U.S. Treasury Notes - Initially issued with two- to ten-year maturities. They are actively traded in a large secondary market and are very liquid. The Treasury may issue Note issues with a minimum of $1,000; however, the average minimum is $5,000.
Agency/Government Sponsored Enterprise Issues - Guaranteed directly or indirectly by the United States Government. All agency/GSE obligations qualify as legal investments and are acceptable as security for public deposits.
These securities usually provide higher yields than U.S. Treasury securities with generally all of the same advantages in terms of safety and liquidity. Examples include:
FICBs (Federal Intermediate Credit Bank Debentures) - Loans to lending institutions used to finance the short-term and intermediate needs of farmers, such as seasonal production. These securities are usually issued monthly in minimum denominations of $3,000 with a nine-month maturity. Interest is payable at maturity and is calculated on a 360-day, 30-day month basis.
FFCBs (Federal Farm Credit Bank) - Debt instruments used to finance the short and intermediate term needs of farmers and the national agricultural industry. They are issued monthly with three- and six-month maturities. The FFCB issues larger issues (one to ten year) on a periodic basis. These issues are highly liquid.
FLBs (Federal Land Bank Bonds) - Long-term mortgage credit provided to farmers by Federal Land Banks. These bonds are issued at irregular times for various maturities ranging from a few months to ten years. The minimum denomination is $1,000. They carry semi-annual coupons. Interest is calculated on a 360-day, 30-day month basis.
FHLBs (Federal Home Loan Bank Notes and Bonds) - Issued by the Federal Home Loan Bank System to help finance the housing industry. The notes and bonds provide liquidity and home mortgage credit to savings and loan associations, mutual savings banks, cooperative banks, insurance companies, and mortgage-lending institutions. They are issued irregularly for various maturities. The minimum denomination is $5,000. The notes are issued with maturities of less than one year and interest is paid at maturity. The bonds are issued with various maturities and carry semi-annual coupons. Interest is calculated on a 360-day, 30-day month basis.
FNMAs (Federal National Mortgage Association) - Used to assist the home mortgage market by purchasing mortgages insured by the Federal Housing Administration and the Farmers Home Administration, as well as those guaranteed by the Veterans Administration. They are issued about four times a year for maturities ranging from a few months to eight years. They are issued in minimum denominations of $10,000. They carry semi-annual coupons. Interest is computed on a 360-day, 30-day month basis.
FHLMCs (Federal Home Loan Mortgage Corporation) - A government-sponsored enterprise established to develop the secondary market for conventional home mortgages. Mortgages are purchased solely from the Federal Home Loan Bank System member lending institutions whose deposits are insured by agencies of the United States Government. They are issued for various maturities and in minimum denominations of $10,000. Interest is paid semi-annually and is calculated on a 360-day, 30-day month basis.
Other federal agency issues are Small Business Administration notes (SBAs), Government National Mortgage Association notes (GNMAs), and Tennessee Valley Authority notes (TVAs).
As a matter of practice, the Town does not invest in these issues as they do not suit our purposes as well as other investment opportunities available.
The Town limits its investments to no more than 60% of its surplus funds in any one Federal Agency.
Bankers’ Acceptances - Short-term credit arrangements to enable businesses to obtain funds to finance commercial transactions. They are time drafts drawn on a bank by an exporter or importer to obtain funds to pay for specific merchandise. By its acceptance, the bank becomes primarily liable for the payment of the draft at its maturity. An acceptance is a high-grade negotiable instrument. Bankers Acceptances can be purchased in various denominations for 30, 60, or 90 days, but no longer than -180 days.
The interest is calculated on a 360-day discount basis similar to Treasury Bills. Local agencies may not invest more than 40% of their surplus funds in bankers’ acceptances or more than 10% of the agency’s surplus funds in bankers’ acceptances of any one commercial bank.
Certificates of Deposit - Time deposits of a bank or savings and loan. They are purchased in various denominations with maturities ranging from 30 to 360 days. The interest is calculated on a 360-day, actual-day month basis and is payable monthly.
Negotiable Certificates of Deposit - Unsecured obligations of the financial institution, bank or savings and loan, bought at par value with the promise to pay face value plus accrued interest at maturity. They are high-grade negotiable instruments, paying a higher interest rate than regular certificates of deposit. The primary market issuance is in multiples of $1,000,000; the secondary market usually trades in denominations of $500,000, although smaller lots are occasionally available. As a matter of practice, only the ten largest U.S. banks where there is a secondary market established for continued liquidity are considered for investment. The Town’s total investment in negotiable certificates of deposit may not exceed 30% of surplus funds.
Commercial Paper - Short-term unsecured promissory notes issued by a corporation to raise working capital. These negotiable instruments are purchased at a discount to par value or at par value with interest bearing.
The Town is permitted by State law to invest in commercial paper of "prime" quality of the highest ranking or of the highest letter and numerical rating as provided for by a nationally recognized statistical-rating organization (NRSRO).
Eligible paper is further limited to issuing corporations that are organized and operating within the United States and having total assets in excess of five hundred million dollars ($500,000,000) and having an “A” or higher rating for the issuer’s debt other than commercial paper as rated by an NRSRO. Commercial Paper issued by an Issuer that has a rating of “A” on their debt other than commercial paper but are on credit watch for a possible downgrade by an NRSRO shall not be considered for investment purposes.
Purchases of eligible commercial paper may not exceed 270 days maturity nor represent more than 10% of the outstanding paper of an issuing corporation. Purchases of commercial paper may not exceed 25 percent of the portfolio.
Medium Term Corporate Notes - Unsecured promissory notes issued by a corporation organized and operating in the United States. These are negotiable instruments and are traded in the secondary market. Medium term corporate notes can be defined as extended maturity commercial paper.
Local agencies are restricted by the Government Code to investments in corporations rated in the top three note categories by Moody's Investors Service, Inc., and/or Standard and Poor's Corporation. For medium-term notes, eligible purchases consist of instruments that have a rating of "A" or better by both Moody's Investors Service, Inc., and Standard and Poor's Corporation. Corporate Notes issued by an issuer that has a rating of “A” but are on credit watch for a possible downgrade by a nationally recognized rating agency shall not be considered for investment purposes. If the security's credit rating falls below an "A" rating by one of these agencies, then awareness is heightened, and the security monitored closely to determine if credit risk has been significantly increased. If a security falls below an "A" rating by both rating agencies, then the Town Treasurer or his/her designee will evaluate the need to sell the security prior to maturity.
Further restrictions on the purchase of medium-term corporate notes are a maximum term of five years to maturity and total investments in medium term corporate notes may not exceed 30% of the local agency's surplus funds or 5% in any one issuer name.
Repurchase Agreements - A repurchase agreement is a short-term investment transaction. Banks buy temporarily idle funds from a customer by selling U.S.
Government or other securities with a contractual agreement to repurchase the same securities on a future date. Repurchase agreements are typically for one to ten days in maturity. The customer receives interest from the bank. The interest rate reflects both the prevailing demand for Federal funds and the maturity of the repurchase agreement. Some banks will execute repurchase agreements for a minimum of $100,000 to $500,000, but most banks have a minimum of $1,000,000. The term of a repurchase agreement may not exceed one year. The market value of securities that underlay a repurchase agreement shall be valued at 102 percent or greater of the funds borrowed against those securities and the value shall be adjusted no less than quarterly. Repurchase Agreements can only be executed with financial institutions or broker/dealers that have signed a Master Repurchase Agreement with the Town.
Reverse Repurchase Agreements - A reverse repurchase agreement is the opposite of a repurchase agreement. The Town loans a security to a bank in exchange for cash. The Town agrees to pay off the loan with interest on a future date. As this type of investment actually involves a loan arrangement, the Town may not invest more than 10% of its surplus funds in reverse repurchase agreements and must always match its maturities to the reinvestment. Reverse repurchase agreements may be utilized only when either of the following conditions are met:
1. The security was owned or specifically committed to purchase, by the local agency, prior to December 31, 1994, and was sold using a reverse repurchase agreement on December 31, 1994.
2. The security:
a. to be sold has been owned and fully paid for a minimum of 30 days prior to sale; and
b. total of all reverse repurchase agreements owned does not exceed 10 percent of the base value of the portfolio; and
c. agreement does not exceed a term of 92 days, unless the agreement includes a written codicil guaranteeing a minimum earning or spread for the entire period between the sale of a security using a reverse repurchase agreement and the final maturity date of the same security.
LAIF (Local Agency Investment Fund) - A special fund in the State Treasury which local agencies may use to deposit funds for investment. There is no minimum investment period and the minimum transaction is $5,000, in multiples of $1,000 above that, with a maximum balance of $40,000,000 for any agency. The Town is restricted to a maximum of fifteen transactions per month. It offers high liquidity because deposits can be converted to cash in 24 hours and no interest is lost. All interest is distributed to those agencies participating on a proportionate share basis determined by the amounts deposited and the length of time they are deposited. Interest is paid quarterly. The State retains an amount for reasonable costs of making the investments, not to exceed onequarter of one percent of the earnings. California Government Code §16429.3 states, in part:
"money placed with the State Treasurer for deposit in the Local Agency Investment Fund by cities, counties, or special districts shall not be subject to impoundment or seizure by any state official or state agency." Money Market Mutual Funds - Shares of beneficial interest issued by diversified management companies. To be eligible for investment, shares must:
1. attain the highest rating provided by Moody's Investors Service, Inc., which is currently "Aaa," and/or Standard and Poor's Corporation, which is currently "AAA;" and,
2. the investment adviser managing the shares must be registered with the Securities and Exchange Commission with not less than five years’ experience investing in instruments authorized under California Government Code §53601 subdivisions (a) to (m) inclusive, and with assets under management in excess of five hundred million dollars ($500,000,000); and,
3. the purchase price of shares shall not include any commission that these companies may charge; and,
4. investment in shares shall not exceed 20 percent of surplus funds.
However, no more than 10 percent of the Town’s surplus funds may be invested in shares of beneficial interest of any one mutual fund. Furthermore, any investment in a money market mutual fund must comply with other self-imposed restrictions as specified in this Investment Policy.
Asset-Backed and Mortgage-Backed Security - Bonds backed by payments from receivables/mortgages having a maximum of five years maturity. These securities must have an "AA" or better rating by Moody's Investors Services, Inc., and/or Standard and Poor's Corporation. No more than 20% of the Town's surplus money may be invested in these securities.
VIII. INVESTMENT OF BOND PROCEEDS
When investing proceeds from the issuance of bonds, the Town of Apple Valley will follow this Investment Policy when determining allowable investments. Should the trust agreement of a particular bond issue be more restrictive than the Town's policy on permitted investments, then the trust agreement will take precedence.
IX. TOWN CONSTRAINTS
The Town Treasurer or his/her designee will evaluate local banks and savings institutions and may invest idle cash funds with such institutions when the criteria for prudent investment previously stated are met. The Town operates its investment pool according to State and self-imposed constraints. It does not buy stocks; it does not speculate; it does not deal in futures or options. Any investment extending beyond a five-year period requires prior Town Council approval. Additionally, a minimum of 20% of the outstanding investments must mature within a one-year time period.
