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NYS Comptroller

THOMAS P. DiNAPOLI

The Academy for New York State's Local Officials

Cash Management: A Tutorial for Local Governments and School Districts

Module 3: Maximizing Interest Earnings

Requesting a Proposal for Banking Services

Once you have determined which services you require, one way to ensure that you obtain these services at the best possible price is to issue a request for proposals (RFP) for banking services. When developing an RFP for banking services, review your current banking services and the cost of these services. Determine if these banking services meet your needs or if you require additional services. Meet with various bank representatives and ask what banking services are available and how these services will help increase your access to collected funds.

Issue RFPs for banking services every three to five years. There are many reasons to consider issuing RFPs:

  • It is important to "test the waters" periodically to determine the services you need and the costs of those services.
  • Your requirements for banking services may have changed. The more computerized your office becomes, the more you may need other types of services available through the banks.
  • Your current available bank services and/or personnel may have changed.
  • Your bank decides to reduce or eliminate current services, for example, elimination of a lockbox service.
  • Your bank does not meet current contract provisions or the level of services that you may require.
  • Your current bank merges with another banking institution. The impact of this can be negative or positive.

Before preparing the RFP, know your present collection and disbursement systems, the banking services used, and the costs associated with those banking services. Developing an RFP specifically designed for your government's need is important. Often local governments select banking service contracts based on the direct cost of traditional bank services offered (i.e., monthly maintenance charges, checks processed, and deposits processed). We suggest revising the selection criteria to include the following considerations:

  • What you and your bank can do to increase the availability of funds for investment purposes.
  • What banking services are available that can improve your ability to monitor cash flow.
  • Emphasizing internal controls involving the deposit of funds.

One of the most important responses you receive from the banks is the definition of what available funds are and what you and your bank can do together to increase these funds. In addition, addressing the above considerations may cause some modification to your business processes, such as changing the processing of daily cash receipts to meet the bank's processing deadlines. The responses of the bank or banks awarded your business become the basis of an agreement, unique to your government. Ideally, the agreement should aid in developing a mutually beneficial partnership between you and your designated bank.

  Next: Elements of a Comprehensive RFP