3-11.000
PAYMENT
PROCESSING
INTERNAL CONTROLS
3-11.100 Introduction
3-11.110 Definitions
3-11.120 Standards For Internal
Financial Control-Employee Responsibilities
3-11.121 Independent Verification
3-11.130 Receipt of Payments
3-11.131 Logging Checks
3-11.132 Exception Register
3-11.133 Receipt of Cash or
Currency
3-11.134 Conversion of Cash or
Currency to Checks
3-11.135 Security of Cash Which
Cannot
be Converted immediately
3-11.140 Posting and Deposit of
Payments
3-11.141 Electronic Funds
Transfer
3-11.142 Direct Deposit of
Payments
3-11.143 Indirect Payments
3-11.144 Private Counsel Program
3-11.145 Application of Payments
for
Civil Debts
3-11.146 Application of Payments
for
Criminal Debts
3-11.147 Reconciliation of Bank
Statements
This policy meets the guidelines on internal control systems
published by the Office of Management and Budget in Circular A-123,
as
amended August 4, 1986. Deficiencies in internal control policies
were
identified by the Office of the Inspector General, Inspections
Division,
during two investigations of United States Attorneys' offices
conducted
in Fiscal Year 1990.
"Check Log" is defined as the established form USA-247. This is the only acceptable
check log form, and is used to record checks received during a
given day;
"Debts owed to the United States" are amounts owing to the
United States, as more fully defined in 28 U.S.C. 3002(3);
"Direct payments" is defined as the actual delivery of
payment instruments to United States Attorneys' offices;
"Exception Register" is defined as the established form
USA-247A. A USA-247A exception
register is used to record payments that are not immediately
processed and deposited;
"Independent verification" is defined as the use of a
non-Financial Litigation Unit employee to verify the payment
processing controls in place in a United States Attorney's office
that is too small to have enough employees to apply the
guidelines of "separation of duties" defined below;
"Indirect payments" is defined as those payments for which
payment advice notices are received, however, the actual payment
was received by another entity;
"Lockbox" is the bank where payments are sent by the
Financial Litigation Units or by debtors in the Direct Deposit
Program (Debtor Statement Program);
"Point of entry" means any location within a United States
Attorney's office (including branch offices) where payments are
first received;
"Priority payments" are any payments requiring special
handling by electronic funds
transfer;
"Separation of duties" as defined in the Office of Management
and Budget's Circular A-123 (Revised June 21, 1995) is as
follows: "[k]ey duties and responsibilities in authorizing,
processing, recording, and reviewing official agency transactions
should be separated among individuals."
Internal controls are established for payments received by
United
States Attorneys' offices as mandated by the Federal Financial
Managers'
Integrity Act of 1982 (Pub.L. 97-258), specifically 31 U.S.C. §
3512(c)(1), which states that ". . . the head of each executive
agency
shall establish internal accounting and administrative controls
that
reasonably ensure that . . . all assets are "safeguarded against
waste,
loss, unauthorized use, and misappropriation . . ." Proper internal
controls are established by ensuring that a complete separation of
duties is maintained between those persons who initially receive
payment
instruments (i.e., checks, money orders, cashier's checks, or
cash), those
persons who verify deposits, and those persons recording entries to
individual debtor's records.
To comply with the provisions in this chapter, the United
States
Attorney must designate appropriate personnel (by name) in writing,
which may include both Administrative and Financial Litigation Unit
personnel. Senior Financial Litigation Unit employees, who are
responsible for training other Unit employees and insuring
compliance
with all internal controls, are also responsible for preparing
detailed
instructions on the district's internal control procedures. Failure
to
observe internal control requirements may result in indictment and
prosecution.
The procedures set forth herein will ensure the initial
establishment of the internal controls and an audit trail necessary
for
all payments received in United States Attorneys' offices. An
employee
shall be delegated the primary responsibility for receiving
payments and
preparing the check log. See USAM
3-11.131. A second employee shall be delegated the
responsibility
for carrying out these procedures in the absence of the employee
with
primary responsibility. See Separation of duties, 31 U.S.C. §
3512(b)(1).
Branch offices must follow the procedures in USAM 3-11.140 and also designate
responsible personnel in writing. Branch offices must follow the
procedures in USAM 3-11.144 when
payments cannot be mailed to the Financial Litigation Unit on the
day
they are received. Branch offices must also convert cash or
currency
into checks in accordance with USAM
3-11.134.
Provisions for the reporting of government funds which have
been
misplaced or lost can be found in 28 C.F.R. § 0.39a, USAM 1-4.100. In
accordance
with these provisions, the United States Attorney and the Legal
Counsel
for the Executive Office for United States Attorneys must be
notified
immediately of lost or missing funds, and an investigation must be
made
of each reported incidence. In addition, all allegations of
misconduct
or mismanagement of money must be reported to the Office of
Professional
Responsibility.
