Over the past ten years the federal government, specifically the Department of the Treasury,
has placed increasing responsibility on federal program agencies (FPA) to improve their cash
management practices and improve the efficiency of their financial systems. The Automated
Clearing House (ACH), an electronic processing and delivery facility, for the distribution and
settlement of financial transactions is recognized as the most effective method to accomplish
these objectives, and therefore is the Financial Management Service's (FMS) preferred
transaction method. The Preauthorized Debit (PAD) service adds another option to the collection
platform presently offered by FMS.
A PAD is an electronic transfer of funds, authorized in advance by the remitter completing an
SF5510 (Authorization Agreement for Preauthorized Payments) enrollment form. Once completed and
signed, the authorization is returned by the remitter to the agency where the information is
incorporated into a PAD master file. Generally, PADs are used for recurring collections of
fixed amounts such as mortgages, loan payments, and installments for out of service debts.
PAD Process
The PAD process begins one day prior to the settlement date, with the agency transmitting a file
of PAD collection entries to the Kansas City Regional Financial Center (KCRFC). The PAD
collection file can be transmitted to the KCRFC using a personal computer or mainframe application.
The PC PAD application uses an off-the-shelf software package to store the remitter's payment
data and transmit the collection files via modem to the KCRFC. Once received, the file is edited
and reformatted into the National Automated Clearing House Association (NACHA) format and
transmitted to the Federal Reserve Bank (FRB) for processing. The FRB distributes the
collection entries through the ACH system to the remitter's Financial Institution. On settlement
date, the FRB simultaneously debits the financial institution's reserve account and credits the
agency through Treasury's account for the amount of the ACH entries. The financial institution
posts the debit to the remitter's account. FMS supplies the agency, at no cost, with the PAD
software used to maintain the PAD database.
The unique feature of the mainframe application is found in the method of delivery to the KCRFC.
Rather than using the PAD software to transmit the collection files, the information is
delivered via a magnetic tape or data transmission. The agency submits a "Schedule of
Collections (KFC6611)" document on or before the specified collection date. Once authorization
has taken place, the KCRFC transmits the PAD data to the FRB. For both the mainframe and PC
application, accounting totals are reported to the agency through the CA$H-LINK reporting
system each day.
Service Levels
Depending upon the agency's needs, KFC provides the following service levels:
Mainframe: Agency transmits PAD collection file in a specific format.
Personal Computer: KFC provides software and training.
KFC Maintains Database: KFC maintains the PAD database, provides detail reports, as well as
technical and customer support services.
Customized Package: KFC will develop a PAD application to meet the agency's needs
Benefits
Individuals
Companies
Federal Program Agencies
Provides a safe and effective way to remit payments.
Eliminates lost and late payments.
Eliminates checks and postage fees.
Eliminates late fees and interest penalties.
Solidifies the strategic partnership between the remitter and the federal agency.
Establishes on time-every time payment history.
Provides a reliable payment system.
Establishes excellent payment record.
Retains control through written authorization.
Eliminates lost and stolen checks.
Eliminates interest penalties.
Eliminates paper check handling.
Reduces operating costs.
Improves funds availability.
Reduces labor-intensive field office operations.
Supports excellent cash flow forecasting.
Provides better audit trail.
Statistics
In fiscal 2007, KFC processed over 10 million PAD items, collecting more than $3.5 billion.
Agency Customers
Birmingham Financial Center/Debt Management Service
Bureau of Public Debt
Bureau of Reclamations
Department of Education
Department of Energy - Bonneville Power Administration
Department of Energy - Western Area Power Administration
Department of Justice
Environmental Protection Agency - Las Vegas, NV
General Services Administration - Ft. Worth, TX
General Services Administration - Kansas City, MO
Office of the Comptroller of the Currency
National Park Service - Glen Canyon
National Park Service - Grand Canyon
National Park Service - Grand Teton
National Park Service - Hawaii
National Park Service - Yellowstone
National Park Service - Yosemite
Soldiers Home
U.S. Coast Guard
USDA, National Finance Center
USDA, Rural Development
For information regarding pre-authorized debits, please call (816) 414-2100.
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