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Tips and Tools for Evaluating Financial
ServicesRFP Process and Banking Fees
Presented byAimee Briles, Wintrust
FinancialKimberly Feeney, Bank of
AmericaModerator Mark Staehlin, Controller -
CHSD 99
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Mark Staehlin, Controller CHSD 99

• Community High School District 99
• 6301 Springside Avenue
• Downers Grove. IL 60516-2488
• [phone]
• mstaehlin_at_csd99.org
• Mark has been the Controller for CHSD 99 since
  1994. Prior to that he was an Audit Manager for
  RSM McGladrey, Inc., in charge of more than 60
  school audits each year. In addition to his
  school clients, Mark performed audits of banks,
  savings and loans and other financial
  institutions. He also serves as President of his
  local Board of Education in Palos Heights, IL.
• Mark is a Certified Public Accountant (CPA) and
  has a BS degree in Finance from Northern Illinois
  University. 

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Aimee Briles, Vice President

• Wintrust Financial
• 500 Roosevelt Rd., Ste 320
• Glen Ellyn, 60137
• 630-516-4685
• abriles_at_wintrust.com
• Aimee works with public entities throughout
  Chicagoland and has over 11 years of banking
  experience, with 6 years in Treasury Management
  and Government Banking. Aimee is a member of the
  Illinois Association of School Business
  Officials, Illinois Government Finance Officer's
  Association, and the Illinois Park Recreation
  Association. Wintrust Financial owns over 75
  community banks throughout the Chicago and
  Madison, WI areas.

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Kimberly Feeney, Vice President

• Bank of America
• 231S. LaSalle Street
• Chicago, Illinois 60697
• 312-828-2582
• kimberly.feeney_at_bankofamerica.com
• Kim is a Government Client Manager in the
  Midwest Region. Joining the Bank in May 2003,
  she came with over ten years of government
  finance experience and has held roles as
  Accounting Manager and Chief Financial Officer
  for the Cook County Treasurer and Comptroller for
  the Cook County Forest Preserve District.  Her
  responsibilities at Bank of America include
  working with clients to understand their current
  operations and assist in improving, enhancing and
  automating their treasury management operations
  as well as meeting all their capital raising
  solutions.
• Kim is a Certified Public Accountant (CPA) and
  has an MBA in Finance from Loyola University. 

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Session Agenda

• Why issue a formal RFP?
• RFP Basics What, Why How?
• Banking services to consider
• Collections
• Disbursements
• Investment Services
• Information Reporting
• Paying for Services
• Final steps in the RFP process

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Why Issue a Formal RFP?

• GFOA recommended practice periodic evaluation
  of banking services
• Evaluates current banking relationship
• Evaluates available banking/TM services
• Initiates competitive bidding and negotiation
• Mediate political situations

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Preparation Questions

• Are you willing to change providers?
• What are your goals?
• Improvement of efficiencies
• Implementing new technology
• Lowering costs
• Important end results?
• New structure
• New (or renewed) banking relationship
• Best value vs. low cost
• Bundled vs. Unbundled approach?

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Preparation Steps

• Understand current contract, services, fees and
  bank relationship
• Determine minimum qualifications for proposers
  list of banks to be included
• Determine District employees to be involved
• Understand political issues (internal external)

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RFP Section 1 Introduction

• General information about District
• Evaluation criteria
• Contract specifications (duration, renewal
  termination clause)
• Timeline due dates
• Required qualifications of vendors
• Questions response instructions
• Proposal format requirements

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Proposal Format Requirements
Example

• Include requirements of each section
• Cover Letter
• Principal Officers / Bank Background
• Scope of Services
• Implementation Schedule
• References
• Concluding Remarks
• Cost Proposal

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RFP Section 2 Scope of Services

• Question/Response Format
• Account structure
• Rate requirements
• Core service requirements
• Collections, Disbursements, Information Reporting
• Account Executive requirements
• Other services needed
• Bank recommendations for additional and/or new
  services

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RFP Section 3 Cost Proposal

• Standardize format
• Provide accurate activity volumes
• Mirror you Account Analysis statement
• Specify annual or monthly volumes
• Allow space for misc. charges and new services
• Include Compensating Balance calculation

