Federal Reserve Bank Reporting | TFX: Treasury Financial Experience

Treasury Check Reclamation Procedures

Introduction: This chapter prescribes procedures and notices regarding the Department of the Treasury’s check reclamations.

Section 4010—Authority: Under Section 15 of the Federal Reserve Act of December 23, 1913, as amended (12 U.S.C. 391), and Section 10 of the Federal Reserve Act of June 11, 1942, as amended (12 U.S.C. 265), the Secretary of the Treasury sets forth regulations to the Federal Reserve Banks (FRBs) as government depositaries and fiscal agents. If Treasury determines that a check has been paid over a forged or unauthorized endorsement, the Commissioner, Bureau of the Fiscal Service (Fiscal Service), may reclaim the amount of the check from the presenting bank or any other endorser that breached its guarantee of endorsement (31 CFR 240.8).

Section 4020—Notices

4020.10—Notice of Direct Debit (U.S. Treasury Check Reclamation)

The Notice of Direct Debit (U.S. Treasury Check Reclamation) includes the amount due, the reason for the reclamation, the direct debit date, the pertinent check locator information, the procedures for making payment, and the related laws and regulations governing the reclamation process.

4020.20—Summary of Debt Statement

This statement consists of a detailed listing of outstanding reclamation and associated information, the applicable Fiscal Service collection regulations, and an explanation of the columns on the Summary of Debt Statement. It includes the following:

four-digit check symbol and eight-digit check serial number,
payee’s name,
reclamation date,
request ticket number,
amount of principal, and
total amount due.

4020.30—Abandonment Notice to Banks

If Fiscal Service determines that a financial institution is no longer liable for payment of a reclamation, Fiscal Service enters an abandonment code into TRACS. Weekly, TRACS sends the electronic abandonment notices through the FRB to notify financial institutions that they no longer owe a refund.

Section 4025—Treasury Check Reclamation Process

4025.10—Processing a Notice of Direct Debit (U.S. Treasury Check Reclamation)

If Fiscal Service determines that a check has been improperly negotiated, it transmits the Notice of Direct Debit (U.S. Treasury Check Reclamation) through the FRB FedMail System to the appropriate financial institution.

4025.20—Presenting Banks Payment Procedures

Presenting banks have 30 days from the date of the Notice of Direct Debit (U.S. Treasury Check Reclamation) to pay the full amount of the reclamation before their Federal Reserve master account is automatically debited. However, if the financial institution protests within 30 days from the date of the Notice of Direct Debit (U.S. Treasury Check Reclamation), the direct debit will not occur. If a presenting bank enters a protest after the direct debit has occurred, and the protest is substantiated, Fiscal Service will refund the presenting bank the amount of the reclamation.

4025.30—FRB Processing of Debit Authorizations

Daily, after receiving authorization payments from the presenting banks, the FRB:

prepares batches of authorization payments, and
posts authorizations to TRACS.

These authorized payments will include debit authorization for purposes of check reclamations.

At the end of the processing day, 8 p.m. Eastern Time, TRACS collects the authorizations, posts accounting within TRACS, and sends the authorization file to the FRB to be posted to EASy and through DVS to CIR. Fiscal Service can access CIR to view all Debit and Credit Voucher activity associated with collections.

Contact Us

Contact Details

Direct questions concerning this chapter to:

Department of the Treasury
Bureau of the Fiscal Service
National Payment Integrity and Resolution Center
Customer Service Branch

PO Box 603
Bensalem, PA 19020

855-868-0151

Letter Of Credit - Federal Reserve Bank System Operational Requirements

Introduction: This chapter prescribes the operating procedures, forms and format to be followed by Federal Reserve banks and branches (FRBS) for letter-of-credit operations.

Section 5015—Authority: 12 U.S.C. 391 authorizes the Secretary of the Treasury to use Federal Reserve banks and branches as depositaries and fiscal agents of the United States.

Section 5020—Letter of Credit -Federal Reserve Bank System

Functions of the system are summarized as follows:

The Federal program agency will obtain the manual signatures of recipient organization officials authorized to sign payment vouchers drawn on the letter of credit.
The Federal program agency will send a certified letter of credit and signature card to the Cash Management Regulations and Compliance Staff (II TFM 5-5095). This staff will transmit the letter of credit and signature card to the appropriate Federal Reserve bank (FRB) after the signature of the certifying officer of the Federal program agency and information on the letter of credit and signature card are verified. Responsibility for the amount authorized and validity or legal effect of signatures entered on any letter of credit or signature card rests entirely with the certifying officer of the Federal program agency, not the FRB.
As funds are needed, the recipient organization will submit a properly completed payment voucher to the financial institution for transmission to the appropriate FRB. Payment vouchers are generally considered as noncash items and are credited to the account of a financial institution which has access to services provided by a FRB.
The FRB will review the payment voucher and, if proper for payment, credit the account of the financial institution and charge the account of the Treasury with the amount of the voucher.

Section 5030—Forms

The following forms, illustrated in Appendix No. 1 to this chapter, are used under the Letter of Credit -Federal Reserve Bank System:

Form Number Title

SF 1193 Letter of Credit

SF 1194 Authorized Signature Card for Payment Vouchers on Letter of Credit

TFS Form 1207 Statement of Inactive Letters of Credit

TFS Form 1214 Rejected Payment Vouchers on Letters of Credit

TFS Form 5401 Payment Voucher on Letter of Credit

TFS Form 5851 Treasury Letter of Credit Transmittal

TFS Form 5858 2-Way Memorandum Regarding Status of Letter of Credit Audit Verifications

5030.10 -SF 1193 "Letter of Credit." This form will be used by Federal program agencies to issue letters of credit under the Letter of Credit-Federal Reserve Bank System.

5030.20 -SF 1194 "Authorized Signature Card for Payment Vouchers on Letter of Credit." This form will be used to designate the signatures of the recipient organization officials authorized to sign letter-of-credit payment vouchers.

5030.30 -TFS Form 1207 "Statement of Inactive Letters of Credit."This form will be used to report the status of inactive letters of credit to FRBS.

