It is the policy of the City of El Segundo to invest public funds in a prudent manner with the primary objectives of, in priority order, safety, liquidity and yield, and in conformance with all state and local statutes governing the investment of public funds.
This investment policy applies to all funds invested on behalf of the City of El Segundo. These funds are accounted for in the City of El Segundo's Comprehensive Annual Financial Report and include:
2.1.1 General Fund 2.1.2 Special Revenue Funds 2.1.3 Capital Project Funds 2.1.4 Enterprise Funds 2.1.5 Trust and Agency Funds 2.1.6 Debt Service Fund
When investing, reinvesting, purchasing, acquiring, exchanging, selling, and managing public funds, the City Council, Treasurer and other persons authorized to make investment decisions on behalf of the City, shall act with the care, skill, prudence, and diligence under the circumstances then prevailing, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the City.
The standard of prudence to be used by investment officers shall be the "prudent investor" standard and shall be applied in the context of managing an overall portfolio of money and investments that belong to the public. Investment officers acting in accordance with written procedures and the 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 expectations are reported in a timely fashion and appropriate action is taken to control adverse developments.
The primary objectives, in priority order, of the City of El Segundo's investment activities shall be:
Safety of principal is the foremost objective of the investment program. Investments of the City of El Segundo shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. To attain this objective, the City shall only invest in high quality securities and it shall diversify its investments in order that potential losses on individual securities do not exceed the income generated from the remainder of the portfolio so as not to harm the City's cash flow and principal. The City shall also structure its portfolio so as to prevent the need to sell securities prior to maturity and it shall not take short positions, that is, selling securities that the City does not own.
The City of El Segundo's investment portfolio will remain sufficiently liquid to enable the City of El Segundo to meet all operating requirements which might be reasonably anticipated.
4.3 Returns on investment:
The City of El Segundo's investment portfolio shall be designed with the objective of attaining a return throughout budgetary and economic cycles, taking into account the City of El Segundo's investment risk constraints and the cash flow characteristics of the portfolio.
5.0 Delegation of Authority:
Authority to manage the City of El Segundo's investment program is derived from the following: State of California Government Code Section 53600 et seq. Management responsibility for the investment program is therefore delegated to the City 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, collateral/depository agreements and banking service 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 City Treasurer. The City 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 City Treasurer shall transact business only with banks, savings and loans, state and federal credit unions, and securities dealers. The Treasurer shall select and maintain a current list of broker/dealers, as defined by Corporations Code Section 25004, authorized to provide the City investment services. This list of broker/dealers shall be included in the Treasurer's monthly investment report to the City Council. The broker/dealers shall meet the requirements of Government Code Section 53635.5 and Securities & Exchange Commission Rule 240.15c3-1 (uniform net capital rule). The Treasurer shall keep on file with the City an audited financial statement for each authorized broker/dealer's last complete fiscal year. Each authorized broker/dealer shall execute an acknowledgement that it has read the City's current Investment Policy and that it will abide by the terms and conditions of the Policy. Additionally, each such broker/dealer shall complete the questionnaire attached hereto. City funds shall only be placed in and invested with depositories that meet the requirements of Government Code Sections 53630 et seq.
7.0 Authorized & Suitable Investments:
The City of El Segundo is empowered by California Government Code Section 53600 et seq. to invest in the following types of securities pursuant to the limits imposed by said statute. (A copy of Government Code Sections 53601 and 53601.6 are attached and by reference herein incorporated). Of such permitted investments, City funds may be invested, subject to the maturity and percentage restrictions contained in Government Code Section 53601 and 53601.6, as amended from time to time, as set forth below:
7.1 Permitted Investments/Deposits.
7.1.1. Securities of the U.S. Government 7.1.2. Certificates of Deposits 7.1.3. Negotiable Certificates of Deposit 7.1.4. Bankers Acceptances 7.1.5. Commercial Paper 7.1.6. Local Agency Investment Fund (LAIF) 7.1.7. Time deposits 7.1.8. Mutual Funds 7.1.9. Medium Term Notes 7.1.10. County Pooled Funds
Collateralization will be required on certificates of deposit pursuant to Government Code Sections 53652 through 53667.
