FIACCT 02-07_00 General accounting- Investment of restricted funds and trust funds

Effective: March 16, 1998
Revised: March 1, 2008
Reviewed:

Purpose

The purposes of this policy are:
A. To establish in compliance with the State Money Management Act a policy which allows state agencies to invest with the State Treasurer excess cash and receive interest earned on the investments where allowed by law.

B. To formalize the contractual relationship that exists between the State of Utah and investing state agencies as it relates to investing excess cash funds with the State Treasurer.

C. To establish minimum cash balance requirements that must be maintained by each investing fund to cover the costs of accounting and reporting services.

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Policy

Authority of State Treasurer
The State Treasurer is to receive and keep all money belonging to the State and is responsible for the investment of public funds and any funds or accounts under the control and management of the State except for those agencies or funds excluded by law.

Unless otherwise provided by the Constitution or laws of the State or by contractual obligation, the income derived from the investment of state money by the State Treasurer shall be deposited in, and become part of, the General Fund.

The State Treasurer automatically invests all uninvested cash balances within the State, and as mentioned in the above paragraph, all income derived from these investments will become part of the General Fund. All agencies within state government shall be responsible for effective cash management of state and federal funds. State agencies are to insure that the State’s Money Management Act is adhered to and that all funds are deposited according to this Act.

Any penalties, interest, etc., that shall be due the federal government or other agency for not managing federal funds efficiently shall be the expense of the agency and not paid from the investment earnings of the State Treasurer.

Authorization to Invest
This policy applies to the investment of funds if:
1. The funds are maintained on the state’s central accounting system and
2. The funds are authorized to invest and retain interest through legislative directive or
3. The funds are authorized to invest and retain interest by contractual agreement in the case of trust funds (the agreement may be implied if the trust fund investing is in compliance with this policy.) Trust fund classification does not automatically infer investment authority.

Minimum Balances
The State’s General Fund incurs the costs of accounting for and investing funds and, therefore, will receive
compensation for this service. The compensation can be received by the General Fund if each investing fund maintains a minimum uninvested cash balance. (Any uninvested cash balances within the state system are automatically invested by the General Fund.) Each investing fund must maintain an uninvested cash balance of the lesser of $50,000 or 10% of the investing fund’s cash and investment balance. This will also provide a cushion for cash payment or withdrawals from the fund.

Exercise of Due Diligence While Investing
An investment fund custodian should be designated for each investing fund. The investing fund custodian is to exercise due diligence in monitoring cash resources. The General Fund must not be penalized if your resources are over invested. Failure to properly monitor available resources, that results in over investing of cash resources, will cause the investing fund to lose the interest earnings on the over investment in the month the violation occurs. The investment officer must notify the State Treasurer of any changes in balances available for investment.

Uninvested Balances
If a month is past and it is determined by the investment officer that cash funds over and above the minimum balance were available but were not invested, interest will not be applied retroactively. If the investment error was outside of the agency’s control, the agency may request a retroactive application of interest. The Division of Finance, in consultation with the State Treasurer, will consider these applications and approve or disapprove.

Timing of Investments
Investments can only be made with the State Treasurer after the monies are made available in your fund. All monies must first be deposited in a bank account of the State Treasurer and a Cash Receipt Transaction (CR) must be completed by the state agency. The money must be recorded as a revenue or a refund before the investment process noted below begins.

Procedures

Investment or Withdrawal of Funds

Reconciliation of Investee Balances