5030.40 -TFS Form 1214 "Rejected Payment Vouchers on Letters of Credit." This form will be used by FRBs to explain the reason for rejecting a payment voucher.

5030.50 -TFS FORM 5401 "Payment Voucher on Letter of Credit." This form will be used by a recipient organization to withdraw funds on a letter of credit.

5030.60 -TFS FORM 5851 "Treasury Letter of Credit Transmittal." This form will be used by the Bureau of Government Financial Operations (BFGO) to transmit SF 1193, SF 1194, and other letter-of-credit information to the FRBS.

5030.70 -TFS FORM 5858 "2-Way Memorandum" Regarding Status of Letter of Credit Audit Verifications. This form will be used to certify that letter-of-credit balances have been verified and are correct. Furthermore, it will be used by the FRBs to report exceptions to balances.

5030.80 -Special Forms. Upon approval from the Cash Management Regulations and Compliance Staff, Federal program agencies may use special forms to issue letters of credit. When processing these forms, FRBs shall apply the same operational requirements as pertinent to the SF 1193.

Section 5035—Establishing The Letter of Credit

5035.10 -Receipt of Letter-of-Credit Documents. Cash Management Regulations and Compliance Staff will use TFS Form 5851 to forward letter-of credit documents. Upon receipt of TFS Form 5851, the FRB shall verify the signature of the Cash Management Regulations and Compliance Staff representative appearing on the transmittal against signatures of those individuals authorized to sign a TFS Form 5851 identified in correspondence signed by the Commissioner, BGFO, or an appropriate designee. FRBs will be notified as changes in authorizations occur. If an unauthorized signature appears on the transmittal or the transmittal is unsigned, the FRB must contact the Cash Management Regulations and Compliance Staff before processing any documents. After verifying the signature, the FRBs shall insure that the typed information on the transmittal agrees with the letter-of-credit documents attached.

The Cash Management Regulations and Compliance Staff will examine all letter-of-credit documents for completeness and accuracy prior to transmitting the documents. In the event there is extraneous, missing, or erroneous data, the Cash Management Regulations and Compliance Staff must be notified before any further action is taken. If everything is in order, the duplicate copy of the transmittal shall be signed, dated, and returned no later than the next business day to:

Cash Management Regulations
and Compliance Staff
Administrative Services
Bureau of Government Financial
Operations
Department of the Treasury

Treasury Annex No. 1, PB-809
Washington, DC 20226

5035.20 -Receipt of Letter-of-Credit Information by Wire. The Cash Management Regulations and Compliance Staff will wire letter-of-credit information when circumstances warrant. FRBs will accept and act on wired information received from the Cash Management Regulations and Compliance Staff. A FRB, at its own discretion, may use a callback procedure to verify wired information received from the Cash Management Regulations and Compliance Staff. Occasionally, the Cash Management Regulations and Compliance Staff will telecopy signature cards when a FRB has the means available to receive such information. Ordinarily, the SF 1193 and/or SF 1194 will be mailed from the Cash Management Regulations and Compliance Staff no later than the next business day under cover of TFS Form 5851.

5035.30 -Examination of Letter-of-Credit Documents. Federal Reserve banks shall examine for completeness each initial letter of credit and signature card received from the Cash Management Regulations and Compliance Staff. At a minimum, the FRBs shall verify that...

The correct FRB is indicated on the SF's 1193 and 1194.
The name of the recipient organization appearing on the SF 1193 agrees with the corresponding SF 1194.
The letter-of-credit number on the SF 1193 agrees with the SF 1194.
An amount authorized is indicated on the SF 1193 and a period of availability of funds is checked.
A block is checked on the SF 1194 indicating the number of signatures required to draw on the letter of credit.
The SF's 1193 and 1194 are signed.

5035.40 -Amendments to Letter of Credit. Amendments to letters of credit will be transmitted to the appropriate FRBs by the Cash Management Regulations and Compliance Staff. FRBs must review all amendments received for completeness by verifying that...

The Letter of Credit is currently on file.
The correct FRB is indicated.
The amendment number is clearly identifiable and is numbered in consecutive order.
The time designation for funds, recipient organization information, and financial institution information agree with the previous SF 1193. If the amendment changes this information, a footnote is to appear on the amending SF 1193 describing the information that changed.
If there is a change in the amount authorized, the prior authorization plus or minus the change equals the amount authorized.
The amended SF 1193 is signed.

5035.50 -Amounts Authorized. FRBs are responsible for establishing and maintaining ledgers for all letters of credit, including reestablishing periodic authorizations. FRBs should post amounts authorized no later than the effective date. If the effective date falls on a weekend or holiday, the amount authorized should be posted no later than the next business day. A letter of credit received after the effective date will be posted immediately upon receipt. If an amendment decreases the amount authorized below the available balance, the Cash Management Regulations and Compliance staff should be contacted by telephone immediately.

For letters of credit with periodic authorizations, the unpaid balance should be revoked at the end of the period indicated and the full amount reestablished at the beginning of the new period. These entries may be posted to the letter-of-credit subsidiary ledger either on the first business day of the new period or on the business day that the first voucher is presented for payment.

5035.60 -Replacement Signature Cards. The Federal program agency will furnish the Cash Management Regulations and Compliance Staff with a replacement signature card whenever there is a change in the persons authorized to sign payment vouchers on a letter of credit. BGFO will transmit the signature cards after verifying the signature of the certifying officer of the Federal program agency. Replacement signature cards will be effective on the date received by the FRB.

Section 5040—Payment Vouchers On Letters Of Credit

5040.10-Presentation to FRBs. FRBs shall establish a cutoff time for processing TFS Forms ,5401, which is as late in the day as possible, but no earlier than 2:00 p.m. local time. The Federal Reserve bank will receive from the recipient organization's financial institution the original, duplicate, and triplicate copies of TFS Form 5401. The quadruplicate copy will be retained by the drawer. The original copy must be received in order for the voucher to be processed. If either the duplicate or triplicate copies are missing, the FRB will photocopy the original copy of TFS Form 5401 and substitute the photocopies for the missing copies and process the voucher as usual. Payment vouchers may be accepted from a financial institution which does not maintain an account with the FRB, for credit to a financial institution which does maintain an account with the FRB. Payment vouchers received from financial institutions which do not maintain an account with the FRB should identify, on an accompanying document, the financial institution which will receive credit.

