[Federal Register Volume 61, Number 145 (Friday, July 26, 1996)]
[Rules and Regulations]
[Pages 39254-39259]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-19073]



[[Page 39253]]


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Part VI





Department of the Treasury





_______________________________________________________________________



Fiscal Service



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31 CFR Part 208



Management of Federal Agency Disbursements; Interim Rule

  Federal Register / Vol. 61, No. 145 / Friday, July 26, 1996 / Rules 
and Regulations  

[[Page 39254]]



DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Part 208

RIN 1510-AA56


Management of Federal Agency Disbursements

AGENCY: Financial Management Service, Fiscal Service, Treasury.

ACTION: Interim rule with request for comments.

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SUMMARY: Chapter 10 of the Omnibus Consolidated Rescission and 
Appropriations Act of 1996, Pub. L. 104-134, is the Debt Collection 
Improvement Act of 1996 (the ``Act''). Section 31001(x) of the Act 
amends 31 U.S.C. 3332 to require Federal agencies to convert from 
checks to electronic funds transfer in two phases. Phase one affects 
newly-eligible recipients of Federal payments. During phase one, which 
begins on July 26, 1996, all recipients of Federal payments (other than 
payments under the Internal Revenue Code of 1986) who become eligible 
to receive those payments on or after July 26, 1996, must receive them 
electronically unless the recipient certifies that the recipient does 
not have an account at a financial institution or authorized payment 
agent.
    Phase two covers the conversion from checks to electronic funds 
transfer for all Federal payments, except payments under the Internal 
Revenue Code. The Act provides that, subject to the Secretary of the 
Treasury's authority to grant waivers, all Federal payments made after 
January 1, 1999, must be made by electronic funds transfer.
    The Financial Management Service (the ``Service'') is adopting an 
interim rule to implement Section 3332(e), as amended. The Service 
invites public comments on the interim rule and on issues related to 
implementation of the requirements that take effect on January 1, 1999.
    This interim rule is designated as 31 CFR Part 208. The Service 
anticipates that Part 208 will contain all provisions relating to the 
management of Federal agency disbursements. Currently, 31 CFR Part 206 
contains several provisions governing the timely collection and 
disbursement of funds by Federal agencies. When regulations are issued, 
sometime in 1997, to implement phase two, the Service will move those 
portions of Part 206 that deal with Federal agency disbursements into 
the new Part 208. In addition, all provisions relating to collections 
by Federal agencies will be revised and consolidated into Part 206.

DATES: This rule is effective upon publication. Comments will be 
received until November 25, 1996.

ADDRESSES: All comments should be addressed to Cynthia L. Johnson, Cash 
Management Policy and Planning Division, Financial Management Service, 
U.S. Department of the Treasury, Room 420, 401 14th Street S.W., 
Washington, D.C. 20227.
    A copy of the interim rule is being made available for downloading 
from the Financial Management Service home page at the following 
address: http://www.ustreas.gov/treasury/bureaus/finman/.

FOR FURTHER INFORMATION CONTACT: Aurora Kassalow, Financial Program 
Specialist, at (202) 874-5742; Cynthia L. Johnson, Director, Cash 
Management Policy and Planning Division, at (202) 874-6657; Anne 
Wallace, Attorney-Advisor, at (202) 874-6681.

SUPPLEMENTARY INFORMATION:

