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4000 - Advisory Opinions
Insurance Coverage for Deposits of Colorado State
Colleges and Universities
FDIC-88-38
May 19, 1988
Roger A. Hood, Assistant General Counsel
This will respond to your letter of January 5, 1988, regarding
deposit insurance coverage for deposits of Colorado state colleges and
universities. Specifically, you have asked (1) whether each Colorado
state college or university would be considered a separate "public
unit" or "political subdivision" and thus entitled to separate
deposit insurance under the FDIC's insurance regulations (12 C.F.R.
Part 330), and (2) whether the Colorado Commission on Higher Education
("CCHE") would similarly be entitled to separate deposit
insurance coverage as a separate "public unit" or "political
subdivision."
Enclosed with your letter was an opinion letter from Colorado
Attorney General Duane Woodard that addressed the first question. As
Mr. Woodard correctly noted, the determination of deposit insurance
coverage is one of federal law. While provisions of state law are
germane in determining whether an entity qualifies as a "political
subdivision" or "public unit" under the criteria of 12 C.F.R.
§ 330.8(c), the ultimate question of qualification is one of federal
law, and the opinion of the cognizant State Attorney General, although
entitled to respect and careful consideration, is not conclusive.
1. Colorado State Colleges and Universities
a. Does the governing board of each Colorado state
college or university qualify as a separate "public unit" or
"political subdivision"?
As the Colorado Attorney General has noted, the pertinent FDIC
regulations governing deposit insurance coverage of deposits in public
unit accounts are found at 12 C.F.R. § 330.8. Essentially, funds
deposited by the same official custodian of the same public unit in
time or savings deposits in the same insured bank in the same state
where the public unit is located are insured in the aggregate, up to
$100,000. A separate, additional $100,000 limit applies to
noninterest-bearing demand deposits of the official custodian in such
bank.
{{4-28-89 p.4335}}In the case of an out-of-state bank,
there would be no such separate coverage for demand deposits.
If any public unit has autonomous political subdivisions or
departments, each such subdivision or department is entitled to
separate deposit insurance coverage, whether or not it has the same
official custodian as its parent public unit. In this regard, the term
"political subdivision" is defined to include a subdivision or
principal department of a public unit, if the subdivision or department
meets the following tests:
1) Its creation is expressly authorized by state statute;
2) Some functions of government are delegated to it by
state statute; and
3) Funds have been allocated to it by statute or ordinance
for its exclusive use and control.
Excluded from the term are subordinate or nonautonomous divisions,
agencies, or boards within principal departments. 12 C.F.R.
§ 330.8(c).
Whether Colorado state colleges and universities are entitled to
separate FDIC deposit insurance coverage depends upon our determination
as to whether each institution meets the above criteria and qualifies
as a separate public unit.
In establishing state colleges and universities, the Colorado
legislature has provided for governing boards to which general control
and supervision of one or more institutions has been committed. Six
such governing boards were identified by the State Attorney
General. 1
It is each of these six governing boards, rather than the institutions
that they operate, whose status as a "political subdivision" we
shall examine.
The first part of the definition of "political subdivision" is
clearly satisfied by all six governing boards since each was expressly
created by state statute. Sections 23-20-102, 23-30-101, 23-40-104,
23-41-102, 23-50-101, 23-60-104, C.R.S. (1973 & 1987 Supp.). The second
prong is likewise satisfied by all six governing boards since numerous
government functions have been delegated to the governing boards by
state statute. See e.g., Sections 23-20-111, 23-30-102,
23-40-104, 23-41-104, 23-50-103, 23-60-102, C.R.S. (1973 & 1987 Supp.).
With respect to the third part of the test, all six governing boards
seem to meet it. The Colorado constitution vests the governing boards
with "the exclusive control and direction of all funds and
appropriations to their respective institutions, unless otherwise
provided by law." Colorado Const. article VIII, section 5(1). The
statutory basis for the exclusive use and control of funds by the
governing boards is provided at Section 23-1-104 of the Colorado
revised statutes (1987 Supp.):
(a) The general assembly shall make annual
appropriations as a single line item to each governing board for
the operation of its campuses. . . .Each governing board
shall
{{4-28-89 p.4336}}allocate said appropriations in
the manner deemed most appropriate by such governing board.
(emphasis added)
Additionally, some of the statutes creating governing boards
specifically provide them with the authority to direct and control
their appropriate funds. See generally, sections 23-20-111,
23-30-106, 23-50-103, 23-60-202, C.R.S. (1973 & 1987 Supp.). In light
of these provisions, it appears that the six governing boards for
Colorado state colleges and universities have funds allocated to them
by statute for their exclusive use and control. Therefore, the third
part of the test is satisfied. Since all three parts of the test appear
to be satisfied, the six governing boards will qualify as political
subdivisions entitled to separate insurance coverage, unless they are
excluded because they are subordinate or nonautonomous divisions,
agencies, or boards within principal departments.
