Detailed Information on the
Financial Management Service Payments Assessment

FMS will continue working with Federal agencies to reduce the number of paper check payments and increase the number of more efficient and secure electronic payments. FMS will continue to promote its electronic payment mechanisms such as Stored Value Card (SVC), and the Internet Payment Platform (IPP). In FY 2008, after a successful pilot, FMS rolled out the Direct Express debit card to disburse benefit payments to federal benefit payment recipients who do not have bank accounts. FMS is working closely with the SSA to enroll new beneficiaries in direct deposit in anticipation of the baby boomers. FMS continues its Go Direct marketing program, and is close to reaching the 2,000,000 mark for conversion from check to direct deposit of federal benefit payments.

Implement Go Direct, a nationwide campaign to encourage current Federal check recipients to switch to direct deposit. Go Direct has converted one million check recipients to direct deposit since its inception.

Measure: Percent of Treasury payments and associated information made electronically

Explanation:Supports FMS Strategic Goal#1""Provide Federal payments timely and accurately, move toward an all-electronic Treasury for payments, and determine the optimal payment processing environment for the future."

Measure: Percentage of Treasury payments and associated information made electronically.

Explanation:Supports FMS Strategic Goal #1: "Provide Federal payments timely and accurately, move toward an all-electronic Treasury for payments, and determine the optimal payment processing environment for the future."

Measure: Unit Cost for Federal Government Payments

Explanation:Measuring the unit cost per Federal Government Payments, ensures that FMS is using the most efficient and effective method of payment disbursements.

Measure: Percentage of paper check and Electronic Funds Transfer (EFT) payments made accurately and on time.

Explanation:Supports FMS Strategic Goal #1: "Provide Federal payments timely and accurately, move toward an all-electronic Treasury for payments, and determine the optimal payment processing environment for the future."

Is the program purpose clear?

Explanation: The purpose of the payments program is to issue Federal payments on behalf of Executive Branch Federal Program Agencies (FPAs) timely, efficiently, and accurately. FPAs certify payment schedules to FMS, which initiates electronic payments and produces check payments as requested by the FPAs. This includes a variety of payment types such as lifeline payments (benefit payments like Social Security), vendor payments, and tax refunds. It also includes the processes that occur after payments have been issued, which are refered to as "aftermath" processing. Aftermath processing includes claims of non-receipt, forgeries, altered checks, and payments returned due to incorrect addresses, death of the recipient, or incorrect routing or account numbers on electronic payments.

Evidence: Exclusive payment responsibility within the Executive Branch was provided to Treasury by Executive Order 6166 (June 10, 1933) and by 31 U.S.C. 3321. Disbursement authority was delegated to the Commissioner of FMS in Treasury Directive 16-36.

Does the program address a specific and existing problem, interest, or need?

Explanation: The FMS payments program allows the Executive Branch of the U.S. Government to issue payments to satisfy its financial obligations. It provides critical services to millions of U.S. citizens, businesses, and Federal Agencies. The centralization of the payments program provides additional economies of scale and efficiencies in issuing payments and aids in determining U.S. Government cash balances. The aftermath process settles claims against the U.S. resulting from Government checks which have been forged, lost, stolen, or destroyed, and collects monies from those parties liable for fraudulent or improper negotiation of Government checks.

Evidence: The Government could not function without a payments program to satisfy its financial obligations. In general, Federal Agencies do not have the authority to issue payment instruments to satisfy their debts/obligations on their own. The payments process is centralized at the Department of the Treasury's Financial Management Service (FMS). In 2004, FMS issued over 940 million non-Defense payments (705 million electronic payments and 235 million checks), valued at $1.5 trillion.

Is the program designed so that it is not redundant or duplicative of any other Federal, state, local or private effort?

Explanation: FMS issues 85 percent of all Federal payments. No other level of government, state or local, is authorized or has the capacity of executing its functions for the U.S. Treasury and Federal agencies. Agencies that issue their own payments do so either under statutory authority (two examples are the Department of Defense and U.S. Marshals Service) or "delegated disbursing authority" from Treasury, and issue payments as Non-Treasury Disbursing Offices (NTDOs). Delegated disbursing authority is granted only in limited cases - - when an agency requires a level of service that FMS cannot provide and it is deemed more efficient, effective, and economical for both the Government and the public. The centralization of the payments process keeps costs down due to economies of scale (over 940 million payments in 2004).