5040.20-Payment Voucher Limitations. Foremost letters of credit, payment vouchers will not be drawn more frequently than daily. However, where there is an agreement between the Cash Management Regulations and Compliance Staff and FRBS, multiple vouchers will be processed for certain letters of credit. Additional vouchers received the same day for the same letter of credit should be processed, regardless of the date drawn. In the absence of an agreement additional vouchers received the same day for the same letter of credit should also be processed, if the drawn dates are different. If the drawn dates are the same, the Cash Management Regulations and Compliance Staff should be contacted.

Payment vouchers should not be drawn for amounts more than $5,000,000 unless so stated on the letter of credit. The FRB should telephone BGFO regarding the disposition of a voucher, if the amount is more than $5,000,000 and authorization to pay such amounts is not annotated on the SF 1193. This is to preclude the rejection of payment vouchers drawn under the letter-of-credit checks paid technique.

Vouchers drawn in amounts less than $5,000 should be processed. However, repeated drawdowns of less than $5,000 on the same letter of credit should be brought to the attention of the Cash Management Regulations and Compliance Staff.

In the event the Cash Management Regulations and Compliance staff is closed or in cases where time differences preclude an FRB from contacting the staff, a payment voucher in question should be held until the next business day.

5040.30 -Examination of TFS Form 5401. FRBs should use care and diligence in examining payment vouchers drawn on letters of credit. The TFS Form 5401 should be examined for completeness, verifying that the letter-of-credit number, agency location code, and the financial institution identified are the same as shown on the related letter of credit, and that the amount requested is not altered and is within the remaining balance of the letter of credit.

The FRB should determine if the TFS Form 5401 is signed by the individuals whose signatures appear on the currently effective SF 1194. However, the FRB is not held accountable for a forged or unauthorized signatures entered on the TFS Form 5401 if the forged or unauthorized signatures appear on the currently effective SF 1194.

FRBs are not responsible for the sequential numbering of vouchers drawn on a letter of credit. A voucher received with the voucher number out of sequence should not be rejected. FRBs should not review the amount of Federal funds on hand. This information is supplied by recipient organizations for use by Federal program agencies only.

5040.40 -Payment of TFS Form 5401. If the TFS Form 5401 is proper for payment, payment will be effected by debiting the account of Treasury and crediting the account of the financial institution. The payment is posted to the letter-of-credit subsidiary ledger and charged to the amount authorized according to the date paid, not the date the voucher was drawn. The original and triplicate copy of the voucher should be legibly dated with the date paid, and either signed or stamped, in the "FOR FEDERAL RESERVE BANK USE ONLY" block. The date paid will signify the date that Treasury's account was debited and the financial institution's account credited.

5040.50 -Distribution of Paid TFS Form 5401. Paid TFS Form 5401 will be distributed as follows:

Originals of paid TFS Forms 5401 must support information on the daily TFS Form 17 "Transcript of the General Account of the United States Treasury." Each TFS Form 5401 document will be shown as a separate entry on a specially prepared listing entities "Letters of Credit." The summary amount of the listing is reported on TFS Form 17M "Abstract of Charges" submitted to:
Government Reports Branch
Bureau of Government Financial
Operations
Department of the Treasury
Treasury Annex No. 1
Attn: GAO Building -Room 1415
Washington, DC 20226
Duplicate copies of paid TFS Form 5401 should be retained by the FRB.
Triplicate copies of paid TFS Form 5401 should be mailed first class, the same day that payment is accomplished, to:
Cash Management Regulations
and Compliance Staff
Administrative Services
Bureau of Government Financial
Operations
Department of the Treasury
Treasury Annex No. 1, PB
Washington, DC 20226

FRBs are required to notify the Cash Management Regulations and Compliance Staff in writing in the event no payment vouchers are paid on a given day. Written notification should be mailed to the same address as the triplicate copies of paid TFS Form 5401.

5040.60 -Criteria for Rejection. The Cash Management Regulations and Compliance Staff requires that FRBs reject a payment voucher for any of the following reasons and immediately notify the financial institution of the rejection. The final decision to reject any TFS Form 5401 rests on the judgment of the FRB.

The dollar amount exceeds the available balance.
The dollar amount has been altered.
A signature on the TFS Form 5401 does not appear in the blocks entities "Typed Name and Signature" on the related SF 1194.
The number of signatures required does not conform to the requirements indicated on the SF 1194.
A signature on the TFS Form 5401 is not original or has been erased or pasted over with correction fluid. Facsimile signatures are not acceptable.
A signature on the TFS Form 5401 does not compare favorably to the signature on the SF 1194.
The letter-of-credit number, agency location code, name of recipient organization, or name of financial institution differs from the information on the SF 1193.
The dollar amount exceeds $5,000,000 and the FRB does not have authorization to pay amounts in excess of $5,000,000.

5040.70 -Distribution of Rejected TFS Form 5401. The rejected voucher shall be posted to the letter-of-credit subsidiary ledger. The FRB should send all copies of a rejected TFS Form 5401 to the Cash Management Regulations and Compliance Staff with TFS Form 1214 explaining the reason for rejection. The rejected TFS Form 5401 and the accompanying TFS Form 1214 should be mailed no later than the next business day to the same address as triplicate copies of paid TFS Form 5401.The FRB should have no further liability with respect to the unpaid voucher.

5040.80 -Holding Payment Vouchers. A FRB may hold a voucher if advised by the Cash Management Regulations and Compliance Staff that an amendment or replacement signature card is in transit, which will avoid rejection of the voucher. Similarly, for letters of credit with period authorizations, FRB may receive a payment voucher on the last day of a period in which there are insufficient funds remaining. Since the amount authorized will be re-established, such vouchers may be held until the first business day of the new period.

