25990 Federal Register / Vol. 60, No. 94 / Tuesday, May 16, 1995 / Rules and Regulations

Exchange/NFA 1995 Fee

New York Cotton Exchange ........................................................................................................................................................ 53,205.10

Kansas City Board of Trade ........................................................................................................................................................ 10,545.54

New York Futures Exchange ....................................................................................................................................................... 43,908.68

Minneapolis Grain Exchange ....................................................................................................................................................... 14,786.57

Philadelphia Board of Trade ........................................................................................................................................................ 1,857.41

Amex Commodity Corporation .................................................................................................................................................... 587.45

National Futures Association ....................................................................................................................................................... 278,187.94

Total ...................................................................................................................................................................................... $1,136,390.33

As in the calculation of fees in

previous years, the fiscal 1995 fee for

the Chicago Board of Trade includes the

MidAmerica Commodity Exchange.

V. Regulatory Flexibility Act

The Regulatory Flexibility Act

(‘‘RFA’’), 5 U.S.C. 601 et seq., requires

agencies to consider the impact of rules

on small businesses. The fees

implemented in this release affect

contract markets (also referred to as

‘‘exchanges’’) and registered futures

associations. The Commission has

previously determined that contract

markets are not ‘‘small entities’’ for

purposes of the Regulatory Flexibility

Act, 5 U.S.C. 601 et seq., 47 FR 18618

(April 30, 1982). Registered futures

associations also are not considered

‘‘small entities’’ by the Commission.

Therefore, the requirements of the

Regulatory Flexibility Act do not apply

to contract markets or registered futures

associations. Accordingly, the

Chairman, on behalf of the Commission,

certifies that the fees implemented

herein do not have a significant

economic impact on a substantial

number of small entities.

Issued in Washington, DC., on May 9,

1995, by the Commission.

Jean A. Webb,

Secretary of the Commission.

[FR Doc. 95–11990 Filed 5–15–95; 8:45 am]

BILLING CODE 6351–01–P

DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Part 247

RIN 1510–AA44

Regulations Governing FedSelect

Checks

AGENCY: Financial Management Service,

Fiscal Service, Treasury.

ACTION: Final rule.

SUMMARY: The Financial Management

Service, U.S. Department of the

Treasury, is issuing a final rule to

govern FedSelect checks, a new

payment instrument for use by Federal

agencies in paying Federal obligations.

This final rule sets forth procedural

instructions for using FedSelect checks,

and defines the rights and liabilities of

the Federal Government, Federal

Reserve Banks, and banks in connection

with FedSelect checks.

EFFECTIVE DATE: June 15, 1995.

FOR FURTHER INFORMATION CONTACT: Gary

Garner, Program Analyst, Cash

Management Policy and Planning, 202–

874–6751; or Brad Ipema, Principal

Attorney, 202–874–6680.

SUPPLEMENTARY INFORMATION: This

portion of the preamble discusses the

basis and purpose of 31 CFR part 247.

It also responds to comments on the

Financial Management Service’s (FMS)

notice of proposed rulemaking (NPRM)

on this subject issued October 21, 1994

(59 FR 53125). A notice to extend the

comment period for the notice of

proposed rulemaking to December 21,

1994 was issued November 28, 1994 (59

FR 60739).

The FMS currently offers Federal

agencies two payment mechanisms for

paying Federal obligations. A Federal

agency may either request the issuance

of a Treasury check or the initiation of

an electronic funds transfer. However,

the FMS is making available to Federal

agencies a third payment option called

FedSelect, a new check instrument to be

used with imprest fund transactions and

other ‘‘on-demand’’ payment needs. The

preferred method of payment is

electronic. However, FedSelect is the

FMS’s response to customer needs for a

new paper instrument and is to be used

only when checks are deemed

appropriate and consistent with FMS

policy as contained in 31 CFR part 206.

General Comments and Responses on

the NPRM

The Department received eight

written comments on the NPRM from

Federal agency officials and the

financial community. One organization

expressed concern that the Government

proposes direct competition to the

current third party draft industry. The

Report of the National Performance

Review (NPR), September 1993, FM08,

stated that since third party drafts are

like checks, agencies essentially pay

someone else to have a bank account for

them. It was recommended that the

Secretary of the Treasury eliminate the

use of third party drafts and allow the

use of commercial checking accounts.

FedSelect grew out of this NPR

recommendation, with an FMS desire to

offer an alternative to third party drafts

and improve customer services.

Several questions were raised

regarding the operation of FedSelect.

One organization and one bank wanted

to know whether existing Federal

Reserve bank routing numbers will be

utilized on FedSelect checks. FedSelect

checks will be drawn on the Federal

Reserve Bank of Chicago and will bear

that Reserve Bank routing number.

