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HomeMy WebLinkAbout2002 01 28 Regular E Investment Policy Amendment 012802 Reg E Investment Policy Amendment.doc COMMISSION AGENDA ITEM E CONSENT INFORMATIONAL PUBLIC HEARING REGULAR X 01/28/02 Meeting MGR. j2---- IDEPT Authorization REQUEST: City Manager requesting the City Commission to amend Section "XVII Investment Committee" of the Winter Springs Investment Policy, amending the composition of the Investment Committee, and adding Section XVII.1 "Investment Oversight Committee" providing for legislative oversight by the City Commission, and amending "Section VI Ethics and Conflicts" to disclose conflicts to the Oversight Committee. PURPOSE: This agenda item is needed to clarify roles and responsibilities of the Investment Committee and to improve the oversight provisions of Section XVII. CONSIDERATION: On September 10, 2001 the City Commission approved the City of Winter Springs Investment Policy. This policy was adopted to establish the framework in which the staff would manage idle funds. The city attorney, financial consultant, finance director and I have been reviewing the policy in an effort to provide improved segregation of duties and oversight of responsibilities. Section XVII Investment Committee was provided to perforn1 administrative provisions relative to implementation of the investment policy established by the Commission. It was also envisioned that the committee would perforn1 an oversight function by inclusion of a City Commissioner on the committee. Although the intent was good, as written this section has a number of problems that compromise the checks and balances and segregation of duties essential for sound financial management and government accountability. These flaws may not appear to be of great importance. However, they are similar to the flaws in accountability that resulted in the collapse of ENRON and the Savings and Loan Institutions in the 80's. I. The separation of legislative oversight responsibilities and administrative responsibilities is not well enough defined resulting in a co-mingling of legislative oversight and ministerial functions. This is clearly inconsistent with the segregation of powers concept of checks and balances in council manager government and good financial practice. 2. The current policy provides for staff to oversight itself. It is impossible for staff to effectively oversight itself. Oversight has to be done by an entity at arn1S length to day to day administration. Additionally, oversight in a legislative function not an administrative function and should be separated from administration to be effective. 3. Thus, the appropriate body for oversight is the City Commission as a body, not individuals of the Commission, and certainly not individuals of the Commission who are immersed in administration rather than at arms length with administration. The oversight function of the City Commission is so essential to maintaining the checks and balances of city government that is imperative that the oversight function not be compromised by entrusting that function to one member of the body. Additionally, the city controller should not be involved in treasury management transactions (investment transactions) since he is required to audit these transactions. The segregation of treasury and accounting functions is imperative. In order to provide for a more appropriate segregation of duties and more effective oversight the following recommendations are made: a) The investment committee should be involved only in administrative implementation of the investment policy approved by the Commission. b) The oversight function of the committee should be transferred to the City Commission as a body. FUNDING: None RECOMMENDATION: Staff is recommending the Commission make the following amendments to the Investment Policy to accomplish the above recommendations. A. Amend Section XVII Investment Committee as follows: 1. Delete the Commission member pOSItIon from the Investment Committee making it a ministerial committee exclusively. 2. Replace the Controller's position on the Investment Committee with the Revenue Collection Manager/City Treasurer position segregating the accounting and auditing function from the Treasury and Investment functions. B. Add Section XVILl Investment Oversight Committee transferring oversight responsibilities to the Commission as follows: XVII.] Investment Oversight Committee. The City Commission shall serve as the Investment Oversight Committee and shall be responsible for monitoring the results of investments and compliance with the investment policies provided herein. The City Manager shall file a report with the Investment Oversight Committee quarterly verifying investment transactions and results. C. Amend Section VI Ethics and Conflicts as follows: Also employees involved in the Investment Committee and or investment process shall disclose to the Oversight Committee any material financial interest in financial institutions that conduct business with the City, ATTACHMENTS: I) Section XVII Investment Committee Policy. 