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HomeMy WebLinkAboutFiscal Year 1996/1997 - City Treasurer - Investment Policy - f6lcl 7) 710q Council/Agency Meeting Held 2 / 3/0.a° Deferred/Continued to: ❑Approved ❑ Conditionally Approved ❑ Denied City Clerk's Sign re Council Meeting Date: December 16, 1996 Department ID Number: TR 96-007 CITY OF HUNTINGTON BEACH REQUEST FOR COUNCIL/REDEVELOPMENT AGENCY ACTION SUBMITTED TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS SUBMITTED BY: SHARI .L. FREIDENRICH, City Treasurer, ZF PREPARED BY: SHARI L. FREIDENRICH, City Treasurer , q�_ l67 SUBJECT: 1996 INVESTMENT POLICY C �o...tC� .�t`��A� Flo• -28d Statement of Issue,Funding Source,Recommended Action,Alternative Action(s),Analysis,Environmental Status, Attachment(s) Statement of Issue: Pursuant to California Government Code, the Treasurer of the local agency shall render an annual statement of investment policy to the legislative body for acceptance. The City Treasurer, with the assistance of the Investment Advisory Board, has prepared a new investment policy that is in an easier to read format and incorporates additional internal controls into the existing policy. Funding Source: Not applicable. Recommended Action: That the City Council/Redevelopment Agency adopt the attached Resolutions for the City of Huntington Beach as the Investment Policy for the year 1996/97. Alternative Action(l: Continue existing policy or modify as desired. FBI Federally Sponsored Agencies A, Federal Intermediate Credit Bank (FICB'S) Loans to lending institutions used to finance the short-tern and intermediate needs of farmers, such as seasonal production. They are usually issued monthly in minimum denominations of S3,000 with a 4-month maturity. Interest is payable at maturity and is calculated on a 360-day. 30-day month basis. B. Federal Land Bank (FLB'S) Long-tenn mortgage credit provided to farmers by Federal Land Banks. These bonds are issued at irregular times for various maturities ranging from a few months to ten years. The minimum denomination is S1.000. They carry semi-annual coupons. Interest is calculated on a 360-day. 30-day month basis. C. Federal Home Loan Bank (FHLB'S) Issued by the Federal Home Loan Bank System to help finance the housing industry. The notes and bonds provide liquidity and home mortgage credit to savings and loan associations, mutual sayings banks, cooperative banks, insurance companies, and mortgage-lending institutions. 1 hey are issued irregularly for various maturities. The minimum denomination is S10,000. The notes are issued with maturities of less than one year and interest is paid at n•,aturity. The bonds are issued with various maturities and carry semi-annual coupons. Interest is calculated on a 360-day. 30-day month basis. D. Federal National Jvlortuoe Association (FMNIA'S) To assist the home mortgas�e market by purchasing mortgages insured by the Federal Housing Administration and the Farmers Home Administration, as well as those guaranteed by the Veterans Administration. They are issued about four titres a year for maturities ranging fi-om a few months to eight years. They are issued in minimum denominations of 510,000. They carry semi-annual coupons. Interest is computed on a 360 day, 30-day month basis. FNMA is a publicly held corporation listed on the NYSE. E. Federal Home Loan \,fortgage Corporation Created to promote the development of a nationwide secondary market in mortgages, it does this by purchasing residential mortgages from financial institutions insured by an agency of the federal 2oyernment and sellin; its interest in them through mortga2e- backed securities. The interest and �Jncipal payments from the mortgages pass through to the investors either monthly. semiannually or annually. 6 F Government National k1ortgage Association(GNMA'S) Securities guaranteed by GNMA and issued by mortgage bankers, commercial banks, savings and loan associations, and other institutions. Security holder is protected by full faith and credit of the U.S. Government. Ginnie Mae buys FHA and VA mortgages and auctions them to private lenders which pool these mortgages and sell pass-through certificates. Each month, principal and interest payments from the pool pass through to investors. F.2. Federally Related Institutions A. Tennessee Valley Authorities (TVA'S) A U.S. Corporation created in the 19301s, to electrify the Tennessee Valley area; currently a major utility headquartered in Knoxville, Tennessee. TVA's securities are highly liquid and are widely accepted. B. Student Loan Association Notes (Sallie Mae's) A U.S. Corporation and instrumentality of the U.S. government. Through its borrowings, funds are targeted for loans to students in higher education institutions. SLMA's securities are highly liquid and are widely accepted. F.3. Small Business Administration (SBA'S) The portion of these Securities,'Loans which are guaranteed by Federal government to provide financial assistance through direct loans and loan guarantees to small businesses. G. REPURCHASE AGREEIIENT, maximum term 3 months. Short-term agreement between a seller and a buyer (investor) of U.S. Government securities, whereby the seller agrees to repurchase the securities at an agreed upon price and, at a stated time. The city may utilize repurchase agreements on a daily basis. The bank or dealer sells securities to . the city, agreeing to buy them back at the stated time. Thus, the city utilizes a temporary surplus of cash to enhance interest earnings. H. REVERSE-REPURCHASE AGREEMENTS (Requires City Council_ approval for each transaction) A reverse-repurchase is exactly %khat the name implies. Reverse-repurchase agreements are the sale of securities by the city under an agreement to "repurchase" the securities on or before a specified date and for a specified amount. This investment shall be utilized to provide short tern liquidity,but only with specific council approval on each transaction. 7 I. MEDIUM-TERM CORPORATE NOTES, maximum 20% of portfolio (310% with Council approval). Unsecured promissory notes issued by a corporation organized and operating in the United States. These are negotiable instruments and are traded in the secondary market. Medium term corporate notes can be defined as extended maturity commercial paper. Notes eligible for investment shall be "A" rated or its equivalent or better as determined by a nationally recognized rating service. Further restrictions are a maximum tern of five years to maturity and total investments in medium temp corporate notes may not exceed 30%of the local agency's surplus funds. J. TIME DEPOSITS-CERTIFICATES OF DEPOSIT (non-negotiable certificates of deposit.) ( maximum of 3 years) - Time deposits of a bank or savings and loan. They are purchased in various denominations with maturities ranging from 6 to 36 months. The interest is calculated on a 360-day, actual da;7 month basis and is payable monthly. Refer to Section 12.0 regarding Government Code Collateral ization Provisions. K. OBLIGATIONS OF THE STATE OF CALIFORNIA Registered state warrants or treasury notes or bonds of this state, including bonds payable solely out of tl,e revenues from a revenue-producing property owner, controlled, or operated by the state or by a department, board, agency, or authority of the state. 