9.1 Banking
(Last Modified on September 4, 2019)
The following sections of the Official Code of Georgia (OCGA) provide the primary laws governing actions of the State Depository Board, including selection of state depositories, protection of state funds on deposit, and management of banking relationships:
- OCGA §§ 50-17-50 - Creation of the State Depository Board; membership; quorum; assignment for administrative purposes
- OCGA §§ 50-17-51 – Meeting dates of Board, protection of state funds on deposit, prescribing cash management policies and procedures
- OCGA §§ 50-17-52 - Contracts for interest on deposits; authority to remove deposits
- OCGA §§ 50-17-53 – Authority to determine amounts to be deposited; deposit security required
- OCGA §§ 50-17-54 – Monitoring financial condition of depositories; action in case of insolvency of depository
- OCGA §§ 50-17-58 – Execution of bond by depositories
- OCGA §§ 50-17-59 – Deposit of securities in lieu of bond
- OCGA §§ 50-17-63 – Deposit of demand funds; investment of funds; reports; remittance of interest earned; motor fuel tax revenues
Pursuant to OCGA §§ 50-17-50, the State Depository Board (SDB) was created as the standard setting Board for State banking policy. The Office of the State Treasurer (OST) oversees and manages the policies established by the SDB.
Banking guidelines for USG institutions are established by the Board of Regents in accordance with SDB and OST banking policies (OST Bank Policy).
9.1.1 Treasurer’s Responsibilities
(Last Modified on June 13, 2019)
Section 7.5.1 of the BOR Policy Manual provides that the USG Chief Fiscal Officer (BOR Treasurer) is responsible for reviewing and approving all banking services for each institution. The BOR Treasurer has final approval authority for establishing all accounts and expansion of banking services.
The BOR Treasurer is also responsible for appointing a person or persons at each USG institution with authority to sign checks drawn on banks where funds of the respective institutions are deposited. Persons so appointed shall be authorized to sign any documents that may be required by the banks concerned.
When new bank accounts are proposed, the institution, following BOR procurement policy, will solicit bids for banking services. The President of the institution, or designee, shall review the bids. Based on competitive bid results, the President shall request the approval of the BOR Treasurer for the bank(s) desired.
OST will also review the banking services requested, focusing on pricing and solvency, and offer recommendations. Once the review of the banking service request is completed, the BOR Treasurer will make the final determination as to which provider is selected.
Once the bank is selected, the BOR Treasurer must be provided with the following information:
- New bank name (if applicable)
- The bank’s ABA (Federal Reserve routing) number
- The institution’s bank account number
- The name and number of the Federal Reserve Bank in Atlanta with whom the local bank corresponds
- The name or names of the proposed signatories for the account
This information should reach the BOR Treasurer’s Office at least ninety (90) days before the effective date of the proposed change.
Once the bank is selected, the BOR Treasurer will notify OST and verify that such bank is a qualified state depository. If a new bank is selected, upon approval of the SDB and receipt of the State Signature Card and Depository Agreement, the new bank account will be added to the State Bank Registry.
The BOR Treasurer is also responsible for sending certified copies of the minutes of the BOR to the new bank, which advises it of corporate authority for the signers to execute checks drawn on University System funds.
Upon accomplishing the above, the old bank account must be closed as soon as all outstanding checks have cleared, since the old account is no longer the bank account of record. Any transactions clearing through the old account, other than clearing outstanding checks and transferring any remaining cash balances, are unauthorized.
9.1.2 Selection of Banks for General Operating and/or Payroll Accounts
(Last Modified on August 7, 2019)
BOR procurement policies are established in accordance with OCGA §§ 50-5-50. For USG institutions, banking services should be competitively bid every five (5) years, seeking banks which offer the best value while meeting OST guidelines. OST best practices suggest obtaining at least three (3) bids or a combination of three (3) bids and/or responses from banks declining to bid. Forms and instructions needed for the review are provided on OST’s website: https://ost.georgia.gov.
The OST requires that each bidding bank must complete and include a Bank Fee Schedule and a Bank Compensation Proposal in its Request For Proposal (RFP). Using the information provided, OST will prepare a 5 year present value cost analysis of the bids which is forwarded to the institution and the BOR Treasurer. Following the OST evaluation, the institution should select its bank from the three lowest cost providers. If the institution desires to select a different provider, the institution must provide a written explanation to the BOR Treasurer as to why the alternative bank should be selected. The BOR Treasurer will make the final determination on which bank is selected. Once final selection is made, the BOR Treasurer will provide the OST with a copy of the signed State Signature Card and Depository Agreement for accounts to be added to State Bank Registry.
As an alternative to the formal bidding process, an institution may elect to choose from banks participating in the OST Bank Program. To participate in this program, banks must acknowledge that they will follow guidelines established in OST Bank Policy and that they are subject to periodic evaluations by the OST. Since OST performs periodic evaluations to verify that participating banks are qualified to function as state depositories, general procurement requirements would be met, thus eliminating the need for formal bids. However, since bank pricing of services may vary significantly between banks in the OST Bank Program, pricing data must be considered in the bank selection process. Therefore, institutions must complete pricing templates (available from OST) on at least three (3) banks from the OST Bank Program list and submit this information along with justification to BOR Treasurer for the bank requested. BOR Treasurer will finalize selection based on information provided.
BOR “system office” bank accounts do not fall under banking selection criteria available to the institutions. System office accounts must be managed in the same manner as state agency accounts and are subject to the OST Bank Policy guidelines, which require selecting a bank from the four (4) primary banks (lowest cost providers) as identified by OST.