One organization requested

identification of the types of

transactions for which FedSelect checks

will be used. FedSelect checks

potentially may be used to pay all

Government financial obligations; e.g.,

benefit and vendor payments.

Two organizations wanted to know

how many FedSelect checks will be

issued for each type of payment. It is

undetermined at this time how many

checks will be issued for each type of

payment.

One organization requested to know

the types of persons and entities that

will be payees of such instrument. All

types of persons and entities doing

business with the Government will be

payees of such instrument.

One organization wanted to know the

start-up date of FedSelect. The start-up

date for FedSelect will be July through

October 1995.

Two organizations requested that the

FMS provide banks with sample

FedSelect checks so that their personnel

can become familiar with them. It will

be recommended that area banks be

provided sample FedSelect checks by

Federal agencies utilizing FedSelect

checks in their respective locale. This

will allow bank personnel to become

familiar with the FedSelect checks.

Several organizations requested that

the FMS describe plans to prevent fraud

losses due to counterfeiting, forgery and
Federal Register / Vol. 60, No. 94 / Tuesday, May 16, 1995 / Rules and Regulations 25991

alterations. FedSelect checks will be

fraud-evident checks with built-in

security features such as:

• Chemical-sensitive paper that

reveals attempts to alter checks with

solvents and ink eradicators.

• Watermark paper that is visible

when held to a light source, and

impossible to reproduce with a

photocopier or scanner.

• Micro-print signature line: Tiny

type, visible when viewed through a

magnifying glass, which appears as a

dotted line when reproduced.

One organization recommended that

the FMS initiate a nationwide

educational program to lessen the

potential for confusion and facilitate

acceptance of FedSelect checks by

banks. It will be recommended that area

banks be provided sample FedSelect

checks by Federal agencies utilizing

FedSelect checks in their respective

locale. This will allow bank personnel

to become familiar with FedSelect

checks. A nationwide educational

program will not be provided at this

time.

One organization suggested that the

FMS establish a FedSelect ‘‘hotline’’ to

address banker concerns and/or

questions regarding FedSelect checks. A

dedicated telephone number is provided

on the face of each FedSelect check to

facilitate verification of FedSelect

checks.

One organization recommended that a

$5,000 standard dollar limit be placed

on FedSelect checks to minimize

potential losses to banks, and that the

amount should be preprinted on the

FedSelect check. FedSelect checks will

have a dollar limit of $10,000, which

will be preprinted on the FedSelect

check. Federal agencies can request

waivers for higher amounts if their

circumstances justify an increase above

the $10,000 limit.

Section-by-Section Comments and

Responses

Section 247.2

One organization requested changes

in the language of this section for

purposes of clarity.

The words ‘‘these regulations’’ in

§ 247.2 are changed to ‘‘this Part’’ and

other words are added for clarity. In

addition, FedSelect checks will not be

governed by the Uniform Commercial

Code (UCC), as drafted by the National

Conference of Commissioners on

Uniform State Laws, but will be

governed by the UCC, as adopted by

Illinois, and as amended from time to

time.

Section 247.3

One organization recommended that

the term ‘‘bank’’ be used, as defined in

Regulation J of the Federal Reserve

System, 12 CFR 210.2(b), instead of

‘‘depositary institution’’ in order to

achieve consistency with the

commercial law governing checks,

(Regulation CC of the Federal Reserve

System, 12 CFR part 229; Regulation J

of the Federal Reserve System, 12 CFR

part 210 and the UCC). The term ‘‘bank’’

is now used instead of ‘‘depositary

institution.’’ However, ‘‘bank’’ is

defined as it is defined in Regulation CC

of the Federal Reserve System, 12 CFR

229.2(e).

In the definition of Reserve Bank, the

phrase ‘‘or any branch of a Federal

Reserve Bank’’ was deleted and

language was added clarifying that

‘‘Reserve Bank’’ is limited to one of the

twelve Reserve Banks in order to

conform with the manner of

presentment identified in Regulation

CC, 12 CFR 229.36(b). Accordingly,

FedSelect checks will not be considered

presented to the paying bank until they

are presented to the paying bank

identified by the routing number placed

on the FedSelect check, which is

currently the Federal Reserve Bank of

Chicago.

Section 247.4

One organization raised a concern

regarding the clarity of the relationship

between the FMS and the Federal

Reserve bank upon which FedSelect

checks are drawn. As referenced in

§ 247.4, the FMS has established a

Memorandum of Understanding (MOU)

between the Federal Reserve Bank of

Chicago (Reserve Bank) and the FMS

which further establishes the role and

functions of the payor Reserve Bank on

FedSelect checks. Treasury Financial

Manual, Volume II, Part 8, Chapter

5000, entitled ‘‘Payment And Processing

of FedSelect Checks By Federal Reserve

Banks’’ will not be issued as the above

referenced MOU provides sufficient

detail. Therefore, reference to that

Treasury Financial Manual chapter is

deleted.

