e-commerce conference april 23, 2008 electronic task force update gwen canady, chief deputy state...
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E-Commerce ConferenceE-Commerce ConferenceApril 23, 2008April 23, 2008
Electronic Task Force UpdateElectronic Task Force Update
Gwen Canady, Chief Deputy State ControllerGwen Canady, Chief Deputy State ControllerDavid C. Reavis, E-Commerce ManagerDavid C. Reavis, E-Commerce Manager
Office of the State ControllerOffice of the State Controller
Special ProvisionSpecial Provision2007 Appropriations Act - OSC was charged with the task of:2007 Appropriations Act - OSC was charged with the task of:
Evaluate opportunities for efficiencies in State government Evaluate opportunities for efficiencies in State government through the use of electronic commerce as it relates to both through the use of electronic commerce as it relates to both disbursementdisbursement and and collectioncollection of funds of funds
Report the results of that evaluation to the 2008 Regular Session Report the results of that evaluation to the 2008 Regular Session of the 2007 General Assembly – April 30of the 2007 General Assembly – April 30
Recommend proposed legislation that may be considered by the Recommend proposed legislation that may be considered by the 2008 Regular Session of the 2007 General Assembly.2008 Regular Session of the 2007 General Assembly.
OSC to acquire input from various sectors of state government.OSC to acquire input from various sectors of state government.
Input was acquired by two primary means:Input was acquired by two primary means:• Creation of a task force - Various government sectorsCreation of a task force - Various government sectors• Conducting a comprehensive survey of fiscal officersConducting a comprehensive survey of fiscal officers
Task Force AssembledTask Force Assembled
Central AgenciesCentral Agencies• OSCOSC• DSTDST• OSBMOSBM• ITSITS• UNC-GAUNC-GA• NC CCSNC CCS• DPIDPI
Other AgenciesOther Agencies• DORDOR• DOTDOT• DHHSDHHS• ESCESC• SOSSOS
Input and ActivitiesInput and Activities
Blog Postings to WebsiteBlog Postings to Website Zoomerang Survey – Fiscal OfficersZoomerang Survey – Fiscal Officers
• General Govt.General Govt.• UniversitiesUniversities• Community CollegesCommunity Colleges
OSC ResearchOSC Research• Best PracticesBest Practices• Other StudiesOther Studies
ObjectivesObjectives In each of the two areas (disbursements and collections), ascertain current In each of the two areas (disbursements and collections), ascertain current
utilization:utilization:• Paper based (types of transactions, number volumes, and dollar volumes) Paper based (types of transactions, number volumes, and dollar volumes) • Electronic based (types of transactions, number volumes, and dollar volumes) Electronic based (types of transactions, number volumes, and dollar volumes)
Identify agencies and programs that have developed successful programsIdentify agencies and programs that have developed successful programs Identify reasons and obstacles for lack of ecommerce participationIdentify reasons and obstacles for lack of ecommerce participation Identify current costs of ecommerce activitiesIdentify current costs of ecommerce activities Identify the various types of ecommerce solutions availableIdentify the various types of ecommerce solutions available Identify the various types of agency activities suitable for e-commerceIdentify the various types of agency activities suitable for e-commerce Identify best practices in e-commerceIdentify best practices in e-commerce Identify security related issuesIdentify security related issues Identify industry issues of concern to governmentsIdentify industry issues