Opinion Number ( 1997 )

Dear Rep. Wilkerson:

You requested the opinion of this office concerning the selection of a financial institution by a state university, and the laws on the payment of fees/interest on university deposits. Please be advised as follows:

R.S. 49:320 provides as follows:

Fiscal agent banks for the deposit of funds belonging to any state depositing authority shall be selected and designated in the manner provided by resolution of the Interim Emergency Board and under the terms and conditions deemed appropriate or advisable by the board.

R.S. 49:319 defines "state depositing authority" to mean "the state treasurer, and other elected state officials or any department, board, commission or institution of the state".

R.S. 49:317 provides as follows:

The Interim Emergency Board shall designate as state depositories such financial institutions doing business in this state as it may deem advisable after considering the recommendations of the treasurer. No financial institution that has received two consecutive ratings of less than satisfactory under the Community Reinvestment Act of 12977, 12 U.S.C. § 2901, et seq., shall be selected to receive the deposits of any public funds. When a financial institution receives two such consecutive ratings of less than satisfactory, the institution may continue to hold all public funds until maturity to avoid the imposition of a penalty upon the depositor; however, the institution shall not accept the public funds for reinvestment and shall not accept additional public funds.

R.S. 49:320.1 further provides:

Any state depositing authority which deposits state funds in a bank designated as a fiscal agent bank by the Interim Emergency Board shall provide written notice to the state treasurer upon opening any type of account at the fiscal agent bank. The state treasurer shall annually provide a listing to the Joint Legislative Committee on the Budget of all accounts reported under these provisions.

Additionally, universities are subject to the Cash Management Review Board (the "Review Board") as provided in R.S. 39:371, et seq. The Review Board is composed of the State Treasurer, the Commissioner of Administration and the Legislative Auditor. R.S.39:371. The Review Board may require all state agencies to submit a report of all banking and checking accounts and the balances in each. All banking and checking accounts opened or to be opened by state agencies must have the approval of the Review Board in writing for authorization for the account and the method of compensation. All state agencies shall furnish full and complete information, as may be requested by the Review Board, regarding the policies and procedures for its handling of receipts and disbursements. The Review Board shall approve the cash management policies and procedures adopted by each state agency. R.S.39:372.

As to the fees that banks may charge state agencies, R.S. 49:316 provides in pertinent part as follows:

All banks selected as fiscal agents or depositories for the deposit of funds belonging to the state, or any state agency, shall pay at par and receive on deposit at par all checks and drafts drawn by or in favor of the state or state agency . . . The state or any agency may elect to pay for services rendered either through compensating balances or through the assessment of service or activity charges, or any combination thereof, as may be agreed upon by the state or state agency and the fiscal agent or depository bank.

To summarize, universities may select a bank which has been designated as a fiscal agent by the Interim Emergency Board, however, that selection is subject to the approval of the Review Board. The fees to be paid the bank may be based upon compensating balances or through a service or activity charge as agreed upon by the university and the bank.

Trusting this adequately responds to your request, we remain

Yours very truly,

RICHARD P. IEYOUB Attorney General

BY: ___________________________ MARTHA S. HESS Assistant Attorney General

RPI/MSH/

Date Received:

Date Released:

Martha S. Hess, Assistant Attorney General

Section Chief — Finance and Contracts