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HomeMy WebLinkAbout17 Attach 1 DC Chapter 3.20 Investments Title 3 Page 30 review by any Director in the Administrative Services Department. The Board shall officially authorize payment of all disbursements that have been made by the Treasurer and presented on the accounts payable check register at a board meeting, monthly. 3.16.030.7(C) The Treasurer shall list on the agenda any invoice for purchases that have not been made in accordance with the District's purchasing policies as set forth in Title 3, Chapter 3.08 Purchasing. 3.16.030.7(D) Statement of the general fund showing the beginning checking account balance, the categories of cash received by the District during the month, a summary list of the cash disbursements made during the month, any authorized transfers in or out of the general fund and the ending balance at the end of the month. 3.16.030.7(E) Semi-annual budget reports showing the status of budgeted expenditures compared to actual expenditures will be presented at a board workshop after the close of the June and December financial records. 3.16.030.7(F) Semi-annual financial statements showing the status of all revenues and expenditures in the format of financial statements using generally accepted accounting principles for utilities after the close of the June and December financial records. CHAPTER 3.20 INVESTMENTS Sections: 3.20.005 Local Agency Investment Fund Investments 3.20.008 Fund Transfers 3.20.010 Investment of Surplus Funds 3.20.012 Investment Policy 3.20.005 Local Agency Investment Fund Investments 3.20.005.1 Authorization has been given for the deposit and withdrawal of monies in the Local Agency Investment Fund (LAIF) in the State Treasury in accordance with the provisions of Section 16429.1 of the Government Code for the purpose of investment as stated therein. 3.20.005.2 Any two of the following officers or employees of the District, the President of the Board, the General Manager or the Treasurer, may execute documents to add or delete District accounts and authorized persons to make transfers to and from those accounts with the LAIF. 3.20.008 Fund Transfers Title 3 Page 31 3.20.008.1 The Board approved commercial bank (Bank) is requested to honor, execute and process the District's telephonic, electronic, written or oral requests for the transfer of funds between the accounts of the District at Bank and the Local Agency Investment Fund, subject to such terms and conditions as may from time to time be agreed upon by the District. 3.20.008.2 Any one of the following listed officers or employees of the District, the President of the Board, the General Manager or the Treasurer are hereby authorized, directed and empowered for and on behalf of and in the name of the District as follows: 3.20.008.2(A) To execute agreements with the Bank providing for such funds transfers and to make and verify requests for such transfers, and the Bank shall be entitled to honor and charge this District for all such requests, when given (or purported to be given) by any one of the above. 3.20.008.2(B) To make, execute and deliver such other agreements as may be required by the Bank; and 3.20.008.2(C) To perform or cause to be performed all further acts and execute and deliver all further instruments which Bank may deem necessary to carry out the purposes of this policy. 3.20.008.3 The District hereby ratifies and confirms the acts of its officers, agents or employees in heretofore requesting transfers of funds from this District's accounts with the Bank by wire or comparable transfer together with any acts performed in relation hereto. 3.20.008.4 That the Clerk of the District is hereby authorized and directed to execute, acknowledge and deliver a certified copy of the Resolution related hereto to the Bank and any other person or agency which may require copies, and that the certification of the (Secretary) Clerk as to the signatures of the above named officers will be binding on this District. 3.20.008.5 That the Bank is authorized to act upon this policy until written notice of the revocation thereof by a resolution duly adopted by the Board of Directors of this District is delivered to the Bank, such revocation is in no way to affect the obligations of this District to the Bank incurred pursuant to the terms of this policy prior to receipt by the Bank of such notice or revocation. 3.20.010 Investment of Surplus Funds The District Treasurer shall invest surplus funds, both restricted and general, pursuant to the District’s Investment Policy (District Code 3.20.12). A regular accounting of all fund activities shall be presented to the Board of Directors in the monthly Treasurer’s Report. 3.20.012 Investment Policy 3.20.012.1 Investment Authority In accordance with Section 53600 et seq. of the Government Code of the State of California, the authority to invest public funds is expressly delegated to the Board of Directors for subsequent delegation to the Treasurer. The Title 3 Page 32 Treasurer of the District receives direction and authority to invest any and all District funds from the Board of Directors of the District. 