Evidence: Agencies with delegated disbursing authority are reviewed on a periodic basis to ensure the need to disburse outside of FMS is still necessary. Every two years, delegated disbursing agencies must self-certify that they are in compliance with the same general accounting and internal control rules to which FMS adheres. If it is deemed that a delegated disbursing agency is not in compliance or the payments are at risk, the Treasury Chief Disbursing Officer can revoke the delegation. For example the Department of State has been given delegated disbursement authority for its foreign disbursement operations. Delegated authority is warranted, due mostly to the geographical dispersion of those needing payment services, especially in areas where electronic payment processing is not common. The Chief Disbursing Officer has given Department of State authority to make these specific disbursements but requires every two years they submit a package to FMS to revalidate their case and assure FMS that they are adhering to the required accounting and internal controls.

Is the program design free of major flaws that would limit the program's effectiveness or efficiency?

Explanation: To accomplish the program objective of providing Federal payments timely and accurately FMS stays informed of changing technologies that could increase timeliness, accuracy, or efficiency to the payments program. Ongoing technology initiatives to upgrade the payment tools used in payment production, such as the Secure Payment System (a payment certification system) ensure that payment production efficiency and effectiveness achieve a service level that increases or stays constant but does not decline.

Evidence: In 2004, FMS issued over 940 million non-Defense payments, valued at $1.5 trillion. The program acheived a 99.99 percent efficiency rate for payments made accurately and on time. Incident reports when errors do occur are analyzed for improvements in control processes. In addition, audits by third parties and internal management control organizations show no significant flaws. Edit checks are built into the program software to identify errors before a payment is produced, prompting a return to the Federal agency for correction and re-certification for payment. Recent reviews of the Regional Financial Centers as part of the Financial Statement audits have revealed no material weaknesses. Any problems that are identified are quickly corrected - - for 2004, FMS adjudicated 99 percent of all check claims within 14 days.

Is the program design effectively targeted so that resources will address the program's purpose directly and will reach intended beneficiaries?

Explanation: Beneficiaries/recipients are identified by the Federal Program Agencies for payments FMS is making on their behalf. For payments that are returned due to incorrect addresses (check payments) or bank routing or account numbers (electronic payments) rules and regulations have been developed to identify how payments should be returned to the requesting FPA and re-issued, if appropriate, to the correct recipient. These processes are highly automated and return funds quickly back to the FPAs.

Evidence: Payments that are returned are received and accurately processed in accordance with industry standards established in 31 CFR Part 210, the National Automated Clearing House Association (NACHA), Green Book (Electronic Fund Transfer - EFT - returns), and the Field Operations Manual (FOM) for Returned Payments (check returns). The number of returned payments compared to the number of payments issued is very small. For combined check and EFT payments, significantly less than 1 percent of all payments result returned payments. 80 percent of all electronic lifeline benefit payments (Social Security payments) where the recipient claims a payment was not received, are resolved within 5 days. All instances of purported forgery of Treasury checks are investigated and adjudicated. In FY 2004, 99 percent of forgery and non-receipt claims were processed within 14 days or less.

Does the program have a limited number of specific long-term performance measures that focus on outcomes and meaningfully reflect the purpose of the program?

Explanation: The strategic goal of the program is to provide Federal payments timely and accurately, move towards an all-electronic Treasury for payments, and determine the optimal payment processing environment for the future. In support of this, FMS has developed a long-term performance measure to evaluate this goal of issuing 90 percent of all payments electronically by the end of 2010.

Evidence: Appendix A of the FMS Strategic Plan (FY 2003 - FY 2008). The Programs' long-term strategic goal is to "provide Federal payments timely and accurately, move toward an all-electronic Treasury for payments, and determine the optimal payment processing environment for the future." This goal is supported by underlying objectives, strategies, and action plans that are intended to move the program forward. Further, FMS uses activity based costing to track costs and to assess actuals for the current and preceding years. This data and other information is used as part of the budget deliberation process to project future strategic goals, performance measures and targets, two years out.

