N.C. Local Government Finance Policy Manual

6.0 Introduction

Proper management of a local government’s and public authority’s resources are important both to ensure that sufficient funds are available and to maintain public trust in the government. Internal controls are processes designed to safeguard the assets of the unit. Although the exact nature of internal controls will vary significantly from government to government, due to differences in size, resources, and organizational structure, all local government entities need to take steps to ensure the proper stewardship of public funds. And that duty should take precedence over the efficiency and expediency of business processes.

A local unit has a good deal of flexibility in establishing and implementing internal controls. At a minimum, internal controls must serve to detect, mitigate, and ideally prevent, the misappropriation of moneys collected or received by the unit. The Local Government Budget and Fiscal Control Act (LGBFCA), specifies certain statutory controls including ones specifically focused on managing a local unit’s resources. The state’s Local Government Commission (LGC) has also promulgated rules detailing processes and requirements to comply with the statutory requirements. The rules are found in the North Carolina Administrative Code, Title 20, Chapter 07 of the  NCAC. The provisions in the LGBFCA and NCAC set the minimum internal controls for cash management required by law. Basic legal compliance could go a long way toward preventing fiscal malfeasance but often is not sufficient to fully insulate a government entity from an employee or vendor/contractor mistake or fraud. Most units need to implement additional financial internal controls to safeguard public funds. This chapter focuses on managing the local unit’s cash resources, including selecting an official depository(ies), collateralization requirements, making deposits, accepting donations, investing idle funds, and maintaining petty cash.

6.1 Cash Management Definitions

The LGC has adopted definitions related to cash management and deposits. (20 NCAC 07 .0102). Where applicable, these excerpted definitions apply throughout this chapter.

• Demand Deposits are all deposits that are not time deposits.
• Deposit Accounts include all demand and time deposits.
• Deposit Insurance means the insurance provided by the Federal Deposit Insurance Corporation.
• Depository means a financial institution into which a participating unit is empowered to deposit money with or without interest, and which is required by law to secure the deposits with deposit insurance and collateral securities.
• Governmental Unit, Local Government, Local Unit, or Unit includes any city, town, county, special district, public hospital, public authority, whose deposits are required to be secured.
• Public Depositor means the person charged with the custody of public deposits of a participating unit.
• Public Deposits means all deposits made by a participating unit in any depository, including those held by the depository in an escrow capacity.
• State Treasurer means the State Treasurer of North Carolina.
• Time Deposits means interest-bearing deposits, including savings accounts, negotiable order of withdrawal (NOW) accounts, money market deposit accounts (MMDA), and certificates of deposits and savings certificates, both negotiable and non-negotiable.

6.2 Official Depository Requirements

6.2.1 What is an Official Depository

An official depository is the place a local government and public authority keeps its cash. The governing board must designate one or more banks, savings and loan associations, or trust companies in the state to serve as the unit’s official depository(ies). (G.S. 159-31). A unit can have more than one official depository. It is “unlawful for any public moneys to be deposited in any place, bank, or trust company other than an official depository.” (G.S. 159-31).

A depository generally must be located in North Carolina to qualify. However, the Secretary of the LGC may authorize a local unit’s governing board to select a nationally chartered bank located in another state as an official depository. The secretary of the LGC may approve the use of nationally or state-chartered out-of-state bank as a depository or fiscal agent for the payment of debt service or to address other special circumstances. A unit should contact Department of State Treasurer staff to discuss any potential exceptions. (Contact staff at 919.814.4300 or at SLGFD@nctreasurer.com.) Note that the availability of higher rates, alone, likely will not present a sufficient special circumstance.

A credit union may not serve as an official depository, even if it is in the state. The reason is that the statute limits authorized entities to banks, savings and loan associations, and trust companies.

6.2.2 Governing Board Selects Official Depositories

The governing board must select the official depository(ies). (G.S. 159-31). The board may not delegate this task to the finance officer, manager, mayor, board chair, or any other employee or official of the unit. It must vote as a board majority (in an official meeting with a quorum present) to designate one or more qualifying entities as its official depository(ies). Once the board designates an official depository, it remains as such until the board votes to change it. The board does not need to vote on this issue annually or even after a new board majority assumes office. A new board vote is only required when the board wants to make a change to one or more of its official depositories. That includes changes to a depository account, too, though.

State law generally forbids governing board members and other officials involved in the contracting process to make contracts for the local governments in which they have an interest. (G.S. 14-234). An exception exists, however, for transacting business with banks or banking institutions. Therefore, a county or a municipality may designate as a depository a bank or a savings institution in which a governing board member, for example, is an officer, owner, or stockholder.

The manager, mayor, or a department head may not establish a bank account for the unit, even for a limited purpose. This applies to independently elected or appointed officials and boards. For example, the Office of the Sheriff may not open a bank account for Sheriff office purposes. All public funds of the Office of the Sheriff (and any other department, commission, authority, board, or other agency of the county) must be deposited in an official depository of the county. The same is true for municipalities and public authorities. This issue sometimes comes up when a county or municipal department wants to accept donations for a specific purpose. Even in those situations, the moneys must be held in an official depository of the unit, authorized by the governing board, and managed by the unit’s finance officer.

6.2.3 Selection Process

Local governments and public authorities follow a variety of methods in selecting or designating official depositories. Some name each bank and savings institution with an office located within their jurisdiction as an official depository and open an account in each. Others maintain just one account, rotating it among the local financial institutions that are qualified to serve as an official depository and changing it according to a predetermined schedule. Although these methods are legally acceptable and demonstrate a local government’s support of local banks and financial institutions, they can complicate the government’s cash-management procedures, hinder its investment program, and cause it to pay more than it would otherwise for banking services. For these reasons, the majority of local units statewide follow a third method—selecting the bank or other qualifying financial institution to serve as the depository through a request-for-proposals (RFP) process. It awards the business to the institution that offers the most services for the fees charged or the most services for the lowest compensating balance that the county or the municipality must maintain at the bank or financial institution. A local unit is not legally required to use an RFP process, but if it chooses to do so, it must follow the process it establishes to select its official depositories. At a minimum, the RFP should cover the following:

• Scope of Services. Provide a detailed description of required banking services, including checking accounts, savings accounts, investment services, and payment processing services.
• Legal Requirements. Specify requirements for collateralization, compliance with other state and federal laws and regulations, and security protocols and fraud prevention measures.
• Evaluation Criteria. Identify criteria for assessing proposals and weighting of each criterion.
• Pricing Structure. Request all information about fee schedules for various services and any minimum balance requirements. Ask for clarity around transparency in pricing (including any hidden fees).
• Implementation Plan. Identify transition timeline and process, including training and support for the local unit’s staff.
• Technology Integration. Set expectations for online banking capabilities and integration with existing financial systems.
• Fraud Prevention. Set requirements for reliable fraud detection and prevention. Identify cybersecurity protections.
• Service Level Agreements (SLAs). Set expectations for service delivery, accountability measures, reporting requirements, and other ongoing legal requirements.
• Documentation of Financial Soundness. Require external documentation of the financial institution’s financial soundness.
• References. Specify requirement for reference from similar entities.

