FDIC Law, Regulations, Related Acts
4000 - Advisory Opinions
Insurance Coverage Afforded Public Funds to be Disbursed for Child Care Services to Applicants Who Meet Certain Eligibility Criteria
June 8, 1992
J. William Via, Jr., Counsel
As we understand your letter of May 18 (addressed to Mr. Hood), you are concerned about insurance coverage for a deposit of public funds comprised of money that is to be disbursed, to provide child care services, to applicants who meet certain eligibility criteria. We assume, for purposes of this reply, that the deposit in question is the only one that is owned by this public unit depositor in the depository institution in question.
In general, a public unit (e.g., a state, county, municipality, or qualified subdivision) is entitled to separate deposit insurance for its funds of (i) up to $100,000 for time or savings deposits and (ii) of up to $100,000 for demand deposits placed in an insured depository institution in its state (as well as to insurance of up to $100,000 in the aggregate for its time, savings and demand deposits placed in an out-of-state insured institution). See 12 CFR § 330.14(a)(2). Any number of insured institutions may be used.
Of course, a deposit held by a public unit consisting of funds that belong to others (e.g., a deposit by a court of funds belonging to litigants or wards of the court) is eligible to be insured according to the interests of the owners, if certain recordkeeping requirements are met (see 12 CFR § 330.4); when the applicable requirements are met, each beneficial owner will be recognized for deposit insurance purposes as if he or she had made a deposit in his or her own name (see 12 CFR § 330.6(a)). However, we surmise that the deposit that you describe is not eligible to be insured on this basis inasmuch as persons who apply for a payment from it would appear to have no vested, ascertainable ownership interest in the funds. Accordingly, as an alternative to using more than one insured depository institution, the public unit that holds this deposit might arrange to have the depository institution pledge acceptable securities to secure the amount in excess of the insurance coverage, assuming this is permissible under state law.
If you wish to discuss this matter, please telephone me at (202) 898-3733.