Does the program have ambitious targets and timeframes for its long-term measures?

Explanation: The FMS long-term performance measure is sufficiently ambitious. Significant effort will be required to move the remaining check payments to electronic funds transfer (EFT) by 2010.

Evidence: For 2002, 73 percent of all Treasury-disbursed payments were made electronically. For 2003 and 2004, the percentages increased to 74 percent and 75 percent respectively. Social Security "lifeline" benefit payments, the largest category of Treasury-disbursed payments, were at 81 percent for 2004. Overall, the direct deposit growth rate for Federal benefit payments has leveled off to a growth rate of less than 0.7 percent a year, a decrease of almost two-thirds since the late 1990's. With the forthcoming increase in Social Security benefit recipients, significant effort on the part of FMS, the Social Security Administration, and the Federal Reserve is required to continue working on research, marketing, and education campaigns in order to convert check recipients to electronic payments. This research provides data about the reasons people choose to receive checks and what would encourage them to move to EFT payments. The target of 90 percent electronic payments by the end of 2010, a 15 percent increase over the next six years, is ambitious given that in the five year period from 2000 through 2004, the percentage increase in electronic payments was only 7 percent. To be successful, FMS will have to double the number of people converted to EFT in the 2005 to 2010 time frame as compared to the growth experienced between 2000 and 2004.

Does the program have a limited number of specific annual performance measures that can demonstrate progress toward achieving the program's long-term goals?

Explanation: FMS has concrete, quantifiable, and measurable annual goals to help manage the program's progress toward the conversion of paper check payments to electronic payments. FMS also has operational performance measures in place to measure the timeliness and accuracy of paper check and electronic payments as well as a Federal Program Agency customer satisfaction measure regarding the payment services provided by FMS.

Evidence: Performance measures are: 1) Percentage of paper check and Electronic Funds Transfer (EFT) payments made accurately; 2) Percentage of paper check and EFT payments made on time; 3) Percentage of Treasury payments and associated information made electronically; and 4) Unit cost for Federal Government Payments. FMS tracks payment statistics for each category of Treasury-disbursed payments on a monthly basis. FMS, through activity based costing, tracks the full cost of electronic payments vs. check payments. FMS also tracks the success of marketing campaigns by measuring the number of checks converted to EFT. FMS's Congressional Budget Justification has included the annual performance measure on the percentage of payments and associated information made electronically for many years. In 2004, the Regional Operation's Annual Customer Satisfaction Survey indicated an overall satisfaction rate of 98 percent from customers. Survey results are used to determine if payment tools are efficient, effective, and relevant technologically in the business setting. Follow up by Washington Office staff on all customer ratings that are less than satisfactory is accomplished to ensure issues are addressed and problems resolved.

Does the program have baselines and ambitious targets for its annual measures?

Explanation: FMS measures the percentage of electronic payments vs. check payments overall and for each category of Treasury-disbursed payments (Social Security, Veterans benefits, tax refunds, vendor and miscellaneous, etc.). Each year FMS baselines its performance against the annual targets and sets new ambitious target amounts for the upcoming fiscal year. For 2006, the FMS target is that 78 percent of the payments will be made electronically. Historically, over 240,000,000 check payments are issued a year and for each check converted to direct deposit, the government saves approximately $0.75.

Evidence: For 2002, 73 percent of all Treasury-disbursed payments were made electronically. For 2003 and 2004, the percentages increased to 74 percent and 75 percent respectively. For 2005, the goal is 76 percent. Given that new SSA beneficiaries are signing up for EFT payments at a lower rate, these are realistic, yet ambitious measures. Also, during 2004, FMS adjudicated 99 percent of all check claims within 14 days. FMS also has a 2005 internal management target to adjudicate 94 percent of all claims within 12 days.

Do all partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) commit to and work toward the annual and/or long-term goals of the program?

Explanation: The Federal Program Agencies (FPA) and Federal Reserve Banks (FRB) work with FMS to achieve its performance goals. FMS meets regularly with FPAs, the FRB, financial institutions, and financial trade organizations to discuss issues and improve processes related to performance goals. FMS also tracks check usage and works directly with FPAs to find solutions that enable them to move from check to EFT payments.

