By paying bills mostly by check, Montgomery County pays almost five times as much per transaction in fees and exposes itself to the risk of fraud. That’s according to a report issued by the county’s Office of Inspector General. The OIG recommends use of an electronic system instead.
In the recently released Review of the County’s Use of Paper Checks, Inspector General (IG) Megan Davey Limarzi details how the county can save money by paying electronically rather than paper checks. During fiscal year 2023 and 2024, the county issued about 90,000 checks, according to the 13-page report.
Montgomery County’s default method for making payments “continues to be paper checks,” according to the IG.
“In addition to higher costs, paper checks create operational inefficiencies due to the necessary tracking that is required for outstanding and returned checks. It also exposes the County to greater risk of fraud including theft, duplication, and alteration of checks”.
Instead, the county should pay by automated clearing house (ACH) and purchasing cards requiring only ACH payments be used. If the county had relied on ACH during FY 23 and FY 24, it could have saved $18,000.
According to the report, anywhere from 5 to 20 checks are returned to the county weekly. And in some cases, the same check may be returned multiple times. This results in repeated costs for the same transaction.
The county’s treasury division listed the return of 876 unique checks in FY23 and FY24. That results in extra time staff spends figuring out why a check was returned.
In the county’s response to the report, Chief Administrative Officer Rich Madaleno wrote, “We concur with this recommendation. However, we would need time to assess the legal, equity, process, and system considerations before we implement defaulting vendor payments to ACH.”