3.20.012.2 Statement of Objectives Per section 53600.5 of the California Government Code, the primary objective of the Treasurer shall be to safeguard the principal of the funds under his/her control when investing public funds. The secondary objective shall be to meet all liquidity requirements and the third objective shall be to achieve an acceptable return on the funds under his/her control. In order of priority, three fundamental criteria shall be followed in the investment program: 1. Safety - Safety of principal is the foremost objective of the investment program. Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. The objective will be to mitigate credit risk and interest rate risk. a) Credit Risk: The District will minimize credit risk, the risk of loss due to the failure of the security issuer or backer, by: i. Limiting investments to the safest types of securities. ii. Pre-qualifying the financial institutions, broker/dealers, intermediaries and advisers with which the District will do business (custodial risk). iii. Diversifying the investment portfolio so that potential losses on individual securities will be minimized (concentration of risk). b) Interest Rate Risk: The District will minimize the risk that the market value of securities in the portfolio will fall due to changes in general interest rates, by: i. Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity. ii. Investing operating funds primarily in shorter-term securities, money market mutual funds, or similar investment pools. 2. Liquidity – In an effort to ensure that the District’s portfolio will be sufficiently liquid to meet current and anticipated operating requirements, periodic cash flow analysis will be performed. Investments shall be made so that the maturity date is compatible with cash flow needs and safety of principal. 3. Yield – Investments shall be undertaken to produce an acceptable rate of return after first considering safety of principal and liquidity and the prudent investor standard. Investment Strategy – The portfolio will be managed to meet the District’s cash flow needs. The maximum maturity of any security will not exceed 5 years except as specifically noted below. All investment activity shall be consistent with prudent investor standard and in accordance with the Title 3 Page 33 authorized investments included under District Code 3.20.012.5. 3.20.012.3 Prudent Investor Standard As applicable to the District, the prudent investor standard is a standard of conduct whereby any person authorized to make investment decisions on behalf of the District acts with care, skill, prudence and diligence under the circumstances then prevailing, including but not limited to, the general economic conditions and the anticipated needs of the District, that a prudent person acting in like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and meet the liquidity needs of the District. 3.20.012.4 Portfolio Any reference to the portfolio shall mean the total of the District’s cash and securities under management by the Treasurer. Except for cash in certain Board designated, restricted and special funds, the District will consolidate cash and reserve balances from all funds to maximize investment earnings and to increase efficiencies with regard to investment pricing, safekeeping, and administration. Investment income will be allocated to the various funds or accounts based on their respective participation and in accordance with generally accepted accounting principles. The Treasurer may invest in any security authorized for investment under the California Government Code, subject to the limitations described herein: 1. Maturity Limitations – a) The aggregate maturity of the total portfolio must not exceed five (5) years for the general operating funds of the District. b) Funds which represent debt service reserve funds may be invested up to a term of ten years, as long as the period invested does not exceed the term of the debt repayment. c) Investments of restricted funds held for the Donner Lake Assessment District that are not expected to be needed to pay debt service on the SRF loan may be invested up to the term of the SRF loan. d) Construction funds may be invested to mature on or before the date funds are expected to be needed for construction purposes. 2. Investment Transactions – the purchase of any investment other than those purchased directly from the issuer shall be, to the extent possible, from a firm designated as a Primary Dealer by the Federal Reserve of New York. 3. Sale of Securities – Securities may be sold to provide needed liquidity, to restructure the portfolio to reduce risk or to increase the expected return of the portfolio. In no instance shall a sale of securities be used for speculative purposes. All sales are to be reported to the Board on a monthly basis. 