By Camille Ho-A-Lim, CPA, CGMA
Ciuni & Panichi, Inc.
The Treasurer of the State of Ohio (TOS) has implemented a new Ohio Pooled Collateral System (OPCS) that became effective July 1, 2017.
The new OPCS benefits government entities and financial institutions* by reducing the administrative burden for both. Additionally, it enables government entities daily access of collateral pledged by their financial institutions, and for financial institutions, it collateralizes all public deposits using one method.
Government entities will be notified via email when their financial institution enrolls in OPCS.
OPCS allows eligible financial institutions to pledge collateral to the TOS to secure local government (Public Units) deposits. Financial institutions who participate in OPCS shall pledge to the TOS a single pool of eligible securities with aggregate market value at all times equal to at least either of the following:
a) 102 percent of the total amount of all uninsured public deposits; or
b) an amount determined by rules adopted by the treasurer of state that set forth the criteria for determining the aggregate market value of the pool of eligible securities pledged by a public depository pursuant to division (B) of this section. Such criteria shall include, but are not limited to, prudent capital and liquidity management by the public depository and the safety and soundness of the public depository as determined by a third-party rating organization. (Ohio Rev. Code § 135.182(B)(1)(b)).
The TOS’ office is the sole administrator and monitor of the OPCS.
For those financial institutions that are not members of the OPCS, they shall pledge eligible securities of aggregate market value at all times equal to at least 105 percent of the total amount of all uninsured public deposits.
The TOS – Responsible for determining financial institution eligibility, market value, and face value of the pooled securities pledged by the eligible financial institution. Also, the TOS is responsible for monitoring that the bank is meeting its obligation in providing adequate collateral.
Government entities – While the TOS is responsible for the OPCS, government entities still have a fiduciary responsibility for their public deposits. As such, they should monitor the OPCS to ensure:
a) reported bank balances are accurate;
b) reported bank balances are complete (all accounts included), and
c) bank is meeting its obligation in providing adequate collateral.
OPCS has added a report “Public Unit Attestation,” which shows those government entities that have not logged in. The spirit of the idea is that the local government officials should not leave their funds at risk if their financial institutions are not properly collateralizing the balances.
If the government entities’ financial institutions are not enrolled in OPCS they would use the Specific Pledge Method and are required to maintain a record of all securities pledged at all times by the financial institution and to monitor the compliance by ensuring the sufficiency of the securities pledged by the financial institution.
Financial institutions – Required to maintain accounting records at all times of the total amount of all public deposits to be secured by the pool and the total market value of securities pledged to secure the deposits and report this information to the TOS. Must have a qualified trustee approved by the TOS (i.e. Federal Reserve) and deposit the eligible securities with the trustee for safekeeping. Additionally, financial institutions will be required to confirm the accuracy of its account balances upon request by the TOS up to four times per year.
For more details on OPCS please refer to ORC 135.182 (codes.ohio.gov/orc/135.182) or the TOS website (OhioTreasurer.gov).
This is a complicated subject. At Ciuni & Panichi, we have been helping government entities stay in financial compliance for more than 40 years. We have a dedicated team with extensive experience and expertise serving government entities throughout the state. If we can help you, call Camille Ho-A-Lim, CPA, CGMA, Audit and Accounting Services manager at 216-831-7171 or CHo-A-Lim@cp-advisors.com
*Financial Institutions who are Public Depositories (national or any savings and loan association or savings bank doing or authorized to do business in the State of Ohio, which receives or holds any public deposits).