X. SAFEKEEPING AND COLLATERALIZATION
All security transactions, including collateral for repurchase agreements, entered into by the Town shall be conducted on a delivery-versus-payment (DVP) basis. Securities will be held by a third-party custodian designated by the Town Treasurer or his/her designee.
Collateralization will be required on two types of investments: certificates of deposit and repurchase (and reverse repurchase) agreements. In order to anticipate market changes and provide a level of security for all funds, a minimum collateralization level is required.
Surplus funds must be deposited in State or national banks, State or Federal savings and loan associations, or State or Federal credit unions within the State of California. The deposits cannot exceed the amount of the bank's or savings and loan's paid-up capital and surplus.
The bank or savings and loan must secure public funds deposits with eligible securities having a market value of 110% of the total amount of the deposits. State law also allows as an eligible security, first trust deeds having a value of 150% of the total amount of the deposits. A third class of collateral is 105% in the form of a letter of credit drawn on the Federal Home Loan Bank.
The Town Treasurer or his/her designee may waive security for that portion of a deposit, which is insured pursuant to Federal law. Currently, the first $100,000 of a deposit is
federally insured. Deposits in excess of $100,000 are collateralized as previously indicated.
XI. DERIVATIVE INVESTMENTS
A derivative is a generic term often used to categorize a wide variety of financial instruments whose value "depends on" or is "derived from" the value of an underlying asset, reference rate, or index.
Investments in derivative instruments are limited to debt securities that have periodic increases, or step-up interest rate adjustments that provide upward mobility in yield return. Investments in debt securities, which contain a callable feature are also allowable, but must comply with other restrictions as specified in this Investment Policy.
Investments purchased after June 19, 1995, in derivative instruments known as "inverse floaters," "dual index," or "stepped inverse" securities that produce higher than market yields at purchase date (when interest rates are low), but have the possibility of producing low or no coupon rates as market interest rates rise through the life of the instrument are not allowable. Furthermore, investments in range notes or interest-only strips that are derived from a pool of mortgages are not allowable. However, debt securities that have a floor or a built-in feature that prevents the instrument from potentially returning no yield are allowable.
XII. POLICY COMPLIANCE REGULATIONS
Should the portfolio, for any reason, fall out of compliance with this Investment Policy, immediate liquidation of securities in order to bring the portfolio back into compliance is not required. However, the Treasurer must take action to bring the portfolio into compliance within 12 months from the date the portfolio was determined to be in noncompliance with the provisions of this Investment Policy. Additionally, adequate disclosure as to all instances of noncompliance, and the efforts undertaken to bring the portfolio into compliance, must be made on the monthly Treasurer’s Report.
XIII. REPORTING
Under provisions of Section 53646 of the California Government Code, the Treasurer or his/her designee shall render a quarterly investment report to the Town Council, the Town Manager, and the Town Attorney within 30 days following the end of the quarter covered by the report. However, as a matter of practice, a monthly report shall be submitted listing the type of investments, institution, date of maturity, par value, amount of deposit, rate of interest, current market value for all securities, and such other data as may be required by the Town Council on a monthly basis.
XIV. QUALIFIED DEALERS
The Town of Apple Valley shall transact business only with banks, savings and loans, and registered investment securities dealers. The Town will limit the number of broker/dealers authorized to do business with the Town to no more than one (1) broker/dealer for every $10,000,000 of portfolio size. Each authorized broker/dealer shall be required to annually file a signed certification with the Town Treasurer certifying that
they have read and understand the Town’s most recently adopted investment policy. The Town Treasurer or his/her designee will maintain a list of financial institutions authorized to provide investment services. In addition, a list will also be maintained of approved broker/dealers who are authorized to provide investment services in the State of California. These may include "primary" and "regional" broker/dealers with offices located in the State of California. All financial institutions and broker/dealers who desire to become qualified bidders for investment transactions must be approved by and supply the Town Treasurer or his/her designee with a completed broker/dealer questionnaire.
An annual review of the financial condition and registrations of qualified bidders will be conducted by the Treasurer. A current audited financial statement is required to be on file for each financial institution and broker/dealer in which the (entity) invests.
XV. POLICY REVIEW
This Statement of Investment Policy shall be reviewed at least annually to ensure its consistency with the overall objectives of preservation of principal, liquidity and return, and its relevance to current law, financial and economic trends.
Should conditions change or legislation become effective that behooves subsequent changes or a liberalization of terms within the policy during the next fiscal year, the revised policy will be submitted to Council for adoption of the recommended action.
TOWN OF APPLE VALLEY
INVESTMENT GUIDELINES AND STRATEGY
I. Guidelines - Guidelines are established to direct and control activities in such a manner that previously established goals are achieved.
II. Investment Transaction - Every investment transaction must be authorized and reviewed by the Treasurer or his/her designee.
III. Pooled Cash - Whenever practical, local agency cash is consolidated into one bank account and invested on a pooled concept basis. Interest earnings are allocated quarterly according to month-end cash and investment balances for each fund.
IV. Competitive Bids - Purchase and sales of securities are made on the basis of competitive offers and bids when practical.
V. Cash Forecast - The cash flow for the Town is analyzed with the receipt of revenues and maturity of investments scheduled so that adequate cash will be available to meet disbursement requirements.
VI. Investment Limitations - Security purchases and holdings are maintained within statutory limits imposed by the California Government Code. Current limits are:
Bankers Acceptances 40% Section 53601(f)
Commercial Paper 25% Section 53601(g)
Negotiable Certificates of Deposit 30% Section 53601(h) Reverse Repurchase Agreements 20% Section 53601(i)
Medium Term Notes 30% Section 53601(j)
Money Market Mutual Funds 20% Section 53601(k)
Asset-Backed/Mortgage-Backed Securities 20% Section 53601(n) Federal Agency restriction 60% per Agency Section VI of Policy Local Agency Investment Fund $40,000,000 per Section VI of Policy Portfolio Maturing within one year 20% per Section IX of Policy VII. Liquidity - The marketability of a security is considered at the time of purchase, as the security may have to be sold at a later date to meet unanticipated cash demands.
VIII. Diversification - The portfolio should consist of a mix of various types of securities, issuers, and maturities.
IX. Evaluate Certificates of Deposit –
(a) Certificates of Deposit shall be evaluated in terms of FDIC coverage. For deposits in excess of the insured maximum of $100,000, approved collateral at full market value shall be required. (California Government Code Section 53652 and/or 53651(m) and 53651.2(a)(1).
TOWN OF APPLE VALLEY
INVESTMENT GUIDELINES AND STRATEGY
(Continued)
(b) Negotiable Certificates of Deposit shall be evaluated in terms of the credit worthiness of the issuer, as these deposits are uninsured and uncollateralized promissory notes.
X. Strategy - Strategy refers to the ability to manage financial resources in the most advantageous manner.
XI. Economic Forecasts - Economic Forecasts are obtained periodically from economists and financial experts through bankers and brokers to assist the Treasurer or his/her designee with the formulation of an investment strategy for the local agency.
XII. Implementing Investment Strategy - Investment transactions are executed which conform with anticipated interest rate trends and the current investment strategy plan.
XIII. Rapport - A close working relationship is maintained with large vendors of the city.
The objective is to pinpoint when large disbursements will clear the city's bank account. It is essential for good cash control that such large expenditures be anticipated, estimated as to dollar amount, and communicated to the Treasurer or his/her designee for liquidity planning purposes.
XIV. Preserve Portfolio Value - Field standards are developed in order to maintain earnings near the market and to preserve the value of the portfolio.
TOWN OF APPLE VALLEY
INVESTMENT PROCEDURES
INTERNAL CONTROL - GUIDELINES
OBJECTIVES OF INTERNAL CONTROL
Internal control is the plan of organization and all the related systems established by the management's objective of ensuring, as far as practicable:
1. The orderly and efficient conduct of its business, including adherence to management policies.
2. The safeguarding of assets.
3. The prevention or detection of errors and fraud.
4. The accuracy and completeness of the accounting records.
5. The timely preparation of reliable financial information.
LIMITATIONS OF INTERNAL CONTROL
No internal control system, however elaborate, can by itself guarantee the achievement of management's objectives. Internal control can provide only reasonable assurance that the objectives are met, because of its inherent limitations, including:
1. Management's usual requirement that a control be cost-effective.
2. The direction of most controls at recurring, rather than unusual, types of transactions.
3. Human error due to misunderstanding, carelessness, fatigue, or distraction.
4. Potential for collusion that circumvents controls dependent on the segregation of functions.
5. Potential for a person responsible for exercising control abusing that responsibility; a responsible staff member could be in a position to override controls which management has set up.
ELEMENTS OF INTERNAL CONTROL
Elements of a system of internal control are the means by which an organization can satisfy the objectives of internal control. These elements are:
1. ORGANIZATION
Specific responsibility for the performance of duties should be assigned and lines of authority and reporting clearly identified and understood.
2. PERSONNEL
Personnel should have capabilities commensurate with their responsibilities.
Personnel selection and training policies together with the quality and quantity of supervision are thus important.
TOWN OF APPLE VALLEY
INVESTMENT PROCEDURES
INTERNAL CONTROL - GUIDELINES
(Continued)
3. SEGREGATION OF FUNCTIONS
Segregation of incompatible functions reduces the risk that a person is in a position both to perpetrate and conceal errors or fraud in the normal course of duty. If two parts of a transaction are handled by different people, collusion is necessary to conceal errors or fraud. In particular, the functions that should be considered when evaluating segregation of functions are authorization, execution, recording, custody of assets, and performing reconciliations.
4. AUTHORIZATION
All transactions should be authorized by an appropriate responsible individual. The responsibilities and limits of authorization should be clearly delineated. The individual or group authorizing a specific transaction or granting general authority for transactions should be in a position commensurate with the nature and significance of the transactions. Delegation of authority to authorize transactions should be handled very carefully.
5. CONTROLS OVER AN ACCOUNTING SYSTEM
Controls over an accounting system include the procedures, both manual and computerized, carried out independently to ascertain that transactions are complete, valid, authorized, and properly recorded.
TOWN OF APPLE VALLEY
CASH CONTROLS
PROCEDURES PERFORMED BY EXTERNAL AUDITORS WITH RESPECT TO CASH
RECEIPTS
A. Town procedures and controls are reviewed. Some of the system strengths are:
1. Receipts are controlled upon receipt by proper registration devices.
2. Receipts are reconciled on a daily basis.
3. Amounts are deposited intact.
4. All bank accounts are authorized by resolution.
5. Cash counts are done by two or more individuals.
6. Bank reconciliations are reviewed.
7. Prompt posting of cash receipt entries in books.
8. Receipt forms are pre-numbered, accounted for, and physically secured.
9. Proper approval required for write-offs of customer accounts.
10. Checks are restrictively endorsed upon receipt or when run through cash register.
11. Adequate physical security over cash.
12. Individuals that handle cash do not post to customer account records or process billing statements.
13. Adequate supervision of Finance Department operations.
B. Significant revenues are confirmed directly with payer and compared with Town accounting records to make sure amounts are recorded properly.
