Establishing and Managing Special Bank Accounts for UMB Funds

Financial Affairs, Office of the Controller   |   Approved July 1, 2017

Purpose

Establish and manage Special Bank Accounts.

Applicability

Operational Units (schools, departments, divisions, affiliates) or individuals who conduct UMB business with UMB Funds and need to establish a Special Bank Account for a specific purpose (e.g. research conducted in a remote area, student activities, etc.).

Instructions

General Guidelines

1. All UMB Funds must be deposited into the State Treasury via a bank account authorized by the State Treasurer’s Office (STO).  Approval from the STO is required before an Operational Unit or individual may open a Special Bank Account.  This approval is obtained by the Department of Financial Services (FS) via the Bank Account Action Form (BAAF) available on the FS website.  Instructions for completing the BAAF are also available on the FS website.
2. A BAAF is required whenever an account is opened, closed, or a change in the original submitted information occurs.
3. Special Bank Accounts are limited to checking accounts and must use the UMB Federal Tax ID Number.
4. Expenditures using funds in Special Bank Accounts are subject to State, USM, and UMB policies and procedures.  Expenditures include any form of payment or withdrawal using physical or electronic methods; such as checks, point-of-sale purchases, bank withdrawals, ACH transactions, wire transfers, and payments made through third-party providers.  Expenditures must include receipts showing details of the expenditure, purpose, and the benefit to UMB.       
5. Operational Units are required to establish internal controls that safeguard cash and checks, segregate duties, and comply with this Procedure and related Policies.
6. A Special Bank Account may be closed at the discretion of FS.

Procedures

Opening a Special Bank Account

1. The following roles are required for a Special Bank Account:
   • Fund Custodian - The Fund Custodian is the primary individual responsible for the Special Bank Account. Ensures funds are deposited and payments are made in accordance with applicable policies and procedures and ensures sufficient funds are available for payments.
   • Depositor - Receives and processes deposits.
   • Check Writer - Prepares checks for the Authorized Signer(s). In a manual process, this individual writes the check. If checks are processed electronically, this person generates the checks using the check-printing software.
   • Authorized Signer - Signs checks. Two signers are recommended on every check, but required on checks in the amount of $25,000 or more. There must always be at least two Authorized Signers who are active UMB employees. The Authorized Signers cannot have physical access to the blank check supply.
   • Reconciler - Reconciles the transaction record with the bank statement. Responsible for sending reconciliations to the Associate Controller in FS as required by this Procedure. The Reconciler cannot hold any other Special Bank Account role.
   • Reviewer - Reviews, signs, and dates the reconciliations confirming the reconciliation is complete and reasonable. The Reviewer should be a person who is familiar with these procedures and has sufficient knowledge of the business practices pertaining to the Special Bank Account so that reasonableness can be determined. The Reviewer must not be a subordinate of the Reconciler and cannot be the Fund Custodian.
2. One individual cannot have responsibility to perform all Special Bank Account roles.  The roles should be distributed among at least three individuals.  Operational Units that are not able to separate the roles among three individuals should contact Management Advisory Services (MAS) for guidance.
3. A BAAFis completed to request authorization from the STO for the Special Bank Account.   
   1. The Operational Unit selects an eligible financial institution provided in a drop-down list on the BAAF.  Institutions listed on the BAAF are currently under contract with the State of Maryland.
   2. The Operational Unit contacts the state representative at the selected financial institution.  The representative should reserve a bank account number pending final approval from the STO.
   3. The Operational Unit designates Authorized Signers.
      1. Authorized Signers listed on the BAAF must always match the records maintained in the bank.
      2. To ensure UMB access to the funds there must always be at least two Authorized Signers in the Operational Unit who are current active UMB employees.  In addition, the Chief Business and Finance Officer (CBFO) must be listed as an Authorized Signer.
      3. To accommodate operational needs, a nonemployee (i.e.  Authorized Affiliate Employee, student) may be designated as an Authorized Signer.
   4. Supporting documentation must include the following:
      1. Purpose of the account
      2. Internal procedures for managing the account
      3. Internal controls (e.g. access to funds, segregation of duties)
      4. Estimated deposit and disbursement activities (amounts, frequencies)
      5. Verification of funds (e.g. cash count if a cash supply is maintained)
      6. Reconciliation procedures
   5. The BAAF and supporting documentation are forwarded to the Associate Controller in FS.
4. After FS approves the BAAF, FS completes and submits the STO X-1 Request Form to the STO.  The STO may take two weeks to review requests.
5. STO communicates approved and rejected requests to FS.
6. FS communicates approved and rejected requests to Operational Units.
7. The Operational Unit submits a copy of the approved request to the financial institution as final authorization to open the new bank account.

