Senate Bill No. 279
(By Senators Minard, Jenkins and Love)
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[Introduced February 24, 2005; referred to the Committee
on Banking and Insurance.]
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A BILL to amend and reenact §7-6-2 of the Code of West Virginia,
1931, as amended; to amend and reenact §8-13-22a of said code;
and to amend and reenact §18-9-6 of said code, all relating to
the requirement of banking institutions to post bond or other
security for the deposit of county, municipal or county board
of education funds.
Be it enacted by the Legislature of West Virginia:
That §7-6-2 of the Code of West Virginia, 1931, as amended, be
amended and reenacted; that §8-13-22a of said code be amended and
reenacted; and that §18-9-6 of said code be amended and reenacted,
all to read as follows:
CHAPTER 7. COUNTY COMMISSIONS AND OFFICERS.
ARTICLE 6. COUNTY DEPOSITORIES.
§7-6-2. Bond of depositories.
No such designation shall be binding on any county, nor shall any public money be deposited thereunder, until the banking
institution designated shall execute bond with good and sufficient
sureties, to be accepted and approved by the county commission,
payable to the State of West Virginia, in a sum as the county
commission shall direct, and which shall not be less than the
maximum sum that shall be deposited in the depository at any one
time. The bond shall be executed by at least four resident
freeholders as sureties owning in the aggregate unencumbered real
estate having an assessed valuation thereon equal to the penalty of
the bond, or by a fidelity or indemnity company authorized to do
business within the state, satisfactory to, and acceptable by the
county commission, and having not less than six hundred thousand
dollars capital; and the bond shall be conditioned for the receipt,
safekeeping and payment over of all money which may be deposited in
or come under the custody of the banking institution designated a
county depository under the provisions hereof, together with the
interest thereon at the rate specified by this article; and the
bond shall be further conditioned for the faithful performance, by
the banking institution so designated, of all the duties imposed by
this article upon a depository of public moneys: Provided, That the
clerk of the county commission shall keep a record of each surety
on all personal bonds given as hereinbefore provided for and the
clerk shall notify the county commission of every recorded
conveyance of real estate made by any surety on said personal bond.
An action shall lie on the bond at the instance of the county
commission, or the sheriff, for the recovery of any money deposited
in the depository, upon failure or default of the depository to
fully and faithfully account for and pay over any and all public
moneys deposited by the sheriff and of all interests earned and
accrued thereon as required by this article. A bond shall not be
accepted by the county commission until it shall have been
submitted to the prosecuting attorney, and certified by him or her
to be in due and legal form, and conformable to the provisions of
this article, which certificate shall be indorsed thereon:
Provided, That the county commission may, in lieu of the bond
provided for hereinbefore, accept as security for money deposited
as aforesaid, interest-bearing securities of the United States, or
of a state, county, district or municipal corporation, or of the
federal land banks, or indorsed county and district warrants of the
county in which the depository is located, or letters of credit of
the federal land banks, or federal home loan banks, or such other
letters of credit approved by the treasurer; the face value of
which securities shall not be less than the sum hereinbefore
specified as the amount to be named in the bond in lieu of which
the securities are accepted; or the county commission may accept
the securities as partial security to the extent of their face
value for the money so deposited, and require bond for the
remainder of the full amount hereinbefore specified, to be named in the bond, and in the bond so required, the acceptance of securities
as partial security, and the extent thereof, shall be set forth:
Provided, however, That a banking institution shall not be required
to provide a bond or security in lieu of bond if the deposits
accepted are placed in certificates of deposit under the following
conditions: (i) The funds are invested through a designated state
depository selected by the county; (ii) the selected depository
arranges for the deposit of the funds in certificates of deposit in
one or more banks or savings and loan associations wherever located
in the United States, for the account of the county; (iii) the full
amount of principal and accrued interest of each such certificate
of deposit is insured by the federal Deposit Insurance Corporation;
(iv) the selected depository acts as custodian for the county with
respect to such certificates of deposit issued for the county's
account; and (v) at the same time that the county's funds are
deposited and the certificates of deposit are issued, the selected
depository receives an amount of deposits from customers of other
financial institutions wherever located in the United States equal
to or greater than the amount of the funds invested by the county
through the selected depository.
The hypothecation of the securities shall be by proper legal
transfer as collateral security to protect and indemnify by trust
any and all loss in case of any default on the part of the banking
institution in its capacity as depository as aforesaid. All the securities shall be delivered to or deposited for the account of
the county commission, and withdrawal or substitution thereof may
be permitted from time to time upon approval by the county
commission by order or record, but the collateral security shall be
released only by order of record of the county commission when
satisfied that full and faithful accounting and payment of all the
moneys has been made under the provisions hereof. In the event
actual possession of the hypothecated securities are delivered to
the county commission, it shall make ample provision for the
safekeeping thereof and the interest thereon when paid shall be
turned over to the banking institution, so long as it is not in
default as aforesaid. The county commission may permit the deposit
under proper receipt of the securities with one or more banking
institutions within or without the state of West Virginia and may
contract with any institution for safekeeping and exchange of any
hypothecated securities, and may prescribe the rules for handling
and protecting the same.
