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Warren County staff: US Bank miscoded bond amortizations; year-end report overstated by about $50,000
Summary
County finance staff said the county's custodian bank failed to post two principal paydowns on locally issued bonds, causing a roughly $50,000 overstatement in the year-end bond portfolio report; staff separated local issues into a dedicated account and will correct the report in January.
Warren County finance staff told the Board of Commissioners at a meeting that US Bank failed to post two principal paydowns for locally issued bonds, which caused the county's year-end bond portfolio report to overstate holdings by about $50,000. The county will correct the error in the January report.
The issue arose because the county keeps locally issued bonds in a separate portfolio with US Bank; those bonds amortize (pay down principal over time) while other holdings pay principal at maturity. "We've had a continuing problem with our custodian bank in getting the amortizations of the local bond," Barton, a county staff member, said. He said the county discovered the missing entries during its review and separated local bonds into a dedicated account to make tracking easier.
"It'll be corrected for the January," Barton said. He estimated the separate account now holds about $8,000,000 in those local issues and described the miscoding as an "ongoing irritation" rather than a loss: "It's not like there's money actually lost or anything. It's really just an account." Barton also said the county must do extra work each December to ensure paydowns are posted correctly.
Staff discussed options for changing custodial banks but noted few local alternatives with adequate capacity. "There are only one or two others in the state that make any sense. It'd be Fifth Third or Huntington," Barton said, adding that switching banks is an option but that the problem was largely procedural, not an immediate financial loss.
Barton also reviewed broader portfolio conditions, saying the portfolio yield has been "gradually increase[ing]" as maturities roll off and are reinvested. He said county staff will consider extending average portfolio maturity in light of current market advice to lock in longer rates; he cited five-year Treasury rates near their 20-year highs and referred to a figure of about 4.3 percent when asked about rates.
There was no formal action taken at the meeting to change custodial banks. Commissioners were told the accounting error will be corrected in the January report and that staff will continue to monitor posting of principal paydowns.
The remarks occurred during the county's regular meeting; staff noted one commissioner would be absent because of illness but did not change the handling of the portfolio report.
