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1998 02 11 IAB4 78-495 CALLE TAMPICO - LA QUINTA, CALIFORNIA 92253 - (760) 777-7000 FAX (760) 777-7101 AGENDA TDD (760) 777-1227 INVESTMENT ADVISORY BOARD Study Session Room 78-495 Calle Tampico- La Quinta, CA 92253 February 11, 1998 - 5:30 P.M. I CALL TO ORDER a. Pledge of Allegiance b. Roll Call 11 PUBLIC COMMENT -(This is the time set aside for public comment on any matter not scheduled on the agenda.) III CONFIRMATION OF AGENDA IV CONSENT CALENDAR A. Approval of Minutes of Meeting on January 14, 1998 for the Investment Advisory Board. V BUSINESS SESSION A. Transmittal of Treasury Report for December, 1997 B. Fiscal Year 1998/99 Investment Policies C. City Council Consideration of Boards and Commissions Structure and Operations - February 17th, 1998 City Council Meeting VI CORRESPONDENCE AND WRITTEN MATERIAL A. Month End Cash Report - January, 1998 B. Pooled Money Investment Board Reports - November 1997 C. GASB 31 Technical Report VII BOARD MEMBER ITEMS A. Next Meeting Date Vill ADJOURNMENT ,y MAILING ADDRESS — P.O. BOX 1504 — LA QUINTA, CALIFORNIA 92253 �' -' U � OF INVESTMENT ADVISORY BOARD February 11, 1998 BUSINESS SESSION A ITEM TITLE: Transmittal of Treasury Report for December 31, 1997 L1-1X*]xCJl-*9111z1 Attached please find the Treasury Report for December 31, 1997. Review, Receive and File the Treasury Report of December 31, 1997. hn M. Falconer, Finance Director MEMORANDUM TO: La Quinta City Council FROM: John Falconer, Finance Director/Treasurer SUBJECT: Treasurer's Report for December 31, 1997 DATE: February 5, 1998 Attached is the Treasurer's Report for the month ending December 31, 1997. 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 $631,543. due to the net effect of revenues in excess of expenditures. State Pool: Decrease of $1,000,000. due to the net effect of transfers to and from the cash and investment accounts. U.S. Treasury Bills, Notes and Securities: Increase of $4,627. due to the net effect of a T-Note maturity and the monthly adjustment in the amortized value of the investments. Mutual Funds: Decrease of $458,490. due to the net, transfer of project funds and interest earned. Total decrease in cash balances $822,320. 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. 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U) O C4 'i QUO NtiCNDe tp1-CDL1. r C)o a�� P O N ONO tip! 1NNC6Ili CO .IZ CCD ti �7 cIm t h 7 O � C t H y C 'C a m O 13 C C m C w V m X m Of CA C Q L w y 0td a Cu c- �i a ''�fl � y m c ,m m Q y ~gym>m y mica)�? �- Q. 6.i� c m 3 c c m CA c LD °tS2XCLZX N��W m y V c C - n y �cmm> c Cc > Lmma>'c.M� °' OC rn c C C� m a`HcmnO� w `DM00012 z U w z O .47 N I- CM co qT e- Cn 'fit LO ti r- LO � O e- C10 ' co T- N CD0) CA V CD � M N M _ CA 0 O M O v Cfp .47 c m Z a) CA M � Ch O N w O � UP N w � C M� W C O� m V O N O O cr � yyag �mCCL 0mVN m Cgmo CA y tT O C CT m C V VZ 0 1 Z y LD c c w w CITY OF LA QUINTA CITY CITY RDA RDA FA BALANCE SHEET 12131/97 FIXED LONG TERM FIXED LONG TERM FINANCING LONG TERM GRAND CITY ASSETS DEBT RDA ASSETS DEBT AUTHORITY DEBT TOTAL ASSETS: POOLED CASH (920,962.62) 4,139,287.79 159,783.81 3,378,108.98 LQRP INVESTMENT IN POOLED CASH 410,000.00 410,000.00 INVESTMENT T-BILUNOTES & OTHER 15,000,000.00 15,000,000.00 LQRP CASH 55.701.59 55,701.59 BOND REDEMPTION CASH 6,475.77 768.22 7,243.99 BOND RESERVE CASH 525,180.85 525,180.85 BOND PROJECT CASH 10,239,360.64 596,505.66 10,835,866.30 BOND ESCROW CASH 2,643.29 2,643.29 PETTY CASH 1 000.00 1,000.00 CASH & INVESTMENT TOTAL 14,080,037.38 15,378,649.93 757,057.69 30,215,745.00 INVESTMENT IN LAND HELD FOR RESALE ACCOUNTS RECEIVABLE PREMIUMIDISCOUNT ON INVESTMENT LQRP-ACCOUNTS RECEIVABLE INTEREST RECEIVABLE LOAN/NOTES RECEIVABLE DUE FROM OTHER AGENCIES DUE FROM OTHER GOVERNMENTS DUE FROM OTHER FUNDS DUE FROM RDA INTEREST ADVANCE -DUE FROM RDA NSF CHECKS RECEIVABLE ACCRUED REVENUE TRAVEL ADVANCES EMPLOYEE ADVANCES PREPAID EXPENSES RECEIVABLE TOTAL 8,749,501.93 3,255,983.61 7,282.69 12,012,768.23 86,319.85 86,319.85 85,945.37 83,057.68 6,973.00 175.976.05 (11,629.01) (2,212.14) 309.69 (13,531.46) 19,725.78 19,725.78 2,383.33 2,383.33 2,560,500.03 2,560,500.03 164,065.27 551,038.04 715,103.31 6,890,277.20 6,890,277.20 1,614,795.00 1,614,795.00 2,189.77 2,189.77 43,874.22 43,874.22 1,475.00 1,475.00 WORKER COMPENSATION DEPOSIT 37,637.00 RENT DEPOSITS 37,637.00 UTILITY DEPOSITS 75.00 75.00 MISC. DEPOSITS 2,100.00 2,100.00 DEPOSITS TOTAL 39,812.00 39,812.00 GENERAL FIXED ASSETS 693,426.00 14,947,094.00 11,438,745.05 27,079,265.05 ACCUMULATED DEPRECIATION (77,811.96) (77,811.96) AMOUNT AVAILABLE TO RETIRE UT DEBT 2,340,653.00 2,340,653.00 AMOUNT TO BE PROVIDED FOR L/T DEBT 350,653.00 91,104,894.28 8,790,000.00 100,245,547.28 TOTAL OTHER ASSETS 615,614.04 14,947,094.00 350,653.00 11,438,745.05 93,445,547.28 8,790,000.00 129,587,653.37 TOTAL ASSETS 23,484,965.35 14,947,094.00 350,653.00 18,720,953.39 11,438,745.05 93,445,547.28 764,340.38 8,790,000.00 171 942 298 45 LIABILITY ACCOUNTS PAYABLE (61,632.19) (61,632.19) DUE TO OTHER AGENCIES 503.50 503.50 DUE TO OTHER FUNDS 551.038.04 164,065.27 715,103.31 INTEREST ADVANCE -DUE TO CITY ACCRUED EXPENSES PAYROLL LIABILITIES 92,779.20 92,779.20 STRONG MOTION INSTRUMENTS 2,196.91 2,196.91 FRINGE TOED LIZARD FEES (2,984.24) (2,984.24) SUSPENSE 29,664.23 29,664.23 DUE TO THE CITY OF LA QUINTA PAYABLES TOTAL 122,159.60 489,405.85 164,065.27 775,630.72 ENGINEERING TRUST DEPOSITS 88,330.02 88,330.02 SO. COAST AIR QUALITY DEPOSITS ARTS IN PUBLIC PLACES DEPOSITS 206,831.51 206,831.51 LQRP DEPOSITS 14,341.00 14,341.00 DEVELOPER DEPOSITS 849,447.86 849,447.86 MISC. DEPOSITS 54,647.49 54,647.49 AGENCY FUND DEPOSITS 782,259.25 782,259.25 TOTAL DEPOSITS 1,981,516.13 14,341.00 1,995,857.13 DEFERRED REVENUE OTHER LIABILITIES TOTAL COMPENSATED ABSENCES PAYABLE 350,653.00 350,653.00 DUE TO THE CITY OF LA QUINTA 8,505,073.41 8,505,073.41 DUE TO COUNTY OF RIVERSIDE 12,320,655.87 12,320,655.87 DUE TO C.V. UNIFIED SCHOOL DIST. 11,270,808.00 11,270,808.00 DUE TO DESERT SANDS SCHOOL DIST. 569,010.00 569,010.00 BONDS PAYABLE 60,780,000.00 8,790,000.00 69,570,000.00 TOTAL LONG TERM DEBT 350,653.00 93,445,547.28 8,790,000.00 102,586,200.28 TOTAL LIABILITY 2,103,675.73 350.653.00 503,746.85 93,445,547.28 164,065.27 8,790,000.00 105,357,688.13 EQUITY -FUND BALANCE 21,381,289.62 14,947,094.00 18,217,206.54 11,438,745.05 600,275.11 66,584,610.32 TOTAL LIABILITY i EQUITY 23,484,965,35 14,947,094.00 350,653.00 18,720,953.39 11,438,745.05 93,445,547.28 764,340.38 8,790,000.00 171 942 298 45 i r1 Lor C"9`i O� '" • U � yAlv�r.onu-.'� OF TNT INVESTMENT ADVISORY BOARD Business Session No. B Meeting Date: February 11, 1998 Fiscal Year 1998/99 Investment Policies Pursuant to State Legislation the City investment policies must be approved on an annual basis by the City Council. This approval is done in June of each year. In order to meet this June deadline, the current investment policies have been attached for any changes or updates that may be considered appropriate. Commence review of the Investment policies for approval by City Council in June 1998. l Jolhn M. Falcone[, Finance Director - City of La uinta 1997-98 Fiscal Year - Investment Policy CITY OF LA QUINTA Investment Policy Table of Contents — Section Topic Executive Summary I General Purpose — II Investment Policy III Scope IV Objectives ► Safety ► Liquidity ► Yield V Prudence _ VI Delegation of Authority VII Conflict of Interest VIII Authorized Financial- Dealers and Institutions _ ► Broker/Dealers ► Financial Institutions IX Authorized Investments and Diversification — X Investment Pools XI Col lateral ization XII Safekeeping and Custody — XIII Interest Earning Distribution Policy XIV Maximum Maturities XV Internal Controls _ XVI Benchmark XVil Reporting Standards XVIII Investment of Bond Proceeds XIX Investment Advisory Board - City of La Quinta XX Investment Policy Adoption Appendices Authorized Investments and Diversification Municipal Code Ordinance 2.70 - Investment Advisory Board — Municipal Code Ordinance 3.08 - Investment of Moneys and Funds Listing of Approved Financial Institutions Broker/Dealer Questionnaire and Certification — Investment Pool Questionnaire Segregation of Major Investment Responsibilities Glossary Pa9g 2 4 4 4 5 6 6 7 7 8 11 12 12 12 13 13 15 15 15 16 16 17 18 19 21 22 26 30 31 1 City of La Quinta Investment Policy Executive Summary The general purpose of this Investment Policy is to provide the rules and standards users must follow in investing funds of the City of La Quinta. It is the policy of the City of La Quinta to invest all public funds in a manner which will provide a diversified portfolio with maximum security while meeting daily cash flow demands and the highest investment return in conformity to all state and local statutes. This Policy applies to all cash and investments of the City of La Quinta, La Quinta Redevelopment Agency and the La Quinta Financing Authority, hereafter referred in this document as the "City". The primary objectives, in order of priority, of the City of La Quinta's investment activity shall be: Safety of principal is the foremost objective of the investment program. _ Investments of the City of La Quinta shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. The investment portfolio shall be designed with the objective of attaining a market rate of return or yield throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs. Investments shall be made with judgment and care - under circumstances then prevailing - which persons of prudence discretion, and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived. Authority to manage the City of La Quinta's investment portfolio is derived from the City Ordinance. Management responsibility for the investment program is delegated to the City Treasurer, who shall establish and implement written procedures for the operation of the City's investment program consistent with the Investment Policy. The Treasurer shall establish and implement a system- of internal controls to maintain the safety of the portfolio. In addition, the internal control system will also insure the timely preparation and accurate reporting of the portfolio financial information. The adequacy of these controls will be reviewed and reported on annually by an independent auditor. 2 Investment responsibilities carry added duties of insuring that investments are made without improper influence or the appearance to a reasonable person of questionable or improper influence. The City of La Quinta maintains a listing of financial institutions which are approved for investment purposes.' All Broker/Dealers and financial institutions selected by the Treasurer to provide investment services will be approved by the City Manager subject to City Council approval. The Treasurer will be permitted to invest only in City approved investments up to the maximum allowable percentages and, where applicable, through the bid process requirements. Authorized investment vehicles and related maximum portfolio positions are listed in Appendix - Authorized Investments and Diversification. At least two bids will be required of investments in government securities. CoIlateral ization will be required for Certificates of Deposit in excess of $100,000. Collateral will always be held by an independent third party with whom the City of La Quinta has a current custodial agreement. Evidence of ownership must be supplied to the City and retained by the City Treasurer. The City of La Quinta shall require that each individual investment have a maximum maturity of two years unless specific approval is authorized by the City Council. In addition, the City's investment in the State Local Agency Investment Fund (LAIF) is allowable as long as the average maturity does not exceed two years, unless specific approval is authorized by the City Council. The City's investment in Money Market Mutual funds is allowable as long as the average maturity does not exceed 60 days. The City of La Quinta will use the six month U.S. Treasury Bill as a benchmark when measuring the performance of the investment portfolio. The Investment Policies shall be adopted by resolution of the La Quinta City Council on an annual basis, The Investment Policies will be adopted before the end of June of each year. This Executive Summary is an overall review of the City of La Quinta Investment Policies. Reading this summary does not constitute a complete review which can only be accomplished by reviewing all the pages. 3 T a 4hf 4 4a Quift rACA) 78-495 CALLE TAMPICO - LA QUINTA, CALIFORNIA 92253 - (619) 777-7000 FAX (619) 777-7101 City of La Quinta Statement of Investment Policy July 1, 1997 through June 30, 1998 Adopted by the City Council on June 24, 1997. I GENERAL PURPOSE The general purpose of this document is to provide the rules and standards users must follow in administering the City of La Quinta cash investments. II INVESTMENT POLICY It is the policy of the City of La Quinta to invest public funds in a manner which will provide a diversified portfolio with safety of principal while meeting daily cash flow demands with the highest investment return . In addition, the Investment Policy will conform to all State and local statutes governing the investment of public funds. III SCOPE This Investment Policy applies to all cash and investments of the City of La Quinta, City of La Quinta Redevelopment Agency and the City of La Quinta Financing Authority, hereafter referred in this document as the "City". These funds are -- reported in the City of La Quinta Comprehensive Annual financial Report (CAFR) and include: All funds within the following fund types: ► General ► Special Revenue ► Capital Project _ Debt Service ► Internal Service ► Trust and Agency __ ► Any new fund types and fund(s) that may be created. 4 MAILING ADDRESS - P.O. BOX 1504 - LA QUINTA, CALIFORNIA 92253 IV OBJECTIVES The primary objective, in order of priority, of the City of La Quinta's investment activity shall be: 1. Safety Safety of principal is the foremost objective of the investment program. Investments of the City of La Quinta shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio in accordance with the permitted investments. The objective will be to mitigate credit risk and interest rate risk. Credit Risk - is the risk of loss due to the failure of the security issuer or backer. Credit risk may be mitigated by: ► Limiting investments to the safest types of securities; ► Pre -qualifying the financial institutions, and broker/dealers, which the City of La Quinta will do business; and ► Diversifying the investment portfolio so that potential losses on individual securities will be minimized. i. MMXTMMI Interest Rate risk is the risk that the market value of securities in the portfolio will fall due to changes in general interest rates. Interest rate risk may be mitigated by: ► 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; and ► By investing operating funds primarily in shorter -term securities. 2. Liquidity The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This is accomplished by structuring the portfolio so that securities mature concurrent with cash needs to meet anticipated demands. Furthermore since all possible cash demands cannot be anticipated the portfolio should consist of securities with active secondary or resale markets. 5 3. Yield The investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs. Return on investment is of least importance compared to the safety and liquidity objectives described above. The core of investments are limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed. Securities shall not be sold prior to maturity with the following exceptions: ► A declining credit security could be sold early to minimize loss of principal; ► Liquidity needs of the portfolio require that the security be sold. V PRUDENCE The City shall follow the Uniform Prudent Investor Act as adopted by the State of California in Probate Code Sections 16045 through 16054.. Section 16053 sets forth the terms of a prudent person which areas follows: Investments shall be made with judgment and care - under circumstances then prevailing - which persons of prudence, discretion, and intelligence excerise in the professional management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived. ' 1 t •11r• A - i • i Authority to manage the City of La Quinta's investment portfolio is derived from the City Ordinance. Management responsibility for the investment program is delegated to the City Treasurer, who shall establish written procedures for the operation of the investment program consistent with the Investment Policy. Procedures should include reference to safekeeping, wire transfer agreements, banking service contracts, and collateral/depository agreements. Such procedures shall include explicit delegation of authority to persons responsible for investment transactions. No person may engage in an investment transaction except as provided under the terms of this Investment Policy and the procedures established by 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. The City Manager or Assistant City Manager shall approve in writing all purchases and sales of investments prior to their execution by the City Treasurer. 0 VII CONFLICT OF INTEREST Investment responsibilities carry added duties of insuring that investments are made without improper influence or the appearance of improper influence. Therefore, the City Manager, Assistant City Manager, and the City Treasurer shall adhere to the State of California Code of Economic Interest and to the following: ► The City Manager, Assistant City Manager, and the City Treasurer shall not personally or through a close relative maintain any accounts, interest, or private dealings with any firm with which the City places investments, with the exception of regular savings, checking and money market accounts, or other similar transactions that are offered on a non-negotiable basis to the general public. Such accounts shall be disclosed annually to the City Clerk in conjunction with annual disclosure statements of economic interest. ► All persons authorized to place or approve investments shall report to the City Clerk kinship relations with principal employees of firms with which the City places investments. The City of La Quinta maintains a listing of financial institutions which are approved _ for investment purposes. In addition a list will also be maintained of approved broker/dealers selected by credit worthiness, who maintain an office in the State of California. 1. Broker/Dealers who desire to become bidders for investment transactions must supply the City of La Quinta with the following: ► Current audited financial statements ► Proof of National Association of Security Dealers Certification ► Trading resolution ► Proof of California registration ► Resume of Financial broker ► Completion of the City of La Quinta Broker/Dealer questionnaire which contains a certification of having read the City of La Quinta Investment Policy The City Treasurer shall evaluate the documentation submitted by the broker/dealer and independently verify existing reports on file for any firm and individual conducting investment related business. 