Chapter 9 – NSF Check Processing
Paying by check is a convenient method of payment for parents and members of the general public, but
sometimes checks are returned by the bank because funds are not available or the bank account is
closed. When this happens, the bank will post a debit memo to the school’s internal bank account and
return the original check or a facsimile copy of the check to the school, along with a debit advice. The
debit memo should be posted to the school’s financial records and reversed against the account that
originally received credit for the revenue and pursued for collection with the maker.
Why are so many banks converting original checks to a facsimile copy? New legislation passed after
September 11th, commonly referred to as Check 21, permits any bank engaged in the check clearing
process to convert original checks to facsimile copies and destroy the original check. At that point the
facsimile image of the check becomes the document of record, and banks process and handle the
facsimile document through the same channels, except they now route the documents ELECTRONICALLY
through the banking system, as opposed to transporting the checks PHYSICALLY from one bank to
another. To get this concession from Congress, the banks guaranteed that they would honor facsimile
copies in lieu of the original check. Therefore, a facsimile copy of an NSF check can be redeemed at the
bank or submitted for re-deposit as an original document and the bank will accept it.
It will be easier for the bookkeeper to reverse an NSF check if a notation is added to the check before it
is deposited, making it possible to trace the check back to a specific account or deposit batch. Most
bookkeepers write the internal account number on the check; others write the Batch#/Deposit# on the
check; and some note the School Cash receipt number on the check. Schools with large volumes of
checks often require the sponsors to write the internal account number on the check as part of the
money collection process prior to submitting the deposit to the bookkeeper.
The School Cash system allows bookkeepers to detail checks to the student level as part of the deposit
process. If the school elects to detail checks in this manner and if one of the detailed checks is
subsequently returned NSF, the bookkeeper can easily locate the exact check that was returned and the
system will automatically reverse the NSF entry against the same category numbers that were credited
when the check was originally deposited.
Handling, Recording, and Filing NSF Checks
When the school receives an NSF check from the bank, the following actions are required:
1. Make three copies of the check:
• Route one copy to the teacher/sponsor to notify them that a reversal will be posted to
their Activity Account.
• Attach one copy to the NSF notice or collection letter that is sent to the parent.
• Retain one copy as a permanent record to be attached to the NSF check log.
2. Log the NSF check in the School Cash system as a debit against the original deposit account.
3. Send a letter or NSF notice to the maker asking for payment in cash. With the advent of the
credit card as a payment option for internal funds, some schools are assigning NSF checks to the
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4.
5.
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parent as a payment item so they can use VISA, Master Card, or debit card to make restitution
for the NSF check.
Retain the original (or facsimile) check in an NSF file until it is either paid or deemed
uncollectible by the principal.
Continue to pursue collection periodically and take appropriate action. For example, schools
can notify the parent they can no longer pay by check (this is not always easy to enforce) or they
can ban a student from extracurricular activities until restitution is made. However, students
cannot be penalized academically or be excluded from most activities that occur during the
normal school day due to an NSF check. Consult Policy 2.21, School Requests of Payment from
Students, for more definitive guidance on acceptable payment requests from students.
Record the NSF reimbursement in the NSF checks module of School Cash to update the NSF
check log.
Prepare a Monies Collected Report and record the collection in the Deposits module of School
Cash by entering a Detailed Deposit Form when the NSF check is repaid.
Entering NSF Checks in School Cash
Returned checks must be entered into the School Cash system by the bookkeeper. In order to log an
NSF check, the prior month’s bank reconciliation must be complete.
From the main menu in School Cash select the Non Sufficient Funds menu item. The bookkeeper now
has the option to add a new entry to the NSF log, print an NSF notice, receive an NSF Payment, or print
reports on NSF Activity.
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To add a new NSF entry to the School Cash system, select the Add New NSF Charge button from the
items on the NSF menu and click the gray New NSF Entry tab. Enter the following information as
illustrated below:
•
•
•
•
•
•
Deposit From – the name of the maker of the check
NSF Date – the date from the bank debit advice
Amount – the issue amount on the check
Bank Charge – Do not use
Category – Select the Account Name from the Pick List
Admin Charge – schools are permitted to pass their NSF bank charge to the maker of the check as
an administrative fee. However, they are not permitted to request an amount in excess of the
amount they are charged by their banking institution.
• Reason – the reason for the payment (Yearbook, SACC, Prom, etc.)—some schools have found it
useful to include the name of the student here as well since this information prints on the reports
and the NSF notice.
Save the transaction to post an NSF entry to the School Cash ledger. The returned check transaction will
be cleared as part of the bank reconciliation process.
