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2009 12 09 IAB MinutesINVESTMENT ADVISORY BOARD MEETING December 9, 2009 CALL TO ORDER Regular meeting of the La Quinta Investment Advisory Board was called to order at the hour of 4:00 p.m. by Vice Chairman Park, followed by the Pledge of Allegiance. PRESENT: Board Members Olander, Moulin, Park and Rassi ABSENT: Board Member Ross OTHERS PRESENT: John Falconer, Finance Director, Vianka Orrantia, Senior Secretary and Bryan Gruber, Lance Soll & Lunghard LLC, Audit Manager II. PUBLIC COMMENTS -None. III Confirmation of Agenda Mr. Falconer requested that the three handouts be added to the agenda: Interim Revision of the 2009-2010 Investment Policy prepared by Board Member Moulin and a letter from Board Member Olander addressed to the Mayor to be added for discussion under Board Member items; and an email follow-up to Pam Milliron, LAIF Administrator at the request of Chairman Ross and Board Member Moulin to be added for discussion under "Correspondence and Written Material," Item B. IV CONSENT CALENDAR A. Approval of Minutes of Meeting on November 4, 2009 for the Investment Advisory Board. Board Member Moulin requested that the following correction be made to page 5, first sentence; Board Members Park and 81ar~der Moulin volunteered to [...1 In response to Board Member Moulin, Mr. Falconer confirmed that the first paragraph on page 2, fourth sentence, "the current TLGP risk weighted factor declined from 20% to 0%," was correct. MOTION: It was moved Board Members Rassi/Olander to approve the minutes of November 4, 2009 as amended. Motion carried unanimously. V VI Mr. Falconer requested that Correspondence and Written Material Item A be discussed in order to meet the schedule of the presentation by the auditor. Board concurred. BUSINESS SESSION A. Transmittal of Treasury Report for October 2009 Mr. Falconer presented and reviewed the staff report advising the Board that page 2 reflects a slight decrease in cash by 54 million due to a two month payment of police services, asemi-annual debt service payment of 5500,043 and 5909,000 of various capital projects payments. Mr. Falconer further advised that page 7 reflects a decrease in the portfolio due to a maturity of a Treasury Bill and the current need for cash in the month of October. The report also reflects a slight decline in the yields by three basis points finishing the month at .50%. Mr. Falconer advised that pages 5 & 6 the unrealized gain and loss, the report currently reflects an unrealized gain. MOTION - It was moved by Board Members Moulin/Olander to approve, receive and file the Treasury Reports for October 2009. Motion carried unanimously. B. Continued Consideration of the Fiscal Year 2009-2010 Work Plan Motion - It was moved by Board Members Olander/Moulin to continue the discussion of the 2009-2010 Work Plan. Motion carried unanimously. CORRESPONDENCE AND WRITTEN MATERIAL A. City of La Quinta FY 2008-2009 Audited Financial Statements Mr. Bryan Gruber of Lance Soll, & Lunghard, LLP, Audit Managers presented the Audited Financial Statement. Mr. Gruber advised 2 that he would review the audited financial statements, the audit process and the city's cash and investments as presented in the financial statements. Mr. Gruber advised that the audit is conducted in two phases, : an interim audit which occurs during the fiscal year, and a subsequent interim audit phase after the end of the fiscal year. Mr. Gruber also advised that the audit's focus during the fiscal year is on internal controls, processes of the City, and a test of internal controls; in addition, an audit of cash and investments consisting of reconciliations of cash and investments, procedures and controls over purchases and sales of investments along with compliance with the investment policy. At the end of the fiscal year, the audit's focus is on balances and amounts reported in the financial statements, cash and investments include independent third party confirmation and testing of the reconciliations. In response to Board Member Moulin, Mr. Gruber advised that cash balances are confirmed 100%. Mr. Gruber advised that at the conclusion of the audit there are three letters issued, one One of the letters is an independent audit report, which is included in the financial statements; the letter expresses an unqualified opinion on the financial statements, (which is the best opinion an entity can receive in a financial audit-, in addition, there are two communication letters: a management letter, and an audit letter which describes the process of the audit and/or describes any issues as a result of the audit. Mr. Gruber further advised that there was one material audit adjustment related to payables and one immaterial audit variance that was not booked due to immateriality but related to the fair value of cash and investments at June 30, 2009. Mr. Gruber further advised that the GASB 31 adjustment was the fair value adjustment that was not recorded, which was approximately 570,000. Mr. Gruber also advised that this year the City implemented Governmental Standard Board Statement 45 which related to the accounting and reporting of post-employment benefits other than pensions, a footnote disclosure and other amounts were reported in the financial statements. 