WIC Direct Settlement and Reconciliation Manual

Transcription

1 WIC Direct Settlement and Reconciliation Manual DELIVERABLE VERSION 1.0 Submitted by: 2012 CDPehs. All rights reserved.

2 1 TABLE OF CONTENTS 1 Table of Contents... i 2 Table of Figures... ii 3 Document Information Document History Definitions and Acronyms Introduction Document Purpose WIC Direct Financial Operations Financial Activity Settlement Introduction Funding the Daily Settlement Gateway Settlement WIC Direct Settlement Stand-beside POS Reconciliation Synchronizing with MIS Database Reconciliation and valuation Reconciliation of Retailer Payments Summary Reconciliation of Payments Gateway Reconciliation WIC Direct Reconciliation Direct Connect TPP Reconciliation Direct Connect Store Reconciliation Variances Introduction i

3 9.2 Types of Variances Household account balance exceptions Direct Connect Reconciliation Gateway Reconciliation Activity exception Adjustments Introduction General Business Rules Knowing when an adjustment is needed Creating an Adjustment Types of Adjustments Entering the Adjustment Settling Adjustments Researching a Variance or Adjustment Request TABLE OF FIGURES FIGURE 1 - FINANCIAL ACTIVITY REPORT... 3 FIGURE 2 - RETAILER ACTIVITY REPORT... 4 FIGURE 3 RETAILER ACTIVITY... 5 FIGURE 4 DAILY DRAWDOWN REPORT... 6 FIGURE 5 TOPOLOGY OF GATEWAY SETTLEMENT... 7 FIGURE 6 TOPOLOGY OF DIRECT CONNECT SETTLEMENT... 8 FIGURE 7 SETTLEMENT HISTORY REPORT... 9 FIGURE 8 DATABASE CHANGE IN VALUE RECONCILIATION FIGURE 9 GATEWAY RECONCILIATION DAILY FIGURE 11 TPP RECONCILIATION FIGURE 12 DIRECT CONNECT RECONCILIATION ii

4 3 DOCUMENT INFORMATION 3.1 DOCUMENT HISTORY Version Date Effective Summary of Changes 1.0 6/10/2014 Review and Submission 3.2 DEFINITIONS AND ACRONYMS Acronym or Term Automated Clearing House (ACH) Banking Day Benefit Adjustment Business Day Clearing Account Cut off Daily Financial Activity End-of-Day Gateway Money movement Origination Definition A payment system operated by the Federal Reserve to facilitate the electronic movement of funds between banks and bank accounts. Any day that Banks are open for business. an adjustment made through the WDWUI that only affects a household s food benefit account. The WIC Direct Business Day is a configurable 24 hour window (usually midnight to midnight Eastern Time) that is used for the daily system close out, reconciliation and balancing. An account at a commercial bank that is used for processing ACH transactions used to pay the stores and receive off setting funds from the State Agency. A predetermined time each day for which redemption transactions will be settled to the store on that day. Transactions occurring after the Cut-Off will be settled on the following day. Refers to all financial transactions (redemptions) that occurred on a single Business Day. End of Business Day when books are closed for balancing. A network transaction processing entity that consolidates transactions from multiple transaction acquires for forwarding to WIC Direct for processing and settles those transactions to the acquirers. The actual movement (debits and credits) of funds into and out of the clearing account. This happens on the next bank day morning following the Cut-Off. The act, by a bank member of the Federal Reserve system, of submitting ACH transactions through the Federal Reserve system. 1

5 Acronym or Term Payment Adjustment Settlement Settlement day Suspense Third Party Processor (TPP) Transaction Adjustment Definition An Adjustment to make a payment to a named payee as requested by an authorized individual. It will not affect a household benefit account; only settlement. The act of reimbursing authorized stores for approved benefit redemptions processed by the store. The Business Day on which a settlement Cut-Off occurs and the 24 hour period since the previous Cut-Off. Financial activity that has not yet been settled. A network entity that acquirers, switches, and settles redemption transactions for its store customers. An adjustment made through the WDWUI that is intended to un-do the outcome of a benefit redemption transaction. It will generally affect both a household account and a settlement to a store. 4 INTRODUCTION 4.1 DOCUMENT PURPOSE This document describes the strategies, methodologies and processes implemented in WIC Direct to support reconciliation and balancing and the tools available for any research and correction that may be necessary. 5 WIC DIRECT FINANCIAL OPERATIONS The WIC Direct EBT system is responsible for the accurate issuance, redemption and settlement of millions of dollars in Government benefit authorizations. The system has a number of internal controls and processes that are designed to monitor and manage the integrity of the system on a daily basis. It will automatically detect when the system accounts are not correctly balanced or if there is an anomalous condition that could be a threat to overall financial integrity. However, these processes require human oversight to ensure the system is operating with total accuracy and to investigate and resolve conditions that may occur. To this end, WIC Direct financial operations should be monitored on a daily basis. On most days, monitoring and managing financial operations requires very little effort as the norm is that everything works as it is expected. However, there will be days when action beyond simply checking exception reports is required. Following are the duties of the WIC Direct operations management staff to this function. Verify the summary totals on all reports are consistent Check for communications from authorized state agency staff requesting adjustments Investigate any issues that are identified and determine the correct resolution 2