(1) Background

     Section 31001 (x) of the Act amends 31 U.S.C. 3332 to require 
Federal agencies to convert from paper-based payment methods to 
electronic funds transfer in two phases under regulations prescribed by 
the Secretary of the Treasury (the ``Secretary'').
    Enactment of the electronic funds transfer legislation is an 
important step in achieving Treasury's goal of an All-Electronic 
Treasury. Treasury began using electronic funds transfer more than 20 
years ago and, over the years, has expanded its use of electronic 
payment methods for several reasons. First, the administrative cost of 
making payments by electronic funds transfer is far less than making 
payments by checks. Second, an electronic funds transfer is much safer 
than a check; an electronic payment is rarely lost, stolen or damaged 
and cannot be forged. However, on those few occasions when an 
electronic funds transfer is mis-routed, it can be traced and quickly 
rerouted to the recipient, usually within 24 hours. Third, the use of 
electronic funds transfer will enable the Federal Government to provide 
better service to recipients who claim their checks have been lost, 
stolen, damaged, or delayed during delivery by improving response time 
in tracing payments.
    Current Federal law requires some recipients of Federal payments to 
receive those payments electronically. Specifically, 31 U.S.C. 3332 (a) 
through (d) require that Federal wage, salary, and retirement payments 
to individuals who began to receive such payments after January 1, 
1995, be paid by electronic funds transfer. In addition, 31 U.S.C. 3335 
requires executive agencies to provide for the timely disbursement of 
funds in accordance with regulations prescribed by the Secretary.
    As amended by the Act, section 3332 is broader than existing law in 
several respects. First, the definition of Federal payments in the new 
Sec. 3332 (j)(3) covers all payments other than payments under the 
Internal Revenue Code. Second, the definition of Federal agency in the 
new section 3332 (j)(2) includes all departments, agencies, and 
instrumentalities of the United States Government, and corporations 
owned or controlled by the Government of the United States.
    As amended, section 3332 contains several provisions to facilitate 
the transition from cash and checks to electronic funds transfer. In 
phase one, the head of each agency is directed to waive the electronic 
funds transfer requirement if the recipient certifies in writing that 
the recipient does not have an account with a financial institution or 
authorized payment agent. In phase two, which begins on January 1, 
1999, the Secretary is authorized to waive the electronic funds 
transfer requirement for individuals or classes of individuals for whom 
compliance imposes a hardship; for certain categories of checks; and in 
other circumstances deemed necessary.
    The Service intends to move quickly to implement the amendments to 
31 U.S.C. 3332. In addition to adopting this interim rule, the Service 
plans to launch an extensive educational campaign to inform agencies, 
individuals, businesses, and the financial services industry about the 
provisions of the Act. The Service also will promote electronic funds 
transfer through increased marketing of Direct Deposit and other 
electronic payment options. Direct Deposit involves the transfer of 
funds from an agency to a recipient's account at a financial 
institution by means of the Automated Clearing House system. Direct 
Deposit is a safe, convenient, and economical method of making 
payments. A major challenge is reaching the millions of individuals, 
and some small businesses, that do not have an account at a financial 
institution. The Service looks forward to working with consumers and 
small businesses, as well as Federal agencies and the financial 
services industry, to meet this challenge.
    The Service recently began working with the financial services 
industry on a marketing initiative called Direct Deposit Too. Direct 
Deposit Too involves the establishment of a simple, low-cost account at 
a financial

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institution, such as an account that is accessible only through a 
plastic card used at automated teller machines and point-of-sale 
terminals.
    In addition, the Service will work with agencies to implement other 
provisions of the Act. Specifically, section 31001 (y) of the Act 
amends 31 U.S.C. 3325 by adding a new subsection (d) which requires the 
head of each executive agency to include the Tax Identification Number 
(TIN) of each person receiving a payment in the certified voucher 
submitted to the disbursing official. This provision of the Act became 
effective April 26, 1996, the date the Act was signed into law. 
Treasury Financial Management Bulletin 95-10, which was issued on 
August 18, 1995, currently directs Federal agencies to provide the TIN 
when requesting the Service to make disbursement to vendors and Federal 
employees. The Service will amend Bulletin 95-10 in the near future in 
accordance with the provisions of section 3325 (d).
    The Service is planning to meet with agencies to explain the 
requirements of the Act and the interim rule and to identify issues 
that need to be resolved. The Service also will form a task force of 
Federal agencies to obtain information that will be used in formulating 
a final rule and provide guidance to agencies on how to reach those 
individuals and small businesses who face barriers in converting to 
electronic funds transfer.

