KANSAS STATE DEPARTMENT OF EDUCATION

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1 Guidelines fr By Schl Districts General investment authrity f lcal gvernments; types f investments authrized; direct investments; pledging securities and requirements; security peak depsit perids; use f investment incme; distributin f tax mney; investment prceeds frm bnd issues and temprary ntes; insurance; active and time accunts. KANSAS STATE DEPARTMENT OF EDUCATION 900 SW Jacksn St, Tpeka, Kansas

2 Guidelines fr by Schl Districts Click n a tpic belw r scrll dwn: General Investment Authrity f Lcal Gvernments Security - Peak Depsit Perids Types f Investments Authrized Pledging Securities Active Accunts - Opinins f Attrney General Use f Investment Incme Distributin f Tax Mney Kansas Bankers Assciatin - Lcal Public Funds Depsits Revised July 2012 Legislative Research Office MEMORANDUM Kansas Legislative Research Department Rm 545-N - Statehuse Tpeka, Kansas Telephne (785) FAX (785) June 11, 1997 GENERAL INVESTMENT AUTHORITY OF LOCAL GOVERNMENTS (Includes Legislatin Enacted in 1992, 1993, 1994, 1995, 1996, and 1997) This memrandum summarizes the general lcal gvernment investment statutes as amended thrugh The general investment statutes d nt restrict investment f prceeds f bnd issues, sinking funds, building funds, lcal pensin r retirement funds, r ther funds r mneys the investments f which are specifically authrized by ther statutes. Als summarized is the statute relating t distributin f taxes by the cunty treasurer t taxing subdivisins. The general investment statutes apply t cunties, cities, twnships, schl districts, area vcatinal-technical schls, cmmunity clleges, firefighters' relief assciatins, cmmunity mental health and retardatin centers, and any ther gvernmental entity having authrity t receive and expend public mneys.

3 Types f Investment Authrized Under K.S.A , as amended, lcal units f gvernment may first invest mneys which are nt immediately required fr the purpses which they were cllected r received as fllws: Savings depsits, time depsits, pen accunts, certificates f depsits, r time certificates f depsits. Banks, 1 Savings & Lan assciatins, 2 r savings banks 3 which have a main 4 r branch 5 ffice in the investing unit and which will make depsits available t the investing unit at interest rates equal t r greater than the investment rate, 6 ; r If there is n main r branch ffice f an eligible financial institutin in the investing unit, r n eligible financial institutin will pay the investment rate r greater, then the investing unit may invest in banks, S&L assciatins, r savings banks which have a main r branch ffice in the cunty r cunties in which all r part f the unit is lcated and which will make depsits available t the investing unit at interest rates equal t r greater than the investment rate. Maturities may nt exceed tw years. OR Repurchase agreements (reps) fr direct r insured bligatins f the federal gvernment r any agency theref. Such investments may be made at any time and they must be with a bank, S&L assciatin, r savings bank having a main r branch ffice in the investing unit, except: -- if there is n ffice in the unit r if an eligible financial institutin in the unit will nt enter int an agreement at an interest rate equal t r higher than the investment rate, then a rep may be made with a bank, S&L assciatin, r savings bank having an ffice in the cunty r cunties in which all r part f the investing unit is lcated; -- r, as a last resrt, if n bank, S&L assciatin, r savings bank in such cunty r cunties will enter int an agreement at a rate at least equal t the investment rate, then a rep may be made with a bank, S&L assciatin, r savings bank lcated in Kansas. OR Temprary ntes r n-fund warrants issued by the investing gvernmental unit. If n eligible financial institutins, whether in the investing unit r within the cunty r cunties f the investing unit, will accept the lcal unit funds at a rate at least equal t the investment rate, the investing unit may then invest in any f the fllwing: U.S. treasury bills r ntes with maturities nt exceeding tw years. The Municipal Investment Pl Fund Any depsit in the pl must be fr the same term as the depsit that was ffered and refused lcally. Upn maturity, depsits in the pl must be ffered t eligible financial institutins fr investment and refused befre they may be reinvested in the pl.