5040.90 -Checks Paid Technique. Under the telephonic checks paid application, payment On a letter of credit will be accomplished by the FRB completing, signing, and processing the TFS Form 5401 based on telephonic, telegraphic, or similar form of electronic telecommunication received from the recipient organization's financial institution. This method facilitates payment on a letter of credit for financial institutions located outside of the Federal Reserve city and unable to present payment vouchers for same day credit.

5040.90a -Notification. For each letter of credit established under the telephonic method of payment, the Cash Management Regulations and Compliance Staff will notify the appropriate FRB before proceeding with implementation.

5040.90b -Implementation. The Cash Management Regulations and Compliance Staff will provide the FRB with the following information for letters of credit operating under the telephonic method:

Name and address of recipient organization
Name and address of financial institution
Names and telephone numbers of authorized persons at financial institution
Letter-of-credit number
Proposed date of implementation

The FRB should contact the financial institution to make the necessary arrangements to facilitate implementation. The Cash Management Regulations and Compliance Staff will send an SF 1193 and 1 194 to the FRB. An initial supply of blank TFS Forms 5401 with reordering instructions will be sent directly to the FRB by the Federal program agency. FRBs should establish adequate control procedures for storing blank TFS Forms 5401. TFS Forms 5401 are not interchangeable since each Federal program agency is assigned a different agency location code.The SF 1194 will be used to insure that officials having authority to make a telephonic drawdown have their signatures on file at the FRB. Prior to the effective date of implementation, the Cash Management Regulations and Compliance Staff will verify, by telephone,that the FRB has received the SF 1193, SF 1194, and supply of TFS Forms 5401. Subsidiary ledger cards should be established and be annotated with the legend "Payment by Telephonic Message Only" to preclude any change of a duplicate payment being made based on presentation of a TFS Form 5401 through normal channels.

5040.90c -Completing TFS Form 5401. A FRB will be expected to use care and diligence in completing and paying vouchers based on telephonic, telegraphic, or similar form of" electronic telecommunication, and will have no liability except for its own negligence. Federal Reserve banks will complete the TFS Form 5401 based on instructions received from the financial institution. At a minimum, instructions will include: letter-of-credit number, voucher number, agency location code, amount, name and address of recipient organization, and name and address of the financial institution. An adequate code word, call back, or other similar procedure should be arranged to verify messages received from the financial institution. Such a procedure should conform to the same security standards as for similar methods of transferring funds.

The FRB will complete the TFS Form 5401 insuring that the correct agency location code is entered on the payment voucher. On all copies of the voucher, the name of the person at the financial institution who shall authorized the drawdown shall be printed in the area reserved for the authorized signature. Upon proper completion, the voucher will be legibly dated with the date paid, and either signed or stamped in the block reserved for FRB use. Distribution of the original, duplicate, and triplicate copies will be the same as shown in II TFM 5-5040.50. The quadruplicate copy should be sent to the financial institution for its records.

Section 5045—Improper Payments

A FRB will have no liability in the payment of vouchers drawn on letters of credit except for its own negligence. FRBs are required to notify the Cash Management Regulations and Compliance Staff immediately in the event an improper payment is made. The major type of improper letter-of-credit payments are the following:

payment in excess of the available balance (overpayment)
payment of a voucher bearing a signature that does not appear on the currently effective SF 1194 (unauthorized payment)

5045.10 -Overpayment.

5045.10a -If the overpayment is detected on the same day that it occurs, the TFS Form 5401 should be in the custody of the FRB. If this is the case, it is the FRBs responsibility to collect the original and all copies of the TFS Form 5401, notify the financial institution of the payment rejection, and make the necessary adjusting entries to the FRBs records and letter-of-credit subsidiary ledger. The TFS Form 5401 would then be rejected through normal procedures.

5045.10b -If the overpayment is detected after the TFS Form 5401 has been paid and copies distributed the following guidelines apply:

The FRB should contact the financial institution to determine if the funds have been withdrawn by the recipient organization.
If the funds have not been withdrawn by the recipient organization, the financial institution should be requested to return the funds, or at least an amount equal to the amount of the overpayment, to the FRB.
If the financial institution will return the funds to the FRB, the Cash Management Regulations and Compliance Staff should be contacted to assist in the handling of the return of the funds.
The FRB, after receiving the funds from the financial institution and the identifying information from the Cash Management Regulations and Compliance Staff, will prepare an SF 215 "Deposit Ticket" and process the deposit for the Federal program agency in the normal manner. The SF 215 will be completed using the correct agency location code for deposits, which should be obtained from the Cash Management Regulations and Compliance Staff.The agency location code that appears on the letter of credit should not be used.
The amount of the voucher should be posted to the letter-of-credit subsidiary ledger. However, it is important that no reversing entry be made to the subsidiary ledger for the return of funds to the FRB.
The depositary copy of the completed SF 215 will be retained by the FRB. The FRB should mail the confirmed memorandum and agency copies of the SF 215 to the Cash Management Regulations and Compliance Staff.

5045.10c - If the FRB cannot recover the funds, the Cash Management Regulations and Compliance Staff will notify and request the Federal program agency to recover the funds from the recipient organization.

5045.10d -If the Federal program agency is unable to recover the funds and the recipient organization is not entitled to additional funds, and the FRB was negligent in performing its obligation in this regard, the amount of the overpayment will be charged to the Federal Reserve bank.If the recipient organization is entitled, and the Federal program agency is willing to amend the letter of credit, the Cash Management Regulations and Compliance Staff will provide the Federal Reserve bank with documentation to cover the overpayment.

5045.20 -Unauthorized Payment. If the unauthorized payment is detected after the TFS Form 5401 has been paid and copies distributed, the Cash Management Regulations and Compliance Staff should be contacted. The Cash Management Regulations and Compliance Staff will attempt to obtain approval, from the appropriate Federal program agency, that the payment was valid despite the incorrect signatures. If the payment was fraudulent and the Federal program agency is unable to recover the funds, and the Federal Reserve bank was negligent in performing its obligation in this regard, the amount of the payment will be charged to the FRB.

