Minnesota Legal Compliance Audit Guide for Local Government - Section 1

Minnesota Office Of The State Auditor

Description

LEGAL COMPLIANCE MANUALDEPOSITORIES OF PUBLIC FUNDSANDPUBLIC INVESTMENTSIntroductionA government entity that receives and disburses funds may deposit the funds only infinancial institutions designated by its governing body. The governing body mayauthorize its treasurer or chief financial officer to make such designations. Thegovernment entity may deposit funds in amounts that are federally insured or, if itdeposits more than this amount, it must either have the depository furnish a bond orassign collateral to protect the excess deposit."Government entity" for the purpose of this section means:- a county;*- a city;*- a town;- a school district;- a hospital district;- a public authority;- a public corporation;- a public commission;- a special district; - a political subdivision; or- an American Indian tribal government entity located within a reservation.Minn. Stat. § 118A.01, subd. 2."Public funds" for the purpose of this section means all general, special, permanent,trust, or other funds, regardless of source or purpose, held or administered by agovernment entity, unless otherwise restricted. Minn. Stat. § 118A.01, subd. 4.If the audited government al ent ity is one of those list ed and it has the power to receiveand disburse public funds, then complete this section to determine if the governmententity has properly invested its funds or deposited its funds in a properly designateddepository with appropriate collateral or bond. In ...

Informations

• Publié par: Armyo
• Nombre de lectures: 62
• Langue: English

Extrait

Introduct ion

LEGAL COMPLIANCE MANUAL

DEPOSITORIES OF PUBLIC FUNDS AND PUBLIC INVESTMENTS

A government ent it y t hat receives and disburses funds may deposit t he f unds only in f inancial instit ut ions designat ed by it s governing body . The governing body may aut horize it s treasurer or chief f inancial of f icer to make such designat ions. The government entit y may deposit f unds in amount s that are f ederally insured or, if it deposits more t han t his amount , it must eit her hav e t he depository f urnish a bond or assign collat eral t o protect t he excess deposit.

" Government entit y" f or t he purpose of t his sect ion means:

          

a county;* a city;* a t ow n; a school dist rict; a hospital dist rict; a public authorit y; a public corporat ion; a public commission; a special district ; a polit ical subdivision; or an American Indian t ribal government ent it y located w it hin a reservat ion.

Minn. Stat. § 118 A.01 , subd. 2.

" Public f unds" f or t he purpose of t his sect ion means all general, special, permanent , t rust , or other funds, regardless of source or purpose, held or administ ered by a government ent it y, unless otherw ise restrict ed. M inn. St at. § 118A.0 1, subd. 4.

If t he audit ed gov ernment al ent it y is one of t hose list ed and it has the pow er to receive and disburse public f unds, t hen complet e t his sect ion t o det ermine if t he government ent it y has properly invest ed it s f unds or deposit ed it s f unds in a properly designat ed depository w it h appropriate collateral or bond.

In addit ion, t he deposit ory and collat eral requirement s of Minn. St at . §§ 356A.06, subd. 8a, and 1 18A.03 apply t o f ire relief associat ions. Part s I and II should be complet ed for f ire relief associat ions.

* Not e:

11/03

A “ cit y w it h a population in excess of 200,000 or a count y t hat cont ains a cit y of t hat size” (current ly t he t w o largest cit ies and count ies) has addit ional invest ment authorit y. See Minn. Stat. § 118 A.07 .

11

d .

B.

a.

b .

c .

1 .

a.

a n in s u re d c re d it u n i o n ; o r

1 2

Is ea c h d ep o s it o r y o n e o f t h e f o l lo w i n g :

In t h e c a se o f a re li ef a s so c i at i o n :

§ 1 1 8 A . 0 3

A .

1 1 / 0 3

b .

c .

d .

e.

W ork pap er Ref e ren c e

2 .

Has eac h d epo sit ory f or asset s, n ot held by t he relief assoc iat ion ’ s cu st od ian b ank , b een d esign at ed b y t he relief a ss o c ia t i o n ’ s g o v e rn i n g bo a rd ?

B.

§ 3 5 6 A . 0 6 , su bd . 8 a

N o

a n in s u re d t h r if t i n st i t u t i o n ?

Part I. Design at ion of Deposit ory

M inn . St at . S ec t i o n

Part II. Insuring or Sec uring D ep osit s

§ 1 1 8 A . 0 1 , s ub d . 3

2 .