2) Section VI Ethics and Conflicts of Interest. COMMISSION ACTION: XVII. INVESTMENT COMMITTEE The Finance Director with the approval of the City Manager will establish an Investment Committee for the purpose of formulating alternative investment strategies and short-range directions within the guideline herein set forth and for monitoring the performance and structure of the City's portfolio. The Committee shall include the Finance Director as Chairman, the City Controller, a Commission member and the City's financial/investment advisor, and may include other members as may be designated by the City Manager from time to time. A designee of the Finance Director wilI provide the Committee members with current market information, an updated portfolio listing and analysis, and various pertinent financial data. The Committee, or quorum of the committee shall meet as often as deemed necessary, under the given conditions, to review, discuss and affirm or alter the current investment strategy and perform other functions as herein provided. The Investment Committee activitiesshalI include but not be limited to review and setting investment strategies; review and establishing of written investment procedures; review and approval of bank and other rating agency services; review and approval of source documentation regarding issuers, institutions and dealers, and any other functions as"defined herein. XVIII. INVESTMENT POLICY ADOPTION The Investment Policy shall be adopted by the City in writing. The Finance Director, Controller, and the Investment Committee shall review the policy annually and submit recommendations to the City Manager for review and approval. If a change in the Policy is recommended for approval by the City Manager, the Finance Director will prepare the necessary report to Commission. APPROVED AND ADOPTED BY THE CITY COMMISSION ON SEPTEMBER 10,2001. Title: Title: Title: City of Winter Springs Investment Policy Page 15 with like aims by diversifying the investments of the funds, so as to minimize the risk, considering the probable income as well as the probable safety of their capital. VI. ETHICS AND CONFLICTS OF INTEREST Employees involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions. Also, employees involved in the investment process shall disclose to the Investment Committee any material financial interests in financial institutions that conduct business with the City, and they shall further disclose any material personal financial/investment positions that could be related to the performance of the City's investment program. VII. INTERNAL CONTROLS AND INVESTMENT PROCEDURES The Finance Director shall establish a system of internal controls and operational procedures that are in writing and made a part of the City's operational procedures. The internal controls should be designed to prevent losses of funds, which might arise from fraud, employee error, and misrepresentation by third parties, or imprudent actions by employees. The written procedures should include reference to safekeeping, repurchase agreements, separation of transaction authority from accounting and record keeping, wire transfer agreements, banking service contracts, collateral/depository agreements, and "delivery vs. payment" procedures. No person may engage in an investment transaction except as authorized under the terms of this policy. These procedures are intended to reduce to a relatively low risk that material losses may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Independent auditors as a normal part of the annual financial audit to the City shall conduct a review of the system of internal controls to ensure compliance with policies and procedures. VIII. CONTINUING EDUCATION The Finance Director, management designee and/or appropriate staff shall annually complete 8 hours of continuing education in subjects or courses of study related to investment practices and products. IX. AUTHORIZED INVESTMENT INSTITUTIONS AND DEALERS Authorized City staff and Investment Advisors shall only purchase securities from financial institutions, which are Qualified Institutions by the City or institutions designated as "Primary Securities Dealers" by the Federal Reserve Bank of New York. Authorized City staff and Investment Advisors shall only enter into repurchase agreements with financial institutions that are Qualified Institutions and Primary Securities Dealers as designated by the Federal Reserve Bank of New York. The Finance Director, management designee and/or the Investment Advisors shall maintain a list of financial institutions and broker/dealers that are approved for investment purposes and only firms meeting the following requirements will be eligible to serve as Qualified Institutions: J) regional dealers that qualify under Securities and Exchange Commission Rule 15C3-1 (uniform net capital rule); 2) Cap~tal of no less than $10,000,000; City of Winter Springs Investment Policy Page 5 Investment Policy City of Winter S'prings, Florida Approved by the City Commission . on September 10, 2001 and amended on January 28, 2002 Table of Contents Page I. PURPOSE 3 II. SCOPE 3 III. INVESTMENT OBJECTIVES 3 IV. DELEGATION OF AUTHORITY 