C. Cash balances are substantiated by confirming all account balances recorded in the accounting records. Bank reconciliations are reviewed for propriety and recalculated by the auditor. All significant reconciling items on bank reconciliations are verified as valid reconciling items by proving to subsequent bank statements.
TOWN OF APPLE VALLEY
SEGREGATION OF RESPONSIBILITIES OF
THE TREASURY FUNCTIONS
Function
1. Authorization of investment
transactions:
Formal investment policy should be:
* Prepared by
* Submitted to
Investment transactions
should be approved by:
2. Execution of investment transactions
3. Investment transactions approved for
compliance with Investment policy
and/or State law.
4. Timely recording of investment
transactions:
Recording of investment
Transactions in the
Treasurer’s records.
Recording of investment transactions in
the accounting records
5. Verification of investment, Finance
Manager i.e., match broker confirmation to Treasurer's records
6. Safeguarding of assets and records:
Reconciliation of Treasurer's records
to the accounting records
Reconciliation of Treasurer's records to
bank statements and safekeeping
records
Responsibility
Town Treasurer
Town Council
Town Treasurer
Treasure/Finance Manager
Treasurer/Finance Manager
Senior Accountant/Accountant
Senior Accountant/Accountant
Finance Manager
Senior Accountant/Accountant
Senior Accountant/Accountant
Formatted: Centered
TOWN OF APPLE VALLEY
SEGREGATION OF RESPONSIBILITIES
OF THE TREASURY FUNCTIONS
(Continued)
Function
6. Safeguarding of Assets and Records
(continued):
Annual review of:
(a) financial institution's financial
condition,
(b) safety, liquidity, and potential
yields of investment instruments.
7. No less than an annual review of
investment portfolio as prepared by
Treasurer including:
• Investment types
• Purchase Price
• Par values
• Market values
• Maturity dates
• Investment yields
• Conformance to stated investment
policy
• Safekeeping reports
Responsibility
Finance Manager with Treasurer's
approval
External Independent Auditors
The segregation of responsibilities of the Treasury functions as noted herein are intended to enhance the Town’s internal controls over cash handling procedures. It should be noted that from time to time, due to the limited size of the Finance department staff, segregation of responsibilities as outlined herein may not be followed in order to fulfill the business needs of the organization.
2023-24 Proposed Stmnt.docx
TOWN OF APPLE VALLEY
STATEMENT OF INVESTMENT POLICY
2023-24
I.GENERAL INTRODUCTION
Under the laws of the State of California, it is the responsibility of the Town Treasurer, at the direction of the Town Council, to secure and protect the public funds of the Town, and to establish proper safeguards, controls, and procedures to maintain these funds in a lawful, rational and auspicious manner. Said maintenance shall include the prudent and secure investment of those funds that are deemed temporarily excess, in a manner anticipated to provide additional benefit to the people of the Town of Apple Valley.
This Statement of Investment Policy will be provided annually for the review and approval of the Town Council in an open public meeting. It will be provided to securities dealers, banks, and brokers currently approved for conducting investment transactions with the Town Treasurer’s office in the ongoing effort to manage the excess cash portfolio; to other affected persons or entities; and to any member of the electorate wishing to review this document upon request. The Treasurer reserves the right to provide these documents on a cost basis.
II. SCOPE
This Statement of Investment Policy pertains to those temporarily surplus funds under the control of the Treasurer, designated for the daily ongoing operations of the Town; and concerns the deposit, maintenance, safekeeping, and preservation of all such funds, and the investments made with these funds. This Policy does not apply to pension trust funds, deferred compensation funds, and certain other trust or non-operating funds.
III. PURPOSE
The purpose of this Statement of Investment Policy is to provide the Town Council, and those involved in servicing the investment requirements of the Town, and any other interested party, a clear understanding of the regulations and internal guidelines that will be observed in maintaining and investing those pooled funds deemed temporarily excess.
This statement is intended to provide guidelines for the prudent investment of the Town's temporary idle cash and outline the procedures for maximizing the efficiency of the Town's cash management system. The ultimate goal is to enhance the economic status of the Town while safeguarding its assets.
IV. OBJECTIVE
The Town's cash management system is designed to accurately monitor and forecast revenues and expenditures, thus enabling the Town to invest funds to the fullest extent possible. The Town attempts to obtain the highest yield possible only after the criteria established for safety and liquidity have been met.
The Town of Apple Valley operates its pooled idle cash investments with judgment and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived. This affords the Town a broad spectrum of investment opportunities as long as the investment is deemed prudent and is allowable under current legislation of the State of California Government Code Section 53600 et seq. and the general laws of the Town of Apple Valley.
The Town of Apple Valley strives to maintain the level of investment of all idle funds as near 100% as possible, through daily and projected cash flow determinations. Idle cash management and investment transactions are the responsibility of the Town Treasurer or his/her designee.
Criteria for selecting investments and the order of priority are:
1. Safety: The safety and risk associated with an investment refers to the potential loss of principal, interest, or a combination of these amounts. The Town only operates in those investments that are considered very safe.
2. Liquidity: This refers to the ability to "cash in" at any moment in time with a minimal chance of losing some portion of principal or interest.
3. Yield: Yield is the potential dollar earnings an investment can provide, and sometimes is referred to as the rate of return.
4. Safekeeping: Securities purchased shall be held in third party safekeeping in the Trust Department of a financial institution, in the Town's name and control. The account established shall be protected from seizure by creditors should the financial institution holding the Town's securities file for bankruptcy protection. The basic premise underlying the Town's investment philosophy is and continues to be, to ensure that surplus funds are always safe and available when needed.
V. DELEGATION OF INVESTMENT AUTHORITY
Authority to manage the Town of Apple Valley's investment program is derived from Town of Apple Valley Council Resolution No. 2023-XX Management responsibility for the investment program is hereby delegated for Fiscal Year 2023-24 to the Town Treasurer or his/her designee, who shall establish written procedures for the operation of the investment program consistent with this Investment Policy. Procedures should include references to: safekeeping, repurchase agreements, wire transfer agreements, banking service contracts, and collateral/ depository agreements. Such procedures shall include explicit delegation of authority to persons responsible for investment transactions. No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the Town Treasurer or his/her designee.
The Town Treasurer or his/her designee shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials.
VI. STANDARD OF PRUDENCE
The Treasurer shall perform the investment function in conjunction with the “Prudent Person Rule.” This rule states, in principle that whenever investing property for the benefit of others, a trustee shall exercise the judgment and care, under circumstances then prevailing that persons of prudence, discretion, and intelligence, would exercise in the management of their own affairs not in regards to speculation, but in regard to the permanent disposition of their funds, considering the probability of safety of, as well as the probable income from their capital. The Treasurer and his designees are considered to have a fiduciary, trustee, relationship with the public for the public funds and all investment decisions will be made in a manner sustaining this responsibility.
VII. AUTHORIZED INVESTMENTS
The California Government Code allows the Town to invest in the following media:
Securities of the U.S. Government, or its government sponsored agencies Small Business Administration loans
Certificates of deposit, placed with commercial banks and savings and loan companies Negotiable certificates of deposit
Bankers’ acceptances
Commercial paper
Corporate notes and bonds, including medium term notes
State of California Local Agency Investment Fund
Repurchase agreements
Reverse repurchase agreements
Passbook savings account demand deposits
County Treasurer demand deposits
Asset-backed and mortgage-backed securities
Money market mutual funds
As a matter of practice, however, the Town of Apple Valley generally limits its investments to the following vehicles:
U.S. Treasury Bills - Issued weekly with maturity dates up to one year. They are issued and traded on a discount basis with interest figured on a 360-day basis, actual number of days. They are issued in amounts of $10,000 and up, in multiples of $5,000. They are a highly liquid security.
U.S. Treasury Notes - Initially issued with two- to ten-year maturities. They are actively traded in a large secondary market and are very liquid. The Treasury may issue Note issues with a minimum of $1,000; however, the average minimum is $5,000.
Agency/Government Sponsored Enterprise Issues - Guaranteed directly or indirectly by the United States Government. All agency/GSE obligations qualify as legal investments and are acceptable as security for public deposits.
These securities usually provide higher yields than U.S. Treasury securities with generally all of the same advantages in terms of safety and liquidity. Examples include:
FICBs (Federal Intermediate Credit Bank Debentures) - Loans to lending institutions used to finance the short-term and intermediate needs of farmers, such as seasonal production. These securities are usually issued monthly in minimum denominations of $3,000 with a nine-month maturity. Interest is payable at maturity and is calculated on a 360-day, 30-day month basis.
FFCBs (Federal Farm Credit Bank) - Debt instruments used to finance the short and intermediate term needs of farmers and the national agricultural industry. They are issued monthly with three- and six-month maturities. The FFCB issues larger issues (one to ten year) on a periodic basis. These issues are highly liquid.
FLBs (Federal Land Bank Bonds) - Long-term mortgage credit provided to farmers by Federal Land Banks. These bonds are issued at irregular times for various maturities ranging from a few months to ten years. The minimum denomination is $1,000. They carry semi-annual coupons. Interest is calculated on a 360-day, 30-day month basis.
FHLBs (Federal Home Loan Bank Notes and Bonds) - Issued by the Federal Home Loan Bank System to help finance the housing industry. The notes and bonds provide liquidity and home mortgage credit to savings and loan associations, mutual savings banks, cooperative banks, insurance companies, and mortgage-lending institutions. They are issued irregularly for various maturities. The minimum denomination is $5,000. The notes are issued with maturities of less than one year and interest is paid at maturity. The bonds are issued with various maturities and carry semi-annual coupons. Interest is calculated on a 360-day, 30-day month basis.
FNMAs (Federal National Mortgage Association) - Used to assist the home mortgage market by purchasing mortgages insured by the Federal Housing Administration and the Farmers Home Administration, as well as those guaranteed by the Veterans Administration. They are issued about four times a year for maturities ranging from a few months to eight years. They are issued in minimum denominations of $10,000. They carry semi-annual coupons. Interest is computed on a 360-day, 30-day month basis.
FHLMCs (Federal Home Loan Mortgage Corporation) - A government-sponsored enterprise established to develop the secondary market for conventional home mortgages. Mortgages are purchased solely from the Federal Home Loan Bank System member lending institutions whose deposits are insured by agencies of the United States Government. They are issued for various maturities and in minimum denominations of $10,000. Interest is paid semi-annually and is calculated on a 360-day, 30-day month basis.
Other federal agency issues are Small Business Administration notes (SBAs), Government National Mortgage Association notes (GNMAs), and Tennessee Valley Authority notes (TVAs).
As a matter of practice, the Town does not invest in these issues as they do not suit our purposes as well as other investment opportunities available.
The Town limits its investments to no more than 60% of its surplus funds in any one Federal Agency.
