Loading...
2000 01 12 IAB Minutes INVESTMENT ADVISORY BOARD Meeting January 12, 2000 I CALL TO ORDER Regular meeting of the La Quinta Investment Advisory Board was called to order at the hour of 5:30 P.M. by Chairperson Osborne, followed by the Pledge of Allegiance. PRESENT: Board Members Irwin, Lewis(5:47), Moulin, Mahfoud(5:43), Olander, and Chairman Osborne ABSENT: Board Member Bulgrin OTHERS PRESENT: Ken Al-Imam, Conrad & Associates, John Falconer, Finance Director and Debbie DeRenard, Secretary II PUBLIC COMMENT- None III CONFIRMATION OF AGENDA- Confirmed IV CONSENT CALENDAR A. Approval~ of Minutes of Meeting on December 8, 1999 for the Investment Advisory Board. Chairman Osborne advised that he was not present at the December meeting and the minutes need to be changed to reflect Vice Chairman Mahfoud as calling the meeting to order. Board Member Moulin advised that the minutes' need to reflect that he was not present at the meeting in December. MOTION - It was moved by Board Members Irwin/Moulin to approve the Minutes of December 8, 1999 as corrected. Motion carried unanimously. Investment Advisory Board January 12, 2000 Minutes V BUSINESS SESSION A. Transmittal of Treasury Report for November 1999 Board Member Irwin noted the decrease in the investment in LAIF. Mr. Falconer advised that on the December "snapshot" report it indicates the LAIF investment amount is down 5% million to 6 million dollars. He further advised that the investment is well below the required benchmark set forth in the Investment Policy. In response to Board Member Moulin, Mr. Falconer advised that on page five the column - Expected Maturity Value will be changed to reflect the par value amount for the securities purchased in November. MOTION - It was moved by Board Members Irwin/Olander to review, receive and file the Treasurers Report for November 1999. Motion carried unanimously. VI CORRESPONDENCE AND WRITTEN MATERIAL A. City of La Quinta FY 98/99 Audited Financial Statement Mr. Falconer introduced Mr. Ken Al-Imam of Conrad & Associates who will present the Audited Financial Statement to the Board. Ken Al-Imam presented the audited financial statement advising that the purpose of the audit is to ascertain whether the financial statements of the City are in 100 percent compliance. He further advised that the auditing profession has set forth specific procedures when performing audits for local governments and entities. He explained that his firm has developed an investment compliance checklist that subjects the City's investments to compliance in 43 different areas. Investment Advisory Board January 12, 2000 Minutes In response to Board Member Irwin, Mr. Al-Imam advised that the investment in LAIF is verified directly by Conrad and Associates with the LAIF Investment Office in Sacramento. Even though the firm reviews the statements from LAIF that is sent to the City they do not rely upon the statements - the investment is confirmed directly with LAIF. In response to Board Member Irwin, Mr. Al-Imam advised that his firm services 35 cities in California and in regards to mark-to-market only one city out of 35 makes an entry in their general ledger each month to adjust their investments to market value. Most of the cities just show cost in the treasurer's report and at the end of the year, they will present the market value in the financial statements. The accounting standard states that if there is a big difference between market value and amortized costs - then it has. to be shown on the financial statement. In response to Board Member Irwin, Mr. Al-Imam clarified that some municipalities do account for investments on a mark-to-market. Mr. Falconer advised that if the City did account for investments on a mark-to-market, the gain or loss would have to be spread across all thirty funds. In response to Board Member Irwin, Mr. Falconer advised that the new reporting standard goes into effect in the year 2002/03. He advised that the City will still be required to prepare the current statements, but in addition the City will need to prepare some consolidating statements. Mr. Al-Imam advised that it will look a little different, but it will have the exact same data that is reported under the current accounting standards. There will just be two additional schedules in the front of the report. In response to Board Member Moulin, Mr. Al-Imam advised that as it relates to cash investments there were no audit test exceptions. He further advised there were no audit adjustments made or proposed in this area and he had no disagreements. 'He further advised that the only comment made regarding cash and investments was in that all local 3 Investment Advisory Board January 12, 2000 Minutes governments are struggling with the very strict 30-day timeline in the state government code that requires municipalities to reconcile accounts, bank and investment statements and do the allocations to all the funds and prepare a treasurers report for the City Council within 30 days of the end of each quarter. Virtually none of the firms' clients can make this deadline. As auditors the firm is required to communicate when an exception is made against the Government Code. This has been communicated to the Finance Director, but the firm does not consider this to be a material instance of a noncompliance, it is a very difficuit objective to accomplish in the State Government Code. Mr. Falconer advised that in addition to the Treasurers Report, Staff submits to the City Council an investment summary that lists the investments and pooled cash