A division, agency or board's autonomy or nonautonomy for the
purposes of classification as a political subdivision is determined on
a case-by-case basis after consideration of relevant criteria. We have
traditionally applied the terms as commonly defined. Webster's
Third New International Dictionary 148 (4th ed. 1976) defines
"autonomy" as "the quality or state of being independent,
free, and self-directing . . . the degree of self-determination or
political control possessed by a . . . political unit in relations to
the state or political community of which it forms a part . . .;"
and defines "autonomous" as "undertaken or carried on without
outside control . . ." Autonomy has also been defined as "the
political independence of a nation; the right (and condition) of power
of self-government; the negation of a state of political influence from
without or from foreign powers." Black's Law Dictionary
122 (5th ed. 1979). In the context of 12 C.F.R. § 330.8, each
division, agency or board is analyzed for indicia of independence from
the influence, control, or direction by the superior public unit or
principal department. Such indicia include the independent exercise of
statutorily delegated functions and the exclusive use and control of
allocated funds.
The governing boards of Colorado's state institutions of higher
education are allocated to the state's Department of Higher Education.
Section 24-1-114(4), C.R.S. (1973 & 1987 Supp.). CCHE was established
as a "central policy and coordinating" board, also within the
Department of Higher Education. Section 23-1-102, C.R.S. (1987 Supp.).
The State Attorney General found that "[a]lthough the governing
boards retain substantial autonomy in other matters, the powers
recently conferred on CCHE cast [such] grave doubts on their status
as autonomous public units"' that he concluded the governing
boards were nonautonomous.
On balance, we are of the opinion that these six governing boards
continue to be autonomous bodies within the principal department.
Despite the express powers and duties delegated to CCHE to further its
policy setting and coordinating functions, the legislature
"continue[d] to recognize the constitutional and statutory
responsibilities of duly constituted governing boards . . . ."
Sections 23-1-101 to 102, C.R.S. (1987 Supp.). CCHE apparently did not
usurp governmental functions previously delegated to the governing
boards, but rather was created to establish policy and coordinate the
autonomous operations of the various governing boards. The boards
retained their responsibilities and powers to conduct their
institutions' daily operations, to hire and fire personnel, to
determine the content of courses and to determine the utilization of
facilities. CCHE's powers to determine the role and mission of each
institution, to approve the establishment of new programs, and to
direct the discontinuation of programs are functions of its central
coordination and policy-making purpose, and are not inconsistent with
the retained autonomy of governing boards to direct the operation of
their institutions.
Of particular significance in determining entitlement to separate
insurance coverage, CCHE does not control the allocation of funds by
the governing boards. That CCHE is authorized to establish the
distribution formula of appropriations by the general assembly to
each governing board, section 23-1-105(3), C.R.S. (1987 Supp.),
does not affect the boards' autonomous use of such funds. The boards
receive such appropriations as single line items over which they have
authority to determine appropriate allocations. Section
23-
{{4-28-89 p.4337}}1-104(1)(a) C.R.S. (1987 Supp.).
Neither the source of funds nor their intended use affects insurance
coverage.
Since each of the six governing boards considered satisfies the
criteria for treatment as a "political subdivision" and does not
appear to be excluded as a nonautonomous division, agency or board, we
are of the opinion that the Board of Regents of the University of
Colorado, the State Board of Agriculture, the Board of Trustees of the
University of Northern Colorado, the Board of Trustees of the Colorado
School of Mines, the Trustees of the Consortium of State Colleges in
Colorado, and the State Board for Community Colleges and Occupational
Education are "political subdivisions." Therefore, any funds
deposited by their respective official custodians would be entitled to
separate deposit insurance coverage.
b. Who is the official custodian of each state
college and university?
For insurance purposes, the official custodian of funds belonging
to a public unit, rather than the public unit itself, is insured as the
depositor. Funds deposited by each official custodian of a public unit
are separately insured up to $100,000 for time and saving deposits and
up to $100,000 for demand deposits in the same FDIC-insured bank
located in the same state as the public unit.
If there is more than one official custodian for the same public
unit, the funds deposited by each custodian are separately insured up
to $100,000 for time and savings deposits and $100,000 for demand
deposits in the same FDIC insured bank. By the same token if one person
is official custodian of more than one public unit, he is separately
insured up to $100,000 with respect to the funds of each public unit
deposited by him in properly designated accounts. Depositing funds
belonging to the same public unit in separate accounts solely for
budgetary or accounting purposes, however, does not increase insurance
coverage. For example, the fact that a state university has multiple
campuses (i.e., conducts its operations at more than one
location), each with its own accounts in the same insured bank, does
not increase the deposit insurance coverage that is available to it.
In order to qualify as an "official custodian," the
individual, whether an officer, employee or agent, must have plenary
authority, including control, over funds owned by the public unit to
which the custodian is appointed or elected to serve. Control of public
funds includes possession, as well as the authority to establish
accounts for such funds in insured banks and to make deposits,
withdrawals, and disbursements. The deposit insurance available to a
public unit cannot be increased merely by fragmenting such authority
over the unit funds among several putative official custodians.
Similarly, if the exercise of authority or control over the funds of
public unit requires action by or the consent of two or more putative
official custodians, then they will be treated as one official
custodian.