16 The City Treasurer will also contact the following agencies during the verification process: ► National Association of Security Dealer's Public Disclosure Report File - 1-800-289-9999 ► State of California Department of Corporations 1-916-445-3062 All Broker/Dealers selected by the City Treasurer to provide investment services will be approved by the City Manager subject to City Council approval. The City Attorney will perform a legal review of the trading resolution/investment contract submitted by each Broker/Dealer. Each securities dealer shall provide monthly and quarterly reports filed pursuant to U.S. Treasury Department regulations. Each mutual fund shall provide a prospectus and statement of additional information. 2. Financial Institutions will be required to meet the following criteria in order to receive City funds for investment: A. Insurance - Public Funds shall be deposited only in financial institutions insured by the Federal Deposit Insurance Corporation B. Collateral - The amount of City of La Quinta deposits or investments not insured by agency of the federal government shall be 1 10% collateralized by securities' or 150% mortgages' market values of that amount of invested funds plus unpaid interest earnings. C. Size - The amount of City of La Quinta deposits or investments must be collateralized or insured by an agency of the federal government. D. Disclosure - Each financial institution maintaining invested funds in excess of $100,000 shall furnish corporate authorities a copy of all statements of resources and liabilities which it is required to furnish to the State banking or savings and loan commissioners as required by the California Financial Code. The City shall not invest in excess of $100,000 in banking institutions which do not disclose to the city a. current listing of securities pledged for collateralization in public monies. The City Treasurer will be permitted to invest in the investments listed in the Appendix entitled - Authorized Investments and Diversification. A& STATE OF CALIFORNIA AND CITY OF LA QUINTA LIMITATIONS As provided in Sections 16429.1, 53601, 53601.1, and 53649 of the Government Code, the State of California limits the investment vehicles available to local agencies as summarized in the following paragraphs. Section 53601, as now amended, provides that unless Section 53601 specifies a limitation on an investment's maturity, no investments with maturities exceeding five years shall be made. The City of La Quinta Investment Policy has specified that no investment may exceed two years. State Treasurer's Local Agency Investment Fund (LAIF) - As authorized in Government Code Section 16429.1 and by LAIF procedures, local government agencies are each authorized to invest a maximum of $20 million _- per account in this investment program administered by the California State Treasurer. The City of La Quinta has two accounts with LAIF. The City of La Quinta has a limitation of 35% of the portfolio. Government Aoency Issues - As authorized in Government Code Sections 53601 (a) through (n) as they pertain to surplus funds, this category includes a wide variety of government securities which include the following: • Local government bonds or other indebtedness and State bonds or other indebtedness. The City of La Quinta Investment Policy does not allow investments in local and state indebtedness • U.S. Treasury notes or other indebtedness secured . by the full faith and credit of the federal government. The City of La Quinta Investment Policy limits investments in U.S. Treasury issues to 75% • Other federal agency securities including but not limited to issued by the Government National Mortgage Association, Federal National Mortgage Association, and the Federal Home Loan Mortgage Corporation. The City of La Quinta investment policy limits investments in federal agency securities to 75% with no one federal agency of one specific entity can exceed 25% of the portfolio. Bankers' Acceptances - As authorized in Government Code Section 53601 (f), 40% may be invested in Bankers' Acceptances, although no more than 30% of the portfolio may be invested in Bankers' Acceptances with any one commercial bank. Additionally, the maturity period cannot exceed 270 days; however, Bankers' Acceptances are seldom marketed with maturities in excess of 180 days. The City of La Quinta investment policy does not allow investment in Bankers' Acceptances. Commercial Paper - The City of La Quinta Investment Policy only allows investments in commercial paper to 30%, the dollar weighted average maturity does not exceed 31 days. As authorized in Government Code Section 53601(g), 15% of the portfolio may be invested in commercial paper of the highest rating (A-1 or P-1) as rated by Moody's or Standard and Poor's, with maturities not to exceed 180 days. This percentage may be increased to 30% if the dollar weighted average maturity does not exceed 31 days. These are a number of other qualifications regarding investments in commercial paper based on the financial strength of the corporation and the size of the investment. Negotiable Certificates of Deposit - As authorized in Government Code Section 53601(h), 30% maybe invested in negotiable certificates of deposit issued by commercial banks and savings and loan associations. The City of La Quinta investment policy does not allow investment in Negotiable Certificates of. Deposit. Repurchase and Reverse Repurchase Agreements - As authorized in Government Code Section 53601(i), these investment vehicles are agreements between the local agency and seller for the purchase of government securities to be resold at a specific date and for a specific amount. Repurchase agreements are generally used for short term investments varying from one day to two weeks. There is no legal limitation on the amount of the repurchase agreement. However, the maturity period cannot exceed one year. The market value of securities underlying a repurchase agreement shall a at least 102% of the funds invested and shall be valued at least quarterly. The City of La Quinta Investment Policy does not allow investment in Repurchase Agreements. The term "reverse repurchase agreement" means the sale of securities by the local agency pursuant to an agreement by which the local agency will repurchase such securities on or before a specific date and for a specific amount. As provided in Government Code Section 53635, reverse repurchase agreements require the prior approval of the City Council. The City of La Quinta Investment Policy does not allow investment in Reverse Repurchase Agreements. Corporate Notes and Diversified Management Companies - As authorized in Government Code Section 53601 (j) and (k), local agencies may invest in corporate notes for a maximum period of five years in an amount not to exceed 30% of the agency's portfolio. The notes must be issued by corporations organized and operating in the United States or by depository institutions licensed by the United States or any other state and operating in the United States. Local agencies are also authorized in invest in shares of beneficial interest issued by diversified management companies (mutual funds) in an amount not to exceed 20% of the agency's portfolio. There are a number of other qualifications and restrictions regarding allowable investments in corporate notes and shares of beneficial interest issued by 10 mutual funds. The City of La Quinta investment policy does not allow corporate notes and limits the percentage of mutual funds to 20%. Mortgage -Backed Securities - As authorized in Government code Section 53601(n), local agencies may invest in mortgage -backed securities such as mortgage pass -through securities and collateralized mortgage obligations for a maximum period of five years in an amount not to exceed 20% of the _ agency's portfolio. Securities eligible for investment shall have a "A" or higher rating. The City of La Quinta investment policy does not allow investment in Mortgage -Backed Securities. Financial Futures and Financial Option Contracts - As authorized in Government Code Section 53601.1, local agencies may invest in financial futures or option contracts in any of the above investment categories subject to the same overall portfolio limitations. The City of La Quinta Investment Policy does not allow investments in financial futures and financial option contracts. Certificates of pelt - As authorized in Government Code Section 53649, Certificates of Deposit are fixed term investments which are required to be collateralized from 105% to 150% depending on the specific security pledged as collateral in accordance with Government Code Section 53652. The collateral pool is administered by the State, and is composed of a wide variety of government securities, as well as promissory notes secured by first mortgages on improved residential property located in the State and letters of credit issued by the Federal Home Loan Bank of San Francisco. There are no portfolio limits on the amount of maturity for this investment vehicle. The City of La Quinta investment policy limits the percentage of Certificates of Deposit to 60%. — Sweep Accounts - As authorized by the City Council, a U.S. Treasury Money Market Sweep Account with a $ 50,000 target balance may be maintained in conjunction with the checking account. k u 4 0 11 11111;&N There are three (3) types of investment pools: 1) state -run pools, 2) pools that are operated by a political subdivision where allowed by law and the political subdivision is the trustee i.e. County Pool; and 3) pools that are operated for profit by third parties. The City of La Quinta has an investment with the State of California's Treasurers Office Local Agency Investment Fund commonly referred to as LAIR LAW was organized in 1977 through State Legislation Section 16429.1, 2 and 3. Each LAIF account is restricted to a maximum investable limit of $20 million. In addition, LAIF 11 will provide quarterly market value information to the City of La Quinta. On an annual basis the City Treasurer will submit the Investment Pool Questionnaire to LAIF. Also, prior to opening any new Investment Pool account, which would require City Council approval, the City Treasurer will require the completion of the Investment Pool Questionnaire. The City does not have an investment with any other Investment Pool - County Pools or Third Party Pools. 9: 61•1RWsIW: _ R-N-A1106M Collateralization will be required for Certificates of Deposits. The type of collateral is limited to City authorized investments. 1 Certificates of Deposits under $100,000, The City Treasurer may waive collateral ization of a deposit that is federally insured. 2. Certificates of Deposit over $100.000, The amount not federally insured shall be 1 10% collateralized by securities or 150% mortgages market value of that amount of invested funds plus unpaid interest earnings. Collateral will always be held by an independent third party with whom the City of La Quinta has a current custodial agreement. Evidence of ownership must be supplied to the City of La Quinta and retained by the City Treasurer. ' l • All security transactions of the City of La Quinta shall be conducted on a delivery - versus - payment (DVP) basis. Securities will be held by a third party custodian designated by the City Treasurer and evidenced by safekeeping receipts. Deposits and withdrawals of money market mutual funds and LAW shall be made directly to the entity and not to an investment advisor. Money market mutual funds and LAW shall also operate on a DVP basis to be considered for investment. Uffl l i_ sil l i • • Interest earnings is generated from pooled investments and specific investments. 1. Pooled Investments - It is the general policy of the City to pool all available operating cash of the City of La Quinta, La Quinta Redevelopment Agency 12 and La Quinta Financing Authority and allocate interest earnings, in the following order, as follows: A. Payment to the General Fund of an amount equal to the total annual bank service charges as incurred by the general fund for all operating funds as included in the annual operating budget. B. Payment to the General Fund of a management fee equal to 5% of the annual pooled cash fund investment earnings. C. Payment to each fund of an amount based on the average computerized daily cash balance included in the common portfolio for the earning period. 2. Specific Investments - Specific investments purchased by a fund shall incur all earnings and expenses to that particular fund. UZTAVAIM11 I u s The City of La Quinta shall require that each individual investment have a maximum maturity of two years unless specific approval is authorized by the City Council. In _ addition, the City's investment in the State Local Agency Investment Fund (LAIF) is allowable as long as the average maturity does not exceed two years, unless specific approval is authorized by the City Council. The City's investment in Money _ Market Mutual funds is allowable as long as the average maturity does not exceed 60 days. kt:ftiffAl The City Treasurer shall establish a system of internal controls to accomplish the following objectives: ► Safeguard assets; ► The orderly and efficient conduct of its business, including adherence to management policies; ► Prevention or detection of errors and fraud; ► The accuracy and completeness of accounting records; and, ► Timely preparation of reliable financial information. While no internal control system, however elaborate, can guarantee absolute assurance that the City's assets are safeguarded, it is the intent of the City's internal control to provide a reasonable assurance that management of the investment function meets the City's objectives. The internal controls shall address the following: 13 a. Control of collusion. Collusion is a situation where two or more employees are working in conjunction to defraud their employer. b. Separation of transaction authority from accounting and record keeping. By separating the person who authorizes or performs the transaction from the people who record or otherwise account for the transaction, a separation of duties is achieved. C. Custodial safekeeping. Securities purchased from any bank or dealer including appropriate collateral (as defined by State Law) shall be placed with an independent third party for custodial safekeeping. d. Avoidance of physical delivery securities. Book entry securities are much easier to transfer and account for since actual delivery of a document never takes place. Delivered securities must be properly safeguarded against loss or destruction. The potential for fraud and loss increases with physically delivered. securities. e. Clear delegation of authority to subordinate staff members. Subordinate staff members must have a clear understanding of their authority and responsibilities to avoid improper actions. Clear delegation of authority also preserves the internal control structure that is contingent on the various staff positions and their respective responsibilities as outlined in the Segregation of Major Investment Responsibilities appendices. f. Written confirmation or telephone transactions for investments and wire transfers. Due to the potential for error and improprieties arising from telephone transactions, all telephone transactions shall be supported by written communications and approved by the appropriate person. Written communications may be via fax if on letterhead and the safekeeping institution has a list of authorized. signatures. Fax correspondence must be supported by evidence of verbal or written follow-up. g. Development of a wire transfer agreement with the City's bank and third party custodian. This agreement should outline the various controls, security provisions, and delineate responsibilities of each party making and receiving wire transfers. In addition to the System of Internal Controls developed by the City, the Internal Controls shall be reviewed annually by the independent auditor. 14 The independent auditors management letter comments pertaining to cash and investments, if any, shall be directed to the City Manager who will direct the City Treasurer to provide a written response to the independent auditors letter. This response will also be directed to the City's Investment Advisory Board for their action. The investment portfolio shall be designed with the objective of obtaining a rate of return throughout budgetary and economic cycles commensurate with the investment risk constraints and the cash flow needs of the City. Return on investment is of least importance compared to safety and liquidity objectives. The City of La Quinta will use the six month U.S. Treasury Bill as a benchmark when measuring the performance of the investment portfolio. SB564 section 3 requires a quarterly report to the Legislative Body of Investment activities. The City of La Quinta has elected to report the investment activities to the City Council on a monthly basis through the Treasurers Report. The City Treasurer shall submit a monthly Treasurers Report to the City Council and the Investment Advisory Board that includes all investments under the authority of the Treasurer. The Treasurers Report shall consist of a narrative of significant changes in cash balances and the following: — ► Changes in investments from the previous month; ► A certification statement from the City Treasurer; ► Purchases and sales of investments; ► Cost to market value comparisons of all investments by authorized investment category, except for LAW which will be provided quarterly; Comparison of actual holdings to Investment Policy maximums; ► Twenty four (24) months history of cash and investments for trend analysis; ► Balance Sheet. KUMV l • • 1 • The City's investment policy shall govern bond proceeds and bond reserve fund investments. California Code Section 5922 (d) governs the investment of bond 15 proceeds and reserve funds in accordance with bond indenture provisions which shall be structured in accordance with the City's investment policy. Arbitrage Requirement The US Tax Reform Act of 1986 requires the City to perform arbitrage calculations as required and return excess earnings to the US Treasury from investments of proceeds of bond issues sold after the effective date of this law. This arbitrage calculations may be contracted with an outside source to provide the necessary technical assistance to comply with this regulation. Investable funds subject to the 1986 Tax Reform Act will be kept segregated from other funds and records will be kept in a fashion to facilitate the calculations. The City's investment position relative to the new arbitrage restrictions is to continue pursuing the maximum yield on applicable investments while ensuring the safety of capital and liquidity. It is the City's position to continue maximization of yield and to rebate excess earnings, if necessary. The Investment Advisory Board (IAB) consists of seven members of the community that have been appointed by and report to the City Council. The IAB meets on a monthly basis to 1) review account statements and verifications to ensure accurate reporting as they relate to an investment activity, 2) monitor compliance with existing Investment Policy and Procedures, and 3) review and make recommendations concerning investment policy and procedures :investment contracts and investment consultants. The appendices include City of La Quinta Ordinance 2.70 entitled Investment Advisory Board Provisions. J1_ •• _6•• •V On an annual basis, the Investment policies will be initially reviewed by the Investment Advisory Board and the City Treasurer. The Investment Advisory Board will forward the Investment policies, with any revisions, to the City Manager and City Attorney for their review and comment. A joint meeting will be held with the Investment Advisory Board, City Manager, City Attorney, and City Treasurer to review the Investment policies and comments, prior to submission to the City Council for their consideration. The Investment Policies shall be adopted by resolution of the City of La Quinta City Council on an annual basis. The Investment Policies will be adopted before the end of June of each year. 16 -n S J Sk51 3 D -o fP o �D 5* W a � � fp O � � C CZ. co ga m a� a a mSo cm 9) w m � g m a 3 � �fD g $o . c l< Q. m`=�mm <-+3 Sr a ° o to a g� co s 0S�gO w Mg_@1 3 ' n� g�3 a a mco v to �`"ca 3 am Q3 °o_ BER c 3 m D a-efA m S. O Cl) 8 cu f R c c 0wCLM3 m3 M m" _.