The state treasurer's office administers the program that protects deposits made by public bodies in Iowa banks. In addition to federal deposit insurance, public deposits are secured by collateral pledged by banks and further protected by assessments paid by banks if collateral is insufficient to cover losses.
When a bank accepts a public deposit, it agrees to abide by the provisions of Chapter 12C of the Iowa Code, "Deposit of Public Funds" and Chapter 13 of Iowa Administrative Rules, "Deposit and Security of Public Funds in Banks." The amount of collateral required to be pledged to the state treasurer by a bank shall at all times equal or exceed the total amount by which the public fund deposits in the bank exceed the total capital of the bank.
Pledging for Public Fund Deposits:
Pledging Agreements and Forms:
- Master Custodial Agreement
- Pledge and Security Agreement (securities)
- Pledge and Security Agreement (letter of credit or insurance policy)
- Letter of Credit Form
- Exhibit A
Pledging banks must pledge securities to one of the following custodians which have executed a Master Custodial Agreement and have been approved by the treasurer of state. Pledging banks are responsible for paying for all services provided by the custodian.
- Bankers Bank - Madison, Wisconsin
- Bankers Trust Company - Des Moines, Iowa
- Commerce Bank - Kansas City, Missouri
- Country Club Bank - Prairie Village, Kansas
- Federal Home Loan Bank - Des Moines, Iowa
- First National Bank - Omaha, Nebraska
- First Tennessee Bank - Memphis, Tennessee
- Midwest Independent Bank - Jefferson City, Missouri
- Northern Trust Bank - Chicago, Illinois
- Quad City Bank & Trust - Bettendorf, Iowa
- Security National Bank - Sioux City, Iowa
- UMB Bank - Kansas City, Missouri
- United Bankers' Bank - Bloomington, Minnesota
- Wells Fargo Bank - Minneapolis, Minnesota
Notice to Public Body Treasurers:
Citizens of Iowa count on their public body treasurers to safeguard public funds. This duty is becoming more challenging as new electronic methods are created to move funds and make payments.
For example, recently a state agency began using a service called “Dwolla” to facilitate the collection of money. My office reviewed Dwolla’s normal flow of funds and noted that all the money associated with Dwolla’s members is held in a commingled checking account at Veridian Credit Union. We determined that public funds held in the commingled account would not be collateralized or protected by the state sinking fund. As a result, for the state agency contract, we asked that Dwolla make changes to the flow of funds so that no state funds are ever held in the commingled account. Now, when a citizen makes a payment to the state using Dwolla, the funds are transferred directly to the state’s account at another financial institution.
If you decide to use a third-party, like Dwolla, to process receipts and make deposits, you should require that your collections be deposited directly into an account in the name of the public body at an Iowa financial institution. Public money deposited into a vendor’s account will not be covered by the state sinking fund. It is imperative that your money be deposited directly into your public funds account to ensure protection under Chapter 12C of the Iowa Code.