Section 106 of the State Finance Law requires that moneys received by a state officer in his official capacity shall be deposited into a bank or trust company designated by the State Comptroller. See Chapter XIV, Section 4.B - Establishment and Closing of Bank Accounts for information on controls and special procedures for the establishment and closing of agency bank accounts.
This statute also requires all such deposits be secured by either a surety bond or by certain securities pledged as collateral as specified in Section 105 of the State Finance Law.
The purpose of this section is to: (i) define when a contract for banking services is necessary; (ii) set forth the requirements for competitively bidding for banking services; (iii) describe the methods of payment for services provided under banking services contracts.
The following definitions are applicable to this section:
- Banking Services -- Services provided by a banking institution in maintaining a bank account, including, but not limited to: (i) the acceptance of deposits; (ii) the payment of checks; (iii) electronic funds transfers; (iv) lockbox services; (v) armored car services; (vi) stop payment services; and (vii) reconciliation services.
- Direct Fee -- The method by which the State compensates banking institutions for the provision of banking services by check or electronic payment.
- Compensating Balances -- The method by which the State compensates banking institutions for the provision of banking services by retaining deposits with the bank, which are credited with interest pursuant to a formula prescribed by the Bureau of State Accounting Operations - Cash Management Unit (BSAO CMU) of the Office of the State Comptroller (OSC). These earnings are used to compensate the bank for services provided.
State departments and agencies are required to request the establishment of a bank account at any banking facility, providing in writing the substantiation of the need for such account to BSAO CMU. In addition, state departments and agencies, subject to approval by OSC, may use banking institutions to provide services beyond the scope of check cashing and deposits (e.g., lockbox services, tax processing, etc.). The cost of these services is paid either by direct fee, or through the use of compensating balances.
Banking services are required to be procured in accordance with Section 163 of the State Finance Law. Agencies should consider the actual or anticipated costs for all banking services provided by a single banking institution in determining which procurement methodology to use. Agencies must review their current banking relationships to determine the feasibility of: (i) combining their bank accounts at a single institution into one account; or (ii) moving similar bank accounts at multiple banking institutions to a single banking institution. If an agency determines the cost of banking services at a banking institution exceeds the statutory level of Section 112 of the State Finance Law (see Chapter XI, Section 2.A - Thresholds), the agency must establish a formal contract with that bank to cover such aggregate costs. For determining the appropriate bidding requirements, the agency should consider the cost of banking services provided by a single banking institution at the location level (i.e., regional motor vehicle office, correctional facility, mental hygiene facility, other agency regional offices, etc.). If the total cost of banking services used at a single banking institution by this location level exceeds the statutory requirement (see Chapter XI, Section 2.A - Thresholds), the agency must seek competitive bids for such services. In the event the annual cost of banking services provided at a single banking location is less than the statutory threshold for competitive bidding, an agency may enter into a contract (without competitive bidding) to obtain such services: (i) in accordance with the agency's procurement guidelines and Section 112 of the State Finance Law; and (ii) provided the total value of such contract does not exceed the statutory threshold which requires bidding.
SOLICITATION DEVELOPMENT
Banking services procured through the use of an Invitation for Bid (IFB) or Request for Proposal (RFP) process should consider the credit standing of the bank, the location of the bank, a discussion of similar services provided to other users by the bank, and the cost for the service requested. Prior to the procurement of banking services, the draft IFB or RFP should be provided to BSAO CMU of OSC for review. Certain standardized portions of any IFB or RFP for the provision of banking services must be obtained from BSAO CMU.
CONTRACT DEVELOPMENT
Following the procurement and selection, the state agency will enter into a contract with the banking institution. The contract must allow for payment by either direct fee or compensating balances, whichever results in a lower cost to the state. If payment is to be made using compensating balances, the contract must include a provision providing for this payment mechanism, pursuant to a formula prescribed by BSAO CMU of OSC.
CONTRACT APPROVAL
Contracts for banking services which are subject to approval pursuant to Section 112 of the State Finance Law must be submitted to OSC for approval via the Statewide Financial System (SFS).
Process and Document Preparation:
SFS users will create a contract transaction using the appropriate Audit Type. For transactions subject to OSC approval, users will generate either a Single Transaction Summary (STS) or AC 340-S and submit it with the agreement (contract) and required procurement record documents to OSC.
Guide to Financial Operations
REV. 12/02/2015