What are the Legal Requirements for the Investment of Public Funds?
Cash Management in Montana Local Governments: Legal Framework and Investment Guideline
Similar to private businesses, local governments must manage their cash. Cash management responsibilities include both cash for which there may be an immediate need as well as cash that may be invested for extended periods of time. State law provides for limits, controls and guidance concerning the local government’s cash management responsibilities. Section 7-6-201, MCA requires local governments to “…deposit all public money…in solvent banks, building and loan associations, savings and loan associations, or credit unions…” Money not necessary for immediate use may be placed in savings or time deposit (CD’s) or in repurchase agreements. Section 7-6-202, MCA allows for the investment of public funds in direct obligations of the U.S. government including U.S. treasury bills and bonds, as well as a laundry list of other allowable investments. Investment in money market funds is permitted only in limited circumstances. Finally, the law specifies the security necessary to ensure the safety and prompt payment of all deposits (7-6-207, MCA).