4 V. STANDARDS OF PRUDENCE 4 VI. ETHICS AND CONFLICTS OF INTEREST 5 VII. INTERNAL CONTROLS AND INVESTMENT PROCEDURES 5 VIII. CONTINUING EDUCATION 5 IX. AUTHORIZED INVESTMENT INSTITUTIONS AND DEALERS 5 X. MA TURITY AND LIQUIDITY REQUIREMENTS 6 XI. COMPETITIVE SELECTION OF INVESTMENT INSTRUMENTS 6 XII. AUTHORIZED INVESTMENTS AND PORTFOLIO COMPOSTION 7 XIII. DERIVATIVES AND REVERSE REPURCHASE AGREEMENTS 13 XIV. PERFORMANCE MEASUREMENTS 13 XV. REPORTING 14 XVI. THIRD-PARTY CUSTODIAL AGREEMENTS 14 XVII. INVESTMENT COMMITTEE 15 XVII.I. INVESTMENT OVERSIGHT COMMITTEE 15 , XVIII. INVESTMENT POLICY ADOPTION 16 City of Winter Springs Investment Policy Page 2 City of Winter Springs Investment Policy I. PURPOSE The purpose of this policy is to set forth the investment objectives and parameters for the management of the funds of the City of Winter Springs, (hereinafter "City"). These policies are designed to ensure the prudent management of public funds, the availability of operating and capital funds when needed, and an investment return competitive with comparable funds and financial market indices. II. SCOPE In accordance with Section 2 I 8.415, Florida Statues, this investment policy applies to all cash and investments held or controlled by the City and shall be identified as "general operating funds" of the City with the exception of the City's Pension Funds and funds related to the issuance of debt where there are other existing policies or indentures in effect for such funds. Additionally, any future revenues, which have statutory investment requirements contlicting with this Investment Policy and funds held by state agencies (e.g., Department of Revenue), are not subject to the provisions of this policy. III. INVESTMENT OBJECTIVES Safety of Principal The foremost objective of this investment program is the safety of the principal of those funds within the portfolios. Investment transactions shall seek to keep capital losses at a minimum, whether they are from securities defaults or erosion of market value. To attain this objective, diversification is required in order that potential losses on individual securities do not exceed the income generated from the remainder of the portfolio. From time to time, securities may be traded for other similar securities to improve yield, maturity or credit risk. For these transactions, a loss may be incurred for accounting purposes to achieve optimal investment return, provided any of the following occurs with respect to the replacement security: A. The yield has been increased, or B. The maturity has been reduced or lengthened, or C. The quality of the investment has been improved. City of Winter Springs Investment Policy Page 3 Maintenance of Liquidity The portfolios shall be managed in such a manner that funds are available to meet reasonably anticipated cash flow requirements in an orderly manner. Periodical cash flow analyses will be completed in order to ensure that the portfolios are positioned to provide sufficient liquidity. Return on Investment Investment portfolios shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, raking 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 is limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed. IV. DELEGATION OF AUTHORITY In accordance with the City's Charter, the responsibility for providing oversight and direction in regard to the management of the investment program resides with the City's Manager. The City Manager may, with timely notice (prior to implementation) to the City Commission designate in writing a designee to have management responsibility for all City funds in the investment program and investment transactions. The City Manager shall establish written procedures for the operation of the investment portfolio and a system of internal accounting and administrative controls to regulate the activities of employees. The City may employ an Investment Manager to assist in managing some of the City's portfolios. Such Investment Manager must be registered under the Investment Advisors Act of 1940. ~ STANDARDS OF PRUDENCE The standard of prudence to be used by investment officials shall be the "Prudent Person" standard and shall be applied in the context of managing the overall investment program. Investment officers acting in accordance with written procedures and this investment policy and exercising due diligence shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectation are reported to the City Commission in a timely fashion and the liquidity and the sale of securities are carried out in accordance with the tenns of this policy. The "Prudent Person" rule states the following: 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 from the investment. While the standard of prudence to be used by investment officials who are officers or employees is the Prudent Person standard, any person or finn hired or retained to invest, monitor, or advise concerning these assets shall be held to the higher standard of "Prudent Expert". The standard shall be that in investing and reinvesting moneys and in acquiring, retaining, managing, and disposing of investments of these funds, the