6 Enter any required adjustments into WIC Direct Compare the settlement statements received from the Clearing Bank to ensure they match the settlement amounts determined by WIC Direct Track and resolve any ACH payments that are rejected The remainder of this document describes the strategies, methodologies and processes implemented in WIC Direct to support reconciliation and balancing and the tools available for any research and correction that may be necessary. 6 FINANCIAL ACTIVITY WIC Direct balances and reconciles its accounts on a 24 hour Business Day basis, seven days per week. Control totals are generated at each end-of day that provides a baseline against which to reconcile system activity. The totals for a day s activity may easily be checked in the summary report of the Business Day Financial Activity. Note that the report provides sub totals for the three primary sources of financial activity; Gateway: Totals for all redemptions transactions received from retailers using TPPS and the Gateway to reach WIC Direct for approval. A reference diagram is the Topology for Gateway Settlement (See Figure 5 Topology of Gateway Settlement, Page 7) Direct Connect: Totals for all redemptions transactions received from stores that directly interact with WIC Direct Third Party Processors (TPPs) that interact directly with WIC Direct. A reference diagram is Topology for Direct Connect Settlement (See Figure 6 Topology of Direct Connect Settlement, Page 8) Figure 1 - Financial Activity Report Financial Activity may also be viewed at the detail level. The Retail Activity report provides the activity that originated from each WIC authorized grocer during the current Business Day. It offers a great deal more information such as NTE adjustments, discounts, transaction counts by types, etc. The report can be a useful management tool in that it will identify stores that may be experiencing anomalous conditions such as an abnormal number of reversals or excessive NTE adjustments. 3

7 The Retailer Activity report can be selected for a specific Business Day or for a date range of Business Days. If the report is selected for a specific Business Day, the Settle Amt. must be equal to the Financial Activity report, Net Activity for the same day. Note that Settle Amt does not mean the amount paid to the retailer on that day. Instead, in this context, it is referring to the total financial activity for the day that will eventually be settled to stores based on settlement Cut-Off criteria discussed below. The retailer activity report has two parts. The first, as shown below is the financial data that will provide the detail of all of the day s financial activity for each store. Retail Activity Report Period: 12/05/ :00:00 AM - 12/05/ :59:59 PM Merchant Purchase Reversal Activity Requested Discount NTE MIS Salem Food Market $15.21 $0.00 $15.21 $15.22 $0.00 $0.01 MIS C C-Food Giant 81 $ $0.00 $ $ $0.00 $0.00 MIS Caldwell County HD $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 MIS Hancock's Market $7.96 $0.00 $7.96 $7.96 $0.00 $0.00 MIS C C-Food Giant 80 $ $0.00 $ $ $0.00 $0.00 MIS Hancocks Market $ $0.00 $ $ $0.00 $0.00 MIS Trigg County HD $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 MIS Conrads Food Store $ $0.00 $ $ $0.00 $2.59 MIS Wal-Mart 204 $ $0.00 $ $ $3.42 $0.00 MIS C C-Food Giant 85 $ $0.00 $ $ $0.00 $0.00 Category Total $2, $0.00 $2, $2, $3.42 $2.60 Report Total $248, ($3,408.30) $245, $252, $2, Figure 2 - Retailer Activity Report Merchant - Identifier of the store Processor Identifies who sent the transaction to WIC Direct and consequently, to whom the funds will be settled. Agency The local agency that has contracted with the store Purchase the sum of the amount requested for a redemption transaction less any discounts and NTE exceptions that were reported. Reversal the total purchase amount of transactions that were subsequently voided or reversed. Activity Amount to be settled to the store purchases less reversal. The report total for this column should equal the total amount from the Financial Activity report. Requested the amount requested by the store in the original redemption transaction Discount the amount of store discounts applied to the transaction Surcharge not currently being used 4

8 NTE amount of any NTE adjustments wherein the requested amount for a specific food item exceeded the maximum allowable reimbursement for that item. The second part of the Retailer Activity report, as seen below provides certain processing statistics for each store that may be of interest to the Vendor Management group in role of managing integrity and compliance. Figure 3 Retailer activity # NTE Adjustments The number of transactions for which there was an NTE adjustment # Trans. The total number of transactions processed for each store and in total. It is the total or purchases, balance inquiries, and reversals / voids. # Pur. The total number of Purchase transactions processed for each store and in total. % Pur. Rej. The number of purchase transactions that were rejected by WIC Direct # Bal Inq. The number of balance inquiry transactions by store and in total. # Rev/Void The number of void / reversal transactions by store and in total. # Rev, Rej. The number of reversal / void transactions that were rejected. 7 SETTLEMENT 7.1 INTRODUCTION Settlement is the act of reimbursing stores for the WIC benefit redemptions that were processed and approved in each store. The process is slightly different depending on how a store s transactions are routed to WIC Direct for approval and payment. WIC Direct supports a Gateway settlement, a Direct Connect TPP settlement and a Direct Connect Store settlement. Each of these settlement processes follows the path of the transaction. They will be described in more detail in the subsequent sections. 5