CHAPTER 8. MUNICIPAL CORPORATIONS.
ARTICLE 13. TAXATION AND FINANCE.
§8-13-22a. Investment of municipal funds.
All municipal funds, the investment of which is not governed
by other provisions of this code and not required for the payment
of current obligations and not otherwise prohibited, may be
invested and reinvested in:
(1) Any direct obligation of, or obligation guaranteed as to
the payment of both principal and interest by, the United States of
America;
(2) Any evidence of indebtedness issued by any United States
government agency guaranteed as to the payment of both principal
and interest, directly or indirectly, by the United States of
America including, but not limited to, the following: Government
national mortgage association, federal land banks, federal home
loan banks, federal intermediate credit banks, banks for
cooperatives, Tennessee valley authority, United States postal
service, farmers home administration, export-import bank, federal
financing bank, federal home loan mortgage corporation, student
loan marketing association and federal farm credit banks;
(3) Any evidence of indebtedness issued by the federal
national mortgage association to the extent such indebtedness is
guaranteed by the government national mortgage association;
(4) Any evidence of indebtedness that is secured by a first
lien deed of trust or mortgage upon real property situate within
this state, if the payment thereof is substantially insured or
guaranteed by the United States of America or any agency thereof;
(5) Direct and general obligations of this state;
(6) Any undivided interest in a trust, the corpus of which is
restricted to mortgages on real property and, unless all of such
property is situate within the state and insured, such trust at the time of the acquisition of such undivided interest, is rated in one
of the three highest rating grades by an agency which is nationally
known in the field of rating pooled mortgage trusts;
(7) Any bond, note, debenture, commercial paper or other
evidence of indebtedness of any private corporation or association:
Provided, That any such security is, at the time of its
acquisition, rated in one of the three highest rating grades by an
agency which is nationally known in the field of rating corporate
securities:
Provided, however, That if any commercial paper or any
such security will mature within one year from the date of its
issuance, it shall, at the time of its acquisition, be rated in one
of the two highest rating grades by any such nationally known
agency and commercial paper or other evidence of indebtedness of
any private corporation or association shall be purchased only upon
the written recommendation from an investment advisor that has over
three hundred million dollars in other funds under its management;
(8) Negotiable certificates of deposit issued by any bank,
trust company, national banking association or savings institution
which mature in less than one year and are fully collateralized;
(9) Interest earning deposits including certificates of
deposit, with any duly designated state depository, which deposits
are fully secured by a collaterally secured bond as provided in
section four, article one, chapter twelve of this code:
Provided,
That a banking institution shall not be required to provide this collaterally secured bond, or other security in lieu of bond, if
the deposits accepted are placed in certificates of deposit in
accordance with the following conditions: (i) The funds are
invested through a designated state depository selected by the
municipality; (ii) the selected depository arranges for the deposit
of the funds in certificates of deposit in one or more banks or
savings and loan associations wherever located in the United
States, for the account of the municipality; (iii) the full amount
of principal and accrued interest of each such certificate of
deposit is insured by the federal Deposit Insurance Corporation;
(iv) the selected depository acts as custodian for the municipality
with respect to such certificates of deposit issued for the
municipality's account; and (v) at the same time that the
municipality's funds are deposited and the certificates of deposit
are issued, the selected depository receives an amount of deposits
from customers of other financial institutions wherever located in
the United States equal to or greater than the amount of the funds
invested by the municipality through the selected depository; and
(10) Mutual funds registered with the securities and exchange
commission which have assets in excess of three hundred million
dollars.
CHAPTER 18. EDUCATION.
ARTICLE 9. SCHOOL FINANCES.
§18-9-6. Transfer of moneys; appointment of treasurer; bonding of treasurer; approval of bank accounts; authority to invest;
security for funds invested.
The sheriff of each county shall remit to the board of education
all moneys in his
or her possession held on behalf of the county
board of education, whether or not deposited in a bank or
depository, unless the sheriff has been designated treasurer of the
board of education as provided in this section. Such transfer of
funds shall be made as of the balances on hand on the thirtieth day
of June of the year in which the board of education appoints a
treasurer other than the sheriff, and shall be completed no later
than the first day of August of that year. Such transfer shall be
adjudged complete and final upon the approval of the sheriff's
official settlement for the fiscal year ending on the thirtieth day
of June of the year in which the board of education appoints a
treasurer other than the sheriff, and any minor adjustment made
necessary by the actually known figures shall also be made at that
time. All balances in all county school funds at the end of each
month after the thirtieth day of June of the year in which the
board of education appoints a treasurer other than the sheriff
shall be transferred by the sheriff to the county board of
education not later than the tenth day of the following month.
