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HomeMy WebLinkAbout2024-004 - Res. Electronic Funds Transfer (EFT) Policy I RESOLUTION NO. boa�.00Y Mason County Electronic Funds Transfer(EFT)Policy to be Added to the Mason County Code Title 2 Whereas, RCW 39.58.750 authorizes local governments the use of electronic fund transfers (EFT) and directs the State Auditor to prescribe accounting procedures for Electronic Funds Transfer transactions. Whereas, BARS Manual Section 3.8.11 —Electronic Funds Transfers—Disbursement provides accounting procedures and recommended internal controls to safeguard local government resources when utilizing Electronic Funds Transfers(EFT). Whereas, BARS Manual Section 3.6.6—Electronic Funds Transfers—Receipts provides accounting procedures and recommended internal controls to safeguard local government resources when utilizing Electronic Funds Transfers(EFT). Whereas,the State Auditor's Office has recommended that Mason County have an Electronic Funds Transfer(EFT) Policy. The Mason County Audit Committee has worked to comply with the recommendations as set out in the BARS Manual for Electronic Funds Transfers (EFT)and have created an Electronic Funds Transfer(EFT) Policy for Mason County. Whereas,the Mason County Audit Committee recommends approval of the Mason County Electronic Funds Transfer(EFT) Policy as attached in Attachment"A". Now Therefore,the Mason County Board of County Commissioner's hereby accepts the recommendation of the Mason County Audit Committee and hereby approves the Mason County Electronic Funds Transfer(EFT) policy as shown on Attachment"A". Dated this3O,day of January 2024. BOARD OF MASON COUNTY COMMISSIONERS ATTESTED TO: )kx� /i _ • ase)lNeatherlin,Chair Mc�Ken�zie Smith,Clerk of the Board Kevin Shutty,Vic Chair APPROVED AS TO FORM: � l Sharon Trask,Commissioner Tim Whitehead, Chief Deputy Prosecutor Mason County Electronic Fund Transfers(EFT) Policy 1. Purpose and Scope Mason County makes payments to vendors and employees by electronic funds transfers and receives funds from various parties as a routine business practice. All such payments must be properly authorized and executed to reduce the risk of erroneous or fraudulent transactions. 2. Internal Control Requirements To protect EFT transactions from internal or external threats,the following controls will be adhered to: • Implementation of bank offered security measures to prevent unauthorized individuals from initiating or modifying a transfer,i.e., use of positive pay. • Each user initiating or approving bank transactions must have separate bank User IDs. • Separate users must initiate and authorize electronic transactions. • Use of pre-established templates for specific transaction types and specific accounts may be authorized in advance by the Mason County Treasurer or his/her designee. New templates must be initiated by one user and authorized by the Mason County Treasurer or his/her designee. • The process for creating,securing,sending,and authenticating direct deposit transmittal files to prevent unauthorized modification or submission is documented below. • Adherence to the Mason County computer policies and procedures to protect computers and computing processes used for EFTS from computer malware. • Regardless of payment method, i.e.,wire transfer,ACH or paper warrant(check),employees shall adhere to the authorization and processing requirements as set out in policy or procedures manual. • Changes to employee direct deposit must be processed using the Direct Deposit authorization form with a voided check attached or an account verification form from the employee's financial institution. Under no circumstances will account changes be authorized by telephone or email. • Changes to vendor ACH accounts must be processed using the EFT(ACH/WIRE transfer) authorization form. Under no circumstances will account changes be authorized by telephone or email. 3. Types of Payments made via ACH: • Vendor Payments:In its normal course of business,the Mason County Auditor's Office, Financial Services Department,and the Mason County Treasurer's Office may remit the following types of vendor payments via ACH:Vendor Payments, Employee Reimbursements, routine payments to the State Agencies and Taxing Districts. • Wire Transfers: In its normal course of business,the Mason County Treasurer transfers or receives by wire funds for investment purchases and redemptions, bond proceeds and payments. • Customer Direct Debit: In its normal course of business,the Mason County Treasurer's Office and the Mason County Utilities and Waste Department allow customers the option of to direct the county department to directly debit their bank account to make their payments. For Vendors and employees being paid by paper warrant(check),the county shall adhere to the requirements for payment approvals and accounts payable documentation and processing as described in the Mason County Purchasing&Contract Policy or other applicable laws. With very few exceptions,checks issued to suppliers should only be delivered to the Vendors by United States mail or its equivalent. Payroll checks may be delivered to the employee or picked up by the employee from the Mason County Financial Services Department. Exceptions must be documented and authorized by the Mason County Auditor. Under no circumstances is a warrant (check)to be mailed earlier than the dated date of the check. 4. Training: To ensure consistent compliance with procedures, employees tasked with processing, reconciling and record-keeping will train in the proper procedures and internal controls prior to conducting these functions. 