1996 01 10 IAB4 Q aa r(A
78-495 CALLE TAMPICO - LA QUINTA, CALIFORNIA 92253 - (619) 777-7000
FAX (619) 777-7101
INVESTMENT ADVISORY BOARD
AGENDA
Study Session Room
78-495 Calle Tampico- La Quinta, CA 92253
January 10, 1996 - 5:30 P.M.
I CALL TO ORDER
a. Pledge of Allegiance
b. Roll Call
II CONFIRMATION OF AGENDA
III PUBLIC COMMENT -(This is the time set aside for public comment on any matter not scheduled on the agenda.)
IV CONSENT CALENDAR
A. Approval of Minutes of December 13, 1995.
V BUSINESS SESSION
A. Transmittal of Treasury Report for November 30, 1995.
B. Fiscal Year 1994/95 Management Letter Comments.
VI BOARD MEMBER COMMENTS
VII INFORMATIONAL ITEMS
A. Comprehensive Annual Financial Report - Questions
B. LAI F Report on Mark to Market Policy.
C. Status of Broker/Dealer Selection
D. Legislative Action for 1995 pertaining to Investments
VII ADJOURNMENT
MAILING ADDRESS - P.O. BOX 1504 - LA QUINTA, CALIFORNIA 92253 zim��
INVESTMENT ADVISORY BOARD MEETING: January 10, 1996
BUSINESS SESSION: A
ITEM TITLE
Transmittal of Treasury Report
for November 30, 1995
ISSUE AND DISCUSSION:
Attached please find the Treasury Report for November 30, 1995.
RECOMMENDATION:
Review, Receive and File the Treasury Report for November 30, 1995.
Approved for submission to the Investment Advisory Board:
J n M. Falcone
Fi ance Director
u _
OF
0A.
OF TNT
TO: La Quinta City Council
FROM: John Falconer, Finance Director/Treasurer
SUBJECT: Treasurer's Report for November 30, 1995
DATE: January 05, 1996
Attached is the Treasurer's Report for the month ending November 30, 1995. This report is submitted to
the City Council each month after a reconciliation of accounts is accomplished by the Finance
Department.
Cash and Investments:
Increase of $242,806. due to the net effect of revenue in excess of expenditures.
State Pool:
ICMA:
Decrease of $480,000. due to transfers to and from the cash and investment accounts.
No change.
Mutual Funds:
Decrease of $168,027. due to the net effect of withdrawls from the 95 Series Proceed
Fund and interest earned.
Total decrease in cash balances $405,221.
I certify that this report accurately reflects all pooled investments and is in compliance with the California
Government Code; and is in conformity with the City Investment policy.
As Treasurer of the City of La Quinta, I hereby certify that sufficient investment liquidity and anticipated
revenues are available to meet the pools expenditure requirements for the next six months.