10.2 Indirect Investments - Funds deposited into authorized accounts which are managed by other agencies according to published guidelines. A. MUTUAL FUNDS, maximum 15% of portfolio. (Requires City Council approval for each transaction) Local agencies are authorized to invest in shares of beneficial interest issued by diversified management companies that invest in securities and obligations otherwise eligible for local agency investment. In addition, to be eligible as an investment the company must: (1) attain the highest ranking or rating provided by not less than two of the three largest national rating services; and (2) have an investment advisor registered with the SEC who has at least five years experience with investing public type investments with a portfolio of at least five hundred million. Finally, the purchase price of the shares may not include commission and only a certain stated percentage of the Ciry's money may be invested. B. THE LOCAL AGENCY INVESTMENT FUND (LAIF) Is a special fund of the California State Treasury through which any local goverment may pool investments. The city may invest up to S20,000,000 per agency in this fund. Currently, the city has established two (2) agency funds through which the Treasurer may invest the unexpended s cash for all funds: The City of Huntington Beach City Fund, and the Huntington Beach Redevelopment Agency Funds. Invesmients in LAIF are highly liquid and may be converted to cash within 24 hours. 11.0 Portfolio Adjustments: - Should any investment listed in section 10.1 & 10.2 exceed a percentage-of-portfolio limitation due to an incident such as fluctuation in portfolio size, the affected securities may be held to maturity to avoid losses. When no loss is indicated, the Treasurer shall consider reconstructing the portfolio basing his/her decision on the expected length of time the portfolio will be unbalanced. If this occurs, the City Council shall be notified. 12.0 Collateralization: Under provisions of the California Government Code, California banks. and savings and loan associations are required to secure the city's deposits by pledging government securities ,vitli a value of 110 % of principal and accrued interest. California law also allows financial institutions to secure city deposits by pledging first trust deed mortgage notes having a value of 150% of city's total deposits. Collateral will always be held by an independent third party. A clearly marked evidence of ownership (safekeeping receipt) must be supplied to the city and retained. Repurchase collateral will be at 102% of market value of principal and accrued interest. consistent with CA Code requirements. The City Treasurer, at his/her discretion, may waive the collateral requirement for deposits which are fully insured up to S 100,000 by the Federal Deposit Insurance Corporation. The right of collateral substitution is granted. 13.0 Safekeeping and Custody: All city investments shall have the City of Huntington.Beach as its registered owner, and all interest and principal payments and withdrawals shall indicate the City of Huntington Beach as the payee. All securities shall be safe kept with the city itself or with a qualified financial institution, contracted by the city as a third party. All agreements and statements will be atuivally reviewed by external auditors. All securities shall be acquired by the safekeeping institution on a "Delivery-Vs-Payment'' (DVP) basis. For Repurchase Agreements, the purchase may be delivered by book entr�iphysical delivery or by third party custodial agreement consistent with the Government Code. The transfer 9 of underlying securities to the counterpartv bank's customer book-entry account may be used for book-entry deliverv. 14.0 Diversification: The city's investment portfolio will be diversified to avoid incurring unreasonable and avoidable risks associated with concentrating investments in specific security types, maturity segment, or in individual financial institutions. The City will utilize Moody's Securities, Sheshunoff bank and savings and loan ratings, or other such services to determine financially sound institutions to do business with. Credit risk, defined as the risk of loss due to failure of the insurer of a security, shall be mitigated by investing in only eery safe securities and by diversifying the investment portfolio so that the failure of any one issuer would not unduly harm the city's cash flow. Market risk, defined as the risk of market value fluctuations due to overall changes in the general level of interest rates, shall be mitigated by structuring the portfolio so that securities mature at the same time that major cash outflows occur; thus eliminating the need to sell securities prior to their maturity. It is explicitly recognized herein, however, that in a diversified portfolio, occasional measured losses are inevitable and must be considered within the context of overall investment return. The city's investment portfolio will remain sufficiently liquid to enable the city to meet all operating requirements which might be reasonably anticipated. 15.0 Nfaaimum Maturities: To the extent possible, the City of Huntington Beach will attempt to match its investments with anticipated cash flow requirements. Unless matched to a specific cash flow, the city will not directly invest in securities maturing more than five (5) years from the date of purchase, unless, the legislative body has granted express authority to make that investment either specifically, or as a part of an investment program approved by the City Council. 16.0 Internal Control: The external auditors shall annually review the investments with respect to the investment policy. This review will provide internal control by assuring compliance with policies and procedures for the investments that are selected for testing. Additionally. 10 account reconciliation and verification of ,general ledger balances relating to the purchasing or maturing of investments and allocation of investments to fund balances shall be performed by the Finance Department and approved by the City Treasurer. To provide further protection of city funds, xwitten procedures prohibit the xviring of any city funds without the authorization of at least two of the three designated city officials: 1. City Treasurer 2. Senior Deputy City Treasurer 3. Director of Finance 17.0 Performance Standards: This investment policy shall be revie,,N°ed at least annually by the Investment Advisory Board and. the City Council to ensure its consistency with the overall objective of preservation of principal, liquidity; and return, and its relevance to current law and financial and economic trends. All financial assets of all other funds shall be administered in accordance with the provisions of this policy. The moneys entrusted to the City Treasurer will be an actively managed portfolio. This means that the City Treasurer will observe. review, and react to changing conditions that affect the portfolio. -17.1 Market Yield (Benchmark): The investment portfolio shall be managed to attain a market-average rate of return throughout budgetary and economic cycles, taking into account the city's investment risk constraints and cash flow. Market average will be considered for benclunark purposes to be the Local Agency Investment Fund (LAIF) rate of return and the six month moving average of the 3 month Treasury. While the city will not make investments for the purpose of trading or speculation as the dominant criterion. the City Treasurer shall seek to erihance total portfolio return by means of ongoing portfolio management. The prohibition of highly speculative investments precludes pursuit of gain or profit through unusual risk and precludes investments primarily directed at gains or profits from conjectural fluctuations in market prices. The City