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HomeMy WebLinkAbout2003-09-18 Council Minutes• • 1 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 C:4 Terry Na , Assistant CAO Gene Kiv aho, CAO Page 28 C7 0 • n U 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 '41 �,.' Terry Na. , Assistant CAO rL Gene Kivillo, CAO Page 29 I NqW [it 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 C. • 0 • "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 C 0 • • 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 0 • • 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 • • • 0 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 L' • 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 • is C] 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 Page 28 • 0 0 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 Page 29 is • • 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 Page 30 10 0 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 Page 31 • • • 0 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 Page 32 .7 n U 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. Page 33 • 40 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 Page 34 • • 0 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 PJ • 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 Page 36