of concern to governments Identify current roles of central agenciesIdentify current roles of central agencies Identify inefficiencies in current operationsIdentify inefficiencies in current operations Identify what services could/should be offered on an enterprise basisIdentify what services could/should be offered on an enterprise basis Identify impact of pending planning of BEACON Financials on e-commerceIdentify impact of pending planning of BEACON Financials on e-commerce Identify the correlation between ecommerce and the State’s Cash Identify the correlation between ecommerce and the State’s Cash
Management PlanManagement Plan Identify various statutes pertaining to ecommerceIdentify various statutes pertaining to ecommerce Identify modifications needed to statutesIdentify modifications needed to statutes
Assessment of Current EnvironmentAssessment of Current EnvironmentTwo Master ContractsTwo Master Contracts
Statewide E-Commerce
Program
Electronic Funds Transfer
Merchant Cards
Rates most favorable in the country - RFPsRates most favorable in the country - RFPs EFT - Less than a pennyEFT - Less than a penny Merchant Cards - $.04Merchant Cards - $.04
Common Payment Service GatewayCommon Payment Service Gateway
EFT (ACH)EFT (ACH)
STMSSTMS
CPSCPS
Gateway Service for both EFT & Merchant CardsGateway Service for both EFT & Merchant Cards Provided by Office of Information Technology Services (ITS)Provided by Office of Information Technology Services (ITS)
CardsCards
WachoviaWachovia
Agency WebAgency Web ApplicationApplication
Processes 39% of merchant card transactions (23% of $)Processes 39% of merchant card transactions (23% of $) Processes 20% of EFT transactionsProcesses 20% of EFT transactions
Biggest card user - DMVBiggest card user - DMV Biggest EFT user - DORBiggest EFT user - DOR
Fee Decrease for Cards 4-1-08Fee Decrease for Cards 4-1-08 $.41 to $.35 (15% reduction)$.41 to $.35 (15% reduction)
EFT UtilizationEFT Utilization Biggest Biggest InboundInbound User User
• Dept of RevenueDept of Revenue – Started 1994 – Started 1994• 120,000 taxpayers remitting electronically120,000 taxpayers remitting electronically
9,000 mandated9,000 mandated 111,000 voluntarily111,000 voluntarily
• $1.9 million transactions annually$1.9 million transactions annually• 17.4 billion of $26.2 billion collected = 17.4 billion of $26.2 billion collected = 66%66%• Increased investment earnings of Increased investment earnings of $8.7 million$8.7 million per year - as per year - as
result of 3½ days float reductionresult of 3½ days float reduction
Biggest Biggest OutboundOutbound Users Users• Retirement SystemRetirement System – Started 1977 – Started 1977
200,000 out of 209,000 = 200,000 out of 209,000 = 96%96%• Central PayrollCentral Payroll – Started 1979 – Started 1979
82,700 out of 87,700 = 82,700 out of 87,700 = 94%94% Compare to August Compare to August 74,300 out of 83,800 = 74,300 out of 83,800 = 88% 88%
• NCAS VendorsNCAS Vendors – Started 2000 – Started 2000 ACH: 225,000 out of 954,000 = ACH: 225,000 out of 954,000 = 24% (34% of Dollars)24% (34% of Dollars)
NCAS Vendor PaymentsNCAS Vendor PaymentsFY2006-07 FY2006-07 24% (224,566) of 937,000 NCAS vendor 24% (224,566) of 937,000 NCAS vendor
payments by EFTpayments by EFT 35% ($7.3 billion) of $21 billion by EFT 35% ($7.3 billion) of $21 billion by EFT 2% (17,400) payment totaling $394 million by 2% (17,400) payment totaling $394 million by
Inter/Intra Governmental Transfer methodInter/Intra Governmental Transfer method
Opportunity for ImprovementOpportunity for Improvement Possibly mandate participation ?Possibly mandate participation ? Make enrollment easier – online ?Make enrollment easier – online ?
