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HomeMy WebLinkAboutPolicies - TreasurerFinance Committee of Grant County Ephrata, Washington Resolution No 2017-1 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 August 29, 2017. a LIM M THE COUNTY OF GRANT Chair, Board of County Commissioners County Treasurer County Auditor. TABLE OF CONTENTS Section Page 1. Policy 1 2. Scope 1 3. Objective 2 4. Prudence 293 5. Delegation of Authority 3 6. Authorized Financial Dealers and Institutions 3,4 7. Authorized Investments 4 8. Safekeeping and Custody 5 9. Diversification 596 10. Maturities 617 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 9,10 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), MACC, RSN, Health District, Public Works Funds (Solid Waste, Equipment Rental, Pits & Quarries, Steep), Cities and Towns Funds, Cemetery District Funds, Water District 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 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: 3 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, 3 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 transactions accomplished 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, 36.29.020, 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. Municipal Investment Accounts in local area financial institutions. F. Registered Warrants of Grant County taxing districts. G. 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 U.S Government instrumentality obligations. All securities shall be held in third parry safekeeping. Third party safekeeping agreements must be 2 5 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 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 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 The County's investment portfolio will be diversified to reduce the risk of loss to avoid incurring unreasonable and avoidable risks associated with concentrating 5 0 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 B445, and the State Investment Pool. The State Pool portion is required to have at least 30 million balance at end of each month for cash flow purposes. 2. Ninety percent (90 80%) in U.S Government Agency obligations and U.S. Government instrumentality obligations (callable, bullets) where no more than 50 -7-5% can be in securities that are between 6 years and the current investment policy maximum maturity. 3. Sixty percent (60%) in non-negotiable Certificates of Deposit. 4. 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 practices that include covering the next vendor disbursement and payroll dates through maturing investments. 11 7 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. 0 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. Since this indicators is a relatively risk-free benchmarks 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. 9 Monthly Reporting W] 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 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 0 10 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 parry 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. 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. 10 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