Cancellations, Deposits, Reclamations, And Claims For Checks Drawn On The U.S. Treasury
This chapter provides information on policies, procedures, and reports regarding the processing of check reclamations and canceling U.S. Treasury checks that are:
- Stale dated,
- Identified as not received, lost, or stolen,
- Destroyed or mutilated,
- Not payable (payee not entitled), and
- Improperly negotiated
Section 7010—Scope and Applicability
This chapter prescribes procedures and forms to be used for:
- Automatically canceling checks drawn on the General Account of the U.S. Treasury,
- Processing undelivered and returned checks,
- Processing claims because of non-receipt, loss, theft, destruction, or mutilation of checks, and
- Processing reclamation on improperly negotiated U.S. Treasury checks
The requirements of this chapter apply to federal entities that do their own disbursing (NTDOs), as well as those serviced by the Bureau of the Fiscal Service (Fiscal Service).
Governing authorities that limit the negotiability, claimability, and reclaimability of U.S. Treasury checks include the following:
- The Competitive Equality Banking Act of 1987; Public Law 100-86, 101 Stat. 552, 657-660, and
- The Debt Collection Improvement Act of 1996 (part of the Omnibus Consolidated Rescissions and Appropriations Act of 1996); Public Law 104-134, and
- 31 U.S.C. §§ 321, 3328, 3331, 3343, 3702, and 3712, and
- 31 CFR Parts 235, 240, and 245.
Section 7020—Terms and Definitions
For terms and definitions related to this chapter, please view the TFM Glossary.
7025—Limited Payability Cancellation
The Competitive Equality Banking Act (CEBA) provides that U.S. Treasury checks must be negotiated no later than one year from the date of issuance. In addition, all checks not negotiated are canceled and the proceeds returned to the DO that authorized the issuance of the check. This is known as a limited payability cancellation. U.S. Treasury checks have the legend "VOID AFTER ONE YEAR" printed above the disbursing officer's signature.
Fiscal Service cancels non-negotiated checks that are over 12 months old during the 14th month, and returns the proceeds to the DO that authorized the payment for credit to the appropriation or fund account initially charged.
7025.10—Reversal of Limited Payability Cancellations
In some cases, checks are negotiated to financial institutions within one year from the date of issuance, but processing in the FRB system prevents the payment from being applied to TCIS before the limited payability cancellation has occurred. In these instances, Fiscal Service must reverse the limited payability cancellation credit previously provided to the DO by an IPAC transaction and must provide a copy of the paid item to the DO. This transaction is separate from the monthly cancellation credit.
7025.20—Checks Issued Prior to October 1, 1989
On November 30, 1990, Fiscal Service identified and canceled all checks issued and not negotiated prior to October 1, 1989. Fiscal Service applied the monies as required by Section 1003 of CEBA, rather than making these monies available to the DO, as with subsequent limited payability cancellations.
7025.30—Claims Presented to the DO for Obligations
If a payee presents a claim to a DO for the underlying obligation on a check, the DO must examine its records to see whether an earlier claim or cancellation has been processed. The DO must:
- Determine if the payee is entitled to the payment, and
- Identify the source account from which the funds were originally paid.
The DO may recertify a payment from the appropriation or fund from which the original payment was made (or its successor account).
Section 7030—Available Check Cancellation Processing
Returned, undeliverable, or mutilated U.S. Treasury checks in the possession of the federal entity or Fiscal Service are canceled within three business days of receipt by the disbursing office. Exceptions include:
- Checks recovered or returned to the possession of the federal entity or Fiscal Service subsequent to the submission of a UCC,
- Checks involving holder-in-due course claims,
- Mutilated checks when substantial portions of the checks are missing, and
- Stale-dated checks.
The ACC process cannot be used for NTDO issued Treasury checks. An NTDO may void a check or a range of checks, that they have on hand instead of using the ACC process (see TFM Volume I, Part 4, Chapter 6000, Section 6040).
7030.10—Safekeeping of Returned Checks
DOs must maintain adequate security and procedures for the safekeeping of all checks returned as undelivered while in the possession of their office pending disposition. At a minimum, they must:
- Open, extract, and deface returned U.S. Treasury checks in the presence of two people,
- Limit access to the area where returned U.S. Treasury checks are processed to individuals assigned the responsibility of processing returned checks, and
- Secure the checks in a locked container, if there is a delay between the time the checks are received and when they are defaced.
7030.20—Defacing Returned Checks
The face of each U.S. Treasury check to be canceled is defaced by stamping the legend "Not-Negotiable." The letters of the legend must be of prominent size to remove all possibility of negotiation and must be a color other than black (preferably red).