Evidence: FMS is continuing to concentrate efforts on converting remaining check payments to EFT. FMS is working with the Federal Reserve and the Social Security Administration on initiatives involving EFT research, marketing, and education campaigns. In 2005, FMS will conclude a pilot of an EFT marketing campaign, called GoDirect, focused on areas of the U.S. with high concentrations of check payments (parts of Tennessee, Texas, and Illinois). The GoDirect campaign results will be evaluated to determine whether, and if so, how to expand GoDirect on a more national level. FMS is also working to increase the number of vendor and miscellaneous payments made electronically. FMS is developing a new web-based payment application that involves a data warehouse containing detailed information associated with the payment. Lack of payment data has often been cited as a barrier to the conversion of vendor and miscellaneous payments to EFT. FMS also continues to work with the IRS to increase the number of tax refunds made by EFT. In 2004, 49 percent of IRS tax refunds were made by EFT vs. 45 percent in 2003. For 2005, FMS has so far experienced an increase of 3.5 percent.

Are independent evaluations of sufficient scope and quality conducted on a regular basis or as needed to support program improvements and evaluate effectiveness and relevance to the problem, interest, or need?

Explanation: Numerous independent evaluations are conducted each year. The Treasury Inspector General (IG) and Government Accountability Offie (GAO) conduct audits annually of major aspects of the payments program. In addition, the Annual Audit of Financial Statements includes the "Cash Audit" which incorporates the government-wide payments program. FMS also has an integrated evaluation, planning, and budgeting process to ensure ongoing feedback and improvement. FMS' Management Controls Branch conducts internal reviews of the payments program as required by the Federal Manager's Financial Integrity Act (FMFIA) and FMS' five-year Management Control Plan. Also, inherent reconciliation activities between FMS systems ensure the accuracy of the payments program.

Evidence: FMS is continually subject to IG and GAO audits, as well as annual financial statement audits conducted by an independent public accounting firm. These audits provide a regular and independent stream of information on the payments program. No external audits or internal reviews uncovered material weaknesses or instances of waste, fraud, or mismanagement. In 2003, FMS conducted various "as needed" evaluations, including one by the Mitre Corporation and McKinsey & Co. of the payments program system architecture. The results of this evaluation were implemented and resulted in the complete redirection of the approach to the redesign of the payments program system architecture. In addition, a monthly reconciliation is performed between the Check Payments and Reconciliation System (CP&R), the FMS system of record for check payments, and the Payments, Claims, and Enhanced Reconciliation (PACER) database which is used for claims, inquiries, and accounting processing. The reconciliation assures that there are no differences between the check payment information in the two systems. On the rare occasion that differences do occur, immediate action is taken to correct the situation.

Are Budget requests explicitly tied to accomplishment of the annual and long-term performance goals, and are the resource needs presented in a complete and transparent manner in the program's budget?

Explanation: FMS's budget is fully aligned with its program activities, including the Payments Program, and is directly tied to the purposes and strategic goals of the program. The budget request includes amounts associated with the direct Federal FTE that support the program.

Evidence: FMS's annual budget requests clearly indicate the full cost of achieving all performance goals. (See FMS's FY 2005 Congressional Budget Justification.) This data and other information are used as part of the budget deliberation process to project future strategic goals, performance measures, and targets. FMS can assess the year-over-year marginal costs of its major performance indicators - the percentage of payment dollars and payment transactions processed electronically - through agency-wide activity based cost allocations for electronic and non-electronic payment activities.

Has the program taken meaningful steps to correct its strategic planning deficiencies?

Explanation: FMS has an integrated evaluation, strategic planning, and budgeting process to ensure ongoing feedback and improvement.

Evidence: FMS senior management meet routinely and review the strategic plan to ensure improvements are being made and make modifications when needed to ensure emphasis is on appropriate parts of its business.

Does the agency regularly collect timely and credible performance information, including information from key program partners, and use it to manage the program and improve performance?

