Policy
FIACCT 06-02_02 – Rec. – FINET – Exempt Agencies – Non-Sufficient Funds Checks
Effective: July 1, 1998
Revised: December 1, 2019
Reviewed: December 1, 2019
Purpose
This policy explains the procedures that are unique to FINET-Exempt agencies to account for and make collections on non-sufficient funds (NSF) checks. Unless explicitly stated otherwise in this policy, agencies that are exempt from using FINET for their NSF checks should comply with FIACCT 06-01.12.
Background
The following policies and procedures have been developed to conform with generally accepted accounting principles (GAAP), and to provide consistent and accurate reporting for all types of transactions.
Policy
A. Agencies with a “separately tracked” capability shall summarize and record this FINET entry at quarter-end and are encouraged to record the entry at each month end.
B. Agencies with a “separately tracked” capability shall record the NSF check and service charge as a receivable in its internal receivable tracking system within five (5) business days of receiving the NSF check. In addition, agencies will either mail the written NSF check notice to the issuer within five (5) business days of receiving the NSF check or send the NSF check to OSDC for collection and request OSDC to mail the written NSF check notice.
C. For governmental funds, when an NSF check is determined to be uncollectible, the actual check amount plus any additional charges will be written off against the original coding block(s) (rather than a bad debt expense). For information on when and how NSF checks can be written off see FIACCT 06-02_04
Receivables — FINET Exempt Agencies Exempt-Write-Offs and Allowances policy.
D. FIACCT 06-01.12 Paragraphs (K) and (M) do not apply to exempt agencies.
Procedures
The procedures for handling NSF checks are divided into three areas as outlined below. State agencies should review the outlined descriptions to identify which area is applicable to their situation. Agencies should then refer to the detailed procedure following the outline.
1. NSF ≤ $5.00
For NSF checks $5.00 or less, it is up to the state agency that originally deposited the check to decide whether to pursue collection of these checks.
If the agency decides not to pursue collection, the agency will write off the NSF check against the original coding block.
If the agency decides to pursue collection, the agency shall follow one of the procedures below.
3. NSF check is over $5.00
and is separately tracked
When a separately tracked NSF check over $5.00 is received, the state agency will include the NSF check plus the $20.00 service charge in its summary IET entry (minimum quarterly; encouraged monthly).
Responsibility
Action
1. NSF check $5.00 or less and Agency Decides to Write-Off
Agency
Process a modification to the original Cash Receipt (CR) document, reduce the dollar amount by the amount of the NSF check, and select the “NSFCHECK” adjustment reason.
For detailed instructions on processing a CR see FIACCT 13-00 Cash Receipts — Handling, Depositing, and Recording.
3. NSF check is over $5.00 and Separately Tracked
Agency
Process a modification to the original FINET Cash Receipt (CR) document, reduce the dollar amount by the amount of the NSF check, select “NSFCHECK” in the reason field.
Process a new separately tracked receivable in the agency’s internal receivable tracking system including the $20.00 service charge.
Agency
Decide whether to turn over the NSF checks to OSDC for collection efforts at the time they are returned by the financial institution, or continue the collection efforts outlined in this policy for an additional thirty (30) calendar days.
Send immediately to OSDC for collection:
Contact OSDC for further guidance on turning over collection efforts to OSDC. Retained by the Department for a 30-day collection:
Send NSF Check notice to the check issuer (see example of the letter to be mailed at the end of this policy): Within five (5) business days of receiving the NSF check, prepare and mail the NSF check notice and other supporting documentation together with the NSF check.
If payment is received within fifteen (15) calendar days of mailing the NSF check notice, enter a Cash Receipts (CR) document.
If the payment is not received within 15 calendar days of mailing the NSF check notice, increase the agency tracked receivable for $35.00 collection fee.
Agency
If payment has not been received when the agency enters its summary FINET IET entry (minimum quarterly; encouraged monthly). Include the NSF check and added costs in the FINET summary entry. NSF checks should be included in the summary entry even when the NSF check was forwarded to OSDC. +
The entries required on the summary IET are as follows:
Debit balance sheet account 1198 – NSF Accounts Receivable for the amount of the check using the agency’s coding block;
Debit (Buyer) balance sheet account 1198 – NSF Accounts Receivable for the $20.00 service charge and if payment is not received within 15 calendar days, an additional $35.00 collection fee using OSDC’s coding block; (Use the following codes: Fund: 2105; Agency: 100).
Credit the coding block on the original CR.
Credit OSDC’s coding block and Revenue Source Code (RSC) 2971 – NSF Service Charge for $20.00 and if payment is not received within 15 calendar days, the additional $35.00 to RSC 2969 – NSF Collection Costs. (Use the following codes: Fund: 2105; Agency: 100; Unit: 5021; Appr Unit: 2105) .
If the $20.00 service charge and any additional costs are later collected due to efforts made by the agency, contact OSDC to determine if an ITI/ITA transaction may be created to transfer this revenue to the agency.
Agency
If the payment is received before the summary FINET IDT entry and before the NSF check has been forwarded to OSDC, enter a CR document.
Line one of the CR: Enter the amount of the NSF check using the coding block on the original CR.
Line two of the CR: Enter the $20.00 charge, using OSDC’s coding block and Revenue Source code 2971 – NSF Service Charge. (Use the following codes: Fund: 2105; Agency: 100; Unit: 5021; Appr Unit: 2105).
Close the separately tracked receivable in the agency’s internal receivable tracking system, which subsequently will be reflected in the agency’s summary FINET IET entry.
Agency
If the payment is received after the summary FINET IET entry and before the NSF check has been forwarded to OSDC, enter a CR document.
Line one of the CR: Enter the amount of the NSF check using a valid agency coding block and the agency’s same Accounts Receivable balance sheet account used when setting up the Receivable.
Line two of the CR: Enter the $35.00 charge, using OSDC’s coding block and balance sheet account 1198 – NSF Checks Accounts Receivable. (Use the following codes: Fund: 2105; Agency: 100.)
Agency
If the Receivable is still outstanding and there is no payment arrangement in place within thirty (30) calendar days, send the NSF check, with the agency’s fund and balance sheet Accounts Receivable account identified, and a copy of the NSF check notice (if mailed), any return mail postal markings, and any other relevant documentation to OSDC. Contact OSDC for further information or clarification on the necessary documentation.
If payment is received by the state agency after transferring collection efforts to OSDC, contact OSDC to determine proper treatment of the payment.
Agency After payment is received, close the separately tracked receivable in the agency’s internal receivable tracking system and reflect its closure in the agency’s summary FINET IET entry.
If subsequent collection efforts require a separately tracked NSF to be entered as a FINET Receivable (RE), the separately tracked receivable should be closed in the agency’s internal receivable tracking system
OSDC
Using the NSF check and related documentation forwarded from the agency, prepare and mail the NSF Check Notice (if needed) begin collection efforts.
Upon collection, credit the agency’s collected portion back to the agency.
If not collected within eighteen (18) months, the account should be evaluated for write-off. For write-off criteria, see policy FIACCT 06-02.04 — Receivables – Exempt Agencies – Write-Offs and Allowances.