To ensure it is getting the best services at the lowest market rate, a unit should engage in this process every 3-5 years. Because of the challenges in changing banking services, though, many units will negotiate to extend existing agreements with their current depository(ies) instead of going through an entirely new RFP process. At a minimum, a local unit should take a fresh look at its banking needs every several years and make sure its current banking services align with those needs.

The following are sample RFPs for banking services:

SAMPLE RFP FOR BANKING SERVICES (Large County)

SAMPLE RFP FOR BANKING SERVICES (Small County)

6.2.4 Types of Accounts

Depositories may include demand deposit accounts and/or time deposit accounts. Time deposit accounts mean interest-bearing deposits, including savings accounts, negotiable order of withdrawal (NOW) accounts, money market deposit accounts (MMDA), and certificates of deposits. Demand deposit accounts are non-interest-bearing accounts, typically with unlimited check-writing privileges. Generally, the use of interest-bearing accounts is recommended. All of these accounts are considered depository accounts that are covered by insurance and collateralization.  The use of “brokered CDs” that function as tradable investments is not authorized in NC.

6.2.5 Insurance and Collateralization of Deposits

Funds on deposit in an official depository must be fully secured.

The amount of funds on deposit in an official depository or deposited at interest pursuant to G.S. 159‑30(b) shall be secured by deposit insurance, surety bonds, letters of credit issued by a Federal Home Loan Bank, or investment securities of such nature, in a sufficient amount to protect the local government or public authority on account of deposit of funds made therein, and in such manner, as may be prescribed by rule or regulation of the Local Government Commission. [G.S. 159-31(b)].

There is a limited exception for funds remitted to and received by the official depository for the payment of principal and interest payments on loans when the funds are remitted no more than sixty days prior to the maturity date. [G.S. 159-31(b)].

Security is accomplished through a combination of methods.

Federal Deposit Insurance Corporation Insurance

First, government funds on deposit with a bank or savings institution or invested in a CD issued by such an institution are insured by the Federal Deposit Insurance Corporation (FDIC). If the funds that a local unit has on deposit or invested in a CD do not exceed the maximum amount of FDIC insurance—currently $250,000 per official custodian for time and savings deposit accounts and an additional $250,000 per official custodian for demand deposit accounts—no further security is required. There are separate insurance coverage levels for each financial institution used. For purposes of FDIC regulations, the finance officer is always the official custodian. For additional information regarding the Federal Deposit Insurance Corporation’s limits on deposit insurance coverage for accounts held by public depositors, click here.

Collateralization

The North Carolina General Statutes and administrative code require official depositories to collateralize the uninsured balances of public funds on deposit in the manner prescribed by 20 NCAC 07 .0104. Uninsured funds in a bank or savings institution may be secured through a collateral security arrangement. And there are two types of collateralization arrangements—the dedicated and pooling methods.

Dedicated Method. Under the dedicated method the depository places securities with a market value equal to or greater than the local unit’s uninsured moneys on deposit or invested in CDs into an escrow account with a separate, unrelated third-party institution (usually the trust department of another bank, the Federal Reserve, or the Federal Home Loan Bank). The escrow agreement provides that if the depository bank or savings institution defaults on its obligations to the local unit, the unit is entitled to the escrowed securities in the amount of the default less the amount of FDIC insurance coverage.

Responsibility for assuring that the deposits are adequately secured under this method rests with the finance officer, who should closely supervise the collateral-security arrangement.

Pooling Method. Alternatively, a bank or savings institution may choose to participate in a pool of bank- and savings institution–owned securities sponsored and regulated by the State Treasurer to collateralize state and local government moneys on deposit or invested in CDs with these institutions. A third-party institution, chosen by the various pooling-method banks, holds the securities in the pool. Participating depository banks and savings institutions are responsible for maintaining adequate collateral securities in the pool, though each financial institution’s collateral balances are monitored by the State Treasurer. In the unlikely event of defaults or similar financial troubles, the State Treasurer would be considered the beneficiary of reclaimed deposits and collateral. Certain standards of financial soundness are required by the state treasurer before a financial institution is allowed to participate in this system. The LGC maintains a list of banks under the pooling method here.

By default, a Depository is considered to operate under the Dedicated Method of collateralizing Public Deposits unless and until it satisfies certain additional requirements necessary for exercising the Pooling Method. (20 NCAC 07 .0105). 

Specifically, if the depository selects the Pooling Method, it must:

1. Submit to the State Treasurer a letter of intent, indicating the effective date it desires to convert to the Pooling Method.
2. Submit to the State Treasurer an executed Form COLL-93A, “Security Agreement with Resolution.”
3. Submit to the State Treasurer all executed escrow agreements.
4. Submit to the State Treasurer Form COLL-99, “Selected Financial Data Report.”
5. Submit to the State Treasurer Form COLL-97, “Annual Report of Public Deposit Accounts by Bank.” The report must be for the period immediately preceding the date of the election of the Pooling Method.
6. Submit to each public depositor (local unit) Form COLL-92, “Election of Pooling Method by Bank,” notifying them that it has opted to pool the collateral of all public deposits through the State Treasurer; and provide the State Treasurer a duplicate copy of all “Election of Pooling Method by Bank” forms.

[20 NCAC 07 .0105(b)].

The depository must pledge the required amount of collateral with the escrow agent in one of two ways:

1. The depository requests the public depositor (local unit) to sign a letter authorizing the escrow agent to release any collateral securities pledged to the unit to be simultaneously repledged to the State Treasurer, with the effective date of the release not being prior to the effective date indicated on the Form COLL-92. The recognized effective date is the date on which the escrow agent records the pledge of the required collateral securities to the State Treasurer; or
2. The depository first pledges the required amount of collateral securities with the escrow agent to the account of the State Treasurer, and then requests that the public depositor (local unit) sign a letter authorizing the escrow agent to release any collateral securities pledged to the participating unit without substitution. The recognized effective date is the effective date indicated on the Form COLL-92.