4. Prohibited Investments – Prohibited investments include inverse floaters, range notes, interest only strips derived from a pool of mortgages (Collateralized Mortgage Obligations), and any security that could result in zero interest accrual if held to maturity. (Zero interest accrual means the security has the potential to realize zero earnings depending upon the structure of the security. Zero coupon bonds and Title 3 Page 34 similar investments that start below the face value are legal because their value does increase.) 5. Safekeeping a) All securities transactions entered into by the District shall be conducted on a delivery versus payment (DVP) basis. b) Securities shall be held by an independent custodian designated by the Treasurer and held in safekeeping pursuant to a safekeeping agreement. c) All financial institutions which provide safekeeping services for the District shall be required to provide reports or safekeeping receipts directly to the Treasurer to verify securities taken into their possession. 3.20.012.5 Authorized Investments 1. The District’s authorized commercial bank in an interest bearing checking or savings account. The Treasurer is authorized to make daily deposits and withdrawals for purposes of the safekeeping of District monies and payments of District financial obligations. 2. Local Agency Investment Fund (LAIF) Deposits for the purpose of investment in the Local Agency Investment Fund of the State of California Treasury may be made up to the maximum amount permitted by State Treasury policy. Any LAIF investments made by the District shall be considered to be short-term in nature even if the LAIF has invested in individual longer-term securities. The Treasurer is authorized to make regular transfers to and from LAIF up to the limit of transactions established by the LAIF investment policy for purposes of meeting the District’s daily cash flow needs and earning interest on surplus funds. 3. Any other investments authorized and listed in the Government Code Sections 53600-53609. The Treasurer will consult with the Board of Directors when recommending any of the investments within these sections other than subsections 1 and 2 above. From time to time, the Board may also consult with an investment professional pursuant to Title 3.20.012.2 Section 1 a) ii. Each investment will be specifically authorized by the Board of Directors. 4. Bond proceeds and reserve funds will be invested only in permitted investments or authorized investments defined in the Trust Agreement for each particular financing which has previously been approved by the Board of Directors (Government Code Section 53601 l). The Treasurer will consult with the Financial Advisor or Trustee on the financing for investment recommendations to submit to the Board of Directors for approval. The Treasurer is authorized to invest funds in a money market fund or LAIF with the Trustee pending investment of those funds in a longer-term investment, which will be approved by the Board of Directors. 3.20.012.6 Reporting in accordance with Section 53646 of the California Government Code, the Treasurer shall submit a quarterly report to the Board of Directors within 30 days following the end of the quarter covered by the report. The report shall include investment activity, including yield and earnings, and the status of cash by depository. Title 3 Page 35 3.20.012.7 Internal Controls Annually, the District will have an independent audit by an external auditor. This audit will provide internal control by assuring compliance with policies and procedures. 3.20.012.9 Annual Review of Investment Policy The Investment Policy shall be submitted at least annually to the Board of Directors for adoption. The policy shall be reviewed annually to ensure its consistency with the overall objectives of preservation of principal, liquidity, yield and its relevance to current law and financial and economic trends. The review will also include the review of the diversification of the investments in the portfolio and the custodial risk of the portfolio. Any modifications made thereto must be approved by the Board of Directors. CHAPTER 3.24 RESTRICTED FUNDS Sections: 3.24.010 Restricted Funds 3.24.010.1 The Board of Directors will direct staff when monies collected by the District are to be considered as restricted funds. 3.24.010.1 (A) Board Designated Restricted Funds are those funds restricted by Board action and which the Board can change the purpose of the designation at any time. 3.24.010.1 (B) Restricted Funds are those funds that are restricted by contract or agreement with the District such as a loan reserve fund. 3.24.010.2 Restricted funds will be invested pursuant to the District’s investment policy as described in Chapter 3.20, Investments. 3.24.010.3 All interest earned upon said restricted funds shall adopt a character of and become part of the specific restricted account unless otherwise directed by the Board of Directors. In the case of loan reserve funds whose balances are greater than the reserve requirement, the surplus funds may be used to offset the principal and interest payments on the loan. 3.24.010.4 Expenditures from restricted funds shall be authorized by the Board of Directors. From time to time, the Board may pre-approve transfers from restricted funds in advance that pertain to specific projects or activities.