WA State Outreach Program

1
WA State Outreach Program

• Presentation to the NAST Treasury Management
  Conference
• December 6, 2004
• Scottsdale, Arizona
• Elaine Emans, Deputy Treasurer
• Jacqueline Biss, Cash Management Division Manager
• Office of the Washington State Treasurer

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Background

• With few exceptions, in 1993 most agencies did
  not have contracts for purchased banking services
• Use of credit cards and other electronic payment
  methods was just beginning and economic
  feasibility was not always considered
• Master agreements for financial services were
  bid through Office of State Procurement no
  working knowledge of the financial process

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Legislative Remedy

• In 1993, the legislature passed the Cash
  Management Act
• Emphasized effective and efficient management of
  states cash resources
• Policies, procedures, and practices to be
  reviewed and revised to ensure that state
  achieves the most effective cash management
  possible

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Cash Management ActRole of Treasury

• Authorized to take such actions as are necessary
  to ensure the effective cash management of public
  funds.
• Authorized to represent the state in all
  contractual relationships with financial
  institutions
• Directed to coordinate agencies acceptance and
  use of credit cards and other payment methods

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Role of Budget and Accounting Office (OFM)

• Approve the use of electronic and other
  technological means to transfer both funds and
  information whenever economically feasible
• Adopt rules requiring agency to perform an
  economic feasibility study (EFS) approval must
  be given before project implemented

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Strategy for ImplementingCash Management Act

• Provide a foundation establish master
  agreements for financial services
• Update policies to support the provisions of the
  Act
• Establish a Cash Management Outreach Program

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Cash Management Outreach Program

• Establish relationships/partnerships with agency
  personnel providing advice and assistance to
  improve collections, payment methods, and reduce
  costs
• Provide information about existing master
  agreements, available technology, alternatives
  and associated costs
• Agencies with unique requirements may request
  delegation to procure financial services
  outreach staff advise and assist with RFP
  development and evaluation

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Outreach Program Strategy

• Master Agreements in place
• Diplomacy and communication with agencies
• Letters and Memos to communicate role of Treasury
• Educational Seminars
• Meet and partner with agencies
• Analyze current deposit disbursement trends
• Send out the posse

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Payment Options First Steps

• Identify Customer Base Businesses? Consumers?
  
• Evaluate Transaction Type
• Identify Risk
• Select Possible Payment Option(s)
• Survey Customers If you build it, will they
  come?

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Why is the customer base so important?

• Anonymous customers (LCB, Parks)
• No established relationship
• Greater risk
• Fewer payment options
• Known customers (Businesses)
• On-going relationship
• Established payment practices
• Easier payment selection

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Evaluate Transaction Types

• Recurring Payments
• Periodic scheduled payments (annual, quarterly,
  monthly)
• Amount known (license renewal)
• Amount unknown (tax payment)
• Single Payments
• Amount of Sale (large , small )
• Ease of Use
• Informational Factors

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Identify Risk

• Recourse
• Ability to collect an alternate form of payment
  if original payment returned?
• Ability to revoke a permit, license, etc.?
• Depth of customer information (including contact
  information) on file
• Degree of data and access security
• Reputation risk
• Potential political or media ramifications

13
Alternative Collection Methods

• Existing Payment Methods Cash and Checks
• Additional Payment Options
• Bankcards Credit Cards and Debit Cards
• Lockbox Alternative method to receive and
  process check payments (some offer more)
• Electronic Funds Transfer (EFT)
• ACH
• Wire

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Bankcard Acceptance

• In Person/Mail or Telephone Order (MOTO)
• Requires a terminal to process payments
• Can process cards on both the Credit and Debit
  Networks
• Contract Allows any processor for In Person /MOTO
  (provided that processor meets the requirements)
• Choice of processor depends on Agency
  requirements
• Dial up or TCP/IP
• PIN based debit
• Best Practices Document Available

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Bankcard Acceptance

• Internet
• Can only accept cards that use the credit network
• Contract allows choice of any processor
• Security Requirements
• Typical Agency Internet process Agency has own
  Storefront and simply uses the processors
  payment button
• Best Practices Document available

16
Electronic Funds Transfer

• Wire Transfer
• Funds distribution only
• Real time
• Costly
• ACH
• Funds collection and distribution
• Batch process/store and forward system
• Inexpensive

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Transaction Flow
OST submits file to States bank for processing
in the ACH Network
Obtain ACH Authorization
Create an ACH file transmit to OST
States bank submits file to ACH Network
ACH Operator routes entries to paying bank based
on routing number
Paying bank posts the transaction to the
Receivers account
Transactions are posted to the States account
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Preauthorized Recurring Debit

• Authorization and banking information obtained in
  writing
• Consumer or corporate transactions
• Agency creates the ACH file
• Settlement date is determined by agreement
  (authorization)
• Similar process for ACH recurring Credit

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ACH Payment via the InternetAgency
Created/Supported

• Consumer or Corporate transactions
• Consumer transactions called WEB entries,
  Corporate transactions called CCD entries.
• Authorization and banking information obtained
  over the Internet
• Commercially reasonable identity verification
  (authentication)
• Routing number verification
• Minimum 128-bit encryption
• Annual audit requirements
• Settlement date determined by agency/program

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ACH Payment via the Internetvia Third Party
Vendor

• Department of Information Services holds master
  contract with Major FI
• Consumer or corporate transactions
• Vendor complies with ACH rule requirements
• Vendor obtains and warehouses banking information
• Vendor provides transaction reporting
• Settlement date determined by agency/program

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Other Collection or Payment Methods

• Stored Value Cards for Disbursements
• Works well for unbanked recipients
• One state agency piloting this application
• Draft RFP for Master Contract
• Check 21 Collection Opportunities?
• Electronic/digital clearing?

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Questions?

• Thank you.

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Contacts

• Jacqueline Biss Ryan Pitroff
• 360-902-8914 360-902-8917
• jackie_at_tre.wa.gov ryan_at_tre.wa.gov