Cash Management/ Banking Relations

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1 Cash Management/ Banking Relations Introductions What is Treasury Management??? Maximizing Cash Flows Credit Card Collection Strategies Lending vs Leasing?? Collateral Discussion House Bill 374 Investments Treasury Management What is Treasury Management? Treasury Management helps you manage your working capital. Bank s liquidity solutions help government entities save and invest wisely. Payables and receivables capabilities help you manage the purchases and the receipt of payments for good and services. 2 1

2 Treasury Management How do Banks assist government entities with their Cash Flow? Checking Account MMA/CD Merchant Services Notes and Bond Check Positive Pay Sweeps ACH Positive Pay Remote Deposit Capture ACH and Wires Equipment Leases/Lease Line Controlled Disbursements Zero Account Balance Safe Cash Lockbox 3 Treasury Management Checking Account - is a deposit account which allows for withdrawals and deposits. CD - Certificate of Deposit is a savings certificate entitling the bearer to receive interest. MMA Money Market Account is an interest-bearing account that typically pays a higher interest rate than a savings account, and which provides the account holder with limited check-writing ability. ACH - allows customers to make and receive payments electronically to or from any domestic U.S. bank and many foreign countries, using a standard format

3 Treasury Management Wires allows the transfer of funds from single individuals or entities to other individuals or entities, while still maintaining efficiencies of fast and secure movement of funds. Merchant Services enables entities to accept any type of electronic payment, whether its credit cards, debit cards, check verification services. Control Disbursements regulate the flow of checks through the banking system on a daily basis, usually by mandating once-daily distributions of checks (usually early in the day.) 5 Treasury Management Remote Deposit Capture lets banks accept checks for deposit using electronic images instead of the original, physical, paper versions. Zero Account Balance - is a checking account in which a balance of zero is maintained by automatically transferring funds from a master account in an amount only large enough to cover checks presented. Sweeps - is an account that automatically transfers amounts that exceed (or fall short of) a certain level into a higher interest earning investment option at the close of each business day. 6 3

4 Treasury Management Positive Pay (check or ACH) - service employed to deter check fraud. Banks use positive pay to match the checks a company issues with those it presents for payment. Any check considered to be potentially fraudulent is sent back to the issuer for examination Lockbox - is a service provided by banks to companies for the receipt of payment from customers. Under the service, the payments made by customers are directed to a special post office box, rather than going to the company. The bank will then go to the box, retrieve the payments, process them and deposit the funds directly into the company bank account. SafeCash is a solution that helps entities consolidate depository relationships, eliminate deposit discrepancies, reduce theft, free staff from the time-intensive task of counting and auditing cash, while receiving daily provisional credit on deposits. 7 Cash Flow Tips Receivables: When are your funds available? Leverage use of onsite deposits via a Scanner Utilize electronic billing and collection services to replace items sent to your location: ACH Lockbox Acceptance of Credit Card Leverage Investment Sweep products or other investment options 8 4

5 Cash Flow Tips Payables: ACH allows the bank to provide initiation of recurring and predated ACH transactions two weeks or more in advance of the settlement date. NACHA has approved same day ACH transactions in 2016 Purchasing/Corporate Card can other purchases be migrated to a centrally managed purchasing card program? Wire Transfer repetitive wire codes should be utilized to reduce time, cost and risk. Controlled Disbursement utilize a unique routing number to help identify what items are being presented for payment in order to maximize investment opportunities. 9 Creating your competitive advantage with your customers payments 5

6 Explore and share Understand payment types you accept Share industry trends and emerging solutions A glimpse at our unique expertise and value Your customers payments How do you get paid? Where are you paid? Internet, phone, in store, in the field, mail What types of payments do you accept? Card, ACH, gift/loyalty, wire, check, cash 6

7 How efficient is your payments process? Customer Point of Sale payment acceptance customer loyalty points of payment speed of payment fraud risk Processing Network infrastructure complexity network connectivity gateway interfaces Settlement & Funding level of automation all card types and checks speed of funding Data Management application integration usable data feeds to reporting systems exception processing Security and Reporting Rapid pace of change How can you use change to your advantage? Innovation Processes Data management 7

8 A new breed of criminals Do you need help to minimize your organization s risk? Hackers Malware Data breaches Fraud Changing consumer expectations Are you capitalizing on new expectations? Payment options Security Mobile Loyalty programs 8

9 Processors expertise used in new ways Our knowledgeable specialists can help Rising interchange costs Changing card schemes Chargebacks Security Fraud management Service Fee Models Use these emerging trends to your advantage Creating a competitive advantage for you Minimize your risk Highest-rated security systems Innovative technology Minimizing fraud a top priority Enhance customer experience Front end flexibility Data-driven marketing Global payments Paperless transactions Leverage rapid change Innovative technology Alternative payments Paperless transactions Utilize expertise Pricing control Enhanced customer experience Seamless payment process 9

10 Leverage our payment solutions for your success Your end-to-end strategic advantage with U.S. Bank and Elavon Security. Flexibility. Financial Strength. Deliver end-to-end advantage through a single point of contact Leverage our proprietary platform Same-day ledger credit Next business-day funds availability (into U.S. Bank checking accounts) or same day credit Personalized customer service Next steps toward your competitive advantage Introduce our experts Evaluate your unique situation 10

