Independent Accountant’s Report
We have examined the accompanying statement of securities accountability of the State of California’s State Treasurer’s Office as of December 31, 2015, and the related notes. The State Treasurer’s Office is responsible for the statement. Our responsibility is to express an opinion based on our examination.
We conducted our examination in accordance with attestation standards established by the American Institute of Certified Public Accountants and accordingly, included examining evidence supporting the statement of securities accountability and performing such other procedures as we considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion.
In our opinion, the statement referred to above presents fairly, in all material respects, the securities accountability of the State of California’s State Treasurer’s Office as of December 31, 2015, in conformity with the basis of accounting described in Note 1.
Our report is intended solely for the purpose of providing information required by Section 13299.1 of the California Government Code and is not intended to be and should not be used for any other purpose.
CALIFORNIA STATE AUDITOR
JOHN F. COLLINS II, CPA
Deputy State Auditor
Date:
July 22, 2016
Staff:
Jim Sandberg-Larsen, CPA, Audit Principal
Nasir Ahmadi, CPA
Sarah Hartstrom
Jay Patel
| Account Title | Securities in the State Treasurer’s Office Vault | Securities on Deposit with Banks and Trust Companies | Totals |
|---|---|---|---|
| Pooled Money Investment Account (Note 2) | – | $56,350,940,565 | $56,350,940,565 |
| Individual State Investment Accounts | |||
| California State University, Dormitory Construction Fund | - | $82,310,000 | $82,310,000 |
| Central Valley Water Project Construction Fund | - | 769,501,443 | 769,501,443 |
| Central Valley Water Project Revenue Fund | - | 70,322,000 | 70,322,000 |
| Department of Water Resources Electric Power Fund | - | 917,140,000 | 917,140,000 |
| General Obligation Refunding Escrow | - | 4,082,991,827 | 4,082,991,827 |
| Oakland State Building Authority Fund | - | 75,033,258 | 75,033,258 |
| Public Buildings Construction Fund | - | 1,671,217,874 | 1,671,217,874 |
| State Compensation Insurance Fund* | - | 17,198,797,703 | 17,198,797,703 |
| State Lottery Fund | - | 1,033,714,000 | 1,033,714,000 |
| Collateral to Secure Deposits or Investments Held in Banks | |||
| Agency Bank Deposits | - | $623,792,725 | $623,792,725 |
| Employment Development Department—Escrow | - | 15,215 | 15,215 |
| Human Resources, Department of—Deferred Compensation | - | 2,258,170 | 2,258,170 |
| State Treasurer's Office—Demand Deposits | 1,869,000,000 | 530,671,038 | 2,399,671,038 |
| State Treasurer's Office—Fiscal Agents | - | 26,822,515 | 26,822,515 |
| State Treasurer's Office—Time Deposits | 2,164,685,441 | 4,589,664,628 | 6,754,350,069 |
| Pledges Received by State Agencies† | |||
| Business Oversight, Department of—Division of Corporations | $1,381,000 | - | $1,381,000 |
| Business Oversight, Department of—Division of Financial Institutions | 638,327,000 | $57,279,300 | 695,606,300 |
| Consumer Affairs, Department of | 17,947,295 | - | 17,947,295 |
| Employment Development Department | 222,764,400 | - | 222,764,400 |
| Industrial Relations, Department of | - | 1,325,000 | 1,325,000 |
| Insurance, Department of | 265,368,179 | 10,145,955,051 | 10,411,323,230 |
| State Lands Commission | 1,593,639 | - | 1,593,639 |
| General Safekeeping‡ | |||
| Water Resources, Department of | - | $162,000 | $162,000 |
| Total General Safekeeping | - | 162,000 | 162,000 |
Note: The accompanying notes beginning on page 3 are an integral part of this statement.
* The board of directors of the State Compensation Insurance Fund invests in common stock and the State Treasurer’s Office accounts for these items based on their number rather than their value. Thus, these items are excluded from the statement of securities accountability as described in Note 5.
† A portion of the pledges contained in the State’s vault matured prior to December 31, 2014. In certain cases these may still hold value.
‡ General safekeeping items listed here are on deposit with banks and trust companies. For general safekeeping items held in the vault at the State Treasurer’s Office, see Note 4.
