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 2

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 3

Bank of CSU Overview BANK OF CSU Overview – 273 – 412 – $5.2B – $3.7B – 730K – 632K

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Investments SWIFT (Systemwide Investment Funds – Trust)

• 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

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Investments SWIFT • 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

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Investments SWIFT • 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

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Investments SWIFT • 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

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Investments SWIFT • 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

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Investments SWIFT • 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 A1+/P-1 • 54% invested in cash, U.S. Government or U.S. Agency securities • 39% invested in high – grade corporate securities

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

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Investment Earnings 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 12

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

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Investment Earnings ACCOUNTING FOR INVESTMENT EARNINGS • 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. 14

Banking Banking  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 15

Banking WELLS FARGO BANK Each Campus has been assigned 3 WFB accounts  Deposit account • Checks, Currency, Coin • Wires • ACH

 Electronic Disbursement account • Wires • ACH

 Paper Disbursement account • Checks 16

Banking WELLS FARGO BANK  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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Banking WELLS FARGO BANK •

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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Banking CONSOLIDATION TO THE CONCENTRATION ACCOUNT 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

ZBA

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 ACH Disbursement Account XXXX-XXXXXXX

ZBA

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 Paper Disbursement Account XXXX-XXXXXXX

ZBA

California State University Concentration Account XXXX-XXXXXXX

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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 20

Banking 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 21

Cash Posting Orders (CPO) 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

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Online and Statements 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 24

Online and Statements BANK OF CSU STATEMENT Campus SWIFT Balance  CSU Bank Statements  CPOs  ADNOATs  Allocation Orders  SWATs  SWIFT Earnings Report

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Online and Statements

Bank of CSU Online

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Online and Statements Bank of CSU Online

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The Team

The Teams

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The Team Treasury Operations www.calstate.edu/FT  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 29

The Team Financial Services - Accounting Team

www.calstate.edu/acct/

 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 30

Cash, Investments & Banking a Campus Perspective

Lorlie Leetham Assistant Vice President, Fiscal Services & Aux Reporting Cal Poly San Luis Obispo 31

Agenda Agenda  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 32

Campus overview 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

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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 portal 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 35

Wells Fargo CEO portal 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 38

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 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 41

Accounts Payable Office 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 42

Accounts Payable Office 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 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 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 45

Accounts Payable Office 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 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 48

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 49

The Bank Reconciliation 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 50

The Bank Reconciliation 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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The Bank Reconciliation

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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 53

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 55

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 57

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 58

Investment Distribution

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Investment Distribution

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Campus Specific: Investment Report YTD Investable Trust Cash

M onth:

Average Daily Cash Balance

4th Quarter (April, May, June) Distribution

SWIFT M onthly SM IF M onthly SWIFT Earnings Rate of Return Earnings Earnings Adj

Total

Cam pus CSU Fund Fund

Fund Description

Jul-12

159,465,152

0.0819%

6,518.52

124,129.25

-

130,647.77

403

Aug-12

163,646,143

0.0803%

6,400.42

124,941.77

-

131,342.19

431

Sep-12

189,317,623

0.0762%

6,904.67

137,403.97

-

144,308.64

433

MJ%

Campus Student Loans Trust

Oct-12

175,278,726

0.0823%

6,318.22

137,905.85

-

144,224.07

435

NK%

Miscellaneous Financial Aid - Unrestricted

Nov-12

167,447,372

0.0859%

6,243.84

137,558.24

-

143,802.08

441

MK%

Extended Education

MB001

Perkins Loans

MH% & MI% Campus Scholarships and Grants Trust

Avg Daily Cash Balance

4th Qtr Earnings Distribution

YTD Earnings Distribution

2,085,961

3,080.85

14,000.27

3,330,219

4,918.55

33,839.94

1,899,820

2,805.93

15,196.90

35,404

52.29

277.45

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

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

481 485

Total: YTD Annualized Rate of Return:

0.8798% 0.8798%

71,113.57

1,530,176.13

(551.29) 1,600,738.41

MY%

Parking Revenue Fund-Parking Fees Lottery Education Fund

SL% & MR% CSU Operating Fund

843,105

1,245.22

5,796.03

65,642,671

96,950.61

443,859.73

24,234,810

35,793.48

211,071.19

2,327,257

3,437.23

23,845.17

491

MW%

Special Projects Fund-Special Projects

496

MX%

Miscellaneous Trust

531

NC%

Housing-Operations and Revenue

38,256,281

56,502.42

295,640.92

21,459,087

31,693.89

164,136.82

2,762,798

4,080.50

21,575.97

194,817,508

287,734.73

1,462,071.52

534

NH%

Campus Union-Operations and Revenue

542

NG%

Capital Project Management

541

MZ200

Pooled Investment Fund

Total Investment Earnings, Less: Wells Fargo Bank Charges CO Cash Management Investment Services' Charges Total 12-13 Net Investment Earnings

41,160.90 31,758.01 65,747.98 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

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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 62

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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