Financial Management Service - A Bureau of the United States Department of the Treasury

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Presented by Rita Bratcher, US Treasury Department

Function

• Acting as the U.S. Government’s money manager, FMS provides centralized payment, collection, and reporting services for the Government.

Cash Management Objectives

• Collect funds owed to the Government as quickly as possible at the lowest cost to reduce the need to borrow funds.
• Time the payment of Government funds to allow for earning the most interest before funds are paid out.

The Role of the Federal Reserve Bank

• Collections
• Payments
• Investments
• Accounting

FMS’s Relationship with Federal Agencies

• Review all sources of collections
• Recommend the best way to collect funds
• Make payments for almost 90% of all Federal Agencies

Collections for year ended September 30, 2005

• Electronic: $2.1 trillion 79%
• Paper: $0.5 trillion 21%

Electronic Collection Mechanisms

• Electronic Federal Tax Payment System $1.8 trillion 67%
• Fedwire Deposit System $265.5 billion
• Lockbox ACH $34 billion
• Credit Card Collections $5.5 billion
• Internet Collections $2.3 billion

Paper Collection Mechanisms

• Lockbox (taxes) $300 billion
• TGA (taxes) $103 billion
• FTD $ 71 billion
• Lockbox (non-tax) $ 35 billion
• TGA (non-tax) $ 34 billion

Relationships with Financial Institutions

• Designate financial institutions for collection services and some payment services
• 8 Major Financial Institutions

Relationships with Financial Institutions

• Sign financial agency agreements with designated financial institutions
• Negotiate prices of services
• Pay through an appropriation of funds
• Agreements with Agencies

U.S. Government Payments

• Treasury issues almost 90% of all Federal payments on behalf of Federal Agencies.
• Other 10% are issued by the U.S. military.
• Treasury Payment Volume is 940 million.
• Treasury Payment Amount is $1.5 trillion.
• 75% are made by electronic funds transfer.
• 25% are made by check.

Federal Payment Types Percentage of Total Volume

• Salary -- 6%
• Benefits -- 79% Social Security benefit payments are 83% of total benefit payments; others are veterans, federal employee retirement
• Tax Refunds -- 12%
• Vendor -- 2%
• Miscellaneous -- 1%

U.S. Treasury Payments Objective: Increase Electronic Funds Transfer

• EFT is the preferred payment method.
• EFT benefits the payment recipient its safer, faster, more convenient.
• EFT benefits the U.S. Treasury it costs 63 cents more for check than EFT.

Methods For Increasing EFT Payments

• Educate payment recipients on the benefits of EFT through:
  • National and Local Media
  • Grassroots efforts (GO-DIRECT)
  • Check inserts
  • Call Center

Methods For Increasing EFT Payments: Electronic Transfer Account

• Approximately 4.5 million Federal benefit payment recipients do not have a bank account.
• The ETA is a low cost account that any Federal benefit recipient may open regardless of credit history.
• The ETA may be offered by any bank under conditions set for in an agreement between the bank and FMS.
• Approximately 80,000 ETA accounts are active.

Stored Value Cards

• Used to replace U.S. currency needs on U.S. military bases overseas.
• Reduces the costs and risks of shipping, storing, and handling cash.
• Reduces the amount of U.S. currency in circulation overseas.
• Provides convenience to soldiers, support agencies, and on-site merchants.

How Stored Value Cards Work

• Card is issued to an individual, value is loaded on the card.
• Individual visits participating merchants to make a transaction.
• Merchant runs transaction through Point-of-Sale terminals – transmits file at end of day to U.S.
• FRB processes transactions and sends payment by ACH.
• Merchants receive payments in their bank account the next business day.

Description of Stored Value Card Programs -- EagleCash

• Overseas application used by U.S. Army
• Used at 3 bases in Europe; 5 bases in Middle East; and 1 base in Central America
• 65,000 cards have been issued/ $180 million

Description of Stored Value Card Program -- EZPay

• Used by the U.S. Army, Air Force, and Marines to support basic training in U.S.
• Used at 6 Army bases; 1 Air Force base; and 2 Marine bases
• 1.3 million cards issued/$335 million

Description of Stored Value Card Programs -- Navy Cash

• Used by the U.S. Navy and Marines at sea and ashore
• Installed on 65 ships
• 165,000 cards issued/$580 million

Challenges

• Enterprise Architecture
• Increase Electronic Transactions
• Improve Remaining Paper Transaction Processing