5045.30 -Other Improper Payments. The FRB must contact the Cash Management Regulations and Compliance Staff immediately for instructions and guidance on any other payment made which the FRB feels is erroneous or improper.

Section 5050—Inactive Letters Of Credit

A letter of credit is considered inactive if there has been no activity, including changes in the amount authorized. for 1 year or more. FRBs will review their active files on an annual basis, each September 30, and report all inactive letters of credit to the Cash Management Regulations and Compliance Staff.

A separate report in duplicate for each agency location code should be submitted to the Cash Management Regulations and Compliance Staff. After communicating with respective Federal program agencies, the Cash Management Regulations and Compliance Staff will use TFS Form 1207 to advise the FRB of the disposition of the letters of credit.

Section 5055—Revocation Of Letters Of Credit

When the balance of a letter of credit has been withdrawn or the Federal program agency no longer intends to use the letter of credit for financing recipient organization, the Federal program agency will request the Cash Management Regulations and Compliance Staff to revoke the letter of credit. The Federal program agency's request for revocation will be sent through the Cash Management Regulations and Compliance Staff to the appropriate FRB.

Ordinarily, instructions to revoke letters of credit will appear on TFS Form 5851. Instructions from the Cash Management Regulations and Compliance Staff will sometimes specify an effective date of revocation. If no effective date appears, the FRB should revoke the letter of credit upon receipt of the letter-of-credit transmittal. Payment vouchers received prior to the specified revocation date should be processed. Payment vouchers received on the same day as the transmittal letter or later, regardless of date drawn, should not be processed.

The Cash Management Regulations and Compliance Staff will occasionally revoke letters of credit by wire. Ordinarily, confirmation of telegraphic instructions will be included as part of the next TFS Form 5851 transmitted by the Cash Management Regulations and Compliance Staff.

Section 5060—Retention Of Letter-Of Credit Documents

Letter-of-credit documents will be retained according to the following timeframes:

SF 1193. This includes the initial SF 1193, any amendments to the initial letter of credit, and any special forms that are used in place of the SF 1 193. FBRs should retain these forms for a minimum of 3 years from the date of revocation.
SF 1194. The SF 1194 is deemed revoked when the replacement SF 1194 is received for an active letter of credit or the letter of credit is revoked. In both cases, the revoked SF 1194 should be retained for a minimum 3 years from date of revocation.
TFS FORM 5401. FRBs are not required to retain any copies of rejected TFS Forms 5401. Copies of paid TFS Forms 5401 and letter-of-credit subsidiary ledgers should be retained for a minimum of 3 years from the date paid.
All Other Letter-of-Credit Documents. FRBs should retain all other documents received from the Cash Management Regulations and Compliance Staff, including the TFS Form 5851, a minimum of 18 months from the date of the correspondence.

Section 5065—Letter-Of-Credit Audit Verification

FRB periodically request from the cash Management Regulations and Compliance Staff verification that undisbursed letter-of-credit balances on the books of FRBs agree with balances on the books of Federal program agencies. Verification requests are generally initiated by the audit department of the FRB. The Cash Management Regulations and Compliance Staff functions as a liaison between FRBs and Federal program agencies. The Cash Management Regulations and Compliance Staff does not require that FRBs verify balances. FRBs that verify balances are encouraged to use a sampling technique and not perform a 100 percent verification.

5065.10 -Submitting Requests to the Cash Management Regulations and Compliance Staff. The FRB should send a cover letter with verification requests to the Cash Management Regulations and Compliance Staff. These requests will list the letter-of-credit numbers and corresponding balances as of a specified audit date. The requests should be submitted in duplicate with a separate request for each agency location code.

5065.20 -Processing Requests. The Cash Management Regulations and Compliance Staff will advise the FRB in writing, of receipt of the verification requests to Federal program agencies. Responses from agencies will be returned to FRBs by the Cash Management Regulations and Compliance Staff. If an exception to a balance is reported, the FRB should verify the letter-of-credit subsidiary ledger for any errors in amounts posted.

5065.30 -Completion. The Cash Management Regulations and Compliance Staff will initiate and send to the FRB a TFS Form 5858 when all completed verification requests have been returned. The FRB, upon receiving TFS Form 5858, is required to indicate the status of the audit, retain the duplicate copy, and sign and return the original to the cash Management Regulations and Compliance Staff. The audit will be considered complete if no differences exist between Federal program agency and FRB balances.

5065.40 -Differences in Balances. In addition to the original copy of TFS Form 5858, FRBs are required to submit to the Cash Management Regulations and Compliance Staff a second verification request, as of the same audit date, for all letters of credit where differences reported by Federal program agencies could not be reconciled. The requests should be submitted in duplicate and list only those letter-of-credit numbers and balances which need to be reverified. A separate request is required for each agency location code. Copies of ledger sheets should be attached for each letter of credit and should include entries which revert back to the inception of the letter of credit or the date the balance was last verified. The Cash Management Regulations and Compliance Staff will forward the second request and ledger sheets to Federal program agencies for review. The Cash Management Regulations and Compliance Staff will use TFS Form 5858 to notify the FRB of agency findings.

Section 5070—Disclosure of Information: FRBs should have contact only with financial institutions and the Cash Management Regulations and Compliance Staff regarding letter-of-credit matters. Discretion is required with respect to the information that is disclosed to a financial institution. For example, information on the remaining available balance or the individual authorized to certify payment vouchers should not be disclosed. The Cash Management Regulations and Compliance Staff discourages direct communication between FRBs and recipient organizations, and Federal program agencies. Recipient organizations with inquiries should be referred to the Federal program agency shown on the letter of credit or, if necessary, the Cash Management Regulations and Compliance Staff. Inquiries received from Federal program agencies should be referred to the Cash Management Regulations and Compliance Staff.

Section 5075—Compliance: FRBs are expected to perform letter-of-credit operations under the provisions of this chapter. The Cash Management Regulations and Compliance Staff should be contacted, in writing, for approval if FRB is unable to comply with any provision. FRBs are encouraged to develop and maintain separate internal operating procedures, which incorporate the provisions of this chapter, for use by personnel in letter-of-credit operations.