7030.30—Transmitting Returned Checks to Fiscal Service
If the DO determines that checks should be returned to Fiscal Service, it must do so no later than five business days from the date of their receipt. In addition to stamping all returned checks "Not Negotiable," the DO must do the following:
- Mark the checks with the appropriate return reason code (Appendix 2 lists the return codes with definitions), and
- List the checks on a transmittal.
The transmittal at a minimum must show the federal entity name, ALC, and the name and phone number of a point of contact. Two people must verify the transmittal before the DO sends it to Fiscal Service.
Fiscal Service should process U.S. Treasury checks returned from the DO on the day of receipt if at all possible but no later than three days following receipt.
Fiscal Service must:
- Verify that all checks listed on the transmittal are received,
- Sign the transmittal acknowledging receipt,
- Keep a copy of the transmittal for their records, and
- Return the original transmittal to the DO.
7030.40—Recovered or Returned Checks
Original checks recovered or returned to the federal entity, NTDO or Fiscal Service subsequent to being processed with a UCC are stamped with the legend "Not-Negotiable, Previously Treated as Canceled-SF 1184 UCC dated _______." These checks must be retained for 90 days and then shredded.
7030.50—Fiscal Service Check Cancellation through PACER On-Line
Fiscal Service scans all returned, undeliverable, and checks held by the federal entity for input to PACER On-Line. Data from mutilated checks is manually entered into PACER On-Line. PACER On-Line processes cancellations into TCIS by the overnight batch process. The credit information appears in TCIS the following business day.
7030.60—Available Check Cancellation File Transmissions Returned Without Credit
During the PACER On-Line process, ACC requests will be rejected if the checks have already been paid or canceled.
7030.70—Checks Returned When the Authorizing Federal Entity Is No Longer in Operation
If the DO receives a returned check for a DO that is no longer in operation, it stamps the check "Not-Negotiable" and forwards it to the successor DO.
Section 7035—Accounting and Reporting Requirements for Available Check Cancellations (ACCs)
This section prescribes the requirements and procedures for use by federal entities to account for and report cancellation of available checks.
PACER On-Line file transmissions requesting check cancellation action are transmitted into TCIS for credit. The FPA receives credit from TCIS and passes credit via an SF 1098 (see Appendix 3) to the federal entity's ALC.
7035.10—Establishment of Liability for Payment of the Proceeds of Undelivered Checks Credited to Disbursing Office Accounts
A valid liability exists for the amounts of all undelivered checks credited to the DO's accounts for the possible subsequent payment to the payees or their estates upon claim for the proceeds. This liability represents an unpaid obligation. The DO may use customary documentation to establish the obligation and payability in its accounts. The DO must maintain a file on undelivered checks in order to facilitate the prompt processing of claims for the proceeds when presented by the payees or their estates.
7035.20—Reporting Check Cancellations
This subsection prescribes canceled check reporting procedures for the CARS Account Statement, SF 1219, SF 1220, and SF 1221.
7035.20a—CARS Account Statement
The respective Fiscal Service Payment Center issuing the checks will credit the applicable deposit transactions as reductions in disbursements in the DO’s CARS Account Statement, using the appropriate Business Event Type Code (BETC), if the deposit transactions occurred within the same fiscal year. The DO must monitor its CARS Account Statement to ensure the transaction is reported to the correct TAS/BETC, and reclassify any transactions in the CARS CTA Statement, if necessary.
Fiscal Service submits a SF 1219 reporting cancellations processed on behalf of federal entities, as a reduction to the amount of disbursements.
7035.20c—SF 1220/SF 1221
Disbursing offices, other than Treasury (i.e., NTDOs), must submit a SF 1220 or SF 1221 for foreign currency accounts, along with an SF 1219 or SF 1218, respectively, to report cancellations classified by appropriation, fund, or receipt account.
Section 7040—Determining the Status of Checks
For the status of checks dated within a seven-year period, the DO may access TCIS or PACER On-Line.
See Appendix 4 for a list and explanation of the check status codes.
Section 7045—Non-receipt and Non-entitlement Claims Processing
This section prescribes the forms and procedures DOs use when requesting action on unavailable checks. These procedures are used when:
- The payee reports non-receipt, theft, loss, mutilation, or destruction of a check, the proceeds of which are due the payee.
- The DO determines that the payee is not entitled to the proceeds of the check.
The procedures in this section do not apply to:
- Lost or stolen blank check stock, see TFM Volume I, Part 4, Chapter 5000, subsection 5030.20,
- Holder-in-due course claims, see subsection 7065.20,
- Loss or theft of checks in transit for payment between the FRBs, or from the FRB or certain other financial institutions (see subsection 7065.10), and
- Direct deposit/electronic fund transfers or Fedwire payments.