� m a O F o m• ° gwCa 0,7c C� a c 3r ? 3 m m d no O m am c o m am ,CCc ° A a �? m C v a O 0. = <�.08 ca c3 o aco01 3 c wag am c3 g CL 3 3 g �+ 'A n �<v m 0 Q. M ((Dpp m C y g m >y Q37 3o p m m c(n `° 3' o m aO40 m m 8 ^^ 1 < _ ° m a IM as m 3 °'r 3 0g 5 a to m <m a 0RL 3 3 .fA cn g M m 3�mo CLIS c� cr. m CA goo D c ° m c m � c gn w9QmWH mm3�R�m3C�Wwmm4fl! 2 'Acoat NmGva 0, cc '*Aog.w< a y OLLOMmm m m g� m Q c a a Ncc°u wa a I I a ° f< a m m 7 I� a:0,I �f,<f n m lD y ca r DI 7' c3o 3 C C; T1 -1TT1 -i T1� N ,NI 1a1�iaa° n m m m M ° 0i'o rn CAI IS _, -i m °� d 0-3 ml nI ° a a a o, a 3 m< d ml D °m o'_mmcm�3 c� I� ,° al OR °ZMR, m Q� o ibwto lli IImd�8 � d ;�ImmO� to Iv c R0 S, w 5,m OZ m gw. � C 3 c a m oWi Tr�-O ina� a M. �i �I, t- 0ao0 cq" m cS c CO" L�. Q A �i cr. (Ac m Id @c °��. a al ;� !3 I�� m fD a m ° 71 FA -n CL n 0 ° N 2 �f° _�� m 2-n _n 3 d 01 IOI I�' I w z W M. a C m na) y _ to i3 I I� g c i a a d 1 ao3i x f cwo 3 CA n O I M 01 M m m i O' ^ I &v I Idl M a m 3fn i m I s co. m i I , v i i-O I D I I3 I I I I i I I D C a2R 2 a�R (A C MaR 2 i l 0�-n oa co c ago Q agQ j c Q IQ Q 3 a o o a o c o �o 0 .a I— I— N. cn N W — c o o ° c ol o o ° c o c o la ° ° -n�m m 3 ° C m iD l h X mID i7 S m m vv U 0 D N CA 7 a m CA M to gM g o c Cl) O 9 m co i it i it p N „W N N N N m m w of m m 13 m 17 C',i CL $ uD �I m� o a EL 11 I -n 0 n f)M g Q S' � I $ v I Q c m I I coo m n 7 (m O � c v � l c � m F m � r 06 ; g ag � v m 3 fA r m c� gQ t M am f�yo 0 l m 7 w N C Q Q 0 M X 3 C 3 n O T O c Z D 17 Chapter 2.70 INVESTMENT ADVISORY BOARD PROVISIONS Sections: 2.70.010 General Rules Regarding Appointment and Terms. 2.70.020 Board meetings and compensation. 2.70.030 Board functions. 2.70.010 General rules regarding appointment and terms. Except as set out below, see Chapter 2.06 for General Provisions. The Investment Advisory Board (the "board") is a standing board composed of seven (7) members from the public that are appointed by city council. La Quinta residency is preferred, but not a requirement for board members. Recruitment for members may be advertised outside -- of the city". Background in the investment field and/or related experience is preferred. Background information will be required and potential candidates must agree to a background check and verification. On an annual basis, in conjunction with the Political Reform Act disclosure statutes, or at any time if a change in circumstances warrants, each board member will provide the City Council with a disclosure statement which identifies any matters on the board. Such matters may include, but are not limited to, changes in employment, changes in residence, or changes in _ clients. The Board members will serve for two year staggered terms beginning on July 1 of every other year, commencing July 1, 1993. Initially, two members will be appointed for two year _ terms and three members will be appointed for one year terms. These initial appointments will start their yearly calculations from July 1, 1993. 2.70.020 Board meetings and compensation. Board members will be reimbursed for meeting and related expenses at an amount of fifty dollars ($ 50) per meeting.. — Initially, the Board should meet once a month, but this schedule may be extended to quarterly meetings upon the concurrence of the Board and the City Council. The specific meeting dates will be determined by the Board members and meetings may be called for on an as needed basis. 2.70.030 Board functions. The Board will annually elect a Chairperson and Vice -chairperson at the first meeting held after each June 30. The following are functions of the Board that are to be addressed at each meeting: (1) review account statements and verifications to ensure accurate reporting as they relate to an investment activity; (ii) monitor compliance with existing Investment policy and procedures; and (iii) review and make recommendations concerning investment policy and procedures, investment contracts, and investment consultants. The Board will report to City council after each meeting either in person or through correspondence at a regular City Council meeting. 18 Chapter 3.08 INVESTMENT OF MONEYS AND FUNDS Sections: 3.08.010 Investment of city moneys and deposit of securities. 3.08.020 Authorized investments. 3.08.030 Sales of securities. 3.08.040 City bonds. 3.08.050 Reports. 3.08.060 Deposits of securities. 3.08.070 Trust fund administration. 3.08.010 Investment of city moneys and deposit of securities. _ Pursuant to, and in accordance with, and to the extent allowed by, Sections 53607 and 53608 of the Government Code, the authority to invest and reinvest moneys of the city, to sell or exchange securities, and to deposit them and provide for their safekeeping, is delegated to the city treasurer. (Ord. 2 § 1 (part), 1982) 3.08.020 Authorized investments. Pursuant to the delegation of authority in Section 3.08.010, the city treasurer is authorized to purchase, at their original sale or after they have been issued, securities which are permissible investments under any provision of state law relating to the investing of general city funds, including but not limited to Sections 53601 and 53635 of the Government Code, as said sections now read or may hereafter be amended, from moneys in his custody which are not required for the immediate necessities of the city and as he may deem wise and expedient, and to sell or exchange for other eligible securities and reinvest the proceeds of the securities so purchased. (Ord. 2 § 1 (part), 1982) 3.08.030 Sales of Securities. From time to time the city treasurer shall sell the securities in which city moneys have been invested pursuant to this chapter, so that the proceeds may, as appropriate, be applied to the purchase for which the original purchase money may have been designated or placed in the city treasury. (Ord. 2 § I (part), 3.08.040 City bonds. Bonds issued by the city and purchased pursuant to this chapter may be canceled either in satisfaction of sinking fund obligations or otherwise if proper and. appropriate; . provided, however, that the bonds may be held uncancelled and while so held may be resold. (Ord. 2 § 1 (part), 1982) 19 LISTING OF APPROVED FINANCIAL INSTITUTIONS 1. Banking Services - Wells Fargo Bank 2. Custodian Services - Wells Fargo Bank Institutional Trust 3. Deferred Compensation - International City/County Management Association — Retirement Corporation 4. Broker/Dealer Services - Merrill Lynch, Indian Wells, CA Dean Witter, Newport Beach, CA Smith Barney, Newport Beach, CA 5. Government Pool - State of California Local Agency Investment Fund City of La Quinta Account La Quinta Redevelopment Agency _ 6. Bond Trustees - 1991 City Hall Revenue Bonds - First Trust 1991 RDA Project Area 1 - First Trust 1992 RDA Project Area 2 - First Trust 1994 RDA Project Area 1 - First Trust 1995 RDA Project Area 1 & 2 - First Trust Assessment Districts - First Trust No Changes to this listing may be made without City Council approval. 21 BROKER/DEALER QUESTIONNAIRE AND CERTIFICATION 1. Name of Firm: 2. Address: 3. Telephone:) ► ( ) 4. Broker's Representative to the City (attach resume): Name: Title: Telephone: ( ) 5. Manager/Partner-in-charge (attach resume): Name: Title: Telephone: 6. List all personnel who will be trading with or quoting securities to City employees (attach resume) Name: Title: Telephone: ( ) ( ) 7. Which of the above personnel have read the City's investment policy? 8. Which instruments are offered regularly by your local office? (Must equal 100%) % U.S. Treasuries % Repos % BA's % Reverse Repos % Commercial Paper % CMO's % CD's % Derivatives % Mutual Funds % Stocks/Equities % Agencies (specify): % Other (specify): 22 9. References -- Please identify your most directly comparable public sector clients in our geographical area. Entity Contact Telephone Client Since Entity Contact Telephone Client Since 10. Have any of your clients ever sustained a loss on a securities transaction arising from a misunderstanding or misrepresentation of the risk characteristics of the instrument? If so, explain. 11. Has your firm or your local office ever been subject to a regulatory or state/ federal agency investigation for alleged improper, fraudulent, disreputable or unfair activities related to the sale of securities? Have any of your employees been so investigated? If so, explain. 12. Has a client ever claimed in writing that yQ1 were responsible for an investment loss? Yes No If yes, please provide action taken Has a client ever claimed in writing that your firm was responsible for an investment loss? Yes No If yes, please provide action taken Do ,you have any current, or pending complaints that are unreported to the NASD? Yes No If yes, please provide action taken 23 Does your firm have any current, or pending complaints that are unreported to the NASD? Yes No If yes, please provide action taken 13. Explain your clearing and safekeeping procedures, custody and delivery process. Who audits these fiduciary responsibilities? Latest Audit Report Date 14. How many and what percentage of your transactions failed. Last month? % $ Last year? % $ 15. Describe the method your firm would use to establish capital trading limits for the City of La Quinta. 16. Is your firm a member in the S.I.P.C. insurance program. Yes No If yes, explain primary and excess coverage and carriers. 17. What portfolio information, if any, do you require from your clients? 18. What reports and transaction confirmations or any other research publications will the City receive? 19. Does your firm offer investment training to your clients? Yes No 24 20. Does your firm have professional liability insurance. Yes No If yes, please provide the insurance carrier, limits and expiration date. 21. `*4 Please list your NASD Registration Number Do you have any relatives who work at the City of La Quinta? Yes No If yes, Name and Department 23. Do you maintain an office in California. Yes No 24. Do you maintain an office in La Quinta or Riverside County? Yes No 25. Please enclose the following: • Latest audited financial statements. • Samples of reports, transaction confirmations and any other research/publications the City will receive. • Samples of research reports and/or publications that your firm regularly provides to clients. • Complete schedule of fees and charges for various transactions. 'CERTIFICATION' I hereby certify that I have personally read the Statement of Investment Policy of the City of La Quinta, and have implemented reasonable procedures and a system of controls designed to preclude imprudent investment activities arising out of transactions conducted between our firm and the City of La Quinta. All sales personnel will be routinely informed of the City's investment objectives, horizons, outlooks, strategies and risk constraints whenever we are so advised by the City. We pledge to exercise due diligence in informing the City of La Quinta of all foreseeable risks associated with financial transactions conducted with our firm. By signing this document the City of La Quinta is authorized to conduct any and all background checks. Under penalties of perjury, the responses to this questionnaire are true and accurate to the best of my knowledge. Broker Representative Date Title Sales Manager and/or Managing Partner* Date Title 25 INVESTMENT POOL QUESTIONNAIRE Note: This Investment Pool Questionnaire was developed by the Government Finance Officers Association (GFOA). Prior to entering a pool, the following questions and issues should be considered. SECURITIES Government pools may invest in a broader range of securities than your entity invests in. It is important that you are aware of, and are comfortable with, the securities the pool buys. 1. Does the pool provide a written statement of investment policy and objectives? 2. Does the statement contain: a. A description of eligible investment instruments? b. The credit standards for investments? c. The allowable maturity range of investments? d. The maximum allowable dollar weighted average portfolio maturity? e. The limits of portfolio concentration permitted for each type of security? f. The policy on reverse repurchase agreements, options, short sales and futures? 3. Are changes in the policies communicated to the pool participants? 4. Does the pool contain only the types of securities that are permitted by your investment policy? INTEREST Interest is not reported in a standard format, so it is important that you know how interest is quoted, calculated and distributed so that you can make comparisons with other investment alternatives. Interest Calculations 1. Does the pool disclose the following about yield calculations: a. The methodology used to calculate interest? (Simple maturity, yield to maturity, etc.) b. The frequency of interest payments? c. How interest is paid? (Credited to principal at the end of the month, each quarter; mailed?) d. How are gains/losses reported? Factored monthly or only when realized? 26 REPORTING 1. Is the yield reported to participants of the pool monthly? (If not, how often?) 2. Are expenses of the pool deducted before quoting the yield? 3. Is the yield generally in line with the market yields for securities in which you usually invest? 4. How often does the pool report, and does that report include the market value of securities? SECURI T Y The following questions are designed to help you safeguard your funds from loss of principal and loss of market value. 1. Does the pool disclose safekeeping practices? 2. Is the pool subject to audit by an independent auditor? 3. Is a copy of the audit report available to participants? 4. Who makes the portfolio decisions? 5. How does the manager monitor the credit risk of the securities in the pool? 6. Is the pool monitored by someone on the board of a separate neutral party external to the investment function to ensure compliance with written policies? 7. Does the pool have specific policies with regards to the various investment vehicles? a. What are the different investment alternatives? b. What are the policies for each type of investment? 8. Does the pool mark the portfolio to its market value? 9. Does the pool disclose the following about how portfolio securities are valued: a. The frequency with which the portfolio securities are valued? b. The method used to value the portfolio (cost, current value, or some other method)? 27 OPERA TIONS The answers to these questions will help you determine whether this pool meets your operational requirements: 1. Does the pool limit eligible participants? 2. What entities are permitted to invest in the pool? 3. Does the pool allow multiple accounts and sub -accounts? 4. Is there a minimum or maximum account size? 5. Does the pool limit the number of transactions each month? What is the number of transactions permitted each month? 6. Is there a limit on transaction amounts for withdrawals and deposits? a. What is the minimum and maximum withdrawal amount permitted? b. What is the minimum and maximum deposit amount permitted? 7. How much notice is required for withdrawals/deposits? 8. What is the cutoff time for deposits and withdrawals? 9. Can withdrawals be denied? 10. Are the funds 100% withdrawable at anytime? 11. What are the procedures for making deposits and withdrawals? a. What is the paperwork required, if any? b. What is the wiring process? 12. Can an account remain open with a zero balance? 13. Are confirmations sent following each transaction? STA TEMENTS It is important for you and the agency's trustee (when applicable), to receive statements monthly so the pool's records of your activity and holding are reconciled by you and your trustee. 28 1. Are statements for each account sent to participants? a. What are the fees? b. How often are they passed? c. How are they paid? d. Are there additional fees for wiring funds (what is the fee)? 2: Are expenses deducted before quoting the yield? QUESTIONS TO CONSIDER FOR BOND PROCEEDS It is important to know (1) whether the pool accepts bond proceeds and (2) whether the pool qualifies with the U.S. Department of the Treasury as an acceptable commingled fund for arbitrage purposes. 1. Does the pool accept bond proceeds subject to arbitrage rebate? 2. Does the pool provide accounting and investment records suitable for proceeds of bond issuance subject to arbitrage rebate? 3. Will the yield calculation reported by the pool be acceptable to the IRS or will it have to be recalculated? 4. Will the pool accept transaction instructions from a trustee? 5. Are you allowed to have separate accounts for each bond issue so that you do not commingle the interest earnings of funds subject to rebate with funds not subject to regulations? 