[Michlib-l] Info on ACH Payments

[Tracy Logan]

Thank you so much to everyone who replied to my inquiry about processing
ACH payments. I received a lot of information! It will be very helpful
moving forward. I have compiled the responses below. I also received some
policies and forms as attachments. I have those if you are interested.
Thanks again! You are all so lovely. What a great profession!

1. The only regular ACH debit we typically authorize is for our payroll
processing company.  However, their software development team had a big
screw-up a month ago and debited us for over $224,000 in error.  They
corrected it the same day, but it shook our confidence in the security of
ACH.

As of this morning we have instituted ACH Positive Pay with our primary
bank, which is making me feel much more comfortable.  If a larger amount
than we typically allow is presented, we have the option to stop the
payment.



2. First you need to have a board-approved Electronic transactions policy.
Ours states the board approves a list of vendors authorized to receive ACH
payments, and they review and approve that list at least once a year.

Procedurally, invoices we want to pay via ACH go through the same process
as checks. Our AP person puts them in Quickbooks, prints a list for the
check run that I review and approve, then she prints the checks. Anything
on that list that we want to pay via ACH instead of a check, she does not
print a check but instead she fills out the ACH authorization form
(attached). Two board members sign the checks and the ACH forms. The ACH
form authorizes me to go into our bank account to initiate the payment,
which per bank procedure is released by a separate library employee. Then
the employee who releases the payment goes back into Quickbooks to mark the
item as paid via ACH. Reports of all checks and ACH payments are included
in the board packet for final approval.

The struggle we have had is that not all vendors are set up to accept ACH
payments in which we push the money to them like a direct deposit. They
want us to give them the library’s bank account number so they can pull the
money out. We don’t do that. Those vendors are stuck getting a paper check.



3. Our board approved specified accounts for ACH payments. We use
Quickbooks, these bills and payments are entered as usual with check number
"ACH". These are included in our Check Detail report as part of the
treasury report that is approved by the board each month.


4. In DeWitt, we paid many things by either ACH or automatic payment.  We
were trying too cut down on written checks whenever possible.  We developed
a written library policy with the assistance of Foster Swift.  Once the
policy was approved, our procedure was:

Whenever we wanted to pay a vendor through ACH, it first had to be approved
by the Board.

Approval for the ACH to that vendor wad added as an agenda item for the
next meeting.

Once the Board approved the vendor, we would set up the payment.

ACH payments would then be listed on the financial reports each money like
other payables (and approved like a check).

If the auditors had questions about an ACH, they would go back to Board
minutes and verify that the Board had approved ACH payment to that vendor.


5. We had to put an ACH Policy into place before we could move to ACH
transactions for paying bills (or offering direct deposit!) was an ACH
policy. We followed a template - it's here if you'd like to look at it -
https://drive.google.com/file/d/1HaFvPGFYSI2L8XvQoYF75sMb35kiHTte/view?usp=drive_link

As far as process & approvals go, in my own experience(s), when we pay
bills online we still have to create a voucher/paper trail for it. My board
approves it after the fact. We use a service called SignNow for
e-signatures, and I can go back and pull out any voucher at any time if
there's a question from a member, vendor or board member - the service
saves/archives them for us, and my admin also has the paper versions that
get audited and live with our permanent financials. Going with ACH
transactions cuts down on checks being sent by mail, but it definitely does
not cut down on the overall use of paper.

When I worked at Lapeer, we had a Finance Committee (Board treasurer and
another board member) that would meet ahead of the scheduled board meeting
to go over the "post audits" - the bills that had already been paid, to
double check & verify numbers, and to authorize & pay the current bills -
we did a lot of check signing and initialing on those days. I don't know if
they still use that system or if they have changed things up, but it worked
well at the time - I'm sure there were efficiencies to be found at some
point along the way.

Also in my experience, auditors don't care what you do or how you do it, as
long as they can find what they need at audit time. It's when they can't
find proof or documentation or the policy that supports the
proof/documentation that things get complicated.



6. We are just in the process of transitioning to ACH payments. We use
Chase bank, and they have an electronic payment system called Cashflow 360,
which is powered by Bill.com. We have tried to duplicate the approvals
process we have in place for regular checks, which require the approval of
two signers from our bank account. There are three of us in our Admin
department who are signers: the Operations Manager, Assistant Manager, and
myself. In a nutshell, our Financial Coordinator receives the invoices and
enters them into Cashflow 360. To enter the bills, she just has to forward
the electronic invoice to our Chase inbox, or scan and upload. Cashflow 360
has AI features, and it will actually populate fields and seems to be
improving in accuracy the more we use it, which is totally mind-blowing to
me!

