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It's a shame that scare tactics don't work when you are correctly informed as to where your tax dollars are being spent. Off the top of my head I believe that non sufficient funds, covered overdraft,…

It's a shame that scare tactics don't work when you are correctly informed as to where your tax dollars are being spent. Off the top of my head I believe that non sufficient funds, covered overdraft, and bounced check are really the same thing. It means the money ain't there. Or Howard am I wrong?

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Comment by Bill Walls on April 19, 2010 at 9:14am
Thanks for the opportunity to clarify my position on these issues.
Comment by Bill Walls on April 19, 2010 at 9:11am
I base my comment regarding the excellent bank accounts management by the Borough Manager and the staff on my detailed review of the January bank statements for 7 of the most active accounts.

In my review I noted that on January 13th there was a very small overdraft on the Withholding account. The bank covered the overdraft and the Borough Manager transferred funds to the account within 2 days. The bank did its job as it should and the Borough Manager did her job very well. There were no bounced checks. The overdraft was an administrative error with no adverse financial consequences.

With the complexities of the 15 account system with several balls in the air at all times I see this as good performance – don’t you?

Each covered overdraft requires a timely action by the bank to prevent the overdraft. The bank functions as a goalie in a hockey game. Each blocked overdraft prevents a bounced check and an opportunity for the account holder to transfer funds to the account.

I base my understanding of bounced checks and covered overdraft on bank policy discussions with a retired banker and a bank officer, and internet web sites that describe banking policies for bounced checks and covered overdraft.

I base my judgment of the performance of the bank and the Borough Staff on my experience serving as Treasurer and Managing Director of a small non-profit organization. I might make errors, but I do not make “off the top of my head” comments about finance.
Comment by Bill Walls on April 18, 2010 at 10:14pm
Re: My comment below on Bounced Checks versus Overdraft Protection

I forgot to add, on January 1st there was $44,375 of unrestricted funds available to cover the overdraft. Before the transfer of $17,500 of unrestricted funds was made on January 6th, checks were received by January 5th by the borough that covered the overdraft and provided a positive balance of $25,867.00. Not counting the transfer of $17,500, on January 6th, the balance rose to $31,683.40 on January 6th.

The borough is still trying to recover from the very financially stressed state that developed from the period 2001 to 2007. The fact is the situation on January 5th was manageable and Carole Nasella and the office staff did an excellent job of manageing the 15 accounts in the first two weeks of January so that all necessary payroll and bill payment obligations were met.
Comment by Bill Walls on April 18, 2010 at 9:30pm
Bounced Check versus Overdraft Protection

Bounced Check

A bounced check is one the bank refuses to pay because there are insufficient funds in the account. A bounced check is one that is returned to the merchant who accepted the check.

Writing a bad check is a simple administrative mistake that can snowball into a nightmare of bounced checks, bank fees, and angry merchants wanting to collect what you owe them.

With bounced checks the account balance never falls below zero.

With bounced checks there can be negative credit reports posted against the account holder.


Overdraft protection

If an account holder meets creditworthiness standard, a bank will provide overdraft protection. Ridley Park has 15 accounts with M&T Bank that generally total not less than $200,000 early in the year. During the fiscal year the accounts’ balances will total millions of dollars. Ridley Park meets the creditworthy standard for overdraft protection with M&T Bank.

With overdraft protection, when a check is presented to the Bank and the account has insufficient funds to pay the demand, the Bank is obligated to pay the merchant using bank funds. No check is returned to the merchant so no check bounces.

The bank works with the account holder to transfer or deposit funds to cover the overdraft. Until the account holder transfers or deposits funds to the account, the account shows a negative balance.

There is a federal banking regulation that says, in the case of the business agreement between M&T Bank and Ridley Park, the Bank must charge a fee of $39.50 for each check that causes an overdraft. However, the feds permit M&T to waive the fee. They do waive the fee and the charge is returned to the account.

The result is there is no nightmare of bounced checks, bank fees, and angry merchants wanting to collect what you owe them.

There are no negative credit reports since the overdarft is not a transaction that is reported to credit agentcies.

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