9 In general though, there is a predetermined Cut-Off time each day after which transactions are held for settlement on the following day. The Cut-Off time is usually in the late afternoon and is determined so as to accomplish the dual goals of providing merchants with maximum access to their funds and allowing the processor adequate time to calculate the settlement amounts and to get the payment transactions originated into the ACH system for overnight payment. Note that WIC Direct operates with two cut off schedules. Gateway transactions cut off at 6:00 PM while the Cut off for Direct Connect stores and TPPs is 3:00 PM. Merchants can generally expect to have WIC reimbursement funds deposited at their bank on the next banking day for all transactions that occur before the Cut-Off time. Settlement occurs seven days per week, but money only moves on banking days (usually 5 days per week). On Monday, stores receive settlement for Friday, Saturday, and Sunday. 7.2 FUNDING THE DAILY SETTLEMENT A Clearing Account is established at a Commercial Bank to facilitate the flow and settlement of funds. This account may be owned either by the State or by the EBT service provider. On a banking day basis, the State deposits funds into this account in sufficient amount to cover that day s payments to retailers. WIC Direct will provide a Daily Drawdown report to the State on the morning following the settlement Cut-Off. (I.e. for the settlement Cut-Off on Monday afternoon, the report will be provided to the State on Tuesday morning.) This report provides a summary of the total funding that is required to cover that day s settlement, subcategorized by Gateway and ACH (includes settlement to all entities that are Direct Connected to WIC Direct). Figure 4 Daily Drawdown Report Based on this report, the State will then take actions to move funds from wherever the State s funds are housed and in the amount described in the Daily Draw report into the Clearing Account on the same morning. These funds will be dispersed throughout the day to cover the ACH payment transactions made to retailers, thus leaving a zero balance in the Clearing Account at the end of the banking day. The State s funding of the Clearing Account can happen in several ways and usually depends on the State s policies and procedures for handling such payments. If notification of the amount of funds is received on the morning of money movement, the State can move funds on the same day using a wire transfer if the source of funds is a different bank from the bank housing the Clearing account. If the source account and the clearing account are at the same bank then an inter-bank transfer can be accomplished. Another option that is sometimes used is to have the EBT service provider initiate an ACH transaction on the previous night (Settlement day) that will debit the State s source account and that will credit the Clearing Account. 6

10 Another possibility is for the State to maintain a certain level of funds in the Clearing Account and to only refresh the amount when the level reaches some predetermined minimum (that is adequate to cover the largest daily settlement). In this way, the State does not have to move money on a daily basis but can still track and manage the integrity of the funds disbursement. If it is a State owned account, any interest that is earned on the overage will accrue to the State. 7.3 GATEWAY SETTLEMENT The Gateway is an intermediate processor that consolidates EBT processing for multiple transaction acquirers and switches. Topology of Gateway processing and settlement Figure 5 Topology of Gateway Settlement In this configuration, settlement flows from WIC Direct (the Clearing Account) to the Gateway for all transactions processed through the Gateway. The Gateway combines the WIC settlement with the settlement for any other financial traffic it may receive from a TPP and provides that TPP with a combined settlement and reconciliation. The TPP then does the same; it consolidates traffic for its attached stores and provides them with a combined settlement. In this configuration, WIC Direct knows about financial activity at the store level, but the settlement and reconciliation is with the Gateway. There is no direct business relationship between WIC Direct and the stores or the TPPs/transaction acquirers that are supporting the stores. WIC Direct has no knowledge of or control over when a store actually gets reimbursed for a WIC redemption. The Gateway operates on its own settlement Cut-Off time which is 6:00 PM eastern time. Shortly after the Gateway cut off, an auto-reconciliation file is generated by the Gateway that documents all transactions that it processed during the recently completed 24 hour settlement window and the total amount of settlement that is required. This file is transmitted to WIC Direct as notification of the settlement amount and to verify the correctness of settlement. 7

