Federal agencies are gearing up for a massive public education campaign to get government beneficiaries and vendors to sign up to receive their checks from Uncle Sam electronically, as the government faces a year-end deadline to eliminate paper checks.
Two-thirds of the payments the Treasury Department makes are now handled electronically, according to figures for the first quarter of fiscal 1998. Ninety-five percent of federal salaries, 65 percent of benefits payments, and 35 percent of vendor payments are now directly deposited into recipients' bank accounts.
The 1996 Debt Collection Improvement Act set Jan. 1, 1999 as the deadline for the government to use electronic funds transfer (EFT) for all of its payments. In some cases, people or businesses who can't use direct deposit will receive waivers. The government expects to save more than $100 million a year with the new system, because EFT costs the Treasury Department 28 cents less per transaction than paper checks.
"EFT payments are safer, faster and cheaper," says Bonnie Kind, deputy director of the Social Security Administration's office of finance. She says EFT eliminates concerns about theft or loss of checks, which cost the government more than $60 million in 1996.
While the federal government is well-equipped for EFT, individuals and businesses who receive federal payments must play catch-up. An estimated 10 million federal beneficiaries do not have bank accounts, and people in rural areas sometimes do not have banks nearby. People will be able to set up special accounts to receive their federal payments, or they will be able to get their benefits through state-run offices. In certain cases, people will be able to waive the EFT requirement.
Social Security helped make direct deposit a household word, says Michael Johnson, director of payment and recovery policy at SSA. Beginning in the 1970s, SSA has pushed direct deposits in the banking industry as a way to make payments more reliable and efficient. The agency provides banks with marketing materials and has set up an electronic system through which banks can enroll their customers in SSA's direct deposit program.
Only 35 percent of the government's vendors are being paid electronically, in part because not all financial institutions support commercial electronic transactions. An industry rule goes into effect in September requiring that banks support businesses' requirements for EFT.
Another problem in the contracting area is the lack of a central vendor database, meaning that vendors must sign up separately with each agency for EFT. (See "DoD Vendor Database on Way," January 15.)
Here too, the Social Security Administration is ahead of the pack. SSA already pays 80 percent of its vendors electronically after a vigorous campaign to sign up its business partners for EFT. In addition, 96 percent of SSA employees are paid by direct deposit, and all of those employees are reimbursed for travel expenses electronically.
The Treasury Department later this year will spearhead a public education campaign, including advertisements and brochures, to inform beneficiaries of their options for electronic payments. In conjunction with that effort, SSA will explain the EFT mandate to beneficiaries who still receive their checks in the mail.
NEXT STORY: Senate Aide Sees '99 Balance