Public Money: Common Questions

• General Questions
  
• Account Setup
  
• Increasing and Decreasing Collateral
  
• Agency Responsibility
  
• Determining Amount to be Collateralized
  
• Reports
  
• Financial Institution Agreements
  
• Miscellaneous

GENERAL QUESTIONS

1. What is the Treasury Investment Program (TIP)?

The Treasury Investment Program (TIP) is a centralized Federal Reserve Bank (FRB) application under the TT&L program that receives tax collections, invests funds and monitors collateral pledged to secure public money. This system was designed by the Federal Reserve System at the direction of the Department of the Treasury (Treasury) and is operated by the Federal Reserve Bank of St. Louis. TIP results in improved of collateral pledged to secure public money under 31 CFR 202. The Federal Reserve, as Treasury's fiscal agent, has an expanded role in the of collateral. This provides better protection and minimizes the government's risk of loss in the event of a financial institution's insolvency.

2. What agency accounts require pledging of collateral?

Agencies need to ensure the security of public money under its control in accordance with Securing Government Deposits in Federal Agency Accounts (31 CFR 202). Public money includes, but is not limited to, revenue and funds of the United States and any funds the deposit of which is subject to the control or regulation of the United States or any of its officers, agents or employees.

The "V" accounts established under 31 CFR 202 are included in TIP.

3. What is the National Customer Service Area (NCSA)?

The National Customer Service Area (NCSA) is the organization at the Federal Reserve Bank of St. Louis responsible for of collateral pledged to secure public monies. The NCSA can be reached at 1-888-568-7343 or by fax 1-866-707-6575.

4. Are written instructions available for agencies?

The Treasury Financial Management (TFM 6-9000), which provides instructions for agencies, is available on the FMS Web site at www.fms.treas.gov/tfm/vol1/v1p6c900.html.

5. What is a "V" Account?

A "V" account is a collateral account with the NCSA, established by FMS, for an agency. The "V" account is a three digit number (i.e., V000) used for the purpose of pledging collateral to secure public money. This account is established by providing FMS with agency name, address, collateral contact names, phone numbers and a certifying official on the Federal Agency Collateral Contact Information form. The agency's financial institution uses this number to pledge collateral to the Federal Reserve.

ACCOUNT SETUP

6. What form is required to update the list of authorized collateral contacts?

The Federal Agency Collateral Contact Information form is used to update the list of authorized collateral contacts and is available from FMS on the collateral Web site at www.fms.treas.gov/collateral/pm_forms.html. This form, Federal Agency Collateral Contact Information, replaces the Federal Agency Authorization to Release Collateral form. The reason for this change is that under TIP, the agency no longer formally releases collateral. However, authorized contacts are still needed to provide collateral information. The form can either be downloaded for completion and mailed or submitted electronically using the online form. If you would like a form mailed or faxed to you, please contact FMS at (202) 874-6580. The NCSA also has forms available. FMS will distribute their annual request for updated forms in January.

7. How does an agency update or handle existing accounts?

To update the information on your Federal Agency Collateral Contact Information form, complete a new form and send to FMS at Financial Management Service, Financial Services Division, 401 14th Street, SW, Room 318A, Washington, DC 20227 or submit an electronic form at www.fms.treas/collateral/pm_forms.html. To add a new financial institution to an existing "V" account, contact the NCSA with an amount to be collateralized for a new financial institution.

8. Who should update the name(s) that appear on the Federal Agency Collateral Contact Information?

Each agency must designate a certifying official and authorized contacts. It is the agency's responsibility to determine who will update the Federal Agency Collateral Contact Information form.

INCREASING AND DECREASING COLLATERAL

9. Under TIP, does the agency responsible for an account have input in the withdrawal/reduction of collateral?

The agency has some input in the reduction of collateral. The NCSA will monitor collateral for agencies. The NCSA will not release collateral if it would cause a "V" account to be deficient (i.e. undercollateralized). If a financial institution requests a withdrawal of collateral, NCSA will release it if it does not cause a collateral deficiency. If the release of collateral would cause a deficiency, the NCSA will contact an authorized individual listed on the Federal Agency Collateral Contact Information form at the agency to verify the amount to be collateralized.

10. How does an agency increase their collateral?

An agency will contact the NCSA to increase the amount to be collateralized. The NCSA then will ensure that the financial institution pledges the additional collateral. An agency may advise the financial institution to pledge additional collateral, but the agency must also contact the NCSA.

11. When releasing collateral, is verification by the Clerk of the Court or certifying official needed if another individual is listed on the Federal Agency Collateral Contact Information Form?