11 The Gateway creates, at the same time, an ACH transaction to debit the WIC Direct Clearing Account and to credit the Gateway clearing account for the funds identified in the auto-reconciliation file. The Gateway then generates offsetting ACH payment transactions to the downstream TPPs. The TPPs in turn settle with their transaction acquirers and stores. All of this happens concurrently so there remains the expectation that a store will be reimbursed on the next banking day. WIC Direct combines the Gateway settlement amount with the amount required for other settlement processes and provides the State with a single Daily Drawdown report as illustrated previously. WIC Direct verifies the Gateway settlement as described in the chapter on reconciliation. Any errors found in the settlement amount are handled after the fact through the adjustment process (described in the chapter on Adjustments). 7.4 WIC DIRECT SETTLEMENT WIC Direct supports both TPPs and stores connecting directly to WIC Direct for transaction processing and settlement. Direct Connect Topology Figure 6 Topology of Direct Connect Settlement WIC Direct calculates the settlement due the Direct Connect entities (stores and TPPs) based on its 3:00 PM cut off time. An individual ACH transaction is created and initiated into the Federal Reserve system for next day settlement for each Direct Connect store or TPP that will credit that entity s bank account with the calculated settlement amount and that will debit the clearing account for the offsetting amount. For Direct Connect TPPs, WIC Direct creates an auto-reconciliation file documenting in detail all of the transactions for which that TPP is being reimbursed. This file is used by the TPP to reconcile its expected settlement against the actual settlement calculated by WIC Direct. Any anomalies detected during this daily process are reported to the WIC Direct support staff for investigation and if necessary, adjustment. 8

12 Under the reconciliation Tab in the WDWUI, WIC Direct provides a history of all ACH payments initiated by WIC Direct for Direct Connect settlement. Figure 7 Settlement History Report This list is may be filtered by store and by date range. It provides historical reference of payments to stores and is useful in researching queries and issues. 7.5 STAND-BESIDE POS As part of the WIC EBT retail enablement strategy, an agency may deploy EBT only POS equipment to stores needing an EBT solution. WIC Direct supports stores using these devices as either Direct Connects or as Gateway connected. Note that Gateway connected provides better support for devices that accept both SNAP and WIC. Direct Connect is limited to WIC only. The settlement to these stores depends on the connection strategy employed and will work as described in the above paragraphs. 8 RECONCILIATION During the reconciliation process WIC Direct will verify: WIC Direct Household EBT accounts are synchronized with benefit issuance records maintained by the WIC Information System. WIC Direct accurately processed all financial activity throughout the Business Day the change in database value is equivalent to the transaction activity recorded for the Business Day Settlement to authorized stores, TPPs and the Gateway accurately reflects the transaction redemption activity recorded by WIC Direct and the values remaining in the household EBT accounts. 8.1 SYNCHRONIZING WITH MIS Throughout the Business Day WIC Direct is receiving real-time Benefit Adjust transactions (debits and credits) from the WIC information system. At the end -of-day, on a daily basis, WIC Direct will create a 9

13 file of all benefit adjust transactions that were received from the WIC Information system throughout the business day. This file is used by the Information System to reconcile the activity reported by WIC Direct as having a financial impact on EBT household accounts against the Information System s own accounting for benefits issued to EBT. Any anomalies will be investigated and if necessary corrected. 8.2 DATABASE RECONCILIATION AND VALUATION At the end of each Business Day, WIC Direct will calculate a summary (at the Category and subcategory level) snapshot of the total quantity of food items held in the Household EBT accounts. This is built up by looking at each household independently. The system will then batch process the day s transaction audit log and create a summary total of debits and credits for each food category and subcategory. This total from the transaction audit log is then added to the database summary total from the previous endof-day and the result is compared to today s end-of-day database total. Any exceptions are noted as a variance (see business rule below). In this way, WIC Direct assures the accuracy of its transaction processing. Figure 8 Database Change in Value Reconciliation This report serves several purposes. Demonstrates the accuracy of transaction processing Provides the state with an estimate of the outstanding food benefit liability Cat and Subcat taken from APL; Starting Balance quantity (in standard UOM) of cat / subcat held in the household EBT account database at the end of the previous day. Value includes future dated benefits but does not include benefits that are expired. Issuance Net of all Benefit Adjust transactions received from the WIC MIS throughout the day plus any Benefit Adjustments that are entered through the WDWUI. 10