contractor shall exercise: the judgnlent, care, skill, prudence, and diligence under the circumstances then prevailing, which persons of prudence, discretion, and intelligence, acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of like character and with like aims by diversifying the investments of the funds, so as to minimize the risk, considering the probable income as well as the probable safety of their capital. City of Winter Springs Investment Policy Page 4 VI. ETHICS AND CONFLICTS OF INTEREST Employees involved in the investment process shall refrain from personal business activIty that could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions. Also, employees involved in the Investment Committee and or investment process shall disclose to the Investment Oversight Committee any material financial interests in financial institutions that conduct business with the City, and they shall further disclose any material personal financial/investment positions that could be related to the performance of the City's investment program. VII. INTERNAL CONTROLS AND INVESTMENT PROCEDURES The Finance Director shall establish a system of internal controls and operational procedures that are in writing and made a part of the City's operational procedures. The internal controls should be designed to prevent losses of funds, which might arise from fraud, employee error, and misrepresentation by third parties, or imprudent actions by employees. The written procedures should include reference to safekeeping, repurchase agreements, separation of transaction authority from accounting and record keeping, wire transfer agreements, banking service contracts, collateral/depository agreements, and "delivery vs. payment" procedures. No person may engage in an investment transaction except as authorized under the tenns of this policy. These procedures are intended to reduce to a relatively low risk that material losses may occur and not be detected within a timely period by employees in the nonnal course of perfonning their assigned functions. Independent auditors as a nonnal part of the annual financial audit to the City shall conduct a review of the system of internal controls to ensure compliance with policies and procedures. VIII. CONTINUING EDUCATION The Finance Director, management designee and/or appropriate staff shall annually complete 8 hours of continuing education in subjects or courses of study related to investment practices and products. IX. AUTHORIZED INVESTMENT INSTITUTIONS AND DEALERS Authorized City staff and Investment Advisors shall only purchase securities from financial institutions, which are Qualified Institutions by the City or institutions designated as "Primary Securities Dealers" by. the Federal Reserve Bank of New York. Authorized,City staff and Investment Advisors shall only enter into repurchase agreements with financial institutions that are Qualified Institutions and Primary Securities Dealers as designated by the Federal Reserve Bank of New York. The Finance Director, management designee and/or the Investment Advisors shall maintain a list of financial institutions and broker/dealers that are approved for investment purposes and only firms meeting the following requirements will be eligible to serve as Qualified Institutions: 2) 3) 4) 5) City of Winter Springs .1) regional dealers that qualify under Securities and Exchange Commission Rule 15C3-1 (uniform net capital rule); Capital of no less than $10,000,000; registered as a dealer under the Securities Exchange Act of 1934; member of the National Association of Dealers (NASD); registered to sell securities in Florida; and Investment Policy Page 5 6) the firm and assigned broker have been engaged in the business of effecting transactions in U.S. government and agency obligations for at least five (5) consecutive years. 7) Public Depositories qualified by the Treasurer of the State of Florida, in accordance with Chapter 280, Florida Statutes. All brokers, dealers and other financial institutions deemed to be Qualified Institutions shall be provided with current copies of the City's Investment Policy. A current audited financial statement is required to be on file for each financial institution and broker/dealer with which the City transacts business. X. MATURITY AND LIQUIDITY REQUIREMENTS To the extent possible, an attempt will be made to match investment maturities with known cash needs and anticipated cash flow requirements. Investments of current operating funds shall have maturities of no longer than twenty-four (24) months. . Investments of bond reserves, construction funds, and other non-operating funds ("core funds") shall have a term appropriate to the need for funds and in accordance with debt covenants, but in no event shall exceed five (5) years. XI. COMPETITIVE SELECTION OF INVESTMENT INSTRUMENTS After the Finance Director, management designee or the Investment Advisor has determined the approximate maturity date based on cash flow needs and market conditions and has analyzed and selected one or more optimal types of investments, a minimum of three (3) Qualified Institutions ancllorPrimary Dealers