29 SEGREGATION OF MAJOR INVESTMENT RESPONSIBILITIES Function Develop formal Investment Policy Recommend modifications to Investment Policy Review formal Investment Policy and recommend City Council action Adopt formal Investment Policy Review Financial Institutions & Select Investments Approve investments Execute investment transactions Confirm wires, if applicable Record investment transactions in City's accounting records Investment verification - match broker confirmation to City investment records Reconcile investment records - to accounting records and bank statements - to Treasurers Report of investments Security of investments at City Security of investments Outside City Review internal control procedures Responsibilities City Treasurer Investment Advisory Board City Manager and City Attorney City Council City Treasurer City Manager or Assistant City Manager City Treasurer City Manager or Accounting Supervisor Accounting Supervisor Account Technician Account Technician Vault Third Party Custodian External Auditor 30 GLOSSARY The purpose of this glossary is to provide the reader of the City of La Quinta investment policies with a better understanding of financial terms used in municipal investing. AGENCIES: Federal agency securities COLLATERAL: Securities, evidence of deposit or other property which a borrower ASKED: The price at which securities are pledges to secure repayment of a loan. Also offered. refers to securities pledged by a bank to secure deposits of public monies. BANKERS' ACCEPTANCE (BA): Short-term credit arrangements to enable businesses to obtain funds to finance commercial transactions. They 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 drafts 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 invest more than 40% of their surplus money in bankers acceptances. BID: The price offered by a buyer of securities. (When you are selling securities, you ask for a bid.) See Offer. BROKER: A broker brings buyers and sellers together for a commission. CERTIFICATE OF DEPOSIT (CD): Time deposits of a bank or savings and loan. They are purchased in various denominations with maturities ranging from 30 to 360 days. The interest is calculated on a 360-day, actual - day month basis and is payable monthly. COMMERCIAL PAPER: S h o r t- t e r m unsecured promissory notes 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,. Bank America, etc. COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR): The official annual report for the City of La Quinta. It includes five combined statements for each individual fund and account group prepared in conformity with GAAP. It also includes supporting schedules necessary to demonstrate compliance with finance -related legal and contractual provisions, extensive introductory material, and a detailed Statistical Section. COUPON: (a) The annual rate of interest that a bond's issuer promises to pay the bondholder on the bond's face value. (b) A certificate attached to a bond evidencing interest due on a payment date. DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his own account. 31 DEBENTURE: A bond secured only by the general credit of the issuer. DELIVERY VERSUS PAYMENT: There are two methods of delivery of securities: delivery versus payment and delivery versus receipt. Delivery versus payment is delivery of securities with an exchange of money for the securities. Delivery versus receipt is delivery of securities with an exchange of a signed receipt for the securities. DERIVATIVES: (1) Financial instruments whose return profile is linked to, or derived from, the movement of one or more underlying index or security, and may include a leveraging factor, or (2) financial contracts based upon notional amounts whose value is derived from an underlying index or security (interest rates, foreign exchange rates, equities or commodities). DISCOUNT: The difference between the cost price of a security and its maturity when quoted at lower than face value. A security selling below original offering price shortly after sale also is considered to be at a discount DIVERSIFICATION: Dividing investment funds among a variety of securities offering independent returns. FEDERAL CREDIT AGENCIES: Agencies of the Federal government set up to supply credit to various classes of institutions and individuals, e.g., S&L's, small business firms, students, farmers, farm cooperatives, and exporters. The following is a listing: 1. FNMAs (Federal National Mortaaga Association) - Used to assist the home mortgage 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 in various maturities and in minimum denominations of $10,000. Principal and Interest is paid monthly. 2. FHLBs (Federal Home Loan Bank Notes and Bonds) - 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. They are issued irregularly for various maturities. The minimum denomination is $5,000. 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. 3. FLBs (Federal Land Bank Bonds) - Long- term 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 $1,000. They carry semi-annual coupons. Interest is calculated on a 360- day, 30 day month basis. 4. FFCBs (Federal Farm Oredit_-Bankl - Debt instruments used to finance the short and intermediate term needs of farmers and the national agricultural industry. They are issued monthly with three- and six- month maturities. The FFCB issues larger issues (one to ten year) on a periodic basis. These issues are highly liquid. 32 5. FICBs (Federal Intermediate Credit bank Debentures) - Loans to lending institutions used to finance the short-term and intermediate needs of farmers, such as seasonal production. They are usually issued monthly in minimum denominations of $3,000 with a nine - month maturity. Interest is payable at maturity and is calculated on a 360-day, 30-day month basis. 6. FHLMCs (Federal Home Loan Mortgage Corporation) - a government sponsored entity established in 1970 to provide a secondary market for conventional home mortgages. Mortgages are purchased solely from the Federal Home Loan Bank System member lending institutions whose deposits are insured by agencies of the United States Government. They are issued for various maturities and in minimum denominations of $10,000. Principal and Interest is paid monthly. Other federal agency issues are Small Business Administration notes (SBAs), Government National Mortgage Association notes (GNMAs), Tennessee Valley Authority notes (TVAs), and Student Loan Association notes (SALLIE- MAEs). FEDERAL DEPOSIT INSURANCE. CORPORATION (FDIC): A federal agency that insures bank deposits, currently up to $100,000 per deposit. FEDERAL FUNDS RATE: The rate of interest at which Fed funds are traded. This rate is currently pegged by the Federal Reserve through open -market operations. FEDERAL HOME LOAN BANKS (FHLB): Government sponsored wholesale banks (currently 12 regional banks) which lend funds and provide correspondent banking services to member commercial banks, thrift institutions, credit unions and insurance companies. The mission of the FHLBs is to liquefy the housing related assets of its members who must purchase stock in their district Bank. FEDERAL OPEN MARKET COMMITTEE (FOMC): Consists of seven members of the Federal Reserve Board and five of the twelve Federal Reserve Bank Presidents. The President of the New York Federal Reserve Bank is a permanent member, while the other Presidents serve on a rotating basis. The Committee periodically meets to set Federal. Reserve guidelines regarding purchases and sales of Government Securities in the open market as a means of influencing the volume of bank credit and money. FEDERAL RESERVE SYSTEM: the central bank of the United States created by Congress and consisting of a seven member Board of Governors in Washington, D.C., 12 regional banks and about 5,700 commercial banks that are members of the system. GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA or Ginnie Mae): Securities influencing the volume of bank credit 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 securities are backed by the FHA, VA or FMHM mortgages. The term "passthroughs" is often used to describe Ginnie Maes. 33 LAIF (Local Agency Investment. Fund) - A special fund in the State Treasury which local agencies may use to deposit funds for investment. There is no minimum investment period and the minimum transaction is $ 5,000, in multiples of $1,000 above that, with a maximum balance of $20,000,000 for any agency. The City is restricted to a maximum of ten transactions per month. It offers high liquidity because deposits can be converted to cash in 24 hours and no interest is lost. All interest is distributed to those agencies participating on a proportionate share basis determined by the amounts deposited and the length of time they are deposited. Interest is paid quarterly. The State retains an amount for reasonable costs of making the investments, not to exceed one -quarter of one percent of the earnings. LIQUIDITY: A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss of value. In the money market, a security is said to be liquid if the spread between bid and asked prices is narrow and reasonable size can be done at those quotes. LOCAL GOVERNMENT INVESTMENT POOL (LGIP): The aggregate of all funds from political subdivisions that are placed in the custody of the State Treasurer for investment and reinvestment. MARKET VALUE: The price at which a security is trading and could presumably be purchased or sold. MASTER REPURCHASE AGREEMENT: A written contract covering all future transactions between the parties to repurchase --reverse repurchase agreements that establishes each party's rights in the transactions. A master agreement will often specify, among other things, the right of the buyer -lender to liquidate the underlying securities in the vent of default by the seller - borrower. MATURITY: The date upon which the principal or stated value of an investment becomes due and payable MONEY MARKET: The market in which short-term debt instruments (bills, commercial paper, banders' acceptances, etc.) are issued and traded. OFFER: The price asked by a seller of securities. (When you are buying securities, you ask for an offer.) See Asked and Bid. OPEN MARKET OPERATIONS: Purchases and sales of government and certain other securities in the open market by the New York Federal Reserve Bank as directed by the FOMC in order to influence the volume of money and credit in the economy. Purchases inject reserves into the bank system and stimulate growth of money and credit; sales have the opposite effect. Open market operations are the Federal Reserve's most important and most flexible monetary policy tool. PORTFOLIO: Collection of all cash and securities under the direction of the City Treasurer, including Bond Proceeds. PRIMARY DEALER: A group of government securities dealers who submit daily reports of market activity an depositions and monthly financial statements to the Federal Reserve Bank of New York and are subject to its informal oversight. Primary dealers include Securities and Exchange Commission (SEC) - registered securities broker -dealers, banks and a few unregulated firms. 34 RATE OF RETURN: The yield obtainable on a security based on its purchase price or its current market price. This may be the amortized yield to maturity on a bond the current income return. REPURCHASE AGREEMENT (RP OR REPO): A repurchase agreement is a short-term investment transaction. Banks buy temporarily idle funds from a customer by selling U.S. Government or other securities with a contractual agreement to repurchase the same securities on a future date. Repurchase agreements are typically for one to ten days in maturity. The customer receives interest from the bank. The interest rate reflects both the prevailing demand for Federal funds and the maturity of the repo. Some banks will execute repurchase agreements for a minimum of $100,000 to $ 500,000, but most banks have a minimum of $1, 000, 000 . REVERSE REPURCHASE AGREEMENTS - A reverse repurchase agreement is the opposite of a repurchase agreement. The City loans a security to a bank in exchange for cash. The City agrees to pay off the loan with interest on a future date. SAFEKEEPING: A service to customers rendered by banks for a fee whereby securities and valuables of all types and descriptions are held in the bank's vaults for protection. SECONDARY MARKET: A market made for the purchase and sale of outstanding issues following the initial distribution. SECURITIES & EXCHANGE COMMISSION: Agency created by Congress to protect investors in securities transactions by administering securities legislation. SEC RULE 15C3-1: See Uniform Net Capital Rule. STRUCTURED NOTES: Notes issued by Government Sponsored Enterprises (FHLB, FNMAS, SLMA, etc.) And Corporations which have imbedded options (e.g., call features, step-up coupons, floating rate coupons, derivative -based returns) into their debt structure, Their market performance is impacted by the fluctuation of interest rates, the volatility of the imbedded options and shifts in the Shape of the yield curve. SURPLUS FUNDS: Section 53601 of the California Government Code defines surplus funds as any money not required for immediate necessities of the local agency. The City has defined immediate neccesities to be payment due within one week. TREASURY BILLS: Issued weekly with maturity dates up to one year. They are issued and traded on a discount basis with interest figured on a 360-day basis, actual number of days. They are issued in amounts of $10,000 and up, in multiples of $5,000. They are a highly liquid security. TREASURY BONDS: Long-term coupon - bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities of more than 10 years. 35 TREASURY NOTES: Medium -term coupon - bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities from two to 10 years. UNIFORM NET CAPITAL RULE: Securities and Exchange Commission requirement that member firms as well as nonmember broker - dealers in securities maintain a maximum ratio of indebtedness to liquid capital of 15 to 1; also called net capital rule and net capital ratio. Indebtedness covers all money owed to a firm, including margin loans and commitments to purchase securities, one reason new public issues are spread among members of underwriting syndicates. Liquid capital includes cash and assets easily converted into cash. UNIFORM PRUDENT INVESTOR ACT: The State of California has adopted this Act. The Act contains the following sections: duty of care, diversification, review of assets, costs, compliance determinations, delegation of investments, terms of prudent investor rule, and application. YIELD: The rate. of annual income return on an investment, expressed as a percentage. (a) INCOME YIELD is obtained by dividing the current dollar income by the current market price for the security. (b) NET YIELD or YIELD TO MATURITY is the current income yield minus any premium above par of plus any discount from par in purchase price, with the adjustment spread over the period from the date of purchase to the date of maturity of the bond. v � OF OF TNT INVESTMENT ADVISORY BOARD February 11, 1998 BUSINESS SESSION C City Council Consideration of Boards and Commissions Structure and Operations - February 17th, 1998 City Council Meeting Attached is a Memorandum from the Assistant City Manager regarding the scheduled City Council meeting scheduled for February 17, 1998. The City Council has asked that the City's Boards and Commissions be advised of the Council's intent to consider the referenced amendments. The Council is tentatively scheduled to consider this matter at its regular meeting of February 17, 1998 and welcomes comments or suggestions from the Boards, Commissions and public. The Boards pleasure. hn M. Falconer, Finance Director T 6 4t!t 4 4a�rw MEMORANDUM TO: Investment Advisory Board Members } FROM: John Falconer, Finance Director DATE: January 23, 1998 RE: City Council Consideration of Boards and Commissions Structure and Operations - February 171h, 1998 City Council Meeting Attached please find a memorandum discussing the Study Session item of Boards and Commissions. As it pertains to the Investment Advisory Board, the Council is considering ultimately reducing the size of the Investment Advisory Board from seven (7) to five (5) members. If you have any questions, please feel free to call me at 760 777-7150. Thank you. � CV MEMORANDUM TO: Department Directors FROM: Mark Weiss, Assistant City Manager rk DATE: January 21, 1998 RE: City Council Consideration of Boards and Commissions' Structure and Operations The City Council discussed the organizational structure relating to the City's Boards and Commissions during a Study Session at its regular meeting of January 20, 1998. Pursuant to that discussion, the Council directed staff to prepare options for the Council to consider that, if adopted, would alter existing Commissions' responsibilities, duties and organizational structure. Specifically, the Council will consider the following: • Combining the duties of the Cultural, Parks and Recreation, and Human Services Commissions into one new nine member commission (i.e., a Community Services Commission). The Commission would be comprised of three, three member "committees" that would focus, respectively, on duties currently the responsibility of the aforementioned Commissions (an alternative option discussed included combining the duties of the Cultural and Arts in Public Places Commissions) . • Reducing board membership, by attrition, from seven members to five, on the Investment Advisory Board and the Arts in Public Places Commission. The Council has asked that the City's Boards and Commissions be advised of the Council's intent to consider the referenced amendments. The Council is tentatively scheduled to consider this matter at its regular meeting of February 17, 1998 and welcomes comments or suggestions from the Boards, Commissions and public. Please advise Board and Commission Members of this consideration at the earliest opportunity, Questions may be referred to myself or Britt Wilson at 777-7035. Thank you. c: City Council Thomas P. Genovese, City Manager Dawn Honeywell, City Attorney Britt Wilson, Management Assistant 04 •c9� U OF TNT INVESTMENT ADVISORY BOARD February 11, 1998 CORRESPONDENCE & WRITTEN MATERIAL A TITLE: Month End Cash Report - January 1998 BACKGROUND: This cash report is not a complete Treasury Report (exclude petty cash, deferred compensation and fiscal agent balances, ) but would report in a timely fashion selected cash balances. Information item only. Jbhn M. Falconer, Finance Director a; 0 O LL a) a) CO a a� �rn c m C' J W ch o� 0 o = U m -CIO) O M .-, CO 0 Lo M C) 1� to m to co N wN MOON N000 Oo6� Oco� NC)r(A�� 14 eM-0 O �- oOppN oN� AocotiNN`_ OOOsfOff`- co co O � � C7 (Y) (Y) , d, M cM C' Lf N N O N co co CO CO V CO It MN�~» CO o� CO o"NE a) cn � t CO 0(00 co co h r-Ln� OC)OIV C) �Ct)CO Mr CO O C� MM wq ITCCOON ol co Co COO co COO• p ORems- �QQ O O M O O O v V o v J o � o M N O ti 17 e- N C) M N N co co O CO N N T. •-- e- O Cj LIO LO Ul) ~ co r- n ti n L( Lr) U) Ld v c 0 O O O M o LL•3N N N N O~ N N N NO coCOO 0 N N N N N 00 p CO CO O co O CO Cp0 COO � COO o � c _ O m N L o h o 0 �YN c4i e-a OCO 0 w NN t M oo 0 NcMC act( rn �U0000 wi Coop �- ��CO co � N Go � 2 Q N Y C) o _N c� N L r C) .0 r y � L O o N cm ... a ca U c L ca I N C = N yN (� = m ,� m N c m coo 1° M ca M ca U orn °a o Ym v m `'L m ca .� O °c cmap H c°o 000 a°i �,� 3���E°� Ec Nrn •m 0=v a�v.° 'O 'O ;.. rna°>8°3 m� N om 0 3 0 cnw c L 0¢Q � O O o 0 w Qcn0za > a) O Nam = L^ O ma N Z. O .off O 0 ENS wU ti c� C7 N N 'o .N 0 C •N E= ow �� cH % a o qo 0 a) O w c� O O m CS m aci e Na�oc 3a °Nc�>►c ° N> 0G y�m a°a� ario°E L M = O a� a)c�� =m U)CY ��.2� N� t m�E.0 CSVaj C0 O•-c alaia=0 a= Q cMc8 oa wo CA 8EM t-0 iT €tea) (a m �o'-y >a LACM)= 00Mym U .102 N'D m rnm ) � - a)F= � •Cca 3v°iNv, L ar aoloM. ° ��a U) w o c o��H , .6x m cm'`i' E'LNt = >%4a �O ` 0 C aN>Q �� aaio �—y �aoa�•-o 0 3 �= oc E:o Na t o EEc :3 o-c0�'L 0c "y OW O.EvE�� N Nc= •C _v,a�vso � '0 a�'c 'k0 N cE> t=-=MM O i-• •.. O 400 N c� 0m -0O 3a'_ L °- o— 0 EQr W NKm Q o-�0) 0E`- x0 QW 0 0m'� rnco 0--� coo - co .c cp m c >�•a C om >.".