HomeMy WebLinkAbout2003-09-18 Council Minutes•
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To- Gene Kiviaho Council Agenda # 6(c)
Reeve Hoppms
Members of Council
From. Terry Nash
Date- September 18, 2003
Issue
Kneehill County Logo
Discussion
Skytone Printing and Graphics has been asked to amend the font in the logo per Council
instructions, and change the colour from yellow to gold
Recommendation
1 Request Council adopt the logo as presented by the committee
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Terry Na , Assistant CAO Gene Kiv aho, CAO
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To • Gene Kiviaho
Reeve Hoppins
Members of Council
From. Terry Nash
Date September 18, 2003
Issue
FCSS Rent
Council Agenda # 6(d)
Discussion
Council Motion #431/03 states "that in order to accurately portray the County's financial
support of the FCSS Program, the FCSS be invoiced of Administration services and
office space, with a grant provided in lieu of that amount
Our records indicate that currently KCRP pays $6 700 and FCSS $3,000 in rent per
annum This amount is adjusted for actual insurance expenses incurred The Province
funds 80% of the rent and the balance is cost shared amongst the participating
municipalities Any reporting that does not utilize this calculation makes reconciliation of
accounts and audit extremely difficult The above information clearly indicates that
KCRP and FCSS contribute to their office space
Options
1 Proceed as per Council motion to invoice FCSS and KCRP for office space, with
a grant provided in lieu of that amount
2 Rescind Council Motion 9431/03
Recommendation
1 That Council rescind Motion 4431/03
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Terry Na. , Assistant CAO
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Gene Kivillo, CAO
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Council Agenda Item # 7(g)
To Gene Kiviaho
From Terry Nash
Date September 18 2003
Issue
Investment Policy
Purpose
To ensure the funds of Kneehill County are invested and secured in compliance with the
various provisions of the Municipal Government Act This Policy specifies the objectives,
strategies and the scope of authority of the County Designee who is responsible for the
investment of Kneehill County funds
Background
The Draft Policy was submitted to Bob Klotz — Senior Relationship Manager and referred
to Mike Drotar — Corporate Treasurer, Community Savings for their comments They
replied " for the most part it is an excellent policy and our comments will suggest you
clarify or be more specific in some areas "
Discussion
Under this policy Funds of the County may be invested in any of the securities authorized
by Section 250 (a) to (d) Municipal Government Act with a minimum (DBRS) Dominion
Bond Rating Service of R-1 or AAA
Authorized investments
250(1) In this
section 'securities' includes bonds debentures
trust certificates,
guaranteed investment certificates or receipts,
certificates of
deposit, deposit receipts, bills, notes and mortgages
of real estate
or .leaseholds and rights or interests in respect of a
security
(2) A municipality
may only _invest its money in the following
(a)
securities issued or guaranteed by
(i)
the Crown in right of Canada or an agent of the
Crown or
(ii)
the Crown in right of a province or territory or an
agent of a provinc-e or territory
(b)
securities of a municipality school diJision school
district hospital district health region under the
Regional. Hea—t.:h. Authorities Act or regional services
commission i^ Alberta
(c)
securities that are :.slued or guaranteed by a bank,
treasury branch credit union or trust corporation,
(d)
units in pooled funds of all or any of the investments
described in clauses (a) to (c)
ke)
shares of a corporation incorporated or continued under
the Canada Business Corporations Act: (Canada.) or
incorporated, continued or registered under the Business
Corporations Act if the investment .is approved by the
Minister
DBRS Commercial Paper and Short Term Debt Rating Scale
As is the case with all DBRS rating scales, commercial paper ratings are meant to give an indication of the risk that the
borrower will not fulfill its obligations in a timely manner DBRS ratings do not take factors such as pricing or market risk
into consideration and are expected to be used by purchasers as one part of their investment process. Every DBRS rating
is based on quantitative and qualitative considerations which are relevant for the borrowing entity
RR=1 Prime Credit Quality
R_2 Adequate Credit Quality
RR=3 Speculative
All three DBRS rating categories for short term debt use high middle or low as subset grades to designate the
relative standing of the credit within a particular rating category The following comments provide separate definitions for
the three grades in the Prime Credit Quality area as this is where ratings for active borrowers in Canada continue to be
heavily concentrated
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"R-1 (high)" Short term debt rated R-1 (high) is of the highest credit quality and indicates an entity which possesses
unquestioned ability to repay current liabilities as they fall due. Entities rated in this category normally maintain strong
liquidity positions conservative debt levels and profitability which is both stable and above average Companies achieving
an R-1 (high) rating are normally leaders in structurally sound industry segments with proven track records sustainable
positive future results and no substantial qualifying negative factors Given the extremely tough definition which DBRS has
established for an R-1 (high) few entities are strong enough to achieve this rating
R-1 (middle) Short term debt rated R-1 (middle) is of superior credit quality and, in most cases, ratings in this
category differ from R-1 (high) credits to only a small degree Given the extremely tough definition which DBRS has for
the R 1 (high) category (which few companies are able to achieve) entities rated R-1 (middle) are also considered
strong credits which typically exemplify above average strength in key areas of consideration for debt protection
"R-1 (low)" Short term debt rated R-1 (low) is of satisfactory credit quality The overall strength and outlook for key
liquidity debt and profitability ratios is not normally as favorable as with higher rating categories, but these considerations
are still respectable. Any qualifying negative factors which exist are considered manageable and the entity is normally of
sufficient size to have some influence in its industry
R-2 (high) R-2 (middle) R-2 (low)" Short term debt rated R-2" is of adequate credit quality and within the three
subset grades, debt protection ranges from having reasonable ability for timely repayment to a level which is considered
only just adequate The liquidity and debt ratios of entities in the R-2" classification are not as strong as those in the R-1
category and the past and future trend may suggest some risk of maintaining the strength of key ratios in these areas.