Re v ie w t h e f o l l o w i n g g en e ra l p r in c i p le s o f F DIC c o v e ra g e a n d c o m p l e t e t h e sp r ea d sh e et i n t h i s se c t i o n t o d e t e rm i n e t h e a m o u n t o f t h e g o v e rn m e n t e n t i t y ’ s f u n d s t h a t a re n o t i n su r ed a n d t h u s n e ed t o b e ei t h e r b o n d ed o r c o ll at e r al iz ed . D e po s it s h e ld b y cr edit un ion s are co v ered b y separat e dep osit insu ranc e rules pro m ulg at ed b y t he N at ion al Credit Un ion A dm inist rat ion (NCU A ).

a n at i o n al b an k ;

1 .

an in su red st a t e ban k ;

If a g o v e rn m e n t e n t i t y d e si re s t o d e p o s it a n a m o u n t i n ex c e s s o f d e p o si t i n su r an c e , it m u s t o b t a i n a b o n d o r c o l la t e ra l w h i c h , w h e n c o m p u t e d a t i t s m a rk e t v a l u e, s h al l b e at l e as t t e n p e rc e n t m ore t han t he am ou nt of t he ex cess d epo sit . If irrev oc able st and by let t ers of cr edit f rom Federal Hom e Loan Bank s are used a s c o l la t e ra l, t h e a m o u n t m u s t b e eq u a l t o t h e am o u n t o f t h e ex c ess d ep osit p lu s in t erest a t t h e c lo se o f t h e d ay .

a sa v in g s as so c i at i o n ;

an in du st r ial lo an an d t h rif t c o m p an y ?

H a s e ac h d e p o si t o r y o f p u b l ic f u n d s b ee n d es ig n a t e d b y t h e g o v e r nm e n t e n t i t y ’ s g o v er n in g b o d y , o r b y i t s t r ea su r er o r ch ief f inan cial o f f icer , if t he g ov ernin g b od y has au t ho rized t h e m t o m a k e su c h a d es ig n a t i o n ?

Is ea c h d ep o s it o r y o n e o f t h e f o l lo w i n g :

Yes

A .

§ 1 1 8 A . 0 2 , s ub d . 1

In t h e c ase o f a g ov ern m en t en t it y :

a c re d it u n i o n ; o r

DEPOSITORIES OF PUBLIC FUND S AN D PU BLIC IN V EST M ENT S

a t r ust c o m p an y ;

a c o m m e rc i al b an k ;

M inn . St at . S ec t i o n

1 1 / 0 3

C.

DEPOSITORIES OF PUBLIC FUND S AN D PU BLIC IN V EST M ENT S

Part II. Insuring or Securing Deposits (Continued)

General Principles of FDIC coverage:

1 .

2 .

3 .

4 .

5 .

6 .

7 .

D e p os it s a re in s u re d o n ly i f t h e d ep o s it o r y i s a m e m b e r o f FDIC.

D e p os it s i n o n e d e p o si t o r y a re in s u re d se p ar at e l y f r o m d e p o si t s in a n o t h e r d e p o si t o r y w h i c h is n o t a br an c h o f t h e f irst on e. H ow ev er, a d epo sit ory and all of t he b ranc hes assoc iat ed w it h it are t reat ed as a sing le co m bin ed depo sito ry, and t he f und s deposit ed in t he branc hes are agg regat ed f or p urp oses o f insu ranc e co v erage.

T h e ag g r eg a t e o f a g o v er n m e n t e n t i t y ’ s in t e r es t b e ar in g acc ou nt s, i. e., sav ing s acc ou nt s, N OW acc ou nt s, an d t im e d e p o si t s (C D ’ s ) w i t h t h e s am e d e p os it o r y a r e i n su r ed u p t o a t o t a l o f $ 1 0 0 , 0 0 0 . T h e ag greg at e of a g ov ern m en t en t it y ’ s n o n  in t e r es t b e ar in g a c c o u n t s , i. e . , n o n i n t e re st c h e c k in g acc oun t s, are insured up t o a t ot al of $ 1 0 0 ,0 0 0 and are insu red sep arat ely f rom t he g ov ernm ent ent it y ’ s int erest  b e ar in g d e po s it s . T h i s s ep a ra t e $ 1 0 0 , 0 0 0 c o v e r ag e f o r non int erest bearing ac co unt s only applies if t he depo sito ry is in t h e sam e st a t e as t h e g ov ern m en t en t it y .

