Full text of Electronic Accounting and Cash Management

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

ECTRONIC ACCOUNTING AND CASH MANAGEMENT ELECTRONI

OUNTING AND CASH MANAGEMENT ELECTRONIC ACCOUNTING

CASH MANAGEMENT ELECTRONIC ACCOUNTING AND CASH MA

EMENT ELECTRONIC ACCOUNTING AND CASH MANAGEMENT EL
RONIC ACCOUNTING AND CASH MANAGEMENT ELECTRONIC A

INTING AND CASH MANAGEMENT ELECTRONIC ACCOUNTING AN
ASH MANAGEMENT ELECTRONIC ACCOUNTING AND CASH MAN

MENT ELECTRONIC ACCOUNTING AND CASH MANAGEMENT ELE
NIC A

TING A

A
N

SH MA

NAGEMENT ELECTRONIC ACC

SSS

ECTRONIC ACCOUNTING AND

SSCCOUNTING AND CASH MANA

ENT EL

SSSSSS ND CASH MANAGEMENT ELEC
NAGEMENT ELECTRONIC ACC

NIC A

NAGEMENT ELECTRONIC ACCOUNTING AND

TING

SH MANAGEMENT E

ACCOUNTING AND CASH MANA

ENT ELECTRONIC A

AND CASH MANAGEMENT ELEC

ECTRONIC ACCOUN

SH MANAGEMENT ELECTRONI

DUNT
ASH

NT ELECTRONIC ACCOUNTING

C ACCOUNTING AND CASH MAN

EMEN

NG AND CASH MANAGEMENT EL

TRONI

NG AND CASH MANAGEMENT ELECTRONIC AC

NTING

MANAGEMENT ELECTRONIC ACCOUNTING AN

ASH MANAGEMENT ELECTRONIC ACCOUNTING AND CASH MAN
MENT ELECTRONIC ACCOUNTING AND CASH MANAGEMENT ELE

NIC ACCOUNTING AND CASH MANAGEMENT ELECTRONIC ACCO
ING AND CASH MANAGEMENT ELECTRONIC ACCOUNTING AND

SH MANAGEMENT ELECTRONIC ACCOUNTING AND CASH MANAG

ENT ELECTRONIC ACCOUNTING AND CASHMANAGEMENT ELEC
NIC ACCOUNTING AND CASH MANAGEMENT ELECTRONIC ACC
TING AND CASH MANAGEMENT ELECTRONIC ACCOUNTING AND

SH MANAGEMENT ELECTRONIC ACCOUNTING ANDRASH MANA

ENT ELECTRONIC ACCOUNTING AND CASHMANAGEMENT ELEC

ECTRONIC ACCOUNTING AND CASH MANAGEMENT ELECTRONIC

UNTING AND CASH MANAGEMENT ELECTRONIC ACCOUNTING A

ASH MANAGEMENT ELECTRONIC ACCOUNTING AND CASH MAN

THE

DEP

TREASURY

ART

MEN

T

MENT ELECTRONIC ACCOUNTING AND CASH MANAGEMENT EL
OF THE

Department ofthe Treasury
Fiscal Service
Bureau of Government Financial Operations

1789

339.26
Un352e

Money is such a routine part of our daily lives that
we take for granted the processes that move money
from one party to another in the course of business. A
major source of our strength lies in the ability to move
money across the United States quickly and efficiently
with the safeguards that assure proper receipt and
payment.
The Treasury and the Federal Reserve have a close
working relationship in developing and maintaining
systems that respond to the growing need for financial
interdependence between all segments of our society.
Over the past few years , development of Electronic
Accounting and Cash Management systems described
in this booklet have taken place to meet the many
problems with today's money management . The systems developed provide tools for management to control and account for the large cash resources entrusted to the Government by American taxpayers.