Bankers’ Acceptances - Short-term credit arrangements to enable businesses to obtain funds to finance commercial transactions. They are time drafts drawn on a bank by an exporter or importer to obtain funds to pay for specific merchandise. By its acceptance, the bank becomes primarily liable for the payment of the draft at its maturity. An acceptance is a high-grade negotiable instrument. Bankers Acceptances can be purchased in various denominations for 30, 60, or 90 days, but no longer than -180 days.
The interest is calculated on a 360-day discount basis similar to Treasury Bills. Local agencies may not invest more than 40% of their surplus funds in bankers’ acceptances or more than 10% of the agency’s surplus funds in bankers’ acceptances of any one commercial bank.
Certificates of Deposit - Time deposits of a bank or savings and loan. They are purchased in various denominations with maturities ranging from 30 to 360 days. The interest is calculated on a 360-day, actual-day month basis and is payable monthly.
Negotiable Certificates of Deposit - Unsecured obligations of the financial institution, bank or savings and loan, bought at par value with the promise to pay face value plus accrued interest at maturity. They are high-grade negotiable instruments, paying a higher interest rate than regular certificates of deposit. The primary market issuance is in multiples of $1,000,000; the secondary market usually trades in denominations of $500,000, although smaller lots are occasionally available. As a matter of practice, only the ten largest U.S. banks where there is a secondary market established for continued liquidity are considered for investment. The Town’s total investment in negotiable certificates of deposit may not exceed 30% of surplus funds.
Commercial Paper - Short-term unsecured promissory notes issued by a corporation to raise working capital. These negotiable instruments are purchased at a discount to par value or at par value with interest bearing.
The Town is permitted by State law to invest in commercial paper of "prime" quality of the highest ranking or of the highest letter and numerical rating as provided for by a nationally recognized statistical-rating organization (NRSRO).
Eligible paper is further limited to issuing corporations that are organized and operating within the United States and having total assets in excess of five hundred million dollars ($500,000,000) and having an “A” or higher rating for the issuer’s debt other than commercial paper as rated by an NRSRO. Commercial Paper issued by an Issuer that has a rating of “A” on their debt other than commercial paper but are on credit watch for a possible downgrade by an NRSRO shall not be considered for investment purposes.
Purchases of eligible commercial paper may not exceed 270 days maturity nor represent more than 10% of the outstanding paper of an issuing corporation. Purchases of commercial paper may not exceed 25 percent of the portfolio.
Medium Term Corporate Notes - Unsecured promissory notes issued by a corporation organized and operating in the United States. These are negotiable instruments and are traded in the secondary market. Medium term corporate notes can be defined as extended maturity commercial paper.
Local agencies are restricted by the Government Code to investments in corporations rated in the top three note categories by Moody's Investors Service, Inc., and/or Standard and Poor's Corporation. For medium-term notes, eligible purchases consist of instruments that have a rating of "A" or better by both Moody's Investors Service, Inc., and Standard and Poor's Corporation. Corporate Notes issued by an issuer that has a rating of “A” but are on credit watch for a possible downgrade by a nationally recognized rating agency shall not be considered for investment purposes. If the security's credit rating falls below an "A" rating by one of these agencies, then awareness is heightened, and the security monitored closely to determine if credit risk has been significantly increased. If a security falls below an "A" rating by both rating agencies, then the Town Treasurer or his/her designee will evaluate the need to sell the security prior to maturity.
Further restrictions on the purchase of medium-term corporate notes are a maximum term of five years to maturity and total investments in medium term corporate notes may not exceed 30% of the local agency's surplus funds or 5% in any one issuer name.
Repurchase Agreements - A repurchase agreement is a short-term investment transaction. Banks buy temporarily idle funds from a customer by selling U.S.
Government or other securities with a contractual agreement to repurchase the same securities on a future date. Repurchase agreements are typically for one to ten days in maturity. The customer receives interest from the bank. The interest rate reflects both the prevailing demand for Federal funds and the maturity of the repurchase agreement. Some banks will execute repurchase agreements for a minimum of $100,000 to $500,000, but most banks have a minimum of $1,000,000. The term of a repurchase agreement may not exceed one year. The market value of securities that underlay a repurchase agreement shall be valued at 102 percent or greater of the funds borrowed against those securities and the value shall be adjusted no less than quarterly. Repurchase Agreements can only be executed with financial institutions or broker/dealers that have signed a Master Repurchase Agreement with the Town.
Reverse Repurchase Agreements - A reverse repurchase agreement is the opposite of a repurchase agreement. The Town loans a security to a bank in exchange for cash. The Town agrees to pay off the loan with interest on a future date. As this type of investment actually involves a loan arrangement, the Town may not invest more than 10% of its surplus funds in reverse repurchase agreements and must always match its maturities to the reinvestment. Reverse repurchase agreements may be utilized only when either of the following conditions are met:
1. The security was owned or specifically committed to purchase, by the local agency, prior to December 31, 1994, and was sold using a reverse repurchase agreement on December 31, 1994.
2. The security:
a. to be sold has been owned and fully paid for a minimum of 30 days prior to sale; and
b. total of all reverse repurchase agreements owned does not exceed 10 percent of the base value of the portfolio; and
c. agreement does not exceed a term of 92 days, unless the agreement includes a written codicil guaranteeing a minimum earning or spread for the entire period between the sale of a security using a reverse repurchase agreement and the final maturity date of the same security.
LAIF (Local Agency Investment Fund) - A special fund in the State Treasury which local agencies may use to deposit funds for investment. There is no minimum investment period and the minimum transaction is $5,000, in multiples of $1,000 above that, with a maximum balance of $40,000,000 for any agency. The Town is restricted to a maximum of fifteen transactions per month. It offers high liquidity because deposits can be converted to cash in 24 hours and no interest is lost. All interest is distributed to those agencies participating on a proportionate share basis determined by the amounts deposited and the length of time they are deposited. Interest is paid quarterly. The State retains an amount for reasonable costs of making the investments, not to exceed onequarter of one percent of the earnings. California Government Code §16429.3 states, in part:
"money placed with the State Treasurer for deposit in the Local Agency Investment Fund by cities, counties, or special districts shall not be subject to impoundment or seizure by any state official or state agency." Money Market Mutual Funds - Shares of beneficial interest issued by diversified management companies. To be eligible for investment, shares must:
1. attain the highest rating provided by Moody's Investors Service, Inc., which is currently "Aaa," and/or Standard and Poor's Corporation, which is currently "AAA;" and,
2. the investment adviser managing the shares must be registered with the Securities and Exchange Commission with not less than five years’ experience investing in instruments authorized under California Government Code §53601 subdivisions (a) to (m) inclusive, and with assets under management in excess of five hundred million dollars ($500,000,000); and,
3. the purchase price of shares shall not include any commission that these companies may charge; and,
4. investment in shares shall not exceed 20 percent of surplus funds.
However, no more than 10 percent of the Town’s surplus funds may be invested in shares of beneficial interest of any one mutual fund. Furthermore, any investment in a money market mutual fund must comply with other self-imposed restrictions as specified in this Investment Policy.
Asset-Backed and Mortgage-Backed Security - Bonds backed by payments from receivables/mortgages having a maximum of five years maturity. These securities must have an "AA" or better rating by Moody's Investors Services, Inc., and/or Standard and Poor's Corporation. No more than 20% of the Town's surplus money may be invested in these securities.
VIII. INVESTMENT OF BOND PROCEEDS
When investing proceeds from the issuance of bonds, the Town of Apple Valley will follow this Investment Policy when determining allowable investments. Should the trust agreement of a particular bond issue be more restrictive than the Town's policy on permitted investments, then the trust agreement will take precedence.
IX. TOWN CONSTRAINTS
The Town Treasurer or his/her designee will evaluate local banks and savings institutions and may invest idle cash funds with such institutions when the criteria for prudent investment previously stated are met. The Town operates its investment pool according to State and self-imposed constraints. It does not buy stocks; it does not speculate; it does not deal in futures or options. Any investment extending beyond a five-year period requires prior Town Council approval. Additionally, a minimum of 20% of the outstanding investments must mature within a one-year time period.
X. SAFEKEEPING AND COLLATERALIZATION
All security transactions, including collateral for repurchase agreements, entered into by the Town shall be conducted on a delivery-versus-payment (DVP) basis. Securities will be held by a third-party custodian designated by the Town Treasurer or his/her designee.
Collateralization will be required on two types of investments: certificates of deposit and repurchase (and reverse repurchase) agreements. In order to anticipate market changes and provide a level of security for all funds, a minimum collateralization level is required.
Surplus funds must be deposited in State or national banks, State or Federal savings and loan associations, or State or Federal credit unions within the State of California. The deposits cannot exceed the amount of the bank's or savings and loan's paid-up capital and surplus.
The bank or savings and loan must secure public funds deposits with eligible securities having a market value of 110% of the total amount of the deposits. State law also allows as an eligible security, first trust deeds having a value of 150% of the total amount of the deposits. A third class of collateral is 105% in the form of a letter of credit drawn on the Federal Home Loan Bank.
The Town Treasurer or his/her designee may waive security for that portion of a deposit, which is insured pursuant to Federal law. Currently, the first $100,000 of a deposit is
federally insured. Deposits in excess of $100,000 are collateralized as previously indicated.
XI. DERIVATIVE INVESTMENTS
A derivative is a generic term often used to categorize a wide variety of financial instruments whose value "depends on" or is "derived from" the value of an underlying asset, reference rate, or index.
Investments in derivative instruments are limited to debt securities that have periodic increases, or step-up interest rate adjustments that provide upward mobility in yield return. Investments in debt securities, which contain a callable feature are also allowable, but must comply with other restrictions as specified in this Investment Policy.
Investments purchased after June 19, 1995, in derivative instruments known as "inverse floaters," "dual index," or "stepped inverse" securities that produce higher than market yields at purchase date (when interest rates are low), but have the possibility of producing low or no coupon rates as market interest rates rise through the life of the instrument are not allowable. Furthermore, investments in range notes or interest-only strips that are derived from a pool of mortgages are not allowable. However, debt securities that have a floor or a built-in feature that prevents the instrument from potentially returning no yield are allowable.
XII. POLICY COMPLIANCE REGULATIONS
Should the portfolio, for any reason, fall out of compliance with this Investment Policy, immediate liquidation of securities in order to bring the portfolio back into compliance is not required. However, the Treasurer must take action to bring the portfolio into compliance within 12 months from the date the portfolio was determined to be in noncompliance with the provisions of this Investment Policy. Additionally, adequate disclosure as to all instances of noncompliance, and the efforts undertaken to bring the portfolio into compliance, must be made on the monthly Treasurer’s Report.
XIII. REPORTING
Under provisions of Section 53646 of the California Government Code, the Treasurer or his/her designee shall render a quarterly investment report to the Town Council, the Town Manager, and the Town Attorney within 30 days following the end of the quarter covered by the report. However, as a matter of practice, a monthly report shall be submitted listing the type of investments, institution, date of maturity, par value, amount of deposit, rate of interest, current market value for all securities, and such other data as may be required by the Town Council on a monthly basis.