Direct DepositDirect Deposit Retirement benefits by direct deposit since 1977Retirement benefits by direct deposit since 1977 Payroll by direct deposit since 1979Payroll by direct deposit since 1979 Success largely due to DST being able to pay bank fees Success largely due to DST being able to pay bank fees
from interest earnings as opposed to agencies picking up from interest earnings as opposed to agencies picking up tabtab
Mandatory Direct Deposit PolicyMandatory Direct Deposit Policy• Retirement in 1994Retirement in 1994• Central Payroll in 2007Central Payroll in 2007
Coming in 2008 – Payroll cards for the “unbanked”Coming in 2008 – Payroll cards for the “unbanked”
Number DDNumber DD Percent Percent DDDD
Retirement BenefitsRetirement Benefits 200,000200,000 96% 96%
Central PayrollCentral Payroll 88,000 88,000 94% 94%
Mailing costs savings alone for Retirement = $80,000 per monthMailing costs savings alone for Retirement = $80,000 per month
Paper Warrant TrendPaper Warrant Trend
0
2
4
6
8
10
12
14
16
18
20
FY02 FY03 FY04 FY05 FY06 FY07
TANF
DOR
ChildSup
ESC
Total
Decrease of: 3% 6% 11% 3% 7%
Million
FY 2001-02 was peak in paper warrants = 18.2 millionFY 2004-05 had biggest % decrease = 11%FY 2006-07 - TANF was only increase = 16% (No EFT Program)
14.7
16.517.618.2
Largest
Accounts14.3
13.3
#Transactions#Transactions
0500,000
1,000,0001,500,0002,000,0002,500,0003,000,0003,500,0004,000,0004,500,0005,000,000
FY-01 FY-02 FY-03 FY-04 FY-05 FY-06 FY-07$0
$50$100$150$200$250$300$350$400$450$500$550
FY01 FY02 FY03 FY04 FY05 FY06 FY07
$ Million$ Million
FY-01 285,000FY-02 868,000FY-03 1,573,000FY-04 2,078,000FY-05 2,842,000FY-06 3,673,000FY-07 4,509,000
FY-01 $ 22.8FY-02 $ 76.7FY-03 $ 182.6 FY-04 $ 233.7FY-05 $ 311.4FY-06 $ 435.7FY-07 $ 534.8
Merchant Card UtilizationMerchant Card Utilization
Dollar AmountDollar Amount
•Growth rate FY 2006-07 was 23% (30% previous years)•Currently 92 participants (850+ merchant numbers): 21 Agencies 26 Community Colleges 15 Universities 30 Local Governments
Card Activity FY 2006-07Card Activity FY 2006-07
SegmentTransaction
VolumeDollar
VolumeAvg. Ticket
Size
General Govt. 1,967 M $ 107,541 M $ 54
Universities 1,797 M $ 349,237 M $ 194
Com. Colleges 161 M $ 19,910 M $ 124
Local Units 583 M $ 58,006 M $ 99
LEAs 1 M $ 1 M $ 112
Total 4,509 M $ 534,807 M $ 119
DMV Vehicle Registration largest volume•1.25 million transaction•$ 39 million •Represents 12% of $338 million DMV fees collected
Card Fees FY 2006-07Card Fees FY 2006-07
Trans. Trans. Vol.Vol. Sales Vol.Sales Vol.