Contact Us

Detailed Contacts

Inquiries concerning this chapter should be directed to:

Cash Management Regulations and
Compliance Staff
Bureau of Government Financial
Operations
Department of the Treasury Annex No. 1, PB

Washington, DC 20226

202-634-5569

Procedures For Processing Postal Money Orders

Section 7010—Scope And Applicability: This chapter prescribes the procedures to be followed by Federal Reserve banks and branches (FRBS) in handling paid U.S. Postal Money Orders. These procedures cover the responsibility of the United States Postal Service (USPS) to pay, reconcile and audit postal money orders. Treasury prescribes the method of processing the charges through Treasury's General Account.

Section 7015—Authority: These instructions are issued according to authority of the Secretary of the Treasury to prescribe regulations to FRBs in connection with their fiscal agency responsibilities under 12 U.S.C. 265 and 391.

Section 7020—General Information And Format

All post offices sell paper money orders to the public. These money orders are paid at commercial banks and other depositaries of the Federal Reserve System and sent to FRBS. The FRBs will charge the account of USPS for the amount of the paid money orders and report these charges on the daily transcript of the U.S. Treasury. The FRBs then will send the money order documents to USPS. Upon receipt of the money order documents from the FRBS, USPS will reconcile and audit the documents. USPS will report all money order transactions on the Statement of .Transactions to the Deposit Reconciliation Branch (TFM 4-7095) at the end of each month.

Paper money orders are 3 1/4 inches high, 6 inches long, and are designed to meet American Bankers Association (ABA) check standards and characteristics, including MICR preprinting (Appendix No. 1.) The ABA routing number with the check digit in the transit field (0000-0020 or 000000204) is shown on each money order. The general format and the upper serial number is printed by the forms printer. The date, post office number, and the upper amount is entered by the postal clerk at time of issue. In the lower MICR line, the bank routing number and the on-us field (Money Order Serial Number) are entered by the forms printer. The "pay to" and "purchaser" information is entered by the postal customer who purchases the money order.

All FRBs are advised of the presence of the OCR Read Band, with a width of 9/16ths of an inch beginning 3/8ths of an inch from the top of each paper money order which is used by the USPS for processing paid money orders. FRBs are requested to refrain from writing, stamping, marking, endorsing, etc., in the area of the OCR Read Band. FRBs are further requested to avoid, if possible, any heavy endorsing on the reverse side of the money order in the area of the OCR Read Band.

There are a number of outstanding "punch card" postal money orders that were issued prior to the introduction of paper style postal money orders in the spring of 1973, which bear the ABA routing number 0000-01 19. These money orders have a commercial life of 20 years. Processing instructions for the "punch card" postal money orders are in II TFM 4-7070 of these instructions.

Section 7035—Charges For Postal Money Orders

The FRBs will prepare SF 5515, "Debit Voucher," for 8-digit accounting station code or agency location code (ALC) 18-00-0005 to charge postal money orders based on cash letters or other deposit documents received that have accompanying postal money order documents. After machine classification is made, in order to correct any amount undercharged for money orders made on the original charge of the SF 5515, another SF 5515 will be prepared and processed. If an overcharge is made on the original SF 5515, the FRB will process an SF 215 "Deposit Ticket" for the amount overcharged to ALC 18-00-0005. Appendix No. 1 provides instructions and the distribution of the SF's 5515 and 215. The net amount of all debit vouchers and deposit tickets reported to ALC 18-00-0005 must be shown on the FRBs Daily Balance Wire to BGFO on line 14-A. This amount is reconciled to the confirmed copies of the debit vouchers and deposit tickets received at MOD, St. Louis, Missouri.

PS Form 1901 "Advice of Classification for Postal Money Orders" is basically a reconciliation form prepared by the FRB. Certain data from the SF's 5515 or 215 (confirmed date, document, number, and amount) will be. shown under the block titled "Charge to ALC 18-00-0005." This amount must agree with the total for the block titled "Classification of Postal Money Orders" which reflects the description, code, number of items, and amount of the postal money orders being shipped. The money order documents will be shipped to MOD, St. Louis, Missouri. Adjustments of errors made on previous shipments will also be reported under the "Classification of Postal Money Orders" block and supported by completing the "Schedule of Adjustments Entered Under Code 003" shown at the bottom of the PS Form 1901 (Appendix No. 1). NO COPIES OF THE PS FORM 1901 WILL BE SENT TO TREASURY.

Each PS Form 1901 is accountable to USPS, therefore, if the FRB voids a PS Form 1901, send all copies to:

Postal Data Center
Processing Control Division
Attn: Accounting Section

P.O. Box 14431
St. Louis, MO 63180

These voided copies should not be included with the shipment of money orders. If the PS Form 1901 is destroyed, Processing and Control Division, Accounting Section, should be advised in writing.

Section 7040—Processing Fit Money Orders

Batching and Listing Fit Money Orders. Paper money orders are MICR printed with the routing code (including a routing number of 0000-0020 or 000000204) and the serial number with check digit. The routing number is also preprinted in the upper right corner on the form, which is in the location and front as prescribed by the ABA. FRBs will process FIT money orders as follows:

Receive money orders from banks and process on high speed equipment in the manner most compatible with the processing of other categories of cash items.
Prepare batches of no more than 500 items.
Insert (in numerical sequence) USPS batch Locator Control Documents so that one is filed at the beginning of each batch of money orders to be read.
Create a paper-tape list of serial numbers with optional check digit and amount of each money order read. The list will show the batch number and a subtotal for each batch with an overall total of all money orders listed on the paper tape.
The total amount of fit items should be entered on PS Form 1901, code 100.
Money orders bearing unreadable MICR characters in the on-us field are not to be rejected and handled as mutilated. List the characters that can be read on the paper tape as a reconcilement aid.

7040.10 -Preparation of Recapitulation of Batch Totals. Prepare a PS Form 1175 (Appendix No. 1) or equivalent machine produced summary daily for the batches processed and listed on the paper tapes. Enter each batch number, item count, and total separately. The DAILY TOTAL line of the PS Form 1175 must equal codes 100 and 110 on the PS Form 1901. Submit a separate PS Form 1175 to support code 400 of "Dom. Intl" on the PS Form 1901.