14 Purchases Net of all approved benefit redemption activity Reversals Amount of all transaction reversals / voids Computed Balance Sum of beginning balance less purchases plus reversals Ending Balance the actual totals for food benefits that are contained in the WIC Direct household EBT account database as of the end of the current Business Day Variance any time the Computed value does not equal the Ending Value, a variance is reported. Business Rules If a variance is detected on this report, there will be detail as to the household(s) that was affected by the variance provided on the Household Account Balance Exceptions report. 8.3 RECONCILIATION OF RETAILER PAYMENTS Both settlement and reporting of financial activity are based on a twenty-four window of time. However, the slices of time are different. In the above reconciliation processes, we have reconciled the daily activity that happens from midnight to midnight. This section of the document demonstrates that the total paid to stores as reimbursement for a Business Day s financial activity is exactly equal to the recorded financial activity for that same Business Day even though the payments may happen over a several day span SUMMARY RECONCILIATION OF PAYMENTS Because of the overlapping of settlement periods with Business Days, it is useful to look at the information over a multi-day period. On any given Business Day, a portion of the financial activity will be settled on that day and a portion, referred to as suspense, will be settled on a subsequent day. For each Business Day, the Suspense remaining at the end-of-day will be equal to the Suspense remaining at the end of the previous day plus the current day s activity and minus the day s settlement GATEWAY RECONCILIATION WIC Direct receives an auto-reconciliation file from the Gateway shortly after the Gateway Cut-Off each afternoon. This file contains the list of transactions for which the Gateway is requesting payment. The file also provides the total amount that the Gateway will be debiting from the WIC Direct Clearing account. The transactions on this file will be a combination of transactions authorized yesterday (after the Gateway Cut-Off and before the WIC Direct end-of-day) and transactions authorized today (occurred before today s Gateway cutoff). Transactions in the first category are considered Suspense at the end of the previous WIC Direct Business Day. 11

15 WIC Direct will compare its record of today s activity against the Gateway auto-reconciliation file and will identify all transactions processed today that are to be settled today. This amount plus the Gateway Suspense from the previous day must equal the total being settled today. All remaining Gateway transactions in the WIC Direct database become Suspense at the end of today s processing and will be settled tomorrow. Figure 9 Gateway Reconciliation Daily Activity for Today -the total activity recorded by WIC Direct during its business day and should equal the activity shown on the Financial Activity report. Reconciled the amount of today s activity that was included in today s settlement. Un-reconciled The amount of Today s activity that was suspended and will be included in tomorrow s settlement. Settlement the amount of funds that are being paid to the Gateway today as reimbursement for the reconciled activity from today plus the un-reconciled activity (suspended) activity from yesterday. Variance expected and actual settlement are not the same. Sum of Variance any variance recorded today plus any variance carried forward from previous days Activity Yesterday the Gateway activity recorded for the previous WIC Direct business day. (Pulled forward from yesterday s Gateway Reconciliation report) Reconciled Yesterday the amount of Yesterday s activity that settled yesterday Un-reconciled Yesterday the amount of yesterday s activity that was suspended Note that the amount settled today is equal to the un-reconciled (suspended) from yesterday plus the activity that was reconciled today. There are a number of other detail fields on this report that are not germane to the reconciliation process so they have not been described in this document. Please see the reports manual for more information. 12

16 Business Rules If the Actual settlement (amount Gateway debits from clearing account) does not equal today s activity that will settle today plus yesterday s Suspense then a variance is recorded for investigation The Redemption Activity shown on the Gateway Reconciliation must be equal to the activity shown on the Financial Activity report The actual Settlement must equal the amount shown on the Daily Drawdown report A Transaction Adjustment for a Gateway connected store will cause a variance in the calculated settlement because the Gateway is drawing funds based on its accounting and not WIC Direct s. These adjustments are settled outside the normal settlement processes as is described in the Section on Adjustments under paragraphs related to Settling Adjustments WIC DIRECT RECONCILIATION WIC Direct initiates and manages settlements to stores and TPPs that are Direct Connected to WIC Direct. This allows for a more detailed accounting and reconciliation for each Direct Connected end point. When WIC Direct approves a transaction, it determines when that transaction will be settled, based on the timing of the approval relative to the WIC Direct settlement Cut-Off and the Merchant s selected Business Day. WIC Direct will settle transactions that are approved prior to its Cut-Off but only up until the most recent merchant end-of-day. For example, WIC Direct approves a transaction for Joe s Market at 2:00 PM which is prior to WIC Direct s Cut-Off. However, Joe s Market has selected a Business Day that runs from 1:00 PM until 1:00 PM. Consequently, this transaction will not be settled until the WIC Direct Cut-Off on the following day. Using this logic, WIC Direct is able to calculate, for all of its Direct Connect entities, the day on which transactions processed on that Business Day will settle to the store or TPP. Merchant selected Business Days create the possibility that funds will not be settled for two days instead of the usual one day. For example, Store 1 has a Business Day that ends at 9:00 PM. WIC Direct approves a transaction for this store at 10:00 PM. The transaction cannot settle today because it is past the 3:00 PM WIC Direct Cut- Off. It also can t settle tomorrow because the current merchant Business Day has not completed. Consequently, it will settle on the day after tomorrow DIRECT CONNECT TPP RECONCILIATION Direct Connect TPPs may potentially be providing transaction services to multiple WIC retailers. However, WIC Direct will settle all transactions received from a Direct Connect TPP to that TPP as a single amount regardless of the number of stores that may be behind the TPP. To understand the reconciliation of Direct Connect TPPs, it is necessary to view two consecutive day s reports as shown below. 13