XIV. QUALIFIED DEALERS
The Town of Apple Valley shall transact business only with banks, savings and loans, and registered investment securities dealers. The Town will limit the number of broker/dealers authorized to do business with the Town to no more than one (1) broker/dealer for every $10,000,000 of portfolio size. Each authorized broker/dealer shall be required to annually file a signed certification with the Town Treasurer certifying that
they have read and understand the Town’s most recently adopted investment policy. The Town Treasurer or his/her designee will maintain a list of financial institutions authorized to provide investment services. In addition, a list will also be maintained of approved broker/dealers who are authorized to provide investment services in the State of California. These may include "primary" and "regional" broker/dealers with offices located in the State of California. All financial institutions and broker/dealers who desire to become qualified bidders for investment transactions must be approved by and supply the Town Treasurer or his/her designee with a completed broker/dealer questionnaire.
An annual review of the financial condition and registrations of qualified bidders will be conducted by the Treasurer. A current audited financial statement is required to be on file for each financial institution and broker/dealer in which the (entity) invests.
XV. POLICY REVIEW
This Statement of Investment Policy shall be reviewed at least annually to ensure its consistency with the overall objectives of preservation of principal, liquidity and return, and its relevance to current law, financial and economic trends.
Should conditions change or legislation become effective that behooves subsequent changes or a liberalization of terms within the policy during the next fiscal year, the revised policy will be submitted to Council for adoption of the recommended action.
TOWN OF APPLE VALLEY
INVESTMENT GUIDELINES AND STRATEGY
I. Guidelines - Guidelines are established to direct and control activities in such a manner that previously established goals are achieved.
II. Investment Transaction - Every investment transaction must be authorized and reviewed by the Treasurer or his/her designee.
III. Pooled Cash - Whenever practical, local agency cash is consolidated into one bank account and invested on a pooled concept basis. Interest earnings are allocated quarterly according to month-end cash and investment balances for each fund.
IV. Competitive Bids - Purchase and sales of securities are made on the basis of competitive offers and bids when practical.
V. Cash Forecast - The cash flow for the Town is analyzed with the receipt of revenues and maturity of investments scheduled so that adequate cash will be available to meet disbursement requirements.
VI. Investment Limitations - Security purchases and holdings are maintained within statutory limits imposed by the California Government Code. Current limits are:
Bankers Acceptances 40% Section 53601(f)
Commercial Paper 25% Section 53601(g)
Negotiable Certificates of Deposit 30% Section 53601(h) Reverse Repurchase Agreements 20% Section 53601(i)
Medium Term Notes 30% Section 53601(j)
Money Market Mutual Funds 20% Section 53601(k)
Asset-Backed/Mortgage-Backed Securities 20% Section 53601(n) Federal Agency restriction 60% per Agency Section VI of Policy Local Agency Investment Fund $40,000,000 per Section VI of Policy Portfolio Maturing within one year 20% per Section IX of Policy VII. Liquidity - The marketability of a security is considered at the time of purchase, as the security may have to be sold at a later date to meet unanticipated cash demands.
VIII. Diversification - The portfolio should consist of a mix of various types of securities, issuers, and maturities.
IX. Evaluate Certificates of Deposit –
(a) Certificates of Deposit shall be evaluated in terms of FDIC coverage. For deposits in excess of the insured maximum of $100,000, approved collateral at full market value shall be required. (California Government Code Section 53652 and/or 53651(m) and 53651.2(a)(1).
TOWN OF APPLE VALLEY
INVESTMENT GUIDELINES AND STRATEGY
(Continued)
(b) Negotiable Certificates of Deposit shall be evaluated in terms of the credit worthiness of the issuer, as these deposits are uninsured and uncollateralized promissory notes.
X. Strategy - Strategy refers to the ability to manage financial resources in the most advantageous manner.
XI. Economic Forecasts - Economic Forecasts are obtained periodically from economists and financial experts through bankers and brokers to assist the Treasurer or his/her designee with the formulation of an investment strategy for the local agency.
XII. Implementing Investment Strategy - Investment transactions are executed which conform with anticipated interest rate trends and the current investment strategy plan.
XIII. Rapport - A close working relationship is maintained with large vendors of the city.
The objective is to pinpoint when large disbursements will clear the city's bank account. It is essential for good cash control that such large expenditures be anticipated, estimated as to dollar amount, and communicated to the Treasurer or his/her designee for liquidity planning purposes.
XIV. Preserve Portfolio Value - Field standards are developed in order to maintain earnings near the market and to preserve the value of the portfolio.
TOWN OF APPLE VALLEY
INVESTMENT PROCEDURES
INTERNAL CONTROL - GUIDELINES
OBJECTIVES OF INTERNAL CONTROL
Internal control is the plan of organization and all the related systems established by the management's objective of ensuring, as far as practicable:
1. The orderly and efficient conduct of its business, including adherence to management policies.
2. The safeguarding of assets.
3. The prevention or detection of errors and fraud.
4. The accuracy and completeness of the accounting records.
5. The timely preparation of reliable financial information.
LIMITATIONS OF INTERNAL CONTROL
No internal control system, however elaborate, can by itself guarantee the achievement of management's objectives. Internal control can provide only reasonable assurance that the objectives are met, because of its inherent limitations, including:
1. Management's usual requirement that a control be cost-effective.
2. The direction of most controls at recurring, rather than unusual, types of transactions.
3. Human error due to misunderstanding, carelessness, fatigue, or distraction.
4. Potential for collusion that circumvents controls dependent on the segregation of functions.
5. Potential for a person responsible for exercising control abusing that responsibility; a responsible staff member could be in a position to override controls which management has set up.
ELEMENTS OF INTERNAL CONTROL
Elements of a system of internal control are the means by which an organization can satisfy the objectives of internal control. These elements are:
1. ORGANIZATION
Specific responsibility for the performance of duties should be assigned and lines of authority and reporting clearly identified and understood.
2. PERSONNEL
Personnel should have capabilities commensurate with their responsibilities.
Personnel selection and training policies together with the quality and quantity of supervision are thus important.
TOWN OF APPLE VALLEY
INVESTMENT PROCEDURES
INTERNAL CONTROL - GUIDELINES
(Continued)
3. SEGREGATION OF FUNCTIONS
Segregation of incompatible functions reduces the risk that a person is in a position both to perpetrate and conceal errors or fraud in the normal course of duty. If two parts of a transaction are handled by different people, collusion is necessary to conceal errors or fraud. In particular, the functions that should be considered when evaluating segregation of functions are authorization, execution, recording, custody of assets, and performing reconciliations.
4. AUTHORIZATION
All transactions should be authorized by an appropriate responsible individual. The responsibilities and limits of authorization should be clearly delineated. The individual or group authorizing a specific transaction or granting general authority for transactions should be in a position commensurate with the nature and significance of the transactions. Delegation of authority to authorize transactions should be handled very carefully.
5. CONTROLS OVER AN ACCOUNTING SYSTEM
Controls over an accounting system include the procedures, both manual and computerized, carried out independently to ascertain that transactions are complete, valid, authorized, and properly recorded.
TOWN OF APPLE VALLEY
CASH CONTROLS
PROCEDURES PERFORMED BY EXTERNAL AUDITORS WITH RESPECT TO CASH
RECEIPTS
A. Town procedures and controls are reviewed. Some of the system strengths are:
1. Receipts are controlled upon receipt by proper registration devices.
2. Receipts are reconciled on a daily basis.
3. Amounts are deposited intact.
4. All bank accounts are authorized by resolution.
5. Cash counts are done by two or more individuals.
6. Bank reconciliations are reviewed.
7. Prompt posting of cash receipt entries in books.
8. Receipt forms are pre-numbered, accounted for, and physically secured.
9. Proper approval required for write-offs of customer accounts.
10. Checks are restrictively endorsed upon receipt or when run through cash register.
11. Adequate physical security over cash.
12. Individuals that handle cash do not post to customer account records or process billing statements.
13. Adequate supervision of Finance Department operations.
B. Significant revenues are confirmed directly with payer and compared with Town accounting records to make sure amounts are recorded properly.
C. Cash balances are substantiated by confirming all account balances recorded in the accounting records. Bank reconciliations are reviewed for propriety and recalculated by the auditor. All significant reconciling items on bank reconciliations are verified as valid reconciling items by proving to subsequent bank statements.
TOWN OF APPLE VALLEY
SEGREGATION OF RESPONSIBILITIES OF
THE TREASURY FUNCTIONS
Function
1. Authorization of investment
transactions:
Formal investment policy should be:
* Prepared by
* Submitted to
Investment transactions
should be approved by:
2. Execution of investment transactions
3. Investment transactions approved for
compliance with Investment policy
and/or State law.
4. Timely recording of investment
transactions:
Recording of investment
Transactions in the
Treasurer’s records.
Recording of investment transactions in
the accounting records
5. Verification of investment, Finance
Manager i.e., match broker confirmation to Treasurer's records
6. Safeguarding of assets and records:
Reconciliation of Treasurer's records
to the accounting records
Reconciliation of Treasurer's records to
bank statements and safekeeping
records
Responsibility
Town Treasurer
Town Council
Town Treasurer
Treasure/Finance Manager
Treasurer/Finance Manager
Senior Accountant/Accountant
Senior Accountant/Accountant
Finance Manager
Senior Accountant/Accountant
Senior Accountant/Accountant
TOWN OF APPLE VALLEY
SEGREGATION OF RESPONSIBILITIES
OF THE TREASURY FUNCTIONS
(Continued)
Function
6. Safeguarding of Assets and Records
(continued):
Annual review of:
(a) financial institution's financial
condition,
(b) safety, liquidity, and potential
yields of investment instruments.
7. No less than an annual review of
investment portfolio as prepared by
Treasurer including:
• Investment types
• Purchase Price
• Par values
• Market values
• Maturity dates
• Investment yields
• Conformance to stated investment
policy
• Safekeeping reports
Responsibility
Finance Manager with Treasurer's
approval
External Independent Auditors
The segregation of responsibilities of the Treasury functions as noted herein are intended to enhance the Town’s internal controls over cash handling procedures. It should be noted that from time to time, due to the limited size of the Finance department staff, segregation of responsibilities as outlined herein may not be followed in order to fulfill the business needs of the organization.
2023-24
INVESTMENT POLICY
GLOSSARY
AGENCIES: Federal agency securities and/or government-sponsored enterprises.
ASKED: The price at which securities are offered.
BANKERS’ ACCEPTANCE (BA): A draft or bill or exchange accepted by a bank or trust company. The accepting institution guarantees payment of the bill, as well as the issuer.
BENCHMARK: A comparative base for measuring the performance or risk tolerance of the investment portfolio. A benchmark should represent a close correlation to the level of risk and the average duration of the portfolio’s investments.
BID: The price offered by a buyer of securities. See Offer.
BROKER: A broker brings buyers and sellers together for a commission.
CERTIFICATE OF DEPOSIT (CD): A time deposit with a specific maturity evidenced by a certificate. Large-denomination CD’s are typically negotiable.
COLLATERAL: Securities, evidence of deposit or other property, which a borrower pledges to secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies.
COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR): The official annual report for the Town of Apple Valley. It includes five combined statements for each individual fund and account group prepared in conformity with GAAP. It also includes supporting schedules necessary to demonstrate compliance with finance-related legal and contractual provisions, extensive introductory material, and a detailed Statistical Section.
COUPON: (a) The annual rate of interest that a bond’s issuer promises to pay the bondholder on the bond’s face value. (b) A certificate attached to a bond evidencing interest due on a payment date. DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his own account.
DEBENTURE: A bond secured only by the general credit of the issuer.
DELIVERY VERSUS PAYMENT: There are two methods of delivery of securities:
delivery versus payment and delivery versus receipt. Delivery versus payment is delivery of securities with an exchange of money for the securities. Delivery versus receipt is delivery of securities with an exchange of signed receipt for the securities.
DERIVATIVES: (1) Financial instruments whose return profile is linked to, or derived from, the movement of one or more underlying index or security, and may include a
leveraging factor, or (2) financial contracts based upon notional amounts whose value is derived from an underlying index or security (interest rates, foreign exchange rates, equities or commodities).
DISCOUNT: The difference between the cost price of a security and its maturity when quoted at lower than face value. A security selling below original offering price shortly after sale also is considered to be at a discount.
DISCOUNT SECURITIES: Non-interest bearing money market instruments that are issued a discount and redeemed at maturity for full face value, e. g., U. S. Treasury Bills.
DIVERSIFICATION: Dividing investment funds among a variety of securities offering independent returns.
FEDERAL CREDIT AGENCIES: Agencies of the Federal government set up to supply credit to various classes of institutions and individuals, e.g., S & L’s, small business firms, students, farmers, farm cooperatives, and exporters.
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): A federal agency that insures bank deposits, currently up to $250,000 per deposit.
FEDERAL FUNDS RATE: The rate of interest at which Fed funds are traded. This rate is currently pegged by the Federal Reserve through open-market operations.
FEDERAL HOME LOAN BANKS (FHLB): Government sponsored wholesale banks (currently 12 regional banks), which lend funds and provide correspondent banking services to member commercial banks, thrift institutions, credit unions and insurance companies. The mission of the FHLBs is to liquefy the housing related assets of its members who must purchase stock in their district Bank.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA): FNMA, like GNMA was chartered under the Federal National Mortgage Association Act in 1938. FNMA is a federal corporation working under the auspices of the Department of Housing and Urban Development (HUD). It is the largest single provider of residential mortgage funds in the United States. Fannie Mae, as the corporation is called, is a private stockholder-owned corporation. The corporation’s purchases include a variety of adjustable mortgages and second loans, in addition to fixed-rate mortgages. FNMA’s securities are also highly liquid and are widely accepted. FNMA assumes and guarantees that all security holders will receive timely payment of principal and interest.
FEDERAL OPEN MARKET COMMITTEE (FOMC): Consists of seven members of the Federal Reserve Board and five of the twelve Federal Reserve Bank Presidents. The President of the New York Federal Reserve Bank is a permanent member, while the other Presidents serve on a rotating basis. The Committee periodically meets to set Federal Reserve guidelines regarding purchases and sales of Government Securities in the open market as a means of influencing the volume of bank credit and money.
FEDERAL RESERVE SYSTEM: The central bank of the United States created by Congress and consisting of a seven member Board of Governors in Washington, D. C., 12 regional banks and about 5,700 commercial banks that are members of the system.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA or Ginnie Mae):
securities influencing the volume of bank credit guaranteed by GNMA and issued by mortgage bankers, commercial banks, savings and loan associations, and other institutions. Security holder is protected by full faith and credit of the U. S. Government.
Ginnie Mae securities are backed by the FHA, VA or FmHa mortgages. The term “passthroughs” is often used to describe Ginnie Maes.
LIQUIDITY: A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss of value. In the money market, a security is said to be liquid if the spread between bid and asked prices is narrow and reasonable size can be done at those quotes.
LOCAL GOVERNMENT INVESTMENT POOL (LGIP): The aggregate of all funds from political subdivisions that are placed in the custody of the State Treasurer for investment and reinvestment.
MARKET VALUE: The price at which a security is trading and could presumably be purchased or sold.
MASTER REPURCHASE AGREEMENT: A written contract covering all future transactions between the parties to repurchase – reverse repurchase agreements that establishes each party’s rights in the transactions. A master agreement will often specify, among other things, the right of the buyer-lender to liquidate the underlying securities in the event of default by the seller-borrower.
MATURITY: The date upon which the principal or stated value of an investment becomes due and payable.
MONEY MARKET: The market in which short-term debt instruments (bills, commercial paper, bankers’ acceptances, etc.) are issued and traded.
OFFER: The price asked by a seller of securities. (When you are buying securities, you ask for an offer.) See Asked and Bid.
OPEN MARKET OPERATIONS: Purchases and sales of government and certain other securities in the open market by the New York Federal Reserve Bank as directed by the FOMC in order to influence the volume of money and credit in the economy. Purchases inject reserves into the bank system and stimulate growth of money and credit; sales have the opposite effect. Open market operations are the Federal Reserve’s most important and most flexible monetary policy tool.
PORTFOLIO: Collection of securities held by an investor.
PRIMARY DEALER: A group of government securities dealers who submit daily reports of market activity and positions and monthly financial statements to the Federal Reserve Bank of New York and are subject to its informal oversight. Primary dealers include Securities and Exchange Commission (SEC)-registered securities broker-dealers, banks, and a few unregulated firms.
PRUDENT PERSON RULE: An investment standard. In some states the law requires that a fiduciary, such as a trustee, may invest money only in a list of securities selected by the custody state-the do-called legal list. In other states, the trustee may invest in a security if it is one, which would be bought by a prudent person of discretion and intelligence who is seeking a reasonable income and preservation of capital.
QUALIFIED PUBLIC DEPOSITORIES: A financial institution which does not claim exemption from the payment of any sales or compensating use or ad valorem taxes under the laws of this state, which has segregated for the benefit of the commission eligible collateral having a value of not less than its maximum liability and which has been approved by the Public Deposit Protection Commission to hold public deposits.
RATE OF RETURN: The yield obtainable on a security based on its purchase price or its current market price. This may be the amortized yield to maturity on a bond the current income return.
REPURCHASE AGREEMENT (RP OR REPO): A holder of securities sells these securities to an investor with an agreement to repurchase them at a fixed price on a fixed date. The security “buyer” in effect lends the “seller” money for the period of the agreement, and the terms of the agreement are structured to compensate him for this.
Dealers use RP extensively to finance their positions. Exception: When the Fed is said to be doing RP, it is lending money that is, increasing bank reserves.
SAFEKEEPING: A service to customers rendered by banks for a fee whereby securities and valuables for all types and descriptions are held in the bank’s vaults for protection.
SECONDARY MARKET: A market made for the purchase and sale of outstanding issues following the initial distribution.
SECURITIES AND EXCHANGE COMMISION: Agency created by Congress to protect investors in securities transactions by administering securities legislation.
SEC RULE 15C3-1: See Uniform Net Capital Rule.
STRUCTURED NOTES: Notes issued by Government Sponsored Enterprises (FHLB, FNMA, SLMA, etc.) and Corporations, which have imbedded options (E.G., call features, step-up coupons, floating rate coupons, derivative-based returns) into their debt structure.
Their market performance is impacted by the fluctuation of interest rates, the volatility of the imbedded options and shifts in the shape of the yield curve.
TREASURY BILLS: A non-interest bearing discount security issued by the U. S. treasury to finance the national debt. Most bills are issued to mature in three months, six months, or one year.
TREASURY BONDS: Long-term coupon-bearing U. S. Treasury securities issued as direct obligations of the U. S. Government and having initial maturities of more than 10 years.
TREASURY NOTES: Medium-term coupon-bearing U. S. Treasury securities issued as direct obligations of the U. S. Government and having initial maturities from two to ten years.
UNIFORM NET CAPITAL RULE: Securities and Exchange Commission requirement that member firms as well as nonmember broker-dealers in securities maintain a maximum ratio of indebtedness to liquid capital of 15 to 1; also called net capital rule and net capital ratio. Indebtedness covers all money owed to a firm, including margin loans and commitments to purchase securities, one reason new public issues are spread among members of underwriting syndicates. Liquid capital includes cash and assets easily converted into cash.
YIELD: The rate of annual income return on an investment, expressed as a percentage. (a) INCOME YIELD is obtained by dividing the current dollar income by the current market price for the security. (b) NET YIELD or YIELD TO MATURITY is the current income yield minus any premium above par or plus any discount from par in purchase price, with the adjustment spread over the period from the date of purchase to the date of maturity of the bond.
RESOLUTION NO. 2023-23
A RESOLUTION OF THE TOWN COUNCIL OF THE
TOWN OF APPLE VALLEY, CALIFORNIA,
ADOPTING THE TOWN OF APPLE VALLEY
INVESTMENT POLICY
THE TOWN COUNCIL OF THE TOWN OF APPLE VALLEY DOES HEREBY RESOLVE AS FOLLOWS:
WHEREAS, in accordance with Section 53607 of the Government Code of the State of California, the Town Treasurer is hereby authorized (a) to invest such portion of any sinking fund of, or idle money in, the Town Treasury, not required for the immediate necessities of the Town as is deemed wise or expedient, in securities in which this Council is authorized to invest such sums by the provisions of State Government Code Section 53601 and Section 53635, limited by the Town’s Investment Policy; and (b) to sell, or exchange for other eligible securities, and reinvest the proceeds of the securities purchased. The Town Treasurer shall make a monthly report of such transactions to this Council.
NOW, THEREFORE, BE IT RESOLVED that the Town Council of the Town of Apple Valley has adopted the 2023-24 Statement of Investment Policy as set forth in the attached document. The Town Clerk shall certify to the passage and adoption of this resolution, and it shall thereupon be in full force and effect.
APPROVED AND ADOPTED by the Town Council of the Town of Apple Valley, this 27th day of June 2023.
_______________________________
Scott Nassif, Mayor
ATTEST:
_______________________________
La Vonda M-Pearson, Town Clerk
Town Council Agenda Report
Date: June 27, 2023
To: Honorable Mayor and Town Council
Subject: A RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF APPLE
VALLEY, CALIFORNIA, APPROVING BUDGET APPROPRIATIONS
AND ADOPTING THE OPERATING AND CAPITAL IMPROVEMENT
BUDGET FOR ALL FUNDS FOR FISCAL YEAR 2023-2024
From: Douglas Robertson, Town Manager
Submitted by: Sydnie Harris, Director of Finance
Finance
Budgeted Item: Yes No N/A
RECOMMENDED ACTION
Adopt Resolution No. 2023-24 of the Town Council of the Town of Apple Valley, California, approving a budget appropriation and adopting the budget, including the operating and capital improvement budget for all funds for Fiscal Year 2023-2024.
