Imprest Funds

Alternatives to Imprest Funds

1. The Automated Clearinghouse System
2. GSA SmartPay Card Program
3. US Debit Card
4. Third Party Drafts
5. Convenience Checks

1. The Automated Clearinghouse (ACH) System

ACH is a low-cost, safe EFT alternative to cash. As such, it provides the federal government with a timely and efficient means for the payment and collection of funds. ACH is suitable for any type of recurring payment regardless of the dollar amount or the volume of items. ACH may also be suitable for nonrecurring payments depending on the cash flow.

There are two types of entries, debit and credit, that pass through the ACH system. While all transactions flow from the Originator to the Receiver, the funds flow in either direction, depending on the type of transaction. A debit transaction removes value (or debits) from the Receiver's account and credits the Originator's account. A credit transaction takes value from the Originator's account and credits the Receiver's account.

The Originator is the entity that initiates financial transactions by creating a batch of electronic messages to be passed through the ACH network. The Receiver is a natural person or an organization that has authorized an Originator to initiate an ACH entry to the Receiver's account.

Benefits of the ACH:

• Eliminates cash handling.
• Improves funds availability.
• Provides a better audit trail.
• Allows for the tracing of payments.

2. General Services Administration (GSA) SmartPay Card Program

The GSA SmartPay program provides federal agencies with commercially accepted credit cards (Visa or MasterCard) to pay for travel, fleet, and purchase-related items and services. In choosing a financial institution to provide travel, fleet, and purchase credit card services, federal agencies are required to select one of the financial institutions participating in the GSA SmartPay master contract. The GSA SmartPay contract was negotiated between GSA and the following five financial institutions:

1. Citibank
2. Bank One
3. Mellon Bank
4. Bank of America
5. U.S. Bank

Agencies may select a card program from these providers for each business line (fleet, travel and purchase) or agencies may select one service provider to supply a card program for all three business lines.

Benefits of the GSA SmartPay Card:

• Eliminates the issuance of purchase orders and receipt of multiple invoices.
• Reduces administrative costs and improves cash management by reducing the need for imprest funds and third party drafts.
• Appeals to most vendors, businesses, retail stores, and other agencies, which readily accept it.
• Complies with the Treasury Electronic Funds Transfer rule, 31 CFR Part 208.

3. US Debit Card

The US Debit Card is a magnetic-striped bank card used by federal agencies to issue payments to individuals. Federal agencies can load any amount of value on the card and then issue the card to a federal payee. Agencies can track and account for cards using a host system with a data base of the card serial numbers and associated card balances. Once issued to the payee, the cards may be used at ATMs to make cash withdrawals, or at point-of-sale (POS) terminals to make retail purchases. No fee is charged to the user.

The debit cards may be either disposable, meaning once the fixed amount of value loaded on the card is spent, the card is discarded; or reloadable, meaning that the federal agency can make multiple payments to the payee on the same card. All value loaded on the card is protected with a PIN and backed by a commercial bank.

Benefits of US Debit Card:

• Facilitates the elimination of imprest funds.
• Provides timely availability of funds.
• Maintains funds in the Treasury's account until withdrawn.

4. Third Party Drafts

Third party drafts are check-like instruments drawn on and paid by an outside contractor (draft company) or financial institution (FI). The FI or draft company supplies the federal agency with drafts to be issued against an agency’s account maintained by the FI.

Third party drafts are acceptable alternative payment mechanisms for imprest fund transactions.

The Third Party Draft Process:

• The designated person or a cashier completes the draft by filling in the necessary information, such as payee name, amount, and invoice number.
• The draft is then given to the payee, who takes it to his or her FI.
• Once the payee’s bank accepts the draft, it flows through the Federal Reserve System and is presented at the issuing bank.
• The issuer validates the information and forwards to the agency a listing of the items requesting payment.
• The agency verifies the listing and subsequently reimburses the issuer.

Third Party Drafts:

• Reduces the need for cash.
• Provides additional audit trails and internal controls.
• Provides timely payments.
• Provides ability to meet emergency demands.

For more information on third party drafts, see Treasury Financial Manual Chapter, Third-Party Draft Procedures for Imprest Fund Disbursing Activities

5. Convenience Checks

Convenience checks are drawn on a financial institution and may be written on an approved cardholder purchase account within established dollar limits. The check will include, but is not limited to, the agency’s name, cardholder’s name, office address, and "not to exceed" amount.

Some vendors do not accept charge cards; however, most of those vendors accept checks. Convenience checks make it much easier and more convenient for the agency to acquire goods and services.

Benefits of Convenience Checks:

• Broadens agency's purchase base by including vendors not equipped to handle credit cards.
• Permits vendors to receive immediate payment for goods and services.
• Reduces the need for cash.
• Provides additional audit trails and internal controls.

Convenience checks may be available through your GSA SmartPay contract, depending on your agency's contract.