The various forms and instructions are available here.

6.2.6 Reporting on Depository and Collateralization Requirements

Local units must complete and submit a few different reports.

COLL-91 Form

A local unit must notify the official depository each time it opens a new account that the deposits are subject to the collateralization rules. A unit should have written documentation from a depository that acknowledges that an account is a public funds account when the account is opened.  [20 NCAC 07 .0103(a)]. To assist the depository in keeping its records current the local unit also must provide to each official depository (and to the LGC) an annual “Notification of Public Deposit,” which lists the current account names and numbers of all its public deposit accounts. [20 NCAC 07 .0103(b)]. Historically, the information was reported on the COLL-91 Form created by the LGC.

LGC-203 Report

Additionally, each officer having custody of any funds of a local unit must report to the secretary of the LGC on January 1 and July 1 of each year the following information:

• the amounts of funds then in their custody,
• the amounts of deposits of such funds in depositories, and
• a list of all investment securities and time deposits held by the local government or public authority. (G.S. 159-33).

Historically, this information was submitted using the LGC-203 Report.

Combined Reporting Method

In 2023, the LGC combined these reporting processes. Both the COLL-91 and the LGC-203 Reports are now submitted simultaneously using the LGC-203/COLL-91 Module in LOGOS. (LOGOS is an online local government reporting system hosted by the NC Department of State Treasurer.) The NC Department of State Treasurer then forwards the information to the relevant depositories on behalf of the units. A unit may access LOGOS by clicking here.

LGC-203/COLL-91 submissions are due semiannually on January 25 (disclosing balances as of December 31) and July 25 (disclosing balances as of June 30). The report is due on or before 11:59 pm on the due date, regardless of the day of the week the due date falls.

A local unit may initiate and submit its LGC-203/COLL-91 for the June 30 reporting date beginning July 1, and for the December 31 reporting period beginning January 1. A unit can access, review, print, or submit a report for any prior reporting periods at any time.

Exceptions

Local school administrative units are not authorized to use the combined reporting method. These units must continue submitting the traditional COLL-91 Form, in duplicate, to the Financial Operations Division and to the relevant depository, respectively, in addition to submitting the LGC-203 Report to the State and Local Government Finance Division through LOGOS. Further, entities that are not required to submit LGC-203 reports, such as ABC boards, community colleges, and state agencies, continue to submit COLL-91 Form information using the traditional COLL-91 FORM and process.

Liability for Losses

If deposits are adequately and legally secured, no officer or employee of a local unit may be held liable for losses sustained by the unit because of default by the depository. [G.S. 159-31(b)]. Under the common law a custodian of public funds is strictly liable for any such losses. Thus, this statute operates as an exception to the common law rule.

There are at least three circumstances in which a local unit possesses moneys that arguably it has not “collected or received” for purposes of G.S. 159-32—vending machine proceeds, sealed bid deposits, and certain cash seized by law enforcement.

6.3 Daily Deposit Requirements

All moneys “collected or received” by an “officer or employee” of the local unit must be deposited daily “with the finance officer or in an official depository,” or must be submitted to “a properly licensed and recognized cash collection service . . ..” (G.S. 159-32).

6.3.1 Officer or Employee

The daily deposit requirement applies to all local government and public authority officials. [G.S. 159-32(a)]. That includes independently elected officials, such as sheriffs and registers of deeds, and independently appointed personnel, such as local board of elections officials and staff. If an office, department, board, commission, or other agency is part of a local government for purposes of budget adoption and control, it and its officers and employees also are part of the local unit for purposes of the daily deposit requirement.

6.3.2 Collected or Received

The statute also makes no distinction among types of moneys. (G.S. 159-32).  It applies to all moneys “collected or received” by a local unit, including taxes and fees, as well as moneys collected through fundraisers, state or federal appropriations, donations, grants, loans, and gifts. (G.S. 159-32). It applies, for example, when a law enforcement’s office receives a check from the federal government pursuant to a federal drug share program. It applies when a recreation staff member collects fees on-site for the municipality’s open gym night. It applies when the planning department collects permit fees. It applies when the tax office collects property tax payments. It applies if the local government library holds a used book sale fundraiser. It applies when the social services department receives monetary donations around holiday time to support its assistance programs.

Local units are increasingly using third-party processing companies to collect tax, fee, donation, and other payments. While the moneys are held by the third party, they are not collected or received by the local unit. That only happens when the moneys are transferred to the local unit, usually by means of an electronic transaction directly to the unit’s bank account.

Local units also collect moneys on behalf of other governments or on behalf of private entities or individuals. For example, a county may collect tax revenues for its municipalities. A local government may collect funds for a local nonprofit that runs a customer subsidy program along with its water and sewer payments. Or a local unit may contract with a private electric or gas company to accept customer payments on behalf of the private company. County prison officials typically collect and hold funds belonging to inmates. Many municipalities collect funds to maintain private cemetery plots within a municipal cemetery. With these types of collections, the local unit typically holds these funds in a custodial capacity. They are not recognized as revenue in the unit’s budget. Nevertheless, these funds are subject to the daily deposit requirement because they are “collected or received” by the local unit. Some units even collect deposits on equipment or facility rentals. These deposits also are “collected or received” by the unit and thus are subject to the daily deposit requirement, even if they are held for only a short period of time. The appropriate procedure is for the unit to deposit the funds and then cut a refund check when the equipment is returned or the facility rental period is over.

Exceptions

There are at least four circumstances in which a local unit possesses moneys that arguably it has not “collected or received” for purposes of G.S. 159-32—vending machine proceeds, sealed bid deposits, certain cash seized by law enforcement, and gift cards.

Vending Machine Proceeds. Moneys “received by a [local unit] on account of operation of vending facilities” must be deposited, budgeted, and appropriated. (G.S. 159-17.1) (emphasis added). The law does not require that all proceeds from vending facilities on government property be received by that government, though. Rather, it requires that when such moneys are received by the government, they are to be deposited and otherwise handled pursuant to the Local Government Budget and Fiscal Control Act’s provisions. Therefore, if a unit permits others, whether a vending company or a group of employees, to place vending facilities on the unit’s property and to retain the proceeds from those facilities, the moneys in question are not subject to the daily deposit requirement. If the unit itself collects and keeps the moneys, however, the funds must be deposited according to the law.