4 Lcal units may invest the prceeds f bnds r temprary ntes nt currently needed withut having first t ffer the investment t eligible financial institutins (K.S.A , as amended). The Directr f Investments f the state Pled Mney Investment Bard (PMIB) may invest mney in the pl fund in accrdance with plicies f the PMIB. A fee, applied as a fixed percentage f mneys in the prtfli, shall be charged (i.e., deducted frm earnings). The fee is apprtined at the rate f.10 percent n the state mney in the prtfli and a.25 percent n mney in the Municipal Investment Pl within the prtfli. Direct investments authrized fr cities, cunties, and schl districts Only cities, cunties, and schl districts that have written investment plicies apprved by their gverning bdies and by the PMIB may make directly the investments authrized in that statute. If a city r cunty vilates K.S.A (c) r (d), as amended, r the rules and regulatins f the PMIB, it frfeits its direct investment authrity fr tw years and can be reinstated nly after a cmplete review f its investment plicy by the PMIB. Ntice and an pprtunity t be heard n the matter f frfeiture must be given in accrdance with the Kansas Administrative Prcedure Act. Investments in securities shall be transacted nly with banks, S&L assciatins, and savings banks r primary gvernment securities dealers which reprt t the Federal Reserve Bank f New Yrk; r brker-dealers registered in cmpliance with Sectin 15C f the Securities Exchange Act f 1934 and registered pursuant t K.S.A a401 and amendments theret. Multiple client investment pls managed by trust departments f cmmercial banks Trust departments must be f banks which have main r branch ffices in the cunty r cunties where the investing unit is lcated r with trust cmpanies incrprated under the laws f this state which have cntracted t prvide trust services under K.S.A , and amendments theret, and have ffices lcated in the cunty r cunties in which the investing unit is lcated. Investments by such departments are subject t the same terms, cnditins, and limitatins that are applicable t the Municipal Investment Pl. All security purchases, including thse acquired by repurchase agreements shall ccur n a delivery versus payment basis, and they must be perfected in the name f the investing unit, and shall be delivered t the purchaser r a third party custdian wh may be the State Treasurer. Pledging Securities Banks, S&L assciatins, r savings banks taking lcal units' investments must pledge qualified securities listed in K.S.A , as amended, equal t 100 percent f the depsit in excess f Federal Depsit Insurance Crpratin (FDIC) cverage, and securities pledged must be at market value. 7 Securities, security entitlements, and financial assets 8 securing the depsits f investing units must be depsited with (1) a bank r trust cmpany incrprated under the laws f this state r rganized under the laws f the United States r anther state and which has a main r branch ffice in this state, (2) the Federal Hme Lan Bank f Tpeka, r (3) the State Treasurer.