must be contacted and asked to provide bids/offers on securities in questions. Bids will be held in confidence until the bid deemed to best meet the investment objectives is determined and selected. However, if obtaining bids/offers are not feasible and appropriate, securities may be purchased utilizing the comparison to current market price method on an exception basis. Acceptable current market price providers include, but are not limited to: A. Telerate Information System B. Bloomberg Information Systems C. Wall Street Journal or a comparable nationally recognized financial publication providing daily market pricing D. Daily market pricing provided by the City's custodian or their correspondent institutions The Finance Director or the Investment Advisor shall utilize the competitive bid process to select the securities to be purchased or sold. Selection by comparison to a current market price, as indicated above, shall only be utilized when, in judgment of the Finance Director or the Investment Advisor, competitive bidding would inhibit the selection process. Examples of when this method may be used. City of Winter Springs Investment Policy Page 6 A. When time constraints due to unusual circumstances preclude the use of the competitive bidding process B. When no active market exists for the issue being traded due to the age or depth of the issue C. When a security is unique to a single dealer, for example, a private placement D. When the transaction involves new issues or issues in the "when issued" market Overnight sweep investments or repurchase agreements will not be bid, but may be placed with the City's depository bank relating to the demand account for which the sweep investments or repurchase agreement was purchased. XII. AUTHORIZED INVESTMENTS AND PORTFOLIO COMPOSITION Investments should be made subject to the cash flow needs and such cash flows are subject to revisions as market conditions and as the City's needs change. However, when the invested funds are needed in whole or in part for the purpose originally intended or for more optimal investments, the Finance Director or management designee may sell the investment at the then-prevailing market price and place the proceeds into the proper account at the City's custodian. The following are the investment requirements and allocation limits on security types, issuers, and maturities as established by the City. The Finance Director or management designee shall have the option to further restrict investment percentages from time [0 time based on market conditions, risk and diversification investment strategies. The percentage allocations requirements for investment types and issuers are calculated based on the original cost of each investment. Investments not listed in this policy are prohibited. The allocation limits and security types do not apply to the investment of debt proceeds. These investments shall be governed by the debt covenant included in the debt instrument. A. The Florida Local Government Surplus Funds Trust Fund ("SBA") I. Investment Authorization The Finance Director may invest in the SBA. 2. Portfolio Composition A maximum of 100% of available funds may be invested in the SBA. B. United States Government Securities I. Purchase Authorization .City of Winter Springs Investment Policy Page 7 The Finance Director or management designee may invest in direct negotiable obligations, or obligations the principal and interest of which are unconditionally guaranteed by the United States Government. Such securities will include, but not be limited to the following: Cash Management Bills Treasury Securities - State and Local Government Series ("SLGS") Treasury Bills Treasury Notes Treasury Bonds Treasury Strips 2. Portfolio Composition A maximum of I 00% of available funds may be invested In the United States Government Securities. 3. Maturity Limitations The maximum length to maturity of any direct investment In the United States Government Securities is five (5) years from the date of purchase. C. United States Government Agencies I. Purchase Authorization The Finance Director or management designee may invest in bonds, debentures, notes or callable issued and guaranteed by the United States Governments agencies, provided such obligations are backed by the full faith and credit of the United States Government. Such securities will include, but not be limited to the following: Government National Mortgage Association (GNMA) -GNMA guaranteed mortgage-backed bonds -GNMA guaranteed pass-through obligations United States Export - Import Bank -Direct obligations or fully guaranteed certificates of beneficial ownership Farmer Home Administration -Certificates of beneficial ownership Federal Financing Bank -Discount notes, notes and bonds Federal Housing Administration Debentures General Services Administration United Slates Maritime Administration Guaranteed -Title XI Financing New Communities Debentures -United States Government guaranteed debentures United States Public I-lousing Notes and Bonds -United Slates Government guaranteed public housing notes and bonds United Slates Department of Housing and Urban Development -Project notes and local authority bonds City of Winter Springs Investment Policy Page 8 2. Portfolio Composition A maxImum of 75% of available funds may be invested In United States Government agencIes. 