DISHONORED CHECKS - 8043
Dishonored checks are items deposited at a depository bank and returned due to:
- Insufficient funds in the accounts the checks are drawn.
- Other reasons that prevent the bank from honoring the checks.
Depository banks attempt to clear checks twice before declaring them dishonored.
The depository bank will notify the agency/department when a check is dishonored. The agency/department shall remit payment to the affected account of the depository bank within ten business days of receiving the notification. The payment will reimburse the depository bank affected by the return of the dishonored check.
If the agency/department has been notified by the depository bank that counterfeit checks have been received, the agency/department will follow the appropriate reimbursement procedure and notify the California Highway Patrol.
Agencies/Departments shall track and maintain a monthly count of dishonored checks reimbursed to the depository banks. If deposits are made into more than one depository bank, agencies/departments should maintain a separate dishonored check count worksheet for each bank. A worksheet for tracking dishonored check data is available from the State Treasurer’s Office (STO) for agencies/departments to use. To request this worksheet, e-mail the STO at Checks@treasurer.ca.gov. For more information on dishonored checks, see the STO website.
The STO uses the total count of dishonored checks by centralized State Treasury System (CTS) account to compensate the depository banks for handling these items. To ensure the depository banks are accurately compensated, agencies/departments shall report the following to Checks@treasurer.ca.gov:
- Non-Pre/Miscellaneous sorting agencies/departments - the total number of dishonored checks reimbursed for the previous fiscal year by the third Friday of July. The STO may request monthly dishonored check volume throughout the fiscal year as needed by contacting agencies/departments directly.
- Pre/Miscellaneous sorting agencies/departments - the total number of dishonored checks reimbursed by the 15th of each month.
Agencies/Departments shall endorse checks with identifiable information as a means for depositories to return dishonored checks. For endorsement instructions, see SAM sections 8034.1 through 8034.5.
Dishonored checks relating to deposits in banks outside the CTS will be returned in accordance with usual commercial practices. The bank will debit the account of the depositing agency/department.