that the City has on hand each quarter. In response to Board Member Irwin, Mr. Falconer advised that the thirty- day period is hard to accomplish due to the fact that the City does not receive the bank statements or the fiscal agent statement until the middle of the month. He advised that he prepares an investment summary report for the City Council and will include it in the lAB agenda packet in February. Board Member Moulin advised that the comments by Mr. Al-Imam give him a lot of comfort and he appreciates his firm attending the meeting. Mr. Al-Imam advised that the City of La Quinta's Investment Committee, the City Council and Staff have done a very good job raising the standards for the City of La Quinta. There are no weaknesses that need to be attended to at this time. The firm is satisfied with the internal controls of the City. B. Month End Cash Report- December 1999 Noted and Filed. 4 Investment Advisory Board January 12, 2000 Minutes · C. Pooled Money Investment Board Reports - October 1999 Board Member Irwin advised that in response to Pat Beal's comments regarding investing in small banks in order to spread money to local banks, he advised that he disagrees with her comments and feels that the rate that LAIF earns investing in small banks benefits the small banks because they can pick up 10 - 15 basis points which are in the banks favor and goes against the State. LAIF is getting less than market yields by investing in local banks and there is to some extent a safety issue. Mr. Falconer advised that it was described to him by LAIF that they were able to get a higher yield on some collateral CD's compared to what they would have received on a T-bill or T-note. This was one of the reasons given for investing in small banks. In response to Chairman Osborne, Mr. Falconer advised that the time frame on the CD's ranges from six months to one year. Board Member Lewis advised that he is not real concerned over the safety issue, but he found their reasoning behind reverse repurchase agreements to be interesting. He advised that he feels that this is "classic yield chasing." Anytime you start to chase yields, you leave yourself open to problems. He further advised that his personal opinion is that LAIF is becoming a less attractive investment vehicle. He suggested rolling some of the commercial paper over and reduce the reliance on LAIF. In response to Chairman .Osborne, Mr. Al-Imam advised that it is not the firms' roll to comment on investment strategies of LAIF. He further advised that the firm encourages their clients as a part of their internal control to look at LAIF's investment policies and practices and make sure it's consistent with the agencies' investment policies. In response to Board Member Olander, Mr. Al-Imam advised that a lot of his clients have 40 to 50 percent of their investments with LAIF. He advised that this isn't a guideline. As a rule of auditors they do not comment on investments. He further advised that he is not sure that all his clients have been as conscientious as the City of La Quinta - Investment Advisory Board asking the right questions and looking at LAIF with the scrutiny that's warranted. Investment Advisory Board January 12, 2000 Minutes Board Member Lewis advised that he's still comfortable with LAIF to an extent, but less comfortable than he was previously. Chairman Osborne advised that he feels LAIF is a necessary investment vehicle for the City in regards to liquidity. At the City's standpoint of having less than twenty percent invested in LAIF there is not a need for concern, but he feels that LAIF's percentages in certain investments are growing in the wrong direction from where they were one year ago. Board Member Irwin suggested investing more with money market funds and banks in the context of liquidity and buying shorter term paper. Mr. Falconer advised that from Staff's standpoint a large amount of bond proceeds are already invested in mutual funds. He further advised that currently the City could be fine investing in these mutual funds but when the City issues future assessment bonds (which the City is planning on in the future), the City will have five million dollars come in and this will all have to be re-evaluated. He advised that LAIF also has same day liquidity and they do not have to meet the SEC requirements of money market funds. He advised that he would be hard pressed to meet the 20 percent for mutual funds as set forth on the Government Code. In response to Board Member Irwin, Mr. Falconer advised that 30-day commercial paper would be a lot of work and does not give same day liquidity without market risk. He further advised that if the City had to write an emergency check it would be a problem. He further advised that he doesn't' recommend the total elimination of LAIF as an investment vehicle. Board Member Moulin advised that as the City grows, Staff is going to have to devote more time in actively managing the investment portfolio. VIII BOARD MEMBER ITEMS - None In response to Board Member Moulin, Mr. Falconer advised that historically the Board begins review of the investment.'policy in March. Investment Advisory Board January 12, 2000 Minutes Board Member Moulin requested that at the time the Board begins to review the Investment Policy he would like the document that he prepared regarding San Bruno, Santa Rosa and Oceanside brought back to the Board. IX ADJOURNMENT MOTION - It was moved by Board Members Lewis/Moulin to adjourn the meeting at 6:23 p.m.. Motion carried unanimously. Submitted by, Debbie DeRenard Secretary