7045.10—Unavailable Check Cancellation - Stop Reason/Check Status Inquiry Codes
Before processing claims from the payee/claimant, the DO must ensure the following:
- The claimant is entitled to the payment.
- A check was previously scheduled for issuance.
- The check is not in the possession of the DO.
- No cancellation or deposit action has taken place previously.
To file a non-receipt claim against a U.S. Treasury check, the DO must submit a UCC on-line through TCIS or via file transmission.
7045.10a—Stop Reason Code
DOs use the stop reason codes to advise Fiscal Service of information that assists in determining the adjudication process. See Appendix 1 for a list and explanation of the stop reason codes.
If the check has been paid, a FS Form 3858 (see Appendix 5) is mailed to the DO for UCC stop reason codes A, B, F, or G, and for all Payment Over Cancellation (POC) claims. For stop reason codes C and D, the FS Form 3858 is mailed to the payee/claimant.
7045.10b—Check Status Inquiry Code
DOs use the check status inquiry codes K and L solely for obtaining images of paid checks. The check status inquiry codes are not intended to and will not result in credits to the federal entities, nor are they to be used for a claim of non-receipt. Images of paid checks can be viewed and printed from TCIS or PACER On-Line.
7045.20—Fiscal Service Processing of UCCs
7045.20a—Preparation of File Transmission
The DO is responsible for the accuracy of the payee's name and address. Fiscal Service will reject the UCC if any of the following information is missing or disagrees with Fiscal Service's records:
- For recurring payments, the payee identification number and check date, and
- For vendor and miscellaneous payments, the check issue range or schedule number.
After the DO has verified the UCC file and signed the transmittal, it transmits the file to the Fiscal Service for processing.
The signature on the file transmittal certifies the correctness of the information in the file being transmitted, including the check descriptions, and authorizes Fiscal Service to process the requests.
Upon receipt of the UCC file, Fiscal Service processes the file into PACER On-Line. It consolidates all valid claims, enters them into a sequentially numbered daily UCC file, and transmits the file to TCIS.
The transmission includes the data for each payee or claimant required by Fiscal Service's file specifications. The submitting DO authorizes Fiscal Service to do the following:
- Add the symbol and serial number of the check,
- Consolidate the claims with other UCC submissions, and
- Transmit the UCC records to PACER On-line and TCIS for further processing.
Fiscal Service notifies the DO of the disposition of each claim submitted by a return file or other media.
7045.20b—TCIS Rejection of UCCs
TCIS rejects UCC transmissions if the file formats are improperly prepared, incorrect, or unreadable. TCIS returns the UCC file to the DO before processing the file.
If TCIS can read the UCC file but the required data for individual records are missing or inappropriate for the stop reason code selected, then TCIS issues a Daily Advice of Status (DAS) message to indicate that it has rejected the UCC item.
The DAS provides the reason for rejection and advises of the action to be taken. TCIS may generate more than one DAS rejection message for each UCC submission.
For every accepted or rejected UCC record processed into TCIS, the DO receives a DAS.
Note: The DAS is not an accounting document.
The DAS contains the status date that indicates the date TCIS determined the status of the UCC.
Appendix 6 provides a list of status code messages and explanations.
Section 7050—Accounting and Reporting Requirements
This section prescribes information on accounting and reporting requirements for the following:
- UCC credits,
- Limited payability cancellation credits, and
- Payments over cancellations
TDO UCC submissions result in credits being provided to the federal entity that authorized the payment, if the check status is "issue outstanding." Fiscal Service returns the UCC credits to the TDO by an SF 1185 schedule.
TRACS transfers NTDO UCC credits to the NTDO's ALCs through IPAC. All TRACS transactions are reported to the NTDO's CARS Account Statement after they are translated to the corresponding TAS/BETC within the Shared Accounting Module (SAM). NTDO's must ensure they have completed a Cash Flow Profile within SAM for TRACS activity so that transactions can be translated with the correct TAS/BETC.
Note: TRACS automatically assigns a distinct IPAC bill number for all transactions.
7050.20—Limited Payability Cancellation Credits
Treasury checks over 12 months old and not negotiated are automatically canceled during the 14th month and the proceeds returned to the DO for credit to the appropriation or fund account initially charged. TRACS transfers Limited Payability Cancellation Credits to the DO's ALCs through IPAC.