3. Limits on Individual Issuers A maximum of 50% of available funds may be invested In individual United States Government agencies. 4. Maturity Limitations The maximum length to maturity for an investment in any United States Government agency security is five (5) years from the date of purchase. D. Federal Instrumentalities (United States Government sponsored agencies) . I. Purchase Authorization The Finance Director or management designee may invest in bonds, debentures or notes which may be subject to call, issued or guaranteed as to principal and interest by United States Government sponsored agencies (Federal Instrumentalities) which are non-full faith and credit agencies limited to the following: Federal Farm Credit Bank (FFCB) Federal Home Loan Bank or its district banks (FHLB) Federal National Mortgage Association (FNMA) Federal Home Loan Mortgage Corporation (Freddie-Macs) Student Loan Marketing Association (Sallie-Mae) 2. Portfolio Composition A maximum of 80% of available funds may be invested in Federal Instrumentalities. 3. Limits on Individual Issuers A maximum of 40% of available funds may be invested in anyone issuer. 4. Maturity Limitations The maximum length to maturity for an investment In any Federal Instrumentality security is five (5) years from the date of purchase. E. Interest Bearing Time Deposit or Saving Accounts 1. Purchase Authorization City of Winter Springs The Finance Director or management designee may invest in non-negotiable interest bearing time certificates of deposit or savings accounts in banks organized under the laws Investment Policy Page 9 of this state and in national banks organized under the laws of the United States and doing business and situated in the State of Florida. Additionally, the bank shall not be listed with any recognized credit watch information service. 2. Portfolio Composition A maximum of 2S% of available funds may be invested in non-negotiable interest bearing time certificates of deposit. 3. Limits on Individual Issuers A maximum of I S% of available funds may be deposited with anyone issuer. 4. The maximum maturity on any certificate shall be no greater than one (I) year from the date of purchase. F. Repurchase Agreements I. Purchase Authorization a. The Finance Director or management designee may invest in repurchase agreements composed of only those investments based on the requirements set forth by the City's Master Repurchase Agreement. All firms are required to sign the Master Repurchase Agreement prior to the execution of a repurchase agreement transaction. b. A third party custodian with whom .the City has a current custodial agreement shall hold the collateral for all repurchase agreements with a term longer than one (I) business day. A clearly marked receipt that shows evidence of ownership must be supplied to the Finance Director and retained. c. Securities authorized for collateral are negotiable direct obligations of the United States Government, Government Agencies, and Federal Instrumentalities with maturities under five (S) years and must have a market value for the principal and accrued interest of 102 percent of the value and for the term of the repurchase agreement. Immaterial short-term deviations from the 102 percent requirement are permissible only upon the approval of the Finance Director or management designee. 2. Portfolio Composition A maximum of 50% of available funds may be invested in repurchase agreements excluding one (I) business day agreements and overnight" sweep agreements. 3. Limits on Individual Issuers A maximum of2S% of available funds may be invested with anyone institution. 4. Limits on Maturities City of Winter Springs Investment Policy Page I 0 The maximum length to maturity of any repurchase agreement is 90 days from the date of purchase. G. Commercial Paper I. Purchase Authorization The Finance Director or management designee may invest in commercial paper of any United States company that is rated, at the time or purchase, "Prime-I" by Moody's and "A-I" by Standard & Poor's (prime commercial paper). Additionally, the company shall not be listed with any recognized credit watch information service. 2. Portfolio Composition A maximum of 30% of available funds may be directly invested in prime commercial paper. 3. Limits on Individual Issuers A maximum of I 0% of available funds may be invested with anyone issuer. 4. Maturity Limitations The maximum length to maturity for prime commercial paper shall be 180 days from the date of purchase. H. Bankers' acceptances I. Purchase Authorization The Finance Director or management designee may invest in Bankers' acceptances issued by a domestic bank or a federally chartered domestic office of a foreign bank, which are eligible for purchase by the Federal Reserve System, at the time or purchase, the short- term paper is rated, at a minimum, "P-I" by Moody's Investors Services and "A-I" Standard & Poor's. Additionally, the bank shall not be listed with any recognized credit watch information service. 