment(s) that cannot be made by

electronic funds transfer;

(2) Describe the system problem that prevents the agency from

making the payment(s) by electronic funds transfer; and

(3) Outline a proposed solution and provide a time table for

solving the problem.

Sec. 208.4 Recipient responsibilities.

Each recipient of a Federal payment shall designate a financial

institution or authorized payment agent through which a Federal payment

may be made or certify in writing that such recipient does not have an

account with a financial institution or an authorized payment agent;

and provide the agency with the information requested by the agency in

order to effect the payment.

Appendix A to Part 208--Model Certification

This appendix contains model language which may be used to

qualify for a waiver under Sec. 208.3(b). Use of the model language

is optional. An agency may customize the model language by making

appropriate changes.

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Any payment that we make to you will be made by electronic funds

transfer unless you certify in writing that you do not have an

account with a financial institution or an authorized payment agent.

I certify that I do not have an account with a financial

institution or an authorized payment agent.

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Signature

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Dated: July 23, 1996.

Russell D. Morris,

Commissioner.

[FR Doc. 96-19073 Filed 7-25-96; 8:45 am]

BILLING CODE 4810-35-P