Pass-Thru Pass-Thru FeesFees
Vendor Vendor FeesFees Total FeesTotal Fees
General GovtGeneral Govt 1,967 M1,967 M $ 107,541 M$ 107,541 M $ 1,895 M$ 1,895 M $ 140 M$ 140 M $ 2,036 M$ 2,036 M
UniversitiesUniversities 1,797 M1,797 M $ 349,237 M$ 349,237 M $ 5,634 M$ 5,634 M $ 168 M$ 168 M $ 5,802 M$ 5,802 M
Com. CollegesCom. Colleges 161 M161 M $ 19,910 M$ 19,910 M $ 283 M$ 283 M $ 19 M$ 19 M $ 302 M$ 302 M
Local UnitsLocal Units 583 M583 M $ 58,006 M$ 58,006 M $ 986 M$ 986 M $ 47 M$ 47 M $ 1,033 M$ 1,033 M
LEAsLEAs 1 M1 M $ 113 M$ 113 M $ 2 M$ 2 M $ 0 M$ 0 M $ 2 M$ 2 M
TotalTotal 4,509 M4,509 M $ 534,807 M$ 534,807 M $ 8,801 M$ 8,801 M $ 374 M$ 374 M $ 9,175 M$ 9,175 M
Two Types of Fees•Pass-thru fees are paid to Visa/MC•Vendor Fees are paid to STMS
DMV Vehicle Registration largest volume•1.25 million transaction•$ 39 million
Online Payments for ReceiptsOnline Payments for Receipts
AgencyAgency OptionsOptions FeeFeeDMV RegistrationDMV Registration Cards onlyCards only NoNo
WildlifeWildlife Cards onlyCards only NoNo
Yahoo AgenciesYahoo Agencies Cards onlyCards only NoNo
RetirementRetirement ACH draft onlyACH draft only NoNo
Secretary of StateSecretary of State Cards & ACHCards & ACH $2$2
Child SupportChild Support Cards & ACHCards & ACH $5$5
ESCESC Cards & ACHCards & ACH $5$5
Dept RevenueDept Revenue Cards & ACHCards & ACH 2%2%
UniversitiesUniversities Cards & ACHCards & ACH 2%2%
#Transactions#Transactions
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
Checks Cash ACH Cards
$0
$50
Checks Cash ACH Cards
$ Billion$ Billion
Cards - 11%
Cash - 17%
ACH - 28%
Checks - 44%
Collections MixCollections Mix
Dollar AmountDollar Amount
•Greatest number of transactions are paper - 61%•Greatest transactions dollars are electronic – 76%
•Cards and Cash combined represent 2% of dollars collected•Twice as much is collected by cash than cards
MillionMillion
Cards - .7%
Cash - 1.5%
Checks - 23.5% ACH - 74.2%
CollectionsCollectionsPaper vs. ElectronicPaper vs. Electronic
CollectionsCollectionsPaper vs. ElectronicPaper vs. Electronic
PercentElectronic
PercentPaperTotalE-basedPaperSegment
39%61%39,009,908 15,126,490 23,888,113 Total
34%67%1,082,658 363,784 723,205 Colleges
53%47%3,297,646 1,758,656 1,538,990 Universities
38%62%34,629,604 13,004,050 21,625,918 General Govt.
Transaction Volumes
CollectionsCollectionsPaper vs. ElectronicPaper vs. Electronic
PercentElectronic
PercentPaperTotalE-basedPaperSegment
76%24%$71.0 Billion $54.0 Billion $17.0 Billion Total
40%60%$ .8 Billion$ .3 Billion $ .5 BillionColleges
57%43%$ 3.9 Billion $ 2.2 Billion $ 1.7 Billion Universities
78%22%$66.3 Billion $51.5 Billion$14.8 Billion General Govt.
Dollar Volumes
Paper Base ReceiptsPaper Base ReceiptsChecks vs. CashChecks vs. Cash
PaperPaper--Base ReceiptsBase ReceiptsChecks vs. CashChecks vs. Cash
PercentCash
PercentChecksTotalCashChecksSegment
28%72%23,398,971 6,503,088 16,901,002 Total
46%55%723,193 333,549 394,763 Colleges
11%89%1,209,411 135,648 1,073763 Universities
28%72%21,466,367 6,033,891 15,432,476General Govt.
Transaction Volumes
DisbursementsDisbursementsPaper vs. ElectronicPaper vs. Electronic
DisbursementsDisbursementsPaper vs. ElectronicPaper vs. Electronic
PercentElectronic
PercentPaperTotalE-basedPaperSegment
47%53%36,010,900 16,937,413 19,113,501 Total
19%81%791,907 153,932 637,989 Colleges
55%45%1,811,333 998,253 813,080 Universities
47%53%33,407,660 15,785,228 17,662,432General Govt.
