Treasury Investments

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Process Group/Policy Details

Process Group Description

This process group describes the process related to Treasury investment earnings and distributions.

Rationale or background to policy:

Based on Fit Gap analysis, it was determined that Department of Treasury will not use the CORE Investment Accounting Module. 

JP Morgan Chase Bank is the custodian of the Department of Treasury’s investment accounts.  Wells Fargo Bank holds Department of Treasury’s operating account (Pooled Cash).

In CORE, the Fund Type (6 digits) will indicate whether or not the fund qualifies for earning interest. The first character in the Fund Type field will be used as an indicator for whether or not the Fund or any portion of the Fund earns interest (Y or N). The State shall use a single Chart of Accounts (COA) element to identify interest earning subsets of Funds and SubFunds (and the related average daily cash balance for the Fund or SubFund). If the department wants to break the cash category (and interest earnings) down below the Fund and SubFund level, Department shall provide CORE Reporting Codes to the Office of the State Controller at Fund setup and use them on all relevant transactions. The Office of the State Controller will provide the Reporting Code information to the Department of Treasury for the interest allocation process. Departments shall confirm that the Fund is earning interest as required.

Policy Statement:

Each department is responsible to identify and work with OSC to setup new funds in CORE and must request the interest earning indicator to be set for the Fund. Departments shall provide the Office of the State Controller information on interest earnings for each Fund set up and any Reporting Codes and related Group Rollups needed to further distribute the earnings. The Office of the State Controller shall provide this information to the Department of Treasury for the interest allocation process.

Each department is responsible to process cash receipt documents (CR) timely in CORE to claim money deposited with Treasury and to ensure that the money is included in the Average Daily Balance Report upon which interest earnings allocations are calculated.

To the extent practicable, the Department of Treasury intends to use the CORE Cost Allocation Module for interest earnings calculations. 

Unrealized Gains/Losses on the investments underlying Treasury Pooled Cash (Balance Sheet Account 1100) will be allocated to department’s Funds based on Period 12 closing balances.  The unrealized gain/loss amount will be posted in Period 15 to CORE, and it will be reversed in Period 0 as close as possible to the calendar date that they were posted in Period 15 of the prior Fiscal Year.

Procedures:

TA.PR.03.1 Record Investment Income

Treasury will track the investment activity using a standalone investment system. Treasury books one aggregate daily total investment earnings amount to CORE. Treasury uses a CORE cloned JV document (JV1TRES), event type “XT07” that contains the posting codes “A001 -Cash” and “I005 – Interest Receivable” for this transaction.

TA.PR.03.2 Allocate Investment Interest (Assuming use of the CORE CA module)

Departments or IHE contact the OSC to setup new funds and set the interest earning indicator based on law, rule, or legally qualified management directive. The Office of the State Controller will provide this information to the Department of Treasury for the interest allocation process.  The departments have access to the Reporting Code Table and the Reporting Group Table, and they are responsible for setting those values prior to requesting the Office of the State Controller establish the Fund. Any subsequent changes to Reporting Code or Reporting Group shall be communicated directly to the Department of Treasury by the departments.  

After cash is deposited to the Treasurer’s Pooled Cash account, the department or IHE should promptly prepare a Cash Receipt document (CR) in CORE to claim the cash and ensure it is coded to proper Funds and SubFunds. Using the CORE Cost Accounting Module the Department of Treasury will calculate and distribute investment earnings to interest earning Funds based on their average daily balances. The allocation and distribution will occur monthly at the Department, Fund, SubFund and Reporting Code level. Each department or IHE is responsible to make any necessary redistributions or allocations that have not been arranged with the Department of Treasury. All redistributions or allocations of interest earnings must ensure that cash remains balanced at the Department and Fund level.

TA.PR.03.3 Allocate Unrealized Gains and Losses

The Department of Treasury will generate a report of Unrealized Gains and Losses on the investments underlying the Treasurer’s Pooled Cash account at June 30 each fiscal year. The total Unrealized Gain/Loss will be recorded in Period 15. The State will use the posting as the pool for the Cost Allocation Module to allocate unrealized gains or losses to the Departments and Funds based on their Period 12 cash balances (allocation statistic) to the extent that they are qualified for interest earnings (allocation bases). All unallocated unrealized gains and losses will be recorded in the General Fund or Capital Construction Fund as appropriate. The allocation results will be recorded in Accounting Period 15. The Period 15 balances will roll into Period 0 of the new year and Period 15 transaction will be reversed in Period 0 of the new year as close in time to the original recording as possible. This reversal will leave the fund balance and the Unrealized Gain/Loss revenue source code in a condition to provide the net change in Unrealized Gain/Loss at the next Fiscal Year end. Although each department’s cash balances will be purged of the Unrealized Gain/Loss impact, they should be aware that beginning fund balance will include the effects of the prior year’s cumulative Unrealized Gains/Losses offset by the reversal in the Unrealized Gains/Losses account (RSRC-6050). Please note that in an Agency Fund the Unrealized Gains/Losses shall be recorded in the 2730 – Deposits Held in Custody balance sheet account (BSA).