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Resolution 227-1997 County Clerk RESOLUTION NO. 227 -1997 A RESOLUTION OF THE BOARD OF COUNTY COMMISSIONERS OF MONROE COUNTY, FLORIDA. ADOPTING THE MONROE COUNTY INVESTMENT POLICY WHEREAS, Chapter 218, Part IV, Florida Statutes, requires a unit of local government to file with the State Board of Administration either a resolution to deposit surplus funds in the Local Government Surplus Funds Trust Fund or a formally adopted policy for alternative investment activity; and WHEREAS, Monroe County has heretofore operated under the alternative investment guidelines of Section 218.415( 15), Florida Statutes; and WHEREAS, it is desired to establish a written investment plan in accordance with investment policies developed pursuant to subsections (1) through (14) of said statute; NOW THEREFORE BE IT RESOLVED BY THE BOARD OF COUNTY COMMISSIONERS OF MONROE COUNTY, FLORIDA that Section 1. The Monroe County Investment Policy, which is attached hereto as Exhibit A and incorporated herein by reference is hereby adopted as the County's investment policy. " <:0 --....-J . PASSED AND ADOPTED by the Board of County Commissioners of Monroe ~?unty, c:.::: C", ,"- Florida, at a regular meeting of the Board held on the 18tfcJayof June ,1997, .. ~- Mayor Douglass Mayor Pro T em London Commissioner Harvey Commissioner Freeman Commissioner Reich ves yes yes absent yes r-" J> '-0 '.J ::r..J ( rt t...-; co Z NNE~ H~<?N . c/ LA-:' :; 7 / Monroe County Investment Policy PREPARED BY DANNY L. KOLHAGE CLERK OF THE CIRCUIT COURT E )( '" \ b ~ -t " ~ " I. SCOPE This investment policy applies to all investment activity of the County's pooled cash, not otherwise classified as restricted assets requiring separate investing or otherwise under the care and custody of elected officials other than the Clerk of the Court. They shall be identified as "general operating funds" of the County for the purpose of this policy and shall be invested according to the guidelines set forth herein, The general operating funds include cash and investment balances of the following funds as accounted for and reported by the Monroe County Finance Department under the direction of the Clerk of the Court: · General Fund · Special Revenue Funds · Enterprise Funds · Internal Service Funds · Fiduciary Funds · Debt Service Funds · Capital Project Funds · Any other funds created by the legislative body. II. INVESTMENT OBJECTIVES The investment objectives for the general operating funds are stated as Safety of Capital, Liquidity of Funds, and Return on Investment, in that order. A. Safety of Capital Safety of capital is regarded as the highest priority in the handling of investments. All other objectives are secondary to the safety of capital and the protection of investment principal. Each investment transaction shall be executed to insure that capital losses are avoided, B. Liquidity of Funds The investment portfolio will remain sufficiently liquid to enable the Clerk to meet County operating requirements which might be reasonably anticipated. This will be accomplished by structuring the portfolio so that securities mature concurrent with cash needs, without loss of investment principal. C. Return on Investment In investing public funds the Clerk's Office will strive to maximize the return on County investments while considering investment risk and liquidity needs as described above, Return on investment is of least importance compared to the safety of capital and the liquidity of funds, Page 1 III. DELEGATION OF AUTHORITY The Clerk of the Court, as Chief Financial Officer, defined in s, 28,33 of the Florida statutes will be responsible for administration of the investment of public funds outlined above in Part I. The Clerk will be responsible for compliance with the policy set forth herein and the appointment of subordinate staff to transact, account for and monitor regular investment activity. IV. PRUDENCE AND ETHICAL STANDARDS The "prudent person" standard shall be applied to all officials and staff involved in the management of the overall investment portfolio, This standard is understood to mean the following: Investments should 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. V. REPORTING The following should be submitted to the Clerk's office at least monthly: . Investment activities reported from the external investment advisor, . Current listing of all securities obtained for the County by the investment advisor marked to market. . Accounting of investments held by third party custodian, . Statement of idle funds on hand with third party custodian, . Statement of account with local investment pools (Le, SBA, FCIT, etc.). Using these statements the Clerk's office shall prepare a summary report of the investment portfolio for management purposes, The