7040.20 -Adjustments Between Amounts Charged and Money Orders Listed. The total amount of the PS Forms 1175 should agree with the amount classified on the PS Form 1901. If the total amount of the PS Form 1175 is larger than the amount shown on the PS Form 1901, prepare another SF 5515 for the NET AMOUNT OF THE DIFFERENCE and process for ALC 18-00-0005. Whenever the total amount of the PS Form 1175 is less, prepare an SF 215 for ALC 18-00-0005 and process for the NET AMOUNT OF THE DIFFERENCE. These documents will be functioned on the daily transcript and listed on the PS Form 1901.

7040.30 -Shipping Money Orders. Instructions for shipping money orders to MOD are as

follows.

Place batches of money orders, including the USPS Batch Locator Control Documents in shipping boxes. Maintain the money orders and batches in the same sequence as they were read and listed on the paper tape list.
Mail the original PS Form 1901 to:
Postal Data Center
Processing Control Division
Attn: Accounting Section
P.O. Box 14431
St. Louis, MO 63180
Attach the last three copies of PS Form 1901, to the PS Form 1175 or machine equivalent and place all documents in the last box of money orders for that day.
Place the paper tape list and the mutilated tapes in the same box.
Batches of mutilated money orders may be included in the same box or in the same shipment as fit money orders, provided the batches of mutilated money orders are clearly identified as mutilated.
Place a completed box label on the front of each box. The boxes should bear sequential numbers on the labels (e.g., "Box 2 of 4") to facilitate USPS processing.
When justified by the number of boxes shipped, the boxes may be in the larger No. 5 box shipping carton.
Place the boxes and cartons in mail pouches for delivery to the USPS representatives. Due to the limited space available on the pouch label, the mailing address on the label should read as follows:

St. Louis Missouri 63182
MOD P.O. Box 14963
From: F.R.B. (City)

Shipment will be made to the MOD by registered mail using pouches with rotary locks provided by the USPS.

Section 7050—Processing Mutilated Money Orders

This section relates to the handling of mutilated paper money orders with ABA routing numbers 0000-0020 or 000000204.

7050.10 -Mutilated paper money orders must be grouped in batches not to exceed 200 documents in a batch. If the total number of mutilated items does not exceed 200, they may be handled as one batch. For larger quantities, make as many batches as necessary, not exceeding 200 in any one batch.

7050.20 -Insert a USPS Batch Locator Control Document at the beginning of each batch of mutilated money orders.

7050.30 -Prepare an adding machine listing of each batch showing the following information:

FRB name or code at the top.
The amount of each item.
The total amount of the batch.
FRB clearance date.
Batch number.

7050.40 - Batches of the paper money orders that cannot be machine processed without first being MICR amount encoded may be delivered to the USPS representative without processing, provided the above requirements are essentially met.

7050.50 - The total amount of mutilated items should be entered on the PS Form 1901, code 110.

Section 7060—Detection Of Stolen Or Raised Money Orders: FRBs are not required to institute regular routing procedures for the detection of stolen or raised money orders. However, each FRB will cooperate, in special circumstances, to aid USPS representatives in the detection of these items.

Section 7065—Adjustment of Errors: Adjustment of errors and charges by the FRB will be made by using SF 5515 for ALC 18-00-0005, and PS Form 1176 "Schedule of Differences in Money Order Clearances". (Appendix No. 1). All charges or credits accepted will be identified by the FRB, itemizing the schedule number, as indicated on PS Form I 1 76, and amount on the PS Form 1901 for code 003.

Section 7070—Processing Old Style Money Orders: "Punch card" money orders that have the ABA routing number 0000-0119 will be handled as mutilated items. They should be identified as old style "punch card" money orders on the PS Form 1901 for code 004.

Section 7075—Processing Domestic International Money Orders (Semi-Domestic): Canadian money orders, ABA routing number 0000-0127, and Canal Zone money orders, ABA routing number 0000-0800, can be mechanically processed; all others must be processed manually. The batch size of Canadian money orders cannot exceed 200 documents. Money orders of different countries cannot be intermingled; each country must be batched separately. The total of all domestic-international money orders should be shown under code 400 on the PS Form 1901.

Section 7080—Other Procedural Matters

7080.10 -Postal Service Reimbursement to FRBs. The Postal Service has agreed to reimburse the FRBs for services provided in processing postal money orders beyond the level of service provided to financial institutions paying cash items. Charges will be determined by an annual survey, according to Federal Reserve and U.S. Postal Service agreements, and will be billed monthly with a single bill for each Federal Reserve District submitted to the Money Order Division, and will be paid at the end of each 6 months. The Postal Service reserves the right to review and challenge the method used in calculating these charges.

7080.20 -Replacement of Money Order Lost in Transit. When a money order is lost in transit, in place of submitting a photostatic copy, a PS Form 6401 "Domestic Money Order Inquiry", must be submitted (Appendix No. 1). The forms are available at all post offices. The money order serial number, amount, purchaser or payee, name and address to whom a replacement is to be issued, and the written signature of the person filing the request for replacement must be completed on the PS Form 6401. The remaining information should be provided, if available, to aid in the replacement process. If the original money order has been paid, a replacement cannot be issued. A photocopy of the paid item will be provided without cost to the FRB.

Requests for information from member banks as to FRB date, batch number, and amount in which a particular money order was enclosed but listed free; was MICR encoded wrong or was processed but not credited to the bank, should be made by memorandum or letter to:

Redemption Reconciliation Section
Money Order Division

P.O. Box 14975
St. Louis, MO 63182

If a replacement was previously requested and the request was returned "Paid", then the information on the returned PS Form 6401 should be provided as part of your memorandum or letter.

7080.30 -Alternative Procedures. The Postal Service and the Federal Reserve System will continue, as capabilities and resources permit, to work toward truncating Postal Money Orders at the FRBs for subsequent data transmission to the Money Order Division. Acceptable alternative procedures resulting from this effort will be specified in subsequent amendments to this chapter.

