LEOMINSTER, Mass.— The Wachusett Regional School District plans to withdraw $2 million it has on deposit with Leominster CU due to an IRS rule the district contends prevents it from depositing funds into non-FDIC-insured institutions.
Leominster CEO John O’Brien learned about the school district’s intent Tuesday morning when he read about the district’s plans in a local publication, the Telegram.
“We had no advance notice this was happening. I learned about it an hour ago,” O’Brien told CUToday.info early Tuesday morning. “Of course the credit union’s deposits are covered by the NCUSIF. And any deposits above NCUSIF limits are covered by the Massachusetts Share Insurance Corporation. The school district’s money is definitely insured.”
O’Brien said the $620-million CU is looking into the IRS regulation and believes the school district is not interpreting the rule correctly. “But we need a little time to validate our opinion.”
Julie Kelley, chairman of the Audit Committee of the Wachusett Regional School Committee, told the Telegram that the district needs to move its money from credit unions to FDIC-insured banks due to an IRS regulation. She stated the direction came following the district’s annual audit, this year by Lynch, Malloy and Marini.
According to the district’s October 2014 treasurer's report, the district had $18.1 million cash in hand, with $2 million on deposit with Leominster Credit Union.
Kelley told the Telegram that no one on the audit committee was aware of the IRS regulation that prohibited the school district from using a non-FDIC-insured institution, and said that the audit team from Lynch, Malloy and Marini indicated that Wachusett was not the only school district in violation of the IRS regulation.
The district said it plans to move the money early next year to avoid early withdrawal penalties.
O’Brien said the CU has had a very good relationship with the school district for many years. “We would like to keep this relationship.”
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