SUMMARY:
On June 13, 2023, the Town Council held a Budget Workshop and reviewed the General Fund’s Proposed Operating and Capital Improvement Budget for Fiscal Year 2023-2024. At this meeting, Council decided to enlist the aid of a revenue consultant to review any potential revenue options currently available to the Town to support its growing service needs. Due to the volatile nature of our economy and all of the inflationary factors occurring at present, the Town is being proactive in seeking all options to ensure fiscal stability in our financial projections.
The attached budget adoption resolution includes all revenue estimates, fund, and departmental appropriations included in the Fiscal Year 2023-2024 Proposed Budget discussed and presented to Council at the June 13, 2023 Budget Workshop. This report also includes changes incurred after the budget workshop due to additional scrutiny of budget requests and adjustments proposed by staff and approved by management.
Adoption of the attached Resolution No. 2023-24 will approve the Fiscal Year 2023- 2024 Operating and Capital Improvement Budget for all funds with budgetary activity.
BACKGROUND
The proposed budget represents the Town Manager’s recommended financial plan for Fiscal Year 2023-2024 to address Council’s spending priorities within current fiscal constraints to fulfill the service expectations of the community. The gap between service expectations and fiscal reality has gradually widened over the last ten (10) years. New programs and services have been added over the last ten (10) years with no significant sources of new resources identified to provide for the new funding requirements. These conditions coupled with normal inflationary increases and the lingering impacts of the past recessionary cycle, and the economic impact of the most recent national pandemic have placed increased pressure upon existing resources and eliminated budgetary flexibility that had existed previously. The focus in this year’s budget process was on scaling expectations and services to a level that is supportable within existing fiscal constraints.
As submitted, the proposed budget on an all funds basis is summarized in the following table:
TABLE 1
ADOPTED BUDGET – ALL FUNDS
Appropriations/ Proposed Amended Increase (Decrease)
ALL FUNDS FY 23-24 FY 22-23 Amount Percent
Operating
Budget $106,675,422 $98,527,640 $8,147,782 8.27%
Transfers Out 470,000 470,000 0 0.00%
Capital Budget 18,007,682 14,844,042 3,163,640 21.31%
Total $125,153,104 $113,841,682 $11,311,422 9.94%
The total Fiscal Year 2023-2024 proposed appropriations are $125,153,104 on an all funds basis. The proposed Operating Budget on an all funds basis increased from $98,527,640 in Fiscal Year 2022-2023 to $106,675,422 in Fiscal Year 2023-2024, an increase of $8,147,782 or 8.27%. The increase in the proposed Operating Budget is primarily due to the inflationary factors impacting the cost of living and operating costs to the Town. The proposed Capital Improvement Budget is proposed to increase, from $14,844,042 in Fiscal Year 2022-2023 to $18,007,682 in Fiscal Year 2023-2024, an increase of $3,163,640 or 21.31%. The increase in the proposed budget for the Capital Improvement Program is primarily the result of the same economic inflationary factors impacting the costs of supplies and labor.
The total proposed General Fund budget is $41,283,085, an increase of $458,220 as compared to the adopted budget in Fiscal Year 2022-2023. This increase is due to an increase of personnel specifically for an expansion of programs in the Town. While a large percentage of those programs are reimbursable expenses to the Town, the initial expense must be budgeted for spending. As presented, the proposed General Fund budget for Fiscal Year 2023-2024 is expected to utilize fund balance of $5,484,485 this fiscal year.
The following table is a summary of the total resources and requirements for the proposed Fiscal Year 2023-2024 General Fund budget:
TABLE 2
General Fund Summary
Estimated Revenues $35,798,600
Approp. from Fund Balance $5,484,485
Total Resources 41,283,085
Proposed Budget 41,283,085
Balance $0
The Fiscal Year 2023-2024 proposed budget represents improvements in the format budget balancing methods from the prior budget submissions to the Town Council. Staff has continued to improve the transparency and understandability of the budget document.
These improvements to the budget format are intended to increase the transparency of the budget process and provide a clear picture of the Town’s spending plan for the next fiscal year.
FISCAL REVIEW
Adoption of the attached resolution will adopt the revenue and appropriation estimates with sufficient funding in the amount of $125,153,104 to fund anticipated expenditures in all budgetary funds for Fiscal Year 2023-2024.
LEGAL REVIEW
The attached resolution has been reviewed and approved as to form.
CONCLUSION
Adoption of the attached Resolution No. 2023-24 will approve the Operating and Capital Improvement budget for all budgetary funds for Fiscal Year 2023-2024.
ATTACHMENT:
A. Resolution No. 2023-24
RESOLUTION NO. 2023-24
A RESOLUTION OF THE TOWN COUNCIL OF THE TOWN
OF APPLE VALLEY, CALIFORNIA APPROVING A
BUDGET APPROPRIATION AND ADOPTING THE
BUDGET, INCLUDING THE OPERATING AND CAPITAL
IMPROVEMENT BUDGET FOR FISCAL YEAR 2023-24
WHEREAS, the Town has been notified of funding for Capital Projects by the State and by San Bernardino Council of Governments, the following represents current funding levels and adjustments as necessary, and
WHEREAS, the Town Manager have heretofore submitted to the Town Council a proposed budget for the Town for Fiscal Year 2023-24, as the same may have been revised by the Town Council, a copy of which is attached, and copies of which are in the possession of and in the office of the Town Clerk and the Director of Finance; and WHEREAS, the said proposed budget contains estimates of the services, activities and projects comprising the budget, and contains expenditure requirements and the resources available to the Town; and
WHEREAS, the appropriations limit for the Town for Fiscal Year 2023-24 is $49,887,624 (Forty-Nine Million Eight Hundred Eighty-Seven Thousand Six Hundred Twenty-Four Dollars), and the total annual tax revenues subject to such limitation for Fiscal Year 2023-24 are estimated to be $24,651,200; and WHEREAS, the Town Council has made such revisions to the proposed budget as appears to be desirable; and
WHEREAS, the proposed budget, as herein approved, will enable the Town Council to make adequate financial plans and will ensure that Town officers can administer their respective functions in accordance with such plans,
NOW THEREFORE, BE IT RESOLVED BY THE TOWN COUNCIL OF THE TOWN OF APPLE VALLEY AS FOLLOWS:
SECTION 1: That the appropriation-expenditure budgeting system is hereby adopted. The system consists of:
A. Present Personnel Policies and Procedures, including salary schedules and benefits, except as hereinafter changed by resolution or ordinance of the Town Council.
B. An appropriation-expenditure system which will show budgetary categories by department.
C. The system mentioned above will apply to Operating and Capital Improvement Budget expenditures as intended for use in Fiscal Year 2023-
24.
Resolution No. 2023-24
D. The Town Manager is authorized to transfer Operating Budget Appropriation Balances between functions and/or programs when he deems it necessary to do so.
E. Budget system assumes existing service levels; Council approval will be required for any significant changes involving increased or decreased service levels.
F. The Director of Finance shall be responsible for constant monitoring of the budget and shall establish and implement appropriate control mechanisms necessary for said purpose, after approval of the Town Manager.
G. A monthly report shall be prepared by each department and/or project indicating any changes in service levels and the progress each entity has achieved or failed to achieve and the reasons for said status, if they have not obtained results. Each manager shall be accountable for achieving results of his/her organization unit based upon the objectives set for each unit by the Town Manager and Town Council and shall be evaluated as to their performance in an annual performance appraisal conducted by the Town Manager.
H. A deflator procedure, to be administered by the Town Manager, is hereby established for reducing appropriations in the event that projected revenues are reduced due to a reduction in the State subventions or other revenues that may fluctuate downward due to changes in economic conditions. For Fiscal Year 2023-24, the amount of Total Operating and Capital Budget Appropriation shall be reduced, as determined by the Town Manager based on his assessment of total Town needs.
I. A monthly status report will be available up request for the Town Council reflecting budget, year-to- date expenditures, and percentage used by each department and fund of the Town.
SECTION 2: The proposed budget for the Town of Apple Valley for the Fiscal Year 2023-24 is hereby approved and adopted, and the amounts of proposed expenditures as specified are appropriated for the budget programs and units as herein specified.
Resolution No. 2023-24
A. The 2023-24 Operating and Capital Improvement Budget programs are hereby adopted, establishing the following expenditure levels:
DEPARTMENT 2023-24 PROPOSED BUDGET
1. TOWN COUNCIL 272,203
2. TOWN ATTORNEY 320,000
3. TOWN MANAGER 641,430
4. FINANCE 1,154,658
5. TOWN CLERK 698,973
6. PUBLIC INFORMATION 467,153
7. HUMAN RESOURCES 343,116
8. INFORMATION TECHNOLOGIES 2,236,136
9. GENERAL GOVERNMENT 1,858,730
10. PUBLIC FACILITIES 1,992,757
11. PUBLIC SAFETY 19,331,127
12. EMERGENCY PREP 28,600
13. ANIMAL SERVICES 2,914,565
14. CODE ENFORCEMENT 586,936
15. BUILDING & SAFETY 876,059
16. ECONOMIC DEVELOPMENT 244,351
17. ENGINEERING 875,399
18. PLANNING 950,805
19. GROUNDS 2,755,555
20. AQUATIC PROGRAMS 592,131
21. RECREATION PROGRAMS 1,989,225
22. RECEREATION ADMIN 130,676
23. GAS TAX 2,463,100
24. ROAD MAINTENANCE AND REHAB 2,702,936
25. LOCAL TRANSPORTATION 1,248,316
26. MEASURE I 7,883,907
27. CDBG 919,680
28. APPLE VALLEY HOME 3,388,186
29. VICTORVILLE HOME 2,100,155
30. PEG CHANNEL FUND 50,000
31. QUIMBY 145,340
32. ASSESSMENT DISTRICT LL 535,000
33. PBID 182,600
34. DEBT SERVICE 521,000
35. CAPITAL IMPROVEMENT TIF FUND 765,000
36. STORM DRAIN FACILITIES 250,000
37. WASTEWATER FUND 10,547,199
38. WASTE MANAGEMENT FUND 14,489,500
39. APPLE VALLEY GOLF COURSE 1,422,650
40. APPLE VALLEY CHOICE ENERGY 34,255,450
TOTAL OPERATING & CAPITAL EXPENDITURES $125,153,104
Resolution No. 2023-24
B. The Operating and Capital Budget Revenues are hereby adopted establishing a revenue base by which the Town expenditures will be measured:
1. GENERAL FUND 35,798,600
2. STREET MAINT FUND (GAS TAX) 2,165,347
3. SB1 ROAD MAINT REHAB 1,878,936
4. LOCAL TRANSPORTATION 270,000
5. MEASURE I 6,769,291
6. CDBG 652,733
7. APPLE VALLEY HOME 911,188
8. PEG CHANNEL FUND 130,000
9. QUIMBY 340,000
10. ASSESSMENT DISTRICT LL 265,000
11. PBID 214,000
12. CAPITAL IMPROVEMENT TIF FUND 800,000
13. ANIMAL CONTROL FACILITIES 5,500
14. LAW ENFORCEMENT FACILITIES 20,000
15. GENERAL GOVERNMENT FACILITIES 40,000
17. PUBLIC MEETING FACILITIES 25,000
18. AQUATIC FACILITIES 7,500
19. STORM DRAINS 120,000
20. SANITARY SEWER FACILITES 100,000
21. WASTEWATER FUND 6,771,000
22. WASTE MANAGEMENT FUND 14,365,000
23. APPLE VALLEY GOLF COURSE 1,312,206
24. APPLE VALLEY CHOICE ENERGY 35,001,000
TOTAL OPERATION & CAPITAL REVENUES $107,962,301
SECTION 3: Pursuant to Section 53901 of the California Government Code, within 60 days after the adoption hereof, the Town Clerk shall file a copy of this resolution with the Auditor of the County of San Bernardino.
