Iowa Code r. 781-15.2 - Required provisions for inclusion in public funds custodial agreements
All public funds custodial agreements shall be in writing and shall include the following provisions:
(1) The custodian shall represent and warrant
that it lawfully possesses and exercises fiduciary powers under applicable
federal laws or the laws of the state of Iowa, unless such custodian is located
out of state and is used by the treasurer of state for purposes permitted in
Iowa Code section 12C.4, and that it has the
resources and expertise to act as the custodian of public funds or any security
or document of ownership or title evidencing public funds investments and to
perform its responsibilities under the public funds custodial
agreement.
(2) The scope of duties
and services to be performed by the custodian shall be described in detail
satisfactory to the public unit and shall include, as applicable, custodial,
settlement, collection of income and investment proceeds, reporting, and
securities valuation services.
(3)
The custodian shall agree to provide the public unit with written confirmation
of its custody, on behalf of the public unit, of all assets subject to the
public funds custodial agreement.
(4) The custodian shall agree to segregate
the public fund's assets from the custodian's own assets and to maintain
records adequate to describe the public unit's ownership of or beneficial
interest in the assets held by the custodian.
(5) The custodian shall agree to maintain
adequate records regarding a description of the assets, all receipts,
deliveries and locations of assets, together with a current inventory thereof,
all purchases and sales, all receipts and disbursements of cash and all debits
and credits pertaining to transactions relating to the assets, including but
not limited to interest payments. The custodian shall agree to conduct periodic
inspections in order to verify the accuracy of the inventory, including the
securities, if any, held by a subcustodian.
(6) The custodian shall agree that all
records of investment transactions relating to the public funds custodial
agreement and the services provided thereunder, regardless of who performs the
services, shall be considered records of the public unit and open to inspection
and examination by the public unit, its employees and its designees. To the
extent records of investment transactions are maintained by affiliates of the
custodian, the custodian shall agree to be responsible to obtain any such
records that are in the possession of its affiliates upon reasonable request of
the public unit. The custodian shall agree to make all records of investment
transactions relating to the public funds custodial agreement and the services
provided thereunder available upon reasonable request for inspection and audit
by the public unit, its employees or designees, and to allow these records or
excerpts of these records to be copied and removed to facilitate the audit or
to comply with public records requirements.
(7) If the custodian proposes to use an
affiliated subcustodian or other affiliated agent to perform any services in
connection with the public funds custodial agreement, the custodian shall agree
that it shall be responsible for the acts and omissions of such affiliates as
though the acts and omissions of the affiliates were the acts and omissions of
the custodian.
(8) The custodian
shall agree that it will receive all assets purchased by or for the public unit
from the persons through or from whom the same were purchased, and only upon
receipt thereof (delivery versus payment basis) pay, out of the assets held on
account of the public unit, the total amount payable for the purchase as set
forth in the instructions received by the custodian. The custodian shall agree
to secure possession of all investment instruments that are the subject of or
are the underlying obligations for any repurchase agreement.
(9) The custodian shall agree that it will
transfer assets for sale pursuant to instructions delivered to the custodian
only upon receipt of the total amount payable to the public unit in connection
with the settlement of the transaction, provided that the same conforms to the
total amount payable to the public unit as shown in the instructions with
respect to such sale. No assets may be delivered out of the account of the
public unit without full payment (no "free deliveries" of investment securities
shall be permitted).
(10) If a
public unit has engaged an investment advisor or investment manager, the public
funds custodial agreement must limit the authority of the investment manager or
advisor to authorizing a sale or purchase of an investment on a delivery versus
payment basis pursuant to an instruction procedure which is consistent with the
requirements of the public funds custodial agreement and the internal control
policies of the public unit. The public funds custodial agreement shall not
permit an investment manager or investment advisor to deliver, transfer, or
move cash or securities to another account, location or entity.
(11) The delivery, transfer or movement of
cash or securities held in custody for the public unit (except for trades on a
delivery versus payment basis) shall only be made pursuant to instructions
given to the custodian by the public unit, its employees or designees,
consistent with the internal controls established by the public unit.
(12) The public funds custodial agreement
shall specify in satisfactory detail the procedures for instructions to be
furnished to the custodian in connection with the sales or purchases of
securities and the delivery, transfer or movement of cash or securities held in
the custody account. The instruction provisions must be consistent with the
internal control policies established by the public unit. These procedures must
specify the individual or individuals authorized to issue instructions, the
scope of their authority, require current specimen signatures of authorized
individuals to be maintained by the custodian and require written instructions
to be furnished to the custodian. If oral instructions are permitted, the
procedures or protocol for them must be specified in detail and must address
verification and confirmation procedures and follow-up written instructions
required by the custodian and the public unit.
(13) The public funds custodial agreement
shall require the custodian to furnish a monthly report describing in
satisfactory detail the inventory of the account and transaction history during
the preceding month and other reports at such times as may be adequate to
satisfy the public unit's internal control procedures for reconcilement. In
addition, the custodian shall, to the extent not prohibited by law, provide
written notice to the public unit within 30 days of the custodian's receipt of
an audit by an independent or internal auditor or regulatory authority which
indicates that there is a material weakness in the custodian's internal control
structure or receipt of a regulatory order or sanction which relates to the
type of work performed under the public funds custodial agreement. The
custodian shall include in the written notice a detailed description of the
comment or sanction and any curative measures which the custodian proposes to
take in response thereto.
(14) The
public funds custodial agreement shall not provide for the compensation of the
custodian based on investment performance.
(15) The custodian shall agree to comply with
all applicable federal, state, and local laws and rules when performing within
the scope of the public funds custodial agreement.
(16) At a minimum, the custodian shall agree
to exercise the standard of care expected of a professional custodian of public
funds in holding, maintaining and servicing the public fund's assets and cash
and in performing the custodian's duties and obligations under the public funds
custodial agreement.
Notes
State regulations are updated quarterly; we currently have two versions available. Below is a comparison between our most recent version and the prior quarterly release. More comparison features will be added as we have more versions to compare.
No prior version found.