5. Definitions • Automated Clearing House(ACH)—A nationwide payment and collection system that provides for the electronic distribution and settlement of funds. Although the term Electronic Fund Transfer(EFT) is technically more inclusive than the term ACH,the term EFT is often used synonymously with ACH and Wire Transfer. Wire transfers execute directly between two accounts,as opposed to a clearinghouse,so they process more quickly, but they are more expensive. • Electronic Funds Transfer(EFT)—refers to the disbursement from a bank account by a means of wire,direct deposit,ACH or other electronic means. • National Automated Clearing House Association (NACHA)—is the steward of the electronic system that connects all U.S. bank accounts and facilitates the movement of money among them. 6. Record-Keeping: • Transaction records will include: • Chronological number of EFT payment. • Time and date of disbursement • Payee—name,address,and account number • Amount of disbursement • Purpose of disbursement • BARS or other accounting system expenditure/expense account number • Name and fund number • Disbursing bank's unique transaction identification number • Receiving bank or financial institution's identification number • A file must be maintained of authorizations by payees who have thereby agreed to have moneys added to their accounts electronically. • The Mason County Treasurer should notify the disbursing banks that access to files, records and documentation of all EFT transactions should be provided to the State Auditor when required for the conduct of the annual audit. 7. Procedures: • Origination of ACH File(s): • ACH File Database: Mason County creates ACH files from the MUNIS Financial System, which are downloaded in the proper ACH format. • Transmission: Several options are available to transmit the file to the ACH originating bank, either through a gateway provider,or directly to the bank. Mason County generates and transmits payroll,employee reimbursement or supplier payments files via Umpqua Bank. • Retention:ACH and EFT data files are required to be maintained for six years after the end of the fiscal year(per Local Government Records Retention Manual). • Authorizations: • All employees whose net pay is to be directly deposited must complete a Direct Deposit Authorization Form. This form is submitted to the Auditor's Financial Services Department and must include a deposit slip for a Savings Account or a voided check for a Checking Account. In lieu of a deposit slip or voided check,the employee may provide an account verification form from the employee's financial institution indicating the routing number and account number. • The authorization form shall provide the employee with the ability to change bank account information. Employees should notify the Payroll Office immediately but no later than ten business days prior to the pay date for closed or compromised accounts. • Retention of authorization forms will be maintained until superseded and released from all audits. • Mason County does not allow telephone or email initiated entries or change authorizations. • Transaction Advices: • Participating employees are provided either an electronic or hard copy Direct Deposit Advice (paystub)on the payroll pay date,specifying details of the employee's gross pay,tax withholdings,statutory and voluntary deductions, net pay,and other information. • Vendors being paid by ACH credit will be advised of the payment via email. • Cancellation of Transactions: If it is learned that a supplier or employee does not have a right to payment or the payment amount is more than the amount due to the Vendor/employee,then the payment is to be cancelled. Action to take will depend upon where the payment is in the timeline of the transaction. • If the ACH file has not been transmitted to Umpqua Bank but the payment process has been finalized,staff will void the batch to remove the incorrect payment. • If the ACH file has not been transmitted to Umpqua Bank and the ACH process has begun;staff will remove the incorrect payment prior to finalizing the batch. • If the ACH file has already been transmitted to Umpqua Bank,staff would contact and complete an Umpqua Bank ACH Service request for item delete/reversal and provide to. Umpqua Bank either by email or via other forms of transmission as required by Umpqua Bank. • Cut-off Times and Close Outs The following cutoff times are established for ACH file transmissions: • The ACH file auto-generate at the conclusion of the payroll process is scheduled to transmit two(2) banking days prior to the payroll issue/check date. • The ACH file transmission for suppliers is generated two(2) banking days prior to issue/check date. • Funding outbound ACH transactions: • Funding of ACH files is deemed a critical function that must be performed accurately and timely, in order to avoid the overdrawing of the direct deposit bank account. • The ACH settlement account(s)which accommodates the funding of outbound ACH transactions for Payroll and outbound ACH Vendor transactions is funded via a bank account transfer from the Treasurer's Main Checking held at Umpqua Bank. • Funding of ACH/EFT transactions must occur for settlement no later than two 2 banking days in advance of the payroll issue/check date or the supplier issue/check date. • Funding of the settlement account(s)will be made in writing by the Auditor's Financial Services staff and directed to the Mason County Treasurer's office on their prescribed form and emailed to Treastransmittals@masoncountywa.gov. • Reporting of inbound ACH transactions: • The settlement bank account with accommodates the receipt of inbound ACH transactions is the Treasurer's Main Checking Account held at Umpqua Bank. • The county treasurer receives notice monthly from the Office of the State Treasurer(OST) about two(2)days prior to receipt. The funds are recorded in various funds and revenue accounts as outlined in the notice and the payment is posted as a miscellaneous receipt as part of the daily control drawer batch. • The county treasurer receives ACH payments from various entities(state,federal, billing companies, etc..)on behalf of county departments and junior taxing districts. County Departments and Junior Taxing Districts are required to email or deliver a transmittal form identifying the proper fund and BARS for the payments. The treasurer's staff reconciles the transmittal forms to the payments received and the payment is posted using a miscellaneous receipt as part of the daily control drawer batch. • The county treasurer receives ACH/WIRE notice and a payment file from several mortgage processing companies for the payment of property taxes (due 4/30&10/31). The payment file is reconciled to the payment received and payments are posted as part of the daily cashiering batch. • The county treasurer receives ACH payments via the county's third-party vendor Point and Pay for credit/debit card payments made online or in person. Authorized staff access the Point and Pay website that are reconciled to the payment received. County Departments and Junior Taxing Districts are responsible for reconciling and emailing a transmittal form to Treastransmittals@masoncountywa.gov and payments are posted as part daily control drawer batch. The County Treasurer receives payment files via email,that are then reconciled to the payment received and posted as part of the daily control drawer batch. • Unidentified ACH/Wire payments are those payments received into the Treasurer's Main Checking Account where the County Treasurer has not received a transmittal form to appropriately receipt the funds. These funds are posted by miscellaneous receipt to the Treasurer's Trust Holding Fund as part of the daily control drawer batch. Unidentified funds are held until identified by the appropriate county department or junior taxing district. The Treasurer's Office includes an Unidentified Funds Report with monthly reports to the county departments and junior taxing district for resolution. Once the funds are identified by a transmittal form,the funds are transferred out of the Treasurer's Trust holding account and receipted via miscellaneous receipt to the appropriate fund and BARS and posted as part of the daily control drawer. • Reconciliation • All Bank Statements shall be reconciled monthly as part of a global reconciliation. • Individuals responsible for bank account reconciliations where possible should also not be responsible for handling cash. Additionally,these individuals should only have inquiry access to Umpqua Bank,thus negating their ability to record receipts or process disbursements. • All bank reconciliations are performed in accordance with BARS Manual standards. Completed bank reconciliations where possible should be reviewed by a second reviewer, supervisor/manager as part of the monthly reconciliation process. Completed bank reconciliations should be date stamped,and initialed, by all parties. • All completed bank reconciliations are required to be emailed monthly to the County Treasurer's Office at Treastransmittals@masoncountywa.gov for compilation of the State Auditor's Schedule 6. • All outstanding items are reconciled prior to the succeeding month. Large checks over one year old are reviewed annually. Unclaimed checks are reported to the state each year per state regulations. • Returns • In the case of outbound transactions for Vendor and payroll payments, returns will be credited back to the direct deposit bank account from which the funds were originally disbursed. • Returned items are monitored daily. Any returned items are forwarded to the appropriate Financial Services employee(Payroll for Direct Deposit and AP for all other ACH payments),to be researched and either voided or reissued as appropriate. A second Financial Services Department employee will review all such returns and their related dispositions. • Paying Invoices: • All invoices for banking services received (i.e., Umpqua Bank)shall be paid in a timely manner, in accordance with established county procedures for accounts payable. • Responsibility for inspecting the invoices received and approving payment is that of the Treasurer's Office and forwarded to AP for audit and warrant issuance. • Signatures and Approvals • The US Federal ESIGN Act of 2000 gives the same legal protections to online signing as to traditional pen and paper signing. 8. References • Mason County Code Chapter 2.21-Purchasing ad Contracting Policy • Mason County Code Chapter 2.158—Electronic Signature Policy • RCW 39.58.750—authorizes local governments the use of EFT and directs the State Auditor to prescribe accounting procedures for EFT transaction processing. • BARS Manual Section 3.8.11—Electronic Funds Transfers—Disbursement provides accounting procedures and recommended internal controls to safeguard local government resources when utilizing EFT. • BARS Manual Section 3.6.6—Electronic Funds Transfers—Receipts provides accounting procedures and recommended internal controls to safeguard local government resources when utilizing EFT. • BARS Manual Section 3.1.9—Bank Reconciliations provides guidance regarding appropriate bank reconciliation practices.