Transaction Volumes
DisbursementsDisbursementsPaper vs. ElectronicPaper vs. Electronic
PercentElectronic
PercentPaperTotalE-basedPaperSegment
78%22%$77.0 Billion $60.1 Billion $16.9 Billion Total
19%81%$ 2.2 Billion$ .4 Billion $ 1.8 BillionColleges
50%50%$ 5.9 Billion $ 3.0 Billion $ 2.9 Billion Universities
82%18%$68.9 Billion $56.7 Billion$12.2 Billion General Govt.
Dollar Volumes
Cost of Paper State CheckCost of Paper State Check
Agency Cost DST Cost Total Cost
Gen. Govt. Agency $ .43 $.11 $ .54
University $1.30 $.11 $1.41
Community College $2.11 $.11 $2.22
Weighted Average $ .63 $.11 $ .74
Two components of cost = Agency cost & DST costTwo components of cost = Agency cost & DST cost DST functions as “bank” for agenciesDST functions as “bank” for agencies
• Internal costs = $.09Internal costs = $.09• FRB fees = $.02FRB fees = $.02
Cost of the issuance of a paper state check varies from Cost of the issuance of a paper state check varies from agency to agencyagency to agency
General Government agencies experiences lower per item General Government agencies experiences lower per item cost due to several large volume accountscost due to several large volume accounts
Average overall cost for a State warrant is $.74Average overall cost for a State warrant is $.74 Smaller check volumes = higher per item costsSmaller check volumes = higher per item costs Some agencies’ cost as high as $35Some agencies’ cost as high as $35
Debit Cardsfor
Disbursement
EBT Card
Food Stamps
Debit Card
Child SupportDebit Card
Unemployment
Debit Card
Payroll
Debit Card
Student
Refunds
Debit CardsDebit Cards
EBTEBT – Since 1999; Vendor EFunds; Quest branded; Fee $.55 per case mo. – Since 1999; Vendor EFunds; Quest branded; Fee $.55 per case mo.
Child SupportChild Support – Being implemented in 2008; Vendor is JP Morgan – Being implemented in 2008; Vendor is JP Morgan
ESCESC – Since Jan 2007; Vendor is ACS (EPPI Card) - MasterCard branded – Since Jan 2007; Vendor is ACS (EPPI Card) - MasterCard branded
PayrollPayroll – Being implemented in 2008; Vendor is Wachovia - Visa branded – Being implemented in 2008; Vendor is Wachovia - Visa branded
Student Refunds-Student Refunds- Universities; Vendor is Higher One – MasterCard branded Universities; Vendor is Higher One – MasterCard branded
Procurement Card ActivityProcurement Card ActivityAnnual Volumes
Segment Trans Percent # Dollars Percent $
General Govt. 140,530 29% $ 68.4 Million 49%
Universities 265,510 55% $ 60.5 Million 44%
Colleges 77,896 16% $ 9.4 Million 7%
Total 483,936 100% $138.3 Million 100%
Administered by P&C – Vendor is Bank of AmericaAdministered by P&C – Vendor is Bank of America Not considered a form of “electronic payment” as defined Not considered a form of “electronic payment” as defined
by statute (G.S. 147-86.20(2a)by statute (G.S. 147-86.20(2a) Does not result in movement of monies as it creates an Does not result in movement of monies as it creates an
“accounts receivable” and paid for when invoiced“accounts receivable” and paid for when invoiced Providers for rebates of up to 1.5% ($1million in 2007)Providers for rebates of up to 1.5% ($1million in 2007) Limited to purchases of $2,500Limited to purchases of $2,500 Universities largest user based on number of transactions Universities largest user based on number of transactions
(55% of ½ million transactions)(55% of ½ million transactions) Average transaction size = $285 (avg. check = $1,828)Average transaction size = $285 (avg. check = $1,828) Potential for P-cards to be used for invoices – not just Potential for P-cards to be used for invoices – not just
small purchasessmall purchases
Best Practice - Web CaptureBest Practice - Web Capture
CardCard
STMSSTMS
DatabaseDatabase
Authentication Authentication of O/S of O/S
TransactionsTransactions
Gateway Service providing both capture and processingGateway Service providing both capture and processing• Presentment Engine – Payor is redirected to vendor’s websitePresentment Engine – Payor is redirected to vendor’s website• Payment Engine / Two options – ACH draft or card transactionPayment Engine / Two options – ACH draft or card transaction
Two types of transactionsTwo types of transactions• Bill presentment -Transaction authenticated against O/S databaseBill presentment -Transaction authenticated against O/S database• One time payment – No authentication (One time payment)One time payment – No authentication (One time payment)