7050.30—Accounting for Canceled Checks Credited to DO Accounts
DOs return the proceeds from canceled checks to the account from which the check was originally issued. DOs with annual, multi-year, and no-year appropriation accounts treat the canceled check as an account payable. If the DO determines that the liability is not valid, the funds are available for obligation if the account has not expired.
In cases where the liability is valid but the claim is placed after the appropriation account is closed and the balance canceled, the DO may use up to one percent of its current appropriation by reporting a 46 subclass on the Statement of Transactions or it may seek a re-appropriation.
DOs with un-invested trust, revolving, and deposit fund accounts must follow the procedures in TFM Volume I, Part 6, Chapter 3000.
DOs with invested accounts retain funds from canceled checks on their books.
7050.40—Payment Over Cancellation (POC) Processing
A POC results when a check previously canceled by a UCC is subsequently presented for payment and accepted upon presentation. When Fiscal Service has sent a cancellation credit to the DO and the check is subsequently negotiated, Fiscal Service, via TRACS debits the DO's account through IPAC for the overpayment. Fiscal Service forwards a FS Form 3858 to the DO for completion by the payee/claimant. Upon receipt of the completed claim, Fiscal Service processes it according to the CFIF guidelines.
7050.50—IPAC Bill Data File
TRACS generates an IPAC bill data file reflecting the individual payee or claimant and corresponding check information to accompany the IPAC bill. Credits and charges are listed separately and are not commingled in the same IPAC bill document or IPAC bill data file.
7050.60—Federal Entity Reporting (IPAC)
DOs typically use IPAC bills generated from TRACS for reporting (except for TDO UCCs, as described in Section 7050.10, above). The IPAC bill and detail data are available to the DO in real-time on the IPAC website for current month transactions. The detail data remains available to the DO on the IPAC website up to 15 months after the credits and charges are transferred. The detail data must equal the total amount of the IPAC bill. The IPAC bill is documentary evidence that Fiscal Service provided credits or charges. TRACS transactions are automatically reported along with the federal entity’s daily IPAC transactions on a federal entity’s CARS Account Statement each day.
Federal entities may view details of each TRACS transaction by visiting the IPAC website and querying transaction data for their Agency Location Code (ALC), or by viewing their CARS Account Statements. Throughout each accounting period, DOs must monitor their CARS Account Statements for any TRACS activity recorded. TRACS transactions will post to the TAS/BETC that federal entities have requested within their Cash Flow Profiles at the Shared Accounting Module (SAM) and not to the original TAS/BETC included on the original transaction. By the end of each month, DOs must reconcile their CARS activity by TAS/BETC to their internal accounting system of record and reclassify any transactions to the correct TAS/BETC in the CARS CTA Statement, if necessary.
After reporting a credit or charge to the F3880 account on its internal accounting records, the DO must prepare a journal voucher to clear the credit or charge from the F3880 account. The funds are returned to the appropriation or fund account identified by the DO.
Throughout each accounting period, DO must monitor their journal voucher activity recorded on their CARS Account Statements. By the end of each month, federal entities must reconcile their CARS activity by TAS/BETC to their internal accounting system of record, and reclassify any transactions in the CARS CTA Statement, if necessary.
If the journal voucher transferred a credit from the F3880 account to the DO's appropriation or fund account, the DO reports a charge to the F3880 account and a repayment (credit) to its appropriation or fund account. If the journal voucher transferred a charge from the F3880 account to the DO's appropriation or fund account, then the DO reports a credit to the F3880 account and a debit (charge) to its appropriation or fund account.
For more information on the IPAC procedures, you may also visit the Fiscal Service IPAC website.
Any credit or charge processed after TRACS closes on the last business day of the month, is accounted for in the subsequent accounting month.
7050.70—Liquidating an Account Receivable
In instances where the DO re-certified a payment and established an account receivable before receiving a credit from Fiscal Service, the credit serves to offset the receivable. In cases where the DO has not re-certified a payment and established an account receivable before receiving credit from Fiscal Service, the credit restores the amount of the original payment to the account from which it was made and from which any subsequent re-certified payment will be made.
7050.80—Undisbursed Appropriation Account Ledger
The net dollar amount entered by the Fiscal Service for the F3880 account is reported on the CARS Account Statement. The ALC 20180009 is listed as the reporting entity. Subsequent statement of transaction reporting, by the DO, to clear F3880 accounts is also shown on the CARS Account Statement with the DO's ALC shown as the reporting entity. For example, when two or more ALCs within one DO's report entries for the same F3880 account, line items reflect both (or additional) ALCs reporting on the CARS Account Statement. See subsection 7050.90 regarding the F3880 account for guidance in obtaining identifying suffixes when more than one ALC is used for the same F3880 account.
