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Resolution 96-004-CC� County of Grant Ephrafia, Washington Resolution No 96-4 A RESOLUTION OF THE COUNTY OF GRANT ADOPTING AN AMENDED POLICY FOR INVESTMENT OF COUNTY FUNDS. BE IT RESOLVED BY THE COUNTY FINANCE COMMITTEE OF GRANT COUNTY AS FOLLOWS: The County Finance Committee hereby recommends the Amended Investmen�C Policy to the Grant County Commissioners for their review. Copies of said Policy shall be available for inspection during business hours of the County at the ofifiice of rhe Counry Treasurer, and shall be provided upon request to interested parties. Said Rules are subject to amendment by resolution of the County Finance Committee. 1996. ADOPTED by the County Finance Committee on this day of November 5, THE CO �TY OF GRANT .,._..�...�.--µ�.....�.-#._�.. � By,� f���: e:�°^�.... �' ..� �„�.�;; r Chair, Bo rd of �oun�y Commissioners �.,._. ,�` � , � gY, .�._._ - /. i�'?� [..t C � ty Treasurer � Bv, _ _ ��t., " C�'�c.-, ,� unty Auditor. TABLE OF CONTENTS Secfiion 1. Policy 2. Scope 3. Objective 4. Prudence 5. Delegation ofi Authority 6. Authorized Financial Dealers and Institutions 7. Authorized Investments 8. Safekeeping and Custody 9. Diversification 10. Maturities 1 1. Penalties for Early Withdrawals 12. Internal Controls 13. Performance Standards 14. Competitive Selection 15. Reporting 16. Ethics and Conflicts of Interest 17. Investment Policy Adoption 18. Notice to Financial Dealers and Instituitions Appendix A Page 1 1 2 2 3 3,4 4 4,5 5,6 6,7 7 7 8 8 8,9 9 10 10 11 � INVESTMENT POLICY County of Grant 1.0 Policy It is the policy of Grant County to invest public funds in a manner which will provide the highest investment return with �he maximum security while meeting the daily cash flow demands on the Treasury and conforming to all Washington statutes and Counfiy Resolutions governing the investment of public funds. All participants in the County's investment process shall act responsibly as custodians of the public trust. Investment officials shall recognize that the investment portfolio is subject to public review and evaluation. The overall program shall be designed and managed with a degree of professionalism fihat is worthy of the public trust. 2.0 Scope This investment policy applies to all financial assets held or controlled by the Grant County Treasurer. These funds are accounted for in the County's Annual Financial Report and include: Surplus Funds, County Funds ( Data Processing, Employee Benefits, Insurance, DDRP, Mental Health, CRID Guaranty & Bond), MACC, RSN, Public Works Funds (Solid Waste, Equipment Rental, Pits & Quarries, Sign Shop), Cities and Towns Funds, Cemetery Distric� Funds, Water District Funds, Hospifial Dis�rict Funds, Port District Funds, Fire District Funds, Weed District Funds, Mosquito District Funds, Irrigation District Funds, Public Health Funds, School District Funds, Airport District Funds, GT CO Housing Authority. This investment policy applies to all transactions involving the financial assets and related activity of all the foregoing funds. � 6 3.0 Objective Funds of the County will be invested in accordance with the Revised Code of Washington, the BARS manual, these policies and written administrative procedures. The primary objectives, in priority order, of the County's investment activities shall be: Safety: Safety of principal is the foremost objecfiive of the County. Investments of the County shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. 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. Each investment transaction shall seek to first ensure that capital losses are avoided, whether they be from security defaults or erosion of market value. Investment decisions should not incur unreasonable investment risks in order to obtain current investment income. Liquidity: The County's investment portfolio will remain sufficiently liquid to enable the County to meet all operating requirements which might be reasonably anticipated. Ret�pn: The County's investmenfi par�folio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the County's investment risk constraints and the cash flow characteristics of the portfolio. 4.0 Prudence The standard of prudence to be used by investment officials shall be the "prudent investor" rule and shall be applied in �he contexfi of managing an overall portfolio. It must be recognized that regardless of how prudent the County is, all investment decisions may not meet the desired result. Therefore, investment officers acting in accordance with written procedures and exercising due diligence shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments. The "prudent investor" rule states: Investments shall be made with judgement and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affiairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived. 2 5.0 Delegation of Authority Authorifiy to manage the county's investment program is derived from RCW 36.29.020 which delegates, in part, as follows: The Treasurer may invest funds when authorized by the governing bodies of the relevant municipal corporations or by the Finance Committee. The governing bodies may instruct the Treasurer to invest in a range of qualifying investments. When not already authorized by statute or the Board of County Commissioners and the governing bodies of the relevant municipal corporations, fihe Finance Committee authorizes the County Treasurer to invest any remaining funds in accordance wi�h this investment policy. Management responsibility for the investment program is hereby delegated to the County Treasurer who shall establish written procedures for the operation of the investmen� program, consistent with this investmenfi policy. Procedures should include reference to: safekeeping, wire transfer agreements, custody agreements and investment related banking services contracts. Such procedures shall include explicit delegation of authority to persons responsible for investment tran��c�ions. No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the County Treasurer. The County Treasurer shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activi�ies of subordinate officials. 