report will include current cash position, securities in the portfolio by type, book value (cost), income earned for the period and market value as of the report date, The Clerk's office shall provide other such reports and information as deemed reasonable, upon request, from other internal and external sources. Page 2 VI. PERFORMANCE MEASUREMENTS The investment policy's performance will, at a minimum, be compared to the performance of Florida's Local Government Surplus Trust Fund's Investment Pool administered by the State Board of Administration (SBA) and the Florida Counties Investment Trust administered by the Florida Association of Court Clerks, The purpose of these comparisons shall be to measure current performance to other professionals seeking similar results, Also for comparative performance measurement, the current two year treasury bill yield will be used as a benchmark, VII. MATURITY AND LIQUIDITY REQUIREMENTS Although many securities are acceptable within the restrictions listed above, some are not desirable from a liquidity standpoint. The longer the maturity of a particular investment, the greater its potential for price volatility, Accordingly, in support of the desire to protect public funds from price erosion resulting from rising interest rates, the Clerk will limit both duration of the overall portfolio of County funds, and maximum maturity for any single security. The Clerk will strive to maintain the investment portfolio in such a way as to limit the weighted average to maturity of the total portfolio to a period of less than 2 years. And each individual security must have a final maturity of 5 years or less from the date of purchase. VIII. RISK AND DIVERSIFICATION Portfolio diversification shall be employed as a means of controlling investment risk, The portfolio will be diversified to control the risk of loss resulting from over concentration of assets in a specific maturity, instrument (or class of instruments), issuer, bank, or dealer through whom these instruments are bought and sold, The following maximum limits are guidelines established for diversification of the portfolio by instrument. There are no standard maximum limits available and these limits are merely suggested to avoid overconcentration in anyone instrument. These guidelines may be revised by the Clerk of Court for specific circumstances U,S. Treasury Bills 100% U,S, Treasury Notes 100% Local Government Surplus Funds Trust Fund (SBA) 100% Federal Instruments - Part IX E below 35% Federal Agencies - Part IX F below 15% Certificates of Deposit 10% Page 3 IX. AUTHORIZED INVESTMENTS This policy shall limit investments to: A. The Local Government Surplus Fund's Trust Fund, the Florida Clerks Association's Florida Counties Investment Trust, or any intergovernmental investment pool authorized pursuant to the Florida Interlocal Cooperation Act, as provided in s, 163,01, B. Securities and Exchange Commission registered money market funds with the highest credit quality rating from a nationally recognized rating agency, c. Savings accounts in state certified qualified public depositories, as defined in s,280,02. D. Certificates of deposit in state certified qualified public depositories, as defined in s.280.02. E. Direct obligations of the U,S, Government and obligations guaranteed by the U,S, Government as to principal and interest. Investments in this category would include, but not be limited to, U.S, Treasury Bills, Notes and Bonds, and securities issued by the Government National Mortgage Association (Ginnie Mae), Veterans Administration, and Federal Housing Administration. F. Other U,S, Agency obligations which carry an implied guarantee and the full faith and credit of the U,S, Government. Investments in this category would include, but not be limited to, obligations of the Federal Farm Credit Bank, Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac), Student Loan Marketing Association (Sallie Mae), the Financial Assistance Corporation and Federal Agriculture Mortgage Corporation (Farmer Mac). Investments strictly and specifically excluded from use are collateralized mortgage obligations (CMOs), real estate mortgage conduits (REMICs), Interest Only (10) and Principal Only (PO) agency securities, inverse floaters, reverse repurchase agreements, forwards, futures, currency and interest rate swaps, options and caps/floors/collars and all other investment types prohibited by law, Page 4 X. AUTHORIZED INVESTMENT INSTITUTIONS At the Clerk's discretion, the Clerk may utilize the professional services of an external investment advisor, The investment advisor will be given this investment policy and will be responsible for compliance with the guidelines set forth herein, The Clerk of the Court will be responsible for monitoring the performance of the investment advisor