A p u b l ic a u t h o r it y , p u b l ic c o r p o r at i o n , p u b l ic c o m m i s si o n , o r spec ial dist ric t receiv es separat e insu ranc e co v erage f rom it s p a re n t g o v e rn m e n t e n t i t y o n l y if i t w a s c r ea t e d ex p r e ss ly b y st a t e st a t u t e an d f u n ds h av e b een allo c at e d f o r it s ex c lu siv e use an d c on t rol. Sub ord inat e or n on aut on om ou s div ision s, ag en c ies , o r b o ar ds d o n ot r ec ei v e sep ar at e in su ran c e co v erage.

Fu n d s h el d f o r a s p ec i al p u rp o s e a n d r eq u i re d b y la w t o b e p a id t o b o n d h o l d er s o r b en e f i c ia ri es su c h a s m e m b e r s o f p e n si o n f u n d s o r re li ef a s so c i at i o n s ar e c o v e r ed u p t o $ 1 0 0 , 0 0 0 p e r b o n d h o ld e r o r b en e f i c ia ry w h e t h e r t h e benef icial int erest is vest ed or no t . Th e fid uc iary nat ure m u s t b e in d ic at e d on t h e ac c o u n t n am e in t h e b an k ’ s rec ord s.

If m o r e t h a n o n e p e rs o n is le g al o r o f f i c ia l c u s t o d i an o f f u n d s f or a g ov ernm ent ent it y , eac h c ust od ian is sep arat ely insu red up t o $ 1 0 0 ,0 0 0 . A lso, if t he sam e perso n is t he c ust od ian o f f u n d s f o r t w o s ep a ra t e g o v er n m e n t e n t i t i es , t h e f u n d s f o r t h e t w o g o v e rn m e n t e n t i t i e s a re se p ar at e l y in s u re d .

M on ey s held by a go v ernm ent ent it y in t rust are insu red sep arat e ly f r om o t h er g ov ern m en t en t it y f u n d s o nly if t h e t r u s t i s a n ir re v o c a b le ex p r e ss t r u st a n d t h e a c c o u n t r ec o r d s ind icat e t he n am e of bo t h t he set t lor an d t he t rust ee.

Has t he sp read sh eet been co m plet ed? (See pag e 1 1 0 )

1 3

Yes

N o

W ork pap er Ref e ren c e

b .

a.

1 .

§ 1 1 8 A . 0 3 , s ub d . 1

A .

c .

D i d t h e a ss ig n m e n t p r o v i d e t h a t , u p o n d ef a u l t , t h e d e p o si t o r y s h al l r el ea se t h e c o ll at e r al p le d g ed t o t h e g o v e r nm e n t e n t i t y o n d em a n d ?

b .

N o

W ork pap er Ref e ren c e

§ 1 1 8 A . 0 3 , s ub d . 7

2 .

in an acc ou nt at a t rust dep art m ent of a co m m erc ial b a n k o r o t h e r f i n an c i al in s t i t u t i o n n ot o w n e d o r c o nt r olled by t h e d ep osit o ry ?

W a s t h e c o l la t e ra l p l ac e d f o r sa f e k ee p in g :

Part III. T he Bond and Collateral

1 4

1 1 / 0 3

3 .

W as t he c o lla t eral a ssi g n m en t in w ri t in g ?

§ 1 1 8 A . 0 3 , s ub d . 4

4 .

5 .

a.

D i d t h e g o v e rn m e n t e n t i t y a p p ro v e o f t h e se le c t i o n o f t h e saf e keep in g en t it y ?

an irrev o c ab le st a nd by let t e r o f c red it i ssu ed by a Federal Hom e Loan Bank acc om pan ied b y w rit t en e v id e n c e t h a t t h e Fe d er al H om e L o an Ba n k ’ s p u b li c d eb t i s r at e d “ A A ” o r b et t e r b y M o o d y ’ s o r S t a n d ar d an d Po o r ’ s ; o r

§ 1 1 8 A . 0 3 , s ub d . 7

i n a r es t r ic t e d ac c o u n t a t t h e Fe d er al Re se rv e Ba n k ; o r

If a b o n d w a s f u r n i sh e d b y t h e d ep o s it o r y t o t h e g o v e rn m e n t e n t i t y , a n s w e r t h e f o l l o w i n g q ue st i o n :

DEPOSITORIES OF PUBLIC FUND S AN D PU BLIC IN V EST M ENT S

If t h e d ep osit o ry assig ned c ollat e ral t o t h e g ov ern m en t en t it y , answ er t he f ollo w ing qu est ion s:

U. S. g ov ernm ent t reasury bills, no t es, o r bo nd s;

issues o f a U. S. g ov ernm ent agen cy or in st rum ent s t hat ar e q u o t ed b y a r ec o g n ized in d u st r y q u o t at i o n s er v ic e av ailab le t o t h e g ov ern m en t en t it y ;

d . a re v en u e o bl ig a t i o n o f a st a t e o r lo c a l g o v e rn m e n t , w it h t axing pow ers, rated “ A A ” or bet t er;  e. u nrat ed g eneral o blig at ion secu rit ies of a loc al  gov ernm ent w it h t ax ing po w ers pled ged as co llat eral  ag a in s t f u n d s d e p o si t e d b y t h a t s am e l o c al g o v er n m e n t  en t it y ;

W a s t h e c o l la t e ra l o n e o f t h e f o l lo w i n g :

a gen eral ob ligat ion of a st at e or lo cal g ov ernm ent , w it h t axing pow ers, rated “ A ” or bet t er;

M inn . St at . S ec t i o n

1 .

B.

Cert if icat es of Depo sit insured by t he FDIC?

W a s t h e b o n d ex e c u t e d b y a c o rp o r at e s u re t y c o m p a n y aut ho rized t o d o b usin ess in t he st at e?

f .

g .

§ 1 1 8 A . 0 3 , s ub d . 2

Yes

Part IV . Public Investm ents

Yes

1 .

W ere all repu rc hase ag reem ent s and rev erse repu rc hase agreem ent s on ly e n t e re d in t o w i t h :

Part III. The Bond and Collateral (Continued)

W as t he am ou nt of ex cess d epo sit less t han t he ag greg at e o f t h e b o nd ?

DEPOSITORIES OF PUBLIC FUND S AN D PU BLIC IN V EST M ENT S

W a s t h e assig nm en t an of f i c ial rec o rd of t h e d ep osit o ry ?

C o ll at e r al p le d g ed m u s t e q u al at l e as t t e n p e rc e n t m o r e t h a n t h e unin sured and u nbo nded amo unt on d eposit . Th e deposit ory m ay , at it s disc ret ion , f urn ish b ot h a b on d an d c ollat eral a g g re g at i n g t h e r eq u i re d am o u n t .

CUSIP num bers o r ot her d ist ing uish ing m ark s?

§ 1 1 8 A . 0 5 , s ub d . 2

A .

2 .

§ 1 1 8 A . 0 6

B.

Is t he g ov ernm ent ent it y ’ s ow nersh ip o f all secu rit ies in w hic h t he f un d is in v est ed ev iden ced by w rit t en ac k no w led gm en t s id en t if y i ng t h e sec u rit i es b y :

a n y o t h e r f i n a n c ia l i n st i t u t i o n w h i c h is a m e m b e r o f t h e Federal Reserv e Sy st em a n d w h o s e c o m b i n e d c ap i t a l a n d s ur pl us eq u al s o r ex c e ed s $ 1 0 , 0 0 0 , 0 0 0 ;

a p ri m a ry r e po r t i n g d ea le r i n Un i t e d St a t e s g o v e rn m e n t s ec u r it i e s t o t h e Fe d er al Re se rv e Ba n k o f N e w Y o r k ; o r

a securit ies brokerdealer licensed pursu ant t o c hapt er 80 A , o r an a f f i l ia t e o f i t , r eg u l at e d b y t h e Se c u ri t i es an d Ex c h a n g e C o m m i s si o n an d m a i nt a i n in g a c o m b i n e d c ap i t a l a n d s u rp l u s o f $ 4 0 , 0 0 0 , 0 0 0 o r m o r e, e x c l u si v e o f s u b o r d in a t e d d eb t ?

C.

W as t he am ou nt of co llat eral at least t en p erc ent m ore t han t he u nin sured am ou nt on dep osit ?

int erest rat es?

§ 1 1 8 A . 0 3 , s ub d . 3

2 .

1 .

3 .

b .

a.

4 .

d .

c .

1 .

W a s t h e w rit t e n assig nm en t ap pro v ed by t h e d ep osit o ry ’ s bo ard o f direc t ors o r loan co m m it t ee?

a f inan cial in st it ut ion qu alif ied as a dep osit ory of pu blic f un ds;

1 5

1 .

2 .

