cash, investments & banking - california state...

Cash, Investments & Banking

CSU 101 January 2014 San Francisco

Kelly Cox Associate Director of Accounting Office of the Chancellor

Lorlie Leetham

Assistant Vice President, Fiscal Services & Aux Reporting

Cal Poly San Luis Obispo

Cash, Investments & Banking From the Chancellor’s Office

Kelly Cox Associate Director of Accounting Office of the Chancellor

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Agenda

• Agenda – Bank of CSU Overview – CSU Investments – Daily Cash Positioning – Bank of CSU online & Statements – Cash Posting Orders (CPO) Process – Consolidated Investment Earnings – The Team

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– 273

– 412

– $5.2B

– $3.7B

– 730K

– 632K

Bank of CSU Overview

BANK OF CSU Overview

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• Objectives—In Order of Priority 1) Safety of Principal 2) Liquidity 3) Earnings / Return

• Background Established in July 2007 Invests in securities allowed by State government

code Investments further guided by the CSU SWIFT

Investment Policy

SWIFT (Systemwide Investment Funds – Trust)

Investments

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Investments

• Roles Custody Bank - US Bank

Hold assets in safekeeping Manage deposits to and redemptions from

SWIFT Collect interest income from assets Arrange settlement of buys and sells Report on assets

SWIFT

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Investments

• Roles Investment Managers

– US Bancorp Asset Management – Wells Capital Management

Manage Investments—Buy/Sell decisions – per Investment Policy – per ongoing communication with CSU

Contributions/Redemptions split 50/50

SWIFT

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Investments

• Roles –Financing and Treasury - Chancellor’s Office

• Review Investment Managers’ performance • Review SWIFT portfolio alignment against

Investment Policy • Performance Reporting Quarterly SWIFT Investment Reports Annual Investment Report to Board of Trustees

SWIFT

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Investments

• Size and Performance – $2.5 Billion as of June 30, 2013 – $3.0 Billion as of September 30, 2013 – 0.40% return -12 months ended June 30, 2013 – 0.42% return -12 months ended September 30, 2013

SWIFT

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Investments

• Portfolio Characteristics – September 30, 2013 – Liquidity

• 10% of portfolio matures within 3 months – Quality / Safety

• 68% of securities are rated at least AA/Aa2 or A-1+/P-1

• 54% invested in cash, U.S. Government or U.S. Agency securities

• 39% invested in high – grade corporate securities

SWIFT

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Investments

• Size and Performance – $344 Million as of September 30, 2013 – 0.27% return -12 months ended September 30, 2013

SMIF

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ACCOUNTING FOR INVESTMENT EARNINGS • Investment Earnings are allocated to the SWIFT

campus accounts Allocated on quarterly basis Campus records allocation in Pooled Investment

Fund (CSU Fund 541) based on the CPO instructions Income is allocated internally within campus funds

according to that campus’ allocation policy Net Income in the Pooled Investment Fund is zero at

end of fiscal year • “no fund balance”

GAAP entry will be made to record Q4 earnings and classify appropriately

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Investment Earnings

ACCOUNTING FOR INVESTMENT EARNINGS • Campus investment earnings allocation are net

of charges Allowable Charges in the Pooled Investment Fund

(CSU Fund 541) • Wells Fargo Bank charges • Investment Services • Chancellor’s Office Indirect support

Investment Earnings

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• Consolidated Distribution of Earnings – Includes the earnings from SWIFT and SMIF

• Quarterly interest distributions – 1St Quarter = July, August & September – 2nd Quarter = October, November & December – 3rd Quarter = January, February & March – 4th Quarter = April, May & June

• Distribution is made on or about the 20th of the month following the quarter end.