(2) Discussion

A. Section by Section Analysis of Interim Rule Implementing the July 
26, 1996, Requirements

Section 208.1  Scope and Applicability
    This section provides that Part 208 applies to all payments made by 
agencies and requires such payments to be made by electronic funds 
transfer, unless a waiver is granted. This section also provides that 
Part 208 does not apply to payments under the Internal Revenue Code of 
1986.
Section 208.2  Definitions
    31 U.S.C. 3332(j)(2), as added by section 31001(x) of the Act, 
defines Federal agency as ``(A) an agency (as defined in section 101 of 
this Title); and (B) a Government corporation (as defined in section 
103 of Title 5).'' Section 101 of Title 31 provides that ``agency'' 
means a department, agency, or instrumentality of the United States 
Government. Section 103 of Title 5 defines Government corporation as a 
corporation owned or controlled by the Government of the United States. 
The definition of agency in Sec. 208.2(a) restates the statutory 
definition without change.
    Section 3332(j)(2), as added by the Act, does not distinguish 
between agencies whose disbursements are made by the Department of the 
Treasury and those agencies with delegated or statutory disbursing 
authority, known as Non-Treasury Disbursing Offices (NTDOs). The 
Service believes that both types of agencies are subject to section 
3332(e), as amended, and to Part 208. Further, in the opinion of the 
Service, the source of an entity's funds is not relevant in determining 
coverage under the Act: entities whose funds are derived from 
assessments or fees are covered by Part 208 to the same extent as 
entities using appropriated funds.
    Section 3332(j)(3) provides that ``Federal payments'' includes 
``benefit payments,'' but does not define the latter term. The Service 
has added a definition of benefit payment in Sec. 208.2(b). This 
definition is substantially similar to the definition of benefit 
payment in 31 CFR 210.2.
    The definition of ``electronic funds transfer'' in Sec. 208.2(c) is 
based on the definition of this term in Sec. 3332(j)(1), as added by 
the Act. The Act's definition of electronic funds transfer is similar 
to the definition of ``electronic fund transfer'' in the Electronic 
Fund Transfer Act (the ``EFTA;'' 15 U.S.C. 1693). However, the Service 
has added the phrase ``includes, but is not limited to'' in the 
definition of electronic funds transfer in the interim rule to signal 
its intention to interpret ``electronic funds transfer'' broadly so as 
to accommodate the use by the Federal Government of a wide range of 
payment methods--existing and emerging--that offer convenience, safety, 
and efficiency over paper-based methods. For example, under this 
definition a credit card transaction is an electronic payment.
    The term ``Federal payment'' is defined in Sec. 208.2(d) of the 
interim rule. The Service believes that all payments made by an entity 
covered by section 3332(e), as amended, are subject to the requirement 
to use electronic funds transfer. This requirement applies whether the 
payment is recurring or non-recurring.
    The specific payments enumerated in the definition of Federal 
payment in section 3332(j)(3) are merely illustrative of the payments 
covered by section 3332(e), as amended. The definition of Federal 
payment in Sec. 208.2(d) restates the statutory definition and, in 
order to clarify the broad scope of this term, provides examples of 
payments typically made by agencies. The category of Federal salary, 
wage, and retirement payments includes, but is not limited to, thrift 
savings distributions, military wage and salary payments, Central 
Intelligence Agency annuities, military annuities, and Coast Guard 
retirement payments. The category of vendor payments includes any 
payment for goods or services. The category of expense reimbursement 
includes, but is not limited to, travel and expense disbursements and 
cash advances. Benefit payments, as defined in Sec. 208.2(b), includes, 
but is not limited to, payments for Social Security, Supplemental 
Security Income, Black Lung, Railroad Retirement Board Retirement and 
Annuity, Department of Veterans Affairs Compensation and Pension, and 
Worker's Compensation. The category of miscellaneous payments includes, 
but is not limited to, interagency payments, grants, loans, fees, 
principal, interest, and discounts related to U.S. transferable and 
non-transferable securities, refunds, and payments related to Federal 
insurance or guarantee programs for loans. The term ``Federal payment'' 
does not include payments under the Internal Revenue Code of 1986.
    The term ``financial institution'' is not defined in section 
31001(x) of the Act. The Service has added a definition of financial 
institution in Sec. 208.2(e). The definition in the interim rule, which 
is identical to the definition of financial institution found in 31 CFR 
Part 210, is intended to cover all depository institutions regardless 
of the form of their organization or the nature of their charter.
    The Service also has added a definition of the term ``payment'' in 
Sec. 208.2(f) which is based on the definition of the same term found 
in 31 CFR Part 210.
Section 208.3  Agency Responsibilities
    Section 208.3(a) implements section 3332(e), as amended, which 
supersedes 31 U.S.C. 3332 (a) through (d) (Federal wage, salary, and 
retirement payments) and 38 U.S.C. 5120 (a) and (d) (Veterans 
benefits); and thus requires all Federal payments to a recipient who 
becomes eligible for that type of payment starting on July 26, 1996, to 
be made by electronic funds transfer.
    The Service is sensitive to the administrative burden that 
compliance with the Act may impose on agencies. Therefore, in several 
instances which are discussed below, the Service has interpreted the 
Act's requirements in a manner designed to facilitate compliance.
    Section 3332(e), as amended, provides that all Federal payments to 
a recipient who becomes eligible for ``that type of

