19420     PRIVATE TRUSTS 
(Renumbered and Revised 2/65)

Private trust consist of money, securities, or sundry personal property held by agencies for the benefit of specific individuals such as inmates, students, etc. The State agency acts as custodian of the private individual's assets to the State Treasury for custody.

A subsidiary Trusts Deposits Ledger will be maintained containing an account for each person for whom money or securities are held.

Agencies will exercise normal principles of internal control and will store securities and other personal property in a manner commensurate with their apparent value. Agencies that use safe deposit boxes for the safekeeping of valuable property will permit access to such boxes only when two authorized employees are present to verify the transaction.

19420.3     INTEREST BEARING PRIVATE TRUST ACCOUNTS 
(New 6/83)

Except where prohibited by law, State Departments will deposit private trust moneys (e.g., money held for State hospital residents) in interest bearing account at federally insured financial institutions. Of course, this principle will not apply to trust moneys which must be maintained to meet day-to-day cash needs.

Departments will credit interest earnings to trust accounts when earnings are credited by the depository institutions and at the time trust accounts are closed.

In some instances, individual trust accounts may be consolidated for investment purposes. For example, Treasury Bills or Certificates of Deposit may be purchased with consolidated funds to produce greater interest earnings for each trust account. Interest on such investments will be credited to individual accounts when the earning are made available and at the time trust accounts are closed.

Departments are responsible for maintaining accountability for each private trust account. Any program to consolidate individual trust funds must be approved by the Fiscal Systems and Consulting Unit, Department of Finance.

19421     DEPOSITORS' CASH 
(New 6/83)

Cash receipts will be written in accordance with the provisions of Section 8020 except that agencies may write a receipt to notify a depositor of an amount received from another person for credit to the depositor's account.

Cash in the custody of a State agency for depositors usually will be deposited in the agency's account in the centralized State Treasury System and accounted in Account No. 1120, Agency Trust Fund Cash.

Disbursements will be supported by authorizations signed by depositors or depositors' guardians unless (1) the disbursement is by check payable to the depositor or (2) provisions of law Permit or court orders direct that the disbursement be made.

Receipt of cash trust moneys will be entered in the Trust Fund Cash Receipts Register. Disbursement of cash trust moneys will be entered in the Trust Fund Cash Disbursements Register. Receipts and disbursements of money will be posted to the Trust Deposits Ledger during the month to keep the balance of each depositor's account current.

At the end of each month, agencies will (1) reconcile the Trust Fund Cash portion of their account in the centralized State Treasury System, and (2) balance their Trust Deposits Ledger with Account No. 3510, Deposits.

19422     DEPOSITORS' SECURITIES 
(Revised 5/87)

Agencies will issue press-numbered property receipts for securities received from private individuals. The par or face value of the securities will be shown on the property receipts. No-par stock will be assigned an arbitrary value of one dollar per share. Amounts are entered on property receipts for securities for custody accounting purposes only. They have no relationship to market values.

Interest coupons will be presented for collection as they become due. Interest received will be credited to the depositor's values.

Agencies will obtain receipts discharging themselves from accountability whenever they release securities. The values that were shown in property receipts when the securities were received by the agency will be shown on receipts discharging the agency from accountability for the securities. If the securities are released to other than the owner, the circumstances or the authority for the release will be indicated on the discharge of accountability receipt. The Controller's Receipt will suffice for securities that are remitted to the Unclaimed Property Fund or the Special Deposit Fund.

Property receipts and discharge of accountability receipts will be entered in the General Journal or in a Securities Register if the Volume justifies a register. Receipts and dispositions of securities will be posted to the individual's security account in the Trust Deposits Ledger, which is subsidiary to Account No. 3510, Deposits.

Postings will be made at the end of each month to Account No. 2720, Securities and Other Property Held in Trust, and Account No. 3510, Deposits, from the General Journal or Securities Register. Securities should be inventoried at least annually.

19423     SAFEKEEPING 
(Revised 5/87)

Securities will be kept in a safe or vault. Agency facilities may be used or the securities may be transmitted to the State Treasurer for safekeeping.. If securities are transmitted to the State Treasurer, the head of the agency or his deputy will complete a letter similar to the following on the agency's letterhead:

Date _________________  

State Treasurer
P.0. Box 1919
Sacramento, CA  95809

Dear Sir:

The following employees of the (Name of Agency), whose names and signatures appear below are hereby authorized to issue and sign any letters, instructions, or other written evidence of authority directed to the State Treasurer of the State of California whereby said State Treasurer is authorized to receive, release, or otherwise dispose of any securities or other property belonging to or under the control of this agency, which is about to be deposited or is now on deposit with the State Treasurer for safekeeping or which is or may be deposited with him under the provisions of any laws of the State of California.