q7� L��
John M. Falconer
Finance Director/Treasurer
Date
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CITY OF LA QUINTA
CITY
CITY RDA
RDA FA
BALANCE SHEET 11/30/95
FIXED
LONG TERM FIXED
LONG TERM FINANCING LONG TERM
GRAND
ASSETS:
CITY ASSETS
DEBT RDA ASSETS
DEBT AUTHORITY DEBT
TOTAL
POOLED CASH
LQHP CASH
10,292,554.50
4,191,705.36
14,4848425986
. ,25986
BOND REDEMPTION CASH
100,587.75
299,459.10
100,587.75
BOND RESERVE CASH
536,574.44
4,422.80
707,820.13
303,881.90
1,244,394.57
BOND PROJECT CASH
13,501,825.10
13,501,825.10
BOND ESCROW CASH
171,486.35
PETTY CASH
1,000.00
171,486.35
BANK OF THE DESERT M/M
9,708.35
1 . 0 ,0000
ICMA DEFERRED COMPENSATION
279,965.79
,
CASH ✓9iINVESTMENT TOTAL
10,583,228.64
18,801,638.10
712,242.93
.35
279,708.00
30,097,109.67
ACCOUNTS RECEIVABLE
182,596.21
87,526.34
LOAN/NOTES RECEIVABLE
67,120.00
270,122.55
DUE FROM OTHER AGENCIES
(57,244.84)
67,120.00
DUE FROM OTHER GOVERNMENTS
(57,244.84)
DUE FROM OTHER FUNDS
551,038.04
DUE FROM RDA
6,048,957.20
551,038.04
INTEREST ADVABCE-DUE FROM RDA
252,039.90
6,048,957.20
NSF CHECKS RECEIVABLE
707.59
252,039.90
ACCRUED REVENUE
707.59
TRAVEL ADVANCES
2,462.75
EMPLOYEE ADVANCES
2,462.75
PREPAID EXPENSES
RECEIVABLE TOTAL
6,429,518.81
705,684.38
7,135,203.19
WORKER COMPENSATION DEPOSIT
RENT DEPOSITS
UTILITY DEPOSITS
75.00
MISC. DEPOSITS
2,000.00
.00
DEPOSITS TOTAL
2,075.00
2,07575
2,000.00
.00
GENERAL FIXED ASSETS
15,893,519.00
5,879,910.05
21,773,429.05
AMOUNT AVAILABLE TO RETIRE Lff DEBT
2,340,653.00
2,340,653.00
AMOUNT TO BE PROVIDED FOR L/T DEBT
309,279.00 70,239,577.06
8,360,000.00 78,908,856.06
TOTAL OTHER ASSETS
15,893,519.00
309,279.00 5,879,910.05 72,580,230.06
8,360,000.00 103,022,938.11
TOTAL ASSETS
17,014,822 45 15,893 519 00
309,279.00 19,507,322.48 5,879 910 05 72,580,230.06
712,242.93 8,360,000.00 140,257,325.97
LIABILITY
ACCOUNTS PAYABLE
DUE TO OTHER AGENCIES
32,809.86
DUE TO OTHER FUNDS
INTEREST ADVANCE -DUE TO CITY
ACCRUED EXPENSES
40,000.00
PAYROLL LIABILITIES
(45,079.71)
STRONG MOTION INSTRUMENTS
1,075.37
FRINGE TOED LIZARD FEES
82,417.40
SUSPENSE
(1,360.84)
DUE TO THE CITY OF LA QUINTA
PAYABLES TOTAL
109,862.08
ENGINEERING TRUST DEPOSITS
35,029.78
SO. COAST AIR QUALITY DEPOSITS
ARTS IN PUBLIC PLACES DEPOSITS
165,621.91
DEVELOPER DEPOSITS
155,254.40
MISC. DEPOSITS
12,186.62
AGENCY FUND DEPOSITS
850,501.68
ICMA-DEFERRED COMP DEPOSITS
279,965.79
TOTAL DEPOSITS
1,498,560.18
DEFERRED REVENUE
OTHER LIABILITIES TOTAL
COMPENSATED ABSENCES PAYABLE
DUE TO THE CITY OF LA QUINTA
NOTE DUE TO MURPHY, DALES, LANE
DUE TO COUNTY OF RIVERSIDE
DUE TO C.V. UNIFIED SCHOOL DISTRICT
DUE TO DESERT SANDS SCHOOL DISTRIC
BONDS PAYABLE
TOTAL LONG TERM DEBT
TOTAL LIABILITY
EQUITY -FUND BALANCE
1,608,422.26
15, 406, 400.19 15, 893, 519.00
32,809.86
551,038.04 551,038.04
386,764.00 426,764.00
(45,079.71)
1,075.37
82,417.40
(1,360.84)
937,802.04 1,047,664.12
35,029.78
165,621.91
155,254.40
12,186.62
850,501.68
279,965.79
1,498, 560.18
309,279.00
309,279.00
6, 300, 998.31
6, 300, 998.31
11,572,687.00
11,572,687.00
12,271, 884.75
12,271, 884.75
1,904,660.00
1,904,660.00
40,530,000.00 8,360,000.00
48,890,000.00
309,279.00 72,580,230.06 8,360,000.00
81,249,509.06
309,279.00 937,802.04 72,580,230.06 8,360,000.00
83,795,733.36
18,569,520.44 5,879,910.05 712,242.93
56,461,592.61
TOTAL LIABILITY & EQUITY 17,014,822.45 15,893,519.00 309,279.00 19,507,322.48 5,879 910.05 72,580,230.06 712,242.93 8,360 000 00 140,257,325.97
INVESTMENT ADVISORY BOARD MEETING: January 10, 1996
BUSINESS SESSION: B
ITEM TITLE
Fiscal Year 1994/95 Management
Letter Comments
ISSUE AND DISCUSSION:
Attached please find the Management Letter Comments from Conrad & Associates, CPA's for the
year ending June 30, 1995. These comments were directed to the City Manager since they were
considered non -reportable conditions. The Finance Departments staff has reviewed the
management letter comments and provided the City's response which has also been attached. We
are in agreement with the auditors findings.