To request on-line access to the CARS Account Statement, refer to the CARS website.
7050.90—F3880 "Unavailable Check Cancellations and Over-payments (Suspense Account)"
The F3880 account is a budget clearing account that holds credit or charge amounts until the DO identifies the correct appropriation or fund. The DO must make every effort to maintain a minimum balance in this account by transferring all monies initially classified in this account to the proper appropriation or fund as expeditiously as possible.
Fiscal Service establishes one F3880 account for each DO. The CARS Account Statement for this account is available on-line after the Monthly Treasury Statement is published. Fiscal Service reports adjustments (ADJ)/reversals (REV) to the DO's F3880 account.
If the DO discovers that Fiscal Service has credited or charged it in error, the DO must contact the Budget Reporting Branch (see Contacts) and provide the facts of the case. It must forward copies of relevant documents, indicating that Fiscal Service must enter an adjusted credit or charge to its ALC's F3880 account. Fiscal Service verifies the information and enters the adjustment to the DO's F3880 account. Under no circumstances should a DO credit or charge any other DO to effect an adjustment.
7050.90a—Suffixes for the F3880 Account
The suffix is a maximum of two numeric digits; for example, F3880.10, F3880.20, etc. It is recommended that the DO:
- Obtain suffixes for the F3880 account for the subdivisions that anticipate a high volume of credits or charges, and
- Establish central oversight of low-volume offices.
To request pertinent identifying suffixes for the F3880 account, send a written request to the Budget Reporting Branch (see Contacts). Include the justification for each request, the address for the suffixed F3880 account, and the ALC responsible for the suffixed F3880 account.
The Budget Reporting Branch does not grant suffixes when it determines that the requests are excessive.
Section 7055—Processing Check Forgery Claims
Fiscal Service is responsible for authorizing the payment of settlement checks issued to replace checks paid over forged endorsements.
This section prescribes procedures for DOs for settling payee/claimant claims of non-receipt where the original check has been fraudulently negotiated.
Fiscal Service issues a reclamation to the Bank of First Deposit (BOFD) for all such claims.
Fiscal Service pays the claim out of the CFIF to a payee or special endorsee of a U.S. Treasury check the amount of the check, if Fiscal Service determines that the payee or special endorsee has established the following:
- The payee or special endorsee presented a timely claim of non-receipt to the DO pursuant to 31 CFR §245.3.
- The original check was lost or stolen without the fault of the payee or special endorsee, whose endorsement is necessary for further negotiation.
- The original check was negotiated and paid by Fiscal Service on a forged or unauthorized endorsement of the payee's or special endorsee's name.
- The payee or special endorsee has not participated in any part of the proceeds of the negotiation or payment of the original check.
7055.10—Completing the FS Form 1133
After examining the check copy, if the payee/claimant denies negotiating the check, the payee/claimant must complete and sign the FS Form 1133 and return it along with the check copy to Fiscal Service. Upon receipt of the FS Form 1133, Fiscal Service's National Payment Integrity and Resolution Center (NPIRC) reviews the claim form for completeness. If the claim form is complete, NPIRC opens a check claim case and begins the adjudication process. To be properly completed, the payee/claimant must answer all questions on the FS Form 1133 and sign where indicated. Both payees must sign if the check is issued to co-payees. Fiscal Service rejects claims not signed by both co-payees. If the payee/claimant signs by mark, the mark must be witnessed in the space provided for witness.
If the FS Form 1133 is not properly completed, NPIRC returns it to the payee/claimant with a letter advising the payee/claimant to complete the area(s) indicated and to return the properly completed form to NPIRC. In instances where the payee admits negotiating the check or does not return the properly completed FS Form 1133, Fiscal Service takes no further action.
7055.20—Claims Adjudication Process
The adjudication process begins when a Legal Administrative Specialist (LAS) at NPIRC receives a properly completed FS Form 1133. The LAS sends Claims Disposition Notices (CDNs) to the DO advising of the status of received forgery claims. Several activities take place during the adjudication process, as described below.
7055.20a—Review of the FS Form 1133 and Supporting Documentation
The LAS reviews the FS Form 1133 for completeness and analyzes the payee's signature and other information on the FS Form 1133 and any accompanying documentation to determine the validity of the claim.
In adjudicating the claim, the LAS accesses the TCIS Integrated View to obtain additional claims information and check images to aid in the adjudication process.
If the LAS determines that the claim is valid, Fiscal Service settles the claim with the payee or the DO, according to the UCC stop reason code. Fiscal Service makes settlement with the DO on POC checks.