Sealed Bid Deposits. Another likely exception to the daily deposit requirement involves deposits included in sealed bids for construction projects that have yet to be opened by a local unit. It is reasonable to assume that the moneys have not been “received” or “collected” for purposes of G.S. 159-32 until the sealed bids are open.

Cash Seized by Law Enforcement. Cash seized by law enforcement as evidence of a crime also likely has not been “received” or “collected” by the local unit for purposes of G.S. 159-32. Seized cash should be handled by the law enforcement agency in the same manner as other evidence.

Gift Cards. Sometimes donations to a department are made by bank or store-specific gift card instead of cash or check. Gift cards are not “moneys” for purposes of the daily deposit statute but should be treated as revenue for budgetary purposes. Gift cards will not be deposited in the official depository, but the finance officer must establish appropriate internal controls for accepting and securely storing them.

6.3.3 Deposited Daily “With the Finance Officer or in an Official Depository”

The statute specifies that moneys must be deposited daily with the finance officer or in an official depository. Under the latter option, the employee or official depositing the funds must immediately notify the finance officer by submitting a “duplicate deposit ticket” that can be reconciled with the bank balance by the finance staff. (G.S. 159-32).

Does the statute require that every dollar collected, whether at 9:00 a.m. or 4:59 p.m., be deposited the day it is collected? The answer is probably not. A reasonable interpretation of the law is that each department that collects or receives moneys must make at least one deposit every business day, either in an official depository or with the finance officer. In many local units the daily deposit to an official depository is made before the cutoff time (e.g., 2:00 p.m.) set by the depository for crediting interest earnings on deposits made that day. This may result in some funds being retained overnight (or possibly even over a weekend). A local government must secure any such moneys in a safe or other secure area.

6.3.4 Deposited in a Licensed and Recognized Cash Collection Service

The legislature has added an alternative to making a deposit in the unit’s bank. It can satisfy the daily deposit requirement by submitting the moneys to a licensed and recognized cash collection service. (G.S. 159-32). A cash collection service is a third-party service that helps public and private entities with their cash collection processes. A local unit may only contract with a company that is licensed and recognized. It’s fairly easy to verify that a business is licensed. It’s not clear what the legislature means by “recognized,” though. The LGC does not maintain a list of authorized entities. Perhaps it means that the entity must regularly provide the same cash collection services for other entities.

6.3.5 Remote Deposits

Increasingly local governments and public authorities are using remote deposit capture (RDC) services to make deposits. RDC allows checks to be scanned into digital images and cleared electronically. A local unit can scan checks that it receives and transmit the scanned images to its official depository(ies) for posting and clearing. Some financial institutions offer optional ACH conversion and clearing in combination with the RDC service. Thus, RDC removes the requirement of processing an actual physical check at the official depository(ies).

6.3.6 $500 Threshold

The daily deposit statute allows a unit’s governing board to authorize an individual who collects or receives moneys to make the deposit only when moneys on hand amount to $500 or more. [G.S. 159-32(a)]. Only the governing board may approve the use of this exception, through an affirmative vote of the majority of the board members at an official meeting of the unit. Managers, finance officers, other officers, or advisory boards or commissions may not authorize it.

The statute is not entirely clear as to whether the $500 is per individual or per local unit. But the interpretation that makes the most practical sense is to assume that the governing board may authorize each individual who collects or receives moneys for the unit to have up to $500 outstanding before triggering the deposit requirement.

As detailed below, the finance officer should craft an internal controls policy related to the receipt, handling, deposit, and safeguarding of all moneys. The board should then adopt a resolution indicating its approval of the policy and ensure that there are sufficient controls to safeguard the amounts outstanding as a condition of approving the $500 exception.

6.3.7 Exemptions and Exceptions

There are a few statutory exemptions from the daily deposit requirement and one exception that allows for the Secretary of the LGC to modify the requirements during a state of emergency.

Exemption from the Daily Deposit Requirement. G.S. 159-32(a) states that if another law provides for a different method of depositing moneys collected or received, the daily deposit requirement does not apply. Occasionally other statutes direct that funds collected by the unit be handled differently. For example, G.S. 1-339.70 directs a sheriff to turn over the net proceeds of an execution sale to the clerk of superior court. Similarly, G.S. 15-15 directs a law enforcement officer to disburse the net proceeds of a sale of confiscated, found, or abandoned property to “the treasurer of the county board of education of the county in which such sale is made.”

Possible Exception to the Daily Deposit Requirement During Declared Emergency. G.S. 159-32(b) provides for an exception to the daily deposit requirement under certain circumstances. Specifically, it authorizes the Secretary of the Local Government Commission to change the limit of moneys on hand requiring daily deposit (either higher or lower than $500) and require deposits on less than a daily basis, during an emergency declaration issued under G.S. 166A-19.20. The moneys must be maintained in a secure location and deposited at least weekly. 

6.4 Finance Officer Oversight and Internal Controls

The finance officer must establish all bank accounts for the local unit within the official depository(ies). (G.S. 159-25). A manager, administrator, mayor, department head, board chair, or other officer or employee may not open an account, even if it is in an official depository. The finance officer may set up separate accounts within an official depository for each fund, department, or each project or revenue source, or the finance officer may choose to pool moneys within a single bank account. Even if moneys are commingled in a single bank account, they still must be accounted for and allocated to the appropriate fund according to the local unit’s budget ordinance. Revenues that are legally earmarked only for certain purposes also must be traceable to ensure proper expenditure.

6.4.1 Cash Management Policy

The finance officer also is legally responsible for the management and oversight of all the moneys collected or received by the unit and deposited into an official depository. (G.S. 159-25). The finance officer must establish processes and procedures related to the collection, deposit, and management of all moneys that incorporate sufficient controls. The processes and procedures should account for all the ways that a local unit collects or receives moneys.