6.0 Authorized Financial Dealers and Institutions Investment transactions will be conducted with those broker/dealers recognized by the Federal Reserve as primary dealer, or secondary dealers that reside and conduct daily business in an office in the Stafie of Washington and those financial institutions that are qualified by the Washington Public Deposit Protecfiion Commission (RCW 39.58). Any new broker/dealer being added for the first time will be approved by the Grant County Finance Committee. The Treasurer will maintain a list of financial institu�ions authorized to provide investment services All broker/dealers who desire to become qualified bidders for investment transactions (securities) must supply the following as appropriate: -audited financial statements, -proof of National Association of Securities Dealers (NASD) certification, -proof of registration with the State of Washington, and -Certification of having read Grant County's Investment PolicyBroker/dealers 3 doing business with the County will be provided a copy of this investment policy and will be expected to assure that the firansactions accomplished for the County fall within these boundaries. An annual review of the registrations of qualified bidders will be conducted by fihe Treasurer. Audited financial statements will be kept on file for each broker/dealer in which Grant County invests. 7.0 Authorized Investments RCW citations provide authorization for the Grant County Treasurer to purchase varying types of instruments for the County and it's junior taxing districts (see RCW 35.39.030, 36.29.020, 39.59.020, 39.59.030, and 43.84.080). Within these limitations and parameters, the County has chosen to invest in fihe following types of securities: Non-negotiable certificates of deposit with qualified public depositories. Obligations of the US government, its agencies and instrumentalities. Prime Bankers' acceptances purchased on the secondary market from the 75 I�rg��� b��ks in �he world based on total assets. Commercial Paper purchased on the secondary market. Washington State Local Government Investment Pool Municipal Investor Account in US Bank Registered Warrants of Grant County taxing districts. (See Appendix A for examples of securities not eligible as investments by the County, whether by statute or as recommended by the Treasurer and included in this policy.) 8.0 Safekeeping and Custody All securi�y transactions entered into by the County, shall be conducted on a delivery versus payment (DVP) basis. Securities purchased by the entity will be delivered against payment and held in a custodial safekeeping account with the trust department of a bank. The trust department of a bank, a third party custodian, will be designated by the County Treasurer. The custodian shall issue a safekeeping receipt to the County listing the specific instrument, rate, maturity, and other pertinent info. � Securities shall be held in (1) the County's safekeeping account with the trust department of a bank selected through a competitive process and insured by the Federal Deposit Insurance Corporation, or (2) at the Federal Reserve Bank.. Certificates of deposit are purchased in the name of the County for each entity and are kept in the county's vault. The originating institution's financial status is reviewed by the treasurer and insured by Washington Public Deposit Protection Commission. The State of Washington Local Government Investment Pool investments are protected by the collateralization of banks where invested as well as possession of all securities, and the taxing authority of the State of Washington. These securifiies are pooled and held by the State. Also through the depository bank the county has a Municipal Investment Account which is insured by the FDIC and WPDPC. 9.0 Diversification The County's investment portfolio will be diversified to reduce the risk of loss to avoid incurring unreasonable and avoidable risks associated with concentrating investments in specific maturities, specific financial institutions, or in specific classes of securities. The following diversification strategies and constraints apply: Maturities: A. Portfolio maturities shall be staggered in a way that avoids undue concentration of assets in a specific maturity sector. Maturities shall be selected which provide for stability of income and reasonable liquidity. B. Liquidity shall be ensured through practices that include covering the next vendor disbursement and payroll dates through maturing investments. Additionally, the use of U.S. Treasury Bills or the State Investment Pool will provide sufficient liquidity to meet anticipated or unanticipated requirements. Financial Institutions: A. No more than 20% of the overall portfolio may be invested in the securities (certificates of deposit and bankers' acceptances) of a single financial institution. B. In accordance with the Public Deposit Protection Act, County deposits including certificates of deposit shall not exceed the total paid-up capital (to include capital notes and debentures) and surplus of any depository bank. �"� � Security Classes: A. The maximum proportion ofi the total portfolio that shall be placed at any one time in each of the categories of investment are as follows: 1. One Hundred percent (100%) in U.S. Treasury Bills, and the Sta�e Investment Pool. 2. Ten percent (10%) in bankers' acceptances and the Municipal Investor Account. 