Banking Opportunities with

Wells Fargo BankRon Flatt – Director, Treasury Operations

• Overview

• Treasury’s Transformation

• Wells Fargo Bank – Systemwide contract

• Cash Handling

• CO’s Roadmap & Technology

• Q&A

Agenda

• Over $20.1 Billion processed annually

• Investment pool of >$5.0 Billion

Overview

CO Treasury Operations

• Maintain Liquidity

• Optimize Cash Resources

• Maintain Access to Short-Term Liquidity

• Establish and Maintain Access to Medium and Long-Term Liquidity

• Manage Investment Risk

• Coordinate Treasury Functions

Responsibilities• Open, close and modify bank accounts

• Oversee day-to-day liquidity and cash management• Deposits • Disbursement• Concentration• Information Gathering & Analysis

• Fund Payroll• Forecasting

• Oversee Investments• Risk Management & Compliance

• Manage relationships with banks and other financial institutions

• Internal Consulting

• Monitor cash balances and ensure adequate liquidity is available to meet cash needs throughout the system

• Establish all bank accounts used systemwide to ensure they meet all legal requirements of the State and that all public funds are protected at all times, including the establishment of appropriate signatory requirements

• Provide consultative advice on domestic and international banking issues

• Establish systemwide Treasury policies

• Process and safekeep deposits and disbursements

• Management user’s access and privileges of the campus bank accounts

• Limit digital footprint

• Establish campus Treasury procedures

Chancellors Office

Campus

Banking Operations Roles

Cash Cycle

CO Treasury identifies surplus or deficit cash on a daily basis and moves it into income-generating investments (“SWIFT”) or request a disbursement to fund the day’s payables

Transformation

Summary July 2016

• Wells Fargo Banking platform started in 2007

• $900,000 in annual banking fees

• 364 Bank Accounts

• Average monthly fees per bank account $66

• Over $100M in annual cash deposits

Objectives • Conduct a systemwide review of our Banking &

Cash Management operations

• Bank Services

• Bank Account Structure

• CEO usage

• Deposit/Disbursement Processes

• Banking/Cashiering Policies

• Cost savings opportunity

• Develop Best Practices / Recommendations

Service Fees

Understanding the Account Analysis Statement • Value of the account analysis statement

• Outlines all of the services being used

• Reporting tool

• Benchmarking • Volumes & Fees

• Resource for improving the cash flow cycle

• Optimization

Service FeesUnderstanding what we’re using

• AFP Service Codes• Over 2,500 AFP codes in the United States• CSU 430 codes used • Categories

• Balance & Compensation Information

• EDI Payment Services

• Foreign Exchange Online

• Depository Services

• General Account Services

• General ACH Services

• Information Services

• International Services

• Paper Disb Recon Services

• Paper Disb Services

• Wire & Other Funds Trans Serv

Service FeesUnderstanding what you’re Paying

• Banking products and services do have a cost• Safe keepers of our funds

• Highly regulated Wire & International Services

Service Type Account Fee Transaction

Fee

Special Features

FOREIGH EXCHANGE ONLINE WIRE OUT15.00000$

Per Item Fee for a wire denominated in a foreign currency initiated on Foreign Exchange

Online.

INTERNATIONAL PHOTOCOPY10.00000$

Per Item Per item charge for photocopy or image request initiated by Customer Service.

DEPOSITED CHECK FOREIGN5.00000$

Per Item Foreign currency or US dollar item drawn on a foreign bank, deposited at Wells

Fargo

DEPOSITED CHECK CANADIAN5.00000$

Per Item Canadian Deposit Item

CASH LETTER FOREIGN DEPOSIT3.00000$

Per Item Sorted foreign cash letter

FOREIGN CHECKS RETURNED25.00000$

Per Item Charge for foreign returned item.

WIRE - BOOK TRANSFER - CEO2.85000$

Per Item Wire between two accounts on the Wells Fargo US account system initiated via

CEO Wires. The debit and credit account are in the same relationship and

linked by the bank on the Wire system.