One organization suggested replacing

the word ‘‘settle’’ in § 247.4(b) with the

word ‘‘pay’’ for clarity and consistency

with Regulation J of the Federal Reserve

System, 12 CFR 210.9. After review of

the cited law, the FMS agrees that the

word ‘‘settle’’ more accurately describes

the role of the paying bank. Therefore,

changes were made to § 247.4(b) which

clarify that the Reserve Bank settles for

items, reserving the right to return the

item, after which payment becomes

final.

One organization recommended that

language be inserted stating that Federal

Reserve banks shall not be expected to

cash FedSelect checks presented

directly to them by the general public.

The FMS believes that this subject is

sufficiently covered under § 247.8(a),

which provides for the presentment of

FedSelect checks through normal

banking channels.

Section 247.6

One organization questioned the

purpose of the ‘‘warranty’’ provision in

§ 247.6(b). The warranty language in

§ 247.6(b) was derived from Regulation

J of the Federal Reserve System, 12 CFR

210.5, under which banks warrant good

title to an item and warrant that the item

has not been materially altered.

Specifically, however, the FMS inserted

the warranty language in § 247.6, which

is addressed to ‘‘Banks’’ in order to

make clear that banks handling

FedSelect checks do so in accordance

with commercial law (the UCC,

Regulation J of the Federal Reserve

System and Regulation CC of the

Federal Reserve System) as opposed to

the rules governing standard Treasury

checks (i.e., 31 CFR part 240). Therefore,

the warranty language was not taken

out. However, reference to the UCC was

removed. As a result, by handling

FedSelect checks, a bank agrees to the

provisions of ‘‘this Part,’’ which, in

accordance with § 247.2, makes clear

that FedSelect checks are governed by

the UCC, Regulation J of the Federal

Reserve System and Regulation CC of

the Federal Reserve System.

Section 247.8

In reference to the limited payability

provisions of § 247.8, one bank stated

that banks will be exposed to greater

liability for losses because banks will

invariably accept for deposit checks that

are ‘‘stale’’ (negotiated more than the

number of days stated on the face of the

FedSelect check) and for which they

will not receive payment from the

Government. The bank stated further

that the practice will inconvenience the

bank’s customers as they will have to

petition the Government for reissuance

of the check, and the bank will bear the

loss where the bank’s customer

withdraws the proceeds of the check

immediately and disappears. One

organization stated that it understood

the payability of an item to be

determined based on the date of deposit

in the bank of first presentment

(depositary bank), not the date the check

is presented to the payor Reserve Bank.

In general, the exposure of banks to

liability for losses in connection with

FedSelect checks is no greater than a
25992 Federal Register / Vol. 60, No. 94 / Tuesday, May 16, 1995 / Rules and Regulations

bank’s current liability for losses in

connection with third party drafts in use

today by Federal agencies. In addition,

the FMS has decided to limit the

payability of all FedSelect checks to 90

days.

At the request of one organization,

words in 31 CFR 247.8(d) were changed

as follows: ‘‘refuse to pay’’ was changed

to ‘‘return unpaid’’; ‘‘presented to’’ was

changed to ‘‘negotiated to’’; and ‘‘bank

of first presentment’’ was changed to

‘‘depositary bank.’’ Therefore, the

Reserve Bank generally will return

unpaid a FedSelect check negotiated to

the depositary bank more than 90 days

after it was issued. The periods of

payability written on the face of

FedSelect checks are instructions to the

Government to return those checks

unpaid, if it so determines. The FMS,

after contacting the Federal agency that

issued the FedSelect check, may pay the

check even though it was negotiated to

the depositary bank after the period of

payability. Therefore, not all ‘‘stale’’

FedSelect checks will be returned to the

depositary bank. This procedure is very

similar to the manner in which banks

may treat checks more than six months

old under the UCC. Section 4–404 of the

UCC provides that a bank is under no

obligation to pay a check more than six

months old. However, as discussed in

the UCC commentary following § 4–404,

the bank may, after contacting the

drawer, decide to pay the item.

Regarding the bank’s increased risk of

loss because a customer might withdraw

funds and disappear immediately after a

‘‘stale’’ FedSelect check is negotiated,

but just before the Reserve Bank has

returned the check, the return of the

‘‘stale’’ FedSelect check is no different

than that of the return of a standard

commercial check; all returns must

comply with the midnight deadline in

the UCC, § 4–301, and Regulation CC of

the Federal Reserve System, 12 CFR

229.30, 229.31.