3. Sixty-five percent (65%) in U.S. Government Agency obligations and U.S.Government instrumentality, obligations (callables, stepups, non-callables►. 4. Five percent (5%) in Commercial Paper purchased on the secondary market. 5. Forty percent (40%) in non-negoitable Certificates of Deposit. 10.0 Maturities To the extent practical, the County will attempt to match its investments with anticipated cash flow requirements. Unless matched to a specific cash flow requirement, the County will not invest in securities maturing more than five years from date of purchase (exception-see next paragraph) . Additionally, in order to preserve liquidity and to lessen market risk, the monthly weighted average to final maturity for the county investment pool shall not be over 650 days. The monthly weighted average to final maturity for the entire portfolio shall not be over 730 days (2 years). Investments purchased specifiically for Surplus funds may not be transferred to the county investment pool. Surplus funds may invest up to a maximum $4,500,000.00 outside the county investment pool. The County may purchase individual callable federal agency and instrumentality investments totaling one million dollars or less that have a final maturifiy date more than five and less than ten years from the date of purchase if the coupon rate is one hundred seventy (170) basis points or more compared to the fireasury rate for that remaining time period. The call date shall be no longer than four months from purchase date. The call dafie will be considered the maturity date. [: The call date will be considered the final maturity date on securities of under five years that are callable the next caldendar month ifi the coupon rate is more than one hundred (100) basis points higher than the current treasury rafie for fihat remaining time period and the market value has decreased from the prior month to reflect a call expectation based on the latest US Bank market value report. The call dafie will be considered the final maturity date on individual securities totaling two million dollars or less of under five years remaining to final maturi�y that are callable within the next six months if the coupon rate is more fihan one hundred fifty (150) basis points higher than the current treasury rate for that remaining time period. The finance committee will approve changes from actual maturity dates to the call date that meet this criteria to provide a more accurate average life to the county investment pool. 11.0 Penalties for Early Withdrawal For investments withdrawn early for any reason from the State Investment Pool, there is no penalty. For investments withdrawn early that are in a CD, the penalty assessed is based on the provisions stated on the CD by the bank the CD was placed. For investments withdrawn early in a Treasury or Agency security, the penalty is just the potential market value loss. For investments withdrawn over $200,000 within the last thirty day time period from the County Inve��menf Pool and invested outside the County Pool, a penalty will be assessed on a sliding scale as detailed in the County Investment Pool Information Statement if notice of withdrawal is less than ninety (90) days. 12.0 Internal Controls Internal Control is a management tool to ensure that a system of checks and balances exist for periodic review and compliance with existing policies and procedures. The Grant County Treasurer shall establish and monitor a set of written internal controls designed to protect Grant County and its junior taxing districts' cash and cash equivalent assets and ensure proper accounting and reporting of the investment transactions. Such internal control procedures shall include details of delivery versus payment procedures, safekeeping procedures and trust receipt documentation, The Treasurer is subject to an annual independent review of its internal controls by the Washington State Auditor, however, the Washington State Auditor is not required to annually audit the Treasurer's internal controls. This review will provide internal control by assuring compliance with all state and federal statutes and the policies and procedures. Investment officials shall be bonded to protect the public against possible embezzlemeni and malfeasance. rl a 13.0 Performance Standards The Coun�y investment portfiolio will be designed to obtain a market average rafie of return during budgetary and economic cycles, fiaking into account fihe County's investment risk constraints and cash flow needs. Given a passive investment sfirategy, the benchmarks used by the County to determine whether market yields are being achieved shall be the average one year Treasury Bill for the month and the State Investment Pool. Since these indicators are relatively risk-free benchmarks they comprise a minimum standard for the portfolio's rate of return. The investment program shall seek to augment returns above this threshold, consistent with prudent investment principles and the risk limitations identified herein. 14.0 Competitive SeMection Before the County invests any temporarily surplus funds, a competitive bid process shall be conducted except for purchases of new federal agency, instrumentality securities at par. If a specific maturity date is required, either for cash flow purposes or for conformance to maturity guidelines, bids will be requested for instruments which meet the maturity requirement. If no specific maturity is required, a market trend (yield curve) analysis may be conducted to determine which maturities would be more advantageous. �ids will requested firom two to three financial institutions or broker/dealers (previously approved) for various options with regards to term and instrument. The County will accept the bid which provides the highest rate of return with the maturity required and within the other parameters of these policies. Records will be kept of the bids offered, the bids accepted and a brief explanation of the decision (if the best bid was not accepted) which was made regarding the investment. 