17 Figure 10 TPP Reconciliation Institution Name of the TPP Settlement Amount amount settled to the TPP today Unsettled amount Previous the portion of today s settlement that was the result of redemption activity prior to yesterday (i.e. a two day settlement window as discussed above); this should always be zero for a TPP Unsettled amount Yesterday Portion of today s settlement that resulted from yesterday s activity (was suspended from yesterday). Unsettled Amount Today Portion of today s settlement that was the result of today s activity Variance the amount settled did not equal today s settlement plus suspense Using the above reports as an example, to reconcile business day activity against settlement for the business day 12/4-12/5, add the Unsettled Amount Today from the 12/05-12/06 report period ($24,496.54) to the Unsettled Amount Yesterday (suspense) from the 12/6-12/7 report period ($57,952.12). This gives a total of $82, which is the amount shown on the Financial Activity Report for the 12/4-12/5 business day DIRECT CONNECT STORE RECONCILIATION The process for reconciling Direct Connect stores is identical to what is described above for Direct Connect TPPs. The Unsettled Amount Today (from yesterday s report) plus the Unsettled Amount Yesterday (from today s report) will equal the activity for Yesterday. In this example, $ was the Unsettled Amount Today from the 12/3-12/4 report period. For the 12/4-12/5 Report period, the unsettled amount yesterday (in other words, suspended from yesterday) is 54, This totals $54, which is equal to the Financial Activity report for 12/4/12. As can also be seen on this report, there is a line item detail for every Direct Connect store that received a settlement. 14

18 Figure 11 Direct Connect Reconciliation Business Rules The calculated redemption activity must equal the activity recorded on the Financial Activity report The Actual settlement amount from the Direct Connect Reconciliation (Direct Connect stores) and the Third Party Processor Reconciliation (Direct Connect TPPs) must add up to the amount shown on the Daily Drawdown report under ACH. If the calculated settlement does not equal the actual settlement a Variance is reported for investigation 9 VARIANCES 9.1 INTRODUCTION A Variance is reported when one of the daily system balancing and reconciliation processes detects that the control totals for the system activity being examined do not yield a net zero difference. Variances are clearly indicated in the detail reconciliation reports and in the variance summary reporting. Further, alerts can, as a configuration option, be generated as a notification to the responsible parties. It is the responsibility of the WIC Direct financial operations group to research and resolve all variances. Sometimes variances are the result of timing issues related to system activity and an off-setting variance on the following day will correct the issues. However, the resolution often requires the recording of an adjustment as described in the chapter on Adjustments 15

19 9.2 TYPES OF VARIANCES This section provides an overview of the types of variances and what they might mean. The reports described in the chapter on Reconciliation provide additional detail on the variance calculations and how they are presented HOUSEHOLD ACCOUNT BALANCE EXCEPTIONS At the end of each Business Day, WIC Direct calculates all financial activity that occurred during that day (as recorded in the WIC Direct audit trail) for every household and at a statewide level and adds the result to the balances that were saved as of the end of the previous Business Day. This is compared to the balance shown for each household and for the State at the end of today s Business Day. A variance is recorded if the totals for a household do not match. Reference the Account Balance Exception report and the Benefit Account Reconciliation report DIRECT CONNECT RECONCILIATION The total of today s Direct Connect activity that is settled today plus the activity from the previous day that is expected to settle today plus any remaining unsettled activity from the second previous day must equal today s settlement. Reference the Direct Connect Reconciliation report GATEWAY RECONCILIATION The total settled to the Gateway today is equal to the sum of Gateway financial activity recorded in WIC Direct for today s Business Day that is matched against the Gateway auto-reconciliation file plus the amount of WIC Direct Gateway activity from yesterday that was not matched against yesterday s Gateway auto-reconciliation file. Reference the Gateway Reconciliation report ACTIVITY EXCEPTION WIC Direct will provide the MIS with a batch file documenting all benefit adjustments that were completed on that business day. The MIS will compare this file against its record of all benefit adjustments for the same business day and will note any exceptions. These exceptions will trigger an investigation and any required resolution. 10 ADJUSTMENTS 10.1 INTRODUCTION An adjustment is a transaction created outside of normal transaction processing that affects a household account balance, a retailer payment (or TPP) or both. Adjustments are used to: Correct a transaction processing error Correct a settlement error (e.g. Gateway draws inappropriate amount) Correct an error in a household EBT account 16