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TM Collection Services

• Services
• EFT / ACH Collection
• Remote Deposit
• Electronic Bill Payment Solutions
• Merchant Services
• Courier Services

• Benefits
• Accelerates funds availability
• Cost reductions
• Simplifies reconcilement
• Reduces errors / fraud
• Reduces bank runs

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Questions to Consider Collections

• EFT / ACH Collection (includes wires)
• Is Bank a receiving member on the Automated
  Clearing House system?
• Same day availability?
• Access to full addenda record?
• Costs involved?
• Receipt of addenda
• Incoming wire transfer vs. ACH

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Questions to Consider Collections

• Remote Deposit
• Cut-off time?
• ACH conversion?
• Image clearing capability?
• Equipment options?
• Cost involved?
• Monthly maintenance
• Per item
• Scanner (payment options)

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Questions to Consider Collections

• Electronic Bill Payment Solutions
• Customizable to District?
• Reporting options?
• File format options?
• Payment options?
• Secure payment site? Maintained by who?
• Cost involved?
• Set up /programming fees
• Monthly maintenance
• Per item

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Questions to Consider Collections

• Courier Services
• Armored Car or Bank Employee?
• If Bank employee are they bonded?
• Same day credit for courier deposits?
• Costs involved?
• Per month, per stop, per day

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TM Disbursement Services

• Services
• ACH (Payroll Vendor Payments)
• Wire Transfers
• P-Card / Credit Card Payments

• Benefits
• Standard formats templates reduce errors
• Eliminates lost checks
• Reduces fraud
• Reduces paper items

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Questions to Consider Disbursements

• ACH Services
• Is Bank a sending member on the Automated
  Clearing House system?
• What are your options for file transmission?
• File transmission security?
• What are the cut-off times for file receipt?
• How are returns NOCs communicated?
• Costs involved?
• Per item, transmission, returns, deletions

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Questions to Consider Disbursements

• Wire Transfer Services
• Initiation Capabilities?
• Cut off times?
• Security features?
• Notifications?
• Costs involved?
• Online vs. fax/phone
• Notification fees
• Repetitive vs. Non-Repetitive

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Questions to Consider Disbursements

• P-Card / Credit Card Payments
• Online capabilities?
• Reporting, Administrative Functions
• Card limits available? What types?
• Monthly statements?
• Billing methods and cycles available?
• Rebate schedule?

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TM Reconciliation Fraud Prevention Services

• Services
• Account Recon Services
• Positive Pay
• ACH Blocks Filters

• Benefits
• Automates expedites monthly reconcilement
• Eliminates incorrectly posted or encoded items
• Protects District funds

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Questions to Consider Recon Fraud Prevention
Services

• Account Reconciliation Services
• File formats Customizable?
• Timing of file transmission to from Bank?
• File transmission options security?
• Costs involved?
• Monthly maintenance (partial vs. full)
• Per item
• File transmission

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Questions to Consider Recon Fraud Prevention
Services

• Positive Pay Services
• Positive Pay vs. Reverse Positive Pay?
• Payee information verification?
• Teller line transactions verified?
• Exception notification? (phone, fax, online)
• Decision deadlines?
• Costs involved?
• Included with Full Recon Services?
• Exception items

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Questions to Consider Recon Fraud Prevention
Services

• ACH Blocks Filters
• Verification types available?
• Dollar amounts, SEC Codes, Business Names
• Costs involved?
• Monthly maintenance
• Per suspect item

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TM Investment Services

• Services
• Automated Investment Sweep (AIS or Sweep)
• Public Funds Interest Checking Account (PFIC)

• Benefits
• Earn interest on idle funds
• Remains liquid to cover inclearing items
• Accurate and convenient
• Several investment vehicle options

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Questions to Consider Investments

• Automated Investment Sweeps (AIS)
• What are the associated fees?
• Is it properly collateralized?
• What are my investment options? (i.e. repo, MM)
• Is reporting available online?
• Can I set a peg or target balance?

