TOPIC: ACH Question
OFFICE: Office of Financial Services
QUESTION / ISSUE:
STATE: MI
DATE: 04/20/2015
Do other states allow customers to submit payment using ACH credit (money being sent to the state)? If so, how
do they determine the agency and/or program in order to post the funds?
Do they use one bank account and routing # for all payments, or do they have separate accounts by
agency/program? How do they handle payments that can’t be identified?
State
Alaska
Comments
For the state of Alaska it varies by program. It can be accomplished with sub accounting.
We accept ACH credits for certain, but not all revenue programs and we use methods such
as segregated bank accounts for specific high volume payment types, with known formats of
addenda (e.g., Social Security Administration payments for public guardian and protective
children’s service programs, oil & gas royalties, insurance premium taxes). The accounts are
set up with a Zero Balance Account (ZBA) structure so the funds are concentrated
automatically for daily investment in the general fund where applicable.
In another method we provide in advance to registered payers specific ACH credit payment
instructions that include instruction to append a unique alphanumeric suffix to our 8 digit
primary bank account number. NACHA allows 17 characters in field five of the Entry Detail
Record; our bank only uses the first eight digits, but reports all 17. We use a Treasury
Management System that parses out the unique subaccount suffix from our daily BAI report
and then the treasury management system (GTreasury) can automatically apply transaction
assignment rules we have built to the routine ACH entries for final interface to our state’s
general ledger. This is particularly useful for numerous federal grant programs and merchant
card acceptance programs among some others.
ACH credit payments that cannot be identified automatically by our comprehensive rules are
handled on an exception basis manually reviewed and assigned financial coding. We are
fortunate to have few exceptions to manage.
Arizona
Arizona is in the process of testing ACH payments owed to the state. The participating
agency is required to map the list of its products/services that are being sold/offered through
its website to the agency’s chart of accounts. The agency is also required to set up an
account (ZBA) with the state of Arizona Treasurer’s Office. When a customer pays for a
product/service directly through the agency website, the agency’s banking information and
product/service information are captured as part of the financial transaction and matched
with the agency’s chart of accounts in order to post funds. The matching is being handled by
a contracted third party vendor.
Each of our state participating agencies must have a separate account, and each agency is
recommended to use the same account for multiple programs for ease of reconciliation.
If a received ACH payment is not identifiable, we work with our servicing bank to trace the
originator and the receiver.
State
Delaware
Comments
Yes, Delaware accepts ACH Payments. We receive the majority of ACH Deposits from
federal sponsors when the organizations do their draws. But we also receive ACH payments
from customers, i.e., court fines, DelDOT third party.
The way that we and the Treasurer’s Office manage these is the Treasurer’s Office assigns
the organization or school the banking “Reference Number” which is the “Payment ID” in
accounts receivable. We use a customization to map these numbers to the Business Units
in FSF and a custom process to generate the deposit into accounts receivable.
Iowa
Iowa does allow customers to submit payments using ACH credit. The Treasurer’s Office as
a general rule works with the departments to keep the payment amount above $5,000. The
recipient agency must claim the money by submitting a Cash Receipt (CR) document that
includes the accounting information to the Treasurer.
Iowa has one bank account and routing number for all payments.
Kansas
Yes, Kansas accepts ACH payments from vendors. Addenda information from the state’s
bank typically provides the state agency name/identifying information; we encourage our
agency’s to set up the ACH payment (forms are completed for each vendor by each state
agency and signed by our commercial banking officer) so that when it comes in it can be
identified to the agency (i.e., use abbreviations and/or agency 3-digit number). The agency
then posts accordingly to their particular fund through our accounting software system. State
statute addresses the daily remittance of monies collected daily. Payments come to one
bank account. When they can’t be identified after exhaustive research, they may be
rejected/returned, but that does not happen often.
State
Massachusetts
Comments
Massachusetts accepts ACH payments; eligible entities decide whether they want to accept
this payment method depending on their business requirements. ACH is attractive due to its
low cost; however, if payment timing is an issue, sometimes entities opt to not implement it
since ACH takes longer to settle. Typically, ACH is a great fit for entities that have low
volume, high dollar value transactions that are not super time sensitive. That way, entities
don’t have to pay card processing fees on high dollar transactions. For example, if a
professional licensee needs their license paid by tomorrow morning so that they can work as
a nurse, ACH is not a good fit. However, nursing home facilities that have high dollar
payments are a great fit since entities would never want to pay interchange on a $1M
payment! We also can set thresholds (credit accepted only up to a certain dollar amount and
ACH only over a certain dollar amount).
Non-tax revenue capture is decentralized in Massachusetts, so each department has its own
(or multiple) DDAs for settlement (ACH, credit, debit, lockbox funds), depending on the size
of the entity/program. For eCommerce, our current web hosting solutions vendor, HP, hosts
payment pages and/or IVRs for numerous entities. HP works with Bank of America to initiate
a WEB, CCD, or TEL debit on behalf of the entity. These are set up as non-credentialed,
one-time, not recurring ACH debits.
We’ve discussed the model you allude to in your question, – but that would require a central
“super agency” to administer intake of revenue for multiple agencies and then be responsible
for allocation to appropriate departments/funds.
We have also had questions from departments where customers use online banking to pay
with ACH credits, and it poses a huge (and growing) reconciliation challenge for departments
if the payer does not adequately identify the payment in their online bill pay solution.
