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Public Funds Collateral Programs — What State Treasuries Need to Know

Public Funds Collateral Programs — What State Treasuries Need to Know


State treasuries perform a wide variety of services in addition to investing surplus funds. One of these services is monitoring public funds collateral. To fully address the needs of our state treasury customers, Clearwater provides for more efficient and automated administration and monitoring of public funds collateral programs (PFCP).

Administering PFCP – A “Tall Task”

For background, when local government entities (counties, cities, water districts, etc.) deposit funds at financial institutions, the institution receiving the funds must set aside qualified assets as collateral to back and protect public deposits more than the FDIC-insured amount of $250,000 (qualifications for acceptable collateral for public deposits are generally similar across all states with some minor variations).   

The burden of administering and monitoring public deposits and submitted collateral typically falls upon state treasuries. PFCP administration requires that state treasuries know the locations and amounts of public funds deposited and the sufficiency (amounts and quality) of cash and securities pledged as collateral. 

Public fund deposits and pledged collateral changes daily, so monitoring collateral while maintaining communication between involved parties and sorting the flow of data can be a tall task. In many states, local governmental entities number in the thousands and financial institutions accepting public deposits number in the hundreds.

How Clearwater Helps with PFCP

Clearwater communicates with custodians, trustees, and financial institutions daily — this is a key process is our core offering of investment data aggregation, reconciliation, and reporting — to determine pledged collateral details and amounts. Clearwater then compares and reconciles pledged collateral details to information from hundreds of third-party data vendors and Clearwater’s database of over $4 trillion in assets updated daily. This allows Clearwater to accomplish and automate many tasks on behalf of state treasuries like proper collateral identification; updating collateral market values; updating changes in pledged collateral principal (due to calls, paydowns, etc.); and calculating collateral sufficiency. Clearwater then allows administrators to quickly match and view public deposits with collateral.

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Data Management and Reconciliation

Clearwater’s automation and core foundation of data reconciliation allows state treasuries to improve efficiency and reduce risk. Clearwater automatically catches inadequate or unqualified collateral with an emphasis on accuracy and timeliness. Clearwater’s highly customizable reports allow PFCP administrators to sort and aggregate PFCP exposures quickly and easily.  

For more detailed insight into Clearwater’s capabilities for public fund collateral administration and our wide range of investment accounting and analytical services for state treasuries, contact Clearwater today.

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