3 In response to Board Member Moulin, Mr. Gruber advised pension benefits are similar in nature to post employment health care benefits. Mr. Falconer advised that Note 15 gives an explanation of the pension benefits and summarized the reason for the payment. Mr. Gruber touched on a few of the highlights of the financial statement as follows: The government wide net assets increased from the prior year by 3% with the City's general fund reporting unreserved fund balance at approximately S46 million, which is approximately 133% annual of the Annual General Fund Budget. Page 41 -Note 3 reporting of cash and investments governed by GASB Statement 40; which is designed to provide a comprehensive overview of the City's cash and investments and discuss how the City is managing its risk as related to its investment portfolio. The City reported approximately S193 million in cash and investments, which is a 2% decrease in comparison to this time last year. The table provided in the note reflects the range of maturities of the investment portfolio, which 94% of the investments are short-term. The City's investments as of June 30 were rated by the rating agencies within the parameters of the City's investment policy. Mr. Gruber advised that GASB 40 requires a separate note disclosure for any investments with any one issuer that exceeds 5%, which the City did not have as of June 30, 2009nor did the City have custodial credit risk to report. In response to Board Member Moulin, Mr. Falconer advised that the asterisk referenced on page 42 is referring to five-year investments, which is required by state law. Board Member Moulin stated that this might be something that will need to be reviewed next year. In response to Board Member Park, Mr. Falconer explained the assumptions used to in the long-term financial plan. In response to Board Member Moulin, Mr. Gruber advised that he was not aware of any Governmental Accounting Standards similar to those of the Financial Accounting Standards 168. 4 Mr. Falconer asked the Board if they wanted to review the audit letters which could be included in next months agenda. It was the conclusion of the Board not to review the audit letters. The Board thanked Mr. Gruber for his presentation. B. Month-End Cash Report and other selected Financial Data -August 2009 Mr. Falconer presented and reviewed the Month-End Cash report advising the Board that page 3 reflects the current LAIF rates at .59% with the City at .50%. Mr. Falconer also advised that page 4 reflects the recent bill results with the three-month bill at .03% and the six-month at .15%. He further advised that the notes report will be included in next months report, due to the investment of the two year notes. In response to Board Member Rassi, Mr. Falconer advised that he contacted Pam Millirin from LAIF and she advised that the reason for the decrease in the loans were due to the issuance of government obligation bonds earlier in the year, which decreased the amount of the loans to 9%. Noted and Filed C. Pooled Money Investment Board Reports -September 2009 Noted and Filed D. October 27, 2009 Joint Meeting Minutes with the City Council Noted and Filed VII BOARD MEMBER ITEMS Board Member Olander presented his letter to the Board advising that the letter was sent to the Mayor and the City Council for their consideration in allowing him to continue to serve on the board. Upon his appointment in June, Board Member Olander stated he was not made aware that he had to reside within the city in order to serve on the Board, he further stated had he known prior to his appointment he would not have reapplied to the Board. Board Member Olander asked the Board for their support, with Board Members Rassi and Park 5 volunteering to write a letter to the Mayor and City Council on Board Member Olander's behalf. Board Member Moulin advised the Board that he and Chairman Ross met with Mr. Falconer regarding increasing the limit in TLGP Corporate Notes to 20% of the portfolio. Board Member Moulin requested that this item be placed on the January agenda for the Board's consideration and approval. VIII ADJOURNMENT MOTION - It was moved by Board Members Rassi/Olander to adjourn the meeting at 4:45 p.m. Motion carried unanimously. S bmitt ~~ Vianka Orrantia, Senior Secretary 6