[[Page 39256]]

payment'' on or after July 26 must be made by electronic funds 
transfer. Section 208.3(a) of the interim rule provides that payments 
made to a recipient who becomes eligible for ``the payment'' on or 
after July 26 must be made electronically. The Service made this change 
to make clear that the payments that must be made electronically are 
only those for which the recipient becomes eligible on or after the 
trigger date of July 26, and not payments of the same type made by the 
paying agency for which the recipient became eligible prior to July 26. 
For example, if a recipient currently receives an interest payment, by 
check, on a Government security purchased before July 26 and, after 
July 26, the recipient purchases another Government security from the 
same agency, the interim rule requires the agency to pay interest on 
the security purchased after July 26 by electronic funds transfer. The 
agency would not be required to convert from check to electronic funds 
transfer the interest payment on the security purchased prior to July 
26.
    Since the phrase ``becomes eligible for'' is not defined in section 
3332(j), and this phrase may have different meanings in the context of 
different types of payments, the Service has divided Federal payments 
into six categories and defined eligibility in the context of each 
class of payment. The interim rule is designed to minimize the burden 
of compliance by defining the triggering date for determining 
eligibility for receiving an electronic payment, as the time at which 
the agency and the recipient have direct contact, either to obtain the 
routing transit number, account number, and any other information the 
agency needs to make payments electronically or, alternatively, to give 
the recipient the opportunity to certify that the recipient does not 
have an account and thus qualifies for a waiver.
    Under Sec. 208.3(a)(1), all individuals who apply for benefit 
payments starting on July 26, 1996, are subject to the mandatory 
electronic funds transfer requirement. The Service chose the date of 
application rather than, for example, the date on which an individual 
attains a specified age, because the application process affords the 
agency an opportunity to have contact with the recipient. The agency 
can obtain account information during the application process and those 
recipients who do not have accounts can certify to that fact.
    Section 208.3(a)(2) addresses eligibility in the context of Federal 
wage and salary payments. The interim rule provides that a recipient 
who has a date of entry on duty with an agency on or after July 26, 
1996, must receive wage and salary payments by electronic funds 
transfer, unless the recipient certifies that he or she does not have 
an account at a financial institution. Thus, an individual who begins 
working for an agency, transfers from one agency to another, or resumes 
Federal service after a break in employment on or after July 26, must 
receive such payments by electronic funds transfer, unless the 
recipient certifies that he or she does not have an account with a 
financial institution or authorized payment agent.
    Currently, 31 U.S.C. 3332 (a) through (d) provide that Federal 
wage, salary, and retirement payments paid to individuals who began to 
receive such payments after January 1, 1995, must be paid by electronic 
funds transfer unless the recipient made a written request for another 
form of payment. In addition, section 3332(c)(1) authorized the 
Secretary to grant waivers for a group of recipients upon a request by 
the head of an agency. These provisions remain effective until July 26, 
1996, when they are superseded by section 3332(e), as amended, and the 
interim rule. Consequently, Federal employees and retirees who become 
eligible to receive payments on or after July 26, 1996, must certify 
that they do not have an account at a financial institution or 
authorized payment agent in order to qualify for a waiver.
    Section 208.3(a)(3) of the interim rule provides that, in the case 
of Federal retirement payments, ``becomes eligible for'' means a 
recipient applies for retirement from an agency on or after July 26, 
1996. There may be special circumstances in which a recipient applies 
for retirement from an agency on or after July 26, while at the same 
time the recipient is already receiving retirement payments from a 
previous agency. In this circumstance, the recipient would be required 
to receive retirement payments from the second agency electronically.
    Section 208.3(a)(4) addresses vendor payments. Under the interim 
rule, payments made under a contract or purchase order resulting from a 
solicitation issued on or after July 26, 1996, must be made 
electronically. This requirement applies to all contracts and purchase 
orders for goods and service whether or not they are covered by the 
Federal Acquisition Regulation. The interim rule does not require an 
agency to convert payments for contracts or purchase orders executed 
prior to July 26 to electronic funds transfer.
    Section 208.3(a)(5) of the interim rule provides that, in the case 
of grants, eligibility is determined by reference to the date on which 
a grant application is filed or renewed.
    Section 208.3(a)(6) is a catch-all provision that applies to all 
other Federal payments, such as expense reimbursements and interest, 
not addressed in subsections (1) through (5). The Service expects 
agencies to fashion eligibility rules that are consistent with the 
spirit of the Act.
    Section 208.3(b) provides that, for a recipient who becomes 
eligible to receive a Federal payment on or after July 26, the head of 
each agency must waive the requirement to be paid by electronic funds 
transfer if the recipient certifies in writing that the recipient does 
not have an account with a financial institution or authorized payment 
agent. The Appendix contains a model that may be used to make such a 
certification. The use of this model is optional; an agency may 
customize the model as needed.
    The Service recognizes, however, that agencies may encounter 
obstacles in converting to electronic funds transfer. Section 208.3(c) 
provides that, if the head of an agency determines that the agency 
cannot make a Federal payment or class of Federal payment in accordance 
with Sec. 208.3(a) due to the inability of the agency's system to make 
the payment(s) by electronic funds transfer, then the agency shall 
notify the Service immediately in writing and shall submit an 
implementation plan to the Service no later than January 1, 1997. The 
plan shall:
    (1) Identify the specific type of payment(s) that cannot be made by 
electronic funds transfer;
    (2) Describe the system problem that prevents the agency from 
making the payment(s) by electronic funds transfer; and
    (3) Outline a proposed solution and provide a time table for 
solving the problem.
    Nothing in Part 208 should be construed to prevent an agency from 
continuing to make payments while the agency's plan is being developed, 
reviewed, and implemented. The Service will work with agencies to 
develop and implement the plan and provide any assistance the agency 
may need.
Section 208.4  Recipient Responsibilities
    Section 208.4 implements sections 3332(e) (2) and (g) as amended by 
the Act and provides that (1) a recipient of a Federal payment must 
designate a financial institution or authorized payment agent through 
which a Federal payment may be made or certify in