DEPOSITORY

FEB

1 1977

UNIV. OF ILL . LIBRARY
ARANA CHAMPAIGN
SanidMosso
David Mosso
Fiscal Assistant Secreta

UNIVERSITY OF
ILLINOIS LIBRARY
AT URBANA- CHAMPAIGN

FOREWORD

Money Management has become increasingly important
to the Treasury with today's growth in Government and correspondent spending needs and income and borrowing
capacities . Automated systems are required to be developed to more rapidly confirm the Nation's financial position as a step toward improving the decision- making process. Earlier availability of more accurate and reliable financial data is the Keystone upon which sound decision making rests. In recognition of this need , the Congress enacted
the Legislative Reorganization Act of 1970 and the Congressional Budget and Impoundment Control Act of 1974 , addressing the issue of developing improved fiscal , budgetary
and financial management systems.
The Treasury, like other organizational units in its attempt
to improve its financial systems , has been faced with the
problem of ever increasing amounts of paper work in
connection with its role as the Government's central financial control arm . The problem does not stem so much from
—
any imposition of official record keeping
on the contrary,
the recording process only serves to highlight the volume
of paper used to consummate financial transactions .
Amplifying the problems is the rapidly expanding population and economy that demands financial services which

SSSSS
SSS

$$

proportionally increase Treasury's workload . Were the present system of accounting for the collection and disbursement of monies to remain in effect , the alternatives would
be either to hire additional work force with associated costs
to perform the repetitive tasks of handling the financial
paper work or to allow the reporting and record- keeping
functions to lag extended time periods behind the actual
date the financial transactions were consummated . In today's economic environment , neither of these alternatives is
acceptable . Congressional needs have required shorter time
frames for disclosure of Federal financial transactions . The
change of the Government's fiscal year also required accelerated year-end reporting . Demands for improved reporting
and creation of the Congressional Budget Office attest to
the growing concern for earlier and better financial data .
To meet these needs , the Department of the Treasury ,
Bureau of Government Financial Operations , is actively
engaged in the development of Electronic Accounting and
Cash Management systems to enhance control over governmental resources . This report has been prepared to inform
the reader of a portion of the Treasury's role in Government
finances and the developmental efforts underway to improve its financial management responsibilities .

O

ar
ELECTRONIC ACCOUNTING AND CASH MANAGEMENT

Government Financial Operations

The agencies of Government act to some degree like divisions in a large corporation . Each of these agencies has a
specific mission and charter, and , in the course of carrying
out that mission and charter, has a need to disburse and
receive funds . The Treasury Department , as the Government's financial organization , estimates Federal cash
needs; receives, keeps , and disburses funds; and provides
the accounting and record keeping necessary for overall
governmental financial control . In a given year , about one
trillion dollars flows into and out of Federal Government
accounts.
Payments (disbursements) are authorized by Government
agencies for a variety of reasons . For example , every
month, millions of recurring payments are made to recipients of social security and veterans ' benefits; non- recurring
or one-time payments are made , such as those to Government contractors or grantees of Federal programs , and
both recurring and non- recurring payments are made to
manage the federal debt (Treasury and agency securities)
as well as purchase federal securities for Government investment accounts . Government disbursing offices issue

approximately 750 million checks for these payments each
year as well as provide sources of funds and accounting
control over government cashiers that accommodate cash
and letter of credit payments . In addition , Federal Reserve
Banks and Branches acting as Treasury Fiscal Agents accommodate similar disbursing activities for primarily federal
debt management .
Deposits (receipts) are received by the U.S. Treasury on
behalf of Federal Government agencies for many types of
financial transactions such as fees, taxes, debt issuance
proceeds, and the sale of security investments . These deposits are made to the account of the U.S. Treasury at Federal depositaries throughout the country including Federal
Reserve Banks and certain designated commercial banks.
To provide control over these Federal disbursing and collecting operations, and to meet the responsibility for financial reporting to Congress and to the public , Treasury maintains a comprehensive system of central accounts which
serve to monitor and record the Government's financial
transactions. Figures 1 and 2 illustrate this cash financial
flow described above.