In addition, where depositary

institutions face this risk of doing

business, Regulation CC of the Federal

Reserve System, 12 CFR

229.10(c)(1)(iii)(A) makes clear that in

order for the requirement of next day

availability to be applied, the check

must be deposited in person by the

payee to an employee of the depositary

bank, thereby affording the depositary

bank an opportunity to review the

FedSelect check for ‘‘staleness.’’

Regulation CC of the Federal Reserve

System, 12 CFR 229.13(e), provides that

the depositary bank may delay next day

availability when there is reasonable

cause to doubt collectibility.

Furthermore, as made clear in

Regulation CC of the Federal Reserve

System, 12 CFR 229.19(c)(2)(ii), as well

as the official commentary following

that provision, the depositary bank’s

credit to its customer may be

provisional; the depositary bank may

charge back against the customer’s

account. Section 4–212(1) of the UCC

would govern the depositary bank’s

right of recovery of the provisional

credit.

The FMS is of the opinion that the

words ‘‘more than the number of days’’

in the second sentence of § 247.8(d),

which is in reference to the manner of

determining stale-dated items, is

sufficiently clear. Nonetheless, the

words ‘‘after the date on which the

FedSelect check was issued’’ are added

in order to further clarify that FedSelect

checks generally will be returned

unpaid if they are negotiated to a

depositary bank more than the number

of days stated on the face of the check

after the date the check was issued

(more than 90 days after the date on

which the check was issued).

One organization stated that noncash

items were no longer handled by

Federal Reserve banks. In response, the

third sentence of § 247.8(d) was changed

to state that stale FedSelect checks

should be marked ‘‘void’’ on the face of

the check and sent to the issuing agency

or the FMS.

Section 247.9

Comments were received from several

organizations regarding the warranty

provisions in § 247.9, stating that the

warranty provisions unfairly shifted the

burden of loss to banks.

The warranty provisions of § 247.9

were drafted in an attempt to provide

additional protection for public funds.

However, after reviewing the comments

arguing that such provisions are

unnecessary, unfair to banks and

inconsistent with commercial law (the

UCC, Regulation J of the Federal Reserve

System and Regulation CC of the

Federal Reserve System), the FMS has

decided to delete this section.

Section 247.10 (Now Section 247.9)

Two banks expressed a concern that

a bank will not learn that a FedSelect

check with a stop payment order placed

against it is being returned until two to

four days after the funds deposited must

be made available to the customer under

Regulation CC of the Federal Reserve

System, thereby placing the depositary

bank at significant risk. The banks

argued that the depositary bank is at risk

of losing the funds which must be made

available by the next day if the Reserve

Bank returns a ‘‘stopped’’ FedSelect

check.

The FedSelect proposed rule states

that Federal agencies are to request stop

payment orders when the agency has

notice that a FedSelect check has not

been received by the payee, or that a

FedSelect check is lost, stolen or

destroyed. Stop payment orders protect

both the Government and the payee

from loss. In addition, early detection of

potential fraud protects banks from loss.

As discussed under § 247.8 above,

while Regulation CC of the Federal

Reserve System requires next day

availability for certain checks, 12 CFR

229.10(c)(1)(iii)(A) makes clear that the

check must be deposited in person by

the payee to an employee of the

depositary bank, thereby affording the

depositary bank an opportunity to

review the FedSelect check. In addition,

Regulation CC, 12 CFR 229.33(a),

requires that the paying bank provide

notice of return to the depositary bank

for items of $2,500 or more. If the

depositary bank is concerned about

potential loss, it can call the number

stated on the face of the FedSelect

check. If the depositary bank receives an

indication from the Reserve Bank or the

FMS that a stop payment order might be

placed against a FedSelect check, the

depositary bank may delay next day

availability because there is reasonable

cause to doubt collectibility under 12

CFR 229.13(e). In addition, as made

clear in Regulation CC of the Federal

Reserve System, 12 CFR 229.19(c)(2)(ii),

as well as the official commentary to

that provision, the depositary bank’s

credit to its customer may be

provisional; the depositary bank may

charge back against the customer’s

account if a check is returned by reason

of a stop payment order. Section 4–

212(1) of the UCC continues to govern

the depositary bank’s right of recovery

of a provisional credit against the

customer.

The word ‘‘replacement’’ has been

deleted from the title of § 247.9 in order

to avoid confusion; while agencies may

issue another FedSelect check or other

form of payment to fulfill an obligation,

no ‘‘replacement’’ FedSelect checks will

be issued.