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writing that the recipient does not have an account with a financial 
institution or authorized payment agent; and (2) provide the agency 
with the information requested by the agency in order to effect the 
payment.

B. Regulations to Implement the January 1, 1999, Requirements

    During the next two years, Treasury will work with agencies, the 
financial services industry, and representatives of individuals and the 
vendor community, to meet the challenge of delivering all Federal 
payments by electronic funds transfer. Efforts will include intensive 
marketing of Treasury's existing Direct Deposit program for individuals 
and businesses; new products such as Direct Deposit Too; and services 
such as Electronic Benefit Transfer (EBT). The Service will continue to 
develop, test, and implement innovative forms of electronic payment 
mechanisms. The Service also plans to hold forums at which the public, 
the financial service industry, Federal agencies, and other interested 
parties will be invited to share their views regarding implementation 
of the requirements that take effect on January 1, 1999.
    In order to assess the current capabilities of agencies and to 
assess their future needs, the Service requests agencies to submit an 
implementation plan that addresses the points listed below. Agencies 
subject to the Chief Financial Officers Act of 1990 (31 U.S.C. 901) 
must submit the plan by January 1, 1997. All other agencies must submit 
the plan by July 1, 1997. The plan must:
    (1) List the types of Federal payments the agency currently makes 
by check, especially those payments that the agency believes would be 
difficult to convert to electronic funds transfer;
    (2) Describe the obstacles the agency has encountered, or expects 
to encounter, in converting payments made by check to electronic funds 
transfer. The Service invites comment on the cost-effectiveness of 
converting small dollar cash and check payments and non-recurring 
payments to electronic funds transfer;
    (3) Provide suggestions for removing the obstacles for each type of 
payment and the electronic payment methods that could be used;
    (4) Provide a timetable for the orderly and systematic conversion 
of check payments to electronic funds transfer; and
    (5) Identify the assistance each agency anticipates it will need in 
order to convert payments currently made by check to electronic funds 
transfer.
    The Service will use this information to assess the requirements 
for converting from cash and checks to electronic funds transfer 
payments for each payment type and determine what assistance agencies 
need in order to meet the January 1999 implementation date.
    As noted above, where the head of the agency determines that the 
agency cannot make a Federal payment or class of Federal payment in 
accordance with Sec. 208.3(a) due to the inability of the agency's 
system to make the payment(s) by electronic funds transfer, then the 
agency must notify the Service immediately in writing and must submit a 
plan in accordance with Sec. 208.3(c).
    The Service would like to work with the financial services industry 
to expand and enhance existing electronic payment methods and, where 
necessary, develop new ones so as to facilitate the transition from 
checks to electronic funds transfer. The industry is invited to:
    (1) Discuss the capability to process electronic payments and to 
provide the payment information customers need, especially for vendor 
payments; and
    (2) Provide suggestions regarding improvements to the electronic 
payment methods currently available and ideas for new electronic 
payment methods to meet the needs of recipients who receive checks.
    Members of the public are specifically invited to comment on the 
following:
    (1) Obstacles to receiving payments electronically, such as 
geographical barriers and physical, mental, educational, or language 
barriers;
    (2) The availability of banking services, especially for the 
segment of the public that is currently unbanked;
    (3) Suggestions for improving the electronic payment methods 
currently available and ideas for new types of electronic payment 
methods;
    (4) Suggestions for implementing the provisions relating to the use 
of an authorized payment agent for receipt of a Federal payment by 
means of electronic funds transfer, including qualifications for 
serving as an authorized payment agent and any limitations on the terms 
of the contractual relationship between the recipient and the 
authorized payment agent; and
    (5) The needs of unbanked recipients when selecting an electronic 
payment method or a financial institution.
    Section 3332(i)(2), as added by section 31001 (x) of the Act, 
provides that regulations issued by the Secretary shall ensure that 
individuals who are required to have an account at a financial 
institution because of the application of section 3332(f)(1) will have 
access to such an account at a reasonable cost. Further, the Secretary 
is directed to ensure that such individuals are given the same consumer 
protections with respect to the account as other account holders at the 
same financial institution. All interested parties are invited to 
comment on these provisions.
    Section 3332(f)(2) authorizes the Secretary to waive the electronic 
funds transfer requirement for individuals or classes of individuals 
for whom compliance poses a hardship, for classifications or types of 
checks or in other circumstances as may be necessary. The Service 
invites comment regarding these requirements.
    In response to a Congressional request, the Service will study: (1) 
the socioeconomic and demographic characteristics of those recipients 
who currently receive checks to determine how best to increase 
electronic payment usage; and (2) the adequacy of consumer protections 
available to those individuals who will be required to obtain an 
account with a financial institution.