Alternative sources of liquidity support are considered satisfactory- however, even the strongest liquidity support will not
improve the commercial paper rating of the issuer The size of the entity may restrict its flexibility and its relative position
in the industry is not typically as strong as an R-1 credit' Profitability trends, past and future may be less favorable
earnings not as stable and there are often negative qualifying factors present which could also make the entity more
vulnerable to adverse changes in financial and economic conditions
R-3 (high) , R-3 (middle) , "R-3 (low) Short term debt rated R-3 is speculative and within the three subset grades
the capacity for timely payment ranges from mildly speculative to doubtful. R-3 credits tend to have weak liquidity and
debt ratios and the future trend of these ratios is also unclear Due to its speculative nature companies with R-3 ratings
would normally have very limited access to alternative sources of liquidity Earnings would typically be very unstable, and
the level of overall profitability of the entity is also likely to be low. The industry environment may be weak and strong
negative qualifying factors are also likely to be present
DBRS Bond and Long Term Debt Rating Scale
As is the case with all DBRS rating scales, long term debt ratings are meant to give an indication of the risk that the
borrower will not fulfill its full obligations in a timely manner with respect to both interest and principal commitments DBRS
ratings do not take factors such as pricing or market risk into consideration and are expected to be used by purchasers as
one part of their investment process. Every DBRS rating is based on quantitative and qualitative considerations that are
relevant for the borrowing entity
AAA Highest Credit Quality BBB Adequate Credit Quality CCC Very Highly Speculative
AA Superior Credit Quality BB Speculative CC Very Highly Speculative
A Satisfactory Credit Quality B Highly Speculative C Very Highly Speculative
AAA Bonds rated AAA are of the highest credit quality, with exceptionally strong protection for the timely repayment
of principal and interest Earnings are considered stable the structure of the industry in which the entity operates is
strong and the outlook for future profitability is favorable. There are few qualifying factors present which would detract
from the performance of the entity the strength of liquidity and coverage ratios is unquestioned and the entity has
established a creditable track record of superior performance Given the extremely tough definition which DBRS has
established for this category few entities are able to achieve a AAA rating
"AA" Bonds rated AA are of superior credit quality and protection of interest and principal is considered high In many
cases, they differ from bonds rated AAA only to a small degree Given the extremely tough definition which DBRS has for
the AAA category (which few companies are able to achieve) entities rated AA are also considered to be strong credits
which typically exemplify above-average strength in key areas of consideration and are unlikely to be significantly affected
by reasonably foreseeable events
A Bonds rated A are of satisfactory credit quality Protection of interest and principal is still substantial but the
degree of strength is less than with AA rated entities. While a respectable rating, entities in the A category are
considered to be more susceptible to adverse economic conditions and have greater cyclical tendencies than higher rated
companies
"BBB Bonds rated BBB are of adequate credit quality Protection of interest and principal is considered adequate,
but the entity is more susceptible to adverse changes in financial and economic conditions, or there may be other
adversities present which reduce the strength of the entity and its rated securities.
BB Bonds rated BB are defined to be speculative where the degree of protection afforded interest and principal is
uncertain particularly during periods of economic recession Entities in the BB area typically have limited access to capital
markets and additional liquidity support and in many cases, small size or lack of competitive strength may be additional
negative considerations.