In offices where it is impractical to achieve a complete
separation
of duties due to the number of employees in the Financial
Litigation
Unit or for other reasons, substitute controls shall be
implemented. For
example, a weekly verification of check/payment logs shall be
conducted
by the Assistant United States Attorney responsible for the
Financial
Litigation Unit, or another designated disinterested person. The
person
delegated responsibility for verification shall compare the deposit
tickets against the USA-247s, at least
weekly, making
a notation of
the date of verification and the period covered by the
verification.
Each United States Attorney's office is responsible for
ensuring
that all payments received (checks, other negotiable instruments,
cash
or currency) are properly handled and processed. One employee, at
the
point in the office where payments are first received (i.e., mail
room,
receptionist's desk), shall be delegated the responsibility for the
initial processing of payments, whether received directly from a
person
or in the mail. Under no circumstances shall this initial procedure
be
performed by an employee of the Financial Litigation Unit. Whenever
possible, the employee delegated this responsibility should perform
these duties in plain view of at least one other person.
The Administrative Officer should use a separate system of
internal
controls for checks received for obligations other than debts owed
to
the United States. If the person at the place of entry is unsure
whether
the check should be routed to the Financial Litigation Unit or to
another location or individual designated by the Administrative
Officer,
the check should be routed to the Financial Litigation Unit which
will
resolve the problem.
This section applies to the receipt of payment instruments.
The individual designated to receive payments at the point of
entry in the USAO should follow the procedures found on the
reverse side of the USA-247. Further
instructions for completing the USA-247 are found in the EOUSA Resource Manual at 173.
Instructions for the receipt and handling of cash payments are
discussed in USAM 3-11.133.
Checks or money orders that cannot be deposited on the day they
are
received (i.e., checks returned for signature or because sufficient
information is not available to process the payment must be entered
on
an Exception Register, Form USA-247A.
When every check
to be deposited
on a given day has been logged, but cannot be mailed, the USA-247 may be
used as Exception Register.
After the USA-247-A is prepared, place it with the check(s) or
money
order(s) in a safe or locked cabinet within easy access of the FLU.
The
Financial Litigation Unit should ensure that checks are
expeditiously
processed through the Lockbox bank.
All debtors must be advised to make payments by check, or other
negotiable instrument (such as money order or cashiers check),
payable
to the "United States Department of Justice." Payments made to the
order
of the "United States Treasury" may be processed but should be
discouraged. If a debtor pays in cash or currency the payment must
be
accepted and handled as set forth in USAM
3-11.134.
A separate cash log shall be maintained and recorded in a bound
ledger. A Form USA-200 Receipt must be completed and provided to
the
debtor whether or not the debtor wants or requests a receipt. One
copy
of the receipt shall be maintained in numerical order in a separate
file. The debtor shall be advised of the necessity to make all
future
payments by check or other negotiable instrument.
Once the cash has been converted to a negotiable instrument,
the
check number and amount of the check or money order shall be
entered on
the USA-247 on the date of conversion
and this
disposition shall be
entered on the cash log.
The Form USA-200 Receipt is the only receipt form approved by
the
Department of Justice for use by the Financial Litigation Unit.
All cash or currency delivered to the Financial Litigation Unit
must
be converted immediately to a negotiable instrument suitable for
mailing
for deposit through the Direct Deposit (Lockbox) System. The date
and
amount of cash converted shall be entered into the cash log as
described
in USAM 3-11.133. Voided receipts
must
be maintained.
It will be necessary to make the cash or currency conversion at
a
financial institution or post office. If large sums of cash need to
be
converted, an escort shall be provided for security purposes. Each
United States Attorney's office is responsible for establishing
local
policy on when an escort is needed. The amount of cash to be
converted,
the bulk of the cash, the location of the United States Attorney's
office, the distance to be traveled, and the means of
transportation are
examples of factors to be considered when establishing a local
policy.
Financial Litigation Unit personnel should contact the
Administrative Officer to establish procedures for payment of the
conversion fees as a litigation expense using the draft payment
system.
Only if cash payments are received frequently should procedures be
established for payment of fees to the financial institution on a
monthly or quarterly basis.
Any cash or currency which cannot be converted immediately to
a
payment instrument acceptable for deposit through the Direct
Deposit
(Lockbox) System must be kept in a secure area. See USAM 3-11.133. All United States
Attorneys' offices must use equipment such as safes, locked file
drawers, etc., for this purpose. Procedures should be established
concerning access to keys and, where applicable, changes to
combination
locks.
All checks or money orders received for deposit shall be
endorsed as
soon as possible after receipt in the Financial Litigation Unit,
and
shall be posted daily in accordance with established procedures, as
well
as Department of Justice Order OBD 2110.19, dated June 23, 1986.
Deposit tickets (computerized form or Form OBD-230) shall be
filled
out completely with all required data. The deposit ticket shall be
sequentially numbered and shall be signed and dated by the preparer
and
then countersigned by the employee designated to verify the deposit
and
the USA-247. The District's numeric
identification
code and the United
States Attorney's office case number shall be written on the face
of all
checks or money orders in the lower left hand corner. The person
responsible for preparing the deposit shall enter the appropriate
deposit number and item number on the back of each check or money
order.