Special Bank Account Transactions

1. Deposits
   1. When possible, cash and checks should be deposited on the day received, especially when large amounts are involved; but no later than the first working day after the day of receipt.
   2. Operational Units must have procedures in place to ensure cash and checks are secured.
   3. An individual who is not involved in the receipt and deposit functions should verify that deposits were made intact and timely as evidenced by signatures on the Deposit Log.
2. Payments
   1. Operational Units must have sufficient controls in place to ensure proper segregation of duties in the custody, authorization, and processing of payments.
   2. The Fund Custodian is responsible for ensuring expenditures comply with UMB policies and procedures and State regulations.  Each expenditure must include documentation describing the benefit to UMB.  Any funds that are discovered to have been spent inappropriately must be replaced by the individual or group that initiated the expenditure.  Special Bank Account funds may not be used to purchase (directly or indirectly) unallowable items, including, but not limited to:
      1. Alcohol, tobacco, firearms
      2. Flowers and gifts
      3. Emoluments
   3. Checks under $25,000 require the signature of at least one Authorized Signer.  The signatures of two Authorized Signers are recommended whenever practical.
   4. Checks in an amount of $25,000 or more require the signatures of two Authorized Signers.  Only one of these signatures may be mechanically affixed.
   5. Other forms of withdrawals such as transfers, wire transfers, and electronic debits require written authorization by two Authorized Signers.

Bank Statement Reconciliations

1. A Transaction Record of deposits and withdrawals must be maintained by the Operational Unit.  The Transaction Record must be reconciled with the bank statement monthly by the Reconciler.  Copies of the bank statement reconciliations for the months of March, June, September, and December must be forwarded to the Associate Controller in FS within 30 days of the end of the calendar month.  Reconciliations for other months must be submitted to the Associate Controller in FS upon request.
2. Reconciliations must be signed and dated by the Reconciler and the Reviewer indicated on the BAAF.

Special Bank Account Changes

1. Operational Units are responsible for keeping account information up to date. 
2. The Operational Unit completes the BAAF when a change in one of the following occurs: Fund Custodian, Reconciler, Reviewer, Authorized Signers, or Account Purpose.  The revised BAAF is sent to the Associate Controller in FS.   
3. After FS reviews the changes, FS completes and submits the STO X-1 Request Form to the STO, if appropriate.
4. The Operational Unit must also contact the bank to update the bank records when there is a change in the Authorized Signers.

Closing a Special Bank Account

1. The Operational Unit is required to contact the bank to close a Special Bank Account.  The bank should be contacted as soon as possible after the account is no longer needed. 
2. If there is a balance remaining in the account, the Operational Unit must transfer the funds to another authorized Special Bank Account or deposit the funds into the main UMB account at the UMB Cashier’s Office.  The Deposit Summary form is used to deposit funds into the main UMB account. 
3. After the Special Bank Account balance is zero, the Operational Unit completes the BAAF and forwards it to the Associate Controller in FS. The bank statement indicating the account status is “Closed” must be attached to the BAAF.
4. After FS reviews the BAAF, FS completes and submits the STO X-1 Request Form to the STO.
5. Reconciliations must continue to be performed until the Special Bank Account is officially closed by the STO.

