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ATTACHMENT NO. 3
CITY OF NORWALK
INVESTMENT PROGRAM
INVESTMENT GUIDELINES
Cash Availability Guidelines:
1. A cash flow analysis shall be developed which will serve as a basis for determining the cash available for investment and maturity dates needed to cover future disbursements.
2. Revenue receipts are consolidated into one bank account and invested on a pooled concept basis. Interest earnings are allocated according to fund cash and investment balances.
3. Active bank balances are kept as low as possible without jeopardizing good banking relationships by maintaining investment of available cash as near to 100% as possible.
4. Sufficient funds are maintained in very liquid investments to meet most unexpected contingencies.
Investing Guidelines:
1. Only investments authorized by this Investment Policy are to be utilized.
2. A copy of this Investment Policy should be given to each broker/dealer with whom the City does business.
3. Before an unfamiliar security is purchased, the issuer and the instrument is researched and investigated and all contractual agreements and administrative procedures are completed before any transactions are consummated.
4. Every investment transaction is documented and the procedure for monitoring is clearly defined.
5. Investment strategies are reviewed by the City Treasurer for possible need to change at least annually. They are reviewed more frequently as changes in economic conditions dictate.
6. The City Treasurer will make an effort to diversify the investment portfolio as indicated in the investment policy. However, the Cit y's cash flows and liquidity needs, along with the additional time and effort that is required to purchase new investments, need to be strongly considered before making an investment just to diversify. This diversification strategy does not pertain to component units.
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7. The City does not permit the purchase of securities on margin or via reverse repurchase agreements (using the security to be purchased as collateral), the City does not enter into reverse repurchase agreements under any circumstances.
8. Under the provisions of CGC 53601.6 and 53631.5, the City shall not invest any funds covered by this Investment Policy in inverse floaters, range notes, interest only strips derived from mortgage pools or any investment that may result in a zero interest accrual if held to maturity.
Guidelines for Certain Types of Investments:
Investment Pools - In the State of California, there are provisions for the creation and operation of a government investment pool. The purpose of the pool is to allow political subdivisions to pool investable funds in order to achieve a potentially higher yield. The City will utilize guidelines established by the California Municipal Treasurers Association and the California Society of Municipal Finance Officers for evaluation before entering any new pool (other than LAIF). Agency Board must grant prior approval of the use of any new government pool.
INTERNAL CONTROL OBJECTIVES FOR INVESTMENTS
Internal control for investments is the procedure established by management of the City to assist in ensuring as far as practicable:
1. An orderly and efficient conduct of investing, including adherence to investment policies.
2. The safeguarding of assets.
3. The accuracy and completeness of the accounting records for investments.
4. The timely preparation of reliable financial information.
5. The prevention of errors.
6. The detection of fraud.
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Elements of Internal Control for Investments:
Adherence to the use of sufficient elements of a system of internal control is the method by which the City can satisfy the objective of internal control. A list of sample elements follows:
1. Responsibility
Specific responsibility for the performance of duties should be assigned and lines of authority and reporting clearly identified and understood.
2. Segregation of Functions
Segregation of functions reduces the risk that a person is in a position to conceal errors if different people handle two parts of a transaction; 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, and performing reconciliations.
3. Authorization
All transactions should be authorized by an appropriate responsible individual.
The responsibilities and limits of authorization should be clearly delineated.
Delegation of authority to authorize transactions should be handled very carefully.
4. Transfers of Investment Funds
The transferring of investment funds will be carried exclusively by use of the Federal Reserve Bank's electronic wire transfer system. Each Banker or Dealer with whom the City does business shall receive in writing from the City Treasurer a listing which limits transfers of funds to preauthorized bank accounts only.
The listing will also contain the names of the City staff authorized to request such transfers and will be updated in writing for all changes of authorized staff and bank accounts as necessary.
5. Recording
The recording system should provide that the recording procedures, both manual and EDP, be carried out independently of the individual doing the investment execution to help assure that recorded transactions are complete, valid, authorized and properly recorded.
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CITY OF NORWALK
INVESTMENT PROGRAM
Segregation of Responsibilities of the Treasury Function
Function Responsibility
1. Authorization of Investment
Transactions:
Formal Investment Policy should be:
• Prepared by City Treasurer
• Submitted to City Council
Investment transactions should be City Treasurer
approved by
2. Execution of investment transactions: City Treasurer
3. Timely recording of investment:
Transactions:
Recording of investment transactions in Controller / Deputy Treasurer the Treasurer’s records
Recording of investment transactions in Senior Accountant the accounting records
4. Verification of investment, i.e., match Senior Accountant broker confirmations to Treasurer records
5. Safeguarding of Assets and Records:
Reconciliation of Treasurer records to the Senior Accountant accounting records, bank statements and
safekeeping records
Review of (a) Agency’s financial condition, City Treasurer (b) safety, liquidity, and potential yields
of investment instruments
6. Review of investment policy and Independent Auditors compliance with policy during annual
audit of Agency’s financial records