20 Make a payment out of scope of normal EBT processing An adjustment should only be entered into the WIC Direct system after careful problem analysis to ascertain the appropriate corrective action and at the request of an authorized individual. The State Agency will be notified via or some other agreed upon process whenever an adjustment is entered into the system. This communication will include all relevant information about the adjustment including amounts, the household, the store, the date, and the identification of the transaction being adjusted GENERAL BUSINESS RULES Adjustments: Adjustments must be made quickly WIC benefits expire. o Adjustments can be applied to expired benefits but this does not help the WIC household who may have lost some benefits or the store who lost some revenue. Must always be applied to the benefit period that was affected by the original transaction May not create a negative benefit amount in a household account May only be generated by individuals with the appropriate authority Must always be supported by detail as to why the adjustment was created Should always be made in respect to a specific and referenced transaction 10.3 KNOWING WHEN AN ADJUSTMENT IS NEEDED There are several ways that the need for an adjustment may be identified. WIC Direct has a series of balancing and reconciliation processes that are executed every night. These processes will generate a Variance if the control totals do not properly align. Generally, an alert will be generated as well. See the section of this document dealing with Variances. It is the responsibility of WIC Direct Systems Operations to check the Variance Summary on a daily basis and, if a Variance has been reported, to undergo a problem analysis of the issues and hence determine the appropriate corrective action. Occasionally, WIC Direct Operations will receive adjustment requests from the Gateway service provider or from a Direct Connect store or Third Party processor. These would typically reflect that, while the transaction was processed properly by WIC Direct, someone downstream encountered an error when trying to complete the transaction. As in the Variance scenario, due diligence must be exercised to ensure the appropriate (if any) action is applied. A third process is that an authorized representative from the State agency has requested that a payment be made to a specific payee or that a household account balance be modified. 17

21 10.4 CREATING AN ADJUSTMENT The first step in creating an adjustment is to understand the type of adjustment that is required. Once careful analysis has been completed and it has been determined that an adjustment is necessary, a manual process is used by the WIC Direct operations staff to implement the adjustment. This may amount to forcing the reversal of an existing transaction or creating a new transaction as a correcting entry, or it may amount to adjusting an account balance outside of the normal processes. It is both infrequent and situational that an adjustment is required and consequently, the correct response is determined based on an analysis of each issue independently TYPES OF ADJUSTMENTS TRANSACTION ADJUSTMENTS Transaction Adjustment: This type of adjustment is used to either un-do a transaction that was successfully completed and accurately recorded in the WIC Direct database or to add a new transaction to the WIC EBT database that was not present but that should have been. The key to a Transaction Adjustment is that it concurrently affects both a household benefit account and a retailer payment account. Adjustment Type Un-do Add Examples of when it might be used. Un-do is used when the transaction already exists in the WIC Direct Database. WIC Direct financial operations receives notification (usually an ) from a downstream processor that a transaction needs to be undone (probably because of some downstream system error). An internal WIC Direct error (like posting a reversal twice). These will usually show up as un-reconciled transactions. ADD is used when a required transaction is missing from the WIC Direct database (probably as a result of a system error). The auto reconciliation process uncovers a transaction that the external processor believes is authorized but that WIC Direct is not showing as authorized. Investigation shows that the transaction was, in fact, legitimate BENEFIT ADJUSTMENT A Benefit Adjustment will only modify the contents of a household s EBT Benefit account. It has no impact on retailer activity or settlement. 18

22 Examples of when a Benefit Adjustment might be used. A request is received from authorized Agency staff to add or remove benefits from a household EBT account. An error in the Approved Product List resulted in more or less quantity of a sub category being debited (or credited) to a household account. A good example is a six pack of formula being set up in the APL as 1 can. the payment to the store in this case is correct for the six pack of formula but the EBT account is only debited for one unit instead of six. A variance is reported by the MIS reconciliation process that resulted in an incorrect or missing posting to a household account PAYMENT ADJUSTMENT A payment only affects the settlement to a store, TPP or any other designated entity that is indicated as the payee. It does not affect a household EBT account. Payment Adjustments in almost all cases are the result of authorized agency staff requesting the payment. They are not usually the result of a variance detected during daily reconciliation. Consequently, payment adjustments are tracked and reported separately from settlements for normal transaction processing. Examples of when a Payment Adjustment might be used. Make payments to a Formula Warehouse for products delivered to participants. Provide additional payment to a store as reimbursement for inappropriate (in hind sight) Notto-Exceed adjustments. Reimburse a store for a Clerical Error. For example, a clerk inappropriately enters a discount amount that is far greater than was warranted. Reimburse the Gateway in the event they draw too little funds from the clearing account. This has happened as a result of a Gateway system error in handling NTE adjustment on reversals ENTERING THE ADJUSTMENT TRANSACTION ADJUSTMENT If the transaction adjustment is for a known transaction (as indicated by the Transaction Identifier ) then the system will find that transaction from the proper source (WIC Direct transaction log or the Unmatched Transaction data set) and will automatically perform the correct action to create and process the adjustment BENEFIT ADJUSTMENTS WIC Direct allows benefit updates to household accounts (add and remove) under the accounts management tab in the WIC Direct Administrative system (strong security processes are in place to limit the use of this function to only those designated individuals that absolutely must have access to the function). 19