Treasurer will not directly pursue any investments that are leveraged or deemed derivative in nature. However, as long as the 11 REQUEST FOR vOUNCIUREDEVELOPMENT t.OENCY ACTION MEETING DATE: December 16, 1996 DEPARTMENT ID NUMBER: TR 96-007 Analysis: The attached Resolutions for 1996 have been reviewed by the city's Investment Advisory Board and are a more in depth policy for city investments and strengthens internal controls. Environmental Status: Not applicable. Attachmentsj: City Clerk's age Number' 1 Resolutions and proposed investment policy for 1996/97 0014573.01 -2- 12/10/96 4:24 PM RESOLUTION NO. 280 A RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH APPROVING THE ANNUAL FISCAL YEAR 1996/1997 INVESTMENT POLICY WHEREAS, the City Council of the City of Huntington Beach is required to approve an annual statement of investment policy, and the Redevelopment Agency of the City of Huntington Beach, by virtue of Resolution No. 1 applies City policies, rules and regulations wherever practicable; and The duly elected City Treasurer has recommended approval of the City of Huntington Beach Investment Policy, attached hereto and incorporated herein by this reference; and The duly appointed Investment Advisory Board has reviewed the City Treasurer's recommended policy and also recommends approval thereof; and The policy is consistentwith California Government Code.§53600, et. seq., attached hereto and incorporated herein by this reference. NOW, THEREFORE, the Redevelopment Agency of the City of Huntington Beach hereby approves and adopts the attached City of Huntington Beach Investment Policy for Fiscal Year 1996/1997 so long as applied in a manner consistent with state and local law as amended from time to time. PASSED AND ADOPTED by the Redevelopment Agency of the City of Huntington Beach at a regular meeting thereof held on the i 6th day of December , 1996. Chairman ATTEST: APPROVED AS TO FORM: /t4ow; 4 Agency SeeMtM Clerk /z Agency Counsel REVIEWED AND APPROVED: INITIATED AND APPROVED: /' C reasurer Executive Director 5/fy9697 2 Res. No. 280 STATE OF CALIFORNIA ) COUNTY OF ORANGE ) CITY OF HUNTINGTON BEACH ) I, CONNIE BROCKWAY, Clerk of the Redevelopment Agency of the City of Huntington Beach, California, DO HEREBY CERTIFY that the foregoing resolution was duly adopted by the Redevelopment Agency of the City of Huntington Beach at an adjourned regular meeting of said Redevelopment Agency held on the 16th day of December, 1996 and that it was so adopted by the following vote: AYES: Members: Harman, Julien, Dettloff, Bauer, Sullivan, Green, Garofalo NOES: Members: None ABSENT: Members: Clerk of the Redevelopment Agency of the City of Huntington Beach, Ca. G/resoluti/re sbkpg2/Res.279 CITY OF HUNTINGTON BEACH INVESTMENT POLICY 1.0 Purpose: This policy is intended to provide guidelines for the prudent investment of the city's cash _ balances, and outline the policies to assist maximizing the efficiency of the city'.s cash management system. 2.0 Policy The investment practices and policies of the City of Huntington Beach are based upon state law and prudent money management. The primary goals of these practices are: A. To assure compliance with all Federal; State, and local laws governing the investment of moneys under the control of the City Treasurer. B. To protect the principal moneys entrusted to this office. C. To venerate the maximum amount of investment income within the parameters of prudent risk management. 3.0 Scope: phis investment policy applies to all financial assets of the City of Huntington Beach. These funds are accounted for in tl:,e citv's Comprehensive Annual Financial Report and include: 3.1 Funds The City Treasurer is responsible for investing the unexpended cash in the City Treasury or all fields, except for the employee's retirement funds, which are administered separately and those fiends which are managed separately by trustees appointed under indenture agreements. The City Treasurer will strive to maintain the level of investment . of this cash as close as possible to 100%. These funds are described in the city's annual financial report and include: 3.1.1 General Fund 3.1.2 Special Revenue Funds 3.1.3 Capital Project Funds 3.1.4 Enterprise Funds 3.1.5 Trust and Agency Funds `\ 1 3.1.6 Any new fund created by the legislative body, unless specifically exempted This investment policy applies to all transactions involving the financial assets and related activity of the foregoing funds. 4.0 Prudence: The standard of prudence to be used by the City Treasurer shall be the "prudent investor" standard. This shall be applied in the context of managing an overall portfolio. The "Prudent Investor Rule" provides, pursuant to Government Code Section 53 00.3: Governing bodies of local agencies or persons authorized to make investment decisions on behalf of those local agencies investing public funds pursuant to this chapter are trustees and therefore fiduciaries subject to the prudent investor standard. When investing, reinvesting. purchasing, acquiring, exchanging, selling, and managing public funds. a trustee shall act with care, skill. prudence. and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims. to safeeuard the principal and maintain the liquidity needs of the agency. Within the limitations of this section and considering individual investments as part to an overall strategy. a trustee is authorized to acquire investments as authorized by law. 4.1 The Citv Treasurer and the Senior Deputy City Treasurer, as investment officers acting in accordance with written procedures and the investment policy and exercising due diligence, shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectations are reported to the City Council in a timely fashion and appropriate action is taken to control adverse developments. 5.0 Objective: Consistent with this aim, investments are made under the terms and conditions of California Government Code Section 53600, et seq. Criteria for selecting investments and the absolute order of priority are: 5.1 Safety7: Safety of principal is the foremost objective of the investment program. Investments of the City of Huntington Beach shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. To attain this objective, diversification is required in order that potential losses on individual securities do not exceed the income generated from the remainder of the portfolio. 5.2 Liquidity: The City of Huntington Beach's investment portfolio will remain sufficiently liquid to enable the City of Huntington Beach to meet all operating requirements which might be reasonably anticipated. Liquidity is essential to the safety of principal. 5.3 Return on Investments: The City of Huntington Beach's investment portfolio shall be designed with the objective of attaining a market-average rate of return throughout budgetary and economic cycles (market interest rates), within the City of Huntington Beach's investment olp icv's risk parameters and the cash flow needs of the Citv. See also Section 17.0. 6.0 Investment Advisory Board: By City Charter, the City Treasurer is the custodian of all public funds of the City of Huntington Beach. The City Council may appoint Huntington Beach residents, professional, and non professional people, to serve on an Investment Advisory Board for the purpose of advising the Cite Treasurer on an investment program and at least quarterly, review the investment portfolio for compliance with the adopted investment policy. Exceptions: Items to the Investment Policy that require City Council approval will first be reviewed by the Investment Advisory Board. 