"B" Bonds rated B are highly speculative and there is a reasonably high level of uncertainty which exists as to the
ability of the entity to pay interest and principal on a continuing basis in the future especially in periods of economic
recession or industry adversity
"CCC I "CC / C Bonds rated in any of these categories are very highly speculative and are in danger of default of
interest and principal The degree of adverse elements present is more severe than bonds rated B Bonds rated below
B often have characteristics which if not remedied may lead to default. In practice there is little difference between the
C to CCC categories with CC and C normally used to lower ranking debt of companies where the senior debt is
rated in the CCC' to B range
D" This category indicates Bonds in default of either interest or principal
( high", low") grades are used to indicate the relative standing of a credit within a particular rating category The lack of
one of these designations indicates a rating which is essentially in the middle of the category Note that high and low"
grades are not used for the AAA category
The Investment Officer will have the authority to execute transactions unless the
transaction involves the transfer of funds to another institution The transfer of funds to
another institution would require a second signature in compliance with the Signing
Authorization Policy
Recommendation
1 Recommend Council receive the draft investment policy which has been prepared in
accord' e rth the Municipal Government Act
CLI
Terry N h, Assistant CAO Gene Kivia , CAO
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INVESTMENT POLICY
This Investment Policy is adopted by Kneehill County pursuant to Section 250 of the
Municipal Government Act
PURPOSE
This Policy with respect to Kneehill County investments has been adopted to
establish policies and procedures that enhance opportunities for a prudent and systematic
investment of Kneehill County funds The initial step toward a prudent investment policy is
to organize and formalize investment related activities Related activities which comprise
good cash management include accurate cash projection, the expeditious collection of
revenue, the control of disbursements cost-effective banking relations, and a short term
borrowing program which coordinates working capital requirements and investment
opportunity In concert with these requirements are the many facets of an appropriate and
secure short term investment program The funds of Kneehill County shall be invested and
secured in compliance with the various provisions of the Municipal Government Act This
Policy will also specify the scope of authority of the County Designee who is responsible for
the investment of Kneehill County funds
SCOPE
It is intended that this policy cover all County funds and funds under the direct
control of Kneehill County
INVESTMENT OFFICER
Council hereby appoints the Chief Administrative Officer/Designate to serve as
Investment Officer to handle the investment of County funds The Investment Officer shall
be responsible for investing County funds in accordance with this Policy The Investment
Officer shall invest County funds using the judgment and care under circumstances then
prevailing that 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 The standard of prudence to
be used by the Investment Officer shall be the "prudent person," and shall be applied in the
context of managing an overall portfolio The Investment Officer (1) acting in accordance
with this Policy and any written procedures approved by Council and (2) exercising due
diligence shall be relieved of personal responsibility for an individual security's credit risk or
market price changes, provided that deviations from expectation are reported in a timely
fashion and appropriate action is taken to control adverse developments
Disclosures of Relationships with Persons Selling Investments to the County
An investment officer of an entity who has a personal or business relationship with
an entity seeking to sell an investment to the entity shall file a statement disclosing that
personal business interest An investment officer who is related within the second degree by
affinity or consanguinity, to an individual seeking to sell an investment to the investment
officer's entity shall file a statement disclosing that relationship
Reporting by the Investment Officer
Not less than each Fiscal Quarter and within a reasonable time after the end
period reported the Investment Officer shall prepare and submit to Council a written
of the investment transactions for all funds of the County for the preceding reporting pf,..,,.