RECOMMENDATION:
Review, Receive and File the Fiscal Year 1994/95 Management Letter comments and staffs
recommendation.
prod for submj,�sior}?to the Investment Advisory Board:
Jdtin M. Falconer
Fi ance Director
INVESTMENT ADVISORY BOARD MEETING: January 10, 1996
INFORMATIONAL ITEM: A
ITEM TITLE
Comprehensive Annual Financial Report
ISSUE AND DISCUSSION:
At the December 1995 Board meeting the Comprehensive Annual Financial Report (CAFR) was
distributed.
Staff is available to answer questions the Board may have regarding the CAFR.
Approved for submission to the Investment Advisory Board:
- 4 fl &,
i M. Falconer
nce Director
INVESTMENT ADVISORY BOARD MEETING: January 10, 1996
INFORMATIONAL ITEMS: B
ITEM TITLE
LAW Report on Mark to Market
Policy
ISSUE AND DISCUSSION:
At last months meeting discussion ensued regarding the LAIF mark to Market Policy. Ken AI -Imam,
has spoken with LAIF and prepared a report which represents LAIF's policy.
Approved for submission to the Investment Advisory Board:
CONRAD
L ,SSOC11 1TES, L.L.P.
A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
John M. Falconer
Director of Finance
City of La Quinta
78-495 Calle Tampico
P.O. Box 1504
La Quinta, California 92253
Dear John:
CERTIFIED PUBLIC ACCOUNTANTS
January 4, 1996
1100 MAIN STREET, SUITE C
IRVINE, CALIFORNIA 92714
(714) 474-2020
In response to a request from the La Quinta Investment Advisory Committee, I spoke to
Pat Beal, LAIF Administrator, on December 22, 1995. We had an extensive discussion of
how the LAIF accounting system works. She indicated to me the following:
• LAIF periodically provides market value information.
• However, as required by government accounting principles, investments
are recorded at cost. Unrealized market gains or losses are not
recorded or reflected in the participant's account balance until the
investment is sold.
• Monthly account balances reflect only the amount of interest receipted
in cash. The quarterly remittance advice reflects accrued interest
earned as of the end of that quarter.
Our firm has a very good working relationship with Pat. Please let me know if the
Committee has any further questions.
KA:dac
3207H
Very truly yours,
CONRAD & ASSOCIATES, L.L.P.
Ken Al -Imam, CPA
Partner
MEMBERS OF AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS
MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION
CERTIFIED PUBLIC ACCOUNTANTS
1 �SOC 1 TES, L.L.P.
A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
August 18, 1995
Mr. Tom Genovese
City Manager
City of La Quinta
78-495 Calle Tampico
La Quinta, California 92253
Dear Mr. Genovese:
1100 MAIN STREET, SUITE C
IRVINE, CALIFORNIA 92714
(714) 474-2020
During our audit of the financial statements of the City of La Quinta, California for the
year ended June 30, 1995, we became aware of certain matters that we believe may
provide an opportunity for the City of La Quinta to strengthen its internal controls.