7.0 Delegation of Authority: Within the City Treasurer's office, the responsibility for the day to day investment of the City funds will be the City Treasurer and is delegated to the Senior Deputy City Treasurer in the absence of the City Treasurer. The City Treasurer shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials. 8.0 Ethics and Conflicts of Interest: In addition to state and local statutes relating to conflicts of interest, all persons involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions. Employees and investment officers shall disclose to the City Clerk any material financial interests in financial institutions that conduct . � 3 1� business within this jurisdiction, and they shall further disclose any large personal financial/investment positions that could be- related to the performance of the City of Huntington Beach, particularly with regard to the time of purchases and sales. 9.0 Authorized Financial Dealers and Institutions: To provide for the optimum yield in the investment of city funds, the city's investment procedures shall encourage competitive bidding on transactions from approved broke rs/dealers.t In order to be approved by the city; the dealer must be a "primary" dealer or regional dealer that qualifies under Securities and Exchange Commission Rule 15C3-1 (Uniform 'Net Capitol Rule). The institution must have an office in California. The dealer must be experienced in institutional trading practices and familiar with the California Government Code as related to investments appropriate for the city; and, other criteria as may be established in the investment procedures. All broker/dealers who desire to become qualified bidders for investment transactions must an-nually submit a `Broker/Dealer Application" and related documents relative to eligibility including a current audited annual financial statement. The Citv Treasurer will perform an annual review of the financial condition and registrations of qualified bidders and Nvill maintain a list of the authorized institutions and dealers. 10.0 Authorized & Suitable Investments: Investments not specifically listed below are deemed inappropriate and prohibited: 10.1 Direct Investments Investments made directly by the City Treasurer in the name of the City of Huntington Beach. A. BANKERS ACCEPTANCES, maximum 2S% of portfolio (up to 40% with Council approval). Maximum term 180 days (270 days with Council approval). These are time drafts drawn on a bank by an exporter or importer to obtain funds to pay for specific merchandise. By its acceptance, the bank becomes primarily liable for the payment of the draft at its maturity. An acceptance is a high-grade negotiable instrument. Acceptances are purchased in various denominations for 30, 60, or 90 days, but no longer than 270 days. The interest is calculated.on a 360-day discount basis similar to treasury bills Local agencies may not So long as the requirements of California Government Code Section 53601.5 are adhered to. 4 invest more than 40% of their surplus money in bankers acceptance and the long and short-term rankings of them must be of an A or higher rating as provided by Moody's Investors Service or Standard and Poor's Corp, B. NEGOTIABLE CERTIFICATES OF DEPOSIT, maximum 30% of portfolio. Maximum term three (3) years, (Up to five (5) years with Council approval). Unsecured obligations of the financial institution, bank or savings and loan, bought at par value with the promise to pay face value plus accrued interest at maturity. They are high-grade negotiable instruments, paying a higher interest rate than regular certificates of deposit. The primary market issuance is in multiples of S1,000,000, the secondary market usually trades in denominations of S500,000, although smaller lots are occasionally available. C. CO'NIMERCIAL PAPER, maximum 15% of portfolio. Maximum term 180 days; plus additional 15% of portfolio if the dollar-weighted average maturity of the entire amount does not exceed 31 days. Short-term unsecured promissory note issued by a corporation to raise working capital. These negotiable instruments are purchased at a discount to par value or at par value with interest bearing. Commercial paper is issued by corporations such as General Motors Acceptance Corporation, I13A4, BankAmerica, etc. Local agencies are permitted by State law to invest in commercial paper of companies that are organized and operating, within the United States and have total assets in excess of S500.000.000 and have an "A" or higher rating for the issuer's debt. other than commercial paper. as provided by Moody's Investor's Service, Inc., or Standard and Poor's Corporation. D. BONDS ISSUED BY THE CITY OR ANY LOCAL AGENCY WITHIN THE STATE OF CALIFORNIA. Bonds, notes, warrants, issued by the local agency, including bonds payable solely out of the revenues from a revenue producing property owned,controlled, or operated by the local agency or by a department, board, agency, or authority of the local agency. E. OBLIGATIONS OF THE UNITED STATES TREASURY United States Treasury Notes, bonds, bills or certificates of indebtedness, or those for which the faith and credit of the United States are pledged for the payment of principal and interest. F. FEDERAL AGENCIES Debt instruments issued by agencies of the Federal government. Though not general obligations of the U.S. Treasury, such securities are sponsored by the government and, therefore, have high safety ratings. The following are authorized: 5 original investments can be justified by their ordinary earning power, trading in response to changes in market value is a requirement of on going portfolio management. 18.0 Reporting: The City Treasurer shall submit a monthly investment report to the City Council, City Administrator, and City Finance Director and the Investment Advisory Board. This report will include the following elements: 18.1 Type of investment 18.2. Institution/Issuer 18.3 Purchase Date 18.4 Date of maturity 18.5 Amount of deposit or cost of the investment 18.6 Face value of the investment 18.7 Current market value of securities 18.8 Rate of interest 18.9 Interest earnings 18.10 Statement relating the report to the Statement of Investment Policy 18.11 Statement on availability of funds to meet the next 30 days' obligations 18.12 Monthly and Year to date Budget Amounts for Interest Income 18.13 Percentage of Portfolio by Investment Tape 18.14 Days to Maturitv for all Investments 18.15 Comparative report on Monthly Investment Balances & Interest Yields This monthly report shall be placed on the City Council Agenda for Council and public review. 