The reports must (1) describe in detail the investment position of the County on the date of
the reports, (2) state the book value and the market value of each separately invested asset at
the beginning and end of the reporting period by the type of asset and fund type invested, (3)
state the maturity date of each separately invested asset that has a maturity date, (4) state the
fund for which each individual investment was acquired, and (5) exceptions to the policy
Selection of Bank and Securities Dealers
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Depositories seeking to establish eligibility for certificate of deposit purchase
programs shall be selected through the County's depository procurement process which
shall begin with a formal request for proposals every three years All financial institutions
and broker/dealers who desire to become qualified bidders for investment transactions must
supply the Office of Corporate Services with the following (1) Audited financial
statements for the financial institution or broker/dealer (2) Evidence of appropriate
registration For Bank Dealers this requires a statement from a senior bank official that the
Bank Dealer is appropriately registered with its primary regulatory agency as a government
securities dealer, municipal securities dealer or both All transactions will be on a delivery
versus payment basis
Certifications from Approved Sellers of Investments
The Investment Officer shall present this Policy to any person seeking to sell to the
County an Authorized Investment and to obtain from a principal written confirmation of
their intention to adhere to the County's investment policy prior to executing any
transaction
INVESTMENT OBJECTIVES
Objectives
1 The County's general objectives in investing its funds, listed in the order of
importance, are
a understanding of the suitability of the investment to the financial
requirements of the County,
b preservation and safety of principal,
c liquidity,
d marketability of the investment if the need arises to liquidat
oFf
investment before maturity,
e diversification of the investment portfolio, and
f yield
2 Safety of principal is the foremost objective of the County
3 Investment decisions should favor stability of principal over income
4 The County's investment portfolio shall be structured so as to be suffic,1UUY
liquid to enable the County to meet all operating requirements which might
be reasonably anticipated. This need for investment liquidity may be
tempered to the extent that the County is allowed to borrow under a short
term basis to meet its operating requirements if needed, taking into
consideration the net cost to the County
5 The investment portfolio shall be designed to attain a rate of return
comparable to the constant maturity treasury which most closely matches the
portfolio's average weighted maturity
6 Investments shall be made to avoid incurring unreasonable and avoidable
risks regarding specific security types or individual financial institutions
7 No investments shall be made for the purpose of trading or speculation, such
as anticipating an appreciation of capital through changes in market interest
rates
The Investment Officer shall seek in the investment process to act
responsibly as a custodian of the public trust The Investment Officer shall
avoid any transaction that might impair public confidence in the County's
ability to operate effectively The Investment Officer shall recognize that the
investment portfolio is subject to public review and evaluation The overall
program of managing the County's funds shall be designed and managed
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with a degree of professionalism that is worthy of public trust
9 The County, as a general objective plans to hold investments to maturity
while protecting principal and obtaining the highest rate of return possible
at the date of investment It is not the intent to devote substantial efforts to
earn profit on investment market fluctuations Investments will be
purchased because of their interest yield expectations over their remaining
life rather than for speculative purposes
10 Investments will be primarily fixed income securities and generally held to
maturity Investments can be sold prior to maturity as long as it can be
demonstrated to be in the best interests of the County Investments will not
be sold based on projected interest rate movements
II Pooling of fund groups for the purposes of investment is approved and
allowed
nRAFT
Authorized Investment Instruments
Funds of the County may be invested in any of the securities authorized by Sec
250 (a) to (d) Municipal Government Act with a minimum (DBRS) Dominion Bond Ra
Service of R-1 or AAA
Internal Accounting Controls
The Investment Officer shall prepare a system of internal accounting controls which
shall be documented in writing The controls shall be designed to prevent losses of public
funds arising from fraud, employee error misrepresentation by third parties, unanticipated
changes in financial markets, or imprudent actions by employees and officials of the
County Controls deemed most important include control of collusion, segregation of
duties, segregation of transaction authority from accounting and record keeping, custodial
safekeeping, avoidance of bearer form securities, clear delegation of authority specific
limitations regarding securities losses and remedial action approved written confirmation of
telephone transactions, documentation of transactions and strategies and code of ethics
standards Investments will be valued and accounted for according to Generally Accepted
Accounting Principles
Maturily
County funds except funds accumulated for debt service Road renewal and
replacement, and operating contingency shall be invested only in investments whose
maturities do not exceed three years at the time of purchase Debt service funds may be
invested for a period not to exceed two years Capital funds may be invested for a period
not to exceed three years Road Renewal and Replacement Funds and Contingency Funds
may be invested for a period not to exceed seven years
In addition, the weighted average maturity of the overall portfolio excluding those
investments held for future mayor capital expenditures (construction funds) debt service,
and Road renewal and replacement shall not exceed two years
Diversification
It is the policy of the County to diversify its investment portfolio All funds shall be
diversified to eliminate the risk of loss resulting from over concentration of assets in a
