Mitzi BakerMidland County Treasurer

New Treasurers’ Orientation

December 2020

Where is the law on establishing a Depository?

Approaching the RFP process Building a timeline Collecting and providing information The evaluation process Approval process Securities for funds held in depository

Texas Local Government Code

Chapter 116 for County Public Funds

Texas Local Government Code

Chapter 117 for Trust Funds and Registry Funds

LENGTH OF CONTRACT §116.021Contract 2 years w/extension of 2 yearsContract 4 years w/extension of 2 yearsNegotiate terms of extension by

Commissioners Court and approved by an authorized representative of the bankCommissioners Court must approve…Who will negotiate? The Treasurer?You must give yourself time to go out for a

new bid if negotiation fails. 116.021

BUILDING A TIMELINEEstablish when the new contract must begin and work backwardsCommissioners Court authorizes the

advertisement for bids in regular court sessionInformation is collected on all bank

balances including registry accountsBid packets are emailed or mailed to

prospective banks…and possibly at the same time

BUILDING A TIMELINE continued….….Notice is placed in the newspaper that

the Commissioners Court intends to receive applications from which to select a depository bank. It must be ran once each week for at least 20 days BEFORE the date to submit an application. A notice shall also be posted at the courthouse door of the county. 116.022

BUILDING A TIMELINE continued….Establish a deadline to accept questions

from bidders.Establish when sealed bid packets are

due. (116.023 states no later than 60th

day before expiration of existing depository contract)Giving time to evaluate, set approval

date in regular court session. 116.024

BUILDING A TIMELINE continued….Establish 15 day deadline – Bond must

be filed and securities provided by bank depository 116.024(e)Give yourself time to get signature cards

done and checks and deposit slips orderedNew contract begins with depository

JANUARY 23, 2017 - C. COURT AUTHORIZES ADVERTISING FEBRUARY 17, 2017 – BANK BALANCES DUE FROM DEPTS. MARCH 3, 2017 – PACKETS ARE MAILED AND 1ST NOTICE MARCH 10, 2017 – 2ND NOTICE MARCH 17, 2017 - 3RD NOTICE MARCH 20, 2017 – QUESTIONS DUE FROM BIDDERS MARCH 31, 2017 – BID PACKETS DUE APRIL 10, 2017 – APPROVAL OF DEPOSITORY IN C. COURT APRIL 25, 2017 – 15 DAY DEADLINE FOR SECURITIES JUNE 1, 2017 – NEW CONTRACT BEGINS WITH DEPOSITORY

INTERNAL TEAM OPTIONAL

TreasurerAuditorPurchasing

Agent/ManagerAttorney

ConsultantTax AssessorCounty ClerkDistrict ClerkAny office that is

legally allowed to have a bank account

GENERAL REQUIREMENTS OF THE BID Define exactly what you expect to receive from the

bidder including the Good Faith Guarantee and Resolution from the Board of Directors

Define exactly when and where you expect to receive the bid

Define how they will be evaluated Define the laws that will govern the contract

Identify the PFIA, the PFCA and what you accept as collateral in your investment policy

Give them the general specifications of the contract Define the security and collateral requirements

SERVICE REQUIREMENTS Define who you require as a contact person/persons daily Define services you require and request for costsOnline ServicesAnalysis ReportStatementsPayroll Direct DepositACH Transactions/Wire TransfersPositive PayDisbursements/Deposits/OverdraftsComputerized Output

SERVICE REQUIREMENTS continued…..Expense Allowance incurred due to changing depository

banksATM ServicesOther services ie: locked bags, checks & deposit slips,

endorsement stamps, coin wrappers, currency strapsAsk the bank for other unspecified services that they may

provideAsk for their agreement with audit procedures and bank

confirmationsAsk for no minimum balance requirements

(Trust/Registry Funds)

SERVICE REQUIREMENTS continued…..

List your Structure of Accounts:# and current $ of Non-Interest Bearing Checking# and current $ of Interest Bearing Checking# and current $ of Interest Bearing Savings# and current $ of CD’s for Trust/Registry Funds# and current $ of Money Market or CD accounts at current

depository

SERVICE REQUIREMENTS continued…..

Optional: Provide a bid worksheet whereby using your current balances and number of transactions (from a current bank analysis sheet) they provide THEIR costs for those services. This is an excellent tool for the evaluation process.

RECOMMENDED ITEMS YOU MAY REQUIRE BE INCLUDED

Amount of bank’s paid-up capital stock and surplusList of referencesQuarterly Uniform Bank Performance ReportsCall ReportsFinancial ReportsSamples of analysis reports and statements

OK, THE RFP IS READY TO GET OUT THERE!