7055.20b—Review Check Endorsement
If the LAS determines that the endorsement on the check is similar to the signature on the FS Form 1133, the file may be forwarded to a Document Analyst for handwriting analysis.
If the Document Analyst renders the opinion that the endorsement on the check does not appear to be that of the payee, the LAS may settle the claim based on the Document Analyst's opinion.
7055.20c—Settling the Claim
If Fiscal Service determines the payee/claimant was not involved in the negotiation of the check, from the examination of the evidence, including the Document Analyst's opinion and/or the bank's protest, and the payee/claimant did not participate in the proceeds from the check, Fiscal Service settles the claim by initiating a request to issue a check to the payee/claimant or transfers the funds to the DO. Settlement is made based upon reclaiming funds from the BOFD.
Stop Reason Code A or B—If the criteria for settlement from the CFIF have been met, Fiscal Service settles with the DO since the federal entity has already issued a replacement check to the payee/claimant. Fiscal Service charges the CFIF and transfers credit to the DO via IPAC. The LAS sends a CDN to the DO with the message "Forgery Established - Treasury is Crediting Your Account." The LAS may request reclamation against the financial institution.
Stop Reason Code C or D—If the criteria for settlement from the CFIF have been met, Fiscal Service issues a settlement check to the payee/claimant and charges the CFIF. The LAS sends a CDN to the DO with the message "Forgery Established - A Settlement Check Is Being Issued to the Payee." The LAS requests reclamation action against the financial institution and sends a settlement letter to the payee.
Stop Reason Code E—Fiscal Service credits the DO for deceased payee checks after the reclamation credit is received from the financial institution. However, when a UCC is received on a check whose issue amount is $25 or less, and the check is paid, the DO receives a DAS Code 29 with the following message: "Paid-The Issue Amount is $25.00 or Less. No Further Action Will Be Taken." Fiscal Service has determined that it is not cost effective to reclaim on checks for $25 or less.
Stop Reason Code F or G—If forgery is substantiated, PFC requests reclamation action against the financial institution. The LAS sends a CDN to the DO with the message "Forgery Established. Claim Valid But Settlement Not Appropriate Based On Your Non-entitlement Code.
7055.30—Settlement From the Check Forgery Insurance Fund (CFIF)
The CFIF is a revolving fund established to settle payee/claimant claims of non-receipt where the original check has been fraudulently negotiated. The CFIF ensures that innocent payees/claimants, whose U.S. Treasury checks are fraudulently negotiated, receive settlement checks in a timely manner. A permanent and indefinite source of funding is an integral part of the CFIF that enables Fiscal Service to meet its obligation to payees/claimants of forged checks.
Fiscal Service bars any claim on a U.S. Treasury check unless the payee/claimant presents a claim to the DO within one year from the date of issuance of the check. In addition, the DO must submit the UCC to Fiscal Service within 13 months from the issue date of the check.
7055.30a—Check Forgery Insurance Fund Act
The Check Forgery Insurance Fund Act does the following:
- Creates a permanent and indefinite appropriation to adequately fund the CFIF. Fiscal Service uses the CFIF to ensure that recipients, whose checks have been forged and fraudulently negotiated, are promptly issued replacement checks.
- Amends the conditions underlying the issuance of substitute checks under 31 U.S.C. 3331 by authorizing the Secretary of the U.S. Treasury to waive any condition for the purpose of ensuring that claimants receive timely payments.
- Clarifies that the initial burden of establishing a claim for a check paid over a forged endorsement rests with the claimant, and that the Secretary has the discretion to determine whether a claimant has met this burden.
- Eliminates the requirement that check replacement is contingent on whether recovery on a forgery is delayed or unsuccessful. This change is necessary to facilitate the timely issuance of replacement checks to innocent payees and to make it clear that a second payment is not contingent on the government's ability to recover on a forged item.
- Ensures that certifying or authorizing federal entities may provide for the expedited payment of replacement checks and that such federal entities may be reimbursed out of the CFIF by a transfer of funds to the appropriated account, trust fund, or other account.
- Enables the U.S. Treasury to comply with two decisions of the Comptroller General, B-24266 (August 31, 1993) and B-243536 (September 7, 1993), which concluded that the Check Forgery Insurance Fund Act (31 U.S.C. 3343) requires the U.S. Treasury to certify checks issued to replace checks paid over forged endorsements and to charge the CFIF.
If forgery is suspected, Fiscal Service takes reclamation action if the check payment date is less than 18 months old. PFC does not request reclamation for claims on checks for $25 or less. For these claims and claims received after the reclamation period has expired, settlement is made from the CFIF for UCC stop reason codes A, B, C, and D.