(Name-Typewritten)              (Title)                               (Authorized Signature) 
__________________  ___________________ ______________________
__________________  ___________________ ______________________
__________________  ___________________ ______________________
     
 
In the event the securities or other property so held are directed by instructions signed by anyone of the above persons to be delivered to this agency, then the following employees whose names and signatures appear below are hereby authorized to take delivery of an official receipt from you on behalf of this agency.

(Name-Typewritten)          (Title)                                 (Authorized Signature) 
_________________  ___________________ ______________________
_________________  ___________________ ______________________
_________________  ___________________ ______________________

Your responsibility will cease upon making delivery in accordance herewith.

These instructions are to remain in full force and effect until written revocation is filed with the State Treasurer.

Very truly yours,

19424     DEPOSITORS' SUNDRY PERSONAL PROPERTY 
(Renumbered and Revised 2/65)

Sundry personal property is personal property other than cash or securities.

Agencies will issue press-numbered property receipts for sundry personal property received from private individuals. No values will be assigned to sundry personal property.

Agencies will obtain receipts discharging themselves from accountability whenever they release sundry personal property. If the property is released to other then the owner, the circumstances or authority for the release will be indicated on the discharge of accountability receipt.

Sundry personal property will be described on the individual's property card, which is a monetary record of the property held by the agency for the individual.

Sundry personal property may vary greatly in value and size. Sundry personal property will be kept in safekeeping in a manner that will be meet the established rule of law that while a State officer in possession of property lawfully received is not an insurer of its safety, he is required to exercise reasonable and ordinary care and diligence to keep and preserve the property so that it may be restored to the person entitled to it or disposed of in the manner directed by law.

19425.1     DECEASED DEPOSITORS' PERSONAL PROPERTY 
(Revised 5/87)

Institutions having possession of deceased inmates' personal property will dispose of such personal property subject to provisions of Section 19425.3 (after the required 30 days' notice) as follows:

The institution delivering any money or other inmates' personal property to the State Treasurer or State Controller shall furnish the State Controller a schedule setting forth (1) a description of all money and other personal property delivered and (2) the name and last known address of the deceased owner. the institution will draw a check payable to the State Treasurer to remit the Unclaimed Property Fund the cash portion of the deceased inmates' personal property after complying with provisions of SAM Section 19425.3. Such cash will be reported on Form CA 21, Controller's Remittance Advice, and will have attached a schedule reflecting the required information. Form CA 21 will not be used to transmit securities or other personal property. Such items will be transmitted by letter, reflecting the pertinent information described above.

To simplify bookkeeping, remittances of cash and property belonging to deceased, escaped, discharged, or paroled depositors will not be included with other remittances to the State Treasurer's Office. The agency will make the following entry for property transmitted to the Unclaimed Property Fund:

Debit

3510 Deposits

Credit

1120 Agency Trust Fund Cash
2720 Securities and Other Property held in Trust

The Trust Deposits Ledger, which is subsidiary to Account No. 3510 deposits, will be posted from the counterfoil of the check or from the Controller's Receipt and as of the date of that document.

Claimants of cash or personal property that has been remitted to the Unclaimed Property Fund will be referred to the Unclaimed Property Bureau, Division of Accounting, State Controller's Office. The claimant will file his claim directly with the State Controller's Office.

19425.2     ESCAPED, DISCHARGED, OR PAROLED DEPOSITORS' PERSONAL PROPERTY 
(Revised 5/87)

Institutions having possession of personal property of escaped, discharged, and paroled inmates, will dispose of such personal property subject to provisions of Section 19425.3, (after the required 30 days' notice) as follows:

Entries to the agency's accounting records are the same as described in Section 19425.1 above.

Claimants of cash or other personal property that has been remitted to the Unclaimed Property Fund-Abandoned Property Account, will be referred to Unclaimed Property Bureau, Division of Accounting, State Controller's Office. The claimant will file his claim directly with the State Controller's Office.

19425.3     NOTICE OF PROPOSED DISPOSITION OF DEPOSITORS' PERSONAL PROPERTY 
(Revised 5/87)

Before any money, personal property, or documents are delivered to the State Treasurer, State Controller, or public administrator or sold at public auction or upon a sealed bid basis or destroyed, in accordance with SAM Section 19425.1 or 19425.2, notice of the intended disposition of the property shall be posted in a public place in the institution where disposition will be made at least 30 days prior to disposition of the personal property.  A copy of such notice shall be mailed to the last known address of the owner or deceased owner.

