Finance Committee Agenda and Packet 2011 12 19

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Proof of state registration (except for those firms providing safekeeping and custodial services only). Audited financial statements demonstrating compliance with state and federal capital adequacy guidelines. Proof of National Association of Securities Dealers (NASD)Financial Industry Regulatory Authority (FINRA) certification. Evidence of adequate insurance coverage. Certification of having read and understood and agreeing to comply with the City’s investment policy. An annual review of the financial condition and registration of all qualified financial institutions and broker/dealers will be conducted by the investment officerFinance Director. Safekeeping and Custody All trades of marketable securities will be executed “delivery versus payment” (where applicable) to ensure that securities are deposited in an eligible financial institution prior to the release of funds. Securities will be held by an independent third-party custodian selected by the City asand evidenced by safekeeping receipts in the City’s name. The safekeeping institution shall provide on an annual basis a copy of its most recent report on internal controls (Statement of Standards 70). Moreover, the investment officermanagement is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the City are protected from loss, theft, or misuse. The internal control structure shall be designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that (1) the cost of a control should not exceed the benefits likely to be derived, and (2) the valuation of costs and benefits requires estimates and judgments by management. The internal controls structure should address the following points: Control of collusion. Separation of transaction authority from accounting and recordkeeping. Custodial safekeeping. Avoidance of physical delivery securities. Written confirmation of transactions for investments and wire transfers. Dual authorization of wire transfers. Compliance with these controls shall be reviewed and confirmed through the City’s annual independent audit. Performance Standards & Reporting The investment portfolio shall be designed with the objective of obtaining a rate of return throughout budgetary and economic cycles, commensurate with the investment risk constraints and the cash flow needs. The City’s investment strategy is passive. Given this strategy, the basis used by the Finance Director to determine whether market yields are being achieved shall be the ColoTrust local government investment pool, the one-year US Treasury Bill, and the two-year Agency Benchmark. 15