A new contract for electronic payment services for State of Nebraska agencies is estimated to save Nebraska taxpayers more than $600,000 over the five-year life of the contract, State Treasurer Don Stenberg said today.
The new contract for ACH (Automated Clearing House) services to transmit electronic payments for state agencies was awarded to U.S. Bank and will go into effect in August, Treasurer Stenberg said. Under the new contract, it is estimated the state will pay about $250,000 a year for electronic payment services, substantially less than the $377,000 a year under the current contract, which is expiring.
Electronic payments are used to pay state employees, as well as to pay contractors, vendors, recipients of state aid programs, and others doing business with the state. Child support payments to custodial parents are also paid electronically in most cases. In addition to state agencies, local governmental entities can make use of the electronic payment services under the contract.
“Awarding this new contract at a substantial savings to the State of Nebraska and ultimately to Nebraska taxpayers is another example of my emphasis on economy and efficiency, while still maintaining high quality services, in the State Treasurer’s Office,” Stenberg said. “My staff and I continue to seek ways to save money for taxpayers and, at the same time, to provide excellent support and to be a leader in the use of technology in the delivery of government services.”
U.S. Bank, which also was the previous ACH contract holder for the state, was awarded the new contract in a competitive bidding process. U.S. Bank’s proposal was the lowest cost of the three proposals submitted in response to a Request for Proposals issued in February by the State Treasurer’s Office. The contract is based on usage.
“We are confident that U.S. Bank will continue to provide high quality service to the State of Nebraska through this contract,” Stenberg said.
The more than $600,000 in savings was calculated based on last year’s usage, Stenberg said. He added that the savings could be even greater as even more electronic payments are made in future years, as the state continues to reduce the use of paper checks called warrants. The contract allows for two one-year extensions.
One measure put in place to encourage electronic payments is an agreement between the State Treasurer’s Office and the State Department of Administrative Services that requires a vendor receiving payments exceeding $25,000 or receiving multiple payments a year from the state to be paid electronically. While the agreement provides some exclusions, all state agencies are encouraged to pay for large-dollar and reoccurring payments by electronic means, Stenberg said. The state is continuing to look for even more ways to reduce the use of paper checks, he added.
Stenberg reported last week that 95 percent of the dollar amount of payments made by the State Treasurer’s Office in 2013 were made electronically through ACH payments, stored value cards or branded prepaid debit cards, and purchasing cards. Specifically, more than $9 billion of the more than $9.46 billion paid out by the Treasurer’s Office in calendar year 2013 was paid out electronically.
The ACH system was developed by the financial industry in the early 1970s as an electronic alternative to checks. ACH processes large volumes of credit and debit transactions in batches. In ACH transactions, payment information is processed and settled electronically, increasing reliability, efficiency, security, and cost effectiveness.