23 The user can view the current account balance and can select a line item for which a benefit quantity is to be modified (using the adjust button). That cat / subcat and quantity will be displayed at the bottom of the screen. The user can change the quantity and use either the add or reduce button to create a change to the account balance. The account balance will be immediately updated. The user can also add a new cat / sub cat to the account by entering that cat / sub cat and the quantity and using the add button. It is assumed that an account is being adjusted at the request of authorized agency staff. Hence, there are no edits associated with this functionality that limit the amount of benefits that may be added to the account SETTLING ADJUSTMENTS Transaction Adjustments represent financial activity and can have an impact on daily settlement. Benefit adjustments do not have a financial impact SETTLEMENT OF TRANSACTION ADJUSTMENTS Settlement amounts resulting from Transaction Adjustments are combined with the other financial activity for the store that occurred during the same Business Day to arrive at the net dollars due to the store for that day s activity. Settlement depends on when the adjustment was recorded versus the daily WIC Direct settlement Cut-Off. It could be today or it could be tomorrow. The rule that applies is that all transactions are settled according to their timing related to the daily settlement cutoff. If the adjustment was made before the cut off then it will be settled today. If it is done after the cutoff then it will be settled tomorrow. However, the actual movement of money is different depending on whether the transaction affected a Gateway retailer or a Direct Connect retailer. For Direct Connect stores and TPPs, WIC Direct controls and creates the ACH settlement amounts for which those stores are reimbursed based on WIC Direct s internal financial accounting. Because WIC Direct is in control of this process, it can combine Transaction Adjustments with the daily redemption processing done by that store, consequently reimbursing the store for the net amount. For Gateway transactions, where the Gateway is the master of settlement, the Gateway draws from the funding account based on its internal accounting. Consequently, WIC Direct does not have the option to include adjustments done in WIC Direct as a net of the funds paid to the store. This is controlled by the Gateway. The Gateway sends WIC Direct an auto-reconciliation file on a daily basis that provides the detail of the settlement funds drawn from the clearing account on that day. WIC Direct compares the Gateway list of transactions against its own records as validation. If an adjustment had been done in WIC Direct on that day, it will show up as a variance in the Gateway reconciliation report (probably on the following day). The outcome of the variance will be either that the State owes the Gateway or the Gateway owes the State. These payments are handled outside the normal settlement process and supported with separate documentation such as an . 20

24 11 RESEARCHING A VARIANCE OR ADJUSTMENT REQUEST The questions are: What is the expected outcome of a transaction? What was the actual outcome? What action is necessary to get from the actual to the expected? WIC Direct provides several tools to help with the analysis Transaction History: Use the filters in the Transaction history screens to locate the transaction in question. This will tell you if WIC Direct actually received and processed the transaction and what was the outcome from WIC Direct s perspective. Household Account Balances: Current and future household benefit account balances can be found under the Accounts tab in the WDWUI. Use the filters supplied to locate the desired household to view the balances. A link between the account balance and the transaction history will allow for quick navigation between the two research tools. Unmatched Transactions: WIC Direct undergoes an auto-reconciliation with the Gateway and some Direct Connect processors or stores on a daily basis. A list of transactions provided by the external processor is compared against those that have been recorded in the WIC Direct database. If a transaction is found on the reconciliation file that is not in the WIC Direct database, it is logged and reported in the Unmatched report. This event will probably be a root cause for a Variance and consequently provides a good resource for problem analysis. Following is an abbreviated example of the Unmatched Transactions list. Unmatched Transactions id card_number transaction_type HGTN transmission_time amt paid status_description acquirer x9 id vendor Purchase Reversal /28/2013 9:49 $ 5.60 Total Match for Purchase FIS Purchase Reversal 978 2/27/ :37 $ Total Match for Purchase FIS Purchase Reversal 963 2/27/ :04 $ 9.00 Total Match for Purchase FIS Purchase Reversal 955 2/27/ :41 $ Partial Purchase Match FIS 34 WVW Purchase Reversal 985 2/27/ :21 $ 9.14 Total Match for Purchase FIS Purchase Reversal 893 2/27/2013 9:57 $ Partial Purchase Match FIS 34 WVW007 Un-reconciled Transactions: When WIC Direct settles a transaction (Direct Connect) or a transaction is matched against the Gateway reconciliation file (which means it was settled by the Gateway), the transaction is flagged as being reconciled. The first thing to do with an un-reconciled transaction is to examine the unmatched transactions for the possibility a transaction in that data set corresponds with the un-reconciled one. (Because of the exactness of the auto-matching criteria, it is possible a match was not identified that should have been). If, after closer examination, it is determined that the two transactions do in fact match, there is a feature in the unmatched dataset to force these two transactions to be matched and consequently clear the exceptions. Note this action is not considered an adjustment for internal tracking purposes. 21

25 Account Balance Exceptions: Every night, WIC Direct compares the change in value of the benefit account database (and every household account) against the total transaction values processed against the database and household accounts. Any discrepancies are recorded as a Variance. The Household Account Balance Exceptions report provides the details of the households that are out of balance and is a good research tool for understanding and correcting the problem. 22