Government Cash Requirements

The Latest Rules and Regulations That Impact Your Government Entity

Recently, while working with a few of our smaller governmental clients, we had recognized a concern by those client regarding their requirements to collateralize and/or maintain deposit balances below the ever changing Federal Deposit Insurance Corporation limits (FDIC).  We realize how much those working in government finance are constantly bombarded with items in their day to day jobs and we felt it would be a good time to remind everyone of the requirements set forth by the State of Arizona in regards to their cash deposits.

First and foremost, a governmental entity needs to remember their deposits are the citizen’s deposits and they are stewards of those funds, which gives way to why it is so important to ensure those deposits are secured by FDIC coverage or bank collateralization.  Second, the State legally requires, as noted in Arizona Revised Statute §35-323 G and elsewhere in the statutes, that deposit accounts must be maintained with a financial institution that will guarantee their assets by pledging certain assets of a value that covers the total assets of the District by 101%.  This is sometimes not necessary with the FDIC coverage that has been increased and extended to $250,000 per insured bank for interest bearing accounts and the temporarily unlimited coverage for non-interest bearing accounts up through December 31, 2012.  However, if a government finds themselves with interest bearing accounts that exceed $250,000 or they are preparing for non-interest bearing accounts that will exceed $250,000 after December 31, 2012, the governmental entity will want to begin working with their financial institutions to collateralize their deposits up to 101% of the balance at all times.  Unless some unforeseeable change to the FDIC coverage occurs in the next 8 months, it’s time to start calling your banks to arrange for your accounts to be fully covered.

Brian Hemmerle, CPA