Priority payments, Environmental Protection Agency Superfund
payments, or payments $50,000 and over shall be electronically (or wire) transferred. Steps
should be taken to have the remitter make arrangements for a wire
transfer through his/her bank. If the remitter is unwilling to
electronically transfer funds, the remitter should be instructed
to furnish a certified or cashier's check in lieu of a personal
or company check.
All payments received shall be posted and deposited daily
thorough
the Direct Deposit (Lockbox) System. The procedures set forth in
the
Department of Justice Order OBD 2110.19, dated June 23, 1986, shall
be
followed. No payments shall be directly delivered to client
agencies.
Indirect payments shall be promptly posted (no later than the
fifth
working day after receipt). These payments are to be reconciled
against
the district's payment tallies. The designated person performing
the
reconciliation shall initial and date the payment notice when the
reconciliation is complete. The tallies or financial reports are to
be
attached to the original notification list and maintained.
Financial Litigation Units in districts participating in the
Private
Counsel Program cannot modify financial records or post payments on
civil debts. These functions are performed exclusively by the
Central
Intake Facility, a government contractor. Financial Litigation
Units in
these districts receive payments on civil debts only in the
following
circumstances: debtor error; initial payment on installment payment
agreements; and initial or lump sum payment on debts litigated by
an
Assistant United States Attorney who is not assigned to the
Financial
Litigation Unit. The Financial Litigation Unit must forward any
payment
it receives to the Central Intake Facility for processing on the
day it
is received in the Unit.
USA-247s shall be prepared as
described above in
USAM §§ 3-11.100 through
3-11.135
for all payments received in United States Attorneys'offices. When
the
payments are received in FLU, a FLU employee with a designated
back-up
must enter the civil payments on the Register of Direct Payments
Received program. A printout should be generated and attached to
the
USA-247. The total amount of Private Counsel Program payments
should
be entered as "Sent Other" on the USA-247 and "CIF" should be
annotated in the space provided. The procedures described in USAM 3-11.133 and USAM 3-11.134 must be followed if a
payment is made in cash or currency.
A second individual with a designated back-up must enter the
civil
payments on the Register of Direct Payments Received program. A
printout
should be generated and attached to the check log. The total amount
of
Private Counsel Program payments should be entered as "Sent Other"
on
the check log and "CIF" should be annotated in the space provided.
The
procedures described in USAM
3-11.133
and 3-11.134 must be followed if
a
payment is made in cash or currency.
The "United States Rule" shall be followed in applying civil
payments. Under this rule, a partial payment is credited first to
court
costs and fees, second to accrued interest, and the balance, if
any, to
principal. Subsequent interest then accrues on the remaining
principal,
computed from the date of the partial payment. See Woodward v.
Jewell,
140 United States 247, 248 (1891); 45 Am.Jur.2d, Interest and
Usury,
§ 99; 47 C.J.S. Interest § 66.
In cases with a surcharge under 28 U.S.C. § 3011, the
"United
States Rule" applies (credit interest to the surcharge and then to
the
principal of the surcharge). The surcharge is paid after court
costs
and, by policy, before the underlying debt.
The "United States Rule" shall also be followed in applying any
payments received prior to entry of a judgment, unless the debtor's
obligation (or the program legislation under which it arises)
expressly
provides otherwise.
The "United States Rule" is not followed when applying payments
to
criminal penalties imposed for offenses committed on or after
January 1,
1985. For criminal penalties, payments are credited in the
following
priority, unless otherwise directed by the court: (1) special
assessments; (2) nonfederal restitution, including accrued
interest; (3)
federal restitution, including accrued interest; (3) fines,
including
accrued interest; (4) penalties; (5) costs; and (6) attorney's
fees. See
18 U.S.C. § 3612(c). The court may also prioritize payment to
one
victim over another. 18 U.S.C. § 3664(i). Private victims shall
receive full restitution before restitution is paid to the United
States. Id.
A designated employee shall reconcile the monthly deposits
against
the monthly bank statement to ensure all deposits were properly
received
and credited by the bank. Discrepancies in deposits should be
immediately reconciled against the USA-247s and deposit tickets. If a
deposit item was erroneously entered or is missing from the
confirmed
list, it must be immediately reconciled verbally and in writing to
the
Justice Management Division's Debt Accounting Operations Group
(DAOG). A
copy of the memorandum sent to DAOG should be placed with the bank
statement in question. If the discrepancy has not been resolved
within
ten days, the designated employee shall notify the Financial
Litigation
Staff and follow-up with DAOG until the discrepancy has been
resolved.
If the bank statement includes checks which have not been
deposited
(e.g., insufficient funds), the payments shall be inactivated in
the
case-tracking system and immediate replacement shall be demanded
from
the drawer of the check. Once the bank statement has been
reconciled, it
shall be initialled and dated, and maintained in a file by Fiscal
Year.
| July 1999
| USAM Chapter 3-11
|