specific maturity a specific issuer or a specific class of securities In establishing specific
diversification strategies the following general policies and constraints shall apply
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
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2 Liquidity shall be maintained through practices that ensure thaj to lillndrty
needs of the next disbursement date and payroll date are co ed through
maturing investments or marketable securities
3 Risks of market price volatility shall be limited through maturity
diversification
4 The following diversification limitations shall be imposed on the portfolio
a. Maturity No more than 25% of the portfolio, excluding those
investments held for future major capital expenditures debt service
payments may be invested beyond twenty four (24) months and the
average maturity of the overall portfolio, with the previous
exception, shall not exceed two years
b Risk Default Stringent restrictions on legally authorized investments
and the legal requirements for full collateralization severely reduce
the potential of default risk Nonetheless, no more than 50% of the
overall portfolio may be invested in time deposits, including
certificates of deposit, of a single issuer unless 100% guaranteed
c Marketability At least 15% of the portfolio, excluding those
investments held for future mayor capital expenditures, debt service
payments, bond fund reserve accounts, and capitalized interest funds,
shall be invested in overnight instruments or in marketable securities
which can be sold to raise cash within one day's notice
Risk Tolerance
The County recognizes that investment risks can result from issuer defaults, market
price changes or various technical complications leading to temporary liquidity Portfolio
diversification is employed as a way to control risk. The Investment Officer is expected to
display prudence in the selection of securities as a way to minimize default risk No
individual investment transaction shall be undertaken which jeopardizes the total capital
position of the overall portfolio
In addition to these general policy considerations, the following specific policies will
be strictly observed
1 All investment funds will be placed directly with qualified financial
institutions
2 All transactions will be settled on delivery versus payment basis
3 The County will not enter into reverse repurchase agreements or trade in
options or future contract
4 A competitive bid process will be used to place govemment s
purchases or sales Based on an annual evaluation, banks an
dealers will be dropped from or continued on the eligibili910FT
following criteria will be used in the annual evaluation
a. number of transactions competitively won,
b prompt and accurate confirmation of transactions,
c efficient securities delivery,
d accurate market information,
e account servicing
f moral character and public ethics of both broker and firm
q Trading history
Safekeeping and Custody
To protect against potential fraud and embezzlement, the financial assets of the
County shall be secured through safekeeping procedures County employees shall be
bonded to protect the public against possible embezzlement and malfeasance
Policy of Securing Deposits of Coun!y Funds - Applicable to all Deposited County Funds
1 Only Alberta Credit Unions are insured by the Province of Alberta for 100% of
its member's deposits The County recognizes that CDIC (or its successor)
insurance is available for County funds deposited at any other Financial
Institution (including branch banks) only up to a maximum of $60,000
(including accrued interest) for each of the following (i) demand deposits, (ii)
time and savings deposits, and (iii) deposits made pursuant to an indenture or
pursuant to law in order to pay bondholders or noteholders It is the policy of
the County that all deposited funds in each of the County's accounts shall be
insured by the CDIC, or its successor unless 100% guaranteed by the Province
2 Certificates of deposit to the extent that they are not insured, may be secured by
any securities allowed under the Investment Act and depository contract
3 Demand deposits (for example, checking accounts) and savings accounts, to the
extent that they are not insured, may be secured by any securities allowed under
the Collateral Act
Investment Policy Review
The Investment Policy shall be formally reviewed and approved by Council when
amendments are made or at least annually
INVESTMENT STRATEGIES FOR FUNDS
General Fund Group
The County's operating expenditures and the revenues to fund those expenditures are
accounted for in the County's general fund The general fund is also used to account for
revenues restricted by statute for debt service funds and to account for the accumulati2a 0
resources for public improvement contingencies Most of the general fund is po
other County funds for investment purposes The amount restricted for the Co ti
Fund is invested in the County s pooled investments The debt service funds mclu it n
the general fund classification are not pooled with other County funds for i estment
purposes and should be invested in compliance with the strategies for Debt Service Funds
Short term borrowing may be necessary during the fiscal year for the general fund operating
expenditures to cover negative cash positions until ad valorem tax receipts are received.
The average duration of the investments relating to the general fund operating activity is to
be one year or less The average duration is five years or less
Debt Service Funds
The debt service funds, including those reported in the County's financial reports
within the general fund, are used to account for the accumulation of resources to fund
periodic principal and interest payments on outstanding obligations The revenue stream is
predictable and the majority comes from ad valorem tax and special purpose revenues The
average duration is nine months or less for these funds Most of these debt service funds are
not pooled with other funds for investment purposes
Capital Project Funds
Capital project funds for the County are used to account for construction and other
nonrecurring capital expenditure activity Investment of most of these funds result in a
maximum duration of three years for the investments
Propriety Funds
The County's Road project is also accounted for as a proprietary type fund with
investments restricted by a trust indenture executed in connection with the financing of the
protect The duration of the investments is generally three years or less, with the exception