11 We understand your industry s unique needs Government Protect cardholder data, reduce PCI costs Consolidate processing at all customer interaction points Manage chargebacks more effectively Convert checks into electronic transactions Service Fee programs designed specifically for Government and Higher Education to lower or eliminate cost State and Municipal Leasing How is the lease structured? Master Tax-Exempt Lease Purchase Subject to Annual Appropriations Other options Taxable lease structure Master Tax-Exempt Installment Payment Plan 501c(3) Conduits Fees/Cost of Issuance Can be included in amount financed 11

12 Equipment Types Any essential use assets, such as: Computers and networking equipment; 1:1 ipad/laptop Programs Telecommunications Medical imaging, radiology, robotics, EMR Aircraft, ambulances, fire trucks, police cars and other emergency vehicles Energy management Water storage and metering Parking meters Other essential equipment Terms 2-16 years depending on assets expected useful life From $50,000-$250,000 Small Ticket Group From $250,000 and up Government Leasing and Finance Structured with monthly, quarterly, semi-annual or annual payments Payments can be in advance or arrears No rate differentiation between BQ and Non-BQ designations Standard 60 day rate holds 12

13 Documentation Lease Purchase Agreement Property and amortization schedules Resolution of the governing body lessee certificate Validity opinion and if >$5MM tax opinion Acceptance certificate Insurance IRS form 8038 Possibly an escrow agreement Purpose of Collateralization Collateralization is necessary to protect public funds and recover its ownership in certificate of deposits or deposit accounts in the event of a bank failure. Conditions that must be satisfied to be properly collateralized include: Written, signed Collateral Agreement by both parties. Must be in compliance with ORC and UCC Law. Must have a perfected interest in collateral securities. Must be able to sell collateral in the open market at a price to recoup your investment (does not apply to surety bonds or FHLB LOC)

14 Protecting Public Deposits ORC Requirements The treasurer, before making the initial deposit in a public depository shall require the institution designated as a public depository to pledge t0 the treasurer eligible securities of aggregate market value equal to the excess of the amount of public moneys to be at the time so deposited, over and above the portion or amount of such moneys as is at that time insured by the federal deposit insurance corporation or by any other agency or instrumentality of the federal government. 27 Protecting Public Deposits No bank shall receive or have on deposit at any one time public moneys, including public moneys as defined in section of the Revised Code, in an aggregate amount in excess of 30% 0f its total assets, as shown in its latest report to the comptroller of the currency, the superintendent of financial institutions, the federal deposit insurance corporation, or the board of governors of the federal reserve system

15 Industry & Regulatory Changes Why would my bank NOT want my deposits? Higher bank capital and liquidity requirements Lack of eligible assets to be used as collateral Significantly higher cost given low return on assets Too deposit heavy with insufficient ability to lend given tightened lending regulations and policies Image source: 29 FDIC Insurance Federal deposit insurance is NOT determined on a per-account basis. All time and savings deposits and all demand deposits owned by a public entity in an insured instate bank are added up together and insured up to $250,000. $250,000 applies to the face amount + accrued interest

16 FDIC Insurance Covers money market demand accounts (MMAs) but does not cover money-market mutual funds or securities held by bank. A depositor cannot increase insurance coverage by placing deposits at different branches of the same bank or by dividing deposits into several different accounts at the same insured bank. When a bank fails, FDIC either transfers the insured depositor s account to another FDIC insured bank, or gives the insured depositor a check equal to their account balance after settlement through receivership Methods of Collateralization 1. Specific Securities Direct Pledge or Pooled 2. Letter of Credit Direct Pledge or Pooled 3. Surety Bond Licensed by the State of Ohio and authorized to issue in the State of Ohio ( Qualified to provide surety bonds to the Federal Government (

17 Pooled Collateral ORC (B) In lieu of the pledging requirements prescribed in sections and of the Revised Code, an institution designated as a public depository at its option may pledge a single pool of eligible securities to secure the repayment of all public moneys deposited in the institution and not otherwise secured pursuant to law, provided that at all times the total market value of the securities so pledged is at least equal to 105% of the total amount of all public deposits to be secured by the pooled securities that are not covered by any federal deposit insurance. Each institution shall carry in its accounting records at all times a general ledger or other appropriate account of the total amount of all public deposits to be secured by the pool, as determined at the opening of business each day, and the total market value of securities pledged to secure such deposits. 33 Pooled Collateral ORC (B) The state and each subdivision shall have an undivided security interest in the pool of securities pledged by a public depository in the proportion that the total amount of the state s and/or subdivision s public moneys secured by the pool bears to the total amount of public deposits so secured

18 Required Depository Agreements Frequency of Agreements Sample Depository Agreements State: 2 years There is no true standard. County: 4 years All Other Subdivisions: 5 years Original was prescribed by The Bureau of Inspection & Supervision of Public Offices: Prescribed Form No. 350 (7-69) and Prescribed Form No. 353 (Rev 7/93) How many eligible depositories are allowed? As many as you want keep your options open. House Bill 374 Ohio Pooled Collateral Program What is it and what does it mean to me??? 18

19 Investments Certificates of Deposit CDARS Treasuries Agencies Additional Options Questions??? Maureen Shildwachter Craig Peterson Steve Broerman 19