The items below do not represent reportable conditions or material weaknesses in
internal control. In general, the City has an excellent internal control structure. We
offer the following recommendations as suggestions for consideration by the City to
further strengthen its internal control structure.
(1) Investment Policy
During our review of the City's current investment policy, we noted the following:
(a) The policy does not require review and approval by the City Council annually.
(b) The policy does not prohibit speculative securities such as securities that have
rates that vary inversely to prescribed indices.
(c) The policy does not identify the conditions under which investment agreements
can be used.
(d) The City currently has investments in the Local Agency Investment Fund
(LAIF) only. In the past, LAIF has not provided market value information to
the City throughout the year.
(e) Before investing in a pool, the policy does not require the City to inquire as to
the goals and strategies employed by the pool for the investment of funds to
determine that they are consistent with the goals and strategies of the City for
the investment of funds.
MEMBERS OF AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS
MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION
Mr. Tom Genovese
City Manager
August 18, 1995
Page Two
Recommendations
Due to the changing investment environment, increasing complexity of investment
activity for public entities, and the conditions noted above, we recommend that the
investment committee consider the following changes in the investment policy to
strengthen internal controls, minimize the risk involved and reduce the exposure of
loss to the City:
(a) The investment environment and the needs of the City are constantly
changing. Therefore, we recommend that the City add a clause to to the
policy which requires annual review and approval of the policy by the City
Council.
(b) We recommend that the committee consider whether or not the policy should
prohibit investments in securities that are considered to be speculative such as
securities with rates that vary inversely to prescribed indices. The committee
should also consider the extent to which zero coupon bonds, interest -only
strips, and other securities are used which have market values that are very
sensitive to changes in interest rates.
(c) If the City is going to allow the use of investment agreements, the instrument
should be rated and insured and reasonable in term.
(d) The committee should request market value information from LAIF on at least
a quarterly basis if available.
(e) LAIF currently publishes a pamphlet which discusses the goals and strategies
that the pool employs for investment of funds. We recommend that the
committee request a copy of this pamphlet, review the document, and
determine that the goals and strategies of LAIF are consistent with the goals
and strategies of the City.
(2) Seg_regation of Payroll/Personnel Functions
The payroll and personnel functions are performed by the same person. Internal
control standards recommend that these functions be segregated and the payroll
clerk should have no access to the payroll master files.
Recommendations
We recommend that all personnel functions, including personnel file maintenance be
performed by a personnel clerk. The payroll clerk should not be permitted to
establish or delete employees on the computer system. All updates to the employee
master data file on the computer (i.e., new employee additions, employee deletions,
pay increases, etc.) should be input by the personnel clerk.
Mr. Tom Genovese
City Manager
August 18, 1995
Page Three
(3) Controls Over Business Licenses
Business licenses are not
maintained by the cashier.
receipt form prepared an
Recommendation
d
When new forms are ordered, pre -numbered forms should be purchased. The
uninterrupted sequence of these forms should be ascertained by someone other than
the cashier in conjunction with the review of the sequence of cash receipt form
numbers.
If you have any questions, please give me a call.
Very truly yours,
CONRAD & ASSOCIATES, L.L.P.
Ken Al -Imam, CPA
Partner
KAI:pjm
3240H
78-495 CALLE TAMPICO - LA QUINTA, CALIFORNIA 92253 - (619) 777-7000
FAX (619) 777-7101
January 3, 1996
Mr. Ken AI -Imam, Partner
Conrad & Associates, CPA's
1100 Main Street, Suite C
Irvine, CA 92714
Dear Ken:
The following are the City's responses regarding corrective actions planned or taken for
the three (3) comments in your letter dated August 18, 1995. The City is always interested
in your comments to improve our internal control structure whenever possible.
(1) INVESTMENT POLICY
(a) The policy does not require review and approval by the City Council annually.
