HomeMy WebLinkAboutPolicies - TreasurerJanuary 4, 2023
T O : GRANT COUNTY COMMISSIONERS
FROM: DARRYL PHEASANT
GRANT COUNTY TREASURE
RE: ADOPTION OF COUNTY INVESTMENT POLICY
As per Section 18 titled Investment Policy Adoption, it says the policy shall be reviewed on an
annual basis by the Board of County Commissioners. The policy must be reapproved not more
than 60 days after the beginning of each fiscal year.
There were no. changes made to the Policy in 2022. Enclosed is the latest County Investment
Policy.
RE ��a sv� k r esv:sa P
JAN 04 2023
jrr,
1 �,�Si.'
y,r a
M!� 7 ti .Cr
i�..: 5.,•�
" I%
Aff Is laftft—
q: 1
APPAff M r 1C
'r2� nr V'ED
JAN j p p023
Finance Committee of Grant County
Ephrata, Washington
Resolution No 221-1
A RESOLUTION OF THE FINANCE COMMITTEE OF
GRANT COUNTY ADOPTING AN AMENDED POLICY FOR
INVESTMENT OF COUNTY FUNDS,
BE IT RESOLVED BY THE FINANCE COMMITTEE OF GRANT
COUNTY AS FOLLOWS:
The County Finance Committee hereby recommends the Amended Investment
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 office
of the County Treasurer, and shall be provided upon request to interested parties.
Said Rules are subject to amendment by resolution of the County Finance
Committee.
ADOPTED by the County Finance Committee on this day of January 25,
2021.
THE COUNTY OFGRA
By,
Chair, Board of Coun Commissioners
By,
County Treaspoi(er
By,
Count Auditor.
TABLE OF CONTENTS
Section
Page
1. Policy
1
2. Scope
1
3. Objective
2
4. Prudence
2,3
5. Delegation of Authority
3
6. Authorized Financial Dealers and Institutions
3,4
7. Authorized Investments
4
8. Safekeeping and Custody
5
9. Diversification
5,6
10. Maturities
697
11. Penalties for Early Withdrawals
7
12. Internal Controls
7
13. Performance Standards
8
14. Competitive Selection
8
15. Reporting
8,9
16. Ethics and Conflicts of Interest
9910
17. Investment Service Fees
10
18. Investment Policy Adoption
10
19. Notice to Financial Dealers and Institutions
11
Appendix A
12
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 the maximum security while meeting
the daily cash flow demands on the Treasury and conforming to all Washington
statutes and County 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 that 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,
Unemployment Comp, DDRP, Mental Health and others), MACC, RSN, Health
District, Public Works Funds (Solid Waste, Equipment Rental, Pits &Quarries,
S�icr5ln Cities and Towns Funds, Cemetery District Funds, Water District
"J -XX "XXV11-11
Funds, Hospital District 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, Housing Authority, WRCIP,
SIAW.
This investment policy applies to all transactions involving the financial assets and
related activity of all the foregoing funds.
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
2
procedures. The primary objectives, in priority order, of the County's investment
activities shall be:
Safety: Safety of principal is the foremost objective of the investment
program. 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.
Liquidity: The County's investment portfolio will remain sufficiently
liquid to enable the County to meet all operating requirements which might be
reasonably anticipated.
Return: The County's investment portfolio 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. Return of investments is of secondary
importance to safety and liquidity objectives,
4.0 Prudence
The standard of prudence to be used by investment officials shall be the "prudent
investor" rule and shall be applied in the context 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 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.
5.0 Delegation of Authority
Authority 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, the Finance
Committee authorizes the County Treasurer to invest any remaining funds in
accordance with 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
investment program, consistent with this investment 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 transactions.
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 activities of subordinate officials.