NOTES TO THE STATEMENT OF SECURITIES ACCOUNTABILITY
Note 1—Summary of Significant Accounting Policies
Basis of Presentation
The accompanying statement of securities accountability was prepared for the purpose of providing information required by Section 13299.1 of the California Government Code. This statement presents securities owned by or pledged to the State directly, and securities held for safekeeping. The State Treasurer’s Office must account for all securities held in the treasury or other depositories. It does not account for securities owned by or pledged to the University of California, or for securities in other depositories owned by or pledged to the Public Employees’ Retirement System, the State Teachers’ Retirement System, the Legislators’ Retirement System, or the Judges’ Retirement System. The securities for which the State Treasurer’s Office is accountable are categorized as follows:
- Pooled Money Investment Account (PMIA), which consists of securities that are purchased with money from various state and local funding sources. California Government Code, Section 16480.1, authorizes the State’s Pooled Money Investment Board to designate the amount of money available to make such investments. In addition, Section 16480.2 expresses the intent that such investments realize the maximum return consistent with safe and prudent treasury management. Earnings on PMIA securities are credited to the State’s General Fund, the Surplus Money Investment Fund, the Local Agency Investment Fund, the Fish and Game Preservation Fund, the Public Employees’ Retirement Fund, and the State Teachers’ Retirement Fund.
- Individual state investment accounts, which consists of securities that are purchased for state funds other than the PMIA.
- Collateral to secure deposits or investments held in banks, which consists of securities pledged by banks to protect holdings that the State has on deposit with them.
- Pledges received by state agencies, which consist of securities pledged to the State by certain businesses to protect consumers, guarantee contractor performance, and ensure payment of obligations, such as disability benefits.
- General safekeeping, which consists of securities held on behalf of state agencies.
Valuation of Securities
For the purpose of the statement of securities accountability, the State Treasurer’s Office values securities as follows:
Securities in the State Treasurer’s Office Vault
- Bonds, letters of credit, certificates of deposit, money transmitter bonds, and surety bonds are valued at par value or face value.
- Real estate mortgage notes are valued at the original principal balances.
Securities on Deposit With Banks and Trust Companies
- Bills, notes, bonds, strips, commercial paper, and certificates of deposit, are valued at par value or face value.
- Asset-backed securities are valued at the outstanding principal balances.
- Real estate mortgage notes are valued at the original principal balances.
The accompanying statement of securities accountability is not intended to report securities at fair value in accordance with accounting principles generally accepted in the United States of America.
Note 2
Pooled Money Investment Account—Securities
The State Treasurer’s Office reported a total value of $56,350,940,565 for the securities in the PMIA as of December 31, 2015. In its statement of cash accountability as of December 31, 2015, the State Treasurer’s Office reported a total value of $56,300,064,782 for these securities. The difference between the two values results because the State Treasurer’s Office values the PMIA securities in the statement of securities accountability according to the methods described in Note 1, but it values the same securities at book value for the statement of cash accountability.
Note 3
Personal Property
In addition to securities, state agencies deposit personal property in the vault of the State Treasurer’s Office. The following table lists entities having personal property in the vault as of December 31, 2015.
| Entity | Number of Items |
|---|---|
| Motor Vehicles, Department of | 2,132 |
| State Controller’s Office | 1,430 |
| State Treasurer’s Office | 208 |
Each item or sealed package of personal property is counted individually. However, because personal property items are not securities, they are excluded from the statement of securities accountability.
Note 4
General Safekeeping Securities
In addition to securities the State Treasurer’s Office holds in the vault related to collateral requirements and pledges, it also separately holds certain securities in the vault for general safekeeping. The securities consist of preferred and common stock shares that departments deposit with the State Treasurer’s Office.
Each preferred and common stock share in general safekeeping is counted individually. Because the State Treasurer’s Office has chosen to account for these items based on their number rather than their value, these items are excluded from the statement of securities accountability.
The following table lists entities having items on deposit for general safekeeping in the State Treasurer’s Office vault as of December 31, 2015.
| Entity | Number of Items |
|---|---|
| California State Library—Preferred and Common Stock | 3,659 |
| Developmental Services, Department of—Common Stock | 270 |
| Education, Department of—Preferred and Common Stock | 5,463 |
Note 5
Common Stock Held in Outside Depositories
Each common stock share held by outside depositories is counted individually. Because the State Treasurer’s Office has chosen to account for these items based on their number rather than their value, these items are excluded from the statement of securities accountability. As of December 31, 2015, outside depositories held 12,670,415 shares of common stock for the State Compensation Insurance Fund.