Response
This will be incorporated in the next revision of the investment policy. Staff
anticipates updating the current policy by July 1, 1996 and agrees with your
suggestion to update the policies annually. Staff would suggest doing this as part
of the annual budget adoption process on an annual basis.
(b) The policy does not prohibit speculative securities such as securities that have rates
that vary inversely to prescribed indices.
Response
Staff concurs with the auditors recommendation to specifically exclude speculative
securities and will do so in the next investment policy revision.
(c) The policy does not identify the conditions under which investment agreements can
be used.
Response
Staff concurs with the auditors recommendation and will identify conditions if any,
which investment agreements can be used.
MAILING ADDRESS - P.O. BOX 1504 - LA QUINTA, CALIFORNIA 92253
Mr. Ken AI -Imam
Conrad & Associates
Page 2of3
(d) The City currently has investments in the Local Agency Investment Fund (LAIF)
only. In the past, LAIF has not provided market value information to the City
throughout the year.
Response
LAIF has been providing market value information on a quarterly basis to the City.
We will request that LAW consider providing market value information on a more
frequent basis. i.e. Monthly.
(e) Before investing in a pool, the policy does not require the City to inquire as to the
goals and strategies employed by the pool for the investment of funds to determine
that they are consistent with the goals and strategies of the City for the investment
of funds.
Response
The City currently invests in two types of pools which are LAIF and Mutual Funds.
LAW - Staffs has obtained the goals and objectives of LAIF and have provided them
to the Investment Advisory Board. Staff believes that their goals are consistent with
the City in their stress safely, liquidity and yield. Staff believes that they are
professionally managed and that generally their trading strategies match the Cities,
however they do allow more sophisticated trading techniques than are allowed in
the City investment policy. Staff believes these trading techniques represent a
small segment of the total LAW pool of $27 billion and are being professionally
managed.
MUTUAL FUNDS - Staff has reviewed the annual financial statements and annual
prospectus on the mutual funds that the bond trustee has invested our bond
proceeds and debt service reserves. Staff believes they meet the goals and
objectives of the City.
(2) SEGREGATION OF PAYROLL/PERSONNEL FUNCTIONS
The payroll and personnel functions are performed by the same person. Internal
control standards recommend that these functions be segregated and the payroll
clerk should have no access the payroll master files.
Mr. Ken AI -Imam
Conrad & Associates
Page 3of3
Response
This is a repeat comment from the prior year. Finance will train an individual in the
Finance Department, other than the Payroll Technician, to input and maintain the
Employee Payroll Master File. This person will be assigned a password that
prohibits the Payroll Technician from accessing these files.
(3) CONTROLS OVER BUSINESS LICENSES
Business licenses are not pre -numbered. Numbers are issued from a listing
maintained by the cashier. As a result, two licenses could be issued, but only one
receipt form prepared and the related amount deposited. Licenses should be
sequentially numbered and the numbers accounted for chronologically by someone
other than the cashier.
Response
This is a repeat comment from the prior year. The City will order business license
forms that are pre -numbered sequentially with the implementation of its new
Business License Software. We anticipate completing this implementation by June
30, 1996.
We want to thank Conrad & Associates for their excellent rating of our internal control
structure and welcome these comments in our effort to improve our internal control
wherever and whenever possible.
Sincerely,
Uohn M. Falconer
Finance Director/Treasurer
cc: Thomas P. Genovese, City Manager
Investment Advisory (Board Members, January Agenda
INVESTMENT ADVISORY BOARD MEETING: January 10, 1996
INFORMATIONAL ITEM: C
ITEM TITLE
Status of Broker/Dealer Selection
ISSUE AND DISCUSSION:
The investment policy requires three bids broker/dealers when government securities are purchased.