Under TIP, collateral will be released by the NCSA if it does not cause a collateral deficiency. If the release would cause a collateral deficiency, the NCSA will contact an authorized individual on the Federal Agency Collateral Contact Information Form. If the Clerk of the Court or certifying official is listed as an authorized contact, the NCSA may contact them. If they are not listed as an authorized contact, no verification is needed by this individual. The NCSA will call the agency back to confirm the amount to be collateralized if the agency has indicated "another authorized individual" for call back verification.

12. Are the individual agencies still going to receive calls from financial institutions regarding releases of collateral or will the financial institutions contact the NCSA?

Financial institutions should call the NCSA first regarding the release of collateral. If a financial institution contacts an agency for release of collateral, the agency should refer them to the NCSA. If the release would cause a collateral deficiency, the NCSA would not release collateral until they verify the amount to be collateralized with the agency.

13. Can an agency only contact the NCSA to increase collateral?

The agency must inform the NCSA of an increase in the amount to be collateralized. The NCSA will instruct the financial institution to pledge additional collateral. The agency may request their financial institution to pledge additional collateral but the agency must inform the NCSA of the new amount to be collateralized.

14. When increasing or decreasing the amount to be collateralized, does an agency have to call the request in or can the request be faxed?

The request to increase or decrease the amount to be collateralized can be faxed as well as called in. The request must be signed by an authorized individual. If the request is faxed to 1-866-707-6575, the NCSA will call the agency back to confirm the authorization.

15. Can an agency request an increase in the amount to be collateralized for a few days each month and then decrease it to the original amount?

Yes. If an agency knows the fixed time period that collateral must be increased and subsequently decreased, the agency can make one call to the NCSA. The agency should advise the NCSA of the specific date and amount to increase and decrease the collateral and the NCSA will automatically change the amount to be collateralized. The agency may also call the NCSA when they want to increase the amount to be collateralized and then call again to decrease the amount to be collateralized.

16. Does the agency inform anyone other than the NCSA for collateral changes?

No. The NCSA will work with the financial institution to make the necessary collateral changes. Depending on the arrangement an agency has with their financial institution, an agency may want to inform the institution of a change in collateral.

17. When faxing a request for a change in the amount to be collateralized to the NCSA, what information should be included in the request?

A faxed request should contain the following information: "V" account number, agency name, existing amount to be collateralized, new amount to be collateralized, signature of authorized individual, printed name, date, financial institution and the financial institution's ABA number.

18. Will a verbal authorization to change the amount to be collateralized by the agency be documented by a letter or email?

The NCSA will verbally contact the agency. If requested, the NCSA will send a letter or email confirming the request.

19. Once an agency contacts NCSA to increase collateral, how long will it take to receive confirmation of the increased collateral enabling the deposit of funds?

The NCSA will contact the financial institution as soon as the NCSA receives instructions from agency. The NCSA will promptly inform the financial institution that there is a requirement to pledge collateral. Once the collateral is in place, the NCSA will contact the agency.

AGENCY RESPONSIBILITY

20. What mechanisms are available for agencies to monitor bank balances on a daily basis?

There is no mechanism available from FMS or the NCSA to monitor bank balances. It is the responsibility of the agency to monitor their balances and inform the NCSA of the amount to be collateralized. (see I TFM 6-9025) The agency must monitor their bank balances directly with their financial institution. The NCSA does not have access to actual deposit information from financial institutions. To effectively monitor agency "V" accounts, the NCSA must have the correct amount to be collateralized. This amount is based on the agency's bank balance. An agency may have a higher amount to be collateralized than what its actual balance in a financial institution.

21. What is the communication protocol from the point of opening an investment account to the verification of collateral pledged?

If the agency has a new deposit with a financial institution and does not have a "V" account, the agency must contact FMS to establish the account. (see I TFM 6-9025 and question 1) Once an agency is notified of their "V" account number, they must contact the NCSA with their "V" account number, the name of the financial institution and the amount be collateralized. The NCSA will ensure that the financial institution has FMS Form 5902, Resolution Authorizing Execution of Depositary, Financial Agency, and Collateral Agreement and FMS Form 5903, Depositary, Financial Agency, and Collateral Agreement on file. These forms enable a financial institution to hold public funds. The NCSA will also ensure that the financial institution pledges acceptable securities.

If an agency already has a "V" account but has a new financial institution, the agency must contact the NCSA with the name of the financial institution and the amount to be collateralized for that financial institution. The NCSA will ensure that the financial institution has the proper forms on file and pledges acceptable securities.