Investment Earnings

ACCOUNTING FOR INVESTMENT EARNINGS

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The campus’ cash management is centralized by using one bank Wells Fargo Bank (WFB)

The surplus cash at the bank is invested Systemwide Investment Fund – Trust (SWIFT)

Campuses benefit from the availability of better banking and investment services Lower Fees Safety: Wells Fargo: Aa3/AA- credit rating Consistent reporting & service across all campuses

Banking

Banking

Banking

Each Campus has been assigned 3 WFB accounts

Deposit account

• Checks, Currency, Coin

• Wires

• ACH

Electronic Disbursement account • Wires • ACH

Paper Disbursement account • Checks

WELLS FARGO BANK

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WELLS FARGO BANK

Banking

Deposit Account A Campus may create sub-accounts to facilitate

reporting and reconciliation Campuses deposit currency and coin at local

WFB Cash Vaults Campuses are encouraged to use ACH debit

blocks to restrict unauthorized account access

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WELLS FARGO BANK

Banking

• Disbursement Accounts Electronic

• Wires • ACH (Automated Clearing House)

Paper • Positive Pay File • Controlled Disbursement • Perfect Presentment • Full Account Reconcilement • Image Retrieval

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Bakersfield Channel Islands Chico Dominguez Hills East Bay Fresno Fullerton Humboldt Long Beach Los Angeles Maritime Monterey Bay Northridge

Chancellor’s Office Pomona Sacramento San Bernardino San Diego San Francisco San Jose San Luis Obispo San Marcos Sonoma Stanislaus Systemwide CSURMA





California State University Master Depository Account

XXXX-XXXXXXX

California State University Master ACH Disbursement Account

XXXX-XXXXXXX

California State University Master Paper Disbursement Account

XXXX-XXXXXXX

California State University Concentration Account

XXXX-XXXXXXX

CONSOLIDATION TO THE CONCENTRATION ACCOUNT

ZBA ZBA ZBA

Banking

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Banking

CASH POSITIONING

Calculation of Surplus or Shortage of available money Wells Fargo Bank Prior day closing balance Intraday check presentment

Net systemwide cash needs Shortage Redemption from US Bank Surplus Investment to US Bank Daily communication Treasury Operations – US

Bank Target balance should provide safety cushion

while maximizing invested funds for the CSU

OUR CASH MANAGEMENT ROLES

• Cash Management at the Campus Campus Cash Management Agents

• Depository Agent • Disbursement Agent

• Cash Management at the CO (Treasury Ops.) Management of banking operations Daily cash positioning Calculating quarterly SWIFT earnings to campuses Forecasting short term & long term cash requirements

Banking

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CASH POSTING ORDER (CPO)

• Mechanism to move SWIFT dollars between campuses and the CO

• Examples: – Redemption/Investment in SWIFT (Cash Positioning) – Charge for a product or service – Reimbursement of expenditures – Systemwide Allocation Transfer (SWAT) – Request for Cash Transfer Order (RCTO)

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Cash Posting Orders (CPO)

Checks

Cash Posting Orders (CPO)

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BANK OF CSU STATEMENT • Campus WFB Balance and SWIFT Activity For WFB Reconciliation

• The WFB Statement is used for transactions reconciliation

• The Bank of CSU is used for balance verification For SWIFT Reconciliation

• The Bank of CSU statement is used for both transaction and balance verification.

Distribution • Campuses receive Bank of CSU statements by the

5th business day of the following month

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Online and Statements

Campus SWIFT Balance

CSU Bank Statements

CPOs

ADNOATs

Allocation Orders

SWATs

SWIFT Earnings Report

BANK OF CSU STATEMENT Online and Statements

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Bank of CSU Online

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Bank of CSU Online

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The Teams

The Team

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Robert Eaton, Senior Director, Financing and Treasury ([email protected]) Colleen Zenger, Senior Financial Manager

([email protected]) – Investment Management and Reporting – Cash Management/Banking program administration – Pooled investment earnings distribution

Lisa Tran, Assistant Manager ([email protected]) – Investment Operations

Open position – Banking Operations

Financing and Treasury General Phone Number: (562) 951-4570

The Team

Treasury Operations www.calstate.edu/FT

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mailto:[email protected]



Kelly Cox, Associate Director, Financial Services Accounting ([email protected])

Andre Eubanks, General Accounting Manager ([email protected])

– Primary Campus Contact – CPO Administrator – Bank of CSU Accounting Responsibilities

June Cacho, Trust Fund Accountant ([email protected]) – Systemwide General Fund and Trust Fund Responsibilities