19.0 Investment Policy Adoption: By virtue of a resolution of the City Council of the City of Huntington Beach, the Council shall acknowledge the receipt and filing of this annual statement of investment policy for the respective fiscal year. 12 RESOLUTION NO. 96-107 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH APPROVING THE ANNUAL FISCAL YEAR 1996/1997 INVESTMENT POLICY WHEREAS, the City Council of the City of Huntington Beach is required to approve an annual statement of investment policy; and The duly elected City Treasurer has recommended approval of the City of Huntington Beach Investment Policy, attached hereto and incorporated herein by this reference; and The duly appointed Investment Advisory Board has reviewed the City Treasurer's recommended policy and also recommends approval thereof; and The policy is consistent with California Government Code §53600, et. seq., attached hereto and incorporated herein by this reference. NOW, THEREFORE, the City Council of the City of Huntington Beach hereby approves and adopts the attached City of Huntington Beach Investment Policy for Fiscal Year 1996/1997 so long as applied in a manner consistent with state and local law as amended from time to time. PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a regular meeting thereof held on the 16th day of December , 1996. � 7—h Mayor ATTEST: APPROVED AS TO FORM: City Clerk City Attorney REVIEWED AND APPROVED: INITIATED AND APPROVED: City Administrator _ ' �freas rer 5/fy9697 1 Res. No. 96-107 STATE OF CALIFORNIA ) COUNTY OF ORANGE ) ss: CITY OF HUNTINGTON BEACH ) I, CONNIE BROCKWAY, the duly elected, qualified City Clerk of the City of Huntington Beach, and ex-officio Clerk of the City Council of said City, do hereby certify that the whole number of members of the City Council of the City of Huntington Beach is seven; that the foregoing resolution was passed and adopted by the affirmative vote of at least a majority of all the members of said City Council at a regular meeting thereof held on the 16th day of December, 1996 by the following vote: AYES: Harman, Julien, Dettloff, Bauer, Sullivan, Green, Garofalo NOES: None ABSENT: None City Clerk and ex-officio Clerk of the City Council of the City of Huntington Beach, California G/resoluti/resbkpg/96-100 i � �i PJ Council/Agency Meeting Held: /2//6 ��: ! 3«• '� Deferred/Continued to: LYApproved ❑ Conditionally Approved ❑ Denied City Clerk's Signat re Council Meeting Date: December 16, 1996 Department ID Number: TR 96-007 CITY OF HUNTINGTON BEACH REQUEST FOR COUNCIL/REDEVELOPMENT AGENCY ACTION SUBMITTED TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS SUBMITTED BY: SHARI .L. FREIDENRICH, City Treasured PREPARED BY: SHARI L. FREIDENRICH, City Treasurer ,. 9G- J07 SUBJECT: 1996 INVESTMENT POLICY G ��a • Q28d Statement of Issue,Funding Source,Recommended Action,Alternative Action(s),Analysis,Environmental Status, Attachment(s) Statement of Issue: Pursuant to California Government Code, the Treasurer of the local agency shall render an annual statement of investment policy to the legislative body for acceptance. The City Treasurer, with the assistance of the Investment Advisory Board, has prepared a new investment policy that is in an easier to read format and incorporates additional internal controls into the existing policy. Funding Source: Not applicable. Recommended Action: That the City Council/Redevelopment Agency adopt the attached Resolutions for the City of Huntington Beach as the Investment Policy for the year 1996/97. Alternative Action(sl: Continue existing policy or modify as desired. REQUEST FOR COUNCIL/REDEVELOPMENT AGENCY ACTION MEETING DATE: December 16, 1996 DEPARTMENT ID NUMBER: TR 96-007 Analysis: The attached Resolutions for 1996 have been reviewed by the city's Investment Advisory Board and are a more in depth policy for city investments and strengthens internal controls. Environmental Status: Not applicable. Attachme-nj : City Clerk's. ' Page Number' 1 Resolutions and proposed investment policy for 1996/97 0014573.01 -2- 12/10/96 4:24 PM CITY OF HUNTINGTON BEACH INVESTMENT POLICY 1.0 Purpose: Tlus policy is intended to provide guidelines for the prudent investment of the city's cash balances, and outline the policies to assist maximizing the efficiency of the city's cash management system. 2.0 Policy: The investment practices and policies of the City of Huntington Beach are based upon state law and prudent money management. The primary goals of these practices are: A. To assure compliance with all Federal, State, and local laws governing the investment of moneys under the control of the City Treasurer. B. To protect the principal moneys entrusted to this office. C. To generate the maximum amount of investment income within the parameters of prudent rislc management. 3.0 Scopc: 'this investment policy applies to all financial assets of the City of Huntington Beach. These funds are accounted for in the city's Comprehensive Annual Financial Report and include: 3.1 Funds The City Treasurer is responsible for investing the unexpended cash in the City Treasury for all fiends, except for the employce's retirement funds, which are administered separately and those funds Nvhich are managed separately by trustees appointed under indenture agreements. The City Treasurer will strive to maintain the level of investment of this cash as close as possible to 100%. These funds are described in the city's annual_ financial report and include: 3.1.1 General Fund 3.1.2 Special Revenue Funds 3.1.3 Capital Project Funds 3.1.4 Enterprise Funds 3.1.5 Trust and Agency Funds 1 3.1.6 Any new fund created by the legislative body, unless specifically exempted This investment policy applies to all transactions involving the financial assets and related activity of the foregoing funds. 4.0 Prudence: The standard of prudence to be used by the City Treasurer shall be the "prudent investor" standard. This shall be applied in the context of managing an overall portfolio. The "Prudent Investor Rule" provides, pursuant to Govenment Code Section 53600.3: Governing bodies of local agencies or persons authorized to make investment decisions on behalf of those local agencies investing public funds pursuant to this chapter are trustees and therefore fiduciaries subject to the prudent investor standard. When investing. reinvesting. purchasing. acquiring. exchanging.selling, and managing public funds, a trustee shall act"pith care. skill. prudence, and diligence under the circumstances then prevailing, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with lil.:- aims, to safeguard the principal and maintain the liquidity needs of the agencv. \'Within the limitations of this section and considering individual investments as part to an overall strategy. a trustee is authorized to acquire investments as authorized by law. 4.1 The City Treasurer and the Senior Deputy City Treasurer. as investment officers acting in accordance with written procedures and the investment policy and exercising due diligence, shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectations are reported to the City Council in a timely fashion and appropriate action is taken to control adverse developments. 5.0 Objective: Consistent with this aim, investments are made under the terns and conditions of California Government Code Section 53600, et seq. Criteria for selecting investments and the absolute order of priority are: 5.1 Safety: Safety of principal is the foremost objective_ of the investment program. Investments of the City of Huntington Beach shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. To attain this objective, 2 diversification is required in order that potential losses on individual securities do not exceed the income generated from the remainder of the portfolio. 5.2 Liquidity: The City of Huntington Beach's investment portfolio will remain sufficiently liquid to enable the City of Huntington Beach to meet all operating requirements which might be reasonably anticipated. Liquidity is essential to the safety of principal. 5.3 Return on Investments: The City of Huntington Beach's investment portfolio shall be designed with the objective of attaining a market-average rate of return throughout budgetary and economic cycles (market interest rates), within the City of Huntington Beach's investment 1D0 icy's risk parameters and the cash flow needs of the City. See also Section 17.0. 