ACHACHBank DraftBank Draft
WachoviaWachovia
Agency’s A/RAgency’s A/R SystemSystem
Choice Choice of of
PaymentPaymentMethodMethod
Third-Party VendorThird-Party Vendor
Best PracticeBest PracticeRemote Deposit CaptureRemote Deposit Capture
Two methods for processing receipts of checksTwo methods for processing receipts of checks• ACH Conversion (POP, BOC, ARC) – ACH Conversion (POP, BOC, ARC) – MICR lineMICR line sent to bank sent to bank• Check 21 / IRD (Image Replacement Document) - Check 21 / IRD (Image Replacement Document) - ImageImage sent to bank sent to bank
ACH Conversion not conducive to governmentACH Conversion not conducive to government• Applies to consumer checks onlyApplies to consumer checks only• Has an amount limit of $25,000Has an amount limit of $25,000
DST is evaluating potential use in State governmentDST is evaluating potential use in State government OSC pilot in 2008OSC pilot in 2008
• Check scanner terminalCheck scanner terminal• Small volume of checksSmall volume of checks• Eliminates having to make trips to the bankEliminates having to make trips to the bank
Best Practice PCI Data SecurityBest Practice PCI Data Security Card industry rules to protect cardholder data and prevent security Card industry rules to protect cardholder data and prevent security
breachesbreaches
Potential fines $1 million per occurrencePotential fines $1 million per occurrence
OSC has secured services of a “Qualified Security Assessor” to assist OSC has secured services of a “Qualified Security Assessor” to assist agencies in becoming and remaining compliant - Trustwaveagencies in becoming and remaining compliant - Trustwave• Annual certification via questionnaireAnnual certification via questionnaire• Quarterly scanning of website and other external facing IP Quarterly scanning of website and other external facing IP
addressesaddresses
Requires resources of OSC and agenciesRequires resources of OSC and agencies
OSC has become a member of the PCI Security Council in order to OSC has become a member of the PCI Security Council in order to have input into rule makinghave input into rule making
Costs of ReceiptsCosts of Receipts
General Government
Rank Type Cost
1 ACH $1.00
2 Cards $1.60
3 Paper $2.00
Universities
Rank Type Cost
1 Paper $2.00
2 ACH $3.00
3 Cards $5.00
Comm. Colleges
Rank Type Cost
1 ACH $1.50
2 Paper $2.00
3 Cards $3.60
Cost of Electronic transaction Cost of Electronic transaction NOTNOT always cheaper than Paper always cheaper than Paper• Card transactions – Cost related to amount of transactionCard transactions – Cost related to amount of transaction• Low volume of any one type = high per item costLow volume of any one type = high per item cost• Agency’s cost of ongoing infrastructure could be higherAgency’s cost of ongoing infrastructure could be higher
ACH – Lowest for Gen Govt. and Colleges but not universitiesACH – Lowest for Gen Govt. and Colleges but not universities Cards – Lower than paper only for Gen Govt.Cards – Lower than paper only for Gen Govt. Paper – Lowest cost for universitiesPaper – Lowest cost for universities High dollar tuition results in high card cost for univ & collegesHigh dollar tuition results in high card cost for univ & colleges
Merchant Card FeesMerchant Card FeesProcessing Fees
Credit Cards Debit Cards
Interchange Fees
Assessment Fees
Merchant Service Fees
Interchange Fees
Network Switch Fees
Merchant Service FeesVendor-Levied
Pass-Through
Visa&
MC
CardIssuingBanks
Debit Network
Convenience Fee IssueConvenience Fee Issue Statutes conflict with industry rulesStatutes conflict with industry rules Visa only allows “Flat” feeVisa only allows “Flat” fee Many universities discontinuing VisaMany universities discontinuing Visa
Current statute requires approval of Current statute requires approval of OSBM, ITS, and Govt. OptsOSBM, ITS, and Govt. Opts• Charged by agencyCharged by agency• Charged by third-partyCharged by third-party
Recommendations - ExpansionRecommendations - Expansion OSC to be primary agency charged with the governance OSC to be primary agency charged with the governance
responsibility of establishing comprehensive standards, policies, and responsibility of establishing comprehensive standards, policies, and proceduresprocedures
