PRINTER'S NO. 1000
No. 75 Session of 1975
INTRODUCED BY ANDERSON, ZEARFOSS, PANCOAST, MOEHLMANN,
WHELAN, KUSSE, MILLIRON AND GRING, MARCH 19, 1975
REFERRED TO COMMITTEE ON RULES, MARCH 20, 1975
In the House of Representatives, March 19, 1975
1 WHEREAS, The Department of the Auditor General is currently
2 conducting an audit of the operations of the Treasury Department
3 and has issued an interim report making the following findings:
4 1. The State Treasurer invests public moneys and deposits
5 public moneys in active depositories pursuant to resolutions
6 adopted by the Board of Finance and Revenue.
7 2. The resolution of the Board of Finance and Revenue dated
8 May 1, 1962, limited the total deposits in the 26 active
9 depositories to $125,000,000. This resolution was consistently
10 violated during the period under examination.
11 3. Based on the information provided by 25 out of the 26
12 active depositories for the months of April, May and June 1974,
13 it is estimated that there was during that period a total of
14 $170,000,000 in idle funds of the Commonwealth on deposit which
15 funds were available for investment. In today's money market
16 such funds could have earned $4,250,000 during this three-month
17 period or, projected upon an annual basis, $17,000,000.
1 4. The Treasury Department does not have an adequate system
2 to insure that the legal requirements as to collateral are
3 maintained in the active depositories. Deposits of public moneys
4 were maintained in at least five active depositories in
5 violation of law, in that these five banks did not post
6 collateral to secure deposits in an amount equal to 120% of the
7 total deposits as required by "The Fiscal Code."
8 5. During the period under audit, investments in short-term
9 commercial paper and United States Government obligations
10 violated the limitations established by resolutions of the Board
11 of Finance and Revenue dated August 10, 1961 and June 12, 1970,
12 both as to the total amount and ratio between commercial paper
13 investments and obligations of the United States Government.
14 6. In the opinion of the Auditor General, while such
15 investments are permitted by law, there has been grossly
16 inadequate diversification of investments in prime-rated
17 commercial paper, which is nothing more than an unsecured
18 promissory note of the issuing finance company and is not
19 collateralized in any way to protect the Commonwealth's
20 investments.
21 7. In the opinion of the Auditor General, there appears to
22 be a lack of competition among banks for the Commonwealth's
23 banking business, which has resulted in an inequitable
24 distribution of such business among the 26 active depositories.
25 WHEREAS, During the conducting of this audit, several of the
26 Commonwealth's 26 active depositories refused to supply the
27 Auditor General with complete information in all areas of
28 inquiry; and
29 WHEREAS, This situation necessarily raises profound questions
30 relating to the investment and banking procedures and practices
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1 of the Treasury Department as well as making suspect the safety
2 of Commonwealth funds; and
3 WHEREAS, Under Rule 45 of the House of Representatives each
4 Committee and Sub-committee has the duty to "assist the House in
5 appraising the administration of the laws and in developing such
6 amendments or related legislation as it may deem necessary, each
7 Standing Committee or Sub-committee of the House shall exercise
8 continuous watchfulness of the execution by the administrative
9 agencies concerned of any laws, the subject matter of which is
10 within the jurisdiction of such Committee or Sub-committee; and,
11 for that purpose, shall study all pertinent reports and data
12 submitted to the House by the agencies in the Executive Branch
13 of the Government; therefore be it
14 RESOLVES, That the Chairman of the Committee on Finance
15 appoint a select committee composed of four Democrats and three
16 Republicans from among the members of the committee to review
17 the operations of the Treasury Department and the Board of
18 Finance and Revenue of the Commonwealth of Pennsylvania with
19 respect to the banking and investment of Commonwealth funds to
20 determine whether or not current practices serve the public
21 interest; and be it further
22 RESOLVED, That the committee review all provisions of "The
23 Fiscal Code" dealing in any manner with the deposit or
24 investment of Commonwealth funds and the powers and duties of
25 the Treasury Department and the Board of Finance and Revenue
26 relating thereto; and be it further
27 RESOLVED, That the committee may hold hearings, take
28 testimony and make its investigation at such places as it deems
29 necessary within this Commonwealth. It may issue subpoenas under
30 the hand and seal of its chairman commanding any person to
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1 appear before it and to answer questions touching matters
2 properly being inquired into by the committee and to produce
3 such books, papers, records and documents as the committee deems
4 necessary. Such subpoenas may be served upon any person and
5 shall have the force and effect of subpoenas issued out of the
6 courts of this Commonwealth. Any person who wilfully neglects or
7 refuses to testify before the committee or to produce any books,
8 papers, records or documents, shall be subject to the penalties
9 provided by the laws of the Commonwealth in such case. Each
10 member of the committee shall have power to administer oaths and
11 affirmations to witnesses appearing before the committee; and be
12 it further
13 RESOLVED, That within 30 calendar days after the committee
14 has made its report, the chairman of the committee shall cause a
15 report of all expenses incurred by the committee, or the members
16 thereof, which are payable at Commonwealth expense, to be filed
17 with the Speaker of the House and the Speaker shall cause the
18 same to be entered in the journal thereof. No expenses incurred
19 by the committee or any member thereof shall be reimbursable by
20 the Chief Clerk unless such expense shall first have been
21 included as an expense item in the record heretofore required;
22 and be it further
23 RESOLVED, That the committee report its findings to the
24 General Assembly as soon as possible.
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