For additional information on OST banking requirements, visit the OST website at https://ost.georgia.gov.
9.1.3 Foreign Bank Accounts
(Last Modified on June 13, 2019)
All foreign bank accounts must be maintained in the name of the USG institution. Also, bank accounts can only be opened after OST has performed a pro formal of review of the financial condition of the bank. The USG institution must provide documentation verifying that the proposed bank:
(1) Is financially strong and stable;
(2) Offers security of deposits;
(3) Is convenient to the institutions location;
(4) Imposes bank fees and charges that are rational to its marketplace.
Competitive bids should be considered if multiple bank options are available. Once vetting procedures noted above have been completed and bank has been selected, the institution’s President must receive approval from BOR Treasurer before opening the account.
BOR policy, in compliance with OST requirements, provides as follows:
- “A cap of $100,000 is set on consolidated foreign bank accounts of a USG institution’s depositories in a particular foreign bank and, in any event, shall not exceed the lower of the State Depository Board’s prescribed limit or the limit of the FDIC equivalent organization that applies to the specific USG institution in that particular country. If a foreign country does not have a deposit insurance program, lower balances may be appropriate.”
The $100,000 is an aggregate for all accounts for an institution in a particular bank. Also, as stated in the above policy excerpt, if a foreign country has a depository insurance protection program similar to FDIC, the limit must be the lower of the $100,000 or the insurance protection.
If an institution finds it necessary to open an account in a country that does not have any type of deposit protection program, the institution must contact the Board Treasurer for the account approval and a modified cap limit.
9.1.4 Placement of Cash in Time Deposits
(Last Modified on June 13, 2019)
As with demand accounts, the BOR Treasurer has final approval authority on all time deposits. All units of the USG placing funds in time deposits shall restrict such deposits to banks located in the state of Georgia. If time deposits are to be placed with a bank for which an institution does not have current banking relationship, competitive bid requirements are required, unless the following applies:
- The bank is a member of the OST Bank Program, as discussed in section 9.1.3, or
- The bank participates in the OST’s State Secure Deposit Program, whereby banks are required to pledge collateral into a multibank pledging pool.
The placement of funds in time deposits is usually associated with resources that must be converted periodically to cash to accommodate operational needs. The term of such placements should be for short periods, twenty-four (24) months or less.
9.1.5 Recording of Interest Earned on Bank Accounts
(Last Modified on June 13, 2019)
The following guidelines should be used to record interest earned from bank deposits:
- Interest earned on Cash in Bank General Operations-Demand Deposits (118100) is to be budgeted and receipted in unexpended plant funds and, thus, be used for capital outlay purposes.
- nterest earned on Cash in Bank-Time Deposits (119100) is to be budgeted and receipted as interest earned in the fund group that provides the resource to purchase the time deposit(s) and should be spent in accordance with intent of the fund.
Resources from restricted funds, auxiliary enterprises funds, loan funds, endowment funds, unexpended plant funds, and student activity funds, which are invested in time deposits, shall appear on the Statement of Net Assets as “Cash and Cash Equivalents”. Further, interest earned on said time deposits shall be reflected in the fund group providing the resource as “Non Operating Revenue – Investment Income.”
9.1.6 Bank Depositories/Collateral Requirements
(Last Modified on June 13, 2019)
All depositories, where USG funds are held in time and demand deposits, shall be collateralized in accordance with OCGA §§ 45-8-12 (dedicated collateral method) and/or OCGA §§ 45-8-13 through 45-8-13.1 (pooled collateral method).
When collateralizing under OCGA §§ 45-8-12, the depository secures the deposits of each of its public body depositories separately by either providing a surety bond in some acceptable security company qualified to do business in Georgia, and/or pledge of securities enumerated in OCGA §§ 50-17.59.
When collateralizing under OCGA §§ 45-8-13 and 45-8-13.1, the depository will provide collateral using one of two methods:
- Single Bank Pooled Method – The depository is required to secure deposits through a pool for collateral established by the depository and held by a custodian for the benefit of the institution.
- Multibank Pool Method – Each covered depository agrees to a contingent liability to cover losses sustained by a public body (depositor) caused by the default of other depositories within the multibank pool based on its pro rata share of deposits covered by the pool.
Depositories, that pledge collateral using the “dedicated collateral method”, must ensure that the aggregate of the face value of any surety bond plus the market value of securities pledged must be equal to, but not less, than 110% of the public funds being secured after deduction for deposit insurance.
Depositories pledging collateral using the single bank pooled method are required to pledge securities whereby the aggregate market value of the securities pledged is not less than 110% of the daily pool balance (after consideration for FDIC insurance coverage).
Depositories, that participate in the multibank pledging pool State’s Secure Deposit Program, shall pledge collateral per instructions from the SDB in accordance with OCGA §§ 45-8-13.1(b). Information on the Secure Deposit Program is located under Operating Policies section of Office of State Treasurer website.
9.1.7 Service on Bank Governing Boards
(Last Modified on June 13, 2019)
BOR Policy Section 7.5.1 provides that the chief business officer of each institution along with any other officer or employee, who participates in the selection of the institution’s depository (bank), are prohibited from serving on the governing boards of banks and other financial institutions, if such banks or other financial institutions have or seek a commercial relationship with that institution.
The president of an institution may serve on the governing board of a bank or financial institution that does not have a commercial relationship with the institution. However, such a bank or financial institution, will not be considered for establishment of a commercial relationship with that USG institution until the president is at least two (2) years removed from serving on the governing board.
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