► t a2 " E c c -° °- c 0-6 c� a ,� .o . o..0Q-% cw r- r-T >� to Qi ti aV oot-O -Ec I-Q�ca2 Pam co.!; w 95v La�� •c9 V Qum& OF TNT INVESTMENT ADVISORY BOARD Meeting Date: February 11 1998 Pooled Money Investment Board Report Correspondence & Written Material Item B The Pooled Money Investment Board Report for November, 1997 is included in the agenda packet. At the January Board meeting, the subject of audit and bankruptcy were discussed. Attached is follow-up information on these matters that were taken from the "LAIF Answer Book" last distributed to the Board in September 1997. Receive & File KAI hn M. Falconer, Finance Director Additionally, the PMIA has Policies, Goals and Objectives for the portfolio to make certain that our goals of Safety, Liquidity and Yield are not jeopardized and that prudent managementprevails. revails. These policies are formulated by investment staff and reviewed by both the PMIB and the LAW Board on an annual basis. The State Treasurer's Office is audited bV the Bureau of State Audits on an annual resultingopinion is included in the subsequent Pooled Money monthly report basis. The re publication. The Bureau of State Audits also has a continuing audit pro - following its p basis by ut the year. All investment and LAW claims are audited on a daily cess throughout y the State Controllers Office as well as an _house audit process involving three separate divisions . It has been determined that the State of California cannot declare bankruptcy Federal re ations, thereby allowing the Government Code Section to under F g� ' ed with the state treasurer for deposit in the stand. This Section states that "money plac LAIF shall not be subject to impoundment or seizure by any state official or state agency." grown The LAIF has own from 293 participants and $468 million in 1977 to 2501 participants and $10.8 billion in 1997. State Treasurer's Office Local Agency Investment Fund P.O. Box 942809 Sacramento, CA 94209-0001 (916) 653-3001 http://www.treasurer.ca.gov 2 i "' � � � t � E .,,r• , .n fi, -.a„ $~ ,rd ° y �? h -i, ., "Y,. .x;�^} �•,, ,'�" ��i»3, "+.. 4 :t;{ % S .t ;tl�c+•r �.ti�..' "i, , � '4: ..,�.. -, r?.-v'- w+•'�'. .,§.--�"`�. ^- - ~-a.'ti •,�'" vaAL, *'- .i;.. .ti ��' `..v .. 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" <.. ,. y•... t 'r >.'. - .- STATE OF CALIFORNIA STATE TREASURER'S OFFICE POOLED MONEY INVESTMENT BOARD REPORT NOVEMBER 1,997 Table of Contents SUMMARY............................................................................................................1 SELECTED INVESTMENT DATA....................................................................2 PORTFOLIO COMPOSITION...........................................................................3 INVESTMENT TRANSACTIONS......................................................................4 TIMEDEPOSITS................................................................................................16 DEMAND BANK DEPOSITS............................................................................19 POOLED MONEY INVESTMENT BOARD DESIGNATION .....................20 POOLED MONEY INVESTMENT ACCOUNT SUMMARY OF INVESTMENT DATA A COMPARISON OF NOVEMBER 1997 WITH NOVEMBER 19% (Dollars in Thousands) Average Daily Portfolio Accrued Earnings Effective Yield Average Life --Month End (in days) Total Security Transactions Amount Number Total Time Deposit Transactions Amount Number Average Workday Investment Activity Prescribed Demand Account Balances For Services For Uncollected Funds November 199? Noveer $27,325,013 $128,344 5.715 210 $159217,885 346 $518,200 28 $925,652 $145,818 $151,586 $27,088,172 $124,662 5.599 231 $18,487,457 426 $149,500 22 '$1,035,387 $123,758 $150,866 - $3,2695,572 - 80 + $368,700 +6 - $109,735 + $22,060 + $720 —1— MATT FONG STATE TREASURER STATE OF CALIFORNIA INVESTMENT DIVISION SELECTED INVESTMENT DATA ANALYSIS OF THE POOLED MONEY INVESTMENT ACCOUNT PORTFOLIO (000 OMITTED) Change in November 30,1997 Percent From . Type of Security Amount Percent Previous Month Governments Bills $1,183,753 4.34 + .11 Bonds 0 0 0 Notes 59742468 21.04 + .52 Strips 731,184 .27 - .16 Total Governments $6,999405 25.65 + A7 Federal Agency Coupons $1,7309,947 634 + .61 Certificates of Deposit 64449934 22.89 + .26 Bank Notes 930,000 3AI - .27 Bankers Acceptances 310473 1.14 - 37 Repurchases 0 0 - .11 Federal Agency Discount Notes 644,999 236 + .23 Time Deposits 11,0079095 3.69 + .23 GNMA's 2,699 .01 0 Commercial Paper 5,785,144 21.20 + 1.68 FHLMC 269,349 .10 0 Corporate Bonds 1,4929858 5A7 + .02 Pooled Loans 19767,612 6A8 - SO GF Loans 738400 2.71 - 2.21 Reversed Repurchases -395,712 -1A5 + .04 Total, All Types $274849603 100 INVESTMENT ACTIVITY Number Pooled Money 346 Other 24 Time Deposits 28 TOTALS 398 PMIA Monthly Average Effective Yield 5.715 Year to Date Yield for Last Day of Month 5.699 November 1997 October 1997 Amount NumberAmount $ 159217,885 402 $ 17,7359224 $ 4639405 14 $ 949934 $ 518400 44 $ 6489800 $ 16,199,490 460 $.1894789958 5.705 5.695 —2— Cori Bi 5.. Commercial Paper 21.20% Bar Acce; 1., Pooled Money Investment Account Portfolio Composition $27.3 Billion Reverses Loans-°� 9.19°r6 1.45 CD's/BN's 26.30% :asuries 5.65% Time Deposits 3.69% Mortgages 0.11% .noes 70% 11/30/97 M Treasuries ® Time Deposits ■ Mortgages ©Agencies a CD's/BN's ■ Bankers Acceptances ■ Repo ® Commercial Paper ® Corporate Bonds Loans ® Reverses -3- +tG. EWT>ACCOUNT ..af JELD 11/01/97 REDEMPTION MTN IBM Corp 6.375% 11/01/97 6.030 $9,400 - 521 809,308.67 6.003 CB Assoc 7.750% 11/01/97 5.600 25,000 682 2,675,034.72 5.600 MTN (FR) FMCC 6.118% 11/01/97 6.030 8,500 660 89,276.16 5.776 11/03/97 REDEMPTION BA Montreal 11/03/97 5.680 10,000 158 249,288.89 5.906 CP GMAC 11/03/97 5.720 50,000 3 23,833.33 5.802 CP GMAC 11/03/97 5.720 50,000 3 23,833.33 5.802 CP GMAC 11/03/97 5.720 45,000 3 21,450.00 5.802 CP GMAC 11/03/97 5.720 50,000 3 23,833.33 5.802 CP Assoc 11/03/97 5.690 50,000 3 23,708.33 5.771 CP Assoc 11/03/97 5.690 50,000 3 23,708.33 5.771 CP Assoc 11/03/97 5.690 50,000 3 23,708.33 5.771 CP Assoc 11/03/97 5.690 50,000 3 23,708.33 5.771 SALE a/ CD Dresdner 5.870% 09/15/98 5.800 30,000 3 14,330.83 5.880 PURCHASE CP GECC 11/04/97 5.690 50,000 CP GECC 11/04/97, 5.690 50,000 CP GECC 11/04/97 5.690 50,000 CP GECC 11/04/97 5.690 50,000 CP GMAC 11/04/97 5.700 50,000 CP GMAC 11/04/97 5.700 50,000 CP GMAC 11/04/97 5.700 50,000 CP GMAC 11/04/97 5.700 50,000 CP Lehman 11/04/97 5.750 50,000 CP Lehman 11/04/97 5.750 50,000 CP Lehman 11/04/97 5.750 50,000 CP Conagra 11/07/97 5.700 30,000 CP Conagra 11 /07/97 5.700 50,000 CP Textron 12/10/97 5.710 31,550 CP GECC 03/27/98 5.570 35,000 CP GECC 03/27/98 5.570 50,000 PURCHASE c/ CD Deutsche 5.950% 06/16/98 5.750 40,000 —4— M. GNEY INP. STRENT ACCOUNT r at a/ M TURITY TR/WS PAR 074XS DESCRIPTION DAM " (00HELD ^ 11/04/97 REDEMPTION CP GECC 11/04/97 5.690 50,000 1 7,902.78 5.769 CP GECC 11/04/97 5.690 50,000 1 7,902.78 5.769 CP GECC 11/04/97 5.690 50,000 1 7,902.78 5.769 CP GECC 11/04/97 5.700 50,000 1 7,902.78 5.769 CP GMAC 11/04/97 5.700 50,000 1 7,916.67 5.780 CP GMAC 11/04/97 5.700 50,000 1 7,916.67 5.780 CP GMAC 11/04/97 5.700 50,000 1 7,916.61 5.780 CP GMAC 11/04/97 5.700 50,000 1 7,916.67 5.780 CP Lehman 11/04/97 5.750 50,000 1 7,986.11 5.830 CP Lehman 11/04/97 5.750 50,000 1 7,986.11 5.830 CP Lehman 11/04/97 5.750 50,000 1 7,986.11 5.830 CP Hertz 11/04/97 5.600 50,000 7 54,444.44 5.683 CP FMCC 11/04/97 5.560 50,000 8 61,777.78 5.644 CP FMCC 11/04/97 5.560 50,000 8 61,777.78 5.644 SALE c/ CD Deutsche 5.950% 06/16/98. 5.750 40,000 PURCHASE FHLB 5.810% 11/04/98 5.852 10,000 CD World 5.670% 11/19/97 5.590 50,000 CD World 5.570% 11/19/97 5.590 50,000 CD Mellon 5.625% 02/27/98 5.625 50,000 CD Mellon 5.625% 02/27/98 5.625 50,000 CD Stnrd Chart 5.670% 02/27/98 5.660 50,000 CD Stnrd Chart 5.670% 02/27/98 5.660 50,000 CP GMAC 11/12/97 5.600 50,000 CP GMAC 11/12/97 5.600 50,000 CP GMAC 11/12/97 5.600 50,000 CP GMAC 11/12/97 5.600 50,000 CP Conagra 11/19/97 5.640 25,000 CP Conagra 11/19/97 5.640 50,000 CP GECC 11/19/97 5.560 50,000 CP GECC 11/19/97 5.560 50,000 CP GECC 11/19/97 5.560 50,000 CP GECC 11/19/97 5.560 50,000 CP GECC 11/19/97 5.560 50,000 CP GECC 11/19/97 5.560 50,000 CP GECC 11/19/97 5.560 50,000 CP GECC 11/19/97 5.560 50,000 CP Hertz 01/26/97 5.600 50,000 CP Merrill 11 /26197 5.560 37,000 CP Merrill 11/26/97 5.560 50,000 6,410.77 5.829 M�= Pmebm 4NVLSTMENT ,fiCCOUNT a/: 1r1A R11RrTY 7ttANs ': P1RR ►xs 11/05/97 NO REDEMPTION PURCHASE CP Assoc 11 /06/97 5.690 50,000 CP Assoc 11106/97' 5.690 50,000 11/06/97 REDEMPTION BA B/A 11 /06/97 5.510 5,000 146 111,730.55 5.714 CP Assoc 11 /06/97 5.690 50,000 1 7,902.78 5.769 CP Assoc 11 /06/97 5.690 50,000 1 7,902.78 5.769 CP GMAC 11 /06/97 5.580 50,000 9 69,750.00 5.665 CP GMAC 11/06/97 5.580 50,000 9 69,750.00 5.665 CP Enron 11/06/97 5.620 37,000 13 75,089.44 5.709 PURCHASE CD Montreal 5.670% 01 /14/98 5.670 50,000 CP GMAC 11 /07/97 5.610 45,000 CP Enron 01 /14/98 5.780 8,200 CP Enron 01 /14/98 5.780 50,000 CP GMAC 01/30/98 5.650 25,000 CP GMAC 01/30/98 5.650 50,000 PURCHASE a/ CD Soc Gen 11/07/97 REDEMPTION BA Tokyo-Mits CP GMAC CP Conagra CP Conagra CP GMAC CP GMAC CP GMAC CP GMAC CP Hertz CP FMCC CP FMCC SALE d CD Soc Gen 5.870% 09/30/98 5.680 25,000 11 /07/97 5.660 30,000 135 636,750.00 5.863 11 /07/97 5.610 45,000 1 7,012.50 5.688 11 /07/97 5.700 30,000 4 19,000.00 5.782 11 /07/97 5.700 50,000 4 31,666.67 5.782 11 /07/97 5.580 50,000 10 77,500.00 5.666 11 /07/97 5.580 50,000 10 77,500.00 5.666 11 /07/97 5.610 50,000 11 85,708.33 5.697 11 /07/97 5.610 50,000 11 85,708.33 5.697 11 /07/97 5.590 50,000 15 116,458.33 5.680 11 /07/97 5.530 50,000 15 115,208.33 5.619 11 /67/97 5.530 50,000 15 115,208.33 5.619 5.870% 09/30/98 5.680 25,000 1 3,892.22 5.758 —6— CRIPTION DATE 11/07/97 PURCHASE CD Hypo 5.670% 02/09/98 5.660 50,000 CD Hypo 5.670% 02/09/98 5.660 50,000 CD Montreal 5.680% 02/27/98 5.680 45,000 CP Hertz 12/08/97 5.610 30,000 CP Conagra 01/08/98 5.770 50,000 - CP GMAC 01/08/98 5.640 50,000 CP GMAC 01/08/98 5.640 50,000 CP SRAC 01/14/98 5.650 50,000 11/10/97 REDEMPTION CD Mellon 5.580% 11/10/97 5.580 50,000 116 899,000.00 5.657 CD Mellon 5.580% 11/10/97 5.580 50,000 116 899,000.00 5.657 CP FMCC 11/10/97 5.570 50,000 13 100,569.44 5.658 CP FMCC 11/10/97 5.570 50,000 13 100,569.44 5.658 CP FMCC 11/10/97 5.570 50,000 13 100,569.44 5.658 CP FMCC 11/10/97 5.520 50,000 18 138,000.00 5.612 CP FMCC 11/10/97 5.520 50,000 18 138,000.00 5.612 CP FMCC 11/10/97 5.520 50,000 18 138,000.00 5.612 CP Conagra 11/10/97 5.550 20,000 18 55,500.00 5.642 CP Heller 11/10/97 5.600 50,000 32 248,888.89 5.706 CP GMAC 11/10/97 5.520 50,000 83 636,333.33 5.668 MTN (FR) World 5.925% 11/10/97 5.925 25,000 1091 4,482,402.50 5.991 MTN (FR) World 5.925% 11/10/97. 5.925 25,000 1098 4,511,204.58 5.998 PURCHASE CP SRAC 02/06/98 5.650 50,000 CP SRAC 02/06/98 5.650 10,000 CP FMCC 01/02/98 5.630 50,000 CP FMCC 01 /02198 5.630 50,000 CP Conagra 11/18/97 5.650 15,000 PURCHASE c/ CD Soc Gen 5.960% 09/15/98 5.620 50,000 11/12/97 REDEMPTION CP GMAC 11/12/97 5.600 50,000 8 62,222.22 5.684 CP GMAC 11/12/97 5.600 50,000 8 62,222.22 5.684 CP GMAC 11/12/97 5.600 50,000 8 62,222.22 5.684 CP GMAC 11/12/97 5.600 50,000 8 62,222.22 5.684 CP Country 11/12/97 5.540 34,000 20 104,644.44 5.634 CP Country 11/12/97 5.540 50,000 20 153,888.89 5.634- CP Heiler 11/12/97 5.600 25,000 34 132,222.22 5.707 BA B/A 11/12/97 5.600 23,000 173 618,955.56 - 5.834 —7— CD Soc Gen 5.960% 09/15/98 5.620 50,000 2 15,443.76 5.698 PURCHASE CD Nova Scotia 5.750% 02/27/98 5.750 50,000 - CP GMAC 11/13/97 5.650 50,000 CP GMAC 11/13/97 . 5.650 50,000 CP Heller 02/26/98 6.000 50,000 CP Heller 02/27/98 6.000 25,000 11/13/97 REDEMPTION CP GMAC 11 /13/91 5.650 50,000 1 7,847.22 5.729 CP GMAC 11/13/97 5.650- 50,000 1 7,847.22 5.729 CP Merrill 11/13/97 5.570 13,000 14 28,159.44 5.659 CP Merrill 11/13/97 5.570 50,000 14 108,305.56 5.659 CP Hertz 11/13/97 5.610 30,000 14 65,450.00 5.700 CP GMAC 11/13/97 5.570 50,000 15 116,041.67 5.660 CP GMAC 11/13/97 5.570 50,000 15 116,041.67 5.660 CP GMAC 11/13/97 5.570 50,000 15 116,041.67 5.660 CP GMAC 11/13/97 5.570 50,000 15 116,041.67 5.660 CP Heller 11/13/97 5.600 50,000 16 124,444.44 5.691 CP Enron 11/13/97 5.650 2,759 17 7,361.17 5.743 CP Enron 11/13/97 '5.650 50,000 17 133,402.78 5.743 CP Enron 11/13/97 5.650 50,000 17 133,402.78 5.743 CP Amer Exp 11/13/97 5.530 25,000 20 76,805.66 5.624 CP Amer Exp 11/13/97 5.530 50,000 20 153,611.11 5.624 PURCHASE _ MTN (FR) Bkrs Trst 5.853% * 11 /12/99 5.853 50,000 MTN (FR) US Bancorp 5.900% 11/15/99 4.017 5,000 CP FMCC 11 /14/97 5.530 50,000 CP FMCC 11/14/97 5.530 50,000 CP FMCC 11 /14/97 5.530 50,000 CP FMCC 11 /14/97 5.530 50,000 CP Heller 02/09/98 6.000 50,000 CP Merrill 02/26/98 5.680 13,000 CP Merrill 02/26/98 5.680 50,000 CP GMAC 02/27/98 5.710 35,000 CP GMAC 02/27/98 5.710 50,000 CP GMAC 02/27/98 5.710 50,000 CP Enron 02/26/98 5.800 50,000 CP Enron 02/27/98 5.800 50,000 —8— 'tN\/ESTMEiNT ACCOUNT < tri v e/ a/ MATURETY . TRANS -= PAR .. :DAY9 M... _...::..... 1 DESCR1PTiON DATE i�1ECD HELD 11/14/97 REDEMTPION CP FMCC 11 /14/97 5.530 50,000 1 7,680.56 5.607 CP FMCC 11 /14/97 5.530 50,000 1 7,680.56 5.607 CP FMCC 01 /14/97 5.530 50,000 1 7,680.56 5.607 CP FMCC 11 /14/97 5.530 50,000 1 7,680.56 5.607 CP Salomon 11 /14/97 5.600 50,000 1 140,00.0.00 5.693 PURCHASE BA B/A 05/12/98 5.550 27,000 BN B/A 5.700% 06/30/98 5.700 50,000 BN B/A 5.700% 06/30/98 5.700 50,000 CP FMCC 11/17/97 5.480 50,000 CP FMCC 11/17/97 5.480 50,000 CP Salomon 02/27/98 5.790 50,000 CP SRAC 03/02/98 5.700 50,000 CP SRAC 03/09/98 5.700 50,000 Disc Note - FNMA 06/30/98 5.460 50,000 11/15/97 REDEMPTION Strip Cpns 11/15/97 5.080 20,000 1562 3,860,000.00 5.588 Strip Cpns 11/15/97 5.080 40,000 1562 7,720,060.00 5.588 11/17/97 REDEMPTION CP FMCC 11/17/97 5.480 50,000 3 22,833.33 5.558 CP FMCC 11/17/97 .5.480 50,000 3 22,833.33 5.558 PURCHASE CP SRAC 11/18/97 5.750 50,000 CP Enron 11 /18/97 5.820 20,000 CD World 5.630% 11/24/97 5.650 50,000 CD World 5.630% 11 /24/97 5.650 5,000 PURCHASE c/ CD - Soo Gen 5.730% 05/11/98 5.780 25,000 Treas Note 6.750% 04/30/02 5.720 50,000 Treas Note 6.750% 04/30/02 5.720 50,000 Treas Note 6.750% 04/30/02 5.720 50,000 Treas Note 6.750% 04/30/02 5.720 47,642 192 arwoMy.114VESTMENT ACCOUNT a! ai "TUPUYTRANS PAR DAYS Y DESCRIPTION DATE YIEL 11/18/97 REDEMPTION BA Montreal 11/18/97 5.680 10,000 173 272,955.56 5.920 CP ConAgra 11/18/97 5.650 15,000 8 18,833.33 5.650 CID Enron 11/18/97 5.820 20,000 1 3,233.33 5.901 CP SRAC 11/18/97 5.750 50,000 1 7,986.11 5.830 SALE C/ CD Soc Gen 5.730% 05/11 /98 5.780 25,000 1 3,936.02 5.860 Treas Note 6.750% 04/30/02 5.720 50,000 1 8,039.14 5.799 Treas Note 6.750% 04/30/02 5.720 50,000 1 8,039.14 5.799 Treas Note 6.750% 04/30/02 5.720 50,000 1 8,039.14 5.799 Treas Note 6.750% 04/30/02 5.720 47,642 1 7,660.35 5.799 PURCHASE CP GMAC 11/19/97 5.570 50,000 CP GMAC 11/19/97 5.570 50,000 CD Cr Agric 5.750% 02/27/98 5.750 50,000 CD Cr Agric 5.750% 02/27/98 . 5.750 50,000 CD Hypo 5.750% 03/27/98 5.750 50,000 CD Hypo 5.750% 03/27/98 5.750 50,000 CD Hypo 5.750% 03/27/98 5.750 50,000 CP Bear 02/26/98 5.700 50,000 CP Bear 02/26/98 5.700 10,000 CD World 5.580% 11 /26/97 5.600 50,000 CD World 5.580% 11 /26/97 5.600 50,000 CD World 5.580% 11 /26/97 5.600 50,000 PURCHASE c/ CD Soc Gen 5.730% 05/11 /98 5.630 41,000 11/19/97 REDEMPTION BA B/A 11/19/97 5.640 22,500 174 613,350.00 5.878 CP ConAgra 11/19/97 5.640 25,000 15 58,750.00 5.731 CP ConAgra 11/19/97 5.640 50,000 15 117,500.00 5.731 CP GECC 11/19/97 5.560 50,000 15 115,833.33 5.650 CID GECC 11/19/97 5.560 50,000 15 115,833.33 5.650 CP GECC 11/19/97 5.560 50,000 15 115,833.33 5.650 CP GECC 11/19/97 5.560 50,000 15 115,833.33 5.650 CP GECC 11/19/97 5.560 50,000 15 115,833.33 5.650 CP GECC 11/19/97 5.560 50,000 15 115,833.33 5.650 CP GECC 11/19/97 5.560 50,000 15 115,833.33 5.650 CP GECC 11/19/97 5.560 50,000 15 115,833.33 5.650 CP GMAC 11/19/97 5.570 50,000 1 7,736.11 5.648 CP GMAC 11/19/97 5.570 50,000 1 7,736.11 5.648 CD World 5.570% 11/19/97 5.590 50,000 15 116,457.17 5.667 CD World 5.570% 11/19/97 5.590 50,000 15 116,457.17 5.667 —10— ��tYESYIEi ACGOt3NT :.. MATEIRlTIfiv .:.. :.. - ... .. DESCRUMON 11/19/97 SALE c/ CD Soc Gen 5.730% 05/11/98 5.630 41,000 1 6,289.96 5.708 PURCHASE MTN ' Assoc 7.250% 09/01 /99 6.030 15,000 . MTN Bkrs Trst 6.000% 09/30/99 6.088 15,000 CP FMCC 11/24/97 5.520 50,000 CP FMCC 11/24/97 5.520 50,000 CP FMCC 11/24/97 5.520 30,000 CP GECC 11/20/97 5.560 50,000 CP GECC 11/20/97 5.560 50,000 CP GECC 11/20/97 5.560 50,000 CP Bear 02/28/98 5.710 50,000 CP FMCC 01 /02/98 5.710 50,000 CP FMCC 01 /02/98 5.710 50,000 PURCHASE r/ CD Soc Gen 5.730% 05/11 /98 5.650 40,000 11/20/97 REDEMPTION CP GECC CP GECC CP GECC CD Montreal CD Montreal SALE c/ CD Soc Gen PURCHASE CP GMAC CP GMAC CP GMAC CP GMAC CP Hertz FHLB CD Barclays CD Barclays PURCHASE q/ CD Soc Gen 11/20/97 5.560 50,000 1 7,722.22 5.638 11/20/97 5.560 50,000 1 7,722.22 -5.638 11/20/97 5.560 50,000 1 7,722.22 5.638 5.580% 11/20/97 5.580 25,000 .99 383,625.00 5.657 5.580% 11/20/97 5.580 50,000 99 767,250.00 5.657 5.730% 05/11 /98 " 5.650 40,000 _ 1 6,157.72 5.728 03/02/98 5.710 50,000 03/02/98 5.710 50,000 03/02/98 5.710 50,000 03/02/98 5.710 50,000 03/02/98 5.750 30,000 5.710% 11 /20/98 5.791 50,000 5.730% 03/02/98 5.720 50,000 5.730% 03/02/98 5.720 50,000 5.730% 05/11 /98 5.580 20,000 1291m #LEW II Y_INVESTiIAENT:ACCOUNT MATURM TRANS` PaAR DAYS - AMOUNT - t3A _TEE ..... DESCRlPTtON _ DA - YiECDOt�) _ _ z+ L.. 11/21/97 REDEMPTION BA B/A 11 /21 /97 5.640 18,000 176 496,319.99 5.880 SALE c/ CD Soc Gen 5.730% 05/11/98 5.580 20,000 1 3,041.10 5.657 PURCHASE FMNA (FR) 5.808% 06/30/99 5.808 50,000 FNMA (FR) 5.808% 06/30/99 5.808 20,000 CP Assoc 11/24/97 5.420 50,000 CP Assoc 11/24/97 5.420 50,000 CP Assoc 11/24/97 5.420 50,000 CP Assoc 11/24/97 5.720 30,000 11/24/97 REDEMPTION BA B/A 11/24/97 5.640 25,000 179 701,083.32 5.883 CD World 5.630% 11/24/97 5.650 50,000 7 54,930.11 5.728 CD World 5.630% 11/24/97 5.650 5,000 7 5,493.01 5.728 CD Stand Chart 5.630% 11/24/97 5.620 50,000 130 1,014,758.14 5.698 CD WestDeut 5.630% 11/24/97 5.630 50,000 138 1,079,083.33 5.708 BN FNB Chic 5.640% 11/24/97 5.640 50,000 158 1,237,666.67 5.718 BN FNB Chic 5.640% 11/24/97 5.640 50,000 158 1,237,666.67 5.718 BN FNB Chic 5.640% 11/24/97 5.640 50,000 158 1,237,666.67 5.718 CP Assoc 11/24/97 5.420 50,000 3 22,583.33 5A97 CP Assoc 11/24/97 5.420 50,000 3 22,583.33 5.497 CP Assoc 11/24/97 5.420 50,000 3 22,583.33 5.497 CP Assoc 11/24/97 5.420 50,000 3 22,583.33 5.497 CP FMCC 11/24/97 5.520 50,000 5 38,333.33 5.600 CP FMCC 11/24/97 5.520 50,000 5 38,333.33 5.600 CP FMCC 11/24/97 5.520 30,000 5 23,000.00 5.600 CP GMAC 11/24/97 5.480 50,000 124 943,777.78 5.663 CP GMAC 11/24/97 5.480 50,000 124 943,777.78 5.663 CP Heller 11/24/97 5.750 50,000 140 1,118,055.56 5.963 MITI (FR) Citicorp 6.125% 11/24/97 6.125 25,000 1097 4,474,024.08 5.954 PURCHASE CP GMAC 12/05/97 5.600 25,000 CP GMAC 12/05/97 5.600 50,000 CP GECC 12/08/97 5.580 50,000 CP GECC 12/08/97 5.580 50,000 CP Assoc 12/02/97 5.540 37,800 CP Assoc 12/02/97 5.540 