Explanation: Performance information is tracked daily, monthly, quarterly, and annually using consistent methodology and is used to track performance measures and set future metrics. An annual Customer Survey is provided to all Federal Program agencies to evaluate FMS' program performance and identifiy opportunities to enhance service. Information from the Survey identifies how well FMS is meeting its payments process objectives and gives insight into new technologies that may further assist FPAs in meeting or exceeding the fiscal satisfaction of their program goals. The Regional Financial Centers also hold regularly scheduled Customer Advisory Board (CAB) meetings to encourage discussion with key program partners about FMS's payments program. Suggestions for improved service are looked at seriously and effect change.

Evidence: The volume of payments is tracked through FMS' Production Reporting System (PRS) regularly. On-time figures are collected daily and track to the performance measure of 100 percent of all payments are made accurately and timely (the actual percentage in 2004 was 99.99 percent). In 2004, the Customer Satisfaction Survey indicated an overall satisfaction rate of 98 percent from customer FPAs. The results of the survey are used to determine if payment tools are efficient, effective, and relevant technologically in the business setting. Follow up by Washington Office staff on all customer ratings that are less than satisfactory is accomplished to ensure issues are addressed and problems resolved. The Assistant Commissioner for Regional Operations meets quarterly with her counterpart at the Social Security Administration ensuring key issues for both agencies are discussed and solution arrived at which are beneficial to both parties. Each Fall, FMS meets with IRS to plan for projected workload for the coming tax season. Resources are adjusted based on these meetings and discussions to ensure FMS is prepared to handle the large influx of work produced by tax refunds in the first six months of the calendar year.

Are Federal managers and program partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) held accountable for cost, schedule and performance results?

Explanation: At the end of each fiscal year, actual costs for issuing payments are accumulated and calculated for both checks and EFT. This information is calculated in conjunction with and verified by the program office, and is reviewed by senior level executives. Additional accounting controls provide verification that the number of payments is accurately tracked and reported. Managers validate payment controls and are directly held accountable for payment performance. Each Regional Financial Center Director and the Assistant Commissioner for Regional Operations (those responsible for the execution of the payments process) have in their performance standard an element requiring that 98 percent of all payments are made timely and accurately.

Evidence: Regional Directors and the Assistant Commissioner's performance plans require 98 percent of all payments are made timely and accurately. In 2004, 99.99 percent of all payments met this goal and it was accomplished within budget. For those agencies with delegated disbursing authority, their needs and authority are reviewed on a periodic basis to ensure the need to disburse outside of FMS is still necessary. Every two years, delegated disbursing agencies must self-certify that they are in compliance with the same general accounting and internal control rules to which FMS adheres. If it is deemed that a delegated disbursing agency is not in compliance or the payments are at risk, the Treasury Chief Disbursing Officer can revoke the delegation. FMS holds the Federal Program Agencies responsible for the validity and accuracy of their certified payment files. There have been instances where FPAs have asked FMS to process files with known errors to be corrected after payments were issued. FMS has refused to do so, returning the file for correction to the FPA and requiring new certification of files from the FPA's certifying officer.

Are funds (Federal and partners') obligated in a timely manner and spent for the intended purpose?

Explanation: The majority of funds utilized by FMS in the accomplishment of the payments process are salary and personnel costs along with costs associated with building and machinery used in the payments process and postage. The rest of the appropriated funds associated with the payments process are committed to machinery upgrade/improvement and new technology development that streamlines or increases the security, safety, efficiency and effectiveness of the overall payments process come from within FMS's budget. Annual salaries and expense accounts funds the staffing cost for the program and follows a predictable pattern driven by payroll costs and are obligated annually. The other funding utilized in the payments process is permanent indefinite funding to pay the fiscal agent, the Federal Reserve Bank (FRB), for work it performs in the payments process. FMS is reimbursed by the Social Security Administration and the Railroad Retirement Board for payment services (both check and EFT). IRS, VA, and OPM, reimburse FMS for postage costs. Other agencies reimburse FMS for special handling of payment activities.

Evidence: In 2004, FMS' Payment's Program obligated 97 percent of its annual appropriation. Funds are obligated in a timely mannor with no history of Anti-deficiency Act violations. Use of the permanent and indefinite appropriation is restricted to paying fiscal agents for payments related work such as processing negotiated checks and are paid as work is performed (12 USC §§ 391a and 5018 Note, P.L. 108-199, Div. F, Title II, § 218). Salary, postage, administrative, and initiatives funding allocated within FMS are used for intended purposes - salaries paid, checks mailed, machinery maintained/updated, and new initiatives developed. The FMS Budget Division reviews commitments and obligations to ensure they are accomplished timely and within the appropriate project code.