Fiscal Service institutes the reclamation action in TCIS, against the financial institution that presented the check for payment.
Reclamation credits are received into TRACS and automatically clear a debit in the CFIF account. If there is no debit in a CFIF account, the credits remain in the suspense account until appropriate disposition is determined.
If, from the examination of the evidence, including the LAS's opinion and/or the bank's protest, Fiscal Service determines that the payee/claimant was involved in the negotiation of the check or participated in the proceeds of the check, the claim is denied. Fiscal Service notifies the DO by CDN of the denial of the claim. Any attempts by the DO to collect an overpayment from the payee/claimant must be made in accordance with the Federal Claims Collection Standards (31 CFR Part 900-904).
The LAS sends the payee/claimant a letter denying the claim. The denial letter informs the payee/claimant of the reason for denial and advises the payee/claimant of the right to appeal the denial in writing.
7055.60—Appeal Process for Denied Claims
An appeal is the process whereby a payee/claimant seeks review of a denied claim based upon information used by Fiscal Service in the initial decision to deny a claim, or when a claimant seeks a review of the initial denial based on new or additional information not available at the time of the initial denial.
7055.60a—Filing an Appeal
Claimants must file appeals in writing and must mail them to NPIRC (see Contacts). The payee must return a copy of the initial denial letter to NPIRC, together with a signed statement and any additional information or documentation for further investigation or consideration upon appeal.
The request for an appeal must include the check and symbol number identified in the denial letter. To be considered, an appeal must be postmarked no later than 60 days following the date on the denial letter.
7055.60b—Determining the Appeal Decision
If it is determined that the appeal is valid, the LAS notifies the payee/claimant by letter that the appeal is valid. Settlement is processed in accordance with subsection 7055.20 (CFIF). If it is determined that the appeal is invalid, the LAS upholds the denial and sends the payee/claimant a letter advising that the appeal was denied and of the payee's/claimant's right to file a lawsuit in Federal Court. The LAS sends the DO a CDN advising of the appeal decision.
7055.60c—Effect of Appeal Decision
The denial of a payee/claimant appeal serves as the final action on a claim. A payee/claimant may not file a civil suit until the payee/claimant has filed an appeal with Fiscal Service and received Fiscal Service's appeal decision.
7055.70—Non-receipt of the Settlement Check
If the settlement check is not received, the payee/claimant must report non-receipt of the settlement check to Fiscal Service. Fiscal Service will initiate tracer actions to determine the status of the settlement check. If the settlement check has not been negotiated (outstanding status), the check is canceled by UCC and Fiscal Service will issue a second settlement check to the payee/claimant or may forward the funds to the DO.
If the settlement check subject to the claim of non-receipt has been paid, Fiscal Service forwards another FS Form 1133 to the payee/claimant for examination. If the payee/claimant alleges forgery of the settlement check, the payee/claimant must complete and return the second FS Form 1133 to NPIRC for adjudication with regard to the settlement check.
Section 7060—Miscellaneous Claims
7060.10—Lost-in-Transit Check Procedure
Lost-in-transit items are U.S. Treasury checks that have been negotiated and subsequently lost by a financial institution, lost or stolen between the financial institutions, or the financial institutions and the FRB.
The FRB Atlanta, Government Check Adjustment Department handles these items providing that the U.S. Treasury checks are less than one year old.
If the DO or Fiscal Service receive these requests and the checks have not been canceled and are not older than one year, they must return the requests with instructions for the financial institutions to submit them to the FRB Atlanta, Government Check Adjustment Department.
7060.20—Holder-in-Due Course Claims Procedure
A holder-in-due course claim occurs when a non-banking institution negotiates a U.S. Treasury check and the check is lost or stolen before being presented for cash or deposit at a financial institution. The claim must be submitted to the Fiscal Service for processing.
7060.20a—Processing Holder-in-Due Course Claims
Upon receipt of the holder-in-due course claim, Fiscal Service determines the status of the check.
If the check has been negotiated, Fiscal Service returns the claim with a copy of the check advising the holder that the check has been paid and that no further action is being taken.
If the check has not been negotiated, Fiscal Service forwards an indemnity letter to the holder for completion. When the holder returns the requested information, Fiscal Service ensures that the check is still outstanding.
If the check is still outstanding, the Fiscal Service issues a settlement check to the holder.