City staff .has prepared a broker dealer questionnaire and has forwarded investment service
agreements for three brokers to the City Attorney for her review. The three firms are:
Bank of California
International Securities Group
Merrill Lynch
Staff is prepared to execute these agreements based upon our legal review, and progress toward
diversification of the investment portfolio.
r submissipn tAthe Investment Advisory Board:
ohn Pl. Falcone
'inapice Director
INVESTMENT ADVISORY BOARD MEETING: January 10, 1996
INFORMATIONAL ITEM: D
ITEM TITLE
Legislative Action for 1995 pertaining to Investments
ISSUE AND DISCUSSION:
Attached please find the State Legislative action taken regarding investments for calendar year 1995.
Several of these items were addressed in the auditors management letter. Staff will ensure that
these items are complied with and incorporated into the next updated investment policy.
lvisory Board:
NVESTMENTS
Reporting Requirements for Local Agency Investments. SR 564 Uohnsronl_ Cban
2U. This bill imposes certain reporting requirements on -state and local agencies.
Specifically, the bill:
1) Requires the treasurer or chief fiscal officer of a local agency to submit an annual
statement of investment policy to the legislative body. This report shall be considered
with any changes at a public meeting.
2) Requires the treasurer or chief fiscal officer to submit a quarterly report to the
legislative body containing detailed information on all securities, investments, and
moneys of the local agency. It also requires a statement of compliance of the portfolio
with the statement of investment policy and a statement of the local agency's ability to
meet the expenditure requirements of the pool for the next six months.
3) Permits a local agency to submit its most recent investment statements in lieu of a
quarterly report, if the local agency invests only with the state's Local Agency Investment
Fund, in a county investment pool, or in federally -insured banks or savings and loans.
4) Requires the State Treasurer to annually prepare and submit to the Pooled Money
Investment Board a written statement of investment policy, a quarterly report on
investments, and a description of compliance to the investment policy.
Local Agency Investments. sn MA (Cra�T This bill places restrictions
on the types of investments made by local agencies, allows counties to adopt
qualifications for the office of county teasurer and tax collector and enacts requirements
for county oversight committees. The bill makes the following changes:
1) Provides that the county treasurer, and each person or governing body investing public
funds, is a trustee and therefore a fiduciary mbject to the p nxk mt investor standard.
2) Provides that when investing public funds the primary objective is to safeguard
principal, the second objective is to meet the liquidity needs of the depositor, and the
third objective is to return an acceptable yield
3) Requires that the delivery of my security purchased or obtained by a local agency
shall be by either a book entry, physical delivery or third party custodial agreement.
4) Prohibits investment in inverse Boaters, range notes, interest only strips that are
developed from a pool of mortgages, or any security that could result in zero interest
accrual if held to maturity. If a local agency currently holds any of these prohibited
instruments, the instrument may be held until its maturity date.
5) Provides that investment in repurchase agreements may be made on any investment
authorized in stem when the tam of the agreement does na acceed one year. In
addition, the market value of securities that underlay a rapu mbm agreement shall be
valued at 102 percent or greater of the funds borrowed against those securities and the
value shall be adjusted no less than quarterly.
6) Provides that investment in reverse repurchase agreements may be utilized only when
either (a) the security was owned or specifically committed to purchase, by the local
agency, prior to December 31, 1994 and was sold using a reverse repurchase agreement
on December 31, 1994; or (b) the security to be sold on reverse repurchase agreement has
been owned and fully paid for by the local agency for a minimum of 30 days prior to We.
In addition, the total of all reverse repurchase agreements on investments owned by the
local agency not purchased or committed to purchase prior to December 31, 1994, does
not exceed 20 percent of the base value of the portfolio; and the agreement does not
exceed a term of 92 days, unless the agreement includes a written codicil guaranteeing a
minimum earning or spread for the entire period between the reverse repurchase and the
final maturity date.
7) Requires each county to establish a county treasury oversight committee to be
comprised of three to eleven members. The members shall include the county treasurer,
the county auditor or director of finance, up to five members of the public and a
representative from a special district and a school district. The county treasurer must
prepare an investment policy which the oversight committee will review and monitor.