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2008 12 10 IAB MinutesINVESTMENT ADVISORY BOARD Meeting December 10, 2008 CALL TO ORDER Regular meeting of the La Quinta Investment Advisory Board was called to order at the hour of 4:30 p.m. by Chairman Ross, followed by the Pledge of Allegiance. PRESENT: Board Members Ross, Rassi and Park ABSENT: Board Members Moulin and Deniel OTHERS PRESENT: John Falconer, Finance Director, Vianka Orrantia, Senior Secretary and Mr. Bryan Gruber of Lance Soll &Lunghard, LLP, CPA II Public Comment -None III CONFIRMATION OF AGENDA - Chairman Ross suggested that Section VI, item A be the first item of discussion. Board concurred. Chairman Ross suggested to staff that Section V, item B be postponed for discussion until the January meeting when Board Member Moulin is present. Board concurred. AT THIS TIME SECTION VI, ITEM A WAS DISCUSSED Mr. Bryan Gruber of Lance Soll, &Lunghard, LLP, CPA presented the Audited Financial Statement. Mr. Gruber advised that he would review the audit as it relates to the cash and investments and the City's reporting requirements as it is disclosed in the City's Comprehensive Annual Financial Report. Mr. Gruber further advised that the firm conducts two interim audits during the fiscal year and one additional audit at year-end. Mr. Gruber advised that this year's audit was subject to additional audit requirements based on the auditing standards, which consisted of an in-depth and detailed review of internal controls, (as part of the interim audit review were a review of internal controls specifically related to investments), in addition to a walk-thru of transactions and investment purchases. Mr. Gruber advised that there were no deficiencies or findings to be reported relating to their review of investments. Also included in the interim and year-end audits were a review of the investments for compliance to the Investment Policy, ayear-end audit of the city's cash and investments through confirmation of third party, (banking and institutions) and an audit of the reconciliation of cash and investments. Investment Advisory Board Minutes December 10, 2008 Mr. Gruber advised that the City did not record the GASB market value adjustment, therefore this item was reported and disclosed as an audit difference and considered to be immaterial to the financial statements. Mr. Gruber summarized the firm's audit review of the Comprehensive Annual Financial Report (CAPRI and it's compliance with GASB Statement 40, along with a summary of GASB Statement 40. Mr. Gruber advised that there were no material violations to be noted. Mr. Gruber reviewed the footnote on page 45, which discloses the city's cash on hand as of June 30, 2008 at S 197,368,414 in addition to the city's investment policy and restrictions and limitations. Mr. Gruber further advised that the footnote also discloses the city's policy as it relates to credit rating along with the credit ratings as of June 30, 2008. Also disclosed in the footnote was segmented time distribution of the portfolio as of June 30, 2008. Mr. Gruber advised that GASB Statement 40 requires a disclosure of investments with issuers that exceed 5% of the portfolio which is reflected on page 47 of the CAFR. Mr. Gruber further advised that the statement and the footnote disclose the city's risk related to custodial credit risk. In response to Chairman Ross, Mr. Gruber advised that the interim audit was subject to additional standards that were not previously implemented, and therefore resulted in the in-depth and detailed audit. In response to Board Member Park, Mr. Gruber advised that all audits are scheduled. In response to Chairman Ross, Mr. Gruber advised that the LAIF balances are confirmed directly through the LAIF Pool. In response to Board Member Park, Mr. Gruber advised that they do no review LAIF's audits. In response to Chairman Ross, Mr. Gruber advised that the reporting of post retirement benefits is a result of GASB Statement 45 which requires all cities to report their liabilities associated with other posted benefits provided, which will be implemented by June 30, 2009. In response to Chairman Ross, Mr. Gruber advised that the number of retirees and the amount of benefits to be paid out will determine the liability and its materiality. Board Member Rassi complemented Mr. Gruber on his overview. In response to Chairman Ross, Mr. Falconer advised that with the new statement of auditing standards the firm cannot conduct two roles within a city, 2 Investment Advisory Board Minutes December 10, 2008 (i.e. management service and audit firm). Mr. Gruber advised that these two functions are required to be separated. In Board Member Moulin's absence, Mr. Falconer asked Mr. Gruber to comment on the cash flow statement within the Treasurer's report. Mr. Gruber advised that a cash flow analysis is performed by the City to determine cash needs for the next six months, along with determining how much should be invested and how much should remain liquid. Mr. Gruber also advised that part of the audit is to audit the cash flow analysis and advised that there were no findings to be reported. Chairman Ross on behalf of the Board thanked Mr. Gruber for his report. Noted and Filed IV CONSENT CALENDAR A. Approval of Minutes of Meeting