Per the recommendation of one

organization, the FMS changed the

words ‘‘refuses payment on’’ in the first

sentence of § 247.9(c) to ‘‘returns

unpaid’’ in order to conform with

terminology in Regulation J of the

Federal Reserve System, 12 CFR 210.9,

and Regulation CC of the Federal

Reserve System, 12 CFR 229.30, which

discuss the return of unpaid items. In

addition, the reference to ‘‘§ 247.8(c)’’ in

the first sentence of § 247.9(c) was

changed to § 247.8(d).
Federal Register / Vol. 60, No. 94 / Tuesday, May 16, 1995 / Rules and Regulations 25993

One organization was confused

regarding the intention of the second

sentence of § 247.10(d). The second

sentence of § 247.10(d) was drafted with

the intention of clarifying for Federal

agencies using the services of FedSelect

that any obligations for payment are the

responsibility of the issuing agency, not

the FMS. Therefore, claims by payees

for any continuing obligations should be

addressed to the agency that issued the

FedSelect check that was subsequently

lost, stolen or altered.

Section 247.11 (now Section 247.10)

One bank expressed a concern that

this section does not sufficiently detail

the circumstances under which the

Government would be liable for fraud

claims. While the FMS believes that

sufficient detail is provided, the

purpose of this section is to allocate

accountability between the FMS and the

issuing agencies.

Section 247.12 (now Section 247.11)

In response to a comment by an

organization, currently the Reserve Bank

will not be involved in demanding

refunds from presenting banks or other

debtors. However, contrary to the

understanding of the organization, the

opportunity for the Reserve Bank to be

involved in such collection efforts is not

precluded by § 247.11(b).

Rulemaking Analysis

It has been determined that this

regulation is not a significant regulatory

action as defined in E.O. 12866.

Therefore, a regulatory assessment is not

required. It is hereby certified that this

regulation will not have a significant

economic impact on a substantial

number of small entities. A regulatory

flexibility analysis is not required. It is

anticipated that FedSelect checks will

not negatively affect a substantial

number of small entities because of the

relatively low volume of checks to be

issued in comparison to the use of other

payment mechanisms by Federal

agencies.

List of Subjects in 31 CFR Part 247

Banks, Banking, Checks, Federal

Reserve System.

Authority and Issuance

For the reasons set out in the

preamble, title 31, part 247 of the Code

of Federal Regulations is added to read

as follows:

PART 247—REGULATIONS

GOVERNING FEDSELECT CHECKS

Sec.

247.1 Applicability.

247.2 Governing law.

247.3 Definitions.

247.4 Federal Reserve Banks.

247.5 Federal agencies and termination of

services.

247.6 Banks.

247.7 Certification and internal agency

control.

247.8 Presentment.

247.9 Notice, non-receipt, theft, loss or

destruction; late presentment.

247.10 Losses and accountability.

247.11 Debt collection.

247.12 Funds for losses.

247.13 Additional requirements.

247.14 Waiver of regulations.

247.15 Supplements, amendments or

revisions.

Authority: 31 U.S.C. 3321, 3325 and 3327;

12 U.S.C. 391.

§ 247.1 Applicability.

The regulations in this part prescribe

the rights and liabilities of the United

States, the Federal Reserve Banks,

banks, and others on FedSelect checks.

These regulations apply to FedSelect

checks issued on behalf of the United

States for payments in connection with

United States obligations. FedSelect

checks are issued by Federal agencies

on Federal Reserve Bank check stock.

FedSelect checks are drawn on the

payor Federal Reserve Bank in its

banking capacity. The drawer of a

FedSelect check is the United States; the

drawee is a Federal Reserve Bank.

Therefore, a FedSelect check shall not

be deemed to be drawn on the United

States nor shall the Federal Reserve

Bank be deemed its drawer.

§ 247.2 Governing law.

Except as otherwise provided by

statute or this Part, the regulations

governing checks drawn on the United

States or on designated depositaries of

the United States (e.g., 31 CFR parts

235, 240, 245, and 248) are inapplicable

to FedSelect checks. As to definitions

and other matters not specifically

covered in this part, FedSelect checks

are governed by Regulation J of the

Board of Governors of the Federal

Reserve System, 12 CFR part 210

(‘‘Regulation J’’), Regulation CC of the

Board of Governors of the Federal

Reserve System, 12 CFR part 229

(‘‘Regulation CC’’), and to the extent not

otherwise inconsistent with this part,

with Regulation J, and with Regulation

CC, FedSelect checks will be governed

by the Uniform Commercial Code, as

adopted by Illinois (‘‘UCC’’), as all three

may from time to time be revised. Such

matters include, but are not limited to,

rules regarding general presentment and

transfer warranties, indorsement, and

final payment.

§ 247.3 Definitions.

For the purpose of this Part:

Agency means a department, agency,

or instrumentality in the executive

branch of the United States

Government.

Bank means an entity described in

Regulation CC of the Federal Reserve

System, 12 CFR 229.2(e), as may be

amended from time to time.

Department means the United States

Department of the Treasury.

FedSelect check means a check drawn

upon a Reserve Bank with the

designation ‘‘FedSelect’’ printed on the

check.

Payee means the person to whom a

FedSelect check is payable.