We recently added Telechek services to the present merchant services contract with BOA
(converts paper check to ACH at point of purchase (POP)).
The State Treasurer administers contracts that allow back office conversion (BOC) ACH
transactions—both the hardware and per item fees.
Minnesota
Minnesota does accept payments from customers via ACH. We have two bank accounts
designated for this purpose. Agencies are assigned a 3 character code that is added to the
end of the bank account number when they provide that information to their customers.
That code follows through the banking system to our receiving bank, so we know which
agency it is for. If an ACH receipt comes through without that code, we hold it for a while to
see if any agency claims it and if not, the funds are returned to the sender.
Mississippi
In Mississippi, we don’t receive payments directly from customers but we have many web
based applications for many agencies that accept credit cards and e-checks that are
processed through a third party vendor and processor. Federal money and some law suit
settlements are the only things that come directly into the main bank account and that is
enough to keep up with and track.
North Carolina
Yes, North Carolina allows customers to process ACH payments. Each state agency has
depository accounts with a local bank designated by the Department of the State Treasurer.
The funds are credited directly to that account, but the agency is required to certify the
receipt of those funds through our state cash management system. The agency is
responsible for the certification/claim of funds through the statewide cash management
system even if they are unclear where the money belongs within their agency.
State
Oklahoma
Comments
In Oklahoma ACH payments are allowed but sometimes problematic because they are
deposited into a central state bank account and the funds must be claimed by the agency. It
is often difficult for an agency to determine which payments belong to them. If they are not
claimed, they are put into a holding account until claimed. Agencies with high volumes of
ACH credits have separate lock boxes into which the State Treasurer’s Office records the
payments and sweeps the funds into the main account.
South Carolina
I’ve gotten information to answer this question from our State Treasurer’s Office. In South
Carolina we do allow ACH payments to be submitted by customers of state government.
The STO assigns separate bank accounts to an agency only for that agency’s ACH activity.
We refer to these separate bank accounts as “subaccounts” and each subaccount will sweep
to the state’s general deposit account which is maintained by the STO. Authorized financial
staff at the agency level are able to monitor their subaccount ACH activity using online
banking applications. Once an agency sees that an ACH has posted to their subaccount, the
agency prepares a SCEIS (acronym that includes our statewide accounting system) deposit
document and workflows the document to the STO via SCEIS. In order to avoid unidentified
payments, the STO audits each agency-prepared deposit doc to make sure the bank
validation amount, the bank deposit date, and the name/routing number of the financial
institution match the corresponding information input to SCEIS.
Tennessee
Tennessee has an agreement with our ACH Receiving Depository Financial Institution
(RDFI) to designate a routing number and a variety of unique bank account numbers for
each state agency wishing to receive ACH credits. That unique account number allows us to
allocate the funds to the specific agency. Any credits transmitted to an account number that
does not match our preauthorized account listing or is otherwise unidentifiable is rejected
and returned to the originator.
Texas
Texas does allow taxpayers, etc., to send ACH credit payments. We require that the
payment be formatted in the CCD+ or CTX format and include an addenda record in the TXP
format. The TXP formatted addenda is the key. Our system has been programmed to read
the addenda and record the payment correctly from the information supplied. This is all done
automatically. Any payment that can’t be identified this way is provided to our section daily in
an exception report. These payments are all researched and handled manually.
All money is deposited into the same bank account. We receive money for many different
agencies, but the addenda is key for the money to be posted accurately.
I have attached a couple of examples of the brochures that we send out to payers for
different state agencies. They include detailed explanations of the types of payments that we
receive and how to send them correctly:
96-1270 TEXNET
96-1299 TEXNET
TABC_APR2015_Compliant.pdf
GLO_APR2015_compliant.pdf
State
Wisconsin
Comments
In order to accelerate the receipt of payments, and to receive remittance information
electronically, Wisconsin has developed a number of receipting applications accepting ACH
payments. See: http://epayinfo.wisconsin.gov/. The receipts for each application are
deposited to a unique bank account.
The state also accepts ad-hoc ACH credit payments and these payments can sometimes be
difficult to identify. All banks are required by NACHA rules to post the company name
(Positions 5-20 of Batch Header-5 record) and entry description (Positions 54-63 of Batch
Header-5 record) on the receiver's statement. State agencies are asked to alert the
controller’s office when they are aware that an electronic payment may be posting to the
bank account in order to facilitate the identification process.
Instructions for Sending ACH-Credit Payments to State of Wisconsin Agencies
Businesses, individuals and governments that want to send an ACH credit payment to a
state of Wisconsin agency are provided with the appropriate account and routing number
identifiers. Additionally they are advised of the following: IMPORTANT – In order for the
state agency to correctly apply your payment for the purpose it was intended, the name of
the state agency that you are paying must be included within the payment description field of
the ACH company batch record.
Occasionally the intended recipient (agency) of a payment cannot be identified and the
money is returned.
Some of the more difficult payments to identify originate with the federal government and the
Bureau of Fiscal Services publishes the Green Book – a comprehensive guide for financial
institutions processing federal government ACH payments and collections that is very useful.
Wyoming
Wyoming does not use the ACH credits. We require the vendors to submit their invoices
directly to the agency in which they are doing business with. The agency must confirm and
verify the deliverables have been received and are correct. This is part of our internal
controls.