Iowa Administrative Code › Agency 781 - Treasurer of State › Chapter 15 - Required Public Funds Custodial Agreement Provisions › Rule 781-15.2 - Required Provisions for Inclusion in Public Funds Custodial Agreements

Current through Register Vol. 47, No. 3, July 24, 2024
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.