Payor Reserve Bank means the

Reserve Bank on which a FedSelect

check is drawn.

Presenting bank means a bank which

sends a FedSelect check directly to a

Reserve Bank for payment or collection.

Reserve Bank or Federal Reserve Bank

means any one of the twelve Federal

Reserve Banks.

§ 247.4 Federal Reserve Banks.

(a) Where FedSelect checks are issued

on Reserve Bank check stock and drawn

on the payor Reserve Bank in its

banking capacity, the payor Reserve

Bank shall perform certain functions as

fiscal agent of the United States in the

issuing, processing and final payment of

FedSelect checks. A payor Reserve Bank

shall act as fiscal agent of the United

States on FedSelect checks only when

authorized to do so by a Memorandum

of Understanding between the Financial

Management Service, U.S. Department

of the Treasury (FMS), and the payor

Reserve Bank.

(b) As authorized by a Memorandum

of Understanding between a payor

Reserve Bank and the FMS and in

accordance with this part, the payor

Reserve Bank shall settle with a

presenting bank for the amount

specified in a FedSelect check upon

presentment of the FedSelect check

through normal banking channels. Each

payor Reserve Bank may issue operating

circulars, letters or bulletins not

inconsistent with this part governing

details of its handling of payments

under this part.

§ 247.5 Federal agencies and termination

of services.

(a) Agencies may issue FedSelect

checks in payment for United States

obligations.

(b) Issuance of a FedSelect check by

an agency in payment of an obligation

shall constitute an agreement between

the issuing agency and the FMS. The

issuing agency shall adhere to the terms

of the agreement, including those

relating to fees for services provided by
25994 Federal Register / Vol. 60, No. 94 / Tuesday, May 16, 1995 / Rules and Regulations

the FMS, as expressed in this part and

in the Treasury Financial Manual,

Volume I, Part 4, Chapter 3500 (I TFM

4–3500), entitled ‘‘Issuance Of

FedSelect Checks By Federal Agencies.’’

(c) In addition to the provisions of

this part, agencies issuing FedSelect

checks shall adhere to instructions,

contained in I TFM 4–3500, regarding

items such as procedures for opening

and closing FedSelect accounts with the

FMS, procedures for the adjustment of

agency FedSelect accounts where losses

are the responsibility of the agency,

procedures for the adjustment of agency

FedSelect accounts in cases of

termination of FedSelect services by the

FMS, and performance requirements in

the issuance of FedSelect checks.

(d) When an agency fails to adhere to

the provisions of this part or to the

instructions contained in I TFM 4–3500,

the FMS, at its discretion, may

terminate the services of FedSelect

checks. The FMS shall provide the

agency with prior notification of the

date on which services will be

terminated.

§ 247.6 Banks.

(a) A bank’s acceptance of a FedSelect

check issued pursuant to this part shall

constitute its agreement to the

provisions of this part.

(b) Each bank by its action of handling

a FedSelect check shall be deemed to

warrant to the Federal Government that

it has handled the FedSelect check in

accordance with the requirements of

this part.

§ 247.7 Certification and internal agency

control.

(a) A FedSelect check is not a check

drawn on the United States Treasury.

However, where the drawer of a

FedSelect check is the United States, the

requirements and procedures for

disbursing and certifying activities

under 31 U.S.C. 3321, 3527 and 3528

apply to agency accountable officers

issuing FedSelect checks.

(b) FedSelect checks shall be drawn

by an individual who is duly authorized

by the agency, and shall be certified by

a certifying officer.

(c) When an agency issues a FedSelect

check in payment of a United States

obligation, such agency certifies the

issuance of the payment

contemporaneous to the issuance of the

FedSelect check. Therefore, where

FedSelect checks are issued through an

automated system, certification occurs

through the on-line data transfer

between the agency issuing a FedSelect

check and the FMS.

(d) Agencies shall ensure that there

are proper internal controls over the

issuance of FedSelect checks, including

payment authorization, check issuance,

and reconciliations. Payment

authorization is the process by which

vouchers or invoices are approved for

payment by individuals designated to

do so by the head of the agency, or their

designees. Check issuance is the

physical issuance of a FedSelect check

in payment of a duly approved voucher

or invoice. Reconciliation is the process

by which amounts authorized for

payment are verified against amounts of

checks issued.

§ 247.8 Presentment.

(a) Presentment of FedSelect checks

must be made to the payor Reserve

Bank. FedSelect checks must be

presented through normal banking

channels.

(b) FedSelect checks will have a

standard period of payability of 90 days.

(c) FedSelect checks shall bear a preprinted legend, ‘‘Void After 90 Days.’’