Terri Porter, Assist Trust Fund Accountant ([email protected])

– CPO Processing

The Team

Financial Services - Accounting Team www.calstate.edu/acct/

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Cash, Investments & Banking - a Campus Perspective

Lorlie Leetham Assistant Vice President, Fiscal Services & Aux Reporting Cal Poly San Luis Obispo

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General overview Wells Fargo CEO Cashiering Office, cash and banking Accounts Payable and payment processing Student Financials, receipts and payments Bank reconciliation – not your mama’s bank

account! Campus investment distribution – IDA Summary

Agenda Agenda

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Centralized banking and investments Campus does not need dedicated cash or

investment manager Exceptions: auxiliaries for endowments, other special

cases Sweep handles move of cash to SWIFT and back

Campus cash is fully invested Campus does need to review cash balances,

understand cash flow, investment balance trends

Campus overview

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Wells Fargo CEO portal

Wells Fargo CEO • CEO stands for Commercial Electronic Office • On-line web tool for bank account

administration, transactions and reporting

• Self-Administration for controlling access and ensuring segregation of duties

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Wells Fargo CEO Campus designated administrators: Create and disable users Assign and adjust product access using secure

tokens and dual approval Set dollar limits for wire transfers, reset passwords,

and more Event messaging for critical transaction information

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Wells Fargo CEO • CEO provides specific access and control over:

– ACH deletes and reversals, fraud filters, or inquiry – Cash Vault – Event Messaging – Image Positive Pay – Statements and Notices – Treasury Information Reporting – Wire Transfers

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Cashiering Office

Campus Cashiering Office: Previous day composite report or intra-day

report for daily reconciliation process Critical due to multiple system feeds, EFT activity Resolve discrepancies quickly

Search images function – very useful! Cash Vault - Place cash orders to replenish

petty cash or for change funds

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Cashiering Office

Cashiering Office and campus cash: Cashiering functions have to be authorized by

campus CFO, or designee Satellite cashiering Oversight responsibility retained centrally

Security in custody and transfer is important Transfer receipts or logs used

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Cashiering Office

Cashiering Office and campus cash: Example: Parking meter coin From parking meter to deposit bags in cashiering

without being touched. Transported to bank by armed courier Counted at bank

On-campus deposits transmitted with two people in locked bags. Over $500, must be brought to cashiers daily Campus policy

Over $2500, police escort required CSU policy.

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Accounts Payable Office

Accounts Payable and payment processing: At Cal Poly – medium sized campus: $140 million a year in AP disbursements Check Cycle twice a week Two different cycles: Regular and EFT Almost all EFT disbursements through AP are

employees Exception: U.S. Bank pre-payments (Pro-card)

Some campuses may have setup EFT for regular vendors

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Accounts Payable Office and payment processing: Non-payroll EFT for employees: Staff expense reimbursements, travel advances, travel

claim reimbursements Employee sign up is through the campus portal

Campus mod

Payment hits bank account quickly EFT payment cycle process is more efficient than the

regular check cycle Employees love it –

No check to pick up or deposit Email notification generated

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Accounts Payable Office, positive pay file: Regular Paycycle Includes CSU Positive Payment step Generates file for transmission to Wells Fargo

EFT Paycycle includes transmission of an EFT file to Wells Fargo No positive pay file step needed

Positive pay file advises the bank of specific pieces of check information

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Accounts Payable Office, positive pay file: Discrepancies on file cause exception when

check is presented at bank for payment. Bank notifies campus of exceptions daily Campus personnel review exceptions in CEO

and determine whether to reject or accept. Cancelled check/stop payment information

also transmitted on positive pay file

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Accounts Payable Office, payments and banking CEO sends email notifications and alerts to campus

banking personnel Positive pay file notification after paycycle

completes and bank receives file Daily transaction totals email Exception alert email, with rejects and stops

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Accounts Payable Office, payments and banking: In CEO, electronic payments can be made via wire

transfer. Security for wire initiation and approval segregated Payment information recorded in PeopleSoft AP

separately. CEO direct wire not integrated into the PS AP module.