At a minimum, a cash management policy should address the following:

• Collection Procedures. Define where and how money will be collected and received (e.g., in-person (which departments?), online payments, off-site). Specify the documentation needed for each transaction.
• Handling. Establish guidelines for physically securing the money (e.g., safes, locked drawers). Define who has access to money and under what circumstances. Whenever possible, assign different individuals responsibilities for receiving, depositing, and reconciling cash to mitigate against fraud and mistake.
• Deposit Procedures. Outline frequency and process for making deposits. Identify requirements for preparing deposit slips and reconciling amounts with money collected.
• Petty Cash. Set parameters for maintaining petty cash funds, authorizing and documenting their expenditure.
• Disbursements. Identify signatories for bank transactions. Update regularly to reflect staff changes. Establish disbursement process for authorizing and making payments.
• Reconciliation. Schedule frequencies for reconciling cash accounts. Identify steps for comparing cash records with bank statements and addressing discrepancies.
• Record-Keeping. Establish requirements for maintaining records of all money transactions. Ensure that records retention procedures follow state law.
• Monitoring and Reporting. Set guidelines for generating and reviewing cash position reports regularly. Establish a process for identifying and reporting irregularities or discrepancies in cash management.
• Fraud Prevention. Create a comprehensive fraud prevention policy that includes clear definitions of fraud, reporting mechanisms, and consequences for fraudulent activity. Local governments must comply with national anti-money laundering (AML) laws. This includes customer due diligence (CDD) and suspicious activity reporting.
• Training and Compliance. Provide ongoing training for staff involved in handling revenues. Establish procedures for ensuring adherence to policy and addressing non-compliance.
• Audit and Oversight. Set specific internal control measures to ensure the integrity of the cash management processes. Conduct periodic internal audits of all cash drawers and of all department staff who collect or receive revenues. Correct any deficiencies identified through yearly independent audit.
• Contingency Plans. Identify plans for managing revenues during emergency situations.

6.4.2 Finance Officer Internal Audits of All Cash Drawers

The finance officer must periodically audit the accounts of any individual or department that collects or receives money. (G.S. 159-32). The law requires that it be done at least once per year, but periodic checks should be performed more often. The statute does not prescribe the form or substance of this internal review. A finance officer is free to develop his or her own metrics to ensure that moneys are being accounted for appropriately. The metrics should be designed to test the sufficiency of internal controls within the department and to verify that the amount that should be collected or received is actually accounted for in the actual deposits. A finance officer may want to have at least one unannounced spot check as well as regular scheduled reviews of the departmental procedures, cash draws, and accounts.

6.5 Investments

It would be fiduciarily irresponsible for local units to let significant amounts of cash lie idle in non-interest-bearing depository accounts. Investment income can amount to the equivalent of several cents or more on the property tax rate. G.S. 159-30(c) prescribes allowable investment options for local units. It also makes the finance officer responsible for managing investments, subject to policy directions and restrictions that the governing board may impose. Investments not listed in this statute are not authorized investments for North Carolina governmental units, unless those units have been granted local act authority. (A handful of local governments have been granted special authority to also use investment vehicles authorized for the Department of State Treasurer pursuant to G.S. 147-69.2.)

6.5.1 Authorized Investments

Investments authorized by G.S. 159-30(c) are listed below. The available options reflect a policy decision by the legislature to prioritize liquidity and low-risk investments over those with higher potential yields. A local unit is directed to adopt an investment program that is managed such that “investments and deposits can be converted into cash when needed.” [G.S. 159-30(a)].

United States Treasury obligations (bills, notes, and bonds)—called Treasuries—and United States agency obligations that are fully guaranteed by the United States government.

Because these obligations are full-faith-and-credit obligations of the United States, they carry the least credit risk—that is, risk of default—of any investment available to local units. As a result, short-term Treasuries are usually lower yielding than alternative investment securities. Long-term Treasuries and Government National Mortgage Association (Ginnie Mae) securities (fully guaranteed by the U.S. government) can experience significant price variations, a characteristic of long-term securities in general; therefore, such securities should be carefully evaluated and considered only for investing certain, limited funds, such as capital reserve moneys, that will not be needed for many years.

Direct obligations of certain agencies that are established and/or sponsored by the United States government but whose obligations are not guaranteed by it.

Among the agencies that issue this form of investment are the Federal Home Loan Bank Board, the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), and the Federal Farm Credit System. Direct debt issued by these agencies generally carries a very low credit risk, though economic conditions that adversely affect an economic sector heavily financed by the agency (e.g., housing) can create some risk for local units or others who invest in its securities. Some securities provided by these agencies are not direct debt and therefore are not eligible investments for North Carolina governments. Moreover, even though longer-term direct debt of these agencies carries low credit risk, it can experience significant price fluctuations before maturity.

Obligations of the State of North Carolina or bonds and notes of any of its local governments or public authorities, with investments in such obligations subject to restrictions of the secretary of the LGC.

Because the interest paid to investors on these obligations, bonds, and notes is typically exempt from federal and state income taxes, they generally carry lower yields than alternative investment instruments available to local units. However, should the state and local governments in North Carolina begin to issue significant amounts of securities on which the interest paid is subject to federal income taxes, those securities would carry higher interest rates than tax-exempt state and local government obligations. This could make the taxable obligations attractive to local units as investment instruments.  Investments in certificates of participation (COPs) or notes that roll into COPs are not authorized.  Municipal debt issued by governments outside of North Carolina is also not an eligible investment.

Top-rated commercial paper issued by domestic U.S. corporations.

Commercial paper is issued by industrial and commercial corporations to finance inventories and other short-term needs. Financial institutions also use commercial paper as a short-term financing tool. Such paper is an unsecured corporate promissory note that is available in maturities of up to 270 days, though maturities from 30 to 90 days are most common. For any local unit to invest in commercial paper, the paper must be rated by at least one national rating organization and earn its top commercial paper rating. If the paper is rated by more than one such organization, it must have the highest rating given by each. (Note that Standard and Poor’s (S&P) uses a “+” on some of its ratings which is considered an identifier; therefore, the top rating for S&P is “A1” and not “A1+.”) A commercial paper issuer may have different ratings on various commercial paper series and programs.  The relevant rating is the rating on the specific issue being purchased. The LGC staff reviews the ratings of S&P Global Ratings, Moody’s, and Fitch to evaluate compliance with the statute.

