Best Practices for using ACHs
Hello,
Our foundation is thinking of moving away from checks and utilizing ACHs to make our grant payments. I was wondering how other organizations that are using ACHs get the banking information from the recipients.
Thank you for your input.
Linda Cleveland
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Comments
We are in the same boat, so following along to responses:)
We converted to ACH nearly two years ago and haven't looked back.
At LCF our process is as follows:
For new organizations
1. Any new granting organization that does not already have a banking profile is entered (by us) into our banking website. It's very quick to enter a new organization
2. The granting organization receives an email (from our Bank) that they need to set up their account
3. When setting up the ACH account, the nonprofit enters a keyword generated by us (it literally can be anything but we have a system).
4. After entering the keyword, the Nonprofit completes their profile by entering their routing and account number This is critical in my opinion. We don't want to store bank routing and account numbers on our database. The bank requests this from the grantee organization and we never store the routing and account info
5. We receive confirmation that the account has been confirmed by the organization
6. We do periodic follow up to make sure the account information is correct
For existing organizations
I am happy to answer any questions about our process.
There is one caveat to our system. If it's a large organization (e.g. University) we direct our bank to send a check to the organization. for example, we feel it would be difficult for a scholarship to go to the larger University account and for Financial Aid to track down the payment to match it up with the scholarship recipient. Heck, in the past even paper checks would go astray so we still process scholarships with a check but it is also done online and our bank sends the check. We send materials to the Financial aid offices via email to verify receipt
Thanks. This is very insightful!
On the flip side of this conversation, I work for the foundation of a large hospital system. I recently requested that a community foundation do an ACH transfer instead of writing a check. We are requesting this of all of our major donors. It means we have to have less staff in the office processing checks during this pandemic. I expect one of the outcomes is more wire transfers in the future as opposed to checks.
I applaud those who are being proactive in this regards!
Kent C. Weimer, Chartered Advisor in Philanthropy®
Director of Trusts, Estates and Gift Planning, Parkland Foundation
Following along as well as our bank is not helpful at all with us trying to do this, so we are "at sea" trying to figure out the most secure way to do this.
All this information is very helpful. I have a question that I'm wondering if other foundations have, and if so, how have you been dealt with it? For slight background, we are a small-staffed family foundation. As with others on this thread, we are considering moving toward wire transfers (ACH's).
Our internal rules and regulations require two signatures on checks over $2,000. Do any of you have this requirement and if so, is there a workaround for the two signature rule? What are best practices? We absolutely want everything to be squared away for our annual audit.
I appreciate in advance any and all suggestions/ideas.
Thank you,
Susan Haley, Dean & Margaret Lesher Foundation
Great question! We also require two signatures on checks. I am guessing that, once we figure out how to set up the ACH transfers, we would create an internal procedure that requires two officers to sign off on the transfer. We do that now with all banking transactions so I don't foresee that being a huge hurdle to accomplish.
I'm with @SheilaSteger on looking for more information on how to collect this information without involving our bank. Has anyone else figured out a way to collect the needed information and permissions from grantees securely, without the partnership of their bank?
We are just starting this process, so I don't know how it will shake out, but we are using a DocuSign form to collect the account and routing information.
We are just starting both Foundant and ACH payments, and also question when to obtain the bank information. Has anyone requested the bank info before grants are approved? We're concerned that if we wait until grants are awarded, it will take a while for some organizations to provide the info.
We are only doing ACH for grantees. We have them complete their contact and provide us with a void check.
We started doing ACHs with the pandemic. We have a direct deposit agreement PDF that the recipient completes and emails back to us (they can add password protection). We enter that info into our bank ACH processing system, save it, and destroy the PDF. We send the DD agreement to grantees along with the award letter in an email. They usually respond fairly quickly.
For any payments requiring second signature, we get the second signature via an email approval and include that as backup in the payment documentation, along with the ACH confirmation page.
Thanks! I'm glad to hear they respond quickly.
We opted to make our grant payments via bill.com. It allows for approvals on amounts to pay, so is a good internal control, and is free for the grantees so long as they set their account up for receipts only. We collect the grantee's bill.com information in a follow up form we assign to the applicant when the grant is approved; the auto email that is sent when the follow up form is assigned is our announcement of the grant. I've attached the question list for the form - see section 2 for the bill.com-related information we collect.
We have been doing grant payments via ACH since last May 2020. We process approximately 200 payments in bulk twice a year so our system is pretty straight forward. We utilize DocuSign to obtain banking information (post board approval) which is ultimately pulled out and transferred to our online banking portal. There is no manual entry on our end. We find that most grantees respond quickly (within 5 days) and after a gentle nudge, all but a couple (out of 180 payments) have everything in a few days after. Those payments are delayed as to not hold up everyone elses. Email reminders and strong language are helpful. :) I utilize the bulk functionality of DocuSign and our banking portal to do the heavy lifting; which in many foundation's cases, bulk isn't possible as payments are on going. Happy to discuss further if someone is interested in learning more about our process and happy to share documents.