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Report Number: 2017-008

 

State of California
Statement of Securities Accountability of the State Treasurer’s Office
December 31, 2016


Independent Accountant’s Report

THE GOVERNOR AND LEGISLATURE OF THE
STATE OF CALIFORNIA

We have examined the accompanying statement of securities accountability of the State of California’s State Treasurer’s Office as of December 31, 2016, and the related notes. The State Treasurer’s Office is responsible for presenting the statement in accordance with the criteria set forth in Note 1. Our responsibility is to express an opinion on the statement based on our examination.

Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. Those standards require that we plan and perform the examination to obtain reasonable assurance about whether the statement is presented in accordance with the criteria, in all material respects. An examination involves performing procedures to obtain evidence about the statement. The nature, timing, and extent of the procedures selected depend on our judgment, including an assessment of the risks of material misstatements of the statement, whether due to fraud or error. We believe that the evidence we obtained is sufficient and appropriate to provide a reasonable basis for our opinion.

In our opinion, the statement referred to above is presented in accordance with the criteria set forth in Note 1, in all material respects.

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
Sacramento, California

Date:
June 28, 2017

Staff:
Norm Calloway, CPA
Greg Lucido, CPA, CIA
John Slusser, CPA, CGMA, CFE






State of California
Statement of Securities Accountability
of the State Treasurer’s Office
December 31, 2016
 
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) $60,416,613,330 $60,416,613,330
Individual State Investment Accounts
California State University, Dormitory Construction Fund - $899,941,492 $899,941,492
Central Valley Water Project Construction Fund - 892,595,065 892,595,065
Central Valley Water Project Revenue Fund - 60,445,000 60,445,000
Department of Water Resources Electric Power Fund - 1,474,737,000 1,474,737,000
General Obligation Refunding Escrow - 5,503,279,031 5,503,279,031
Public Buildings Construction Fund - 2,700,022,000 2,700,022,000
State Compensation Insurance Fund* - 17,383,916,809 17,383,916,809
State Lottery Fund - 984,737,000 984,737,000
Total Individual State Investment Accounts $29,899,673,397 $29,899,673,397
Collateral to Secure Deposits or Investments Held in Banks
Agency Bank Deposits - $657,634,001 $657,634,001
Employment Development Department—Escrow - 11,872 11,872
Human Resources, Department of—Deferred Compensation - 4,846,839 4,846,839
State Treasurer's Office—Demand Deposits $1,095,300,000 621,303,070 1,716,603,070
State Treasurer's Office—Fiscal Agents - 23,165,755 23,165,755
State Treasurer's Office—Time Deposits 2,259,252,916 3,993,898,753 6,253,151,669
Total Collateral to Secure Deposits or Investments Held in Banks $3,354,552,916 $5,300,860,290 $8,655,413,206
Pledges Received by State Agencies
Business Oversight, Department of—Division of Corporations $1,321,000 - $1,321,000
Business Oversight, Department of—Division of Financial Institutions 699,227,000 $48,135,292 747,362,292
Consumer Affairs, Department of 21,458,795 - 21,458,795
Employment Development Department 242,555,760 - 242,555,760
Insurance, Department of 252,146,433 10,036,300,200 10,288,446,633
State Lands Commission 1,593,639 - 1,593,639
Total Pledges Received by State Agencies $1,218,302,627 $10,084,435,492 $11,302,738,119
  TOTAL SECURITIES $4,572,855,543 $105,701,582,509 $110,274,438,052


Note: The accompanying notes below 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, 2016. In certain cases these may still hold value.





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 of securities accountability presents securities owned by or pledged to the State directly. 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, 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:

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

Securities on Deposit With Banks and Trust Companies

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 $60,416,613,330 for the securities in the PMIA as of December 31, 2016. In its statement of cash accountability as of December 31, 2016, the State Treasurer’s Office reported a total value of $60,313,949,023 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, 2016.


Entity Number of Items
Motor Vehicles, Department of 2,143
State Controller’s Office 1,517
State Treasurer’s Office 16
Total 3,676

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, 2016.


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 5,211
Total 9,140

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, 2016, outside depositories held 11,977,396 shares of common stock for the State Compensation Insurance Fund.



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