Historically, commercial paper has been relatively high-yielding, and many local units have invested heavily in it over the years. In economic recessions, some commercial paper issuers are downgraded. This means that their commercial paper is no longer eligible for investment by North Carolina local governments. Occasionally, the downgrade occurs after the investment is purchased, but before it matures. In this situation, it is common for the entity to continue to hold the investment to maturity, as the risk of loss is typically limited. As long as a commercial paper issuer is top-rated and the finance officer closely monitors its ratings, the risk for this type of investment is usually low. Eligible commercial paper issued by banks is not a deposit and is not covered by insurance and collateralization, though. There also is not a secondary market for commercial paper and consequently it is not a liquid investment. If commercial paper must be liquidated before it matures, it will typically be at an amount that is significantly below the maturity value.

Bankers’ acceptances issued by North Carolina banks or by any top-rated U.S. bank.

Bankers’ acceptances are bills of exchange or time drafts that are drawn on and guaranteed by banks. They are usually issued to finance international trade or a firm’s short-term credit needs and usually are secured by the credit of the issuing firm as well as by the general credit of the accepting bank. Most bankers’ acceptances have maturity terms of 30 to 180 days. Local units may invest in bankers’ acceptances issued by banks incorporated in North Carolina. For a local government to invest in bankers’ acceptances of non–North Carolina U.S. banks, the institution must have outstanding publicly held obligations that carry the highest long-term credit rating from at least one national rating organization. If the bank’s credit obligations are rated by more than one national organization, the bank must receive the highest rating given by each. At the time of this publication, only a handful of banks in the world meet this requirement. Bankers’ acceptances are not a commonly used investment by North Carolina governmental units.

Participating shares in a mutual fund certified by the LGC under the provisions of G.S. 159-30(c)(8) and the related provisions of 20 NCAC 03 .0710 – .0715.

Currently, only the North Carolina Capital Management Trust (NCCMT) Government Portfolio has been certified by the LGC, but other funds may be certified in the future as long as they are registered with the U.S. Securities and Exchange Commission (SEC) and fulfill all of the provisions of the North Carolina Administrative Code (NCAC). The NCCMT is a mutual fund established specifically for investments by North Carolina local governments and public authorities. It is certified and regulated by the LGC, and unlike other state-sponsored investment pools for public entity investments, it is registered with the SEC, which imposes extensive reporting and other requirements to ensure the safety of moneys invested in the NCCMT. The Government Portfolio maintains a share price of $1. It permits the return of funds invested with it on the same day of notice; however, the managers of the portfolio do request that local governments provide a day’s advance notice if large withdrawals will be made. The NCCMT’s portfolio may invest only in Treasuries, Government agencies, and repurchase agreements.

Repurchase agreements.

A repurchase agreement is a purchase by an investor of a security with the stipulation that the seller will buy it back at the original purchase price plus agreed upon interest at the maturity date. These agreements were once popular for short-term or overnight investments by North Carolina local governments. Unfortunately, some local governments in other states suffered substantial losses by buying repurchase agreements from unscrupulous securities dealers. As a result, strict laws and requirements for the safe use of these agreements have been enacted, both in North Carolina and across the country. G.S. 159-30(c) authorizes local units to invest in repurchase agreements but only under very limited conditions. These conditions have greatly reduced the cost-effectiveness of local government investments in these instruments. The following restrictions apply to local government investments in repurchase agreements: (1) the underlying security acquired with a repurchase agreement must be a direct obligation of the United States or fully guaranteed by the United States; (2) the repurchase agreement must be sold by a broker or a dealer recognized as a primary dealer by a Federal Reserve Bank or by a commercial bank, a trust company, or a national bank whose deposits are insured by the Federal Deposit Insurance Corporation (FDIC); (3) the security underlying the agreement must be delivered in physical or in electronic book-entry form to the local unit or its third-party agent; (4) the value of the underlying security must be determined daily and must be maintained, at least, at 100 percent of the repurchase price; (5) the local unit must have a valid and perfected first security interest in the underlying security. This can be achieved through delivery of the security to the local unit or its third-party safekeeping agent under a written agreement; (6) the underlying security acquired in the repurchase agreement must be free of a lien or third-party claim; and (7) the repurchase agreement must be in a form acceptable to the local government or public authority.

Evidences of ownership of, or fractional undivided interests in, future principal and interest payments of stripped or zero-coupon instruments issued directly or guaranteed by the U.S. government.

These instruments were first authorized as a local government investment in 1987 and were proprietary products sold by different investment firms. The original proprietary products have not been available for years; however, stripped securities are available for investment. They are sold at a discount from face or par value and pay no interest until maturity. At maturity the investor receives the face value, with the difference between that value and the discounted purchase price of the security representing the effective interest earned. Stripped or zero-coupon securities can be useful investment vehicles for certain limited moneys, such as those held in a capital reserve fund that will not be needed until after the instrument matures. However, because most strips or zero-coupon securities have long maturities, they are subject to considerable price fluctuations before maturity and should not be used for the investment of general government funds. If investments are made in these securities and market interest rates later rise substantially, a government that must cash in the investment before maturity may lose a significant portion of the principal invested in the securities.

Certain mutual funds for moneys held by either a county or a municipality that are subject to the arbitrage and rebate provisions of the Internal Revenue Code.

The LGBFCA authorizes unspent proceeds from bonds or other financings subject to the Internal Revenue Code’s arbitrage and rebate provisions to be invested, under strict procedures, in tax-exempt and taxable mutual funds. Operating moneys and proceeds from financings that are not subject to the arbitrage and rebate provisions may not be invested in these mutual funds. Because of the complexity of the federal tax code and the wide variety of available mutual funds, a local government entity should consult with its bond counsel before placing moneys in this type of investment.

A commingled investment pool established and administered by the State Treasurer pursuant to G.S. 147-69.3.

This authorizes a pooled investment fund managed by the NC Department of State Treasurer. The State’s Short-term Investment Fund (STIF) falls into this category.  This fund is used for the State’s General Fund, Highway Fund, and Highway Trust Fund moneys, but boards of education, community colleges, the UNC system, and other outside entities are allowed to use this pool. For municipalities and counties, the primary use of this pool is for moneys that have been placed in an irrevocable trust to fund other postemployment health benefits and the law enforcement officers’ special separation allowance. Investments of other local government funds into STIF are very restricted. STIF invests in treasuries, government agencies, and repurchase agreements, and maintains a stable share price. 

A commingled investment pool established by interlocal agreement by two or more units of local government pursuant to G.S. 160A-460 through G.S. 160A-464, if the investments are limited to those qualifying for investment under G.S. 159-30(c).