6.0 Investment Advisory Board: By City Charter, the City Treasurer is the custodian of all public funds of the City of Huntington Beach. The City Council may appoint Huntington Beach residents, professional, and non professional people, to serve on an Investment Advisory Board for the purpose of advising the City Treasurer on an investment program and at least quarterly, review the investment portfolio for compliance with the adopted investment policy. Exceptions: Items to the Investment Policy that require City Council approval will first be reviewed by the Investment Advisory Board. 7.0 Delegation of Authority: Within the City Treasurer's office, the-responsibility for the day to day investment of the City funds %will be the Citv Treasurer and is delegated to the Senior Deputy City Treasurer in the absence of the City Treasurer. The City Treasurer shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials. 8.0 E—thics and Conflicts of Interest: In addition to state and local statutes relating to conflicts of interest, all persons involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or .vhich could impair their ability to make impartial investment decisions. Employees and investment officers shall disclose to the City Clerk any material financial interests in financial institutions that conduct . 3 business within this jurisdiction, and they shall further disclose any large personal financial/investment positions that could be related to the performance of the City of Huntington Beach, particularly with regard to the time of purchases and sales. 9.0 Authorized Financial Dealers and Institutions: To provide for the optimum yield in the investment of city funds, the city's investment procedures shall encourage competitive bidding on transactions from approved brokers/dealers.' In order to be approved by the city, the dealer must be a "primary" dealer or regional dealer that qualifies under Securities and Exchange Commission Rule 15C3-1 (Uniform Net Capitol Rule). The institution must have an office in California. The dealer must be experienced in institutional trading practices and familiar with the California Government Code as related to investments appropriate for the city; and, other criteria as may be established in the investment procedures. All broker/dealers «-ho desire to become qualified bidders for investment transactions must annually submit a "Broker/Dealer Application" and related documents relative to eligibility including a .current audited annual financial statement. The Citv Treasurer will nerfonn an annual review of the financial condition and registrations of qualified bidders and will maintain a list of the authorized institutions and dealers. 10.0 Authorized & Suitable Investments: Investments not specifically listed below are deemed inappropriate and prohibited: 0.1 Direct Investments Investments made directly by the City Treasurer in the name of the City of Huntington Beach. A. BANKERS ACCEPTANCES, maximum 25% of portfolio (up to 40% with Council approval). Maximum term 180 days (270 days with Council approval). These are time drafts drawn on a bank by an exporter or importer to obtain funds to pay for specific merchandise. By its acceptance,the bank becomes primarily liable for the payment of the draft at its maturity. An acceptance is a high-grade negotiable instrument. Acceptances are purchased in various denominations for 30, 60, or 90 days, but no longer than 270 days. The interest is calculated on a 360-day discount basis similar to treasury bills Local agencies may not So long as the requirements of California Government Code Section 53601.5 are adhered to. 4 invest more than 40% of their surplus money in bankers acceptance and the long- and short-term rankings of them must be of an A or hither rating as provided by Moody's Investors Service or Standard and Poor'•s Coll)- B. NEGOTIABLE CERTIFICATES OF DEPOSIT, maximum 30% of portfolio. Maximum term three (3) years, (Up to five (5) years with Council approval). Unsecured obligations of the financial institution, bank or savings and loan, bought at par value with the promise to pay face value plus accrued interest at maturity. They are high-grade negotiable instruments, paying a higher interest rate than regular certificates of deposit. The primary market issuance is in multiples of S1,000,000, the secondary market usually trades in denominations of S500,000, although smaller lots are occasionally available. C. COMMERCIAL PAPER, maximum 15% of portfolio. Maximum term 180 days; plus additional 15% of portfolio if the dollar-weighted average maturity of the entire amount does not exceed 31 days. Short-term unsecured promissory note issued by a corporation to raise working capital. These negotiable instruments are .purchased at a discount to par value or at par value with interest bearing. Commercial paper is issued by corporations such as General Motors Acceptance Corporation, IBM, BankAmerica, etc. Local agencies are permitted by State law to invest in commercial paper of companies that are organized and operating within the United States and Have total assets in excess of S500.000.000 and have an "A" or hi.,her rating for the issuer's debt. other than commercial paper, as provided by Moody's Investor's Service, Inc., or Standard and Poor's Corporation. D. BONDS ISSUED BY THE CITY OR ANY LOCAL AGENCY WITHIN THE STATE OF CALIFORNIA. Bonds, notes, warrants, issued by the local agency, including bonds payable solely out of the revenues from a revenue producing property owned,controlled,or operated by the local agency or by a department,board, agency,or authority of the local agency. E. OBLIGATIONS OF THE UNITED STATES TREASURY United States Treasury Notes, bonds, bills or certificates of indebtedness, or those for which the faith and credit of the United States are pledged for the payment of principal and interest. F. FEDERAL AGENCIES Debt instruments issued by agencies of the Federal government. Though not general obligations of the U.S. Treasury, such securities are sponsored by the government and, therefore, have high safety ratings. The following are authorized: 5 F.I Federally Sponsored Agencies A. Federal Intermediate Credit Bank (FICB'S) Loans to lending institutions used to finance the short-tenn and intermediate needs of farmers, such as seasonal production. They are usually issued monthly in minimum denominations of S3,000 with a 9-month maturity. Interest is payable at maturity and is calculated on a 360-day,30-day month basis. B Federal Land Bank (FLB'S) Long-tenn mortgage credit provided to fanners by Federal Land Banks. These bonds are issued at irregular times for various maturities ranging from a few months to ten years. The minimum denomination is S1,000. They carry semi-annual coupons. Interest is calculated on a 360-day, 30-day month basis. C. Federal Home Loan Bank(FHLB'S) Issued by the Federal Home Loan Bank System to help finance the housing industry. The notes and bonds provide liquidity and home mortgage credit to savings and loan associations, mutual savings banks, cooperative banks, insurance companies, and mortgage-lending institutions. 