50,000 CP FMCC 12/02/97 5.540 50,000 CP FMCC 12/02/97 5.540 50,000 CP FMCC 12/02/97 5.540 50,000 CP GECC 12/05/97 5.520 13,000 —12— = MONEY INVESTMENT ACCOUNT - dl. a/ 111[ATiiRtTY TRANS :PAR DA1fS AKOt ,.: T'�'PE DESCRIPTION' ;DAIS - ' Y�EID : t�l MELD :: -.::_ 11/24/97 PURCHASE CP GECC CP GECC CP GECC 11/25/97 REDEMPTION 12/05/97 5.520 50,000 12/05/97 5.520 50,000 12/05/97 5.520 50,000 CD UB Calif 5.810% 11/25/97 5.810 50,000 181 1,460,569.44 5.890 CD UB Calif 5.810% 11 /25/97 5.810 50,000 181 1,460,569.44 5.890 PURCHASE CP Amer Exp 12/01/97 5.560 50,000 CP Amer Exp 12/01/97 5.560 50,000 CP Amer Exp 12/01/97 5.560 50,000 CP Amer Exp 12/01/97 5.560 50,000 CP Amer Exp 12/01/97 5.560 50,000 CP Amer Exp 12/01/97 5.560 50,000 CP Heller 12/01/97 5.950 50,000 CP Heller 12/01/97 5.950 50,000 CP Household 12/02/97 5.580 50,000 CP GMAC 12/02/97 5.600 50,000 CP GMAC 12/02/97 5.600 50,000 CP GMAC 12/03/97 5.600 50,000 CP GMAC 12/03/97 5.600 50,000 11/26/97 REDEMPTION CD World 5.580% 11/26/97 5.600 50,000 8 62,222.00 5.677 CD World 5.580% 11/26/97 5.600 50,000 8 62,222.00 5.677 CD World 5.580% 11/26/97 5.600 50,000 8 62,222.00 5.677 CD Montreal 5.530% 11/26/97 5.530 35,000 29 155,915.28 5.606 CD CIBC 5.570% 11/26/97 5.570 50,000 97 750,402.78 5.647 CD ABN Amro 5.640% 11/26/97 5.630 25,000 160 625,582.68 5.708 CD ABN Amro 5.640% 11/26/97 5.630 50,000 160 1,251,165.36 5.708 CD ABN Amro 5.640% 11/26/97 5.630 50,000 160 1,251,165.36 5.708 CD Bayer Lnds 5.660% 11 /26197 5.640 50,000 162 1,269,111.38 5.718 CD Bayer Lnds .5.660% 11/26/97 5.640 50,000 162 1,269,111.38 5.718 CD US Oregon 5.680% 11/26/97 5.680 50,000 162 1,278,000.00 5.758 CD US Oregon 5.680% 11/26/97 5.680 50,000 162 1,278,000.00 5.758 CD Bkrs Trst 5.690% 11/26/97 -5.680 50,000 162 1,278,056.08 5.758 CD Bkrs Trst 5.690% 11/26/97 5.680 50,000 162 1,278,056.08 5.758 BN FNB Chicago 5.680% 11/26/97 5.680 50,000 163 1,285,888.89 5.758 BN FNB Chicago 5.680% 11/26/97 5.680 50,000 163 1,285,888.89 5.758 CP Merrill 11/26/97 5.560 37,000 22 125,717.78 5.656 -CP Merrill 11/26/97 5.560 50,000 22 169,888.89 5.656 CP Hertz 11/26/97 5.600 50,000 22 171,111.11 5.697 CP Lehman 11/26/97 5.620 20,000 154 480,822.22 5.838 CP GMAC 11/26/97 5.590 50,000 159 1,234,458.33 5.811 —13— P�_G..G:Efl. fEY INVESTMENTS ACCOUNT v: -.d! MATURITY DESCRIPTION DATE YIELM �� ::HELD = . ; _ 11/26/97 REDEMPTION CP GMAC 11 /26/97 5.590 50,000 159 1,234,458.33 5.811 CP GMAC 11 /26/97 5.590 50,000 159 1,234,458.33 5.811 CP GMAC 11 /26/97 5.590 50,000 159 1,234,458.33 5.811 CP GECC 11/26/97 5.570 50,000 160 1,237,777.78 5.790 CID GECC 11 /26/97 5.570 50,000 160 1,237,777.78 5.790 PURCHASE CP Merrill 12/03/97 5.650 25,000 CP Merrill 12/03/97 5.650 50,000 —14— a/ The abbreviations indicate the type of security purchased or sold; i.e., (U.S.) Bills, Bonds, Notes, Debentures, Discount Notes, and Participation Certificates: Federal National Mortgage Association (FNMA), Farmers Home Administration Notes (FHA), Student Loan Marketing Association (SLMA), Small Business Association (SBA), Negotiable Certificates of Deposit (CD), Negotiable Certificates of Deposit Floating Rate (CD FR), Export Import Notes (EXMO, Bankers Acceptances (BA), Commercial Paper (CP), Government National Mortgage Association (GNMA), Federal Home Loan Bank Notes (FSLB), Federal Land Bank Bonds (FLB), Federal Home Loan Mortgage Corporation Obligation (FHLMC PC) & (FHLMC GMC), Federal Farm Credit Bank Bonds (FFCB), Federal Farm Credit Discount Notes (FFC), Corporate Securities (CB), U,S. Ship Financing Bonds (TITLE XI'S), International Bank of Redevelopment (IBRD), Tennessee Valley Authority (TVA) Medium Term Notes (MTN). b/ Purchase or sale yield based on 360 day calculation for discount obligations and Repurchase Agreements. c/ Repurchase Agreement. d/ Par amount of securites purchased, sold, or redeemed. e/ Securities were purchased and sold as of the same date. f/ Repurchase Agreement against Reverse Repurchase Agreement. g/ Outright purchase against Reverse Repurchase Agreement. h/ Security "SWAP" transactions. i/ Buy back agreement. RRS Reverse Repurchase Agreement. RRP Termination of Reverse Repurchase Agreement. —15— TIME DEPOSIT NAME • DEPOSIT DATE YIELD PAR AMOUNT ($) MATURITY DATE East West Bank 09/19/97 5.100 12,000,000.00 12/18/97 East West Bank 10/16/97 5.150 5,000,000.00 01/12/08 East West Bank 10/14/97 5.160 10,000,000.00 01/12/98 East West Bank 11/10/97 5.340 35,000,000.00 02/01/98 BEVERLY HILLS City National Bank 02/21 /97 5.390 20,000,000.00 12/18/97 City National Bank 07/29/97 5.380 10,000,000.00 01/27/98 City National Bank 08/19/97 5.370 20,000,000.00 02/18/98 City National Bank 11 /04/97 5.390 10,000,000.00 05/05/98 CHICO Tri Counties Bank 06/26/97 5.310 15,000,000.00 01/02/98 North State National Bank 08/26/97 5.350 1,000,000.00 02/25/98 North State National Bank 09/11/97 5.370 500,000.00 03/11/98 Tri Counties Bank 10/21/97 5.100 10,000,000.00 01/21/98 North State National Bank 10/06/97 5.290 2,000,000.00 04/07/98 FRESNO Kings River State Bank 10/15/97 5.130 1,000,000.00 01/15/98 GLENDALE Glendale Federal Bank 09/29/97 4.960 3,000,000.00 12/29/97 Glendale Federal Bank 10/09/97 5.110 5,000,000.00 01/08/98 Glendale Federal Bank 10/20/97 5.340 100,000,000.00 04/17/98 INGLEWOOD Imperial Bank 09/10/97 5.190 25,000,000.00 12/10/97 Imperial Bank 09/18/97 5.150 11,000,000.00 12/18/97 Imperial Bank 10/01/97 5.170 36,000,000.00 12/31/97 Imperial Bank 10/16/97 5.170 25,000,000.00 01/15/98 Imperial Bank 10/29/97 5.160 5,000,000.00 01/29/98 Imperial Bank 11/03/97 5.250 10,000,000.00 02/03/98 Imperial Bank 11 /06/97 5.250 20,000,000.00 02/05/98 Imperial Bank 11/13/97 5.390 20,000,000.00 02/11/98 LA MIRADA Southern California Bank 10/08/97 5.070 5,000,000.00 01/08/98 Southern California Bank 10/16/97 5.130 5,000,000.00 01/15/98 —16— TIME DEPOSIT NAME DEPOSIT DATE YIELD PAR AMOUNT ($I MATURITY DATE LOS ANGELES Preferred Bank 09/16/97 5.110 5,000,000.00 12/16/97 Preferred Bank 09/18/97 5.110 4,000,000.00 12/18/97 General Bank 09/09/97 5.180 15,000,000.00 12/19/97 Preferred Bank 09/25/97 4.970 3,000,000.00 12/31/97 Preferred Bank 09/22/97 5.310 9,000,000.00 03/24/98 General Bank 10/01 /97 4.940 25,000,000.00 01 /08/98 Preferred Bank 10/15197 5.130 3,000,000.00 01/15/98 . Preferred Bank 11 /20/97 5.290 4,000,000.00 02/18/98 Preferred Bank 11/25/97 5.310 2,000,000.00 02/24/98 PO_ Pomona First Fed Bk & Trst 11 /25/97 5.550 8,000,000.00 05/27/98 PLACER Sierra West Bank 06/06/97 5.480 2,800,000.00 12/03/97 PETALUMA Bank of Petaluma 08/12/97 5.460 1,000,000.00 02/11/98 SACRAMENTO Sanwa Bank of California 07/29/97 5.400 5,000,000.00 01/27/98 Sanwa Bank of California 08/19/97 5.450 50,000,000.00 02/18/98 Sanwa Bank of California 08/26/97 5.350 10,000,000.00 02/25/98 Union Bank of California 10/01/97 5.120 100,000,000.00 12/31/97 Union Bank of California 11/05/97 5.260 100,000,000.00 02/04/98 Union Bank of Califomia 11/19/97 5.310 50,000,000.00 02/17/98 River City Bank 11 /21 /97 5.310 5,000,000.00 02/19/98 Sanwa Bank of California 11/05/97 5.390 7,000,000.00 05/06/98 SAN DIEGO San Diego First Bank 09/03/97 5.220 1,500,000.00 12/03/97 Bank of Commerce San Diego 09/18/97 5.120 14,000,000.00 12/18/97 SAN FRANCISCO Bank of Canton Califomia 08/07/97 5.440 5,000,000.00 02/04/98 Bank of Canton California 08/13/97 5.480 5,000,000.00 02/11/98 Bank of Canton California 09/04/97 5.160 5,000,000.00 12/04/97 Bank of Canton California 09/09/97 5.170 5,000,000.00 12/09/97 TransPacific National Bank 09/16/97 5.650 800,000.00 03/17/98 Bank of Canton California 10/21 /97 5.050 5,000,000.00 01 /21 /98 SAN JOAQUIN . Delta National Bank 07/02/97 5.360 2,000,000.00 12/31/97 —17— TIME DEPOSIT NAME DEPOSIT DATE YIELD PAR AMOUNT (S) MATURITY DATE SAN LEANDRO Bay Bank of Commerce 10/07/97 5.040 2,000,000.00 01/07/98 Bay Bank of Commerce 10/14/97 5.150 2,000,000.00 01/12/98 SAN LUIS OBISPO First Bank of San Luis Obispo 10/07/97 5.130 1,000,000.00 01/07/98 First Bank of San Luis Obispo 11 /05/97 5.280 3,600,000.00 02/04/98 First Bank of San Luis Obispo 11 /13/97 5.310 2,000,000.00 02/11 /98 First Bank of San Luis Obispo 11 /25/97 5.330 2,500,000.00 02/24/98 SAN RAFAEL West America Bank 10/02/97 5.060 25,000,000.00 01/22/98 West America Bank 10/29/97 5.130 25,000,000.00 01/29/98 SANTA ANA Grand National Bank 06/10/97 5.410 1,500,000.00 12/09/97. Grand National Bank 07/01/97 5.300 95,000.00 12/31/97 Grand National Bank 09/10/97 5.160 1,500,000.00 12/10/97 STANISLAUS North Valley Bank 09/22/97 5.300 3,000,000.00 03/24/98 TORRANCE ChinaTrust Bank (USA) 09/12/97 5.140 1,000,000.00 12/11/97 ChinaTrust Bank (USA) 09/11/97 5.170 9,000,000.00 12/11/97 TUSTIN Sunwest Bank 09/23/97 5.100 500,000.00 12/31/97 Sunwest Bank 10/01/97 5.140 2,800,000.00 01/08/98 VACAVILLE Continental Pacific Bank 09/03/97 5.240 1,000,000.00 12/03/97 VICTORVILLE Citizens Business Bank 06/13/97 5.430 10,000,000.00 12/10/97 Citizens Business Bank 08/12/97 5.470 10,000,000.00 01 /09/98 Citizens Business Bank 08/12/97 5.490 10,000,000.00 02/11/98 Citizens Business Bank 09/11 /97 5.400 10,000,000.00 03/11 /98 Citizens Business Bank 10/21/97 5.110 6,000,000.00 01/22/98 Citizens Business Bank 10/21/97 5.190 5,000,000.00 02/19/98 TOTAL TIME DEPOSITS AS OF NOVEMBER 28,1997 $1,007,095,000.00 —18— DEMAND BANK DEPOSITS (000 omitted) DAILY BALANCES WARRANTS NOVEMBER PER BANKS OUTSTANDING 1. $4519,766 $198929,744 -2. 4519766 19892,744 3. 5579313 7819,167 4. 343,086 39,146,105 5. 2259789 3,030,912 6. 2589223 39302432 7. 1739,183 39,1399489 8. 1739183 391399489 9 1739,183 3,1399489 10. 1239396 2,9419121 11. 123,396 299419121 12. 2219,593 39056,979 13. 2959,021 29896,612 14. 3091,981 390799788 15. 3099,981 390799788 16. 309,981 39,0869894 17. 3849317 2,9599,416 18. 1579678 298919260 19. 276,472 2,9549699 20. 3659,102 39013,457 21. 2519087 39246,358 22 251,087 39246,358 23. 2519087 34469,358 24. 3579713 192099,863 25. 4469690 1-4089867 26. 3929408 7389528 27. 3929408 7349071 28. 5259121 734,071 29. 5259121 734,071 At AVERAGE DOLLAR. DAYS $3209075 a/ The prescribed bank balance for November was $297,404,000.00. This consisted of $145,818,000.00 in compensating balances for services, $158,111,000.00 uncollected funds and a deduction of $6,525,000.00 for July delayed deposit credit. —19— DESIGNATION BY POOLED MONEY INVESTMENT BOARD OF TREASURY POOLED MONEY INVESTMENTS AND DEPOSITS No. 1581 In accordance with sections 16480 through 16480.8 of the Government Code, the Pooled Money Investment Board, at its meeting on November 19, 1997, has determined and designated the amount of money available for deposit and investment under said sections. In accordance with sections 16480.1 and 16480.2 of the Government Code, it is the intent that the money available for deposit or investment be deposited in bank accounts and savings and loan associations or invested in securities in such a manner so as to realize the maximum return consistent with safe and prudent treasury management, and the Board does hereby designate the amount of money available for deposit in bank accounts, savings and loan associ- ations, and for investment in securities and the type of such deposits and investments as follows: 1. In accordance with law, for deposit in demand bank accounts as Compensating Balance for Services $171,352,000 The active noninterest-bearing bank accounts designation constitutes a calendar -month average balance. For purposes of computing the compensating balances, the Treasurer shall exclude from the daily balances any amounts contained therein as a result of nondelivery of securities purchased for "cash" for the Pooled Money Investment Account and shall adjustfor any deposits not credited by the bank as of the date of deposit The balances in such accounts may fall below the above amount provided that the balances computed by dividing the sum of daily balances of that calendar month by the number of days in the calendar month reasonably approximates that amount The balances may exceed this amount during heavy collection periods or in anticipation of large impending warrant presentations to the Treasury, but the balances are to be maintained in such a manner as to realize the maximum return consistent with safe and prudent treasury management 2. In accordance with law, for investment in securities authorized by section 16430, Government Code, or in term interest - bearing deposits in banks and savings and loan associations as follows: Time Deposits in various Financial Institutions In Securities (sections 16503a From To Transactions (section 16430)* and 16602)* (1) 11/17/97 11/21/97 $ 1,337,800,000 $ 28,351,105,000 $ 1,002,095,000 Estimated Total $ 29,353,200,000 (2) 11/24/97 11/28/97 $ (457,100,000) $ 27,894,005,000 $ 1,002,095,000 $ 28,896,100,000 (3) 12/01/97 12/05/97 $ (904,800,000) $ 26,989,205,000 $ 1,002,095,000 $ 27,991,300,000 (4) 12/08/97 12/12/97 $ 288,000,000 $ 27,277,205,000 $ 1,002,095,000 $ 28,279,300,000 (5) 12/15/97 12/19/97 $ 2,701,300,000 $ 29,978,505,000 $ 1,002,095,000 $ 30,980,600,000 From any of the amounts specifically designated above, not more than 30 percent in the aggregate may be invested in prime commercial paper under section 16430(e), Govemment Code. Additional amounts available in treasury trust account and in the Treasury from time to time, in excess of the amounts and for the same types of investments as specifically designated above. Provided, that the availability of the amounts shown under paragraph 2 is subject to reduction in the amount by which the bank accounts under paragraph 1 would otherwise be reduced below the calendar month average balance of $171,352,000. Dated: November 19, 1997 *Government Code POOLED MONEY INVESTMENT BOARD: —20— 0i •C OZT4t!t 44 iCC�^ '� OF TNT INVESTMENT ADVISORY BOARD Meeting Date: February 11, 1998 T • GASB 31 Technical Report A - • 1 Correspondence and Written Material C Attached is a quarterly publications of the Municipal Treasurers' Association. Informational item only. ohn M. Faldoner, Finance Director TECHNICAL TOPICS I A Quarterly Publication of the Municipal Treasurers' Association of the United States and Canada January 1998 e Volume One GASB 31 TECHNICAL REPORT GASB Background The Government Accounting Standards Board, GASB, issued its Statement 31 entitled Accounting and Financial Reporting for Certain Investments and for External Pools in March 1997. The Statement is effective for fiscal years beginning after June 15, 1997. New reporting standards and accounting procedures are defined by the Statement as well as a separate reporting standard for external investment pools. The ownership of the funds involved defines these two types of investment pools (or portfolios). Internal pools are defined as portfolios where all the investments belong to one governmental entity. There are no cash or assets from other governmental entities in such an internal pool. But, funds from different sources belonging to that entity may be commingled in the pool. Examples of such an internal pool would be an investment portfolio of a single city, county, school district or authority. External pools contain funds from different governmental entities and earnings are allocated to the individual accounts of the various participants. An external pool is sponsored and managed by a private or governmental entity with cash assets from legally separate entities. The sponsoring entity has the fiduciary responsibility to manage the pool in accordance with its stated investment policy. Examples of external pools include countywide or statewide investment pools. Both types of pools are being required to report fair value on most investments over specific maturity limits. Internal pools are required to report fair value on investments which, when purchased, have a maturity longer than one year. External pools must report fair value on maturities longer than ninety (90) days at purchase. External pools have other specific requirements for disclosure and net asset valuation that do not apply to internal pools. Market Background Over the past decade governmental entities have increasingly recognized the value of their invested assets and see investments as an important source of incremental income. As a result, investors started to extend maturities and lower credit quality to increase yield. Since the markets only pay investors for risk taken this means that they were absorbing more risk. Reporting did not always keep pace with these changes. When interest rates changed dramatically in 1994, many governmental investors were forced to sell securities which had unrealized and unreported losses thus incurring realized losses. If the entity had not compared their amortized book value to the market value the governing board was faced unexpectedly with true losses of principal. Unrealized gains and losses could have acted as a caution flag that too much risk was being taken. Governing boards and state legislatures suddenly demanded a reporting which clearly identified risks through a comparison of book and market values. Losses had also been incurred in the private sector and the Financial Accounting Standards Board issued FASB 115, which required that investments be identified as either buy and hold or trading securities. A buy and hold security could be reported on an amortized value but those available for sale in the trading category had to be marked to market (compared to the market value) to identify risks. GASB 31 expanded on this same idea of identifying risks. The GASB 31 process is seen as an investment performance - or risk - indicator as much as an investment accounting methodology. It is similar to the performance measurements used by longer bond fund and private investment managers to determine the success in their choice of securities and their management of those securities on an ongoing basis. A significant unrealized loss or gain also indicates something about how much risk is present. However, it must be remembered that these longer managed portfolios are, by their nature, usually more actively managed and not necessarily used for matching cash flow but rather long-term investment income and performance. (This difference between the two is also exemplified in the use of yield versus rate of return because the inflows and outflows of cash interfere with the ease of calculation of rate of return. The two are not the same although often termed so.) These longer investment portfolios also do not deal with large, natural inflows and outflows of cash which affect market value but have nothing to do with investments. Amortized Cost Methodology Most accounting for investments follow the amortized cost methodology. With this method investment income is reported on an accrual basis as coupon income is received. The premium paid for securities over par (100) is amortized equally over the life of the bond. The amortization for the period is subtracted from the beginning amortized cost to represent the ending amortized cost or invested principal. If the security is bought at a discount, the discount is accreted equally over the life of the bond. The accretion for the period is added to the beginning period accredited principal for the ending