SSS
SSS

TREASURY

Federal Reserve
District Bank

Reports to
Public

Monthly
Reports of
Deposits
Classification of

Designated
Commercial
Banks

Deposits by
Appropriation
Fund and Receipt
Account

Accounting and
Reconciliation,
Reports

Deposit Ticket

Government
Agency

Cash and check
payments from
the public and
other government
agencies

Figure 1
Collection Flow

Federal
Reports
to
Public

Agency

Accounting and
Reconciliation
Reports

Voucher
wwwwww

TREASURY
Disbursing
Office

Bureau of Government
Financial Operations

Paper
Check

Federal Reserve
District Bank

Payee

Figure 2
Disbursement Flow

Paid
Check

Deposited in Payee's
Account in
Commercial Bank

Integrated into this cash flow system lies the budgetary
control system that associates every disbursement and
collection to the authorizing appropriation , fund or receipt
account established by the Treasury in recognition of Congressional intentions cited in legislative public laws and
resolutions . Together, the cash monitoring and interrelated
budgetary control systems form the nucleus of the Treasury
Governmentwide Accounting Information Management System . The system organizationally integrates the financial
results of Congressional appropriation and receipt authorizations ; executive , legislative, and judicial program agencies payments and collections and associated obligation
and accrual processes ; Federal Reserve , commercial depositary and Treasury offices banking and custody operations ;
and disbursing and collecting officers accountability functions for cash held outside Treasury accounts . Figure 3 illustrates these relationships .

SSSS

SSSS
SSSS

Federal Reserve
and Commercial
Depositary, Treasury
Office Banking
and Custody
Operations

Congressional
Public Law
and Resolution
Enactment

Account
Authorizations,
Appropriations
Contract
Borrowing
Authority

Charges and
credits
affecting
Treasury cash
and monetary
balances

TREASURY

GOVERNMENTWIDE ACCOUNTING

INFORMATION MANAGEMENT

SYSTEM

Classification
of payments ,
collections,
obligations
and accruals
by appropriation
fund and receipt
symbolization and
related deposit
and disbursing
office payment
authorizations

Classification of
payments: check
issues and
non-check payment
operations by Agency
Accounting entities
and deposits of
collections made

Executive ,
Legislative,
Judicial Programs
Agencies
(Accounting
Entities)

Figure 3
Federal Financial
Organizational Relationships

Disbursing
and Collecting
Accountable
Officers

Development of Electronic Accounting and
Cash Management Systems

To improve the effectiveness of the aforementioned financial operations, the Bureau of Government Financial Operations, over the past several years , has been developing automated systems for accounting and cash management .
These systems are designed to reduce the dependence on
the check as the primary vehicle for disbursements; automate the deposit process for collections ; and more effectively monitor and control the flow of Federal funds providing more timly and accurate financial data.
Five such program efforts are currently in operation or
under development within the scope of the Treasury Governmentwide Accounting Information Management System .
The Central Accounting Data Management System
(CADM ) automates the processing of all Federal
financial transactions into a central system of
accounting results associated to budgetary results: surplus ; deficit ; appropriation fund and
receipt account maintenance ; obligation data and
Federal assets and liabilities of both a cash and
accrual nature .
• The Treasury Asset Accountability System (TAAS)
automates the maintenance of Treasury cash and
monetary assets held in Federal depositaries (Federal Reserve Banks, Branches, and commercial
bank depositaries) and Treasury offices (Mints ,
Assay Offices, and Fort Knox Bullion Depositary) .

་

• The Deposits in Transit System ( DIT) automates
the collection of Federal monies through reconciliation of agency reporting of deposits made and
Federal depositaries reporting of related increases
in cash balances.
• The Simplifed Intragovernmental Billing and
Collection System (SIBAC) automates intragovernmental payments and collections without the issuance of separate billing , payment,
documents.

and deposit

• The Treasury Financial Communication System
(TFCS) automates the process of generating certain non-recurring payments and speeds the process of receipt of Government deposits and the
associated accounting control .
All of the above systems vary in stages of completion
from conceptual design , to full -scale operational implementation and utilization .
The remainder of this document describes the Treasury
Financial Communication System currently operational in
initial prototype design established to provide the basic
structure for future system development.
In addition , the TFCS through its telecommunications
development effort, provides the mechanism for the future
telecommunications needs associated to financial data retrieval of the CADM , TAAS, and DIT systems described
above.

Treasury Financial Communication System
(TFCS) Highlights

In September 1976 , the Treasury Department began operation of a computer- to-computer communications link between Treasury, Bureau of Government Financial Operations, and the Federal Reserve Bank of New York and
through the New York Federal Reserve Bank into the Federal Reserve Communication System or " Fedwire ". Key features of the system include :
Video terminal-based processing of many Government financial transactions including :
generation of certain non- recurring (one-time)
payments , that are advantageous to the Government.
- receipts of Government deposits ; and
- transfer of Government balances among depositaries.