of the bond reserve and Road renewal and replacement funds, which are invested with an
average duration of five years or less
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To. Gene Kiviaho
From• Terry Nash
Date September 18, 2003
Issue
Investment Policy
Purpose
To ensure the funds of Kneehill County are invested and secured in compliance with the
various provisions of the Municipal Government Act. This Policy specifies the
objectives strategies and the scope of authority of the County Designee who is
responsible for the investment of Kneehill County funds
Background
The Draft Policy was submitted to Bob Klotz — Senior Relationship Manager and referred
to Mike Drotar — Corporate Treasurer Community Savings for their comments They
replied "for the most part it is an excellent policy and our comments will suggest you
clarify or be more specific in some areas "
Discussion
Under this policy Funds of the County may be invested in any of the securities authorized
by Section 250(a) to (d) Municipal Government Act with a minimum (DBRS) Dominion
Bond Rating Service of R 1 or AAA
A copy of this policy will be provided to all financial institutions that will be investing
funds on behalf of Kneehill County
Policy Highlights
The Investment Officer is the CAO/Designate
The Investment Officer must disclose any potential conflict of interests
Written Reports must be submitted to Council at least quarterly
RFP process for selection of Bank and Securities Dealers, and evidence of registration
Investment Oblectjves
Internal accounting controls and bonding of employees
Specifies maximum investment terms
Debt Service not more than 2 years
County Funds not more than 3 years
Capital Funds not more than 3 years
Road Renewal & Replacement Funds, and C. ontingency Funds not more than 7 years
Diversification
maximum 25% invested more than 2 years (not including capital and debt
service)
maximum 50% in time deposits of a. single user unless 100% guaranteed
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at least 15% in overnight instruments cashable 24 hours notice
Annual Review of Policy by Council
Specifies Investment Strategies for Funds
General Fund average duration of funds for operating activities will be one year or less
Debt Service Fund - average duration is 9 months or less
Capital Project Funds maximum duration of 3 years
Proprietary Funds project funds advanced in trust 3 years or less
Road Renewal and Replacement - average duration of 5 vears or less
The investment officer will have the ability to execute transactions alone unless the
transaction requires funds being transferred to another institution Then the signing
authorization policy would require a second signature
Recommendation
That Council approve the investment policy,
the Muni pal Government Act.
Terry IqA, Assistant CAO
which has been prepared in accordance with
(J/
Gene Kivi o, CAO
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INVESTMENT POLICY
This Investment Policy is adopted by Kneehill County pursuant to Section 250 of the
Municipal Government Act
PURPOSE
This Policy with respect to Kneehill County investments has been adopted to establish
policies and procedures that enhance opportunities for a prudent and systematic investment
of Kneehill County funds The initial step toward a prudent investment policy is to organize
and formalize investment -related activities Related activities which comprise good cash
management include accurate cash projection, the expeditious collection of revenue the
control of disbursements cost effective banking relations, and a short-term borrowing
program which coordinates working capital requirements and investment opportunity In
concert with these requirements are the many facets of an appropriate and secure short term
investment program The funds of Kneehill County shall be invested and secured in
compliance with the various provisions of the Municipal Government Act This Policy will
also specify the scope of authority of the County Designee who is responsible for the
investment of Kneehill County funds
SCOPE
It is intended that this policy cover all County funds and funds under the direct control of
Kneehill County
INVESTMENT OFFICER
Council hereby appoints the Chief Administrative Officer/Designate to serve as Investment
Officer to handle the investment of County funds The Investment Officer shall be
responsible for investing County funds in accordance with this Policy The Investment
Officer shall invest County funds using the judgment and care, under circumstances then
prevailing, that 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 The standard of prudence to
be used by the Investment Officer shall be the "prudent person," and shall be applied in the
context of managing an overall portfolio The Investment Officer (1) acting in accordance
with this Policy and any written procedures approved by Council and (2) exercising due
diligence shall be relieved of personal responsibility for an individual security's credit risk or
market price changes, provided that deviations from expectation are reported in a timely
fashion and appropriate action is taken to control adverse developments
Disclosures of Relationships with Persons Selling Investments to the County
An investment officer of an entity who has a personal or business relationship with an entity
seeking to sell an investment to the entity shall file a statement disclosing that personal
business interest An investment officer who is related within the second degree by affinity
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or consanguinity to an individual seeking to sell an investment to the investment officer's
entity shall file a statement disclosing that relationship
Reporting by the Investment Officer
Not less than each Fiscal Quarter and within a reasonable time after the end of the period
reported, the Investment Officer shall prepare and submit to Council a written report of the
investment transactions for all funds of the County for the preceding reporting period. The
reports must (1) describe in detail the investment position of the County on the date of the
reports, (2) state the book value and the market value of each separately invested asset at the
beginning and end of the reporting period by the type of asset and fund type invested, (3)
state the maturity date of each separately invested asset that has a maturity date, (4) state the
fund for which each individual investment was acquired, and (5) exceptions to the policy
Selection of Bank and Securities Dealers
