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2006 01 11 IAB Minutes INVESTMENT ADVISORY BOARD Meeting January 11, 2006 CALL TO ORDER Regular meeting of the La Quinta Investment Advisory Board was called to order at the hour of 5:30 P.N1. by Vice Chairperson Deniel, followed by the Pledge of Allegiance. PRESENT: Board Members Olander, Moulin, Deniel and Egbert ABSENT: Board Member Rassi OTHERS PRESENT: John Falconer, Finance Director and Vianka Orrantia, Secretary II PUBLIC COMMENTS III CONFIRMATION OF AGENDA Board Member Moulin suggested that first item of discussion should be item VI, Correspondence and Audited Financial Statements. Board concurred. IV CONSENT CALENDAR A. Approval of Minutes of the Meeting on December 14, 2005 for the Investment Advisory Board. MOTION -. It was moved by Board Members Moulin/Olander to approve the Minutes of December 14, 2005. Motion carried unanimously. V BUSINESS SESSION A. Transmittal of Treasury Report for November 2005 Mr. Falconer advised the Board that page 2 reflects the portfolio for the month of November, which did not change much, however there was a large decrease in LAIF and the monies were moved into Treasuries, which is reflected on page 6. This transaction was to gain a better yield; the investments purchased are currently at 4 %. Investment Advisory Board Minutes January 11, 2006 Board discussion ensued as to if and when the City would catch up with the current bench mark. Mr. Falconer informed the Board with the current reinvestments at 40/0 he is currently beating the benchmark. Mr. Falconer also informed the Board that in the current market it is hard to find Farm Credit Paper and asked the Board their feelings on Fannie Mae, which currently are at the same rate as Farm Credit Paper. The consensus of the Board was to go ahead and purchase Fannie Mae with the reservations of Board Member Olander. MOTION - It was moved by Board Members Olander/Moulin to approve, receive and file the Treasury Report for November 2005. Motion carried unanimously. VI CORRESPONDENCE AND WRITTEN MATERIAL A. La Quinta Fiscal Year 2004/05 Audited Financial Statements Mr. Falconer advised the Board of the name change Conrad and Associates to Mayer Hoffman McCann P.C. Mr. Falconer introduced Jennifer Christian, CPA, Senior Manager to the Board along with a brief history of her employment with the firm. Ms" Christian stated that she would review for the Board the Fiscal Year 2004/2005 Audited Financial Statements. Ms. Christian reviewed for the Board cash footnotes and the CAFR. She also reviewed the auditing of cash, investment compliance test work and auditing controls in cash and investments. Ms" Christian reviewed GASB 40 for the Board, located on page 40. This was the first year that government agencies had to implement GASB Statement 40. GASB Statement 40 changed the cash footnote; reaso'n for the ch~nge was to focus on risk areas in the area of investments such as interest rate risks, credit risks and custodial credit risk. Ms Christian reviewed GASB 40 format for the Board: Page 40: The first section is a summary of the cash investment 2 Investment Advisory Board Minutes January 11, 2006 position as of June 30, 2005. This section is broken down as to how it's reported on the financial statements, then broken down between deposits and investments. A significant amount of the summary reflects most of the City's balances are investments. Page 41 : Is a combination of what is authorized by the California government code and authorized by the City's internal Investment Policy. Listed on this page are the restrictions, such as maximum maturities and percentages that can be invested. This footnote was already in place in the previous year and is now a required element of GASB 40. Page 42: This page reflects the significant changes in reporting. It discloses interest rate risks and the footnotes define interest rate risk as the risk that changes in market interest rates that would adversely affect the fair value of investments. The note continues to state that the longer the maturity, the greater the sensitivity to the fair value of the changes in the market interest rates. The schedule listed reflects the maturity of the City's investments. The second column of the schedule reflects (3 months or less column) 55 % of the City's investments mature in three months or less. The first three columns make up a one year time period, (970/0 of the City's investments mature within one year); the interest rate risk is low for the City of La Quinta. Page 43: GASB 40 requires the City to disclose credit risk and credit risk is the risk that an insurer of an investment will not fulfill its obligation to the holder of the investment. This is typically measured by an investment rating. Treasury notes and bills are exempt from a rating; all other investments are usually Triple A or Double A rating. Other investments not rated, one example is LAIF. Concentration Credit Risk - GASB 40 requires that if there is more than 5 % of the portfolio in anyone insurer of an investment that a disclosure be made. Currently 5.4 % of the City's investments are invested in the Federal Home Loan Mortgage Corporation. Page 44: Custodial Credit Risk, this is the risk for deposits; in the event of a failure of a depository financial institution the government 3 Investment Advisory Board Minutes January 11, 2006 will not be able to recover the deposits. Currently all of the City's deposits are fully collateralized so there is no custodial credit risk. Board discussion ensued with questions and clarification on the 2004/05 CAFR. Noted and Filed B. Month End Cash Report and other Selected Data - December 2005 Mr. Falconer reviewed for the new Board member the month end cash report. Noted and Filed C. Pooled Money Investment Board Reports - October 2005 Noted and Filed VIII BOARD MEMBER ITEMS Board Member Moulin informed the Board that the terminology of the activities in the ad placed no longer hold true to the current activities of the Board. In addition, at the January 3rd City Council meeting not one of the applicants was present. Board Member Moulin contacted one of the candidates and the candidate informed Board Member Moulin he had not been notified. Mr. Falconer stated that he was not aware of what took place and would follow up with the City Manager and City Clerk. Board Member Moulin would like in the future 1) the ad for the newspaper updated and 2) to make sure that the candidates are notified in a timely manner. It was requested by the Board to add this item to the next scheduled Board meeting for reviewed of the ad and necessary changes and/or revisions. VIII Adjournment MOTION - It was moved by Board Members Moulin/Olander to adjourn the meeting at 6:50 p.m. Motion carried unanimously. 4 Investment Advisory Board Minutes January 11, 2006 Vianka Orrantia Secretary 5