(d) When an outstanding FedSelect

check reaches its stale-date, a

cancellation indicator will be placed

against it and its status reflected as

cancelled due to stale-dating. A payor

Reserve Bank will return unpaid a

FedSelect check negotiated to the

depositary bank more than the number

of days stated on the FedSelect check

after the date on which the FedSelect

check was issued. A FedSelect check

which has reached its stale-date before

being negotiated to a depositary bank

should be marked ‘‘void’’ on the face of

the check and sent to the issuing agency

or the FMS. The issuance of another

FedSelect check or other form of

payment, to replace a lost, stolen, or

destroyed FedSelect check must be

made in accordance with § 247.9.

§ 247.9 Notice, non-receipt, theft, loss or

destruction; late presentment.

(a) If an agency has notice that a

FedSelect check is not received by the

payee within a reasonable time after a

payment is due, or that a FedSelect

check is lost, stolen or destroyed, the

agency must request to the FMS that a

stop payment order be placed on that

item. The notice may be given by

telephone or facsimile, but if it is given

by telephone, such notice must be

confirmed in writing before another

payment is issued. The notification

must contain sufficient information to

identify the account and/or the

obligation to which the payment is

related. Payment on a FedSelect check

is stopped if the notice of non-receipt,

loss, theft, or destruction is received

from the agency at such time and in

such manner as to afford the payor

Reserve Bank and the FMS a reasonable

opportunity to act on it prior to final

payment, as provided by applicable law.

Once a stop payment order has been

placed against an outstanding FedSelect

check, such stop payment order will not

be removed.

(b) The agency that issued the

FedSelect check will issue another

FedSelect check to replace a lost, stolen

or destroyed FedSelect check, or other

form of payment, at its discretion. Items

an agency may require before issuing

another FedSelect check include:

(1) Written confirmation that the

original FedSelect check was lost,

stolen, or destroyed;

(2) Confirmation from the FMS that

the original FedSelect check is unpaid;

(3) A determination that recovery of

the original FedSelect check is unlikely;

and

(4) An indemnification agreement

executed by the payee and/or indorsee.

(c) If a payor Reserve Bank returns

unpaid a FedSelect check solely as a

result of § 247.8(d), the agency that

issued the original FedSelect check may

issue, at its discretion, another

FedSelect check, or other form of

payment, to a payee or holder upon

surrender of the original FedSelect

check and execution of such

indemnification agreement as may be

required by the agency.

(d) Upon verification of the existence

of a forged or unauthorized indorsement

on a FedSelect check which has been

finally paid, the agency that issued the

original FedSelect check may issue, at

its discretion, another FedSelect check

or other form of payment to the person

entitled. Disputes as to any continuing

obligations for payment remain between

the agency that issued the payment and

the payee. Prior to the issuance of

another FedSelect check, the payee or

indorsee of the original FedSelect check

may be required to execute an affidavit

asserting that the payee or indorsee was

in no way involved in the fraudulent or

unauthorized indorsement of the

original FedSelect check, in addition to

any indemnification agreement required

by the agency.

(e) In the case of a FedSelect check

payable to the order of two or more

persons, the requirements of this section

apply to all designated payees.

§ 247.10 Losses and accountability.

(a) Agencies will be accountable for

all losses arising out of agency activity

related to the issuance of FedSelect

checks. Such activities include

negligence, fraud perpetrated by an

employee or agent of the agency, and

fraud perpetrated by a service-provider

or vendor receiving a FedSelect check as

payment.
Federal Register / Vol. 60, No. 94 / Tuesday, May 16, 1995 / Rules and Regulations 25995

(b) If an agency had notice that a

FedSelect check was not received by the

payee within a reasonable time after a

payment is due, or that a FedSelect

check is lost, stolen or destroyed, and

the agency failed to request to the FMS

that a stop payment order be placed on

that item pursuant to § 247.9(a), the

agency will be accountable for any loss

occurring as a result of the failure to

request stop payment in a timely

fashion.

(c) Losses caused by the fault or

negligence of the FMS will be the

accountability of the FMS. Such losses

include failure to adhere to a request by

an agency to place a stop payment order

on an item in accordance with

§ 247.9(a).

(d) The FMS will be accountable for

losses caused by third-parties, including

losses caused by alteration, counterfeit

and forgery of the payee indorsement,

unless such losses occur as described in

paragraphs (a) and (b) of this section.

§ 247.11 Debt collection.

(a) Agencies are responsible for

collection procedures on all improperly

paid items arising under the

circumstances described in paragraphs

(a) and (b) of § 247.10. However,

excepting cases of fraud, an agency

should write off a debt and refer it to the

FMS for collection if it is not resolved

within 90 days after the item was paid.

When the FMS collects on the debt, the

funds will be returned to the agency

minus an administrative fee for the

collection, in accordance with rules set

forth in I TFM 4–3500. Accountability

for a debt remains with the agency in

accordance with § 247.10.