• A comprehensive accounting and audit control
mechanism to streamline financial record keeping
and reporting providing direct access to up-to-the
minute status of Federal funds available to meet
Government disbursement needs.
In its initial installation , the system will handle payments
initiated by Treasury's Washington Disbursing Center as
well as accept payments from any Fedwire correspondent
terminating such receipt/deposit message traffic at the
Treasury, Bureau of Government Financial Operations in

Washington , D.C. Future plans provide for expansion of the
system to other Government disbursing offices . In addition ,
this expansion will include automatic switching of deposit
messages from Treasury to those Government agencies
which require immediate information to support their cash
management needs . On- line monitoring by Treasury cash
management staff with automated transfer to Treasury available fund balances between Federal depositaries is also
planned .
Work began on developing the system in July 1975. A
predecessor system linking a Teletype terminal in Treasury
to the Fedwire system , had been in operation since December 1974. Prior to 1974, fund transfer involved methods similar to Western Union Teletype processes requiring totally
manual operations at the Federal Reserve Banks and Treasury to reconcile and account for the receipt or disposition
of funds involved .

$$$$$

==
Treasury/Federal Reserve
Communications System
The Treasury system is linked by computer into the Federal Reserve's Fedwire¹ system which is a nationwide
communications network interconnecting the twelve Federal Reserve banks and their branches as shown in Figure 4.
Commercial banks which are members of the Federal
Reserve system (approximately 6,000 of the 14,000 banks in
the U. S.) are connected to the Fedwire through their Federal Reserve district banks . These member banks also act
as correspondents for the non- member commercial banks
thus allowing fund movement to virtually all banking institutions. Treasury's link into Fedwire as well as those for
member banks is shown in Figure 5. It includes :
⚫ the Treasury computer which is connected to the
Federal Reserve Bank of New York and is also
connected by terminals to Government agencies
and disbursing offices ;
⚫ the New York Federal Reserve Bank computer is
connected to member commercial banks in that
district and is also linked to Fedwire's Culpeper
Switch in Culpeper , Virginia;
⚫ the Culpeper Switch , the heart of the Fedwire
network, is connected to all twelve Federal Reserve Banks and branches throughout the country; and finally
⚫ the Federal Reserve district banks which are connected to member commercial banks in their districts (presently only approximately 300 banks are
connected on-line to the Fedwire system , the
remainder are notified of fund movement via telephone communication from FRB's) .
1A further explanation of the Fedwire system is covered in the Federal Reserve publication "The
Culpeper Switch."

Figure 4
Federal Reserve
Communication System

MINNEAPOLIS

CLEVELAND

BOSTON
NEW YORK

CHICAGO

SAN FRANCISCO

CULPEPER
KANSAS CITY

PHILADELPHIA
WASH, D.C.
(TREASURY)
RICHMOND

ST LOUIS
ATLANTA

DALLAS

MEMBER BANKS

MEMBER BANKS

MEMBER BANKS

FED DISTRICT BANK
FED
DISTRICT BANK

FED DISTRICT BANK

CULPEPER SWITCH
MEMBER
BANKS

FED OF NEW YORK
COMPUTER

TREASURY
COMPUTER

Figure 5
TFCS/FRCS
Integration

111

Treasury Financial Communication System

The primary functions of the system are ; generating payments, receiving government deposits , monitoring cash
flow and automating central accounting and auditing functions. The operations and processing concepts supporting
these functions are described below.
GENERATING PAYMENTS
In the past, when government agency wanted to make a
payment (for example , to a grantee of a federal program ) , it
created a voucher and sent it to a Treasury disbursing
office. The disbursing office processed the voucher and
created a government check which was then mailed directly
to the payee. Under the TFCS, when the voucher is received
by the disbursing office , a government clerk using a video
display terminal will generate a payment message to the
payee's bank in a standard Fedwire format and transmit it
immediately to the Federal Reserve Bank of New York.
Each message undergoes extensive editing and error
checking to insure validity before it leaves the Treasury system . At the same time the Federal Reserve credits that
member bank's reserve account and charges the Treasury
account at the Federal Reserve . In cases where the member
bank is outside the New York FRB district, the New York
FRB will forward the message to the appropriate Federal
Reserve district bank and from there to the member bank.
This entire process takes place in a matter of seconds. An
example of this type of funds transfer is shown in Figure 6.

At the same time that the payment message is being generated and validated at the Treasury disbursing office , the
TFCS system automatically performs the required accounting (in the above instance , charging the particular disbursing office account and reducing the Treasury balance at the
New York Federal Reserve Bank) and creates an audit trail
for later reconciliation to FRB and disbursing office reporting of daily government financial activities undertaken .

