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To pay vendor claims, many local government entities may use electronic funds transfers instead of checks. Electronic funds transfers may also be used to purchase and sell investments.

While these transactions are convenient, they present unique opportunities for fraud. As a result, state law requires local units of government to adopt certain policies and procedures before electronic funds transfers are made. The law specifically requires school districts to have all of the following policy controls in place before using electronic funds transfers:

  • On an annual basis, the school board must delegate to a designated business administrator the authority to make electronic funds transfers.
  • The disbursing bank must keep on file a certified copy of the delegation of authority.
  • The person initiating the electronic transfer must be identified.
  • The person initiating the electronic transfer must document the request and obtain approval from the designated business administrator before initiating the transfer.
  • Written confirmation of the transaction must be made within one business day after the transaction.
  • A list with all transactions made by electronic funds transfer must be submitted to the school board at its next regular meeting.

While these requirements are mandatory for school districts, they provide guidance for other units of government when drafting their policies and procedures.

Statutes governing electronic funds transfers include Minn. Stat. ยงยง 385.071 (counties), 471.38 (school districts), and 471.381 (cities, towns, and counties).

Date this Avoiding Pitfall was most recently published: 04/24/2015

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