Special Analyses

    The Service is promulgating the interim rule without opportunity 
for prior public comment pursuant to the Administrative Procedure Act 
(the ``APA''), 5 U.S.C. 553, because the Service has determined, for 
the following reasons, that a comment period would be impracticable and 
contrary to the public interest. As noted above, until passage of the 
Act, only recipients of Federal wage, salary, and retirement payments 
were required to receive those payments by electronic funds transfer. 
However, 31 U.S.C. 3332 (e), as amended, requires recipients who become 
eligible for Federal payments on or after July 26, 1996, to receive 
such payments electronically. Therefore, recipients such as vendors 
doing business with agencies and benefit recipients may not be aware of 
the impact of the law. In addition, the law requiring agencies to 
disburse Federal funds expeditiously, 31 U.S.C. 3335, applies only to 
agencies in the executive branch, whereas the amended section 3332 (e) 
applies to departments, agencies, and instrumentalities of the United 
States Government and to corporations owned or controlled by the 
Government of the United States.
    In addition, since the Act was passed, the Service has received 
numerous requests for guidance from affected agencies. Many of the 
questions relate to the meaning of the phrase ``becomes eligible for,'' 
which determines the applicability of section 3332. As noted above, 
this phrase has different

[[Page 39258]]

meanings in the context of different types of payments. The Service 
believes that, absent an implementing regulation, there will be 
substantial confusion and noncompliance. Since the interim rule 
provides critical guidance which will facilitate compliance, the 
Service believes that it is in the public interest to issue the interim 
rule without opportunity for prior public comment.
    The public is invited to submit comments on the interim rule. As 
noted above, within the next twelve months, the Service expects to 
publish a Notice of Proposed Rulemaking to implement the provisions of 
section 3332 that take effect in January 1999. Therefore, there will be 
an opportunity to take into account any comments received on the 
interim rule.
    The Service has determined that good cause exists to make the 
interim rule effective upon publication without providing the 30 day 
period between publication and the effective date contemplated by the 
APA, 5 U.S.C. 553 (d). The purpose of a delayed effective date is to 
afford persons affected by a rule a reasonable time to prepare for 
compliance. However, in this case, both agencies and recipients of 
Federal payments must comply with the Act when it takes effect on July 
26, 1996, and, as noted above, there may be considerable confusion 
concerning its application. Inasmuch as the interim rule provides 
important clarification that is expected to facilitate compliance with 
the new law, the Service believes that good cause exists to make the 
rule effective upon publication.
    Since the interim rule is being issued without prior notice and 
public procedure pursuant to the APA, the collection of information 
contained in the interim rule has been reviewed under the requirements 
of the Paperwork Reduction Act (44 U.S.C. 3507 (j)) and, pending 
receipt and evaluation of public comments, approved by the Office of 
Management and Budget (OMB) under control number 1510-0066. An agency 
may not conduct or sponsor, and a person is not required to respond to, 
a collection of information unless it displays a valid control number 
assigned by the Office of Management and Budget.
    Comments concerning the collection of information should be 
directed to the Office of Management and Budget, Attention: Desk 
Officer for the Department of the Treasury, Financial Management 