5 All securities, security entitlements, and financial assets must be depsited in a securities accunt pursuant t a written custdial agreement and a receipt taken therefre with ne cpy ging t the investing unit making the public depsit and ne cpy t the depsitry. The depsitry bank, S&L assciatin, r savings bank must enter int a written agreement with the investing units granting thse investing units a security interest in the securities, security entitlements, and financial assets and the security interests must be perfected by the depsitry institutin under the Kansas Unifrm Cmmercial Cde and be given t the investing units. A custdial bank r trust cmpany which receives securities, security entitlements, and financial assets fr safekeeping is nt prhibited frm issuing a receipt and placing the securities, security entitlements, and financial assets in such bank's, S&L assciatin's, r savings bank's accunt with any bank r trust cmpany chartered in Kansas r anther state, any natinal bank, r any centralized securities depsitry (a clearing agency registered with the Securities and Exchange Cmmissin which prvides safekeeping and bk-entry settlement services t its participants) lcated in the United States. N securities, security entitlements, and financial assets pledged may be depsited in any bank, trust cmpany, r natinal bank which is wned directly r indirectly by any parent crpratin f the depsitry bank, r with any bank, trust cmpany, r natinal bank, having cmmn cntrlling sharehlders, having a cmmn majrity f the bard f directrs r having cmmn directrs with the ability t cntrl r influence directly r indirectly the acts r plicies f the bank, S&L assciatin, r savings bank securing such public depsits. When securities are depsited with the State Treasurer, a charge fr the service shall be made which is equivalent t the reasnable and custmary charge made therefre. The Federal Reserve Bank f Kansas City als may act as a custdial depsitry under regulatins and perating letters f the Bank. Active Accunts Opinins f Attrney General In 1975 and 1976, the Attrney General ruled that cunties, cities, schl districts, and cmmunity clleges may transfer part f their demand accunt t a savings accunt and by prearranged agreement transfer mney back t the demand accunt when needed. (Opinin Ns and ) Such an arrangement is nt subject t the requirements f the general investment law because that law applies nly t idle, nt active, funds. On June 13, 1983, the Attrney General issued anther pinin (N ) t the effect that lcal units may depsit active funds in interest bearing NOW (negtiable rder f withdrawal) and mney market depsit accunts. He said that investment f inactive r idle funds may be invested nly in the ways listed in the then applicable general investment statute, but thse restrictins d nt apply t active funds, i.e., thse which lcal units make use f regularly and immediately. Therefre, NOW and mney market accunts, which have n minimum maturity and frm which withdrawals can be made n demand with n penalty, are permissible depsits fr lcal units. Fr all types f active accunts, then, including nninterest bearing demand r checking accunts in banks, lcal units may make depsits in banks, S&L assciatins, and federally chartered savings banks, which have ffices in the cunty r cunties in which all r part f the lcal unit is lcated, if satisfactry security can be btained.

6 On April 3, 1995, the Attrney General issued a further pinin (N ) t the effect that lcal units must depsit active funds in financial institutins with hme ffices in the state f Kansas. Since "hme ffice" was nt a defined term, sme cnfusin arse as t which financial institutins culd be depsitries fr lcal units' active accunts SB 132 remved the ambiguity in the law by allwing lcal units t designate banks, S&L assciatins, and savings banks rganized under the laws f the United States r anther state which d nt have a main ffice in this state, r t designate any bank, S&L assciatin, r savings bank regardless f its charter sites as depsitries fr their active accunts. Hwever, lcal units are precluded frm using the latter financial institutins as depsitries unless the eligible financial institutins cannt r will nt prvide an acceptable bid, which includes services, fr the depsiting f public funds. Then, banks, S&L assciatins, and savings banks rganized under the laws f the United States r anther state which d nt have a main ffice in this state but have branch ffices in the cunty r cunties in which all r part f the lcal units are lcated can be depsitries, prvided satisfactry security can be btained. (Eligibility fr inactive accunts was nt affected by 1997 SB 132 and, therefre, such accunts may nly be invested with banks, S&L assciatins, r savings banks incrprated under the laws f this state r rganized under the laws f the United States and which have a main ffice in this state, r as therwise authrized by law.) Security Peak Depsit Perids During perids f peak depsits at tax paying and distributing times and cntinuing fr nt ver 60 days at any given time and nt ver 120 days in a calendar year, the amunt f security fr the depsit f public mneys as required by K.S.A , as amended, may be reduced by nt mre than half the amunt therwise required. The public entity and the depsitry institutin may enter int an agreement which designates the beginning f each such 60-day perid. (See K.S.A ) Use f Investment Incme Unless therwise required by state r federal law, K.S.A prvides that investment incme received by cunties, area vcatinal-technical schls, and quasi-municipal crpratins must be credited t their general fund. Such incme received by schl districts shall be depsited in accrdance with K.S.A K.S.A des nt mentin cities, but the cmmn practice is t depsit investment earnings in the general fund. Distributin f Tax Mney K.S.A a permits bards f cunty cmmissiners t invest undistributed taxes 9 f any taxing subdivisin which are in the pssessin f the cunty treasurer. Such investments are gverned by the general investment statutes and incme therefrm must be credited t the cunty general fund. Hwever, the statute cited abve requires each cunty treasurer t distribute taxes (but nt interest theren) cllected fr each taxing subdivisin within r partially within the cunty as fllws: n r befre January 20, June 5, and Octber 31, the estimated amunt cllected fr and wed, but nt less than the amunt actually cllected as f nt mre than 20 days befre the distributin date; and n r befre the last business day befre March 20 and September 20, nt less than 95 percent f the estimated amunt cllected fr r wed t each taxing subdivisin, but, again, nt less than the amunt actually cllected as f nt ver 20 days prir t the distributin date. An alternative methd f distributin f taxes and any interest theren may be agreed t by the bard f cunty cmmissiners and the gverning bdy f any taxing subdivisin within r partly within the cunty.

