Electronic Funds Transfer (EFT) Overview
What are the two basic types of Electronic Funds Transfer (EFT) transactions? |
EFT is a generic term for which there are two basic EFT transaction types:
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What are the characteristics of wire transfers? |
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What are the characteristics of ACH transactions? |
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Who is the facilitator of wire transfers and ACH transactions? |
In most cases, the Federal Reserve Bank (FRB) is the facilitator for both. |
What are the two basic types of wire transfers? |
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What State agency facilitates wire transfer payments? |
The Department of State Treasurer (DST) performs nearly all wire transfer payments for agencies. |
What State agency facilitates wire transfer receipts? |
The DST receives all wire transfers received from payors (e.g., Federal government) with:
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How are ACH receipts for an agency handled? |
There are several methods utilized, depending upon the volume:
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What EFT programs for outbound payments does an NCAS agency have access to? |
OSC provides the ACH services for NCAS agencies:
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What options does a non-NCAS agency have to participate in EFT? |
The agency can develop its own program, utilizing the services available through the OSC's Master Services Agreement (MSA), for both outbound and inbound payments. The current service provider is Bank of America, serving as the Originating Depository Financial Institution (ODFI). The agency transmits the ACH file directly to the ODFI. If transmitting directly to Bank of America, the agency can use the bank's Cash Pro program to both create and transmit an ACH file. |
What are the two types of ACH transactions? |
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Can EFT transactions have remittance data included? |
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Who are the players in an ACH transaction? |
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What are the most common uses of ACH credits? |
The payment of payroll and vendor payments. |
What various aspects of EFT could an agency use for inbound payments? |
A large agency, such as the Department of Revenue (DOR) could use a variety of EFT programs:
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What various aspects of EFT could an agency use for outbound payments? |
A large agency, such as the Department of Revenue (DOR) could use a variety of EFT programs:
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Is the funding of an outbound ACH file different for community colleges and LEAs? |
The funding is generally done with a combination of the unit's local bank check and a State warrant. Since banks consider State warrants "next day funds," it is permissible for the warrants to be deposited one banking day prior to the settlement date. The State Treasurer's publication entitled, "Banking Services Handbook," should be referenced (pages 44-45). |
In the case of an inbound ACH file (debit file), when will the funds be received by the agency, and when must the funds be certified? |
The funds will be received into the agency's inbound ACH settlement account on settlement date, as viewed on Bank of America’s Cash Pro Program, and should be certified on CMCS prior to the 2:00 p.m. deadline. |
How are ACH Returns handled? |
In the case of inbound transactions (collections), when the settlement account is a Zero Balance Account (ZBA), a separate Returns Account is established at the bank, for which the funds are debited against, as specified in special instructions associated with the settlement ZBA account. It is the responsibility of the participant to clear any deficit balances in the Returns Account timely. In the case of outbound transactions (where the settlement account is not a ZBA account), a separate Returns Account is normally not needed. The returns are credited back to the settlement account from which they were originally disbursed from. The credit balance in the settlement account can then be cleared by a number of ways: 1) The bank can be requested to remit the funds to the participant by "official check" or by a "book transfer;" or 2) the funds can be used to fund a subsequent outgoing ACH Credit file. |
Who is the current Master Services Agreement (MSA) for EFT Services with? |
Bank of America, acting as the Originating Depository Financial Institution (ODFI). |
Who has the responsibility for reconciling settlement bank accounts? |
It is the participant's responsibility to reconcile the bank accounts timely. Statements are sent directly to the participant monthly. Bank of America Cash Pro can be used to reconcile on a more frequent basis. |
What system does an agency use to view settlement accounts? |
Participants using the OSC's MSA are granted access to their settlement accounts via Bank of America Cash Pro program. For State related participants, OSC is the administrator, establishing agency users and assigning functions, and performing password maintenance. |
What reports are available through Bank of America’s Cash Pro program? |
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What are the basic elements an agency must have in order to create an ACH payment, whether a credit or debit transaction, to be included in an ACH file? |
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What are some computer programs various agencies use to create their own ACH files? |
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What are the laws and regulations governing EFT? |
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What are the three most common ACH Standard Entry Codes assigned by NACHA to ACH transactions? |
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What are some other typical ACH Standard Entry Codes used? |
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For an ACH transaction, what information appears on the recipient's bank account statement? |
Data in the two fields that are contained in the ACH Batch Header Record will appear on the bank statement: 1) Field #3 - Company Name; and 2) Field #4 - Company Discretionary Data. The "company name" is the name of the originator. The "discretionary data" could be a description of the payment, employee name, vendor number, or a combination of data elements. In the case of payroll, the social security number should not be inserted as discretionary data, unless it only shows the last four digits. |
What is a prenote? |
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Are routing-transit numbers required to be verified? |
When an employee or vendor is enrolled as a payee/payor in an ACH database, it is highly recommended that a verification of the validity of the bank transit-routing number is made. In the case of either TEL entries or WEB entries, NACHA Operating Rules require that commercially reasonable procedures be employed to verify the transit-routing number. Downloadable files are available from the Federal Reserve Bank for this purpose. See OSC's SECP link under "About SECP/External E-Commerce Resources." |
Who pays for the bank service fees for EFT Services, for State agency participants? |
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What is an Electronic Check (e-Check)? |
The term "electronic check" generally refers to services offered by banks that allow for the conversion of a paper check to an ACH draft (with the original check being destroyed). Federal regulations only allow for the conversion of "consumer" checks. Commercial checks and government checks cannot be converted, as it by-passes positive pay programs used by companies and governments. This type of transaction is subject to the ACH Rules (i.e., NACHA Operation Rules). These transactions have the ACH Standard Entry Code of either POP or ARC. An agency should consult with OSC before acquiring this type of service. |
What is Remote Capture? |
Remote capture refers to services offered by banks that allow for the capturing of a paper check and generating an image (with original check be destroyed), and presenting the image as a "substitute document" under the Check 21 Law. This type of transaction is subject to the paper check Regulations (i.e., Regulation CC and the Uniform Commercial Code). An agency should consult with OSC before acquiring this type of service. |
What is Check Guarantee? |
This is a service offered by third-party providers that offer two options: 1) Verification of valid account number; and 2) Guaranteeing of funds. It is often used in conjunction with Remote Capture. An agency should consult with OSC before acquiring this type of service. |