as well as monitoring the advisor's compliance with this policy, The Clerk shall only purchase investments for the County from Qualified Public Depositories of the State of Florida as identified by the State Treasurer, in accordance with Chapter 280 of the State Statutes or from primary securities dealers designated by the Federal Reserve Bank of New York. XI. THIRD.PARTY CUSTODIAL AGREEMENTS All securities purchased for the County will be properly designated as an asset of the County and will be placed in safekeeping with a third party custodial institution qualified and chartered by the State of Florida. No withdrawal of such securities, in whole or in part, shall be made from safekeeping except by the properly authorized persons indicated herein, The strongest assurance and control that securities have been properly segregated on behalf of the County is provided by a third-party custodian. XII. BID REQUIREMENT Purchases and sales of securities will be subject to competitive bid or offering when feasible and appropriate, The Clerk will rely upon its external investment advisor to apply their professional expertise in compliance with this requirement and will require the investment advisor to provide evidence of compliance upon request. Page 5 XIII. INTERNAL CONTROLS The delegated authority, as stipulated in Part III above, shall provide for a system of internal controls and operational procedures, in writing, designed to protect the County's funds and ensure the proper accounting and reporting of the securities transactions, The internal controls will be designed to prevent losses which might arise from fraud, employee error, collusion, misrepresentation by third parties, or imprudent actions by employees, The internal controls must be made a part of the operational procedures by January 1, 1996 according to s, 218.415(13) of Florida statute, The internal controls will address the following points: A. Collusion, a situation where two or more employees are working in conjunction to defraud their employer, must be avoided, B. Key functions must be separated whereby different staff members perform different functions to form a "check and balance" review of the other staff members in the same area. Specifically, there must be a separation of transaction authority from accounting and recordkeeping, c. As mentioned in Part X above, securities purchased should be placed into a third party banking institution for custodial safekeeping, D. Securities should not be of "bearer" form but should be registered securities in the name of Monroe County, Registered securities are better protected from conversion for personal use, E. Physical delivery securities should be avoided and book entry securities should be utilized, Book entry securities are easier to transfer and account for. Physical delivery securities must be properly safeguarded and the potential for fraud, theft, or loss is increased. F. Subordinate staff members must have a clear understanding of their authority and responsibilities to avoid improper actions, Clear delegation of authority preserves the internal control structure that is built around the various staff positions and their respective responsibilities, G. Losses on individual securities may arise through implementation of this investment policy, However, these losses should be restricted to specified purposes or events requiring an unforeseen and immediate need for liquidity, Proper documentation of such an event or purpose along with the required approvals shall precede the loss transaction. It is not the intent of this investment policy to incur losses for any other reason, Page 6 H. Telephone transactions for investments and wire transfers must be supported by written confirmation and approved by the appropriate person prior to each transaction, Following each transaction, a staff member independent of the transaction should confirm the transaction, I. Securities purchased or sold will be transferred only under the "delivery versus payment" method to insure that funds or securities are not released until all criteria relating to the specific transaction are met. J. Bank trust receipts or confirmations may be accepted by the properly authorized person on behalf of and in the name of Monroe County from a third party custodian (which must be the trust department of the bank) as evidence of actual delivery of the securities, The trust receipt or confirmation shall fully describe the securities held and include the specific number of each security and indicate that they are held for Monroe County. K. The independent public accounting firm retained to conduct the annual audit of Monroe County shall be directed to evaluate the system of internal controls relating to the investment of assets and compliance with these investment policies, Page 7