Section 7065—Handwriting Analysis of Checks Older Than One Year for Which UCCs Have Not Been Requested Timely
Fiscal Service considers handwriting identification and document examination requests on a case-by-case basis when the DO can demonstrate that it has exhausted all available means of adjudication. The requesting DO must pay any cost above the normal administrative handling per diem, such as travel for court testimony. DOs must submit requests for handwriting identification to NPIRC (see Contacts). NPIRC completes requests as time and volume dictate and forwards a reply to the requesting DO.
Section 7070—Check Reclamations
Fiscal Service reclaims amounts on improperly negotiated U.S. Treasury checks, as provided for in 31 CFR Part 240.8. When Fiscal Service receives a credit that equals full principal, Fiscal Service forwards the credit to the federal entity that authorized the payment, if the federal entity is holding the receivable. Fiscal Service processes credits daily.
Section 7070.10—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 presenting bank.
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 presenting bank 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.
Section 7070.20—Electronic Transmission of Partial Credits
The U.S. Department of Veterans Affairs, U.S. Railroad Retirement Board, Internal Revenue Service (IRS), and Office of Personnel Management receive their data via Connect:Direct. The indicator “CP” (Credit Partial) appears in the record layout at position 177 and 178. The summary information is transmitted to these federal entities by an Intra-governmental Payment and Collection (IPAC) credit document.
Section 7070.30—Abandoned Reclamations
When appropriate, Fiscal Service notifies federal entities that a reclamation has been abandoned. This would occur if a financial institution's protest is substantiated, or if the financial institution's liability for the reclamation was otherwise deemed inappropriate, and the reclamation had not yet been completed. In addition to the initial notification that a reclamation was abandoned, each month Fiscal Service reports to federal entities reclamations that were abandoned during the accounting month (see Appendix 7).
Section 7070.40—Reporting to the IRS on IRS Form 1099-C: Cancellation of Debt
Federal entities are responsible for reporting only the principal amount of their uncollectible receivables to the IRS on IRS Form 1099-C. To assist federal entities, Fiscal Service sends the federal entities a report on the uncollected principal amount of receivables at the end of the calendar year (see Appendix 8) and again at the end of February with any modifications to the data (see Appendix 9).
Fiscal Service reports to the IRS:
- The principal amount of the U.S. Treasury’s uncollectible receivables; and
- Interest, penalty charges, and fees for all uncollectible receivables related to check reclamations.
Direct requests for budget clearing accounts and identifying suffixes for the F3880 account to:
Department of the Treasury
Bureau of the Fiscal Service
Budget Reporting Branch
3201 Pennsy Drive, Building E
Landover, MD 20785
Direct inquiries concerning 8-digit ALC address changes to:
Department of the Treasury
Bureau of the Fiscal Service
Cash Accounting Branch
200 Third Street
Parkersburg, WV 26101
Direct inquiries concerning IPAC procedures and accounting issues:
Treasury Support Center
1421 Dr. Martin Luther King Drive
St. Louis, MO 63106-3716
Direct all other requests to:
Department of the Treasury
Bureau of the Fiscal Service
National Payment Integrity and Resolution Center
Customer Service Branch
PO Box 515
Philadelphia, PA 19105-0515
Summary of Updates in this Release
Summary of Change
Adjusted language to include check reclamations; added last bullet "Improperly negotiated". NOTE: Chapter 7100, Check Reclamations is being rescinded.
Scope and Applicability
Added the last bullet on processing reclamations.
Definition of Terms
Added verbiage and hyperlink redirecting readers to the TFM Glossary.
|7025.20||Checks Issued Prior to October 1, 1989||Changed the legal reference for clarification.|
|7025.30||Claims Presented to the DO for Obligations||Added "to the payment" to the first bullet, for clarification.|
|7030||Available Check Cancellation Processing||Added "of the checks" to the third bullet for clarification.|
Available Check Cancellation Processing
Added the last sentence of the section discussing voiding a range of checks.
|7035.20||Reporting Check Cancellations||Subsection 7035.20d was removed, as it was not necessary.|
|7045.20a||Preparation of File Transmission||Changed "monthly" to "recurring" in the first bullet and added " information in the file being transmitted, including the" to the third paragraph.|
|7050.10||UCC Credits||Added " federal entity that authorized the payment" to the first sentence.|
|7050.40||Payment Over Cancellation (POC) Processing||Added " and accepted upon presentation" to the first sentence.|
|7055.10||Completing the FS Form 1133||Changed Philadelphia Financial Center to NPIRC.|
|7055.70||Non-receipt of the Settlement Check||Re-worded the second paragraph for clarification.|
Added all of Section 7070, Check Reclamations, including the subsections. Also re-worded subsections 7070.10 and 7070.30 for clarification.
Changed "agency/ agencies" to "federal entity/ federal entities".