Wires useful for foreign vendor payments such as international travel

Notification is sent to the CMO for electronic disbursements in excess of $200k

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Accounts Payable Office, payments and banking: Wires transfers At Cal Poly, we wire cash weekly to auxiliary for

student dining payments Free form or wire templates vary by domestic or

international Limits set by administrator, with dual approval

required to change Email notifications sent to all administrators

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Accounts Payable Office and CEO tools: Check status, to see if a check has cleared Wire reports with date ranges, other criteria Exception reports and review Daily transaction reports On-line EFT reversal. 47

Student Financial Services

Student Financials and payments: Majority of payments received are from student

activity Disbursements to students are done through ACH

and AP checks Electronic payments-in account for 88% of

transactions, 75% of those are ACH (echeck) ACH payments-out (Direct Deposit) to students

account for 80% of transactions Notification is sent to the CMO for electronic

receipts or disbursements in excess of $200k

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The Bank Reconciliation

Campus Bank Reconciliation – “Not your momma’s bank recon” Complex due to volume of activity and varied types of

inflows and outflows 27 plus distinct types of feeds or inflows, thousands of

transactions 10 plus distinct types of disbursements or outflows,

thousands of transactions Cal Poly bank reconciliation checklist currently has 46

major steps, many with multiple sub-steps

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Campus Bank Reconciliation – “Not your momma’s bank recon”

• Separate accounts for different types of transactions

facilitates reconciliation • Cal Poly has twelve sub-accounts, in addition to the

three primary WFB accounts

• Debit blocks are also utilized to restrict unauthorized access

• Bank reconciliation can take up to one full week to complete

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Campus Bank Reconciliation Begins with Wells Fargo bank file load, for checks only. Rest of activity is reconciled using PS queries,

spreadsheets, WF bank statements, Bank of CSU info 12 different PeopleSoft queries used in the bank recon

process, plus ad hoc when needed Reconciling factors related to receipts are typically the

most difficult to resolve Manual journal entries can also wreak havoc

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Campus Investments

Campus role in investment process Operating bank account funded according to

checks presented that day for payment Movement between investment and operating

account managed at systemwide level Campus accounting personnel manage

investment distribution according to campus policy CSU developed mod in PS allows for flexibility

in distributing investment earnings

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Campus Investments

Campus investment distribution Campus SWIFT earnings distributed via CPO Posted to CSU Fund 541, Pooled Investment

Fund WF bank charges, investment fees, and CO

CMO costs paid with earnings Net amount available for distribution by

campus

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Campus Investments

Campus investment distribution Campus earnings distributed and spent

according to campus policy, with some caveats: Fund 485 earnings must be recorded in unique

FNAT in 485 Certain funds must receive benefit of earnings, by

CSU or other policy Other

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Campus Investments

Investment Distribution Allocation module Calculates average daily cash balance in a

fund Allows for distribution of earnings to the fund

that earned them, or to a beneficiary fund. Campus administrative charge can be taken

off the top and the net earnings distributed. Endowments can designate their earnings to a

particular scholarship fund.

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Campus Investments

Investment Distribution Allocation module Earnings available for spending can be limited creation of excess/minus reserve

Module uses industry standard for Average Daily Balance (ADB). Example, endowment fund cash balance used

for ADB calculation receives investment earnings revenue transfers earnings out to scholarship fund

Scholarship fund records transfer in

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Campus Investments

Investment Distribution Allocation module IDA generates file for the accounting entries in

order to record the interest distribution. Can be run without posting to test and look at

the results Ensure all new funds are setup and that setup is

correct Ensure funds are inactivated timely

Allows for considerable flexibility at the campus level

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Investment Distribution

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Investment Distribution

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Campus Specific: Investment Report

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M onth:Average Dai ly Cash Balance Rate of Return

M onth ly SM IF Earn ings

M onth ly SWIFT Earn ings

SWIFT Earn ings

Adj Tota l CSU FundCam pus

Fund Fund Descrip tionAvg Dai ly

Cash Balance

4th Qtr Earn ings

DistributionYTD Earn ings

Distribution

Jul-12 159,465,152 0.0819% 6,518.52 124,129.25 - 130,647.77 403 MB001 Perkins Loans 2,085,961 3,080.85 14,000.27