15.0 Reporting The County Treasurer is charged with the responsibility of including a report on investment activity and returns in the County's mon�hly and annual financial reports. Inves�ment reports will include transaction information, portfolio listings, interest earnings, comparative performance data and any other financial or economic information which may affect investment results. Monthly Reporting The County Treasurer shall submit a monthly financial report to the County Finance Committee. The monthly report shall include: A. Detailed listing of investment and deposits in the portfolio by fund and by investment, providing essential identifying characteristics for : each investment or deposit, including purchase and maturity dates, market values, cost, coupon or discount rate and current yield. B. Percentage ofi the portfolio represented by each investment category. C. The portfolio yield for the overall portfolio, together with monthly earnings by item and in total, and changes in yields from the previous period. D. Other relevant detail to accomplish disclosure of investment activity and portfolio status. The County Treasurer shall submifi monthly to the junior fiaxing district fund managers an investment ledger showing all activity for each fund and an investment summary report showing average balances for the month and current year of each investment category, average days to call and final maturity, the interest yield for the county pool and the gross state investment pool rate. A Statement of Financial Assets and Liabilities will be also sent to show the market value of the county investment pool. The more detailed reports given to the County Finance Committee may be requested by any taxing district. Annual Reporting Within 60 days of the end of the fiscal year, the County Treasurer shall present a comprehensive annual report of the investment program and investment activity to the entities listed above. The annual report shall include twelve-month comparisons of return, shall suggest policies and improvements that might enhance the investment program, and include an investment plan for the ensuing fiscal year. 16.0 Ethics and Conflicts of Interest Officers and employees of the County 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. The County Treasurer and investment officials shall disclose to the County Finance Committee any material financial interests in financial institutions that conduct business within this jurisdiction, and they shall further disclose any large personal financial/investment positions that could be related to the performance of the County's portfolio. A disclosure statement shall also be completed whenever there is a change in such information. Disclosure statements shall be reviewed by the County Treasurer and maintained in employee files. Employees and officers shall subordinate their personal investment transactions to those of the County, particularly with regard to the time of purchases and sales. 0 17.0 Investment Policy Adoption The County Investment Policy and amendments and changes to shall be adopted by resolution of the County Finance Committee. The policy shall be reviewed on an annual basis by the Board ofi County Commissioners. The policy must be re-approved not more than 60 days after the beginning of each fiscal year. 18.0 Notice to Financial Dealers and Institutions Annually, the County Treasurer shall send fihe current edition of this investment policy to all institutions which are approved to execute County investments. The institution shall confirm in writing that the policy has been received, reviewed, and accepted by appropriate personnel. In the absence ofi such accepfiance, business transactions shall not be executed with the dealer or institution. 10 APPENDIX A EXAMPLES OF SECURITIES NOT ELIGIBLE AS INVESTMENTS FOR �OUNTY FUNDS (whether by statute or by recommendation of the County Treasurer) �Negotiable Cerfiificates of Deposit *Commercial Paper (not from secondary market) �'Collateralized Mortgage Obligafiions (inc. REMICS) *Corporate Stocks �Corporate Bonds *Foreign Government Obligations �*Options and Futures Contracts �Real Estate �Limited Partnerships 11 -CERTIFICATION- I hereby certify that I have personally read fihe investment policies and objectives of the Government of Grant County and have implemented reasonable procedures and controls designed to prohibit investment transactions inconsisten� with your policies. Whenever we are notified in writing, we will inform our sales personnel ofi your investment objectives, outlook, strategy and risk constraints. We will notify you immediately by telephone and in writing in the event of a material adverse change in our financial condition. We pledge to exercise due diligence in informing you of fundamental risks associated wifih financial transactions conduc�ted with our firm, Price markups will be consistent with prevailing institutional pricing at the time of each transaction. (If applicable or requested by Treasurer to complete) I attest to the accuracy ofi our responses to your questionnaire. Signed: Date: Signature Prinfied (Countersigned by corporate officer responsible for compliance) Date: �F� Signature Printed