WIRE - OUTGOING FX - CEO15.00000$

Per Item Outgoing international foreign currency wire (freeform or templated) initiated

via CEO Wire Transfer (legacy) or CEO Wires (new) settling on the US account

system (Hogan). This element DOES NOT include USD cross-border wires.

WIRE - OUTGOING INTL USD - CEO9.50000$

Per Item Outgoing International USD wire (freeform or templated) initiated from our US

account system (Hogan) via CEO Wire Transfer (legacy) or CEO Wires (new).

This element DOES NOT include foreign currency wires via CEO or Foreign

Exchange Online (FXOL).

WIRE DETAIL RPT SUBSCRIPTION-ACCT15.00000$

Monthly Per month per account maintenance base fee for having the CEO TIR Wire

Transfer Detail report.

WIRE DETAIL RPT SUBSCRIPTION-ITEM0.03800$

Per Item Per detail item viewed charge for the Wire Transfer Detail Subscription.

WIRE IN - INTL - USA OR FX4.75000$

Per Item Incoming international wire for incoming US dollars and Foreign Currency items

credited to a Wells Fargo US account (Hogan) (charged to the credited

account).

WIRE IN DOMESTIC2.37500$

Per Item Incoming domestic wire sent to a Wells Fargo US account (Hogan), this includes

incoming wires when the accounts are not linked on the Wells Fargo wire

transfer system (MTS). (See separate element for incoming drawdown

response wire DDAES078.)

WIRE IN REPAIR SURCHARGE6.00000$

Per Item Per wire fee for incoming repair - domestic and international wires.

WIRE INTL BOOK TRSFR CR - USD OR FX4.75000$

Per Item Incoming wire US Dollar or Foreign Currency, received from Wells Fargo

correspondent relationships and subject to correspondent fees.

WIRE INVESTIGATION55.00000$

Per Item Per wire fee per investigation which can include:

tracers/recalls/returns/amendments/photocopy requests.

WIRE MONTHLY DDA BASE - VOICE6.00000$

Per Item Monthly per account maintenance for voice wire customers. This applies to any

Wells Fargo US account (Hogan) that has a voice wire user set up for any reason

including business continuation purposes.

WIRE OUT REPAIR SURCHARGE6.00000$

Per Item Per wire fee for outgoing repair - domestic and international wires.

WIRE OUTGOING DOMESTIC - BRANCH/STORE 35.15000$ Per Item Outgoing domestic wire sent via Wells Fargo Branch/ Store personnel (SVP).

Includes transfers between debit and credit accounts on the US account system

(Hogan) and are not linked on the Wells Fargo Wire Transfer system.(MTS) All

items are non-repetitive.

WIRE-OUTGOING DOMESTIC - CEO3.80000$

Per Item Outgoing domestic wire (freeform or templated) initiated via CEO Wires.

Includes transfers where the debit and credit accounts are not in the same

relationship thus not eligible to be linked by the bank on the Wire system.

Guide to Banking Fees

Service Fees

• Identify problems • Service Type

• WIRE INVESTIGATION• ACH SPECIAL INVESTIGATION• ACH AUTHORIZATION INVESTIGATION• ACH DELETE/REVERSE - BATCH/FILE\• ACH EXCEPTION PROCESS-DUPLICAT FILE\• ADJ FOR CASH DEPOSITED IN WF BRANCH• CASH VAULT COIN DEP-SUBJ TO COUNT• CASH ORDER FEE IN A WF BRANCH• BRANCH DEPOSIT POST VERIFY

Bank Transformation

• There is no single method for successfully transforming your banking operations.

• Your approach to transformation depends on your goals• Improve service

• Streamline processes

• Reduce costs

Summary July 2019 • Wells Fargo Banking platform started in 2007

• New Agreement as of June 2018

• $900,000 annual banking fees• $450,000 annual banking fees

• 364 Bank Accounts• 300 Bank Accounts

• Average monthly fees per bank account $66• Average monthly fees per bank account $29

Outcome – Banking RFP

• Wells Fargo Awarded the contract March 13, 2018

• Key points:• Disbursement process is highly rated• Branch coverage in comparison to campus locations• Account structure and services offerings

• Next Steps • Campus:

• Account Structure adjustment• Removal of unutilized banking services • Update user and campus profiles

• Auxiliaries, Foundations and campus approved student clubs are eligible to receive CSU negotiated pricing as soon as the new agreement is executed

Case Study Wells Fargo Banking Agreement

Example -

Example -

Change to Wells Fargo Bank University Auxiliary

Current Bank Bank X Wells Fargo Savings WF vs Current

Monthly Fees Volume Mthly Fees Volume Mthly Fees Volume Mthly Fees Volume Mthly Fees

Acct Maintenance 5 $ 125.00 5 $ 100.00 5 $ - 5 $ (125.00)

Full Recon Monthly Maint 4 $ 440.00 4 $ 235.00 4 $ 100.00 4 $ (340.00)

Stale Date - Base 4 $ 10.00 4 $ - 4 $ - $ (10.00)

Bank Statement Web 5 $ 25.00 5 $ - 5 $ - 5 $ (25.00)

Check Image - Monthly Maint 1 $ 5.00 1 $ - 1 $ 5.00 1 $ -

Prior Day Report Acct 1 $ 90.00 1 $ 24.00 1 $ 5.00 1 $ (85.00)

Prior Day Report Acct 4 $ 320.00 4 $ 54.00 4 $ 20.00 4 $ (300.00)

Current Day Reporting Acct 1 $ 75.00 1 $ - 1 $ 5.00 1 $ (70.00)

Current Day Reporting Acct 3 $ 195.00 3 $ - 3 $ 15.00 3 $ (180.00)

Web RI - Monthly Maint 1 $ 8.00 1 $ - 1 $ - $ (8.00)

Wire Transfer Fee - Mthly 1 $ 50.00 1 $ 30.00 1 $ 5.00 1 $ (45.00)

Concentration Acct 2 $ 70.00 2 $ 60.00 2 $ 5.00 2 $ (65.00)

Multi Level Subsidiaries 1 $ 5.00 1 $ 66.00 1 $ 0.75 1 $ (4.25)

Multi Level Subsidiaries 2 $ 10.00 2 $ - 2 $ 0.75 2 $ (9.25)

Remote Deposit Mthly Maint 1 $ 125.00 1 $ - 1 $ 10.00 1 $ (115.00)

Remote Deposit Add'l Acct 1 $ 75.00 1 $ 60.00 1 $ 10.00 1 $ (65.00)

Monthly Fees $ 1,628.00 $ 629.00 $ 181.50 $ (1,446.50)

Sample - Bank Services Current Bank Bank X Wells Fargo Savings WF vs Union

TRX Fees Volume Mthly Fees Volume Mthly Fees Volume Mthly Fees Volume Mthly Fees

Payee Name Validation 953 $ 33.36 953 $ - 953 $ 9.05 5 $ (24.31)

Currency Deposit 68,192 $ 81.83 68,192 $ 96.83 68,192 $ 17.05 4 $ (64.78)

Stop Payment Team 78 $ 987.00 78 $ 780.00 78 $ 156.00 $ (831.00)

Transaction Report - per item 3,383 $ 598.39 3,383 $ 40.60 3,383 $ 40.60 5 $ (557.79)

Pos Pay - per isssues 1,119 $ 202.61 1,119 $ 67.14 1,119 $ 11.19 1 $ (191.42)

$ 1,903.19 $ 984.57 $ 233.89 $ (1,669.30)

Cash Handling Policy

Cash Handling Policy

ICSUAM 6330.00 Cash Handling - REVISED 3102.03 Acceptance of Cash and Cash Equivalents 3102.04 Physical Protection of Cash and Cash Equivalents 3102.11 Deposit and Transfer to the Bank

Cash Handling Unit • Main Cashier/Bursar’s Office – The primary cash handling unit has the

responsibility to collect, control, and maintain records for campus funds. Collections are deposited directly to an approved depository bank account.

• Satellite Cashier – Cashiering unit which generally performs cashiering activities as a primary function. Typically, collections are deposited with Main Cashier or may deposit directly to an approved depository bank account.

• Departmental Cashier Department – Department which performs minimal cashiering activities. For example, petty cash fund intended for minor departmental business expenses. Collections are deposited with Main Cashier.