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Questions to Consider Investments

• Public Funds Interest Checking Accounts
• What are the associated fees?
• Is it properly collateralized?
• What of balances are invested?
• Can I also use Compensating Balances with this?

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TM Online Banking Services

• Services
• Information Reporting
• Internal Transfers
• Stop Payment Initiation
• Outgoing Wire Initiation
• ACH Origination
• Check Images

• Benefits
• Cheaper
• Easy to access
• Multiple Users
• Accessibility of information
• Availability of transaction history

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Questions to Consider Online Banking

• Information Reporting
• Current Day and/or Previous Day reporting?
• Cost involved?
• Format of reports?
• Can I export?
• What formats are available?
• Can I schedule reports?

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Questions to Consider Online Banking

• Money Movement
• Real time or delayed information?
• Associated Costs?
• Are templates available for recurring transfers?
• Can controls be set to segregate duties?

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Questions to Consider Online Banking

• Fees
• Bundled or menu-based
• Per item fees or access charges
• Activity retention fees
• Discounts for online initiated services
• Stop payments
• Wire transfers
• Internal transfers

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Evaluating the Proposals

• Design Comparative Evaluation Matrix

Bank A Bank B Bank C Bank D
Branch Location gt1 mile 1-2 miles 5 miles lt 1 miles
Public Funds Specialist yes no no yes
Total Fees Balances 1,040 975,000 1,290 1,129,500 950 Not provided 1,150 1,325,00
Price Guarantee 2 years 3 years 3 years 2 years
Understands Needs A- B B A
Quality of RFP A- B A B-
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Paying for Bank Services Options

• Compensating Balances
• Direct Fee Payment
• Private and Public Sector moving to payment via
  direct fees
• Payments with direct fees are less expensive than
  payments with balances
• Combination of Balances and Fees (Blended)

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Compensating Balances

• Compensating balances why is this option
  popular?
• Thats the way weve always done it
• I dont pay the banks anything
• No budgeting impact

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Direct Fees

• Required bank reserves (10) become earning
  assets
• Direct investment of balances normally exceeds
  bank earnings credit rate
• Lower balances mean lower FDIC assessment
• Lower balances mean reduced state collateral
  requirements

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Direct Fees (Cont.)

• Bank charges properly expensed, not hidden
• In some cases, fees can be charged against the
  investment income account as a cost of overall
  investment program

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Potential Problems Using Fees

• Requires budgeting
• Requires additional monitoring of collected
  balances
• Requires active investing

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Decision Factors Fees vs. Balances

• Time/resources
• Active investor
• Cash flow monitoring
• Cost/yield of cash management techniques available

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Compensating Balances Terms

• Earning Credit Rate
• Rate provided by your bank used in computation
  of compensating balance
• Multiplier
• Balance required to support 1.00 of Service
• Reserve Requirement
• Banks current Federal Reserve Requirement
  (percentage) as applied to the positive
  collective balance maintained in the demand
  deposit account

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Compensating Balance Formula

• Compensating Balance Formula
• monthly service charge /
• (1.00 - reserve requirement) / Monthly ECR
• Example
• Monthly service charge 4,116
• Earnings credit rate 1.15 divided by 12.167
  months .00095
• Reserve requirement 10

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Compensating Balance Example

• CB 4,116 /(1.00-.10) 4,814,035
  
  .00095
• Multiplier
• (365/31)/1.15
• For every 1.00 of service fee you need 1,023.84
  in balances

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Evaluating Proposals

• Low Cost vs. Best Value
• Lowest compensating balance, best interest rate,
  individual price points
• Ability to meet service requirements
• Creative suggestions for enhancements
• Government experience of bank RM
• References
• Finalist interviews
• Bank visits

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RFP Preparation RemindersHelp Bidders and
Yourself

• Be specific facilitates understanding of
  District needs
• Allow for question submission hold pre-bidder
  meeting
• Provide a copy of District Investment Policy
  Collateral Requirements
• Provide electronic form of RFP and attachments
  (include any required agreements)
• Goal is apples to apples comparison

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Questions

• Thank you!