7 The law als allws a taxing subdivisin, in rder t meet its fiscal needs, t request special payments in advance f the abve dates. Such payments cannt exceed the amunt actually cllected fr and wed t the subdivisin. There must be a certificatin frm the taxing unit that it has neither sufficient cash n hand nr an investment which can be cnverted t cash t meet its expenditure needs. N special payment shall be made between December 1 f any year and January 1 f the next succeeding year r between May 1 and June 1 f any year. ENDNOTES 1. "Bank" means any bank incrprated under the laws f this state, r rganized under the laws f the United States and which has a main ffice in this state. 2. "Savings and lan assciatins (S&L)" means any S&L assciatin incrprated under the laws f this state, r rganized under the laws f the United States and which has a main ffice in this state. 3. "Savings bank" means any savings bank rganized under the laws f the United States and which has a main ffice in this state. 4. "Main ffice" means the place f business specified in the articles f assciatin, certificate f authrity, r similar dcument, where the business f the institutin is carried n and which is nt a branch. 5. "Branch ffice" means any ffice, agency, r ther place f business within this state, ther than the main ffice, at which depsits are received, checks paid r mney lent with apprval f the apprpriate regulatry authrities. Branch des nt include an autmated teller machine, remte service unit, r similar device. 6. "Investment rate" means a rate which is the equivalent yield fr United States gvernment securities having a maturity date as published in the Wall Street Jurnal, nearest the maturity date fr equivalent maturities. The 0 t 90-day rate shall be cmputed n the average effective federal funds rate as published by the Federal Reserve System fr the previus week. The Directr f Investments f the state Pled Mney Investment Bard must calculate the investment rate n Mnday f each week and publish it that week in the Kansas Register. The rate is available n the Internet at 7. FDIC cverage culd reach $200,000 $100,000 n time depsits and $100,000 n nninterest bearing active accunts. Alternatives t pledging f securities are a persnal bnd equal t twice the amunt n depsit at any given time r a crprate surety bnd equal t the amunt n depsit at any given time. 8. "Securities," "security entitlement," "financial assets," "securities accunt," "security agreement," "security interest," "perfectin," and "cntrl" as these terms are used in this sectin n pledging have the meanings given such terms under the Kansas Unifrm Cmmercial Cde. 9. Includes ad valrem taxes, lcal grss earnings taxes, special assessments, and all ther taxes and fees cllected with r at the same time as ad valrem taxes. # # #

8 Kansas Bankers Assciatin LOCAL PUBLIC FUNDS DEPOSITS Charles (Chuck) Stnes THE KANSAS BANKERS ASSOCIATION Jackie Kuhn President Vice President- Legal Department This publicatin has been prepared by the Divisin f Fiscal and Administrative Services, State Department f Educatin, the Legislative Research Department, and the Kansas Bankers Assciatin t prvide data n investment f idle funds by schl districts. It is hped that this publicatin will prvide the type f infrmatin that every unified schl district can use t advantage as they invest their idle funds. Dale M. Dennis, Deputy Cmmissiner fr Fiscal and Administrative Services Craig Neuenswander, Directr Schl Finance

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