Depositories seeking to establish eligibility for certificate of deposit purchase programs shall
be selected through the County's depository procurement process, which shall begin with a
formal request for proposals every three years All financial institutions and broker/dealers
who desire to become qualified bidders for investment transactions must supply the Office
of Corporate Services with the following (1) Audited financial statements for the financial
institution or broker/dealer (2) Evidence of appropriate registration. For Bank Dealers this
requires a statement from a senior bank official that the Bank Dealer is appropriately
registered with its primary regulatory agency as a government securities dealer, municipal
securities dealer, or both. All transactions will be on a delivery versus payment basis
Certifications from Approved Sellers of Investments
The Investment Officer shall present this Policy to any person seeking to sell to the County
an Authorized Investment and to obtain from a principal written confirmation of their
intention to adhere to the County's investment policy prior to executing any
transaction
Obi ectives
INVESTMENT OBJECTIVES
The County's general objectives in investing its funds, listed in the order of
importance, are
a. preservation and safety of principal
b understanding of the suitability of the investment to the financial
requirements of the County,
c liquidity
d marketability of the investment if the need arises to liquidate the
investment before maturity,
e diversification of the investment portfolio, and
f yield
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2 Safety of principal is the foremost objective of the County
3 Investment decisions should favor stability of principal over income
4 The County's investment portfolio shall be structured so as to be sufficiently
liquid to enable the County to meet all operating requirements which might
be reasonably anticipated This need for investment liquidity may be
tempered to the extent that the County is allowed to borrow under a short
term basis to meet its operating requirements if needed, taking into
consideration the net cost to the County
The investment portfolio shall be designed to attain a rate of return
comparable to the constant maturity treasury which most closely matches the
portfolio's average weighted maturity
6 Investments shall be made to avoid incurring unreasonable and avoidable
risks regarding specific security types or individual financial institutions
7 No investments shall be made for the purpose of trading or speculation, such
as anticipating an appreciation of capital through changes in market interest
rates
8 The Investment Officer shall seek in the investment process to act
responsibly as a custodian of the public trust The Investment Officer shall
avoid any transaction that might impair public confidence in the County's
ability to operate effectively The Investment Officer shall recognize that the
investment portfolio is subject to public review and evaluation The overall
program of managing the County's funds shall be designed and managed
with a degree of professionalism that is worthy of public trust.
9 The County, as a general objective plans to hold investments to maturity
while protecting principal and obtaining the highest rate of return possible at
the date of investment It is not the intent to devote substantial efforts to earn
profit on investment market fluctuations Investments will be purchased
because of their interest yield expectations over their remaining life rather
than for speculative purposes
10 Investments will be primarily fixed income securities and generally held to
maturity Investments can be sold prior to maturity as long as it can be
demonstrated to be in the best interests of the County Investments will not
be sold based on projected interest rate movements
11 Pooling of fund groups for the purposes of investment is approved and
allowed
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Authorized Investment Instruments
Funds of the County may be invested in any of the securities authorized by Section 250 (a)
to (d), Municipal Government Act with a minimum (DBRS) Dominion Bond Rating Service
of R 1 or AAA
Internal Accounting Controls
The Investment Officer, shall prepare a system of internal accounting controls which shall
be documented in writing The controls shall be designed to prevent losses of public funds
arising from fraud, employee error, misrepresentation by third parties unanticipated changes
in financial markets, or imprudent actions by employees and officials of the County
Controls deemed most important include control of collusion, segregation of duties,
segregation of transaction authority from accounting and record keeping, custodial
safekeeping avoidance of bearer form securities, clear delegation of authority specific
linutations regarding securities losses and remedial action, approved written confirmation of
telephone transactions, documentation of transactions and strategies and code of ethics
standards Investments will be valued and accounted for according to Generally Accepted
Accounting Principles
Maturity
County funds, except funds accumulated for debt service, Road renewal and replacement
and operating contingency shall be invested only in investments whose maturities do not
exceed three years at the time of purchase Debt service funds may be invested for a period
not to exceed two years Capital funds may be invested for a period not to exceed three
years Road Renewal and Replacement Funds and Contingency Funds may be invested for a
period not to exceed seven years
In addition the weighted average maturity of the overall portfolio, excluding those
investments held for future mayor capital expenditures (construction funds) debt service,
and Road renewal and replacement shall not exceed two years
Diversification
It is the policy of the County to diversify its investment portfolio All funds shall be
diversified to eliminate the risk of loss resulting from over concentration of assets in a
specific maturity, a specific issuer or a specific class of securities In establishing specific
diversification strategies, the following general policies and constraints shall apply
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
2 Liquidity shall be maintained through practices that ensure that the liquidity
needs of the next disbursement date and payroll date are covered through
maturing investments or marketable securities
Risks of market price volatility shall be limited through maturity
diversification.