Does the program have procedures (e.g. competitive sourcing/cost comparisons, IT improvements, appropriate incentives) to measure and achieve efficiencies and cost effectiveness in program execution?

Explanation: FMS's Strategic Goal #1, "Provide Federal payments timely and accurately, move towards an all-electronic Treasury for payments, and determine the optimal payment processing environment for the future," establishes the requirement to have procedures in place to measure efficiencies and cost effectiveness. The Payments Program uses a variety of procedures to promote efficiency and effectiveness, including competitive selection of contractors. FMS has unit cost, timeliness, and accuracy measures in its internal and external performance reporting which are used to manage for improved efficiency. In addition, the Payments Program is subject to a new IT architecture to regulate investment and program decisions. New payment program components go through a rigorous review by an FMS investment review board to ensure a sound business case is made before proceeding with any information technology investments.

Evidence: FMS is making steady progress towards its goal of moving towards an all-electronic Treasury for payments. FMS's investment review board has a procedure in place to ensure a strict and consistent review of new IT systems including applications within the payments process and follows System Development Life Cycle methodology to ensure projects stay on track. A Business Case synopsis is developed for each new application looking at alternatives, cost comparations, business risk, cost savings, and acquisition strategies. Only applications that make good business cases are approved for development. To ensure cost effectiveness in the existing payments process, FMS annually tracks the cost of payments (both issuing payments and the aftermath processes) - - 0.355 per payment in 2005. The Executive management team at FMS accomplishes a mid-year review of the strategic plan to ensure that FMS is on course for the year. If anything unexpected is identified it is reviewed, discussed, and solutions found before critical paths are passed.

Does the program collaborate and coordinate effectively with related programs?

Explanation: The payments process interfaces, collaborates, and/or coordinates effectively with a number of Federal Government programs. This includes: 1) The Federal Reserve Banks - - for payments made through Electronic Funds Transfer; 2) all Executive Branch Federal agencies - - for the transmission and receipt of certified payment requests; and 3) The Treasury Offset Program (TOP) - - for the offset of payments made to payment beneficiaries owing a debt to the Federal Government.

Evidence: A collaborative interface between the payments process and the TOP is evidenced by the $2.8 billion collected through TOP in 2004. Quarterly meetings have been initiated between FMS and the Social Security Administration (FMS' largest customer). Ongoing discussions cover better ways to make Social Security payments to beneficiaries quickly and accurately. The Assistant Commissioner for Regional Operations meets quarterly with her counterpart at the Social Security Administration ensuring key issues for both agencies are discussed and solution arrived at which are beneficial to both parties. The emergency payments made for the Federal Emergency Management Agency on weekends and after normal duty hours to ensure these payments are made as quickly as possible to beneficiaries in great need of these payments following natural disasters shows collaboration and coordination by both agencies. FMS also works with IRS to plan for projected workload for the upcoming tax season - - resources are adjusted based on these meetings and discussions to ensure FMS is prepared to handle the large influx of work produced by tax refunds in the first six months of the calendar year. The Regional Financial Centers also hold regularly scheduled Customer Advisory Board (CAB) meetings to encourage discussion with key program partners. Suggestions for improved service are looked at seriously and effect change.

Does the program use strong financial management practices?

Explanation: FMS has no material weaknesses or reportable conditions from audits of the Payments process. All systems that are part of the payments process and that have an impact on the financial management position meet statutory requirements and provide financial information timely and accurately. Accounting is done in a timely mannor, mostly through automated procedures. Accounting and reconciliation for payments issued is done daily. FMS's Program Integrity Division conducts internal reviews of the Payments Program as required by FMFIA and FMS's Five Year Management Control Program. FMS also uses an activity-based-costing method to track costs.

Evidence: GAO, IG, third party auditors, Regional Operations, and FMS's Program Integrity Division conduct audits including the payments process and its components. There have been no material findings. Corrective actions to improve processes are taken seriously and frequently are completed before the audit report is finalized. FMS received a clean audit opinion on the Government-wide Cash Audit in 2004, a large part of this activity is related to the payment precess.