2. Portfolio Composition A maximum of 30% of available fund,S may be directly invested in Bankers' acceptances 3. Limits on Individual Issuers A maximum of I 0% of available funds may be invested with anyone issuer. 4. Maturity Limitations The maximum length to maturity for Bankers' acceptances shall be 180 days from the date of purchase. 1. State and/or Local Government Taxable and/or Tax-Exempt Debt City of Winter Springs Investment Policy Page 11 I. Purchase Authorization The Finance Director or management dcsignee may invest in state and/or local government taxable and/or tax-exempt debt, general obligation and/or revenue bonds, rated at least "Aa" by Moody's and "AA" by Standard & Poor's for long-term debt, or rated at least "MIG-2" by Moody's and "SP-2" by Standard & Poor's for short-term debt. 2. Portfolio Composition A maximum 01'20% ofavailablc funds may be invested in taxable and tax-exempt debts. 3. Maturity Limitations A maximum Icngth to maturity for an investment in any state or local government debt security is three (3) years from the date of purchase. J. Registered Investment Companies (Money Market Mutual Funds) I. Investment Authorization The Finance Director or management designee may invest in shares in open-end and no- load fixed-income securities money market mutual funds provided such funds are registered under the Federal Investment Company Act of 1940 and invest in securities permitted by this policy. 2. Portfolio Composition A maximum of 100% of available funds may be invested in money market mutual funds excluding one (I) business day overnight sweep agreements. 3. Limits of Individual Issuers A maximum of 25% of available funds may be invested with anyone money market mutual fund. 4. Rating Requirements The money market mutual funds shall be rated "AAm" or "AAm-G" or better by Standard & Poor's, or the equivalent 9Y another national rating agency. 5. Due Diligence Requirements A thorough investigation of any money market mutual market fund is rcquired prior to investing, and on a continual basis. There shall be a questionnaire developed by the Finance Director or managemcnt designcc that will contain a list of due diligence considerations that deal with thc major aspects of any investment pool/fund. A current prospectus must bc obtained. City of Winter Springs Investment Policy Page 12 K. Intcrgovernmentallnvcstmcnt Pool I. Invcstmcnt Authorization The Finance Director or management designee may invest in intergovernmental investment pools that are authorized pursuant to the Florida Interlocal Cooperation Act, as provided in Section 163.01, Florida Statutes and provided that said funds contain no derivatives. 2. Portfolio Composition A maximum of 25% of available funds may be invested in intergovernmental investment pools. XIII. DERIVATIVES AND REVERSE REPURCHASE AGREEMENTS Investment in any derivative products or the use of reverse repurchase agreements is specifically prohibited by this investment policy. A "derivative" is defined as a financial instrument the value of which depends on, or is derived from, the value of one or more underlying assets or indices or asset values. XIV. PERFORMANCE MEASUREMENTS In order to assist in the evaluation of the portfolios' perfonnance, the City will use perfonnance benchmarks for short-tenn and long-tenn portfolios. The use of benchmarks will allow the City to measure its returns against other investors in the same markets. A. Investment perfonnance of funds designated as short-tenn funds and othcr funds that must maintain a high degree of liquidity will be compared to the return on the six-month U.S. Treasury Bill. Investments of current operating funds shall have maturities of no longer than twenty-four (24) months. B. Investment perfonnance of funds designated as core funds and other non-operating funds that have a longer-tenn investment horizon will be compared to an index comprised of U. S. Treasury or Government securities. The appropriate index will have a duration and asset mix that approximates the portfolios and will be utilized as a benchmark to be compared to the portfolios' total rate of return. Investments of bond reserves, construction funds, and other non-operating funds ("core funds") shall have a term appropriate to the need for funds and in accordance with debt covenants, but in no event shall exceed five (5) years. XV. REPORTING The Finance Director, management designee and/or Investment Advisor shall provide the City Manager with a "Quarterly Investment Report" that summarizes but is not limited to thc following: A. Recent market conditions, economic developments and anticipated investment conditions. City of Winter Springs Investment Policy Page 13 B. The investment strategies employed in the most recent quarter. C. A description of all securities held in investment portfolios at month-end. D. The total rate of return for the quarter and year-to-date versus appropriate benchmarks. E. Any areas of policy concern warranting possible revisions to current or planned investment strategies. The market values