accredited (amortized) cost or invested principal. This process is applied each reporting period to adjust the amortized value (book value) so that at maturity the invested principal (book value) equals the par value. Interest earnings under this methodology are accrued for each reporting period and adjusted by the amortization/accretion of the same period. This method allows the investor to accurately reflect the value at which the entity owns the security. This amortized book value can be compared to the current market value (the value at which the security could be sold in the open market) to determine an unrealized gain or loss position. This amortized book value tells the investor how the portfolio is performing at that point in time and what the portfolio is worth on the open market. It reflects the performance of the security (or the worth of the investment decision) since its purchase in then prevailing market conditions not between artificially set time periods. It reflects the market when the investment decision had to be made. When the security matures there is no gain or loss. All the discount or premium has been amortized over the life of the security. If a security is sold before maturity, the difference between the amortized book value and the sale proceeds (market value) represent realized gains or losses. The realized gains or losses are netted into the total earnings for the period. For example, a $1,000,000 bond with a coupon of 5% is purchased at 102 ($1,020,000) with four years to maturity. The premium of $20,000 would be amortized on a daily basis and total $5,000 each year. The 5% coupon would generate $50,000 each year in accrued interest (interest earnings). The earnings would be reduced by the effect of the amortization. Ending Adj . Book Value Interest Am./Acc. Earn. At purchase 1,020,000 Year 1 1,015,000 50,000 -5,000 45,000 Year 2 1,010,000 50,000 -5,000 45,000 Year 3 1,005,000 50,000 -5,000 45,000 At maturity 1,000,000 50,000 -5,000 45,000 200,000-20,000 180,000 The amortization reduces the net earnings each year from $50,000 to $45,000. (The $5,000 is treated as a return of capital each year.) Mortgaged backed securities do not fit this standard of amortizing premiums and discounts because the paydowns on the security, as mortgage payments are made, may fluctuate widely throughout the life of the bond. New Investment Definitions Under GASB Investment Income As seen in the example above, investment earnings under the amortized cost method represent the true interest received plus or minus the pro rated amortization or accretion. Under the fair value GASB standard however there are two parts to investment income. The investment income is defined as the accrued interest from the coupon in the reporting_ period plus or minus the change in the fair value from the beginning of the period. These two components can be combined or reported separately. This means that the change in fair (market) value from the beginning to end of the period will be shown as income and reported in the financial operating statements. Given the unrealized nature of this change in value it would serve every government to report these two components separately so that unrealized (i.e. non-existent) income is not interpreted incorrectly and spent when it does not exist! Realized gains/ losses can only be disclosed separately in the footnotes. For example, the 5% bond from the example above has a beginning fair value on year #1 of 101.00 or $1,010,000. It earns interest during the year of $50,000. At the end of year #1 its market value has fallen to 101.00 or $1,010,000. The investment income for the year is: Coupon Interest $ 50,000 Change in fair value $ < 10,000 > Investment Income $ 40,000 This unrealized change in value is now captured as investment income and reported in the financial statements. This is very different Technical Topics 2 January 1998 Amortized Cost Methodology Most accounting for investments follow the amortized cost methodology. With this method investment income is reported on an accrual basis as coupon income is received. The premium paid for securities over par (100) is amortized equally over the life of the bond. The amortization for the period is subtracted from the beginning amortized cost to represent the ending amortized cost or invested principal. If the security is bought at a discount, the discount is accreted equally over the life of the bond. The accretion for the period is added to the beginning period accredited principal for the ending accredited (amortized) cost or invested principal. This process is applied each reporting period to adjust the amortized value (book value) so that at maturity the invested principal (book value) equals the par value. Interest earnings under this methodology are accrued for each reporting period and adjusted by the amortization/accretion of the same period. This method allows the investor to accurately reflect the value at which the entity owns the security. This amortized book value can be compared to the current market value (the value at which the security could be sold in the open market) to determine an unrealized gain or loss position. This amortized book value tells the investor how the portfolio is performing at that point in time and what the portfolio is worth on the open market. It reflects the performance of the security (or the worth of the investment decision) since its purchase in then prevailing market conditions — not between artificially set time periods. It reflects the market when the investment decision had to be made. When the security matures there is no gain or loss. All the discount or premium has been amortized over the life of the security. If a security is sold before maturity, the difference between the amortized book value and the sale proceeds (market value) represent realized gains or losses. The realized gains or losses are netted into the total earnings for the period. For example, a $1,000,000 bond with a coupon of 5% is purchased at 102 ($1,020,000) with four years to maturity. The premium of $20,000 would be amortized on a daily basis and total $5,000 each year. The 5% coupon would generate $50,000 each year in accrued interest (interest earnings). The earnings would be reduced by the effect of the amortization. Ending Adj. Book Value Interest Am./Acc. Earn. At purchase 1,020,000 Year 1 1,015,000 50,000 -5,000 45,000 Year 2 1,010,000 50,000 -5,000 45,000 Year 3 1,005,000 50,000 -5,000 45,000 At maturity 1,000,000 50,000 -5,000 45,000 200,000-20,000 180,000 The amortization reduces the net earnings each year from $50,000 to $45,000. (The $5,000 is treated as a return of capital each year.) Mortgaged backed securities do not fit this standard of amortizing premiums and discounts because the paydowns on the security, as mortgage payments are made, may fluctuate widely throughout the life of the bond. New Investment Definitions Under GASB Investment Income As seen in the example above, investment earnings under the amortized cost method represent the true interest received plus or minus the pro rated amortization or accretion. Under the fair value GASB standard however there are two parts to investment income. The investment income is defined as the accrued interest from the coupon in the reporting period plus or minus the change in the fair value from the be ig nnin of the These two components can be combined or reported separately. This means that the change in fair (market) value from the beginning to end of the period will be shown as income and reported in the financial operating statements. Given the unrealized nature of this change in value it would serve every government to report these two components separately so that unrealized (i.e. non-existent) income is not interpreted incorrectly and spent when it does not exist! Realized gains/ losses can only be disclosed separately in the footnotes. For example, the 5% bond from the example above has a beginning fair value on year #1 of 101.00 or $1,010,000. It earns interest during the year of $50,000. At the end of year #1 its market value has fallen to 101.00 or $1,010,000. The investment income for the year is: Coupon Interest $ 50,000 Change in fair value $ < 10,000 > Investment Income $ 40,000 This unrealized change in value is now captured as investment income and reported in the financial statements. This is very different Technical Topics 2 January 1998 from the amortized cost valuation methodology because under that methodology no loss would be recognized unless the security was sold before maturity. This can markedly change the beginning and ending value of securities. The differences between these two methodologies becomes even clearer if we compare the two using the example above at each year-end. End Amortized GASB Change in BV to FV Book Value Price Fair Value Fair Value Difference Year 1 1,015,000 101 1,010,000 <-10,000 > < 5,000 > Year 2 1,010,000 99 990,000 < 20,000 > < 20,000 > Year 3 1,005,000 101 1,010,000 20,000 5,000 Year 4 1,000,000 100 1,000,000 < 10,000 > 0 <-20,000 > < 20,000 > Fair Value GASB 31 requires that any security in an internal investment pool purchased with a maturity greater than one year be reported at „fair value in the financial statements for the life of the security. Fair value is defined as the market (bid) value if the security is traded on a recognized exchange or the value of the investment in a current transaction with a qualified buyer not under the condition of a forced sale. GASB did not take a position as to whether the bid or asked price should be used. This does not recognize the realities of the market where prices are constantly changing and bid - ask spreads can be substantial. If accuracy is desired the bid price should be used since that is the price at which the security could be sold on the open market. All derivatives (floating notes, step-ups, callables, etc.), asset -backed securities (ABS), and structured notes are to be reported at fair value regardless of the time to maturity at purchase. Investments in open end mutual fund or pools with fluctuating net asset value must be reported at fair value based on the published share price and number of shares held because of the increased risk these pools and funds represent to the investor. GASB has new reporting standards for government sponsored external pools that are (not "2a- 7 like") not covered here. Securities that have a maturity longer than one year when purchased (which we will call GASB specific securities) must always be reported at fair value even when they have less than a year remaining to maturity. They will continue at fair value until matured or liquidated. Exceptions to Fair Value Reporting GASB intended that most investments be reported at fair value. However, because of the relative short-term nature of most governmental portfolios there are certain exceptions noted in the Statement. (1) Money market investments purchased with less than one year to maturity at purchase may be carried at amortized cost. These securities such as Treasury Bills and Notes, commercial paper, banker's acceptances and agency discount notes and notes are short term and not very volatile. The spread (or difference) between the bid and asked prices is very narrow which indicates little volatility and a better ability for the investor to liquidate near his/her cost if necessary. For that reason GASB allowed that these could be carried at amortized cost. (2) The funds invested with investment pools that operate like a money market fund ("2a-7 like pools") are also reported at cost. Your investment in a constant dollar pool would always be carried at par (100). "A 2a-7 like pool" is a reference to the SEC's Rule 2a-7 in the Investment Company Act of 1940 that allows money market funds to use amortized cost rather than market value. This is because of the short-term nature of the securities (no longer than 13 months) and their inherent limited volatility and because they maintain a $1 net asset value. Fluctuating net asset value pools (mutual funds) do not enjoy this exception. (3) The statement specifies that "nonparticipating contracts" are to be carried at cost. "Nonparticipating" includes those securities whose value is not affected by changes in the market or interest rates, are non-negotiable, and non -transferable. In addition, the Statement adds that the fair value can not be impaired by the credit of the issuer. Nonparticipating contracts would include non-negotiable Certificates of Deposit, nonparticipating Bank Investment Contracts, and nonparticipating Guaranteed Investment Contracts. The Standard provides no guidance on the maturity length, investment dollar amount, or any other restriction. However, considerable caution should be taken with these types of nonparticipating instruments to include insurance and collateralization. Realized Gains and Losses One of the most important changes under the GASB 31 Statement has to do with realized gains and losses. Under the amortized cost method, realized gains and losses are added to the investment income for the reporting period. Under GASB 31. the reporting Technical Topics 3 January 1998 of realized gains and losses is optional. If they are reported it is only in the footnotes of the financial statements! When a capital gain/loss transaction occurs (investment sale or call), only the change in fair value of the current period is included in investment income. For example, a $100,000 bond carried at a fair value of $120,000 and sold for $110,000 would result in a $10,000 loss under GASB, but under the amortized cost method would result in a $10,000 gain. The-$10,000 is the total contribution of the sale to the investment income for the year under GASB. The realized gain of $10,000 can only appear in the notes. If a bond is held over several years the gains and losses may even out, however, it will float totally at the mercy of the market price. For this reason it is important for you to calculate and monitor Realized Gains/Losses on an amortized cost basis to assure that real losses do not go undetected. It will become necessary for each entity to maintain its amortized value records on an ongoing basis and then annually supply GASB fair value calculations for annual reporting purposes only. It is also important that impending fair value losses not drive an investment decision to take real losses which detrimentally affect the entity or its cash flow. Investment Reporting GASB reporting is directed toward your annual financial statements and the readers of the financial statements not the entities creating the statements. Therefore, every entity must chose its own level of calculations it needs for compliance. The GASB 31 Statement, Appendix C traces five securities over a two-year period and assumes that each security in a portfolio would be traced individually throughout the year for a one time entry in the annual financial reports. Most public entities portfolios however are controlled by cash flows which swell portfolios mid -year and spend out funds by year end. Detail reporting on each security throughout the year therefore has little impact on the fair value of the portfolio at the annual reporting date. Since GASB is requiring a point in time annual comparison of the portfolio for risk and valuation purposes, the requirements can be met much more easily and efficiently by a simple two step process. (A) The entity maintains all records on individual securities on an amortized cost basis. This allows the entity to make accurate and effective trading and valuation decisions. And, (B) the entity makes annual GASB fair value adjustments based on fair market values at year end. Naturally, this can also be done on a quarterly, or even monthly, basis for informational purposes. This approach is particularly important for entities with large portfolios and many transactions throughout the year and involve longer "GASB specific securities" bought and sold throughout the year. Year One Reporting Year One Beginning Positions (July 1, 1997 for example purposes only) The first year implementation process has exactly the same effect on GASB reporting if the securities are calculated separately for fair value or the portfolio as a whole is measured on fair value. The starting point for fair value is the purchase cost or current amortized book value and the current fair value is the market value on that date. (A) Individual Security Valuation Basis Original Cost or Yr. End Yr. End Bond Coupon Amortized Cost Par Value Fair Value 1 8.00% 100,000 100,000 100,000 2 5.50% 520,000 500,000 540,000 3 6.50% 200,000 200,000 240,000 Totals 820,000 800,000 880,000 (B) Overall Portfolio Valuation Basis Original Cost or Yr. End Yr. End Amortized Cost Par Value Fair Value Portfolio 820,000 800,000 880,000 Year One Ending Positions and Fair Value Reporting (June 30, 1998) Regardless of the transactions that took place throughout the first year GASB reporting summarizes the portfolio on the closing date. Assuming the following data, the GASB adjustment entry would be based on the overall portfolio's position on June 30, 1998 comparing it to the June 30, 1997 valuation. Beg. Year End Year Amortized Cost Fair Value Fair Value Beg. Year Portfolio 820,000 880,000 End Year Portfolio 850,000 945,000 Technical Topics 4 January 1998 of realized gains and losses is optional. If they are reported it is only in the footnotes of the financial statements! When a capital gain/loss transaction occurs (investment sale or call), only the change in fair value of the current period is included in investment income. For example, a $100,000 bond carried at a fair value of $120,000 and sold for $110,000 would result in a $10,000 loss under GASB, but under the amortized cost method would result in a $10,000 gain. The-$10,000 is the total contribution of the sale to the investment income for the year under GASB. The realized gain of $10,000 can only appear in the notes. If a bond is held over several years the gains and losses may even out, however, it will float totally at the mercy of the market price. For this reason it is important for you to calculate and monitor Realized Gains/Losses on an amortized cost basis to assure that real losses do not go undetected. It will become necessary for each entity to maintain its amortized value records on an ongoing basis and then annually supply GASB fair value calculations for annual reporting purposes only. It is also important that impending fair value losses not drive an investment decision to take real losses which detrimentally affect the entity or its cash flow. Investment Reporting GASB reporting is directed toward your annual financial statements and the readers of the financial statements not the entities creating the statements. Therefore, every entity must chose its own level of calculations it needs for compliance. The GASB 31 Statement, Appendix C traces five securities over a two-year period and assumes that each security in a portfolio would be traced individually throughout the year for a one time entry in the annual financial reports. Most public