Has the program taken meaningful steps to address its management deficiencies?

Explanation: FMS aggressively identifies and corrects deficiencies in the Payments program through regular internal management reviews and reviews conducted by numerous independent parties.

Evidence: FMS has not identified any management deficiencies in the payments program. FMS continuously reviews the payments program and its components. A review by Regional Operations in 2004 identified a need for a redistribution of workload between the Regioanl Finance Center's (RFC) to ensure no RFC had so much payment production work that it couldn't be backed up by another RFC in the event of an emergency or if one RFC became unavailable. This review resulted in a new Business Continuity Plan (BCP) and on-going testing of components, fail over processes, and back-ups are in place. The re-write of the Field Operations Manual (FOM), the document that gives direction to the RFCs, was another initiative that began in 2004. During an internal management review, management recognized that the FOM had become out-of-sync with actual processing due to changes in technology. An effort began to review and re-write the several thousand page manual. Once rewritten, the document will be available on-line.

Has the program demonstrated adequate progress in achieving its long-term performance goals?

Explanation: The payments program has demonstrated consistent progress towards its long-term performance goals on electronic payments as outlined in the FMS Strategic Plan. In addition, FMS has taken concrete steps to upgrade its systems, its program governance, and its regulatory regime to foster further progress towards the goals. FMS is continually working with its partners (Federal Reserve Banks and customer Federal agencies) to eliminate paper-based payments, while respecting the rights of citizens and businesses to receive payments from the government in a variety of ways.

Evidence: FMS has seen a steady (1 percent) annual increase in electronic payments in the past 5 years. In 2005, more than 700 million payments will be made electronically (76 percent of all payments); however, the overall direct deposit growth rate for Federal benefit payments has leveled off to a growth rate of less than 0.7 percent a year, a decrease of almost two-thirds since the late 1990's. Challenges include special one-time payment programs, such as the Tax Relief Program, which may result in increased claims and reconciliation volumes, resulting in increased costs associated with check claims on these special payments. There has also been a steady increase in the overall number of payments issued. There was an increase of about 11,000,000 payments from 2002 and roughly the same increase from 2003 and 2004. In 2005, FMS will conclude a pilot of an EFT marketing campaign, called GoDirect, focused on areas of the U.S. with high concentrations of check payments. The results of the pilot campaign will be evaluated to determine whether, and if so, how to support GoDirect on a nation-wide level. FMS is also working to increase the number of vendor and miscellaneous payments made electronically. FMS is developing a new web-based payment application that involves a data warehouse which contains detailed information associated with the payment. FMS also continues to work with the IRS to increase the number of tax refunds made by EFT.

Does the program (including program partners) achieve its annual performance goals?

Explanation: FMS acheived all but one of its 2005 annual performance goals - - the unit cost of Federal payments. The 2005 target for this measure was 0.35 cents per payment. The actual cost per payment was 0.355 cents. The Federal Program Agencies (FPA) and Federal Reserve Banks (FRB) continue to work towards FMS achieving its annual performance goals. FMS meets regularly with FPAs, the FRB, financial institutions, and financial trade organizations to discuss issues and improve processes related to annual performance goals. FMS also tracks timeliness and accuracy of payments and tracks check usage and works directly with FPAs to find solutions that enable them to move from check to EFT payments.

Evidence: Since 2000, FMS had met or exceeded its annual targets related to the percentage of payments made electronically. This means that in 2004, 75 percent of a total disbursement cash flow of $1.5 trillion was made electronically. FMS has also experienced a steady increase in the overall number of payments issued. There was an 11,000,000 increase in payment volume from 2002 and roughly the same increase from 2003 and 2004. Continued efforts to work with agencies to convert check payments to EFT will assist FMS in achieving the long-term goal of 90 percent EFT payments by 2010. These efforts will include increased marketing activity and the development of new payment applications. FMS consistently maintains a timeliness and accuracy release rate of 99.99 percent for check and EFT payments. During 2004, FMS adjudicated 99 percent of all check claims within 14 days. FMS also has an internal target for 2005 to adjudicate 94 percent of all claims within 12 days.

