Making Remittances Flow Like Water

HEADNOTE

Modesto Irrigation District Keeps Payments Moving

Modesto Irrigation District (MID) was established in 1887 under the California Irrigation Act and has been providing irrigation water for agriculture since

1904. It currently serves approximately 3,000 irrigation water customers and irrigates some 64,000 acres. In 1923 it started its electrical service, which now provides full electric service to over 102,000 retail customers. The last link in MID's multipurpose utility services came in 1994, when it entered the wholesale domestic water business from operations at its Modesto Regional Water Treatment Plant. The plant treats and delivers up to 30 million gallons of surface water each day, supplying half the drinking water for the City of Modesto.

Like the waters of the Tuolumne River, MID's cherished water resource, handling the bill payments for the water district is not a static process. Just as dams and reservoirs are constructed on the river and the water flow is constantly monitored, so has the remittance processing system has been tweaked, and not infrequently totally revamped, to make it more efficient.

MID has seen its share of changes. Their remittance processing department originally used a larger processing system, and later moved to a more compact, tabletop unit, but this they found was too small, and prone to mechanical problems. Modesto was experiencing the Goldilocks syndrome - they needed a remittance processing system that was just right.

Part of the problem was that Modesto Irrigation is growing. The area is experiencing growth in both domestic and commercial development, with new school districts, city development, farming enterprises and apartment blocks, and now averages between 60,000 to 65,000 remittances a month for electric bill payments. So a new remittance processing system needed to be able to cope with a growing district, and to be more cost efficient.

According to Teresa Harman, senior remittance processor at MID, the district issued an RFP and evaluated three different systems before selecting Fairfax Imaging's Quick Modules. The remittance processing system is able to handle the many variants on the one check/one stub payments that the district receives, such as single check, multiple stubs; single stub, multiple checks; and 'check frees' i.e. electronic payments.

MID has two people opening the mail and verifying the contents of each envelope with a visual reconciliation of check(s) to stub(s). If potential problem items are identified at this stage, it allows for faster processing through the system. The payments are then batched into trays, with each tray containing about 750 stubs (1,500 items including checks). Three people process eight trays a day, in under eight hours.

The system operates as a two-pass - the first pass scans the checks and stub amounts and the second pass endorses and encodes the checks. During the first pass, a "Quick Balance" module reads the scanline on the remittance stub, captures the CAR/LAR (Courtesy Amount Recognition/Legal Amount Recognition) amounts and MICR line on the check, while capturing the image of the front of both the remittance stub and check. Using built-in CAR/LAR logic, the system reconciles the check with the remittance total and produces a reconciliation report. Problems can arise with substitute stubs, which have no scanline, with payments made by money order rather than check, and with home printed checks, whose MICR line is not printed with magnetic ink. On the second pass, the checks are endorsed and encoded, and a deposit slip balance is printed out.

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An audit trail is printed on the image of the check and stub, so that should there be a problem, the payment is easily traceable in the archives. Occasionally a customer gives a bad account number, or may make a payment on a bank account that has been closed, necessitating going back to the original image of the check and remittance stub.

MID has been able to speed up their deposits. Now all items received are posted that same day, with no daily carryover, and every check is deposited the next day. The daily volume fluctuates, and although there are days when the process takes more time, overtime is now non-existent because even peak loads can be processed within the 7 am to 4 pm day.

"The system is very clean - it does all the things we need, including giving us additional information and allowing for research," said Harman. "But it does not have a lot of extra bells and whistles that frequently produce problems and get in the way of what the system is designed to do remittance processing."