(b) The FMS is responsible for

collection procedures on all improperly

paid items arising under the

circumstances described in paragraphs

(c) and (d) of § 247.10. With all such

items, the FMS will make an initial

demand for refund of the amount of a

check payment to the presenting bank or

any other debtor. This demand shall

advise the presenting bank or debtor of

the amount demanded and the reason

for the demand. All delinquent debts

will be subject to interest, penalties and

administrative fees in accordance with

the Federal Claims Collections

Standards. Any discrepancies should be

brought to the attention of the FMS.

§ 247.12 Funds for losses.

(a) If collection efforts by the FMS for

debts arising under paragraphs (c) and

(d) of § 247.10 are unsuccessful, sources

of funds for the payment of such losses

include FMS appropriations, to the

extent available, funds collected from

reimbursement fees for services

provided by the FMS pursuant to

§ 247.5(b), and other available sources.

(b) Reimbursement fees paid by

agencies to the FMS for FedSelect check

services will be retained for payment of

uncollectible losses, consistent with all

applicable laws.

§ 247.13 Additional requirements.

In any case or any class of cases

arising under these regulations, the FMS

or the agency that issued the FedSelect

check may require such additional

evidence of loss, improper indorsement

or entitlement to a replacement as may

be necessary for the protection of the

interests of the United States.

§ 247.14 Waiver of regulations.

The FMS reserves the right to waive

any provision(s) of these regulations in

any case or class of cases for the

convenience of the United States or in

order to relieve any person(s) of

unnecessary hardship, if such action is

not inconsistent with law, does not

impair any existing rights, and the FMS

is satisfied that such action will not

subject the United States to any

substantial expense or liability.

§ 247.15 Supplements, amendments or

revisions.

The FMS may, at any time, prescribe

supplemental, amendatory, or revised

regulations, or revoke the regulations in

this part.

Dated: March 16, 1995.

Russell D. Morris,

Commissioner.

[FR Doc. 95–11984 Filed 5–15–95; 8:45 am]

BILLING CODE 4810–35–P

LIBRARY OF CONGRESS

Copyright Office

37 CFR Part 201

[Docket No. 93–2A]

Digital Audio Recording Devices and

Media: Access to and Confidentiality of

Statements of Account and Verification

Audit Filings

AGENCY: Copyright Office, Library of

Congress.

ACTION: Interim regulation with request

for comments.

SUMMARY: The Copyright Office is

issuing an interim regulation to

implement portions of the Audio Home

Recording Act of 1992. This Act deals

with rights with respect to digital audio

recording technology (DART) and

requires the Register of Copyrights to

issue regulations that provide for the

verification, audit, confidential

treatment, and appropriate disclosure of

DART Statements of Account and any

other confidential DART information

that is filed with the Copyright Office

during a verification procedure.

DATES: This interim regulation is

effective June 15, 1995. Public

comments on the interim regulation

should be received on or before July 17,

1995.

ADDRESSES: Parties must submit fifteen

copies of their written comments. If sent

by mail, comments must be addressed

to: Copyright GC/I&R, P.O. Box 70400,

Southwest Station, Washington, DC

20024. If delivered by hand, copies

should be brought to: Office of the

Copyright General Counsel, James

Madison Memorial Building, Room LM–

407, First and Independence Avenue,

SE, Washington DC 20540.

FOR FURTHER INFORMATION CONTACT:

Marilyn J. Kretsinger, Acting General

Counsel, Copyright GC/I&R, PO. Box

70400, Southwest Station, Washington,

D.C. 20024. Telephone: (202) 707–8380.

Telefax (202) 707–8366.

SUPPLEMENTARY INFORMATION:

I. Background

The Audio Home Recording Act

(AHRA) requires parties who

manufacture and distribute or import

and distribute any digital audio

recording devices or media in the

United States to file DART Statements

of Account and make royalty payments.

In separate proceedings, we have

already addressed other issues related to

the filing of DART Statements of

Account. On November 25, 1992, we

issued an interim regulation governing

the filing of notices of initial

distribution under the new DART

provisions of the Copyright Code (17

U.S.C. ch. 10). 57 FR 55464 (November

25, 1992). On February 22, 1993, we

published an interim regulation on the

filing of both quarterly and annual

Statements of Account, including

payment of royalties. 58 FR 9544

(February 22, 1993). On February 1,

1994, we published a superseding

interim regulation establishing

requirements governing the filing dates,

frequency of filing, and content of the

Statements of Account, including the

Primary Auditor’s Report that must be

filed by persons subject to the statutory

obligation. 59 FR 4586 (February 1,

1994).

The Act also requires the Register of

Copyrights to issue regulations that

establish verification and audit

procedures, protect the confidentiality

of the information contained in DART

Statements of Account, and provide for