Once everything is entered and coded, two of the three signers need to
login in and review the payments, then click a button to approve. Once that
happens, the payments are submitted. If we don’t have ACH info for the
vendor, the bank mails them a check, similar to how you might pay a bill
from your own bank’s website. We will provide a report for our board to
approve in our consent agenda, just like a check register.


7. We don't have a lot of items that we ACH for, but for the most part, we
pre-approve payments for a number of ACH transactions before the beginning
of our fiscal year. This includes payroll, payroll taxes, one utility
company, and one other thing I can't think of at the moment. They are also
included in my list of checks made in my board packets every month which
the board "approves." We did have a situation, before the utility company
was on our pre-approved list, where we had our treasurer (who is a second
signer on our checks) initial it before the due date and when it actually
went through and was charged.


8. We have a very simple system that I have used for the past five years in
my role here with Lapeer District Library.

It was taught to me in my orientation training.

We print out a physical copy of all our bills.

When I pay a bill, I take the printed copy of the bill and use that
information to put the details into Quickbooks.

I have a log sheet where that bill is numbered to correspond to that same
number in Quickbooks.

That number is also written in the upper right hand corner of each bill I
process.

Prior to a board meeting, all of my totals are tallied up on my cover log
sheet and it is clipped to the front of the pile of bills.

My director double checks to make sure all is in order.

I then proceed to copy them for the board packets.


The board treasurer and finance committee meet right  before our board
meetings.

They review the financials and then approve them for the record.

In this presentation they are able to see all charges and dates items were
paid.

The results will be affirmed and approved during the board meeting.

This system has worked for our library system because we are a Class 6
library and this is manageable.



9. We currently have limited ACH payments related to payroll – direct
deposits, taxes withheld and miscellaneous payroll deductions. We have a
debit block on our checking account and these companies are set up as
“allowable” with maximum dollar amount withdrawals. The related invoices
are processed in our financial software (BS&A) and approved by the
appropriate department head or director. The system approval is what we use
as our approval for the ACH payments.

We are fortunate in that we remit payment for all expenditures approved
within our annual budget and provide our board with a monthly check
register for them to see the activity and question anything that looks
suspicious.

We discussed more secure payment methods with our Commercial Banker and
recently obtained a purchasing card. We will use the purchasing card to
make as many online payments as we can, such as library materials purchases
and DTE, but we will not use it for vendors that charge a fee. We are just
in the beginning stages, so we also need to update our procedures. We are
also looking into utilizing our banks online payment service. This is all
new to us, but I do look forward to running some thoughts by our auditors
next week to see if they will provide us some direction in regards to best
practices for internal controls in these circumstances.



10. We are a class 4 library and do the following for all types of payments:

Bill comes in.  Reviewed by either AD or Director for accuracy.  The
opposite person enters bill into Quickbooks—this gives our small
organization a separation of duties for accounting standards.  The physical
bill is annotated with budget line payment comes from, date of payment, and
account payment comes out of.  The Secretary and Treasurer are signers and
must approve all bills (though the treasurer said if they ever can’t come
soon enough, they will sign after the fact).  Either one stops by when
there are a few bills to pay and signs check and initials the bill
paperwork.  Then the Director will either mail the paper check or set up an
ACH payment through our bank.  I will update the quickbooks entry with the
ACH confirmation number we get from our bank.  Then, we scan the paper bill
into a folder to be given to our auditor at end of year.  I have attached a
sample of a bill for you.

As far as auditors go, we use Siegfried Crandall and they are enormously
helpful in answering questions….just a thought for your future. Please
note, we do our own payroll and bookkeeping in-house.  My predecessor
stayed a couple extra months to train me and the new AD on our library’s
accounting procedures.  We save a lot of money this way.  I have had to
learn the chart of accounts from the state of Michigan, but totally worth
it.



-- 
Tracy Logan
Library Director
Cadillac Wexford Public Library
411 S. Lake Street
Cadillac, MI 49601
231-775-6541
logant at cadillaclibrary.org
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