Aug-12 163,646,143 0.0803% 6,400.42 124,941.77 - 131,342.19 431 MH% & MI% Campus Scholarships and Grants Trust 3,330,219 4,918.55 33,839.94

Sep-12 189,317,623 0.0762% 6,904.67 137,403.97 - 144,308.64 433 MJ% Campus Student Loans Trust 1,899,820 2,805.93 15,196.90

Oct-12 175,278,726 0.0823% 6,318.22 137,905.85 - 144,224.07 435 NK% Miscellaneous Financial Aid - Unrestricted 35,404 52.29 277.45

Nov-12 167,447,372 0.0859% 6,243.84 137,558.24 - 143,802.08 441 MK% Extended Education 6,198,410 9,154.71 38,411.66

Dec-12 180,699,924 0.0783% 6,644.77 134,779.73 - 141,424.50 452 ML% Facility Revenue Fund-Health Services Fees 1,717,809 2,537.11 13,054.25

Jan-13 195,650,115 0.0796% 5,416.67 150,329.95 - 155,746.62 461 MN% Associated Student Body Trust 5,480,712 8,094.71 40,567.86

Feb-13 193,271,177 0.0678% 4,983.10 126,687.51 (551.29) 131,119.32 463 MO% Instructionally Related Activities Trust 3,881,330 5,732.51 31,202.54

Mar-13 204,514,475 0.0787% 5,462.56 155,459.04 - 160,921.60 466 MQ% Endowment Trust 3,597,216 5,312.89 28,365.25

Apr-13 196,872,300 0.0723% 5,513.51 136,811.37 - 142,324.88 471 MS% Parking Revenue Fund-Fines and Forfeitures 4,225 6.24 60.46

May-13 187,973,659 0.0548% 5,370.13 97,731.25 - 103,101.38 472 MT001 Parking Revenue Fund-Parking Fees 11,060,392 16,335.59 81,169.11

Jun-13 172,011,028 0.0417% 5,337.15 66,438.21 - 71,775.36 481 MY% Lottery Education Fund 843,105 1,245.22 5,796.03

485 SL% & MR% CSU Operating Fund 65,642,671 96,950.61 443,859.73

491 MW% Special Projects Fund-Special Projects 24,234,810 35,793.48 211,071.19

496 MX% Miscellaneous Trust 2,327,257 3,437.23 23,845.17

531 NC% Housing-Operations and Revenue 38,256,281 56,502.42 295,640.92

534 NH% Campus Union-Operations and Revenue 21,459,087 31,693.89 164,136.82

542 NG% Capital Project Management 2,762,798 4,080.50 21,575.97 Total: 0.8798% 71,113.57 1,530,176.13 (551.29) 1,600,738.41 541 MZ200 Pooled Investment Fund 194,817,508 287,734.73 1,462,071.52

YTD Annualized Rate of Return: 0.8798% Total Investment Earnings, Less:

Wells Fargo Bank Charges 41,160.90 CO Cash Management 31,758.01 Investment Services' Charges 65,747.98 Total 12-13 Net Investment Earnings 1,462,071.52 Total 1st Quarter (Jul, Aug, Sep) Distributio (370,198.60)

Total 2nd Quarter (Oct, Nov, Dec) Distributi (394,050.65)

Total 3rd Quarter (Jan, Feb, Mar) Distributi (410,087.54)

Total 4th Quarter (Apr, May, Jun) Distribution 287,734.73

YTD Investable Trust Cash 4th Quarter (April, May, June) Distribution

Summary

Campus cash, banking and investments • Cash and investments managed centrally

– Campuses need to monitor cash overall and at the fund level, know their trends

• Wells Fargo CEO streamlines bank account administration, access and reporting

• Bank account reconciliation process can be complex

• Earnings distribution according to campus policy – PeopleSoft IDA module provides flexibility to meet

campus needs

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Cash Investments and Banking

• Questions?

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Contact Info

• Kelly Cox • [email protected] • (562) 951-4611 • Lorlie Leetham • [email protected] • (805)756-5421

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