SECTION 4: Within fifteen days after the adoption of this resolution, the Town Clerk shall certify to the adoption hereof and, as so certified, cause a copy to be posted in at least three public places within the boundaries of the Town.
Resolution No. 2023-24
APPROVED and ADOPTED by the Town Council of the Town of Apple Valley this 27th day of June, 2023.
Scott Nassif, Mayor
ATTEST:
La Vonda M. Pearson, Town Clerk
Town Council Agenda Report
Date: June 27, 2023
To: Honorable Mayor and Town Council
Subject: FIRST READING OF ORDINANCE 566 – AN ORDINANCE ALLOWING
ELECTRONIC FILING OF FAIR POLITICAL PRACTICES
COMMISSION FILINGS IN THE JURISDICTION OF THE TOWN OF
APPLE VALLEY
From: Douglas Robertson, Town Manager
Submitted by: Kiel Mangerino, Assistant Town Clerk
Town Clerk
Budgeted Item: Yes No N/A
RECOMMENDED ACTION
A. Find the proposed adoption of Ordinance No. 566 is not subject to and is exempt from CEQA based upon a finding that, under section 15061(b)(3) of the CEQA Guidelines, it can be seen with certainty that there is no possibility that the proposed Ordinance may have a significant effect on the environment.
B. Move to waive the reading of Ordinance No. 566 in its entirety and read by title only.
C. Move to introduce Ordinance No. 566 adding a new Chapter 2.05 to the Apple Valley Municipal Code regarding electronic filing of campaign finance disclosure statements.
Background
State law requires all Council Members and Town Council Candidates to file campaign contribution forms with the Town Clerk’s Office. The process of filing these campaign forms requires the candidates or council members to either appear in person or mail their statements to the Town Clerk’s Office. Since January 2021, the Town has been required to make available all campaign contribution reports and forms on the Town’s website. To accomplish this mandate, the Town Clerk’s office must scan, redact, and post all campaign forms it receives from candidates and council members within 72 hours.
Staff have identified a vendor, Netfile, who provides electronic filing for public agencies across California. Alongside the campaign filing system Netfile will also provide electronic filing of Statement of Economic Interest Forms (Form 700). The next campaign disclosures that will utilize the electronic filing software will be the SemiAnnual filing due January 31, 2024.
The proposed Ordinance would streamline the campaign filing process for candidates, council members and the Town Clerk’s Office by requiring electronic filing of all campaign forms, reports, and disclosures. By moving forward with an electronic filing system, the Town would be provided several benefits including time and cost savings for staff, easier filing for council members and candidates, and increased public transparency.
Environmental Review
Staff has determined that the proposed Ordinance is not subject to and is exempt from CEQA based upon a finding that, under section 15061(b)(3) of the CEQA Guidelines, it can be seen with certainty that there is no possibility that the proposed Ordinance may have a significant effect on the environment.
Fiscal Impact
The costs required to pay for the vendor’s services have been previously approved in the FY 2023-24 budget. The Fair Political Practices Commission (FPPC) charges a fee of $1,000 for the Town to implement an electronic filing system. The yearly price of $5,900 is for five years and includes the FPPC’s fee.
Attachments
A. Ordinance 566 - AN ORDINANCE OF THE TOWN COUNCIL OF THE TOWN OF APPLE VALLEY, CALIFORNIA, ADDING CHAPTER 2.05 TO THE APPLE VALLEY
MUNICIPAL CODE REGARDING ELECTRONIC FILING OF CAMPAIGN FINANCE
DISCLOSURE STATEMENTS
ORDINANCE NO. 566
AN ORDINANCE OF THE TOWN COUNCIL OF THE TOWN OF
APPLE VALLEY, CALIFORNIA, ADDING CHAPTER 2.05 TO
THE APPLE VALLEY MUNICIPAL CODE REGARDING
ELECTRONIC FILING OF CAMPAIGN FINANCE
DISCLOSURE STATEMENTS
WHEREAS, California Government Code Section 84615 provides that a legislative body of a local government agency may adopt an ordinance that requires an elected officer, candidate, committee, or other person required to file statements, reports or other documents required by Chapter 4 of the Political Reform Act, except those whose contributions and expenditures each total less than two thousand dollars ($2,000) in a calendar year, to file such statements, reports, or other documents online or electronically with the Town Clerk; and
WHEREAS, The Town Council expressly finds and determines that NetFile, a software web-based system, as proposed by the Town Clerk, contains multiple safeguards to protect the integrity and security of the data, and will operate securely and effectively and will not unduly burden filers; and
WHEREAS, the software used by NetFile's electronic filing system has been certified by the Secretary of State and meets the requirements set by Government Code Section 84615; and
WHEREAS, the Town Clerk and NetFile will operate the electronic filing system in compliance with the requirements of California Government Code Section 84615 and any other applicable laws.
NOW, THEREFORE, the Town Council of the Town of Apple Valley, California, does ordain as follows:
SECTION 1. The recitals contained above are true and correct and are incorporated herein by this reference.
SECTION 2. New Chapter 2.05, Electronic Filing of Campaign Disclosure Information, is hereby added to Apple Valley Municipal Code to read as follows:
"CHAPTER 2.05 ELECTRONIC FILING OF CAMPAIGN DISCLOSURE INFORMATION Sections:
2.05.010 Required Use of Electronic Filing System.
2.05.020 Paper Filing Not Required After Electronic Filing.
2.05.030 Filing Options When a Copy Must be Filed with the Town Clerk.
2.05.040 Paper Filing When Cannot File Electronically.
2.05.050 Internet Posting of Data.
Ordinance No. 566
2.05.060 Records Retention.
2.05.070 Administrative Policies and Procedures.
2.05.010 Required Use of Electronic Filing System.
(A) Except as set forth in subsection B of this Section, any elected officer, candidate, committee other person required to file specified statements, reports, forms, or other documents with the Apple Valley Town Clerk as required by Chapter 4 (commencing with Section 84100) of Title 9 of the California Government Code, also known as the Political Reform Act, and that has received contributions or made expenditures of $2,000 or more in a calendar year, may electronically file such statement using the Town's online system according to procedures established by the Town Clerk.
However, to ensure reporting continuity, once a statement, report, form, or other document is filed electronically on behalf of any elected officer, candidate, or committee, all future statements, reports, forms, and other documents filed on behalf of that officer, candidate or committee must be filed electronically.
(B) An elected officer, candidate, committee or other person may choose not to use the electronic filing system by filing all original statements, reports, forms, or other documents in paper format with the Town Clerk, until such time as the Town Council determines that electronic filing is mandatory for all filers.
2.05.020 Paper Filing Not Required After Electronic Filing. Any elected officer, candidate, committee, or other person who has electronically filed a statement, report, form, or other document using the Town's online system is not also required to file a copy of that document in a paper format with the Town Clerk.
2.05.030 Filing Options When a Copy Must be Filed with the Town Clerk. In any instance in which an original statement, report, form, or other document must be filed with the Secretary of State or other agency, and a copy of that document is required to be filed with the Town Clerk, the filer may electronically file a copy with the Town Clerk or may file in a paper format.
2.05.040 Paper Filing When Cannot File Electronically. If, for technical reasons, the Town's system is not capable of accepting a particular type of statement, report, form or other document, an elected officer, candidate, committee, or other person shall timely file that document in paper format with the Town Clerk.
2.05.050 Internet Posting of Data. The Town Clerk shall ensure that the Town's system makes all filed statements, reports, forms, or other documents available on the Town's internet website in an easily understood format that provides the greatest public access. Within 72 hours of each applicable filing deadline, the statements, reports, forms, or other documents, whether filed electronically or in paper format, shall be available and posted on the Town's internet website. If the final day of the 72-hour period is a Saturday, Sunday, or holiday, the period is extended to the next day that is not a Saturday, Sunday, or holiday. Before posting, the Town Clerk shall redact the street name and building number of the persons or entity representatives listed on any
Ordinance No. 566
statement, report, or document, or any bank account number required to be disclosed by the filer. Providing a link on the Town's internet website to the statement, report, or other document satisfies this requirement. The data shall be made available free of charge. The Town Clerk's office shall also make a complete, unredacted copy of the statement, report, form, or other document available to the Fair Political Practices Commission for Government Code Section 87200 filers.
2.05.060 Records Retention. The Town Clerk's office shall maintain records according to the Town's records retention schedule and applicable State law commencing from the date filed, a secured, official version of each online or electronic statement, report, form, or other document, which shall serve as the official version of that record.
2.05.070 Administrative Policies and Procedures. The Town Clerk is authorized to adopt such administrative policies and procedures as deemed necessary to implement this Chapter."
SECTION 3. Compliance with California Environmental Quality Act. This Ordinance has been assessed in accordance with the authority and criteria contained in the California Environmental Quality Act (CEQA) and the State CEQA Guidelines and it has been determined that approval of the Ordinance is exempt from further environmental review under the general rule in California Environmental Quality Act (CEQA) Guidelines Section 15061(b)(3) that CEQA only applies to projects that have the potential for causing a significant effect on the environment. As a series of text additions without any physical project being approved, it can be seen with certainty that there is no possibility that the additions to the Municipal Code will have a significant effect on the environment. The Town Council concurs in these findings and adopts them as its own.
SECTION 4. Severability. If any sentence, clause or phrase of this Ordinance is for any reason held to be unconstitutional or otherwise invalid, such decision shall not affect the validity of the remaining provisions of this Ordinance. The Town Council hereby declares that it would have passed this Ordinance and each sentence, clause or phrase thereof irrespective of the fact that any one or more sentences, clauses or phrases be declared unconstitutional or otherwise invalid.
SECTION 5. Effective Date. This Ordinance shall become effective 30 days after its adoption.
SECTION 6. Notice of Adoption. The Town Clerk of the Town of Apple Valley shall certify to the adoption of this Ordinance and cause publication to occur in a newspaper of general circulation and published and circulated in the Town in a manner permitted under section 36933 of the Government Code of the State of California.
Ordinance No. 566
PASSED, APPROVED, AND ADOPTED by the Town Council of the Town of Apple Valley on this 11th day of July, 2023.
____________________________
Scott Nassif, Mayor
Attest:
____________________________
La Vonda M-Pearson, Town Clerk.
Approval as to Form: Approval as to Content:
__________________________ ____________________________ Thomas Rice, Town Attorney Douglas Robertson, Town Manager