entities portfolios however are controlled by cash flows which swell portfolios mid -year and spend out funds by year end. Detail reporting on each security throughout the year therefore has little impact on the fair value of the portfolio at the annual reporting date. Since GASB is requiring a point in time annual comparison of the portfolio for risk and valuation purposes, the requirements can be met much more easily and efficiently by a simple two step process. (A) The entity maintains all records on individual securities on an amortized cost basis. This allows the entity to make accurate and effective trading and valuation decisions. And, (B) the entity makes annual GASB fair value adjustments based on fair market values at year end. Naturally, this can also be done on a quarterly, or even monthly, basis for informational purposes. This approach is particularly important for entities with large portfolios and many transactions throughout the year and involve longer "GASB specific securities" bought and sold throughout the year. Year One Reporting Year One Beginning Positions (July 1, 1997 for example purposes only) The first year implementation process has exactly the same effect on GASB reporting if the securities are calculated separately for fair value or the portfolio as a whole is measured on fair value. The starting point for fair value is the purchase cost or current amortized book value and the current fair value is the market value on that date. (A) Individual Security Valuation Basis Original Cost or Yr. End Yr. End Bond Coupon Amortized Cost Par Value Fair Value 1 8.00% 100,000 100,000 100,000 2 5.50% 520,000 500,000 540,000 3 6.50% 200,000 200,000 240,000 Totals 820,000 800,000 880,000 (B) Overall Portfolio Valuation Basis Original Cost or Yr. End Yr. End Amortized Cost Par Value Fair Value Portfolio 820,000 800,000 880,000 Year One Ending Positions and Fair Value Reporting (June 30, 1998) Regardless of the transactions that took place throughout the first year GASB reporting summarizes the portfolio on the closing date. Assuming the following data, the GASB adjustment entry would be based on the overall portfolio's position on June 30, 1998 comparing it to the June 30, 1997 valuation. Beg. Year End Year Amortized Cost Fair Value Fair Value Beg. Year Portfolio 820,000 880,000 End Year Portfolio 850,000 945,000 Technical Topics 4 January 1998 The entry for change in fair value is summarized as: FY 1 Ending Fiscal year Fair Value 9459000 Add: Proceeds of Sales 250,000 Less: Cost of Purchases 330,000 Less: FYI Beginning Fiscal Year Fair Value-880,000 Change in Fair Value - 15,000 This decrease in fair value of < $15,000 > is required by GASB to be included in investment earnings. It will be added to the accruals for the year for the final entry. Earning Accruals Since the change in fair value represents only one of the components in GASB reporting we must also look at the interest accrued during the period. The accrued earnings would also be reported for the portfolio as a whole (as interest accrued for the entire period). This is based on the time held for each investment and would be reported under your amortized cost basis as the coupon interest earned throughout the year plus any interest accrued but not yet paid. On a detailed basis the calculation would be calculated as shown below. Accrued Earnings For Fiscal Year One Annual Coupon Par Interest 1 8.00% 100,000 8,000 2 5.50% 500,000 27,500 3 6.50% 200,000 13,000 4 6.00% 300,000 18,000 Investment Income: Total Accrued Earnings for the Period 51,000 Plus: Increase (Decrease) in Fair Value-15,000 Total Investment Earnings 36,000 (711197-6130198) Days Investment Held Income 360 8,000 360 27,500 180 6,500 180 9,000 51,000 Final Year One GASB Reporting With both the components of (a) change in fair value and (b) accrued interest, the entry can now be made for year end reporting. On the general ledger, the entity would be a debit of $15,000 in GASB Unrealized Gains/Losses and a credit to Fund Balance. Year Two Reporting Year Two ending GASB adjustments would be reported in the same manner as Year One with the exception that the beginning year fair value would be the amount reported as fair value at the end of Year One and not a difference from amortized book value. End of 2nd Year Positions and Fair Value Reporting (June 30, 1999) Beg. Year 2 End Year 2 Change in Fair Value Purchases Sales Fair Value Fair Value 945,000 310,000 440,000 850,000 35,000 The change in fair value is summarized as: Year 2 Ending Fiscal year Fair Value 8509000 Add: Proceeds of Sales 440,000 Less: Cost of Purchases -310,000 (or a net purchases/sales amt.) Less: Yr. 2 Beginning Fiscal Year Fair Value -945,000 Change in Fair Value 35,000 This increase in fair value of $35,000 is required by GASB to be reported as part of investment income. Accrued earning would again be added into the calculation for the final GASB entry: Technical Topics 5 j anuary i tcaa Total Accrued Earnings for the Period 47,500 Plus: Increase (Decrease) in Fair Value 35,000 Total Investment Earnings 82,500 Under GASB if separate security records are maintained the change in fair value is stated separately for each reporting period in the life of the security. Therefore if the portfolio is reported on an individual security basis you must prepare for a very long and complex spreadsheet! The entire portfolio valuation methodology simplifies this process. Making the Move to Fair Value Reporting in FY 97-98 The GASB Statement becomes effective for all governmental entities for fiscal years beginning after June 15, 1997. Therefore provisions must be made now to establish the fair value for all "qualified investments" at your 1996-1997 fiscal year end. This valuation will become the Beginning Fiscal Year Fair Value for 1997-98. It is very important to establish accurate market values for all investments at your fiscal year end. You should also identify how your values were established for disclosure purposes. The Statement requires the following disclosures: (a) The methods and assumptions used to estimate fair value, if that fair value is based on other than quoted market prices. (b) The policy for determining which investments are reported at amortized cost. (c) For investment in non -SEC registered external pools, a description of regulatory oversight and whether fair value of the entity's position is the same as the share value. Any involuntary participation in an external pool. (d) If information is not available from an external pool, the methods and assumptions used to determine fair value. (e) Any income from investments associated with one fund that is assigned to another fund. The following are steps to follow in preparing for the fair value conversion. These steps provide a simplified method to account and report GASB 31 requirements on fair value investment reporting. Remember that only certain investments are required to be included in the fair value reporting. Other investments, such as "2a-7 like" external pools and certain money market securities with less than one year to maturity at purchase, are carried at amortized cost. Step # 1 Identify the investments in your portfolio with maturities longer than one year (365 days) as ofthe date oftheir purchase and as ofJune 3 0, 1997 (assuming a 6/30 year end in this example case). We will call them "GASB specific securities" for this purpose. (There is some ambiguity in the Statement on this point of inclusion and until clarified you should check with your auditors for an interpretation.) Step #2 Obtain the fair value of the GASB specific securities from a reputable source. You can use the Wall Street Journal closing bid price for June 30, 1997 or have your portfolio marked to market by an independent broker or adviser. Independent pricing is always preferable. But, if a completely independent source is unavailable, use at least two sources (two broker/dealers for example) to verify prices. If there is a discrepancy, get a third opinion. Do not have the firm from which you purchased the security price the security. Step #3 Compare the market cost to the amortized book value (or original cost if preferred) of each GASB specific security. This gives you your unrealized gain/loss on that security. Step #4 After securing year end fair value numbers, you are in a position to adjust your entity's amortized cost basis to the GASB 31 fair value basis. Using the previous reporting example the following analysis will assist you in recording this transaction. Portfolio amortized cost basis at 7/l/97 Portfolio Fair Value cost basis at 7/l/97 Fund balance increase required Unrealized Gain/Loss Fund Balance Technical Topics Debit Credit 60,000 60,000 6 $ 820,000 880,000 $ 60,000 Description GASB 31 adjustment GASB 31 adjustment January 1998 Total Accrued Earnings for the Period 47,500 Plus: Increase (Decrease) in Fair Value 35,000 Total Investment Earnings 82,500 Under GASB if separate security records are maintained the change in fair value is stated separately for each reporting period in the life of the security. Therefore if the portfolio is reported on an individual security basis you must prepare for a very long and complex spreadsheet! The entire portfolio valuation methodology simplifies this process. Making the Move to Fair Value Reporting in FY 97-98 The GASB Statement becomes effective for all governmental entities for fiscal years beginning after June 15, 1997. Therefore provisions must be made now to establish the fair value for all "qualified investments" at your 1996-1997 fiscal year end. This valuation will become the Beginning Fiscal Year Fair Value for 1997-98. It is very important to establish accurate market values for all investments at your fiscal year end. You should also identify how your values were established for disclosure purposes. The Statement requires the following disclosures: (a) The methods and assumptions used to estimate fair value, if that fair value is based on other than quoted market prices. (b) The policy for determining which investments are reported at amortized cost. (c) For investment in non -SEC registered external pools, a description of regulatory oversight and whether fair value of the entity's position is the same as the share value. Any involuntary participation in an external pool. (d) If information is not available from an external pool, the methods and assumptions used to determine fair value. (e) Any income from investments associated with one fund that is assigned to another fund. The following are steps to follow in preparing for the fair value conversion. These steps provide a simplified method to account and report GASB 31 requirements on fair value investment reporting. Remember that only certain investments are required to be included in the fair value reporting. Other investments, such as "2a-7 like" external pools and certain money market securities with less than one year to maturity at purchase, are carried at amortized cost. Step # 1 Identify the investments in yourportfolio with maturities longerthan one year (365 days) as ofthe date oftheirpurchase and as ofJune 30,1997 (assuming a 6/30 year end in this example case). We will call them "GASB specific securities" for this purpose. (There is some ambiguity in the Statement on this point of inclusion and until clarified you should check with your auditors for an interpretation.) Step #2 Obtain the fair value of the GASB specific securities from a reputable source. You can use the Wall Street Journal closing bid price for June 30, 1997 or have your portfolio marked to market by an independent broker or adviser. Independent pricing is always preferable. But, if a completely independent source is unavailable, use at least two sources (two broker/dealers for example) to verify prices. If there is a discrepancy, get a third opinion. Do not have the firm from which you purchased the security price the security. Step #3 Compare the market cost to the amortized book value (or original cost if preferred) of each GASB specific security. This gives you your unrealized gain/loss on that security. Step #4 After securing year end fair value numbers, you are in a position to adjust your entity's amortized cost basis to the GASB 31 fair value basis. Using the previous reporting example the following analysis will assist you in recording this transaction. Portfolio amortized cost basis at 7/l/97 Portfolio Fair Value cost basis at 7/l/97 Fund balance increase required Unrealized Gain/Loss Fund Balance Technical Topics Debit Credit 60,000 60,000 6 $ 820,000 880,000 $ 60,000 Description GASB 31 adjustment GASB 31 adjustment January 1998 Portfolio amortized cost basis at 6/30/98 Portfolio Fair Value basis at 6/30/98 GASB Fair Value adjustment at 6/30/98 $ 850,000 945 000 $ 95,000 Debit Credit Description Unrealized Gain/Loss 95,000 GASB 31 adjustment Investments 95,000 GASB 31 adjustment The net unrealized gain in fair value of $3 5,000 (95,000-60,000) should be combined with realized gains/losses if any, and reported as changes in fair value on the Statement of Revenue and Expenditures. In addition, combine all interest, accrued interest, amortization of premium and discount, and increase in accredited values and report as investment income on the Statement of Revenue and Expense. The fund balance adjustment should be shown as a restatement of beginning fund balance or retained earnings, as appropriate. Step #5 On July 1, 1998, reverse the year end investment adjustment (Step #4) returning to an amortized book cost value) and record all investment transactions on an amortized cost basis throughout the year. This year end adjustment and reversal is similar to the accrued interest adjustment normally made at period ends. This method can also be used on interim financial statements released to the elected officials and/or general public. Step #6 Report the other exempted investments (non-GASB specific securities) such as securities with less than one year to maturity on a purchase or amortized cost basis. Step #7 As mentioned above, the reporting on realized gains and losses is optional to GASB in the notes of the financial statements; however, once realized gains/losses are recognized, two additional disclosure statements are required in the footnotes: "a) The calculation of realized gains and losses is independent of a calculation of the net change in the fair value of investments. " "b) Realized gains and losses on investments that have been held during more than one fiscal year, and sold in the current year, were included as a change in the fair value of the investments reported in the prior year(s) and the current year. Complying with GASB 31 and State Laws Many states have statutes, which require amortized book reporting. This was adopted to insure that entities knew the value of their portfolios in the real marketplace should liquidation become necessary for cash flow purposes. It also was established to indicate unacceptable levels of risk in the case of portfolios that had been extended. Longer maturities accept more volatility risk and are paid for that risk by higher yields. A portfolio which is significantly outperforming comparable indices (such as the Treasury Yield Curve) would indicate that some additional degree of risk is being absorbed. Portfolios that are significantly under -performing may indicate that the portfolio is too short or not using acceptable risk levels. For this reason, it is important for investors and oversight committees to look at several key indicators on a periodic basis. Beginning Market Value Gain/Loss (Book -Market) Beginning Book Value Weighted Average Maturity Ending Market Value Benchmarks (comparable maturity Treasury) Ending Book Value Because GASB 31 can distort the true amortized value of a security, and a security under GASB reporting can actually be in a loss position versus cash and show a gain — or the reverse situation, it is recommended that every entity maintain and report securities on both an amortized cost basis and the GASB basis as earlier described. However, for budgetary purposes the entity should budget on an amortized cost basis and show a reconciliation to GAAP in the footnotes for the Unrealized Net Gain/Loss. Remember that GASB 31 is required for annual financial statement purposes only. Monthly and quarterly reports can be produced on an amortized cost basis and adjusted for Realized Net Gain/Loss easily through the worksheet approach. This will undoubtedly Technical Topics 7 January 1998 require additional work for the investing entity but, the accuracy of the information and the accuracy with which risk can be assessed are vital to every governmental entity. Changes to your Investment Policy may be necessary also to ensure that the objectives of the portfolio and the reporting on that portfolio are clear. The address for GASB is: GASB 401 Merritt 7 P.O. Box 5116 Norwalk, CT 06856-5116 203-847-0700 internet: http://www.financenet.2ov/gasb.htm To order a copy of GASB 31: 203-847-0700, Ext. 10 Request Product Code GS31 Cost is $10.50 e-mail: gasb.org The Governmental Accounting Standards Board (GASB) is authoring "Guide to Implementation of GASB Statement 31 on Accounting and Financial Reporting for Certain Investments and for External Pools" for publication by April 15, 1998. This edition of Technical Topics was authored by MTA US&C's Subcommittee on Regulations. MTA US&C supports the use of recycled paper s Technical Topics is published by the Municipal Treasurers' Association of the United States and Canada 1229 Nineteenth Street NW, Washington, DC 20036 Phone: (202) 833-1017 • Fax: (202) 833-0375 Technical Topics Editor: Arthur Barnes, CMFA, Mobile, AL President., Elaine Goebel, CMFA, Auburn Hills, MI Executive Director: Stacey Crane Technical Topics 8 January 1998 require additional work for the investing entity but, the accuracy of the information and the accuracy with which risk can be assessed are vital to every governmental entity. Changes to your Investment Policy may be necessary also to ensure that the objectives of the portfolio and the reporting on that portfolio are clear. The address for GASB is: GASB 401 Merritt 7 P.O. Box 5116 Norwalk, CT 06856-5116 203-847-0700 internet: http://www.financenet.gov/izasb.htm To order a copy of GASB 31: 203-847-0700, Ext. 10 Request Product Code GS31 Cost is $10.50 e-mail: gasb.org The Governmental Accounting Standards Board (GASB) is authoring "Guide to Implementation of GASB Statement 31 on Accounting and Financial Reporting for Certain Investments and for External Pools" for publication by April 15, 1998. This edition of Technical Topics was authored by MTA US&C's Subcommittee on Regulations. MTA US&C supports the use of recycled paper Technical Topics is published by the Municipal Treasurers' Association of the United States and Canada 1229 Nineteenth Street NW, Washington, DC 20036 Phone: (202) 833-1017 4, Fax: (202) 833-0375 Technical Topics Editor: Arthur Barnes, CMFA, Mobile, AL President: Elaine Goebel, CMFA, Auburn Hills, MI Executive Director. Stacey Crane Technical Topics 8 January 1998