I mentioned in March that we already have an account established with The Illinois Funds that allows us to accept donations intended for 501(c)3 entities. The Illinois Funds are an investment pool managed by the State Treasurer’s office for the benefit of public entities. Many years ago, tax disbursements from Cook County were deposited directly into Illinois Funds on behalf of taxing bodies, and we would transfer them from there to our local bank accounts for use. They put a stop to those direct deposits a few years ago because they wanted to public entities to accept those disbursements directly without The Illinois Funds having to administer all of those transactions every year. (They have since recognized the error of this, i.e. a significant reduction in their cash flow, and now allow entities to use them for that purpose again.) When they stopped accepting those payments, we pulled most of our cash out of their account and have kept it in money markets with our bank. For a number of years, there was no reason for us to do business with The Illinois Funds.

That is no longer the case as The Illinois Funds now offers the highest interest rate available for completely liquid accounts. Now that interest rates have recovered from close to zero in recent years, The Illinois Funds is returning 5.399% compared with our Old National money markets at 1.26%. Illinois Funds is completely liquid. There is no required time that funds have to be invested before being withdrawn. There are no fees for moving money in or out, although Old National charges a nominal fee for those transactions. While these funds aren’t FDIC insured, The Illinois Funds has a long and consistent history of portfolio management with a AAAm S&P Global rating (which has never been downgraded in its history) and Fitch’s highest rating of AAAmmf. They are a solid, simple, and worthwhile short-term investment option, in my opinion.

Now that we have some cash on hand again, I think it would make a lot of sense for us to store excess cash with The Illinois Funds to take advantage of their higher interest rate. For reference, a deposit of $500,000 at their current rate of 5.399% would yield almost $2,200 per month in interest. Compared to the $500 or so dollars that we are getting in our Old National money markets, I think this would be a meaningful change for us.

I think you all know me well enough to know that I’m extremely conservative when it comes to stewardship of our financial resources. As a test case to prove (mostly to myself) that The Illinois Funds is still as easy and reliable as it used to be, I propose to transfer $10,000 from our Old National General Fund money market later this month. Once I have seen that the transfer process is as smooth and free of fees that it is claimed to be, I would transfer the majority of our General Fund balance into The Illinois Funds account, leaving enough in Old National to cover expenses for the coming two months. The strategy would be to make a single transfer each month from The Illinois Funds into Old National in the amount needed to cover another month’s bills. If balances were to run low or our money markets were to begin outperforming The Illinois Funds, we could easily transfer all of those funds back to Old National whenever we like.

Recommendation: I don’t believe any action is required on this topic as current policies already allow me to transfer funds between our existing bank accounts as long as that money remains within the General Fund.