Periodic Reviews

The Division of Budget and Finance may conduct periodic reviews of Special Bank Accounts, including reconciliations, to ensure compliance with this Procedure and related Policies.  Units that are not in compliance may lose the privilege of a Special Bank Account and have their account(s) closed by FS.

Exceptions

1. Exceptions to this procedure must be approved in writing by the University Controller (UC) in FS.
   1. Procedure exception requests must be submitted to the UC using the Policy or Procedure Exception Request Form available on the FS website.
   2. Procedure exception requests must be signed/e-mailed by the Department Head or designee.
2. Exceptions to the related policy, UMB VIII-1.30 (A) Special Bank Accounts for UMB Funds, must be approved in writing by the CBFO.
   1. Policy exception requests must be submitted to the UC using the Policy or Procedure Exception Request Form.
   2. Policy exception requests must be signed by the appropriate Dean/Vice President or Associate Dean/AVP.

Questions?  Contact the Associate Controller, Financial Services at 410-706-2509.

RESPONSIBILITIES

Operational Units

• Ensure expenditures comply with USM and UMB administrative and procurement policies and procedures, applicable State laws, and any other restrictions that may apply to the use of the funds in Special Bank Accounts.
• Ensure internal controls are in place to safeguard funds and segregate duties among individuals with Special Bank Account roles (Fund Custodian, Depositor, Check Writer, Authorized Signer, Reconciler, and Reviewer).
• Ensure the Authorized Signers recorded in the bank records match the Authorized Signers recorded in the STO records, at least two of the Authorized Signers are current active UMB employees, and the CBFO is listed as an additional Authorized Signer.
• Perform reconciliations in accordance with this Procedure.
• Immediately notify the Associate Controller in FS and the Director of MAS of unauthorized activity on a Special Bank Account.
• Promptly submit BAAFs to the Associate Controller in FS for opening, closing, or making changes to a Special Bank Account. 

Department of Financial Services

• Assist Operational Units with Special Bank Account questions.
• Take appropriate action to remedy unauthorized activity on a Special Bank Account.
• Timely submit BAAFs to the STO and timely communicate STO responses to Operational Units.
• Review Operational Unit records, as needed, for compliance with this Procedure and related Policies.   
• Complete the annual STO Bank Account Survey.

Management Advisory Services  

• Assist Operational Units with establishing internal controls when requested.
• Take appropriate action, if needed, to remedy unauthorized activity on a Special Bank Account.

DEFINITIONS and TERMS

Authorized Affiliate Employee - Person employed by an entity that has a relationship with UMB authorized by the Board of Regents or by law, e.g., faculty practice plan organizations, University of Maryland Baltimore Foundation (UMBF) and other affiliated foundations, recognized incorporated alumni associations, recognized affiliated business entities, University of Maryland Medical System/University of Maryland Medical Center, and other University System of Maryland institutions.  An Authorized Affiliate Employee is responsible for the administration and reporting of UMB resources.

Deposit Log - The Deposit Log is used to record relevant information pertaining to the business activity or source of funds, such as transaction information.  The Deposit Log must include the date of deposit, amount, and the signature(s) of the individual(s) who prepared and verified the deposit amount. 

Special Bank Account - A bank account established to accommodate the business needs of a UMB unit.  Examples include working fund, lockbox, and student, research, and fundraising activities.  Special Bank Accounts are limited to checking accounts.

Transaction Record - An accounting of all deposits and withdrawals, credits, and charges.  The record should include transaction information such as date, type of transaction, and amount.

UMB Funds - All funds administered by UMB, regardless of fund source.  UMB Funds include State appropriated general funds, tuition, fees, and other income, as well as auxiliary funds, revolving/discretionary funds, Designated Research Initiative Funds, gifts, contract or grant revenues, and other restricted funds.

Related Guidance:

State Treasurer’s Office Banking Services

Downloads

Forms available on the Financial Services website:

• Bank Account Action Form and Instructions - Open, close, or make changes to a special bank account.
• Deposit Summary Form and Instructions - Deposit funds into the main UMB bank account.