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Scope

This policy covers stop and replacement checks on payments that have been issued through the University’s financial and payroll systems.

Reason for Policy

To ensure that payments are stopped and/or reissued timely in order to avoid a potential financial loss.

Policy Statement

At times, the Accounts Payable Shared Services (APSS) or MU Health Care Accounting offices may determine the need to stop or replace a payment that has been previously issued.  A Stop Payment is done directly with the bank and takes effect immediately.  Since the bank assesses a fee for each check that is stopped, prudent stewardship should be exercised in determining if it is needed.  The Campus payroll office, APSS or MU Health Care Accounting may choose to Void the payment and the bank will not honor the check beginning the next regular business day at which there is no fee to the University. After considering these factors, a decision needs to be made on the significance of the financial risk to determine the method to be followed.

Replacement checks may be issued after a Stop Payment.  A replacement check may be issued due to a lost, stolen, never received or mutilated check issued to the payee.  If the payment is stopped due to non-performance, dispute, or fraud, a replacement check must not be issued.  In cases where a check has been forged or altered, a signed affidavit and investigation form must be completed by the payee before the process to issue a replacement check can begin.  Replacement checks are generally not issued until the University has recovered its funds first.

Replacements may also be necessary for an ACH payment due to an overpayment, duplicate payment, and payment to the wrong supplier, etc.  Errors that are detected before the ACH payment effective date can be reversed/stopped by the University’s bank before it is sent to the payee’s bank account.  After the payment has been sent, the University’s bank has five business days from the payment effective date to send a reversal request to the receiving bank, requesting the funds be returned.  After five business days, the bank requires a letter of indemnity or formal request for the reversal of funds.  In these cases, the reversal is not guaranteed and is at the discretion of the receiving bank.

Definitions

Stop Payment – the act of notifying the bank that a check should not be honored if the payment is presented to the bank.  This Stop Payment takes effect immediately with no delay.

Void – the processing of cancelling the payment in PeopleSoft finance; or the cancelling the payment directly in Commerce Connections for payroll checks.  The void is then transmitted to the bank so the payment cannot be honored at a later date.

Accountabilities

UM System Treasurer’s Office:

• Submit online ACH reversal requests to the bank
• Work with the bank to process all ACH stops and reversals
• Submit affidavit and investigation forms to the bank for processing

UM System Controller’s Office:

• Reconcile and clear any amounts remaining from a Stop Payment or ACH pull back

Accounts Payable Shared Services:

• Execute the Stop Payment with the bank
• Process Voids on checks
• Obtain completed and signed Forged or Altered Check Affidavit and Fraud/Forgery Investigation forms from the payee and submit to the Treasurer’s Office
• Work with campus departments to issue new payments after funds have been recovered

Campus Departments:

• Determine whether a Stop Payment or Void is needed and make a request to APSS (or to the campus payroll office for payroll checks) as appropriate
• Approve and process the requests for replacement checks
• Notify the UM System Treasurer’s Office for an ACH stop or reversal; or notify the campus payroll office for payroll reversal

Additional Details

Forms

Forged or Altered Check Affidavit of Loss

Fraud/Forgery Investigation Form

Related Information

History

This policy combines the following former policies:

• Accounting Policy Manual 50.21 – Payments Processing – Stop Pay and Replacement Checks (revised 5/7/2007)
• Accounting Policy Manual 50.22 – Payments Processing – Stop Pay and Replacement Payroll Checks (revised 9/8/2009)

Procedure