Consider a “pre-RFP” meeting with potential biddersRFP Format: PDF vs DOC and EXCELOnce the RFP is released, contact with potential

bidders is restrictedIf you get a question, get it in writing, then your

response is to ALL bidders

In-house or ConsultantCriteria should be for the “best” provider not

necessarily the “cheapest” People do business with PEOPLE, not services,

fee schedules or financial statements If unsure of a bidder’s response, submit

follow-up question(s) for clarificationOptional: Consider inviting top candidates in

for presentations

BANK #1 BANK #2 BANK #3

Interest-Bearing Checking Accnts

NOW rate + .25%/Floor of .70%

.50% and tied to Fed Fund Target Rate changes

Prior months avg T-Bill less 35 bps

Money Market Savings Accnts current deposit sheet rates

.60% and tied to Fed Fund Target Rate changes

Prior months avg T-Bill less 25 bps

Interest Bearing Savings Accnts current deposit sheet rates

.50% and tied to Fed Fund Target Rate changes The bank's published rate.

EARNINGS CREDIT Current rate + .25% 0.75% T-Bill + 25 bpsLess a Federal ReserveRequirement of 10%

Locked or Sealable bags No Charge 20 free then $14 No chargeOne Safe Deposit Box No Charge

Laser Checks Bank Retail Initial Free then Bank Retail1st $3500 free, then Bank

Retail

Checks (in books or binders) Bank Retail Initial Free then Bank Retail2nd $3500 free, then Bank

Retail

Deposit Slips No Charge Initial Free then Bank Retail3rd $3500 free, then Bank

RetailEndorsement Stamps No Charge Initial Free then $15 No ChargeCoin Wrappers No Charge No Charge Bank costCurrency Straps No Charge No Charge Bank costMASTER ACCOUNT MAINT FEE $10 per account $9.45 per account $20.00 per accountPAYROLL DIRECT DEPOSIT YES YES YES

ACH TRANSACTIONS $20 mo + $0.08 per item $20.25 mo + $0.0675 per item $15 mo + $0.15 per item

WIRE TRANSFERS $20 ea. $11.25 ea. $25 ea.

POSITIVE PAY$125 per account/no item chg $33.75 per + $0.036 per item

$40 per account/no item chg

REMOTE DEPOSIT SERVICE $100 + $0.10 per item $21.15 + $0.0675 per item$200 scanner/$0.07 per item

STOP PAY $20 $6.75 $20 ETC. ETC. ETC………….

BANK #1 BANK #2 BANK #3 NOTES

SAMPLE BALANCE SUMMARY FROM LEDGER BALANCES GIVEN

AVG LEDGER BALANCE $13,997,602.00 $13,997,602.00 $13,997,602.00CD's excludedLESS AVG UNCOLL FUNDS

(FLOAT) -$213,761.00 -$213,761.00 -$213,761.00AVG COLLECTED BALANCE $13,783,841.00 $13,783,841.00 $13,783,841.00

AVG NEGATIVE COLL BALANCE $0.00 $0.00 $0.00AVG COLLECTED BALANCE $13,783,841.00 $13,783,841.00 $13,783,841.00

LESS INTEREST BEARING BALANCE -$11,053,149.00

Int bearing bal NOT excluded

AVG COLLECED BALANCE $13,783,841.00 $2,730,692.00 $13,783,841.00

LESS RESERVES REQUIRED (10%) $1,378,384.07 $0.00 $0.00

AVERAGE AVAILABLE BALANCE $12,405,456.63 $2,730,692.00 $13,783,841.00

LESS BALANCE REQUIRED $0.00 $0.00 $0.00No balance required

NET AVAILABLE BALANCE $12,405,456.63 $2,730,692.00 $13,783,841.00

EARNINGS CREDIT ALLOWANCE(0.5125%) $5,399.77

(.75%) $1,739.42

(.77%) $9,014.25 January 31, 2017

LESS TOTAL SERVICE CHARGES -$2,576.38 -$7,277.83 -$9,154.08net of proposed discount

EXCESS OR DEFICIT $2,823.39 -$5,538.41 -$139.83

BANK #1 BANK #2 Bank #3

Banks financial strength 4 4 4

Experience/ability to meet servicerequirements

4 4 3

Responsiveness to County’s needs and initiatives

4 4 4

Value in terms of service and cost 4 2 4

Net rate of return on county funds 4 4 2

Electronic services offered and demonstrated

4 4 4

Any additional bank services offered 4 4 4

Convenience (ie. Location) 4 4 4

Cost of switching banks 4 3 3

TOTALS 36 33 32

Commissioners Court must have entered into the minutes of the Court all applications