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4 The following diversification limitations shall be unposed on the portfolio
a. Maturity No more than 25% of the portfolio, excluding those
investments held for future major capital expenditures, debt service
payments, may be invested beyond twenty-four (24) months and the average
maturity of the overall portfolio with the previous exception, shall not
exceed two years
b Risk Default Stringent restrictions on legally authorized investments
and the legal requirements for full collateralization severely reduce the
potential of default risk. Nonetheless, no more than 50% of the overall
portfolio may be invested in time deposits including certificates of deposit,
of a single issuer unless 100% guaranteed
Marketability At least 15% of the portfolio, excluding those
investments held for future major capital expenditures, debt service
payments bond fund reserve accounts, and capitalized interest funds, shall
be invested in overnight instruments or in marketable securities which can be
sold to raise cash within one day's notice
Risk Tolerance
The County recognizes that investment risks can result from issuer defaults market price
changes or various technical complications leading to temporary liquidity Portfolio
diversification is employed as a way to control risk The Investment Officer is expected to
display prudence in the selection of securities as a way to minimize default risk. No
individual investment transaction shall be undertaken which jeopardizes the total capital
position of the overall portfolio
In addition to these general policy considerations the following specific policies will
be strictly observed
1 All investment funds will be placed directly with qualified financial
institutions
2 All transactions will be settled on delivery versus payment basis
3 The County will not enter into reverse repurchase agreements or trade in
options or future contract
4 A competitive bid process will be used to place government security
purchases or sales Based on an annual evaluation, banks and securities
dealers will be dropped from or continued on the eligibility list The
following criteria will be used in the annual evaluation
a. number of transactions competitively won
b prompt and accurate confirmation of transactions,
c efficient securities delivery
d. accurate market information,
e account servicing,
f moral character and public ethics of both broker and firm
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g trading history
Safekeeping and Custody
To protect against potential fraud and embezzlement, the financial assets of the County shall
be secured through safekeeping procedures County employees shall be bonded to protect
the public against possible embezzlement and malfeasance
Policy of Securing Deposits of County Funds Applicable to all Deposited County Funds
1 Only Alberta Credit Unions are insured by the Province of Alberta for 100% of its
member's deposits The County recognizes that CDIC (or its successor) insurance is
available for County funds deposited at any other Financial Institution (including branch
banks) only up to a maximum of $60,000 (including accrued interest) for each of the
following (i) demand deposits (u) time and savings deposits, and (iii) deposits made
pursuant to an indenture or pursuant to law in order to pay bondholders or noteholders It is
the policy of the County that all deposited funds in each of the County's accounts shall be
insured by the CDIC or its successor unless 100% guaranteed by the Province
2 Certificates of deposit, to the extent that they are not insured, may be secured by any
securities allowed under the Investment Act and depository contract.
3 Demand deposits (for example checking accounts) and savings accounts to the
extent that they are not insured may be secured by any securities allowed under the
Collateral Act.
Investment Policy Review
The Investment Policy shall be formally reviewed and approved by Council when
amendments are made or at least annually
INVESTMENT STRATEGIES FOR FUNDS
General Fund Group
The County's operating expenditures and the revenues to fund those expenditures are
accounted for in the County's general fund The general fund is also used to account for
revenues restricted by statute for debt service funds and to account for the accumulation of
resources for public improvement contingencies Most of the general fund is pooled with
other County funds for investment purposes The amount restricted for the Contingency
Fund is invested in the County s pooled investments The debt service funds included within
the general fund classification are not pooled with other County funds for investment
purposes and should be invested in compliance with the strategies for Debt Service Funds
Short term borrowing may be necessary during the fiscal year for the general fund operating
expenditures to cover negative cash positions until ad valorem tax receipts are received
The average duration of the investments relatma to rhe aanernl fimti rwu rati"n onf;—f—
be one year or less
Debt Service Funds
The debt service funds, including
general fund, are used to account i
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principal and interest payments on outstanding obligations The revenue stream is
predictable and the majority comes from ad valorem tax and special purpose revenues The
average duration is nine months or less for these funds. Most of these debt service funds are
not pooled with other funds for investment purposes
CMital Project Funds
Capital project funds for the County are used to account for construction and other
nonrecurring capital expenditure activity Investment of most of these funds results in a
maximum duration of three years for the investments
Propriety Funds
The County's Road project is also accounted for as a propnetary-type fund with investments
restricted by a trust indenture executed in connection with the financing of the project The
duration of the investments is generally three years or less, with the exception of the bond
reserve and Road renewal and replacement funds, which are invested with an average
duration of five years or less
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