Figure 6
Payment Flow

GOVERNMENT
AGENCY

VOUCHER

TREASURY
DISBURSING
OFFICE

FED OF NEW YORK

TREASURY

COMPUTER

FEDWIRE
CULPEPER
SWITCH

MEMBER BANK
FED OF
SAN FRANCISCO

RECEIVING DEPOSITS
Deposits are monies received by the U. S. Government
such as repayment of government loans , proceeds of the
sale of Public Debt securities or government agency collections (for example , sale of gold and admission fees to our
national parks) . To trace the path of this inflow of cash to
the government , let's use the example of the sale of gold . A
commercial bank, which may have purchased gold on its
own account or on behalf of one of its customers, will have
its reserve account at its Federal Reserve district bank
charged with the purchase amount ; that same amount will
be credited to the account of the U. S. Treasury at the New
York Federal Reserve Bank. A deposit message , giving notice of the increase in this account , is sent through Fedwire
to the New York FRB which , in turn , automatically forwards
the message to Treasury's system . This flow is shown in
Figure 7.
When the deposit message is received by Treasury, the
system automatically credits the account of the agency receiving the funds and records the increase of available
Treasury funds at the New York FRB . Also , as in the case of
payments , the system builds the audit trail for later reconciliation . When a problem is experienced in automatically
identifying the recipient agency ( if a code is missing or incorrect in the message) a Treasury terminal operator using
a video display terminal will intervene to interpret the message so that continued automated

processing can take

place. The entire deposit process also takes place in a matter of seconds .
In the future expansion of the system , some agencies will
be immediately notified , via a computer terminal , of the originator and amount of the funds inflow, thus enhancing
awareness and decision making ability for financial operations.

FED OF CHICAGO

CULPEPERSWITCH

FED OF NEW YORK

TREASURY COMPUTER

Figure 7
Deposit Flow

Account Monitoring And Control

During the daily payment generation and deposit message processing operations, system status and maintenance
is constantly being monitored . Through direct access capabilities , Treasury management may interrogate the system
to ascertain information such as : the Treasury position with
the New York Federal Reserve Bank with respect to fund
movement in and out of Treasury's account ; disbursement
and deposit position with regard to government disbursing
office payment requests and agency accounting entities
collection confirmation ; and reconciliation of Federal Reserve Bank, disbursing office and agency accounting results to insure all entities properly handled funds movement
correctly within their accounting and reporting systems .
Beyond the application of accounting data monitoring
and control , the system also is designed to monitor its own
performance in terms of terminal response time , system
diagnostics of all on- line site interconnection in terms of
system readiness, line functions, etc. , status of message
traffic (e.g. , payments created , verified , acknowledged as
processed by the Fedwire system ) , deposit messages confirmed to correct agency accounting entities and messages
held in suspense awaiting corrective action due to deficient
data transmitted by initiating Fedwire corresponding organizations. Systems performance security monitoring is also
controlled within the system acknowledging security violations with regard to user password identification and associated transaction processing , legal terminal application
processing , including illegal attempted accessing from foreign non-system terminals .
Although prototype in initiation , the system design has
been broad in scope providing attention to : user demands
for improved operator efficiency, the most current accounting and audit reconciliation process and security performance control to assure the safeguard of the financial resource moving over the system .

Summary

Through the TFCS system Treasury has taken advantage
of the latest telecommunications and computer technologies to streamline government funds movement . This has
the dual effect of providing more timely information on
available Treasury funds balances throughout the country
an important element of responsive financial management and control ; as well as reducing the operating costs
associated with record management relating to collection
and disbursement operations.
The TFCS system , as initially implemented , provides the
capability for future system growth which will include :

expansion of payment initiation points within
Treasury and to other government corporations
and agencies ;
• extension of remote communications facilities for
deposit receipt to additional Treasury and other
government end points ; and

•
expansion of message traffic to permit enhanced
communication and monitoring of Federal funds
movement.

As an important component of a larger governmentwide
accounting system , the TFCS system enhances Treasury's
ability to produce integrated government financial results
and to better meet its financial reporting responsibilities.

$$

Department of the Treasury
Bureau of Government Financial Operations
Government Accounting Systems Staff
Washington, D.C. 20226