These are pools established under interlocal cooperation agreements. Various arrangements managed by councils of governments and others have operated over the past 40 years. Currently, there are 2 pools that fall under this statute that are operating in North Carolina. The investments in both pools are limited to investments that are authorized under G.S. 159-30(c) and would normally include commercial paper, Treasuries, Government Agencies, and repurchase agreements.  The objective of these pools is to maintain a stable share price of $1. They are not registered with the SEC but operate under rules created by the Governmental Accounting Standards Board with the oversight of local government officials. They are not certified by the LGC.

Trusts for other post-employment benefits and law enforcement officer special separation allowance benefits.

These pools are designed for funds that will be used for future Other Post Employment Benefits (OPEB) or payments under the Law Enforcement Officer (LEO) special separation allowance and are being held under an irrevocable trust agreement. The funds are managed under the Ancillary Governmental Participant Investment Program (AGPIP) managed by the State Treasurer’s Office. These funds are managed with similar investment objectives to a retirement system so the available investment options are much broader (including equities) than what would be available under G.S. 159-30(c). Information on this program is available here.

Derivatives issued directly by one of the federal agencies listed in G.S. 159-30(c)(2) or guaranteed by the U.S. government

Derivatives are not specifically mentioned in the law, but they may be eligible investments if they are otherwise authorized in G.S. 159-30(c). The term derivatives refers to a broad range of investment securities that can vary in market price, yield, and/or cash flow depending on the value of the underlying securities or assets or changes in one or more interest rate indices. Derivatives commonly include mortgage pass-through instruments issued by federal agencies, mortgage obligations guaranteed by federal agencies (but not by the U.S. government), callable step-up notes, floaters, inverse floaters, and still other securities that go by even more interesting names. It is beyond the scope of this chapter to explain these different types of derivatives. It suffices to say that derivatives are generally complex instruments, and many of them are subject to rapid and major changes in value as market interest rates change. Some local governments in other states have lost vast amounts of moneys by investing in derivatives. The volume of derivatives available to investors has grown dramatically, and investment brokers and dealers often try to sell various types of derivatives to county, municipal, and other local government finance officers. Many derivatives are not legal investment instruments for North Carolina local governments. Those that are direct debt (i.e., a balance sheet liability) of the federal agencies listed in G.S. 159-30(c)(2) or whose principal and interest payments are guaranteed by the U.S. government are usually legal investments. However, many, if not most, of them are inappropriate as investment vehicles for counties or municipalities, except in very special circumstances. Even though legal, many of them are subject to extreme price and cash flow volatility. A finance officer considering investing the local unit’s moneys in one or more derivatives should do so only pursuant to a governing board investment policy that explicitly authorizes such an investment, only if the finance officer understands the nature of the security and the risks associated with it, and only for a short maturity.

6.5.2 Custody of Investment Securities

The LGBFCA requires that “[s]ecurities and deposit certificates shall be in the custody of the finance officer who shall be responsible for their safekeeping.” [G.S. 159-30(d)]. Investment securities come in two forms: certificated and noncertificated. Ownership of certificated investments is represented by an actual physical security. A few securities are issued in certificated form, but these securities are becoming much less common. To obtain proper custody of certificated securities, the finance officer should hold the securities or the certificates in the local unit’s vault or its safe deposit box at a local bank or trust company. Alternatively, certificated securities may be delivered to and held by the local government’s safekeeping agent.

Many investment securities—U.S. Treasury bills, notes, and bonds; federal agency instruments; commercial paper; and other types of securities—are not certificated. Ownership of them is evidenced by electronic book-entry records maintained by the Federal Reserve System for banks and certain other financial institutions and by the financial institutions themselves. In addition, for certain other securities, the Depository Trust Co. in New York maintains the electronic records of ownership. When a local unit buys noncertificated securities from a bank or a securities dealer, the record of ownership is transferred electronically from the seller or the seller’s agent to the local government’s custodial agent. To obtain proper custody of book-entry securities, a local government must have a signed custodial agreement in place with the financial institution that serves as its custodial agent. The securities are held in the name of the governmental unit by the governmental unit’s safekeeping agent and the securities should be segregated from the safekeeping agent’s own proprietary securities. It is essential that a local unit or its applicable custodial agent obtain custody of all investments. Major losses from investments suffered by local governments in other states have been due to the failure of those governments to obtain proper custody of their investments. A third party custodial agent is required for the securities underlying repurchase agreements, but not for other investment securities. Even when not legally required, it is considered a good practice to protect a local unit’s ownership interests.

6.5.3 Distribution of Interest and Investment Proceeds Among Funds

Interest earned on deposits and investments must be credited to the fund in which cash is deposited or invested. [G.S. 159-30(e)]. This is true even if moneys from different funds are pooled for investment purposes. In that case, a prorated share of the investment income must be allocated to each fund from which the moneys derived. [G.S. 159-30(e)].

6.5.4 Guidelines for Investing Public Funds

Because of great changes and technological innovation in financial markets and challenges presented to these markets by international events as well as by the availability of many new types of investment instruments, the investment and general management of public moneys have become very complex. North Carolina local governments can avoid many of the problems that have harmed local governments in other states by adhering to the following guidelines in conducting their investment programs:

The investment program should put safety and liquidity before yield. A local unit should not put its investment funds at risk of loss in the interest of obtaining higher investment earnings. The temptation to sacrifice safety for yield is particularly great when interest rates are falling or low and local government officials are attempting to maintain investment earnings and revenues. Any local unit should always have funds available to meet payment obligations as they come due. This requires maintaining adequate liquidity in an investment portfolio and limiting most investments to securities with short-term maturities.

A local government entity should invest only in securities that the finance officer understands. Many investment vehicles, including most derivatives, are extremely complex. Before purchasing a security, a finance officer should thoroughly understand all of its components—especially how its value is likely to increase or decrease with changes in market interest rates. A finance officer who is considering investing in a type of security that has not been used before should obtain and study the prospectus or equivalent information for the security and talk to LGC staff and other informed, disinterested parties about the nature and risks of that security.