6.0 Authorized Financial Dealers and Institutions
The Treasurer will maintain a list of broker/dealers and financial institutions
authorized to provide investment services to the County who are in
compliance with Washington State and U.S. Securities and Exchange
Commission. Authorized broker/dealers and financial 'Institutions will be
limited to those that meet one or more of the following:
-financial institutions approved by the Washington Public Deposit
Protection Commission (RCW 39.58); or
-primary dealers recognized by the Federal Reserve Bank; or
-non-primary qualified under U.S. Securities and Exchange Commission
Rule 15C3-1, the Uniform Net Capital Rule, and who are a certified member
of Financial Industry Regulatory Authority .
All broker/dealers who desire to become qualified bidders for investment
transactions (securities) must supply the following as appropriate:
-proof of Financial Industry Regulatory Authority (FINRA) certification,
4
-a signed trading authorization form, and
-Certification of having read Grant County's Investment Policy
Broker/dealers doing business with the County will be provided a copy of this
investment policy and any updates and will be expected to assure that the
I -1
transactions accomplished iisned for the County fall within these boundaries.
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, 36.29.0209 39.59.020, 39.59.030, and 43.84.080). Within these
limitations and parameters, the County has chosen to invest in the following types
of securities:
A. U.S. Treasury Obligations
B. U.S. Government Agency and U.S. Government Sponsored Enterprises
(GSE's), including but not limited to Federal Farm Credit Bank (FFCB),
Federal Home Loan Bank (FHLB), Government National Mortgage
Association (GNMA), Federal Home Loan Mortgage Corporation
(FHLMC), Federal National Mortgage Association (Fannie Mae),
Federal Agricultural Mortgage Corporation (Farmer Mac)
C. Non-negotiable certificates of deposit with qualified public depositories
as defined by RCW 39.58.010(2).
D. Washington State Local Government Investment Pool (LGIP).
E. Government Taxable GO Munis in the United States.
F. Municipal Investment Accounts in local area, financial institutions.
G. Registered Warrants of Grant County taxing districts.
H. Repurchase and Reverse Repurchase Agreements provided that a signed
Master Repurchase Agreement shall be on file in the Grant County
Treasurer's Office for all financial institutions that enter into a repurchase
agreement with Grant County. All repurchase agreements will be
collateralized at a minimum of 102% of market value of principal and
interest. The only eligible collateral for repurchase agreements will be
direct obligations of the U.S. Treasury, U.S. Government Agency and/or
2
U.S Government instrumentality obligations. All securities shall be held
in third party safekeeping. Third party safekeeping agreements must be
entered into with a signed agreement between the safekeeping financial
institution and the Grant County Treasurer. All securities in a repurchase
agreement shall be priced daily to reflect current market conditions for
both principal and accrued interest. Securities shall be purchased from
either primary dealers or from institution that are members of the
Washington Public Depository. Credit worthiness of the institution will
also be considered.
(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 security 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 beheld 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 securities
are pooled and held by the State. Also through the depository bank the county has
Municipal Investment Accounts which are insured by the FDIC and WPDPC.
9.0 Diversification
Lei
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.
Financial Institutions:
A. No more than 30% of the overall portfolio may be invested in the
securities (certificates of deposits, municipal investment account) of a
single financial institution at time of purchase.
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 of 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 Obligations and the
State Investment Pool. The State Pool portion is required to have at
least 3 0 million balance at end of each month for cash flow
purposes.
2. Ninety percent (90%) in U.S Government Agency obligations and
U.S. Government instrumentality obligations (callable, bullets)
where no more than 50% can be in securities that are between 6
years and the current investment policy maximum maturity.
3. Twenty percent (20%) in Governmental Taxable GO Munis.
4. Sixty percent (60%) in non-negotiable Certificates of Deposit.
5. Forty (40%) in Money Market type investments.
10.0 Maturities
To the extent possible, the Pool will attempt to match its investment with
anticipated cash flow requirements. Maturities. shall be selected that provide
stability of income and reasonable liquidity. Liquidity shall be ensured through
0
practices that include covering the next vendor disbursement and payroll dates
through maturing investments.