presented in these reports will be consistent with accounting guidelines in GASB Statement 31. On an annual basis, the City Manager designee shall submit to the City Commission a written report on all invested funds. The annual report shall provide all, but not limited to, the following: a complete list of all invested funds, name or type of security in which the funds are invested, the amount invested, the maturity date, earned income, the book value, the market value, the yield on each investment. The annual report will show performance on both a book value and total rate of return basis and will compare the results to the above-stated performance benchmarks. All investments shall be reported at fair value per GASB Statement 31. . Investment reports shall be available to the public. XVI. THIRD-PARTY CUSTODIAL AGREEMENTS Securities, with the exception of certificates of deposits, shall be held with a third party custodian; and all securities purchase by, and all collateral obtained by, the City should be properly designated as an asset of the City. The securities must be held in an account separate and apart from the assets of the financial institution. A third party custodian is defined as any bank depository chartered by the Federal Government, the State of Florida, or any other state or territory of the United States which has a branch or principal place of business in the State of Florida, or by a national association organized and existing under the laws of the United States which is authorized to accept and execute trusts and which is doing business in the State of Florida. Certificates of deposits will be placed in the provider's safekeeping department for the term of the deposit. The custodian shall accept transaction instructions only from those persons who have been duly authorized by the City Manager and which authorization has been provided, in writing, to the custodian. No withdrawal of securities, in whole or in part, shall be made from safekeeping, shall be permitted unless by such a duly authorized person. City of Winter Springs Investment Policy Page 14 The custodian shall provide the Finance Director or management designee with safekeeping statements that provide detail information on the securities held by the custodian. On a monthly basis, the cllstodian will also provide reports that list all securities held for the City, the book value of holdings and the market value as of month-end. Security transactions between a broker/dealer and the custodian involving the purchase or sale of securities by transfer of money or securities must be made on a "delivery vs. payment" basis, if applicable, to ensure that the custodian will have the security or money, as appropriate, in hand at the conclusion of the transaction. Securities held as collateral shall be held free and clear of any liens. XVII. INVESTMENT COMMITTEE The Finance Director with the approval of the City Manager will establish an Investment Committee for the purpose of formulating alternative investment strategies and short-range directions within the guideline herein set forth and for monitoring the performance and structure of the City's portfolio. The Committee. shall include .the Finance Director as. Chairman, the City Treasurer, al}d the City's financial/investment advisor, and may include other members as may be designated by the City Manager from time to time. A designee of the Finance Director will provide the Committee members with current market information, an updated portfolio listing and analysis, and various pertinent financial data. The Committee, or quorum of the committee shall meet as often as deemed necessary, under the given conditions, to review, discuss and affirm or alter the current investment strategy and perform other functions as herein provided. The Investment Committee activities shall include but not be limited to review and setting investment strategies; review and establishing of written investment procedures; review and approval of bank and other rating agency services; review and approval of source documentation regarding issuers, institutions and dealers, and any other functions as defined herein. XVII. I. INVESTMENT OVERSIGHT COMMITTEE The City Commission shall serve as the Investment Oversight Committee and shall be responsible for monitoring the results of investments and compliance with the investment policies provided herein. The City Manager shall file a report with the Investment Oversight Committee quarterly verifying investment transactions and results. City of Winter Springs Investment Policy Page 15 XVIII. INVESTMENT POLICY ADOPTION The Investment Policy shall be adopted by thc City in writing. Thc Financc Director and the Investment Committee shall review the policy annually and submit recommendations to the City Managcr for review and approval. If a change in the Policy is recommended for approval by the City Manager, the Finance Director will prepare the necessary report to thc City Commission. APPROVED AND ADOPTED BY THE CITY COMMISSION ON SEPTEMBER ]0,200] AND AMENDED JANUARY 28, 2002. Title: Title: Title: City of Winter Springs Investment Policy Page 16