Schools that detail checks as part of the deposit entry process will be able to view a list of all checks that
have been deposited on the gray List View tab. Enter the issuer’s last name to view the detailed checks
from the database, highlight the appropriate check, and press Continue to fill in the amount and the
bank charges associated with NSF check processing as shown above.
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Notify the Check Maker and Pursue Collection
School Cash has the ability to generate a collection notice that can be mailed to the parent. Some
schools are using this feature while others have chosen to generate a letter to the parent. Both
methods are acceptable, but it is a good idea to include a copy of the check, regardless of the
notification method.
To generate an NSF notice in School Cash, select Print NSF Notice from the NSF menu. Then highlight
the check to be included on the notice. Check the box to Include the School/Admin Charges on the NSF
Notice if a school fee was added to recoup the school’s NSF bank charges. Checking the box will include
the administrative fee on the NSF notice. Click Continue to view and print the NSF notice.
Schools that detail checks during the Deposit process will also have the ability to extract the mailing
address for the student, since student names and addresses come into School Cash from the TERMS
Student system.
A sample of the NSF notice generated in School Cash is included at the end of this chapter. See Exhibit
9A.
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Record the Repayment in the NSF Module of School Cash
From the main menu select Non Sufficient Funds, Receive NSF Payment. A list of unpaid NSF entries will
be displayed. Highlight the entry that will be repaid and click Continue. The system will default in the
data from the original NSF entry, including the full payment amount and the current date. Select
Continue to accept the date and payment amount or make any changes to the date and payment
amount that are required. Click Continue to complete the payment transaction. All NSF repayments
must be recorded in the NSF module to update the NSF Report.
Whenever a cash payment is received for an NSF repayment, it must be included in a bank deposit and
recorded through the Deposits/Receipts module of School Cash. Record the cash collection on a Monies
Collected Report, log it on the Drop Safe Log, and the bookkeeper will enter the MCR into the Deposits
module of School Cash.
If the school elects to assign the NSF to the parent as an obligation in the Cashless Schools online credit
card payment system, no cash bank deposit will be necessary if the parent uses a credit or debit card to
satisfy the NSF obligation. The payment will come through the banking system as a Direct Deposit.
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NSF Reports in School Cash
There are two reports in School Cash for NSF checks. One report shows only open (unpaid) NSF entries
and the other shows all NSF entries. Throughout the course of the school year, most bookkeepers will
prefer to print the report that shows only the open items. At the end of the year, however, it will be
necessary to print the complete report and attach the copies of the checks so the auditors have a
complete history of the school’s NSF activity.
From the main menu select Non Sufficient Funds, View NSF Entries. Click the Print button and highlight
the appropriate report:
• NSF Transactions – includes all NSF Activity to date (Exhibit 9B)
• Outstanding NSF Transactions – Includes only uncollected NSF entries (Exhibit 9C)
A sample of both reports is included at the end of this chapter.
End of Year Reporting
Any NSF checks that are going to be pursued for collection in the following year must be reported to the
Accounting Department as part of the fiscal year end closing exhibits. Whether or not to pursue
collection is a school-based decision, and the principal must review the Open NSF report in order to
make that judgment call.
• If all outstanding NSF checks are collectible - the bookkeeper will generate the Outstanding NSF
Report and send it to Accounting, signed by the Principal.
• If, in the principal’s opinion, all collection efforts have been exhausted and the likelihood of
collection is very small, the principal has the option to cross uncollectible items off the
outstanding NSF list and change the report total to reflect that decision. The annotated list
must be signed by the Principal at the end of the year and submitted to Accounting.
• Schools have the option to ask the Data Processor to add NSF obligations to the TERMS Student
system for possible future collection by using the A25 screen. If this option is taken, the funds
will follow the student from school to school as long as the student remains in Palm Beach
County Schools, and it is possible the obligation may be collected by the student’s next school.
Records Retention
At the end of the fiscal year, the bookkeeper must print the NSF Transaction report showing all NSF
activity for the year. Include the check copies, any correspondence or NSF notices that were sent, and
note any other collection efforts that were made. Retain all NSF documentation as part of the year-end
files, which must be retained on campus in a secure location for five years.
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School Cash Online Resources
Bookkeepers have three online options available to assist with NSF processing in School Cash.
Tip Sheets and Video Clips – short illustrations of specific tasks – click on the Information icon at
the top of the page to get step-by-step instructions from the School Cash experts. Enter user ID SCN
and Password CASH to access the tip sheets and video clips.
Frequently Asked Questions – an indexed list of questions from end users – click on the
Resource Center on the main page to access FAQs from other users
User Guide - Located at the bottom of every page - NSF processing is covered in Chapter 7 of the
online user guide. Enter user ID SCN and password CASH to access the online user guide.
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