They must consider all applications Select the qualified applicant(s) that offer the

most favorable terms and conditions Immediately return the certified checks for

good-faith guarantee to the rejected applicants

Immediately notify the selected applicant, and within 15 days, the selected applicant must file a bond or other security as approved by the Commissioners Court. §116.024(e)

Return the GFG check to the successful applicant when they have executed and filed a bond or other security that is approved by the Commissioners Court

Within 15 days after the new bank has been selected, the bank must qualify as the depository by providing security for the funds to be deposited by the county by……Personal bond; surety bond; bonds, notes, and other

securities; first mortgages on real property; real property; CD’s, or a combination of these methods, as provided by this subchapter; or

Investment securities or interests in them as provided by law

IN THE NEXT CLASS, WE WILL FURTHER DISCUSS SECURITIES/COLLATERAL AND SAFEKEEPING SERVICES

Use this opportunity to fully understand the banking system for your County.You’re the Treasurer!  Be the “Go To Person” for banking in your County

Mitzi BakerMidland County Treasurer

New Treasurers’ Orientation

December 2020

Review Collateralization Rules and Regulations and Where to Find Them

Outline Collateral DocumentationOutline Required DocumentsHighlight Security Settlement ProceduresDiscuss Safekeeping Services

Public Funds Investment Act – (PFIA) – CHAPTER 2256 TEXAS GOVERNMENT CODE

Public Funds Collateral Act – (PFCA) – CHAPTER 2257 TEXAS GOVERNMENT CODE

Chapters 116 and 117 – TEXAS LOCAL GOVERNMENT CODE

(a) (4)…obligations fully guaranteed or insured by the FDIC or by the explicit full faith and credit of the United States

(a) (7)…guaranteed or insured by the FDIC and NCUSIF…

(a) (8)…or if deposits are invested through… (A) (i) Broker – main or branch office in this state (A) (ii) Depository – main or branch office in this state (B) Spreads to insured depositories (C) Full amount of Principal and interest insured by the US (D) Appoints Custodian

(a) Certificates of Deposit Guaranteed or insured by the FDIC or NCUSIF Collateralized by obligations described by 2256.009 Follows PFCA

(b) (1) Additional Certificates of Deposit (A) Broker – main or branch office in Texas (B) Depository – main or branch office in Texas

(b) (2) Spreads to Insured Depositories (b) (3) Fully Insured – Principal and accrued interest

of each of the CD’S is insured by the US or an instrumentality of the US

(b) (4) Appoints Custodian

2257.021 Collateral Required-Public Funds SHALL be secured in the manner required

2257.022 Amount of Collateral (a) (1)(2) …not less than principal and interest, LESS the amount

FDIC insures the deposit (c) The value of a surety bond is its face value (d) The value of an investment security is its market value

BEST PRACTICE IS NOT LESS THAN 102% OF DEPOSITS. YOU WANT TO COVER YOURSELF FOR UNFORESEEN LARGE DEPOSITS.

2257.023 Collateral Policy (written may include) “Security” of the institution that holds an investment security Substitution or release of an investment security Method by which an investment security used to secure a

deposit of public funds is valued (Market Value) 2257.024 Contract for Securing ◦ (a) A public entity may contract with a bank that has its

main office or a branch office in this state to secure a deposit of public funds. Possession of the collateral Substitution or release of an investment security Ownership of the securities of the bank used to secure Method by which an investment security used to secure a

deposit of public funds is valued (Market Value)

2257.025 Records of Depository

2257.026 Change in Amount or Activity of Deposits of Public Funds

2257.041 Deposit of Securities with Custodian State or National Bank Texas Treasury Safekeeping Trust Company Federal Reserve Bank Federal Home Loan Bank Comptroller Designated

2257.045 Receipt of Security by Custodian◦ Shall immediately identify on its books the pledge of the

security to the public entity◦ Issue and deliver a receipt either to the entity or to the

depository 2257.046 Books and Records of Custodian;

Inspection ◦ Maintain a separate, accurate, and complete record for each

pledged security◦ Provide a complete current list of all securities when the

entity asks for it◦ During audit, they SHALL examine and verify pledged

investment securities and records maintained

Commissioners Court and Bank must sign a Collateral Agreement

Bank Board or Committee Minutes giving authority to make the Agreement

LOC or Custodial Agreement with Safekeeping Entity

Collateral Receipt Check Investment Policy Collateral

Language

Delivery Versus Payment at Third Party Safest Way Required by PFIA Check Independence

38

Public Entity Safekeeping Bank

Broker/Dealer Clearing Bank

Safekeeping Agreement

Commit to Transaction

Clearing Agreement

Securities Transfer –Federal Reserve or Depository Trust

Company

Funds Released On Acceptance