Section 7090—Procurement of Forms

The Postal Service forms PS-1901 and 1175 may be obtained from:

St. Louis Postal Data Center

P.O. Box 14963
St. Louis, Missouri 63182

However, obtain pouch labels (showing the mailing address for money orders), box labels, and money order shipping boxes from your local postmaster.

Contact Us

Contact Details

Questions concerning the processing of Postal money orders may be directed to:

St. Louis Postal Data Center

P.O. Box 14963
St. Louis, MO 63182

314-425-5475; FTS 279-5475

Inquiries relating to Domestic -International money orders (semi-domestic) should be addressed to:

St. Louis Postal Data Center

P.O. Box 14972
St. Louis, MO 63182

Questions on accounting documentation that affect Treasury's General Account may be directed to:

Deposit Reconciliation Section
Division of Government Accounts and Reports
Bureau of Government Financial Operations
Department of the Treasury

Treasury Annex No. 1
Attn: GAO Bldg., Room 3108
Washington, D.C. 20226

202-566-6521

Reporting Deposits And Treasury Check Issues For Payment Of Public Debt Redemptions

Treasury Check Reclamation Procedures

Introduction: This chapter prescribes procedures and notices regarding the Department of the Treasury’s check reclamations.

Section 4010—Authority: Under Section 15 of the Federal Reserve Act of December 23, 1913, as amended (12 U.S.C. 391), and Section 10 of the Federal Reserve Act of June 11, 1942, as amended (12 U.S.C. 265), the Secretary of the Treasury sets forth regulations to the Federal Reserve Banks (FRBs) as government depositaries and fiscal agents. If Treasury determines that a check has been paid over a forged or unauthorized endorsement, the Commissioner, Bureau of the Fiscal Service (Fiscal Service), may reclaim the amount of the check from the presenting bank or any other endorser that breached its guarantee of endorsement (31 CFR 240.8).

Section 4020—Notices

4020.10—Notice of Direct Debit (U.S. Treasury Check Reclamation)

The Notice of Direct Debit (U.S. Treasury Check Reclamation) includes the amount due, the reason for the reclamation, the direct debit date, the pertinent check locator information, the procedures for making payment, and the related laws and regulations governing the reclamation process.

4020.20—Summary of Debt Statement

This statement consists of a detailed listing of outstanding reclamation and associated information, the applicable Fiscal Service collection regulations, and an explanation of the columns on the Summary of Debt Statement. It includes the following:

four-digit check symbol and eight-digit check serial number,
payee’s name,
reclamation date,
request ticket number,
amount of principal, and
total amount due.

4020.30—Abandonment Notice to Banks

If Fiscal Service determines that a financial institution is no longer liable for payment of a reclamation, Fiscal Service enters an abandonment code into TRACS. Weekly, TRACS sends the electronic abandonment notices through the FRB to notify financial institutions that they no longer owe a refund.

Section 4025—Treasury Check Reclamation Process

4025.10—Processing a Notice of Direct Debit (U.S. Treasury Check Reclamation)

If Fiscal Service determines that a check has been improperly negotiated, it transmits the Notice of Direct Debit (U.S. Treasury Check Reclamation) through the FRB FedMail System to the appropriate financial institution.

4025.20—Presenting Banks Payment Procedures

Presenting banks have 30 days from the date of the Notice of Direct Debit (U.S. Treasury Check Reclamation) to pay the full amount of the reclamation before their Federal Reserve master account is automatically debited. However, if the financial institution protests within 30 days from the date of the Notice of Direct Debit (U.S. Treasury Check Reclamation), the direct debit will not occur. If a presenting bank enters a protest after the direct debit has occurred, and the protest is substantiated, Fiscal Service will refund the presenting bank the amount of the reclamation.

4025.30—FRB Processing of Debit Authorizations

Daily, after receiving authorization payments from the presenting banks, the FRB:

prepares batches of authorization payments, and
posts authorizations to TRACS.

These authorized payments will include debit authorization for purposes of check reclamations.

At the end of the processing day, 8 p.m. Eastern Time, TRACS collects the authorizations, posts accounting within TRACS, and sends the authorization file to the FRB to be posted to EASy and through DVS to CIR. Fiscal Service can access CIR to view all Debit and Credit Voucher activity associated with collections.

Contact Us

Contact Details

Direct questions concerning this chapter to:

Department of the Treasury
Bureau of the Fiscal Service
National Payment Integrity and Resolution Center
Customer Service Branch

PO Box 603
Bensalem, PA 19020

855-868-0151

Letter Of Credit - Federal Reserve Bank System Operational Requirements

Introduction: This chapter prescribes the operating procedures, forms and format to be followed by Federal Reserve banks and branches (FRBS) for letter-of-credit operations.

Section 5015—Authority: 12 U.S.C. 391 authorizes the Secretary of the Treasury to use Federal Reserve banks and branches as depositaries and fiscal agents of the United States.

Section 5020—Letter of Credit -Federal Reserve Bank System

Functions of the system are summarized as follows:

The Federal program agency will obtain the manual signatures of recipient organization officials authorized to sign payment vouchers drawn on the letter of credit.
The Federal program agency will send a certified letter of credit and signature card to the Cash Management Regulations and Compliance Staff (II TFM 5-5095). This staff will transmit the letter of credit and signature card to the appropriate Federal Reserve bank (FRB) after the signature of the certifying officer of the Federal program agency and information on the letter of credit and signature card are verified. Responsibility for the amount authorized and validity or legal effect of signatures entered on any letter of credit or signature card rests entirely with the certifying officer of the Federal program agency, not the FRB.
As funds are needed, the recipient organization will submit a properly completed payment voucher to the financial institution for transmission to the appropriate FRB. Payment vouchers are generally considered as noncash items and are credited to the account of a financial institution which has access to services provided by a FRB.
The FRB will review the payment voucher and, if proper for payment, credit the account of the financial institution and charge the account of the Treasury with the amount of the voucher.