Does the program demonstrate improved efficiencies or cost effectiveness in achieving program goals each year?

Explanation: FMS acheived all but one of its 2005 annual performance goals - - the unit cost of Federal payments. The 2005 target for this efficiency measure was 0.35 cents per payment. The actual cost per payment was 0.355 cents. As FMS works toward an "all-electronic Treasury,"??it continues to expand the use of electronic media to deliver Federal payments, improve service to payment recipients, and reduce Government program costs. These efforts help decrease the number of paper checks issued and minimize costs associated with postage, the re-issuance of lost, stolen, and misplaced checks, and inefficiencies associated with the non-electronic delivery of benefits. FMS has increased the number of electronic payments issued per year by 1 percent. This resulted in a Government-wide cost savings of over $1.4 million for 2004.

Evidence: Other than missing its efficiency target, FMS has undertaken significant efforts to modernize its payment systems by incorporating new technologies and making full use of the Internet. The Secure Payment System (SPS) replaced the Electronic Certification System, which has reached technological obsolescence. SPS provides significant technological upgrades for agencies to certify the accuracy, validity, and legality of their payments. SPS is a web-accessible, efficient, and user-friendly system that will provide greater integrity and security to the payments process. Also, FMS's Treasury Check Information System (TCIS) will replace the outdated Check Payment and Reconciliation System (CP&R). TCIS will be a web-based application that uses commercial off-the-shelf software for process flow, accounting, reconciliation, and reporting functions for all Treasury checks. The Automated Clearing House (ACH) payments database will be moved under TCIS and a single interface will provide access for ACH and check payment inquiries. In addition, in 2006, FMS will purchase mail presort equipment that is expected to generate postage cost savings of over $1.5 million per year Government-wide after full implementation. The continued move to electronic processing is expected to save the Government money - - current estimates put those savings at $0.75 for each payment made electronically versus by paper check.

Does the performance of this program compare favorably to other programs, including government, private, etc., with similar purpose and goals?

Explanation: Electronic Fund Transfer (EFT) percentages for Federal government payment categories far exceed those for the private sector. For overall payment processing, the closest programs with similar purposes and goals are the payment activities of non-Treasury disbursed Federal agencies or the payment activities of large state governments. However, meaningful head-to-head performance comparisons are difficult due to unique Federal laws, the unique missions of the non-Treasury disbursed Federal agencies, and the unequaled scale and scope of the FMS payments program which disburses over $1.5 trillion dollars each year to over 100 million individuals and businesses.

Evidence: FMS is recognized as a leader in the electronic payments industry in both the promotion of EFT payments and the development of new payment applications. FMS was instrumental in promoting EFT payments as early as 1976 with efforts to convert Social Security, Federal salary payments, and other Federal payments to EFT. As a result, over 75 percent of all Treasury-disbursed payments are made by EFT while 81 percent of Social Security recipients and 98 percent of Federal employees receive salary payments by EFT. The National Automated Clearing House Association (NACHA) reports that only 65 percent of private sector employees use EFT for their pay. The Association of Financial Professionals (AFP), a trade group for treasury management professionals, reports that only 25 percent of business-to-business (non-government) payments are made by EFT. For 2004, nearly 57 percent of Treasury disbursed vendor payments (government-to-business) were made by EFT.

Do independent evaluations of sufficient scope and quality indicate that the program is effective and achieving results?

Explanation: Program components have had numerous GAO, OIG, and independent third party reviews. FMS' Management Controls Branch conducts internal reviews of the payments program as required by the FMFIA and FMS' five-year Management Control Plan.

Evidence: All reviews validate the effectiveness of the program in timely and accurately processing over $1.5 trillion annually to over 100 million individuals and businesses. The payments program is considered part of the Federal government's critical infrastructure, and the program's proven day-to-day performance is essential to hundreds of other Federal programs, including the issuance of "lifeline" benefit payments, and the operation of the Federal government as a whole. FMS maintained a 99.99 percent timely release rate for its checks and electronic payments during 2004. External audits (GAO, OIG) uncovered no material weaknesses or instances of waste, fraud, or mismanagement. Internal FMS audits produced the same results. Last year's Government Cash audit was also clean.