Other central oversight offices to be involved:Other central oversight offices to be involved:• DST, OSBM, ITS, UNC GA, NC Community College SystemDST, OSBM, ITS, UNC GA, NC Community College System
Management of each agencyManagement of each agency• Take an active role in identifying paper based payments that are Take an active role in identifying paper based payments that are
potential candidates for converting to electronic paymentspotential candidates for converting to electronic payments• Reporting to the OSC on a prescribed basisReporting to the OSC on a prescribed basis
Oversight and approval process should be established within OSC to Oversight and approval process should be established within OSC to ensure all new ecommerce applications desired to be implemented ensure all new ecommerce applications desired to be implemented by an agency are consistent with statewide standards and policies by an agency are consistent with statewide standards and policies that may be establishedthat may be established
Policies to be conducive to the orderly expansion of ecommerce Policies to be conducive to the orderly expansion of ecommerce activitiesactivities
• Statutory requirementsStatutory requirements• Industry requirementsIndustry requirements• Security RequirementsSecurity Requirements
• Cash management effectsCash management effects• Best PracticesBest Practices• Citizens needsCitizens needs
Recommendations - FundingRecommendations - Funding Funding should be a priority for those agencies desiring to establish Funding should be a priority for those agencies desiring to establish
ecommerce functions that require modifications to their website ecommerce functions that require modifications to their website infrastructure. These development cost are separate from the ongoing infrastructure. These development cost are separate from the ongoing processing costs once a system is developed.processing costs once a system is developed.
Whenever it is determined that any ecommerce activity is economically Whenever it is determined that any ecommerce activity is economically beneficial to the State as a whole, the costs incurred should be considered beneficial to the State as a whole, the costs incurred should be considered as a “cost of doing business,” without any expectation that the citizen as a “cost of doing business,” without any expectation that the citizen should pay a convenience fee.should pay a convenience fee.
Funding for ecommerce activities should be in accordance with the type of Funding for ecommerce activities should be in accordance with the type of agency operation, as determined by the Office of State Budget and agency operation, as determined by the Office of State Budget and Management and based upon a business case for a particular agency.Management and based upon a business case for a particular agency.• ““Enterprise or receipts supported” operation - Transaction costs should Enterprise or receipts supported” operation - Transaction costs should
be paid for from the agency’s enterprise or special fund.be paid for from the agency’s enterprise or special fund.• ““Appropriations supported” operation - Transactions costs may be paid Appropriations supported” operation - Transactions costs may be paid
for either by a direct appropriation or from the revenue account for either by a direct appropriation or from the revenue account established to account for Interest on Treasurer’s Investments, established to account for Interest on Treasurer’s Investments, whenever that revenue account is the beneficiary of the increased whenever that revenue account is the beneficiary of the increased availability of funds as a result of being collected electronically.availability of funds as a result of being collected electronically.
Whenever it is Whenever it is notnot more efficient to process a transaction electronically, a more efficient to process a transaction electronically, a convenience fee may potentially be levied against the payor, as approved convenience fee may potentially be levied against the payor, as approved by the Office of State Budget and Management in consultation with the by the Office of State Budget and Management in consultation with the State Controller, based upon the agency’s submitted business case.State Controller, based upon the agency’s submitted business case.