No officer or employee of the State having jurisdiction over the disposition of inmates' personal property at public auction or by sealed bid shall purchase or cause to be purchased for him/her or for his/her use said inmates' personal property.  See Government Code Section 1091.

19440     SPECIAL PURPOSE TRUSTS  
(Revised 5/97)

Individuals, associations, corporations, public agencies, etc., may make gifts or grants to the State for specific purposes such as conducting research in a particular field, providing assistance to deserving students, providing money or other assets for the education or recreation of an institution's inmates, etc.

Sections 16305 through 16305.3 of the Government Code require that all money in the possession of or collected by any state agency be deposited in trust in the custody of the State Treasurer, except when otherwise authorized by the Director of Finance, or unless deposited directly in the State Treasury.

Gifts of money will be credited to the State School Fund unless the donor, at the time of making the donation, specifies in writing (1) that the gift is for another fund or appropriation or (2) the purposes of the trust without specifying any fund or appropriation.  See Government Code Sections 11005 and 16302.

If the written designation states the purposes of the trust without specifying any fund or appropriation, the money will be deposited in the Special Deposit Fund unless statutes provide for keeping the money in depositories other than the State Treasury.  See Government Code Section 16371.

See SAM Section 8634 for procedures to follow in accepting gifts of real and personal property.

In some cases, specific provisions of law permit trusts to be maintained in accounts in the centralized State Treasury System or in bank accounts instead of in a fund in the State Treasury. A few statutes provide that special purpose trusts outside the State Treasury will receive the income from certain sources. For example, Welfare and Institutions Code Section 4125 provides that a benefit trust for the education or recreation of patients will receive the income from the investment of a hospital's cash trust moneys.

Special purpose trusts outside the State Treasury normally will be deposited in an account in the centralized State Treasury System and accounted in Accounts No. 1120, Agency Trust Fund Cash, and 5530, Fund Balance-Unappropriated. If necessary, agencies may maintain a separate self-balancing group of General Ledger accounts for each special purpose trust.
 

19440.1     DOCUMENTATION  
(Revised 5/87)

Each trust account established shall be supported by documentation as to the type of trust, donor or source of trust moneys, purpose of the trust, time constraints, persons authorized to withdraw or expend funds, specimen signatures, reporting requirements, instructions for closing the account, disposition of any unexpended balance, and restrictions on the use of moneys for administrative or overhead costs. This documentation will be retained until the trust is dissolved.

19460     TRUST INVESTMENT  
(Revised 5/97)

Government Code section 11012 requires any state agency with some exceptions, that is authorized to deposit funds in bank accounts or to invest trust funds in securities to obtain prior approval from the Department of Finance (DOF).  However, DOF approval is required only on transactions or balances exceeding $25,000 for securities and $100,000 for each bank account.  Therefore, if any one transaction or the balance in an account exceeds the limits, the state agency must obtain DOF approval.  DOF approval is not required for the state agencies listed in Government Code section 11012 or exempted by other statutes.

Generally, trust money not under the control of the State Treasurer should be deposited or invested only if the interest earnings (1) will accrue to the individual accounts of or directly benefit a group of wards, patients, students, or inmates, or (2) will accrue to a trust account or fund established for gifts and donations that is dedicated to assisting wards, patients, students, or inmates, or (3) will affect the charges for auxiliary nonprofit and nonstate supported activities and services furnished to wards, patients, students, or inmates.

In any circumstance, it is the state agency's responsibility to insure that the bank or savings and loan association is insured by the Federal Deposit Insurance Corporation (FDIC) or Federal Savings and Loan Insurance Corporation (FSLIC), respectively.  Additionally, the state agencies may deposit in excess of the maximum ($100,000) in any one bank or savings and loan association, if the state agency notifies the State Treasurer that the collateral requirement have been met.  See SAM section 8002 for collateral requirements.

19462     BANK ACCOUNTS  
(Revised 9/00)

Departments may be authorized either by statute or by approval from DOF, Fiscal Systems and Consulting Unit, (FSCU) to deposit moneys not under the control of the State Treasurer in banks outside of the centralized State Treasury System (CTS).