The Colorado Attorney General concluded and we would concur that the
state treasurer should be deemed to be the official custodian of those
state college and university funds received by him and deposited by him
in accordance with state statutes and fiscal rules promulgated by the
controller. This conclusion was based upon the provision of the
Colorado constitution that the state treasurer is the custodian of all
"public funds," subject to legislative provision for their
safekeeping and management. Colo. Const. art. X, sec. 12.
However, as the Attorney General noted, the governing boards
of the state universities and colleges have been given special
constitutional powers over their funds, including "the exclusive
control and direction of all funds of and appropriations to their
respective institutions, unless otherwise provided by law." Colo.
Const. art. VIII, sec. 5(2). Moreover, constitutive statutes provide
the governing boards for the University of Northern Colorado, the
Consortium of State Colleges, and the State board for Community
Colleges and Occupational Education with the power to "receive,
demand and hold" money, land or property for the use of their
respective institutions. Sections 23-40-104, 23-50-107, 23-60-104,
C.R.S. (1973 & 1987 Supplement). Other constitutive statutes vest
the following powers specifically in a Treasurer of the board for the
State School of Mines, the University of Colorado and Colorado State
University: to safekeep and faithfully disburse funds
which
{{4-28-89 p.4338}}come into his hands as Treasurer,
23-41-110, C.R.S. (1973 & 1987 Supplement); to keep true and faithful
accounts of all moneys received and paid out by him, and pay all
warrants signed and countersigned by the designated Board member.
Sections 23-20-109, 23-30-105, C.R.S. (1973 & 1987 Supplement). Such
statutory authority, if supported by relevant by-laws and practices of
the governing boards, to establish accounts in insured banks and to
make deposits, withdrawals, and disbursements, would lead us to
conclude that each of the governing boards of the state universities
and colleges, with the exception of the State Board of Agriculture,
should be deemed the official custodian of its respective funds.
Only the constitutive statute for the State Board of Agriculture
specifically designates the state treasurer as custodian of all funds
derived from state and federal appropriations and royalties received.
23-30-105, C.R.S. (1973 & 1987 Supplement). Since custodial power over
the university's funds is explicitly vested by statute in the
constitutionally designated custodian of public funds, we would be
hesitant to find that the State Board of Agriculture is the official
custodian. By contrast, the statute for the Board of Regents of the
University of Colorado does not remove custodial authority from the
board when it provides that any moneys, warrants, bonds or securities
received by the state treasurer from the sale of public lands belonging
to the state university are to be turned over to the Board of Regents.
23-20-121, C.R.S. (1973 & 1987 Supplement).
2. Colorado Commission on Higher Education
("CCHE")
CCHE's status as a separate "public unit" for FDIC deposit
insurance purposes is determined by the three-prong analysis for a
"political subdivision" set forth at 12 C.F.R. § 330.8 and
discussed above. The first requirement of the test is clearly satisfied
since CCHE was expressly created by statute. Section 23-1-102, C.R.S.
(1987 Supp.). Since the statute delegated various functions of
government to CCHE, the second part of the test is also satisfied.
See, e.g., sections 23-1-105 to 109, C.R.S. (1987 Supp.).
However, there is apparently no allocation of funds to CCHE for its
exclusive use and control. Compare section 23-1-102(5)
C.R.S. (1987 Supp.) (CCHE members "shall receive seventy-five
dollars per diem for attendance at official meetings plus actual and
necessary expenses incurred in the conduct of official business.").
Thus the third prong of the test is not satisfied.
Since all three parts of the test do not appear to be satisfied, we
are of the opinion that the Colorado Commission on Higher Education
does not qualify as a "political subdivision" and therefore is
not entitled to separate FDIC deposit
insurance.
1 The following governing boards have been considered in this
opinion: the Board of Regents of the University of Colorado, the State
Board of Agriculture, the Board of Trustees of the University of
Northern Colorado, the Board of Trustees of the Colorado School of
Mines, the Trustees of the Consortium of State Colleges in Colorado,
and the State Board for Community Colleges and Occupational Education.
The board of directors of the Auraria Higher Education Center has not
been included in this analysis because it was not established as a
governing board of any state institution of higher learning. Rather,
the Auraria board was established to coordinate and facilitate
cooperation among three "constituent institutions" located in the
city and county of Denver. Section 23-70-101, C.R.S. (1973 & 1987
Supp.). Each constituent institution is represented by its own
governing board which has been fully analyzed herein.
In addition to its function as the governing board for the Colorado
State University, the Board of Agriculture appears to exercise
authority over various other unrelated programs and services.
See, e.g., sections 23-30-201 to 208, conservation of the
forests; 23-30-301 to 308, state forest service service; 23-30-401 to
405, oversight of Christmas trees and evergreen boughs; C.R.S. (1973 &
1987 Supplement). This opinion pertains exclusively to the public unit
status of the State Board of Agriculture in its capacity as the
governing board of the Colorado State University; no opinion is
rendered as to any other functions of the State Board of Agriculture.
The application of 12 C.F.R. § 330.8 might result in a determination
that all accounts of the State Board of Agriculture, including those of
the University, should be aggregated as belonging to one public unit. Go Back to Text
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