22. To collateralize a new account, does an agency contact the financial institution or the NCSA?

The agency must contact the NCSA with the amount to be collateralized. The agency should also contact the financial institution to ensure that the financial institution is aware that the account has been established and requires collateralization.

23. What form or notice will an agency receive to enable a deposit with a financial institution?

The agency should call the NCSA when the agency selects a new financial institution . When the financial institution account has been properly set up and collateral has been pledged, the NCSA will call the agency and inform them that the agency is able to deposit funds.

DETERMINING AMOUNT TO BE COLLATERALIZED

24. If an agency has multiple banks with multiple accounts under the same "V" account number, what needs to take place?

If an agency has deposits in 3 different financial institutions, the agency needs to provide the NCSA with 3 separate amounts to be collateralized. Each financial institution pledges securities under their ABA number which is by charter bank not branch. For example, Bank "ABC" has many branches throughout the country. If an agency has $200,000 in an account with Bank "ABC" in Virginia and $400,000 in an account with Bank "ABC" in Georgia, the amount to be collateralized is $500,000. The 2 accounts are added together and the $100,000 insurance limit is deducted to determine the amount to be collateralized.

25. Does the aggregate of ALL accounts have to be collateralized?

The aggregate of all accounts must be collateralized. If an agency has several accounts pledged to the same "V" account, the accounts are collateralized as an aggregate. To determine the amount to be collateralized, the agency will combine all accounts under the same "V" number and collateralize the amount over $100,000. However, in the case of district or bankruptcy courts that have accounts set up in "case names", there is separate insurance on each "case name" account. (See I TFM 6-9045.10)

26. If accounts are set up separately under the "case name" for District and Bankruptcy Courts rather than agency name, will the total amount to be collateralized be the amount that exceeds $100,000 for the total of all accounts combined or per each account?

The District Courts and the Bankruptcy Courts can have separate accounts established in each "case name" under the same "V" account number. In this case, each account must be collateralized for the amount over $100,000.

27. If an agency does not have any accounts that exceed $100,000, what does the agency need to do concerning collateral?

The agency is required to monitor the account(s) to ensure that the account is collateralized as soon as it exceeds $100,000. The agency must call the NCSA with the amount to be collateralized. The NCSA will then contact the financial institution to pledge collateral.

REPORTS

28. What type and how often will an agency receive reports?

Agencies will receive 2 reports monthly - the Pledgee Collateral Holdings Report and the Security Account Collateral Recap. The Pledgee Collateral Holdings Report identifies the par and book value of each security held by a financial institution. The Security Account Collateral Recap report identifies any changes in collateral values or amounts to be collateralized for each financial institution.

29. What actions does an agency take when they do not recognize a financial institution on the Pledgee Collateral Holdings report?

An agency should contact the NCSA if there is a financial institution an agency does not recognize. In this case, the financial institution is still holding collateral for the agency and the financial institution never requested the collateral to be released. If the agency did not supply the NCSA with the amount to be collateralized, the NCSA will contact the agency to ensure that there is no money in the account and then the NCSA will contact the financial institution to release the collateral.

30. What is par balance and book value as reported on a monthly Pledgee Collateral Holdings Report?

Par value is the original face value of the security or original par amount at which the security was issued. Book value is the current face value or par amount of that security. In the case of a fixed rate (bullet issuance), par and book value would be the same. The only time you would see a difference in the par and book value would be if it was a declining balance security because of mortgage balance payments made by issuing party.

FINANCIAL INSTITUTION AGREEMENTS

31. What forms must a financial institution complete to hold public money under 31 CFR 202? Who is responsible for these forms?

Financial institutions must complete 2 FMS agreement forms in order to hold public money under the 31 CFR 202 program. These forms are FMS Form 5902, Resolution Authorizing Execution of Depositary, Financial Agency, and Collateral Agreement and FMS Form 5903, Depositary, Financial Agency, and Collateral Agreement.

MISCELLANEOUS

32. Under TIP, are there any situations where agencies will have contact with any Federal Reserve Bank other than the NCSA at the Federal Reserve Bank of St. Louis?

The agency should only have contact with NCSA at the Federal Reserve Bank of St. Louis.

33. If an agency's collateral is held at the Federal Reserve Bank of Chicago, will it be moved to the Federal Reserve Bank of St. Louis? (i.e. where will the safekeeping of collateral be done?)

The safekeeping of collateral will still be performed by the local Federal Reserve Bank of the financial institution.