Departments that have statutory authority to deposit moneys in banks outside the CTS should adhere to the conditions prescribed by the Director of Finance and must notify the State Treasurer by letter stating the name and location of the bank, amount, source, and purpose of the funds to be deposited, and the type and term of the deposit arrangement. In addition, departments that have statutory authority to deposit outside the CTS must submit the report required by Condition 4 of this section.

Departments without such statutory authority will request approval from DOF, FSCU by letter to deposit moneys in bank accounts outside CTS.  See SAM Section 8002.

The following conditions are prescribed by the Director of Finance for depositing moneys in bank accounts outside CTS:

Any department that maintains maximum deposits of $100,000 should periodically review its bank account balances to make certain that the maximum insured amount will not be exceeded when interest earnings are added to the accounts. It is the department's responsibility to make arrangements with the bank to allow interest payments to be sent directly to the department when such payments would increase the balance of an account in excess of the maximum insurable amount. These excess amounts may be deposited in another bank (upon approval by DOF, FSCU) or within CTS.

The deposit of moneys in bank accounts should permit the maximum earnings of interest and the ready access to a reasonable amount of cash to meet unusual demands.

Departments should assure that time or interest-bearing term deposits are held until expiration of the certificate or certificate of deposit to avoid early withdrawal penalties. Federal regulations require a substantial interest penalty for early withdrawals of principal.

19463     SAVINGS AND LOAN ASSOCIATION ACCOUNTS  
(Revised 9/00)

Departments may be authorized either by statute or by approval from DOF, FSCU, to deposit moneys not under the control of the State Treasurer in savings and loan associations.

Departments that have statutory authority to deposit moneys in savings and loan associations should adhere to the conditions prescribed by the Director of Finance but must notify the State Treasurer by letter of each new account and must submit the report required by Condition 6 of this section.  The letter will state the name and location of the savings and loan association, amount, source, and purpose of the funds to be deposited and the type and term of the deposit arrangement.

Departments without such statutory authority will request approval from DOF, FSCU, by letter to deposit moneys in savings and loan associations.  See SAM Section 8002.

The following conditions are prescribed by the Director of Finance for depositing moneys with savings and loan associations:

A department that maintains maximum deposits ($100,000) should periodically review its savings and loan balances to make certain that the maximum insured amount will not be exceeded when interest earnings are added to its accounts. It is the department's responsibility to make arrangements with its savings and loan association to allow interest payments to be sent directly to the department when such payments would increase the balance of an account in excess of the maximum insurable amount. These excess amounts may be deposited in another eligible savings and loan association (upon approval by DOF, FSCU) or within CTS.

The deposit of moneys in savings and loan associations should permit the maximum earnings of interest, and the ready access to a reasonable amount of cash to meet unusual demands, in addition to cash held in the State Treasury account to meet ordinary withdrawal demands.

Agencies should assure that time or interest-bearing term deposits are held until expiration of the certificate or certificate of deposit to avoid early withdrawal penalties. Federal regulations require a substantial interest penalty for early withdrawals of principal. Generally, no interest is earned for 90 days immediately preceding the withdrawal and any applicable interest earnings are calculated at the current rate on regular accounts.

19464     SECURITIES  
(Revised 5/87)

Agencies that invest cash trust moneys in securities may make arrangements with the State Treasurer's Office (or in some instances with the State Employees' Retirement System) for the handling of purchase and sale transactions. The securities will be held by the State Treasurer for safekeeping. The head of the agency or his deputy will send a letter to the State Treasurer similar to that prescribed in SAM Section 19423.

The following principles will be observed in accounting for investments in securities.

• Par value, premium, discounts, and accrued interest purchased on stated rate of interest securities will be accounted in separate accounts.
  
• The "no stated rate of interest" securities will be recorded at cost and no interest will be recognized except at time of sale or maturity and at June 30 (when the interest will be accrued).
  
• Premium will be amortized and discount will be accumulated by the "interest method" (amortization of premium and discount is used to yield an equal periodic rate of interest) as of each June 30 only. Amortization and accumulation to each interest date will not be required.
  
• Interest will be accrued as of each June 30.
  
• Bond amortization schedules will be developed by the agency or may be purchased from a publishing company. Effective yield will be computed to the nearest 1/100 of 1 percent. The following information must be supplied when ordering bond amortization schedules: (1) face value, (2) purchase price, (3) coupon rate, (4) maturity date (month, day, year), (5) purchase date (month, day, year). and (6) the fact that amortization is required as of each June 30 only.

The following journal entries illustrate the prescribed procedure for stated rate of interest securities only.