1'lrev are issued irregularly for various maturities. The minimum denomination is S10,000. The notes are issued with maturities of less than one year and interest is paid at maturity. The bonds are issued with various maturities and carry semi-annual coupons. Interest is calculated on a 360-day, 30-day month basis. D Federal National Nlotteage Association (FNI\,1A'S) To assist the home mongas!e market by purchasing mortgages insured by the Federal Housing Administration and the Farmers Home Administration, as well as those guaranteed by the Veterans Administration. They are issued about four times a year for maturities ranging from a few months to eight years. They are issued in rninirnurn denominations of S10,000. They carry semi-annual coupons. Interest is computed on a 360 day, 30-day month basis. FNMA is a publicly held corporation listed on the NYSE. E. Federal Home Loan 'vfortgage Corporation Created to pron•ote the development of a nationwide secondary market in mortgages It does this by purchasing residential monga;es from financial institutions insured by an . a�!enev of the federal government and selling its interest in there throw, mortgaoe- backed securities. The interest and principal payments from the mortgages pass throw h to the investors either monthly. semiannually or annually, 6 Government National Mortgage Association (GNMA'S) Securities guaranteed by GNMA and issued by mortgage bankers, commercial banks, savings and loan associations, and other institutions. Security holder is protected by full faith and credit of the U.S. Government. Ginnie Mae buys FHA and VA mortgages and auctions them to private lenders which pool these mortgages and sell pass-through certificates. Each month, principal and interest payments from the pool pass through to investors. F2 Federally Related Institutions A. Tennessee Valley Authorities (TVA'S) A U.S. Corporation created in the 1930's, to electrify, the Tennessee Valley area; currently a major utility headquartered in Knoxville, Tennessee. TVA's securities are highly liquid and are widely accepted. B. Student Loan Association Notes (Sallie Mae's) A U.S. Corporation and instrumentality of the U.S. government. Through its borrowings, funds are targeted for loans to students in higher education institutions. SLMA's securities are highly liquid and are widely accepted. F.3. Small Business.Administration (SBA'S) The portion of these Securities/Loans which are guarameed by Federal government to provide financial assistance through direct loans and loan guarantees to small businesses. G. REPURCHASE AGREEMENT, maximum term 3 months. Short-term agreement between a seller and a buyer (investor) of U.S. Government securities, whereby the seller agrees to repurchase the securities at an agreed upon price and, at a stated time. The city may utilize repurchase agreements on a daily basis. The bank or dealer sells securities to . the city, agreeing to buy them back at the stated time. Thus, the city utilizes a temporary surplus of cash to enhance interest earnings. H. REVERSE-REPURCHASE AGREEMENTS (Requires City Council approval for each transaction) A reverse-repurchase is exactly what the name implies. Reverse-repurchase agreements are the sale of securities by the city under an agreement to "repurchase" the securities on or before a specified date and for a specified amount. This investment shall be utilized to provide short term liquidity,but only with specific council approval on each transaction. 7 I. MEDIUM-TER.M CORPORATE NOTES, maximum 20% of portfolio (30% with Council approval). Unsecured promissory notes issued by a corporation organized and operating in the United States. These are negotiable instruments and are traded in the secondary market. Medium term corporate notes can be defined as extended maturity commercial paper. Notes eligible for investment shall be "A" rated or its equivalent or better as determined by a nationally recognized rating service Further restrictions are a maximum term of five years to maturity and total investments in medium term corporate notes tnay not exceed 30%of the local agency's surplus funds. J. TIME DEPOSITS-CERTIFICATES OF DEPOSIT (non-negotiable certificates of deposit.) ( maximum of 3 years) Time deposits of a bank or savings and loan. They are purchased in various denominations with maturities ranging from 6 to 36 months. The interest is calculated on a 360-day, actual day month basis and is payable monthly. Refer to Section 12.0 regarding Government Code Collateral ization Provisions. K. OBLIGATIONS OF THE STATE OF CALIFORNIA Registered state warrants or treasury notes or bonds of this state, including bonds payable solely out of the revenues from a revenue-producing property owner, controlled, or operated by the state or by a department, board, agency,or authority of the state. 10.2 Indirect Investments - Funds deposited into authorized accounts which are managed by other agencies according to published guidelines. A. MUTUAL FUNDS, maximum 15% of portfolio. (Requires City Council approval for each transaction) Local agencies are authorized to invest in shares of beneficial interest issued by diversified management companies that invest in securities and obligations otherwise eligible for local agency investment. In addition, to be eligible as an investment the company must: (1) attain the highest ranking or rating provided by not less than two of the three largest national rating services; and (2)have an investment advisor registered with the SEC who has at least five years experience with investing public t�'pe investments with a portfolio of at least five hundred million. Finally, the purchase price of the shares may not include commission and only a certain stated percentage of the City's money may be invested. THE LOCAL AGENCY INVESTMENT FUND (LAIF) Is a special fund of the California State Treasury through which any local goverment may pool investments. The city may invest up to $20,000,000 per agency in this fund. Currently, the city has established two (2) agency funds through which the Treasurer may invest the unexpended s cash for all funds: The City of Huntington Beach City Fund, and the Huntington Beach Redevelopment Agency Funds. Investments in LAIF are highly liquid and may be converted to cash within 24 hours. 11.0 Portfolio Adjustments: Should any investment listed in section 10.1 & 10.2 exceed a percentage-of-portfolio limitation due to an incident such as fluctuation in portfolio size, the affected securities may be held to maturity to avoid losses. When no loss is indicated, the Treasurer shall consider reconstructing the portfolio basing his/her decision on the expected length of time the portfolio will be unbalanced. If this occurs, the City Council shall be notified. 12.0 Collateral ization: Under provisions of the California Government Code, California banks, and savings and loan associations are required to secure the city's deposits by pledging government securities with a value of 110 % of principal and accrued interest. California law also allows financial institutions to secure city deposits by pledging first trust deed mortgage notes having a value of 150% of city's total deposits. Collateral will always be held by an independent third party. A clearly marked evidence of ownership (safekeeping receipt) must be supplied to the city and retained. Repurchase collateral will be at 102% of market value of principal and accrued interest, consistent with CA Code requirements. The City Treasurer, at his/her discretion, may waive,the collateral requirement for deposits which are fully insured up to $100,000 by the Federal Deposit Insurance Corporation. The right of collateral substitution is granted. 