“ Tips and Tools for Evaluating Financial Services: RFP Process and Banking Fees” Presented by: Aimee Briles, Wintrust Financial Kimberly Feeney, Bank of America Moderator: Mark Staehlin, Controller - CHSD 99

2 Mark Staehlin, Controller CHSD 99 Community High School District Springside Avenue Downers Grove. IL (630) Mark has been the Controller for CHSD 99 since 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.

3 Aimee Briles, Vice President Wintrust Financial 500 Roosevelt Rd., Ste 320 Glen Ellyn, 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.

4 Kimberly Feeney, Vice President Bank of America 231S. LaSalle Street Chicago, Illinois 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.

5 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

6 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

7 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?

8 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)

9 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

10 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

11 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

12 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

13 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

14 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

15 Remote Deposit  Cut-off time?  ACH conversion?  Image clearing capability?  Equipment options?  Cost involved? Monthly maintenance Per item Scanner (payment options) Questions to Consider: Collections

16 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 Questions to Consider: Collections

17 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 Questions to Consider: Collections

18 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

19 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

20 Wire Transfer Services  Initiation Capabilities?  Cut off times?  Security features?  Notifications?  Costs involved? Online vs. fax/phone Notification fees Repetitive vs. Non-Repetitive Questions to Consider: Disbursements

21 P-Card / Credit Card Payments  Online capabilities? Reporting, Administrative Functions  Card limits available? What types?  Monthly statements?  Billing methods and cycles available?  Rebate schedule? Questions to Consider: Disbursements

22 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

23 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 Questions to Consider: Recon & Fraud Prevention Services

24 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 Questions to Consider: Recon & Fraud Prevention Services

25 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

26 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

27 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?

28 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?

29 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

30 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? Questions to Consider: Online Banking

31 Money Movement  Real time or delayed information?  Associated Costs?  Are templates available for recurring transfers?  Can controls be set to segregate duties? Questions to Consider: Online Banking

32 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 Questions to Consider: Online Banking

33 Design Comparative Evaluation Matrix Evaluating the Proposals Bank ABank BBank CBank D Branch Location >1 mile1-2 miles5 miles< 1 miles Public Funds Specialist yesno yes Total Fees Balances $1, ,000 $1,290 $1,129,500 $950 Not provided $1,150 $1,325,00 Price Guarantee 2 years3 years 2 years Understands Needs A-B+BA Quality of RFPA-BAB-

34 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)

35 Compensating Balances Compensating balances – why is this option popular?  “That’s the way we’ve always done it”  “I don’t pay the banks anything”  No budgeting impact

36 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

37 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

38 Potential Problems Using Fees Requires budgeting Requires additional monitoring of collected balances Requires active investing

39 Decision Factors: Fees vs. Balances Time/resources Active investor Cash flow monitoring Cost/yield of cash management techniques available

40 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  Bank’s current Federal Reserve Requirement (percentage) as applied to the positive collective balance maintained in the demand deposit account

41 Compensating Balance Formula Compensating Balance Formula:  monthly service charge / ( reserve requirement) / Monthly ECR Example:  Monthly service charge = $4,116  Earnings credit rate: 1.15% divided by months =  Reserve requirement: 10%

42 Compensating Balance: Example CB = $4,116 /( ) = $4,814, Multiplier  (365/31)/1.15%  For every $1.00 of service fee you need $1, in balances

43 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

44 RFP Preparation Reminders: Help 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

45 Questions Thank you!