Agenda Item

AGENDA STAFF REPORT

 

††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††† ASR Control 16-001038

 

MEETING DATE:

09/13/16

legal entity taking action:

Board of Supervisors

board of supervisors district(s):

All Districts

SUBMITTING Agency/Department:

Treasurer-Tax Collector†† (Approved)

Department contact person(s):

Shari L. Freidenrich (714) 834-7625

 

 

Paul Gorman (714) 834-2288

 

 

Subject: Amendment of Custody Agreement with Northern Trust Company

 

††††† ceo CONCUR

County Counsel Review

Clerk of the Board

Concur

Approved Agreement to Form

Discussion

 

 

3 Votes Board Majority

 

 

 

††† Budgeted: Yes

Current Year Cost: $84,852

Annual Cost: FY 2017-18 $60,750

 

 

 

††† Staffing Impact:

No

# of Positions:

Sole Source: No

††† Current Fiscal Year Revenue: N/A

Funding Source: GF: 4%, State: 58%, Other: 38%

County Audit in last 3 years: 2014, 2015, 2016

 

 

††† Prior Board Action: 10/06/2015 #19, 10/19/2010 #35

 

RECOMMENDED ACTION(S):

 

Authorize the Treasurer-Tax Collector to execute Amendment No. 2 to Agreement with The Northern Trust Company to amend and extend the agreement for custodial services to increase agreement amount by $145,602, commencing on October 20, 2016, through December 31, 2017, for a revised total cumulative amount of $918,000, in accordance with County Contract Policy Manual section 3.3-105(2).

 

 

 

 

SUMMARY:

 

Approval of Amendment No. 2 will allow the Treasurer-Tax Collector to meet the core objective of safety of public funds by providing custodial services for the safekeeping of over $8 billion of investment securities.

 

 

 

BACKGROUND INFORMATION:

 

This agreement is coming to the Board of Supervisors (Board) for approval as the Contract Policy Manual (CPM) section 3.3-105(2) allows a service contract to exceed five years in duration if specifically approved by the Board. In addition, this is a Discussion item as this agreement in total exceeds $750,000.

 

The Northern Trust Company (Northern) provides custodial services to the Treasurer-Tax Collector (Treasurer). Northern currently is responsible for delivering monies and securities to complete settlement of individual investment trades by delivery vs. payment on a daily basis and safekeeping those securities valued at over $8 billion. The Treasurer planned to do a Request for Proposal (RFP) during the current term of this agreement, but has not issued a RFP, and now expects to complete a RFP for custodial services prior to the expiration of this extension.††

 

This contract amendment will add just over 14 months to the Agreement. As we are going out for RFP, it is critical that the agreement end on a month end date. In addition, the Treasurer has negotiated that pricing will remain the same with no increases. The Treasurer has been satisfied with the service from Northern. This contract does not include subcontractors or pass through to other providers. See Attachment F for Contract Summary Form.

 

County Audits in Last Three Years:

The County Internal Audit Department and the Auditor-Controller Internal Audit unit were combined effective August 21, 2015, to make one internal Audit unit (IA). IA regularly audits compliance with the Investment Policy Statement (IPS) as required by Government Code 27134 and a Treasury Oversight Committee directive, respectively. The Investment Administrative Fee is included in the IPS, and therefore, an analysis of custodial banking charges is included in these audits. IA has performed the Annual Audit of Treasurerís Investment Compliance for the calendar years 2013 and 2014 with no significant findings and the quarterly Continuous Compliance Auditing of the Treasury Investment Portfolio from March 31, 2014, through March 31, 2016, with no significant findings.

 

Prior Board Action:

On October 6, 2015, the Board approved Amendment No. 1 to Agreement No. MA-074-11012506 with Northern to extend the agreement to provide custody banking services for a one-year term expiring on October 19, 2016. On October 19, 2010, the Board approved the selection of Northern as the result of an RFP for Custody Banking Services, effective October 19, 2010, through October 19, 2015, in an amount not-to-exceed $675,000 for a five-year term ($135,000 annually). The selection of Northern was based on a competitive bid selection process, which included five other custody banks.

 

 

 

FINANCIAL IMPACT:

 

The cost of this agreement is fully reimbursed through the Investment Administrative Fee allocated to all investment pool participants based on their average cash balances in the investment pools. The mix of the Pools currently by funding source is General Fund 4%, State (Educational Investment Pool) 58%, County Non-General Fund and Other Agencies 38%. The State portion is comprised primarily of school districts and community college districts. The County and other Agencies include the allocated charges in their approved budget appropriations. Appropriations and the related revenue for custodial banking services are included in the Treasurerís FY 2016-2017 Adopted Budget and will be included in the budgeting process for future years. The County has the right to terminate the contract without penalty at any time upon 90 days written notice.

 

 

 

STAFFING IMPACT:

 

N/A

 

ATTACHMENT(S):

 

Attachment A - Amendment No. 2 to MA-074-11012506
Attachment B - Amendment No. 1 to MA-074-11012506
Attachment C - Master Agreement MA-074-11012506
Attachment D - California Government Code 53649-53665
Attachment E - California Government Code Section 27134
Attachment F - Contract Summary Form