13.0 Safekeeling and Custody: All city investments shall have the City of Huntington Beach as its registered owner, and all interest and principal payments and withdrawals shall indicate the City of Huntington Beach as the payee. All securities shall be safe kept with the city itself or with a qualified financial institution, contracted by the city as a third party. All agreements and statements will be amnually reviewed by external auditors. All securities shall be acquired by the safekeeping institution on a "Delivery-Vs-Payment" (DVP) basis. For Repurchase Agreements, the purchase may be delivered by book entry. physical delivery or by third arty custodial agreement consistent with the Government Code. The transfer 9 of underlving securities to the counterparty bank's customer book-entry account may be used for book-entry delivery. 14.0 Diversification: The city's investment portfolio will be diversified to avoid incurring unreasonable and avoidable risks associated with concentrating investments in specific security types, maturity segment, or in individual financial institutions. The City will utilize Moody's Securities, Sheshunoff bank and savings and loan ratings, or other such services to determine financially sound institutions to do business with. Credit risk, defined as the risk of loss due to failure of the insurer of a security, shall be mitigated by investing in only very safe securities and by diversifying the investment portfolio so that the failure of any one issuer would not unduly hams the city's cash flow. Market risk, defined as the risk of market value fluctuations due to overall changes in the general level of interest rates, shall be mitigated by structuring the portfolio so that securities mature at the same time that major cash outflows occur, thus eliminating the need to sell securities prior to their maturity. It is explicitly recognized herein, however, that in a diversified portfolio, occasional measured losses are inevitable and must be considered within the context of overall investment return. The city's investment portfolio will remain sufficiently liquid to enable the city to meet all operating requirements whicli might be reasonably anticipated. 15.0 Maximum Maturities: To the extent possible, the City of Huntington Beach will attempt to match its investments with anticipated cash flow requirements. Unless matched to a specific cash flow, the city \will not directly invest in securities maturing more than five (5) years from the date of purchase, unless, the legislative body has granted express authority to make that investment either specifically, or as a part of an investment program approved by the City Council. 16.0 Internal Control: The external auditors shall aimivally review the investments with respect to the investment policy. This review will provide internal control by assuring compliance with policies and procedures for the investments that are selected for testing Additionally, 10 accent reconciliation and verification of general ledger balances relating to the purchasing or maturing of investments and allocation of investments to fund balances shall be performed by the Finance Department and approved by the City Treasurer. To provide further protection of city funds, written procedures prohibit the wiring of any city funds without the authorization of at least two of the three designated city officials: I. City Treasurer 2. Senior Deputy City Treasurer 3. Director of Finance 17.0 Performance Standards: This investment policy shall be reviewed at least annually by the Investment Advisory Board and the City Council to ensure its consistency Nvith the overall objective of preservation of principal, liquidity, and return, and its relevance to current law and financial and economic trends. All financial assets of all other funds shall be administered in accordance with the provisions of this policy. The moneys entrusted to the City Treasurer will be an actively managed portfolio. This means that the City Treasurer will observe, review, and react to changing conditions that affect the portfolio. - 17.1 Market Yield (Benchmark): The investment portfolio shall be managed to attain a market-average rate of return throughout budgetary and economic cycles, taking into account the city's investment risk constraints and cash flow. Market average will be considered for benclunark purposes to be the Local Agency Investment Fund (LAIF) rate of return and the six month moving average of the 3 month Treasury. While the city will not make investments for the purpose of trading or speculation as the dominant criterion, the City Treasurer shall seek to enhance total portfolio return by means of ongoing portfolio management. The prohibition of highly speculative investments precludes pursuit of gain or profit through unusual risk and precludes investments primarily directed at gains or profits from conjectural fluctuations in market prices. The City Treasurer will not directly pursue any investments that are leveraged or deemed derivative in nature. However, as long as the 11 original investments can be justified by their ordinary earning power, trading in response to changes in market value is a requirement of on going portfolio management. 18.0 Reporting: The City Treasurer shall submit a monthly investment report to the City Council, City Administrator, and City Finance Director and the Investment Advisory Board. This report will include the following elements: 18.1 Type of investment 18.2. Institution/Issuer 18.3 Purchase Date 18.4 Date of maturity 18.5 Amount of deposit or cost of the investment 18.6 Face value of the investment 18.7 Current market value of securities 18.8 Rate of interest 18.9 1 merest earnings 18.10 Statement relating the report to the Statement of investment Policy 18.11 Statement on availability of funds to meet the neat 30 days' obligations 18.12 Monthly and Year to date Budget Amounts for Interest Income 18.13 Percentage of Portfolio by Investment T= 18.14 Days to Maturitv for all Investments 18.15 Comparative report on Monthly Investment Balances & Interest Yields This monthly report shall be placed on the City Council Agenda for Council and public review. 19.0 Investment Police Adoption: By virtue of a resolution of the City .Council of the City of Huntington Beach, the Council shall acknowledge the receipt and filing of this annual statement of investment policy for the respective fiscal year. 12 RECEIVED FROM AND MADE A PART OF HE RECORD AE COUNCIL MEETING OF-(-&- .. OFFICE OF THE CITY CLERK CONNIE BROCKWAY,CITY CLERK QlAra Lij L G� U LL, r Investment Policy 96/97 - Shari L. Freidenrich, CPA .Investment Policy • Approved by IAB on 12-9-96 (4-0) • Annually updated/revised Slide 2 Investment Policy 96/97 - Shari L. Freidenrich, CPA Major Changes • Internal Control Enhancements • Other Significant Changes Slide 3 Investment Policy 96/97 - Shari L. Freidenrich, CPA Internal. Control Enhancements • Sect. 4: New Prudent Investor Rule • Sect. 4. 1 : Clarification of Officers • Sect. 9 . 0: Qualified Bidders • Sect. 10 . 1 A: Rating Criteria Added • Sect. 10 . 1 C: Rating Criteria Added Slide 4 Investment Policy 96/97 - Shari L. Freidenrich, CPA Internal Controls Enhancements • Sect. 16.0: Reconci l iation/al location/ approval req't added • Sect. 17 . 1 : Benchmark updated • Sect. 18. 0: Add 'l reports required Slide 5 Investment Policy 96/97 - Shari L. Freidenrich, CPA Internal Control Enhancements • Sect. 10. 1 E: Rating Criteria Added • Sect. 10. 1 J : Maximum Term Added • Sect. 12.0 : Collateral Req't Added • Sect. 13. 0 : Transfers clarified • Sect. 16 .0: Auditor criteria enhanced Slide 6 Investment Policy 96/97 - Shari L. Freidenrich, CPA Other Significant Changes • Sect. F. 1 E : Investment added • Sect. 10 .2 : OCIP Removed • Policy Reformatted/Renumbered Slide 7 Investment Policy 96/97 - Shari L. Freidenrich, CPA Summary • IAB Liability / E & O Insurance. • Recommendation to City Council Slide 8