Service, Office of Information and Regulatory Affairs, Washington, D.C. 
20503, with copies to Jacqueline Perry, Public Reports Clearance 
Officer, Financial Management Service, 3361 75th Avenue, Landover, 
Maryland 20785. Any such comments should be submitted not later than 
September 24, 1996. Comments are specifically requested concerning:
    Whether the proposed collection of information is necessary for the 
proper performance of the functions of the Service, including whether 
the information will have practical utility;
    The accuracy of the estimated burden associated with the proposed 
collection of information (see below);
    How the quality, utility, and clarity of the information to be 
collected may be enhanced; and
    How the burden of complying with the proposed collection of 
information may be minimized, including through the application of 
automated collection techniques and other forms of information 
technology.
    The collection of information in this regulation is in Sec. 208.4. 
The information (name of financial institution, account number and 
routing transit number or certification that the recipient does not 
have an account with a financial institution) is required to enable an 
agency to pay the recipient of a Federal payment by electronic funds 
transfer. The collection of information is mandatory. 31 U.S.C. 3332 
(g), as amended, requires recipients of Federal payments to ``provide 
to the Federal agency that makes or authorizes the payments information 
necessary for the recipient to receive electronic funds transfer 
payments.'' The likely respondents are individuals who are employed by 
the Service on or after July 26, 1996; existing employees of the 
Service who become eligible to receive, for example, travel 
reimbursement payments on or after July 26, 1996; individuals who apply 
for retirement from the Service on or after July 26, 1996; and 
individuals and businesses that become eligible to receive a vendor 
payment from the Service on or after July 26, 1996.
    The estimated total annual reporting burden is 325 hours. The 
estimated burden hours per respondent is 0.25 hours. The estimated 
number of respondents is 1,300. These figures represent the burden 
imposed by the Service. The reporting burden imposed by other agencies 
will be addressed by those agencies.
    Although it has been determined that the interim rule is a 
significant regulatory action as defined in E.O. 12866, the Office of 
Management and Budget (OMB) has waived the preparation of a Regulatory 
Assessment. One substantive change was made to the regulation 
subsequent to its submission to OMB. At the suggestion of OMB, the 
Service added Sec. 208.3 (c), which requires that an agency notify the 
Service immediately in writing if it determines that it is unable to 
make a payment or class of payments by electronic funds transfer due to 
the inability of the agency's system to make the payment(s) 
electronically.

List of Subjects in 31 CFR Part 208

    Accounting, Banks, Banking, Electronic Funds Transfer.

Authority and Issuance

    For the reasons set out in the preamble, Part 208 of Title 31 is 
added to read as follows:

PART 208--FEDERAL AGENCY DISBURSEMENTS

Sec.
208.1  Scope and application.
208.2  Definitions.
208.3  Agency responsibilities.
208.4  Recipient responsibilities.


Appendix A to Part 31--Model certification

    Authority: 5 U.S.C. 301; 31 U.S.C. 321, 3301, 3302, 3321, 3325, 
3327, 3328, 3332, 3335, and 6503.


Sec. 208.1  Scope and application.

    This part applies to all Federal payments made by an agency and 
requires such payments to be made by electronic funds transfer, unless 
a waiver is granted. This part does not apply to payments under the 
Internal Revenue Code of 1986.


Sec. 208.2  Definitions.

