Can someone explain the difference between a Third Party Sender and a Third Party Service Provider? I am working on the annual audit and am having difficulty determining if our bank customers who we originate payroll deposits for are a sender or a service provider.

I believe your customer would be an "Originating Company" - an organization or company that produces an ACH file and delivers it to an ODFI for introduction into the ACH network. They would not be a 3rd Party Sender or 3rd Party Service Provider.

A third party sender is one that you allow to deliver files directly into the ACH network, like the way some smaller institutions allow a payroll company to originate files to the FRB on their behalf. You can't run these files through your risk or quality management programs so it's a great risk for you to not ensure they have a strong legal agreement with you and that they're audited to ensure they adhear to the rules. Meanwhile, a third party service provider is one that stands between you and your Originator or Receiver in processing files on their behalf.

The 2005 ACH rules book is pretty clear on these definitions and I'd recommend that you look at the ACH Network Primer in that book, as well as the rules that relate to the third party senders and providers. Your Regional ACH Association should have a help desk expert you could call if you have need of further clarification.

This is according to the NACHA Publication, "Third Party Senders and the ACH Network", Third Party Senders are a subset of Third Party Service Providers (TPSP). In other words, a Third Party Sender is a always a TPSP that acts on behalf of an Originator, but a TPSP does always act as a Third Party Sender. A TPSP is considered to be a Third Party Sender ONLY when it acts as an intermediary between the ODFI and the Originator and there is NO contractual agreement between the Originator and the ODFI. When an Originator uses the services of a TPSP but has also executed a contractual agreement directly with the ODFI, the TPSP is NOT considered to be a Third Party Sender and is not subject to the rule provisions governing Third Party Senders.

In short, it all depeneds if there is an agreement in place between the ODFI and Originator.

Thanks all for your comments, but I am still confused. I have read the NACHA publication and still cannot apply to our situation. We have a commercial customer who is sending us a file of payroll credits for the employees of his customers. We then originate this file into the ACH system. Is our customer considered a third party sender?

Does anyone have any ACH Audit procedures they would be willing to share, or point me in the direction of where some are available? Thanks.

Since you are required to comply with the annual NACHA audit requirements, I would purchase the specific audit program directly from them (it's on their website).

Try the "ACH 2005 Audit Workbook". It can be purchased from Mid-America Payment Exchange. www.mpx.org. I have used it for several years.