(2/7/11) INVESTMENT OF PUBLIC FUNDS 1. PURPOSE This Directive states the policy and responsibilities for investment of public funds maintained by the Agricultural Marketing Service (AMS). 2. REPLACEMENT HIGHLIGHTS This Directive replaces AMS Directive 2210.2, Investment of Public Funds, dated August 2005. 3. AUTHORITIES a. Title 31, Code of Federal Regulations (CFR), Parts 202-226, Money and Finance: Treasury. b. Volume I, Treasury Financial Manual 6-9000, Securing Government Deposits in Federal Agency Accounts. 4. DEFINITIONS OF TERMS a. Agency. Any department, agency, or instrumentality of the U.S. Government. b. Designated Depositary. A financial institution designated by the Department of the Treasury as a depositary and financial agent of the Federal Government which has been selected by an agency to hold public funds. c. Federal Reserve Districts and Banks. The Federal Reserve Bank or branch of the district within the geographic area where the agency’s designated depositary is located. d. Government Deposits. Public money, including, but not limited to, revenue and funds of the United States and deposited funds subject to the control or regulation of the United States or any of its officers, agents, or employees. e. Recognized Insurance Coverage. The insurance provided by the Federal Deposit Insurance Corporation (FDIC), National Credit Union Share Insurance Fund, and the insurance organizations specifically approved by the Secretary of the Treasury under Title 31, CFR, Part 226. 5. POLICY It is AMS policy to: a. Exercise prudent cash management of funds collected through: (1) Fees for services, (2) Assessments from handlers and producers to finance research and promotion efforts, and (3) Assessments to administer marketing agreements and orders. This also applies to payments received by producer settlement funds and interest or other charges collected on overdue accounts. b. Require that a formal agreement or Memorandum of Understanding be signed between parties before funds are deposited with a financial institution. This agreement is to state the responsibilities of both the custodial agency and the financial institution, and must conform with the policies and guidelines established by the U.S. Treasury with respect to the deposits of, and collateral for, public funds. c. Require complete safety of invested funds. In this regard, AMS adheres to U.S. Department of the Treasury Regulations, Title 31, CFR, Parts 202-226. 6. RESPONSIBILITIES a. The fund custodians for AMS who maintain public funds are the Budget Division, the Research and Promotion Boards, Milk Market Administrators, and the Fruit and Vegetable Marketing Order Administrative Committees. When investing funds held in public trust, fund custodians must follow these guidelines: (1) Investments. All investments must be short-term, risk-free, interest-bearing instruments. (a) Short-Term. All investments must have a maturity period of 1 year or less to ensure availability and rapid conversion of the principal to cash. (b) Risk-Free. All investments must be federally insured or fully collateralized with Federal Government securities. (2) Insurance Coverage. All investments must be fully secured. Accounts are to be established at financial institutions having FDIC insurance which protects the funds depositor’s place in banks and savings associations. Accounts at individual institutions should not exceed, in the aggregate, FDIC insured thresholds in order to ensure full insurance for both account principal and interest. The standard insurance amount currently is $250,000 per depositor through December 31, 2013. On January 1, 2014, the standard insurance amount will return to $100,000 per depositor for all deposit accounts. (3) Collateralization. All investments exceeding FDIC insured thresholds, within said institutions, must be fully collateralized. (a) Before sending funds to an institution for investment, eligible collateral must be pledged to an account under the control of the investing custodian. (b) Only those securities specified in U.S. Department of the Treasury Regulations, Title 31, CFR, Part 202, are acceptable collateral. They include securities issued, fully insured or guaranteed by U.S. Government agencies, or U.S. Government-sponsored corporations. Regulations that govern the types of acceptable collateral that may be pledged to secure deposits of public monies, as well as the valuation of that collateral are addressed in Title 31 CFR, Part 380. For a current list of acceptable classes of securities and instruments described within this Code and their valuations, see the Bureau of the Public Debt’s Web site at www.publicdebt.treas.gov. (c) Collateral must be pledged at face value. Financial institutions must provide the investor with quarterly inventories of pledged collateral showing both face and market value. (d) Pledged collateral must be separately segregated in the name of the investor (i.e., AMS-Budget Division, Board, Milk Market Administrator, or Administrative Committee), in order to prevent double pledging. (e) Collateral not held by the Federal Reserve Board must be held by a financial institution authorized by Treasury as a Federal Depositary, having FDIC insurance, and approved by the Federal Reserve Board. (f) Investment records must be maintained for 6 years and 3 months, as required by the AMS Records Management Program. b. The Planning and Accountability Division, AMS, will conduct a biennial review of the investment decisions process for the AMS investment program. Investment authorities outside of the AMS investment program will continue to be reviewed as outlined in their investment authority. The Budget Division will issue quarterly investment letters that will apprise committee members of their investment earnings. The Budget Division will also host an annual meeting with the Investment Committee to provide an overview of the investment program activities. c. On an annual basis, all employees authorized to conduct business with any financial institution participating in the AMS investment program must complete an AMS Investment Program Disclosure Statement Form which indicates any personal relationships with those financial institutions with which business is conducted. d. The Budget Program and Analysis Branch Chief and the AMS Budget Officer share the responsibility of approving daily investment decisions respectively. In their absence, acting staff (GS-13 and above) assume these responsibilities provided they have signed disclosure statements and have confidential disclosure reports on file. 7. INQUIRIES a. For further information, please contact the AMS Budget Office. b. This Directive is available online at http://www.ams.usda.gov/amsissuances