    (a) Agency means any department, agency, or instrumentality of the 
United States Government, or a corporation owned or controlled by the 
Government of the United States.
    (b) Benefit payment means a payment for a Federal Government 
entitlement program or for an annuity (other than a Federal retirement 
payment), including, but not limited to, payments for Social Security, 
Supplemental Security Income, Black Lung, Railroad Retirement Board 
Retirement and Annuity, Department of Veterans Affairs Compensation and 
Pension, and Worker's Compensation.
    (c) Electronic funds transfer means any transfer of funds, other 
than a transaction originated by cash, check, or similar paper 
instrument, that is initiated through an electronic terminal, 
telephone, computer, or magnetic tape, for the purpose of ordering, 
instructing, or authorizing a financial institution to debit or credit 
an account. The term includes, but is not limited to, Automated 
Clearing House transfers, Fedwire transfers, and transfers made at

[[Page 39259]]

automated teller machines and point-of-sale terminals.
    (d) Federal payment means any payment made by an agency.
    (1) The term includes, but not is limited to:
    (i) Federal wage, salary, and retirement payments;
    (ii) Vendor and expense reimbursement payments;
    (iii) Benefit payments; and
    (iv) Miscellaneous payments, including but is not limited to, 
interagency payments, grants, loans, fees, principal, interest, and 
discounts related to U.S. transferable and non-transferable securities, 
overpayment reimbursements, and payments under Federal insurance or 
guarantee programs for loans.
    (2) The term ``Federal payment'' does not apply to payments under 
the Internal Revenue Code of 1986.
    (e) Financial institution means any bank, savings bank, savings and 
loan association, credit union, or similar institution.
    (f) Payment means a sum of money transferred to a recipient in 
satisfaction of an obligation.


Sec. 208.3  Agency responsibilities.

    (a) Paying by electronic funds transfer. Subject to Sec. 208.3 (b), 
and notwithstanding any other provision of law, all Federal payments 
made by an agency to a recipient who becomes eligible for the payment 
on or after July 26, 1996, shall be made by electronic funds transfer. 
For purposes of this subsection, ``becomes eligible for'' means:
    (1) In the case of benefit payments, the recipient applies for that 
type of benefit on or after July 26, 1996;
    (2) In the case of Federal wage or salary payments, the recipient 
has a date of entry on duty with the agency on or after July 26, 1996;
    (3) In the case of Federal retirement payments, a recipient applies 
for retirement from an agency on or after July 26, 1996;
    (4) In the case of vendor payments, the payment is made under a 
contract or purchase order resulting from a solicitation issued on or 
after July 26, 1996;
    (5) In the case of grants, an application is filed or renewed on or 
after July 26, 1996; and
    (6) For all other Federal payments, as determined by the agency.
    (b) Waiver. The head of an agency shall waive the application of 
subsection 208.3 (a) only upon receipt of written certification that 
the recipient does not have an account with a financial institution or 
an authorized payment agent.
    (c) Agency implementation plan. If the head of an agency determines 
that the agency cannot make a Federal payment or class of Federal 
payment in accordance with Sec. 208.3 (a) due to the inability of the 
agency's system to make the payment(s) by electronic funds transfer, 
then the agency shall notify the Service immediately in writing and 
shall submit an implementation plan to the Service no later than 
January 1, 1997. The plan shall:
    (1) Identify the specific type of payment(s) that cannot be made by 
electronic funds transfer;
    (2) Describe the system problem that prevents the agency from 
making the payment(s) by electronic funds transfer; and
    (3) Outline a proposed solution and provide a time table for 
solving the problem.


Sec. 208.4  Recipient responsibilities.

    Each recipient of a Federal payment shall designate a financial 
institution or authorized payment agent through which a Federal payment 
may be made or certify in writing that such recipient does not have an 
account with a financial institution or an authorized payment agent; 
and provide the agency with the information requested by the agency in 
order to effect the payment.

Appendix A to Part 208--Model Certification

    This appendix contains model language which may be used to 
qualify for a waiver under Sec. 208.3(b). Use of the model language 
is optional. An agency may customize the model language by making 
appropriate changes.

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    Any payment that we make to you will be made by electronic funds 
transfer unless you certify in writing that you do not have an 
account with a financial institution or an authorized payment agent.
    I certify that I do not have an account with a financial 
institution or an authorized payment agent.

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Signature

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    Dated: July 23, 1996.
Russell D. Morris,
Commissioner.
[FR Doc. 96-19073 Filed 7-25-96; 8:45 am]
BILLING CODE 4810-35-P