Audit of the Municipal Depository Designation Process

Executive Summary

The Office of Inspector General (OIG) conducted an audit of the Department of Finance’s (DOF) administration of the process for designating municipal depositories. Banks designated as depositories hold and pay interest on funds deposited by the City and the Chicago Board of Education, essentially serving as the City’s checking accounts. The objectives of the audit were to determine if DOF ensures that banks applying for designation submit the required information, and whether the designation process serves the City’s goal of partnering with institutions that not only have the capacity to fulfill its banking needs, but also provide financial services to Chicago communities in an inclusive and equitable manner.

A community’s access to financing is critical to its prosperity. Financial institutions, however, invest much less in some communities than others. To address this inequality, Chicago and other cities have established responsible banking ordinances (RBOs) to encourage equitable lending by the banks that hold their deposits.

DOF administers Chicago’s RBO through a request for proposal (RFP) process to determine banks’ eligibility. The RFP process is intended to identify banks that can meet the City’s financial needs and have demonstrated a commitment to providing equitable lending and other banking services throughout Chicago.