On or before the first Monday in May each county board of education
shall upon recommendation of the county superintendent appoint a
treasurer for the board. Such treasurer shall be the fiscal officer of the board, or an employee commonly designated as the person in
charge of the financial affairs of the county board, or the county
sheriff:
Provided, That once a board of education has appointed a
treasurer other than the sheriff, the sheriff shall not be named
treasurer of the board in a subsequent year. Upon appointment this
person shall be titled and referred to as treasurer of the board of
education. For the faithful performance of this duty, such
treasurer shall execute a bond, to be approved by the board of
education, in the penalty to be fixed by the board of education,
not to exceed the amount of school funds which it is estimated the
treasurer will handle within any period of two months. The premium
on such bond shall be paid by the board of education.
The board of education may open a bank account, or accounts,
as required to adequately and properly transact the business of the
district in a depository, or banks, within the county. Such
depositories, or banks, shall provide bond to cover the maximum
amount to be deposited at any one time. However, the county board
of education may, in lieu of such bond, accept as security for
money deposited securities of the United States, or of a state,
county, district or municipal corporation, or federal agency
securities:
Provided, That a banking institution shall not be
required to provide a bond or security in lieu of bond if the
deposits accepted are placed in certificates of deposit in
accordance with the following conditions: (i) The funds are invested through a designated state depository selected by the
county board of education; (ii) the selected depository arranges
for the deposit of the funds in certificates of deposit in one or
more banks or savings and loan associations wherever located in the
United States, for the account of the county board of education;
(iii) the full amount of principal and accrued interest of each
such certificate of deposit is insured by the federal Deposit
Insurance Corporation; (iv) the selected depository acts as
custodian for the county board of education with respect to such
certificates of deposit issued for the county board of education's
account; and (v) at the same time that the county board of
education's funds are deposited and the certificates of deposit are
issued, the selected depository receives an amount of deposits from
customers of other financial institutions wherever located in the
United States equal to or greater than the amount of the funds
invested by the county board of education through the selected
depository. One hundred ten percent of the face or par value of
such securities shall not be less than the sum hereinbefore
specified as the amount to be named in the bond in lieu of which
such securities are accepted, or the county board of education may
accept such securities as partial security to the extent of their
face value for the money so deposited and require bond for the
remainder of the full amount hereinbefore specified, to be named in
the bond, and, in the bond so required, such acceptance of securities as partial security and the extent thereof shall be set
forth. The hypothecation of such securities shall be by proper
legal transfer as collateral security to protect and indemnify by
trust any and all loss in case of any default on the part of the
banking institution in its capacity as depository as aforesaid. All
such securities shall be delivered to or deposited for the account
of the county board of education, and withdrawal or substitution
thereof may be permitted from time to time upon approval by the
county board of education by order of record, but such collateral
security shall be released only by order of record of the county
board of education when satisfied that full and faithful accounting
and payment of all the moneys has been made under the provisions
hereof. In the event actual possession of such hypothecated
securities is delivered to the county board of education, it shall
make ample provision for the safekeeping thereof, and the interest
thereon when paid shall be turned over to the banking institution,
so long as it is not in default as aforesaid. The county board of
education may permit the deposit under proper receipt of such
securities with one or more banking institutions within the state
of West Virginia and may contract with any such institution for
safekeeping and exchange of any such hypothecated securities, and
may prescribe the rules
and regulations for handling and protecting
the same.
On and after the first day of July, one thousand nine hundred seventy-three, all levies and any other school moneys received by
the sheriff and paid to the treasurer of the county board of
education shall be deposited in these accounts, and all proper
payments from such funds shall be made by the designated depository
or bank upon order or draft presented for payment and signed by the
duly authorized signatories of the board of education:
Provided,
however, That in determining the depository for board of education
funds a board member who has a pecuniary interest in a bank within
the county shall not participate in the determination of the
depository for such funds.
If it be deemed that sufficient funds are on hand in any
account at any one time which may be more than are normally
required for the payment of incurred expenses, such funds in the
amount so deemed available may be invested by the treasurer of the
county board with the West Virginia municipal bond commission, or
in guaranteed certificates of deposit issued by the depository or
bank, or other guaranteed investments such as treasury bills,
treasury notes or certificates of deposit issued by either the
United States government or a banking institution in which federal
or state guarantees are applicable. Interest earned in such
investments is to be credited to the fund from which the moneys
were originally available.
NOTE: The purpose of this bill is to allow federally insured depository institutions to accept county, municipal and county
board of education public moneys for deposit without posting a bond
or other assets if the funds are placed in a deposit matching
network that provides for federal deposit insurance from the FDIC
for the full amount accepted.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.