Cash management technology in state and local government: results of a GFOA/JPMorgan Chase survey.

• Author: Michel, Gregory

For the first time in history, Americans have started making more payments electronically than with paper checks. Is your government ahead or behind in its acceptance of electronic payments and use of electronic disbursement tech nologies? How does your government compare to other governments in its use of technologies such as Internet payments, credit cards, electronic data interchange, kiosks, and automatic bank debits? Are governments using important fraud prevention safeguards recommended by GFOA? GFOA and JPMorgan Chase discovered the answers to these and other questions about cash management practices through a recent survey of state and local governments. This article summarizes the key findings from the survey, focusing on the following areas: use of collection and disbursement technologies, use of online banking services, and fraud prevention.

The GFOA/JPMorgan Chase survey found that many state and local governments accept payments via automatic bank debit, the Internet, and the telephone. In the near future, it is possible that many more governments will accept payments through these methods. The survey also found that most governments not only use paper checks and warrants, but also use technologies such as ACH and wire transfers to disburse funds. Use of important fraud prevention safeguards recommended by GFOA was mixed. A high percentage of government respondents use fraud prevention safeguards such as account reconciliations from their bank, computer network security, and confirmation of transactions from financial institutions. However, many government respondents indicated that they do not use other important safeguards, including positive pay, reverse positive pay, and ACH blocks and filters.

The survey was conducted using an online survey tool. The survey was e-mailed to GFOA members in more than 4,000 governments, and 912 responses were received. The respondents reflect a wide variety of geographic regions, sizes, and types of governments in the United States and Canada. More than three-quarters of the respondents represent municipal and county governments.

DEPOSITING RECEIPTS

More than 90 percent of the governments surveyed deposit most receipts the same day or the next day. Larger governments tend to deposit receipts faster than smaller governments. Sixty-six percent of governments with a population between 500,000 and 1 million deposit most receipts the same day, while 38 percent of governments with a population less than 50,000 deposit most receipts the same day.

METHODS OF PAYMENT

We found that many state and local governments accept payments via automatic bank debit, the Internet, and the telephone. Fifty-four percent of the governments surveyed accept payment by automatic bank debit. Unlike other cash management technologies, automatic bank debits are used as frequently in smaller governments as in larger governments.

A sizeable percentage of governments (35 percent) now accept payment by the Internet and the telephone. Both tend to be more prevalent in larger governments. For example, while 47 percent of governments with a population between 50,000 and 1 million accept payments over the Internet, only 9 percent of governments with a population less than 10,000 accept this method of payment.

The use of lockboxes is most prevalent in the largest governments. Survey results showed that 60 percent of governments with a...