on November 12, 2008 for the Investment Advisory Board. MOTION - It was moved by Board Members Park/Rassi to approve the minutes of November 12, 2008. Motion carried unanimously. V BUSINESS SESSION A. Transmittal of Treasury Report for October, 2008 Mr. Falconer presented and reviewed the staff report advising the Board that the portfolio has declined by 57 million due to the construction activities, with the main construction project on 48`"Avenue and Adams. The payments for 48`" Avenue and Adams are near complete with the retention on the contract remaining. Mr. Falconer advised that the average portfolio has increased slightly by four days to fifty-five days, with investments mainly in T-Bills; as a result the yields will decline in the upcoming months, with the current yields down slightly by three basis points. Mr. Falconer advised that upon review of the sweep account and the decrease of the sweep earnings it was decided to discontinue the sweep account at this time, as a result that bank costs will be paid out of the earning analysis. 3 Investment Advisory Board Minutes December 10, 2008 In response to Chairman Ross, Mr. Falconer advised that correct term when the bank fees are more than the earnings is net decrease. In response to Board Member Rassi, Mr. Falconer advised that the city has never paid hard dollar costs on the sweep account previously due to the interesting earnings on the account. Mr. Falconer advised that the last of the GE Capital commercial paper held by the City matured at 5.2% and was rolled into a T-Bill at 1.368%. He further advised that due to the current economy, he would not be investing in commercial paper at this time. Chairman Ross commended staff on incorporating the suggested changes to page 7 of the Treasurer's Report. Chairman Ross stated that the words "Bond Draw" were still reflected in the second column under "Investments Sold/Matured Section," and it was his recollection that they were to be removed. After general discussion amongst the Board and staff it was agreed that staff review the previous meeting minutes and report back to the Board with their findings. Mr. Falconer advised that page 9 reflects a major change in the cash flow due to a purchase of the Washington Street Apartments near Darby Street, purchased in the month of October for 54.1 million. MOTION - It was moved by Board Members Park/Rassi to approve, receive and file the Treasury Report for October 2008. Motion carried unanimously. B. Continued Consideration of the Fiscal Year 2008/2009 Work Plan The Board agreed to continue discussion of the Fiscal Year 2008/2009 Work Plan to the January meeting. MOTION - It was moved by Board Members Park/Rassi to approve the suggested changes and continue the discussion of the Fiscal Year 2008/09 Work Plan to the January meeting. Motion carried unanimously. VI CORRESPONDENCE AND WRITTEN MATERIAL A. City of La Quinta FY 2007/2008 Audited Financial Statements Noted and Filed 4 Investment Advisory Board December 10, 2008 Minutes B . Month End Cash Report -November, 2008 Mr. Falconer presented and reviewed the Month End Cash Report advising that the interest rates have declined and page 3 of the report reflects the following for the month of November: 3-month Bill was previously at 1.5% and is now down at .005%; 6-month Bill was purchased at S2 million with the bill yielding on December 11, 2008 at 2.3%. Mr. Falconer also advised that page 11 reflects the LAIF rates with a slight decline from September 30, 2008 at 2.77% to the month of October 30, 2008 at 2.51 % with the overall portfolio at 563 billion. General discussion ensued amongst Board the regarding the economy and foreclosures within the city. Noted and Filed C. Pooled Money Investment Board Report -September, 2009 In response to Chairman Ross, Mr. Falconer advised that most cities at this time are reducing their investments in LAIF due to immediate cash needs but also advised that if other agencies need to invest their monies that LAIF would be a safe investment at this time. Mr. Falconer advised that due to the current California economy there might be some hesitation to invest in LAIF for fear of the state impounding funds, which the state cannot do. Noted and Filed D. November 25, 2008 Joint Meeting Minutes with the City Council Mr. Falconer advised that the meeting minutes for the joint meeting with City Council were not available; upon availability they would be forwarded to the Investment Board. Mr. Falconer also advised that during the joint meeting staff was directed to include in the agenda the Marketing and Economic Development Marketing Plan. Chairman Ross advised that these items derived from his question regarding business incubator activities. In response to Board Member Rassi, Mr. Falconer advised that the Economic Development Division in the City Manager's office prepares the reports. 5 Investment Advisory Board December 70, 2008 Minutes VII BOARD MEMBER ITEMS Chairman Ross advised that there was one item for discussion but due to Board Member Deniel's absence that this item would be discussed at the next scheduled meeting. VIII Adjournment MOTION - It was moved by Board Members Rassi/Park to adjourn the meeting at 5:30 p.m. Motion carried unanimously. Su fitted Vianka Orrantia, Senior Secretary 6