Factors for Cost of Doing Business Factors for Cost of Doing Business Considered for Absorbing Fees as a “Cost of Doing Business”Considered for Absorbing Fees as a “Cost of Doing Business” Reduced transaction costsReduced transaction costs Speedier collections and availability of funds (increased interest earnings)Speedier collections and availability of funds (increased interest earnings) Payment for service or product is considered “mandatory” (e.g., taxes)Payment for service or product is considered “mandatory” (e.g., taxes) Acceptance of an electronic transaction would likely increase sales or Acceptance of an electronic transaction would likely increase sales or
revenuerevenue Payment is to satisfy a “delinquent” account or other type of payment that Payment is to satisfy a “delinquent” account or other type of payment that
would not likely otherwise be collectedwould not likely otherwise be collected Other factors deemed appropriate for a particular type of payment (e.g., Other factors deemed appropriate for a particular type of payment (e.g.,
convenience expectation of citizen)convenience expectation of citizen)
Approval ProcessesApproval Processes Funding for Enterprise and Receipts Supported Operations – By OSBMFunding for Enterprise and Receipts Supported Operations – By OSBM Funding for Appropriations Supported OperationsFunding for Appropriations Supported Operations
• If appropriated – By General AssemblyIf appropriated – By General Assembly• If from interest earnings – By OSBM in consultation with OSC & DSTIf from interest earnings – By OSBM in consultation with OSC & DST
Levy of convenience fee – By OSBM in consultation with OSCLevy of convenience fee – By OSBM in consultation with OSC
Reporting of Convenience FeesReporting of Convenience Fees To General Assembly by OSCTo General Assembly by OSC
Funding E-Commerce TransactionsFunding E-Commerce TransactionsDetermine
Type of Operation
Enterprise or Receipts Supported
AppropriationsSupported
Cost of Electronic Less
Than Paper
Cost of Electronic
Not Less
Than Paper
Cost of Electronic Not Less
Than Paper
Cost of Electronic Less
Than Paper
Convenience Fee Prohibited (Cost of doing business)
Fund from Operations
Convenience Fee Possible
If other factors -Fund from operations
If for citizen’s convenience only – Fund from convenience fee
Convenience Fee Prohibited (Cost of doing business)
Fund from Interest Earnings
Convenience Fee Possible
If other factors -Fund thru appropriations
If for citizen’s convenience only – Fund from convenience fee
Any Convenience Fee to be approved by OSBM w/OSC
Funding to be approved by OSBM
Funding to be approved by OSBM w/ OSC and DST
Agency Business Case Agency Business Case
Recommended LegislationRecommended Legislation
Cash Management LawCash Management Law
G.S. 147-86.10G.S. 147-86.10
Pertains to Cash ManagementPertains to Cash Management
(Existing)(Existing)
Electronic CommerceElectronic Commerce
in State Govt. G.S. 66-58in State Govt. G.S. 66-58
Pertains to Digital, etc.Pertains to Digital, etc.
(Existing)(Existing)
1)1) Create a New ChapterCreate a New Chapter
Incorporates two existing chaptersIncorporates two existing chapters
Pertains to “Electronic Payments” onlyPertains to “Electronic Payments” only
Clarifies ResponsibilitiesClarifies Responsibilities
2) Amend Various Agencies’ Statutes2) Amend Various Agencies’ Statutes
(Existing)(Existing)
More InformationMore InformationOffice of the State Controller Office of the State Controller
Web SiteWeb Sitewww.ncosc.netwww.ncosc.net
David C. ReavisE-Commerce Manager
(919) 871-6483
April 23, 2008Robert PowellState Controller
Amber YoungCentral Compliance Manager
(919) 981-5481
Support Services Center
(919) 875-HELP (4357)