Here are five bond financing obligation tips to ensure smooth sailing in your interactions with your trustee as part of a revenue bond financing.
Always read the contract
We’re beginning with the most important suggestion: read the contract! If you’re the head of finance, you have probably done so, but has your day-to-day team? Encourage them to read the contract as well. Contracts vary—and it’s not uncommon to run into an unexpected wrinkle— even for those with lots of experience with bond financings. When these wrinkles are recognized early, they may not have a large impact. But, when they’re recognized later, especially just ahead of payments or required financial reporting, the impact can be large, and challenging.
“Ticklerize” your payment and financial reporting obligations
You may not use the word “ticklerize” in your workplace, but it’s one we embrace. The idea is to create a tickler or reminder file that prompts action at the proper times, helping you stay ahead of payments and contractual and organizational reporting requirements. These ticklers can help you avoid stress ahead of a board meeting, and help ensure smooth, timely interactions with your other service providers on contract-required matters, such as your auditors and municipal counsel. “Ticklerizing” will help you know—and remember—when you need to involve them.
Use the trustee’s online portal
You probably use online banking in your personal life and may use it to manage your organization’s deposit accounts. Just like those tools, the trustee’s online portal can be a great way to manage your trust accounts as well. Doing so can benefit your workflow through both convenient access and earlier receipt of statements. Statements are generally posted two business days after the close of a reporting period; those same statements might not be delivered by mail until at least seven days after that same close date. Earlier access to data lets you better optimize your workflow to help you stay ahead of periodic reporting obligations and keep you up-to-date on normal reconciliation processes.
Gather W-9s from your vendors
Many contracts allow for either the trustee to pay vendors directly or for the issuer to make payment and subsequently be reimbursed by the trustee. Some municipalities have well-established payment processes and find it convenient to handle payments directly (subject to contract provisions, of course). But in many cases, issuers prefer the simplicity of having the trustee handle payments directly. Here’s the key point: to disburse funds to a third party, trustees must have in hand that party’s current W-9 or W-8 form.
Some contractors and other vendors will issue W-9s as a matter of course. But if your vendor doesn’t, we suggest asking up front to help ensure no holdups arise when it comes time to pay for their services.
Designate multiple authorized representatives (ARs)
For a corporate trust account, the AR of the bond issuer fulfills multiple contractual responsibilities, including giving the final go-ahead to transfer funds as requested, such as payments to vendors. Call-back protocols help protect you from malicious actors. When implemented, they require the trustee to obtain authorization from ARs only.
Therefore, take care to avoid the awkward situation of needing to pay a vendor when a sole AR is unreachable. Typically, there is no extra cost to add another person, and it’s simple—almost like creating a second signature card on a personal account.
Here’s a tip as you consider who might best serve this role: “one with the power, and one with the need.” That might, for example, be the CFO and the staff member with specific day-to-day responsibility.
These ideas may seem simple, but their impact can be significant in reducing stress and wasted time. Over the years, we have seen things go well….and less well for our clients. You might be surprised how many of the “less well” moments could have been avoided by putting these simple ideas into practice.
UMB’s corporate trust team can help you evaluate where, and if, wrinkles become challenges. UMB is a nationally recognized and ranked provider of bond trustee and agency services to the corporate and municipal marketplaces. To learn more about our offerings, and to see if UMB is the right trustee for your organization, visit umb.com/corporatetrust.
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