Accounts Outside the Treasury System and Collateral Requirements
Approval: See State Administrative Manual (Sections 19462, 19463, and 8002)
Departments (including agencies) may be authorized either by statute or by approval from the Department of Finance (Finance), Fiscal Systems and Consulting Unit (FSCU), to deposit moneys not under the control of the State Treasurer (Treasurer) in banks outside of the centralized State Treasury System (CTS).
Departments that have statutory authority to deposit state moneys in banks outside the CTS without Finance approval should adhere to the conditions prescribed by the Director of Finance and must notify the Treasurer by letter stating the name and location of the bank, amount, source, and purpose of the funds to be deposited, and the type and term of the deposit arrangement.
Departments that do not have statutory authority and desire to open accounts outside the CTS must request approval of accounts with a bank, savings and loan association, or credit union to be maintained outside the CTS. The request is required to be sent to Finance, FSCU. If and when outside accounts are deemed necessary, departments are encouraged to establish the account outside the CTS with one of the State Treasurer’s Office (STO) approved depository banks.
Reporting: See State Administrative Manual (Sections 7930, 7951, and 7975)
- All departments with accounts outside the treasury must submit the Report of Accounts Outside the State Treasury - Year-End Report No. 14 (STD. 445) stating the balance as of June 30, and shall complete all other fields in the report for each account listed.
- Each Report 14 shall include the tax identification number(s) under which the accounts were or could be established.
- Bank statements for each account indicating collateralization on Report 14 shall be submitted in FI$Cal annually to STO, Collateral Management Section, by August 20 (monthly bank statement stating bank balances as of June 30).
- If no accounts exist outside the CTS, indicate "No accounts outside State Treasury" on the Report 14.
- If the account has been closed during the reporting period, departments must specify the date the account was closed.
- The report should only contain accounts in which "State Money" is deposited as defined by Government Code (GC) 16305.2.
- For questions regarding if the deposited funds are considered "State Money" as defined in Government Code 16305.2 and need to be reported, it is strongly encouraged that each department consult with their legal counsel for that determination.
- The original Report No. 14 must be submitted in FI$Cal annually to the STO and a copy must be sent to the State Controller's Office (SCO) by August 20 or the following Monday if August 20 falls on a weekend.
Collateral: See Government Code (Sections 16520-16522 and 16610-16612)
Even though this report is prepared and submitted once a year, it is the department’s responsibility to ensure that the deposited funds are adequately collateralized throughout the year by working with their financial institution and the Treasurer’s Office to ensure compliance.
To provide collateral as required by law, departments shall instruct their financial institutions to submit form STO-TD-011B to the STO, Centralized Treasury and Securities Management Division and ensure that the appropriate Safekeeping Agreement is in place with the STO, Collateral Management Section. To obtain form STO-TD-011B, refer to the STO website.
In order to ensure that your financial institution is submitting the collateral on the department’s behalf, the department shall contact the financial institution and request a copy of their accounts and the associated collateral (collateral listing report) for use in the department’s verification prior to the submission of the report 14 and ensuring collateralization throughout the year. A copy of the collateral listing shall be sent to the STO.
Although this report requires the listing of all accounts in which “State Money” is deposited, not all accounts will need to be collateralized. To date, we are of the understanding that the following types of accounts do not need to be collateralized – however, please note that this is not a complete and comprehensive list due to the variety of accounts reported. We strongly advise each department to check with their own legal counsel to ensure compliance with the law. For the accounts listed below, the box titled “Not Required” should be checked.
- Investments (Mutual Funds, Stocks, Bonds, Annuities or any other investment that is not a deposit)
- Zero Balance Account (ZBAs)*
*A ZBA is a type of account held outside the CTS in which a balance of zero is maintained by automatically transferring funds into a main account daily.
GC section 16520 – Security is not required for that portion of deposited funds insured under any law of the United States.
GC section 16521 – Requires banks to deposit securities as collateral with the State Treasurer valued at 110 percent of the uninsured portion of the collected funds deposited with the banks.
GC section 16522 – Specifies the types of securities that banks may deposit as collateral with the State Treasurer.
Savings and Loan Association and Credit Union Accounts
GC section 16610 – Security is not required for that portion of deposited funds insured under any law of the United States.
GC section 16611 – Requires savings and loan associations and credit unions to deposit securities as collateral with the State Treasurer valued at least 110 percent of the uninsured portion of the collected funds deposited with the savings and loan associations and credit unions.
GC section 16612 – Specifies the types of securities that savings and loan associations and credit unions may deposit as collateral with the State Treasurer.
Other pertinent Government Code sections:
GC section(s) 16305.2, 16305.3, 16506 and 16510