Executive Branch Agency Reduction in Convenience Check Usage

GSA SmartPay® Smart Bulletin No. 012

UPDATE:

Effective Date

From Issuance until superseded

Business Line(s) Affected

Purchase and Integrated (purchase)

Introduction

The Office of Federal Financial Management (OFFM) within the Office of Management and Budget (OMB) and GSA’s Center for Charge Card Management (CCCM) began requiring customer agencies to reduce the use of convenience checks in FY2010. Agencies have done a tremendous job in reducing the number of checks written as well as the total dollar amount spent through convenience checks. However, the need to continue with convenience check reductions still exists, especially as the Government looks toward GSA SmartPay 4 and more commercial payment solutions. CCCM continues to monitor the progress of this initiative and reports the results to agencies during each Quarterly A/OPC meeting in January, April, July, and October. Results will also be provided to OMB/OFFM as requested.

Summary

1. The Debt Collection Improvement Act of 1996, 31U.S.C. 3332, requires that subject to the authority of the Secretary of the Treasury (Secretary) to grant waivers, all Federal payments (other than payments under the Internal Revenue Code of 1986) made after January 1, 1999, must be made by electronic funds transfer (EFT). It is Treasury’s view that payments made by a third-party draft or by convenience check must be made by EFT unless a waiver is available. EFT may be waived under the following circumstances:

   1. Hardship to an individual;
   2. Payment in a foreign country where EFT is not available;
   3. Payments in a disaster area;
   4. National emergency declared by the President or Congress;
   5. Where a threat may be posed to national security;
   6. One-time, non-recurring payment and the cost of making the payment via electronic funds transfer exceeds the cost of making the payment by check; and
   7. unusual and compelling urgency.

2. CCCM recognizes that convenience checks with certain merchants or in unique circumstances may be unavoidable. However, due in part to the issues listed below, one of the hallmarks of a well-managed charge card program is to maximize card use while reducing check use. Using convenience checks has the following disadvantages:

   1. Refund rates on check transactions are generally much lower than purchase card transactions;
   2. Internal controls and management data are less robust; and
   3. Checks are less environmentally responsible.

3. Agencies shall take the following actions to reduce convenience check use whenever practical and possible:

   1. If convenience checks are being written to a merchant where there is also purchase card activity, discontinue use of convenience checks with that merchant; and
   2. For merchants that do not accept the purchase card, find and use alternate merchants that do accept the purchase card and can provide the same or similar products/services whenever possible.
   3. Applicability of Executive Order 14247 - Modernizing Payments To and From America’s Bank Account Convenience checks issued under the GSA SmartPay program are NOT considered third party drafts, which are checks/payment orders drawn by a party other than the person who is actually liable for the payment.
   4. Rather, convenience checks are issued by the charge card bank and allow the account holder to write checks that draw against the charge card account. Convenience checks are tied directly to the GSA SmartPay account number from which they are issued.
   5. Convenience checks are not directly tied to or issued from the Department of the Treasury (aka America's Bank Account) and are not instruments drawn by or payable to third parties in the typical-third party draft sense.
   6. CCCM does not actively encourage the use of convenience checks and has consistently asked agencies to reduce their use of convenience checks since FY2010 and in conjunction with the Debt Collection Improvement Act.
   7. To align with the spirit of EO 14247 and comply with the Debt Collection Improvement Act, agencies are encouraged to continue reducing the use of convenience checks and seek alternative electronic payment methods in lieu of using convenience checks to the maximum extent possible.

Action

Executive agencies shall continue to take appropriate action to reduce the quantity and total dollar amount of convenience checks written. This reduction is not intended to adversely affect mission accomplishment. Agencies may continue to use convenience checks when mission needs require it in conformance with DCIA and OMB Circular A-123, Appendix B, Chapter 12.