Collateral will always be held by an independent third party with whom the City has a current custodial agreement. A clearly marked evidence of ownership (safekeeping receipt) must be supplied to the City and retained.
9.0 Safekeeping and Custody:
All security transactions entered into by the City of El Segundo shall be conducted on a delivery-versus-payment (DVP) basis pursuant to Government Code Section 53601. Except for certificates of deposit, securities shall be held by a third party custodian designated by the Treasurer and evidenced by safekeeping receipts pursuant to Government Code Section 53608.
The City of El Segundo will diversify its investment by security type and institution. With the exception of U.S. Treasury securities and authorized pools, no investment shall be made in contravention of Government Code Sections 53601 and 53601.6 or which will cause more than 50% of the entity's total investment portfolio to be invested in a single security type or with a single financial institution.
11.0 Maximum Maturities:
To the extent possible, the City of El Segundo will attempt to match its investments with anticipated cash flow requirements. The City will not directly invest in securities maturing more than five (5) years from the date of purchase pursuant to Government Code Section 53601.
12.0 Internal and External Control:
The Treasurer shall establish internal control procedures such that daily investment activity is being reviewed by the Director of Finance. These procedures shall provide adequate internal controls to insure compliance with this Investment Policy and state law. The procedures shall be reviewed annually by an independent external auditor.
If the City deposits funds in County Treasuries for investment by County Treasurers, the City Treasurer shall review the statements and reports generated pursuant to Government Code Sections 16481.2, 27133, 27134 and 53684 for each County in which the City has deposited funds. Based upon the review process, the Treasurer shall on a quarterly basis provide a written report to the City Council summarizing any failure by the County Treasuries to comply with state law or their own investment policies and any significant investment activity by the County Treasuries.
If any particular investment is downgraded, the Treasurer and Director of Finance will review and determine if a change in that particular investment must be made.
The City Council shall establish a periodic independent external audit of the City's compliance with this Investment Policy.
The Treasurer shall file a monthly report, which states its relationship to the Statement of Investment Policy. This report mush be filed with the City Manager and the City Council and comply with Government Code Sections 53607, 53646 and 53684. The General elements of the monthly reports include, but are not limited to, the following:
Type of investments.
Date of maturity.
Par and dollar amount invested
Current market value of securities with maturity in excess of twelve months
Rate of interest.
Statement relating the report to the Statement of Investment Policy
Statement that there are sufficient funds to meet the next 6 month's obligations County pool investment report List of current authorized broker/dealers List of all investments not held by a third party custodian and the reason they are not placed with a third party custodian.
The Treasurer shall provide the California Debt and Investment Advisory Commission (CDIAC) with second and forth quarter investment portfolio reports in order to comply with Assembly Bill 943 (AB943.) These reports must state the financial assets of the City and contain the information detailed in Government Code section 53646(b). The reports must be filed with the CIDAC within 60 days after the close of the second and forth quarters of each calendar year.
14.0 Investment Advisory Committee:
The City has established an Investment Advisory Committee (AIAC@) comprised of the City Treasurer, the Finance Director, an El Segundo Resident (Council appointed) and a member of the investment community (Council appointed). The IAC shall be provided with copies of the monthly reports identified in Section 13. The IAC shall meet the third Tuesday at the end of each quarter to discuss the City's investments and shall communicate in writing any concerns or comments it has with respect to the City's investments or this Investment Policy to the City Council.
15.0 Ethics and Conflicts of Interest:
All participants in the City's investment process shall seek to act responsibly as custodians of the public trust. The City Treasurer, or when appropriate the Deputy City Treasurer, shall avoid any transaction that might impair public confidence in the City's ability to govern and manage the investment of public funds in an effective manner. The City Treasurer, Deputy City Treasurer, or other official charged with the responsibility of making investment decisions shall have no vested interest in any investment being made involving public funds of the City, and shall gain no financial benefit from such investment decisions.