[1 2 U. S.C. § 1 8 2 3 (e)]

N o

W ork pap er Ref e ren c e

1 1 / 0 3

A r e a ll in v e st m e n t s h el d in s af e k e ep i n g ? If s o :

A ssign m ent [Federal St at ut ory Requ irem ent s]

D .

M inn . St at . S ec t i o n

t he n am es of t he issu ers?

m at urit y dat es?

1 .

a.

D .

W ere all gu arant eed in v est m ent co nt rac t s or ag reem ent s on ly ent ered int o w it h an issuer or guarant or:

1 .

C.

2 .

2 .

r eg is t er ed u n der t h e Fed er al In v es t m e nt C o m p an y A c t o f 1 9 4 0 ;

D i d t h e g o v e rn m e n t e n t i t y o n l y in v e st i n s h ar es o f a M i n n es o t a join t po w ers inv est m ent t rust w ho se inv est m ent s w ere rest ric t ed t o s ec u ri t ies d es c ri bed in M i n n . St a t . §§ 1 1 8 A . 0 4 an d 1 1 8 A . 0 5 ?

on ly t o m eet sho rt t erm cash need s and no t t o g enerat e cash f or in v est m ent s?

w ho se cred it qu alit y f or lo ng t erm and sho rt t erm un secu red d eb t w as rat e d in on e o f t h e h ig hest t w o c at e go ries b y a n at i o n al ly r ec o g n ized rat i n g ag en c y ?

1 6

Did all gu arant eed in v est m ent co nt rac t s giv e t he p ub lic en t it y w it hd raw al righ t s in t he ev ent t he issu er’ s or g uaran t or’ s cr edit q u a li t y w a s d o w n g r ad e d b el o w “ A ” ?

w ho se shares w ere regist ered u nd er t he Federal S ec u r it i e s A c t o f 1 9 3 3 ;

N o

W ork pap er Ref e ren c e

W ere t he sec urit ies sold or p ledg ed u nd er t he rep urc hase ag reem e n t o r r ev e rs e r ep u rc h as e ag reem e n t p er m is si bl e d ir ec t inv est m ent s un der M inn . St at . § 1 1 8 A .0 4 (see L and M belo w )?

§ 1 1 8 A . 0 5 , s ub d . 4

I.

H .

1 1 / 0 3

J .

G.

§ 1 1 8 A . 0 5 , s ub d . 5

a f i n an c i al in s t i t u t i o n q ua li f i ed a s a d ep o s it o r y h a v i n g a p r in c i p al ex e c u t i v e o f f i c e i n M i n n es o t a ; o r

1 .

2 .

F.

t h a t w a s a U. S . c o m m e rc i al b an k , a d o m e st i c b r an c h o f a f oreig n b ank , a U .S. insu ranc e co m pan y , o r it s Canad ian s ub si di ar y ; a n d

Yes

DEPOSITORIES OF PUBLIC FUND S AN D PU BLIC IN V EST M ENT S

a f inan cial in st it ut ion w hic h is a m em ber o f t he Federal Re se rv e S y st e m a n d w h o s e c o m b i n e d c ap i t a l a n d s u rp l u s equ als or ex ceed s $ 1 0 ,0 0 0 ,0 0 0 , an d w hic h h as a prin cip al ex ecu t iv e of f ice in M inn esot a?

Part IV . Public Investm ents (Cont inued)

D i d t h e c u s t o d i an o r en t i t y o p e ra t i n g t h e se c u ri t i es le n d in g pro gram on ly ent er int o sec urit ies lend ing t ransac t ion s w it h t ho se ent it ies iden t if ied in Part IV .A . (ab ov e)?

E.

b .

§ 1 1 8 A . 0 5 , s ub d . 3

W e re al l r ev e r se re p u rc h a se ag r ee m e n t s o n ly e n t e r ed i n t o :

1 .

f o r a p er io d o f 9 0 d a y s o r l es s, a n d

M inn . St at . S ec t i o n

§ 1 1 8 A . 0 5 , s ub d . 2

M u t u a l Fu n d s  D i d t h e g o v e rn m e n t e n t i t y o n l y in v e st i n s h ar es o f an inv estm ent co m pany t hat m et t he crit eria in eith er 1 o r 2 b e lo w :

W e re al l s ec u r it i e s l en d i n g a g re em e n t s ( in c l u d in g c u s t o d y a g re em e n t s ) en t e r ed i n t o o n ly w i t h :