NO. 96-14-OMB

ORIGINATING AGENCY: OFFICE OF MANAGEMENT AND BUDGET

EFF DATE: 2/1/96

EXP DATE: INDEFINITE

SUPERSEDES: 94-28-OMB

SUBJECT: OFFICE SYSTEM FUNDS OR ACCOUNTS

ATTENTION: DIRECTORS OF ADMINISTRATION, CHIEF FISCAL OFFICERS AND BUSINESS
MANAGERS

FOR INFORMATION CONTACT: JOHN DITRI
PHONE: 292-8938

Some state agencies and officials are custodians, by statute or long
standing practice, of fiduciary funds which are not under the control
of the State Treasurer. The origin and purpose of these funds are not
established or defined within the Annual Appropriation Act or may be
exempt by appropriate statutes. Examples of such funds include, but
are not limited to, patient funds, inmate funds, and commissary funds.
These funds may also be known as non-appropriated accounts.

The State Treasurer has issued regulations dealing with the
administration of such funds. These regulations require state
agencies to comply with the following:

1. OMB - Cash Management must be contacted before opening any bank
account in connection with these funds. Procedures included in
Treasury Circular Letter 93-02-OMB, item 1, Establishing an
Account, should be followed. If an account was previously opened
without Cash Management being contacted, Cash Management must be
notified of its existence. Procedures included in Treasury
Circular Letter 93-02-OMB, item 5, Disclosure of Unauthorized
Account(s) or Other Banking Services, should be followed.

2. All investments of these funds must be made through the Division
of Investments. Agencies are not to make investments in
Certificates of Deposit, money market accounts, stocks or bonds.

3. Each agency is required to maintain adequate accounting records
for each fund. Proper accountability denoting specific
transactions and categories of receipts and expenditures is to be
maintained at all times. Agency records of the funds are to be
retained for seven years.

In addition to the above, agencies administering off system funds or accounts
are to ensure that periodic audits of each off system fund or account are
performed. Audit reports are required in accordance with the following
schedule:

ANNUAL DISBURSEMENTS	AUDIT FREQUENCY
$500,000 or more	every two years
$250,000 to less than $500,000	every three years
Less than $250,000	every four years

To determine the next period to be audited, the total of fund disbursements
during the last period audited should be measured. For example, if the fund
was audited for the year ended June 30, 1994, and the disbursements for that
year were $240,000, the next period to be audited should be the year ended
June 30, 1998. If disbursements in 1998 are $260,000, the frequency of audit
would then be every three years and the next period to be audited would be
June 30, 2001.

A report of the audit is to be submitted to the Office of Management and
Budget, Management and Internal Audit, no later than 180 days after the audit
period. The auditor is to identify the auditing standards used in performing
the audit, and give positive assurances that the fund or account was operated
in accordance with the authorized purpose of the fund or account or, if
applicable, report the instances of non-compliance.