Section 200 – Handling •Depositing Cash and Checks

•All Cash Handling Units that accept cash equivalents must be provided with an official campus endorsement stamp, or its mechanical equivalent, that identifies the employee and the Cash Handling Unit. Immediately upon receipt, cash equivalents must be restrictively endorsed (endorsement stamp or its mechanical equivalent) with the phrase "for deposit only".

••The Main Cashier shall deposit at the bank no later than the next business day of receipt. Cash and/or cash equivalents are to be deposited, either physically and/or electronically. All other Cash Handling Units must deposit to the Main Cashier or bank in a timely manner, and at least within five (5) business days of receipt. Certain Cash Handling Units may require a more restrictive policy based on security, and cash/cash equivalents composition. A single cash equivalent in excess of $10,000 or more must be deposited more frequently.

••Cash Handling Units shall deposit to the Main Cashier and/or bank, whenever excess cash exceeds $1,000 or cash and cash equivalents accumulatively exceeds $5,000 or cash equivalents accumulatively exceeds $5,000. Deposits meeting or exceeding these thresholds require a campus police escort or armored car.

••Receipt of cash and cash equivalents should be verified, processed, and document conjointly by at least two (2) employees before a bank deposit is finalized or change in custodian.

Treasury operations road map

Challenging Times

• High level of uncertainty on the future of banking • Cash & Personal Checks vs. Card & Digital Payment

• Core processes vs. new technologies

• How the regulators are going to respond

• Shift from Branch to Digital banking

• The demand for real-time payments

• Artificial Intelligence (AI)

• Organization Readiness

Strategic Initiatives

• Organization• Maximizing the contributions of the treasury team • Treasury polices• Key Metrics• Cross-silo• Liquidity Management • Bank Operations RFP • New Investments • Technology • Straight-through processing

New Investments

Liquidity Portfolio

SWIFT

CSU

Wells Fargo Bank N.A.

SWIFT(Systemwide Investment Fund Trust)

Liquidity Portfolio

The California State UniversityOffice of the Chancellor

Intermediate Duration

Portfolio

IDP

Total Return Portfolio

TRP

Min – Target – Max

5% - 20% - 100%

Min – Target – Max

0% - 52% - 95%Min – Target – Max

0% - 28% - 30%

Normal banking activity

(Deposits, checks, wire transfers, etc.)

CSU Bank Accounts

CSU Investment Account

Each day, CSU cash position is reviewed

If net cash available, transfer to Investment

If net cash needed, transfer from Investment

U.S. Bank - Custodian

Technology

• Introduce/update where necessary the use of Remote Desktop Deposit

• Introduce SmartSafe and Cash Recyclers

• Treasury Management System

What Makes a “Smart Safe” Smart? • Protect cash. Smart safes store cash, whether at the POS or in the back

office. Once inserted into the safe, cash is secured in either a tamper-proof bag or cassette.

• Contain built-in note validators. Smart safes detect and reject fake notes at the POS.

• Offer provisional credit with Wells Fargo Bank.

• Smart safes are intended to reduce theft. When a CIT messenger arrives to collect cash, the safe often requires two sets of credentials to open.

• Slash fees. Since a smart safe generates and monitors data – such as the denominations and amounts of cash inside – you know when cash needs to be collected. Optimizing armored car pickups and deliveries helps you avoid unnecessary trips and the costs associated with them.

• Can be integrated with other cash management technology to provide an end-to-end solution.

What Makes a “Cash Recycler”?

• Automate the Cash Handling Process by recycling cash.

• A cash recycler is a complex machine that handles a couple of simple, but important tasks—accepting and dispensing cash.

• Keeps an accurate accounting of cash on hand• Sorts bills by denomination

• Checks for suspect counterfeits

• Counts and verifies the total

Chancellor’s Office Treasury Contacts

• Ron Flatt, Directorrflatt@calstate.edu

(562)951-4521

• Alisa Schivley (Banking)aschivley@calstate.edu

(562)951-4597

• Scott August (Investment)saugust@calstate.edu

(562)951-4498