The finance officer and other officials involved in investing a local government entity’s funds should know the financial institutions, the brokers, and the dealers from which the government buys investment securities. Investment transactions are made by phone, and investment funds and securities are often electronically transferred in seconds. Funds and securities can easily be lost or “misplaced” in such an environment. To protect the local government, officials conducting the investment program must be sure that they deal only with reputable and reliable institutions, brokers, and dealers. In fact, the authoritative literature that establishes generally accepted accounting principles (GAAP) also refers to the importance of knowing one’s brokers or dealers. The finance officer should obtain a list of the North Carolina local government clients of any firm or person attempting to sell investment securities and obtain references from these officials. The finance officer should also obtain and evaluate current financial statements from any institution, broker, or dealer that sells or wishes to sell securities to the local government entity. Local governments in other states have lost invested funds because they placed moneys with firms that later went bankrupt and were unable to return the funds. A county should also enter into an investment trading agreement with any firm or person from which it buys investments. Model investment trading agreements are used by and are available from several of North Carolina’s large governments.

The finance officer should ensure that the county or the municipality adequately insures and collateralizes all deposits in banks and that it has proper custody of all investment securities. Insurance and collateralization must be in accordance with statutory requirements. (See Section 6.2.5 of this chapter for more information.)

The local government’s investment program should be conducted pursuant to the cash management and investment policy approved by the governing board. Such a policy should be based on G.S. 159-30 and related statutes. It should set forth the governing board’s directions and expectations about which investments will be made and how they will be made and should establish general parameters for the receipt, disbursement, and management of moneys.

The finance officer should report periodically to the governing board on the status of the government’s investment program. Such a report should be made at least semiannually and preferably quarterly or monthly and should show the securities in the local government’s investment portfolio, the terms or maturities of those investments, and their yields. If possible, average investment maturity and yield also should be calculated and shown in this report.

The local government should understand that the use of investment managers does not relieve the finance officer of the responsibility of safeguarding public funds. A few counties and municipalities in North Carolina have considered the engagement of outside professional investment managers to administer their routine investment functions. Obviously, there are advantages and disadvantages to this arrangement. The most obvious disadvantage is the inability of the finance officer to have direct control of the investments even though he or she has responsibility for them. Also, because of legal restrictions on the types of investments local governments can make, the return an investment manager can earn for the unit after management fees have been deducted may be lower than the return the unit can earn on its own. It also should be noted that local legislation may be required in order for an entity to engage an outside investment manager. [See G.S. 159-25(a)(9)]. If it is determined that an outside investment manager would be beneficial, a written agreement should be executed outlining permissible investments, safekeeping arrangements, diversification requirements, maturity limitations, the liability to be assumed by both parties, and the fees of the contract.

6.5.5 Finance Officer Responsible for Investments & Investment Policy

The finance officer is statutorily charged with managing a unit’s investments. [See G.S. 159-30; G.S. 159-25(a)]. In conducting an investment program, a finance officer must forecast cash resources and needs, thus determining how much is available for investment and for how long. A finance officer also must investigate what types of investment securities are authorized by law and by the unit’s internal investment policies and decide which ones to purchase. If an investment security is to be sold before maturity, the finance officer must make that decision.

A governing board, however, should establish a general investment policy for its finance officer to follow. An investment policy is a set of rules that guides how a local government manages its money. The main goal is to keep taxpayer money safe while earning some returns, like interest, to help fund services and projects. The policy makes sure the government invests in a way that balances safety, the ability to access funds when needed, and the chance to earn money.

It also ensures that investments are spread out across different types of assets, like bonds or stocks, so that the government isn’t too exposed to any one risk. The policy helps keep everything transparent and accountable by setting clear goals and requiring regular updates on how the investments are performing. In short, the investment policy helps local governments manage public money wisely, protect the community’s funds, and earn some income, all while being transparent and responsible.

Such a board-adopted policy could, for example, limit the maximum maturities for investments of general fund moneys; require the use of informal competitive bidding for the purchase of securities; authorize the finance officer to invest in the Government Portfolio of the North Carolina Capital Management Trust (discussed above); and make clear that safety and liquidity should take precedence over yield in the county’s or the municipality’s investment program.

SAMPLE CASH MANAGEMENT & INVESTMENT POLICY (Large County)

SAMPLE INVESTMENT POLICY (General)

SAMPLE INVESTMENT POLICY (Small Unit)

6.5.6 Donations of Unlawful Investments

Local units sometimes receive securities as donations. What if the securities are not eligible investments under G.S. 159-30? The governing board must vote to accept any donations to the unit and it may not vote to accept securities that violate state law. The local unit could request that the donor first liquidate the security or transfer it to an eligible security and then make the donation.

If the LGC determines that public funds are invested in unauthorized securities, it must notify the finance officer in charge of the funds of the failure to comply with law or applicable regulations. Once receiving such notification the finance officer must sell the securities within nine months at a price to be approved by the secretary of the LGC. The LGC may extend the time for sale of ineligible securities, but no one extension may cover a period of more than one year. (G.S. 159-33).

6.6 Cash Flow Forecasting

Cash flow forecasting is the process of predicting how money will come in and go out of the government’s accounts over a set period, like a month or a year. The main goal is to make sure the government has enough cash to pay for things like salaries, bills, services, and debt payments. By forecasting cash flow, local units can avoid running into financial problems and plan ahead for any shortages or surpluses.

To create a forecast, the first step is to estimate cash inflows, or the money that will come into the unit’s accounts. This includes sources like taxes (property, sales, etc.), fees (e.g., permits or licenses), grants, and transfers from other governments.

Next, the government must estimate cash outflows, or the money that will need to be paid out. This includes day-to-day expenses like salaries, utilities, and maintenance, as well as bigger costs like debt repayments and capital projects.

The forecast is usually done using a spreadsheet or special software, which helps track when money is expected to come in and when payments are due. This is important because revenue doesn’t always come in at the same time expenses are due. The forecast helps account for these timing differences, ensuring there’s enough cash on hand when needed.

Once the forecast is complete, it can show if there will be any cash shortfalls—times when the government won’t have enough money to meet its expenses. If that happens, the government can plan in advance to either cut spending, borrow money, or use savings to cover the gap.

Cash flow forecasting isn’t a one-time task. It needs to be updated regularly to reflect changes in revenue, expenses, or unexpected events. Local units may also run different scenarios, such as a best-case or worst-case situation, to plan for uncertainties like lower-than-expected tax revenue or unexpected costs.

Cash flow forecasting helps local governments and public authorities avoid cash shortages, plan better, and stay financially stable. It also helps ensure that a local unit is managing taxpayer money responsibly and can keep services running smoothly without disruptions. Regular forecasting is a key part of financial planning and accountability, helping local units meet their financial obligations while maintaining trust with the public.