Administrative Procedure 8.740 Administrative Procedure 8.740

Dishonored Checks

Administrative Procedure Chapter 8, Business and Finance
Administrative Procedure AP 8.740, Dishonored Checks
Effective Date:  May 2019
Prior Dates Amended:  October 1995, January 1999, April 2006, July 2007, May 2015    
Responsible Office: Office of the Vice President for Budget and Finance/Chief Financial Officer
Governing Board and/or Executive Policy: EP 1.102, General Provisions 
Review Date:  May 2021

To provide procedures for the processing of checks which have been returned unpaid by the maker's bank.  This procedure is based on Chapter 2010, Delinquent Financial Obligations, Hawai‘i Administrative Rules adopted by the University of Hawai‘i (UH) Board of Regents on December 12, 1974, and amended as of December 12, 2002; and Section 40-35.5, Hawai‘i Revised Statutes.

To assure that all dishonored checks are recorded properly in the University’s Kuali Financial System (KFS), makers of returned checks receive proper notification, and the dishonored check is repaid.

A.    Dishonored check - A paper or electronic check, which the University has received and deposited, and is subsequently returned unpaid to the University by the maker's bank.  For purposes of this administrative procedure, dishonored check also includes any rejected Automated Clearing House (ACH) transaction related to scheduled payments to the University due to account closure, incorrect account, insufficient funds, etc.  A dishonored check is a financial obligation due to the University and must be held for safekeeping until it is repaid by the student or maker.

B.    Sanctions - The range of penalties which the University may invoke if a dishonored check is not repaid.

C.    Service charge - An amount assessed by the State of Hawai‘i in accordance with §40-35.5 HRS for a check that is dishonored for any reason.  The service charge cannot be waived and is deposited to the State general fund.

A.    Action to be taken when a check is dishonored and returned by the bank.

        1.    Treasury Office
              a.    Identify the University department that originally accepted the check and the
                      campus/department /fiscal administrator responsible for contacting the student or maker of
                      the check to have the check repaid.  Note:  The standard UH Endorsement Stamp will usually
                      indicate the name of the receiving department.

              b.    Upon receipt of a returned check for a non-student account payment, the UH Treasury
                      Office will process a non‐check disbursement (ND) document in KFS. The ND is charged to
                      the campus/department’s AR clearing account, object code 9239 and is routed to the
                      campus/departmental fiscal administrator.

        2.    University Cashier’s Office upon receiving notice of a dishonored check or rejected ACH payment
              for student account transactions will:

              a.    Post the returned item and dishonored check fee to the student’s account.

              b.    Place a financial hold on the account.

              c.    Notify the student of the dishonored check.

              d.    Maintain a chronological record of all collection efforts.

              e.    Post the payment to the account and clear the hold when the dishonored check is repaid.

Note:    Any dishonored check posted to a student account in the student information system shall be handled centrally by the University Cashier’s Office for processing, regardless of which campus originally accepted the payment.

        3.    Campus/department upon receiving notice of a dishonored check and ND document in KFS
              workflow for non-student account transactions will:

              a.    Change the AR clearing account and object code on the ND to the appropriate account and
                      object code.  Approve and route the ND in KFS to General Accounting.

              b.    Create a Debit Memo (DM) invoice in KFS and route to Treasury.  Refer to KFS process
                      documentation – DM Invoice Procedures.

              c.    Notify the maker of the check (see Attachment 1 for sample notification).

              d.    Maintain a chronological record of all collection efforts.

              e.    Prepare and process a Cash Control (CTRL) in KFS when the dishonored check is repaid.
                      Refer to KFS process documentation - DM Invoice Procedures. 

B.    Sanctions are imposed when a dishonored check is not repaid and the maker of the check and/or the student incurs a delinquent financial obligation with the University.  Sanctions are administered in accordance with A8.731, section 7.

C.    University departments reserve the right to refuse further check payments for any University receivable where three (3) or more checks have been returned for any reason.

There is no administrative specific delegation of authority.

    
Treasury Office, 956-8527, or uh-treasury@lists.hawaii.edu
Website:  http://www.fmo.hawaii.edu/cash_handling/index.html#tab7

Chapter 20-10, Hawaii Administrative Rules, Delinquent Financial Obligations may be viewed at:  http://www.hawaii.edu/offices/bor/adminrules/chapter10.pdf

Section 40-35.5, Hawai‘i Revised Statutes may be viewed at:  http://www.capitol.hawaii.gov/hrscurrent/Vol01_Ch0001-0042F/HRS0040/HRS_0040-0035_0005.HTM

KFS process documentation – DM Invoice Procedures http://www.hawaii.edu/kualifinancial/docs/DM%20procedures.pdf

Attachment 1:  UH Bill and Notice of Dishonored Check

    Vice President for Budget and Finance/Chief Financial Officer