The County Pool expects to hold most investments to call or maturity. Investment
sales are expected to occur only if cash flow needs change from as originally
anticipated. However, the Pool may sell investments early to meet unexpected
cash flow needs, mitigate risk associated with a security type or issuer, or to
capture increased yield or income when appropriate.
The Pool's weighted average maturity (WAM) will not exceed 5.0 years, using the
final stated maturity. The entire county portfolio shall maintain at least 25 percent
of the overall balance under 270 days using final stated maturity. Unless matched
to a specific cash flow requirement, the County will not invest in securities
maturing more than nine years from date of purchase,
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 Investment 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
embezzlement and malfeasance.
13.0 Performance Standards
The County investment portfolio will be designed to obtain a market average rate
of return during budgetary and economic cycles, taking into account the County's
investment risk constraints and cash flow needs. Given a passive investment
strategy, the benchmark used by the County to determine whether market yields
are being achieved shall be the State Investment Pool. This indicator is a relatively
risk-free benchmark that comprises 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 Selection
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.
Bids will be requested from 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. Email records
will be kept of the bids offered and the bids accepted.
15.0 Reporting
The County Treasurer is charged with the responsibility of including a report on
investment activity and returns in the County's monthly and annual financial
reports. Investment reports will include transaction information, portfolio listings,
interest earnings, comparative performance data and any other financial or
economic information which may affect investment results.
F
Re;J
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 of 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 submit monthly to the junior taxing district fund
managers and other governmental entities an investment ledger showing all net
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 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
10
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.
17.0 Investment Service Fees
There are different investment fee methods per the RCW's. RCW 36.29.020
discusses the charges allowed to be assessed on investments outside the county
investment pool to pay for the investment services provided for by the Treasurer's
Office. It states that "Five percent of the earnings, with an annual maximum of
fifty dollars, on each transaction authorized by the governing body shall be
paid as an investment service fee to the office of the county treasurer ... when
the earnings become available to the governing body". This Investment policy
requires that all purchases of securities be done through a payment vs delivery
process to ensure ownership and possession of the securities. The third party
custodian assesses a fee for providing this service and assesses another fee if the
security is sold prior to its final maturity date. For any securities purchased outside
the Pool, any additional fees imposed by the third party custodian will be assessed
in addition to the Treasurer's investment fee to cover the safekeeping costs that
were charged for that security. This additional fee(s) will be deducted from the
interest earnings the same way as the annual Treasurer's investment fee.
County Investment Pool participants will be charged an investment fee based on
RCW 36.29.024. The Grant County Investment Pool Information Statement
discusses the fee that is assessed and its basis.
10
18.0 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 of County Commissioners. The policy must be re-
approved not more than 60 days after the beginning of each fiscal year.
19.0 Notice to Financial Dealers and Institutions
Upon any change made to the Investment Policy, the County Treasurer shall send
the latest 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 of such acceptance, business transactions shall not be executed
with the dealer or institution.
APPENDIX A
EXAMPLES OF SECURITIES NOT ELIGIBLE AS INVESTMENTS FOR
COUNTY FUNDS
(Whether by statute or by recommendation of the County Treasurer)
*Negotiable Certificates of Deposit
*Bankers acceptances
*Commercial Paper
*Collateralized Mortgage Obligations (inc. REMICS)
*Corporate Stocks, Bonds
*Foreign Government Obligations
*Options and Futures Contracts
*Real Estate
*Limited Partnerships
11
11
-CERTIFICATION-
I hereby certify that I have personally read the investment policies and objectives
of the Government of Grant County and have implemented reasonable procedures
and controls designed to prohibit investment transactions inconsistent with your
policies. Whenever we are notified in writing, we will inform our sales personnel
of your investment objectives, outlook, and 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 with financial transactions
conducted with our firm. Price markups will be consistent with prevailing
institutional pricing at the time of each transaction.
Name of business
Signed:
Printed
Date:
Signature
(Countersigned by corporate officer responsible for compliance)
Date:
12
Signature
Printed
12