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HomeMy WebLinkAboutPalm Desert Treasury Policies & Procedures 2004 - City/RDA/FACITY OF PALM DESERT OFFICE OF THE CITY TREASURER STAFF REPORT Retroactively rove Palm Desert Treasury Policies and REQUEST: Procedures for 2004, as amended. APPLICANT: N/A CASE NOS. N/A DATE: February 10, 2005 CONTENTS: Palm Desert Treasury Policies and Procedures Nos. 6, 8, 9, 15, and 16 (As Amended) Recommendation: B minute motion: That the City Council retroactively approves Palm desert y Treasury Policies and Procedures for 2004, a Background: Citypolicy requires that the Palm Desert Treasu Policies and Per tcedurF Manual be updated annually. This is the update for calendar year 2004. Due is was a delay in submitting these changes. Consequent) retroactive approval requested. Most of the proposed changes are minor technical corrections. Policy deletions are highlighted with der; policy additions are highlighted with WAR. In Treasury Policy No. 6, the date for the City's annual l delivery of instructions to its custodian would be changed from June 30th to January t. In Treasury Policy Nos. 8 and 16, the phrases "Finance Committee" and "Finance and Investment Committee would be replaced with the Committee's correct title -- "Investment and Finance Committee." Staff Report Annual Treasury Policy Review February 10, 2005 Page 2 of 2 In Treasury Policy No. 9, the Information Systems Manager (Doug Van Gelder) would be added as an additional Finance staff check signer in order to ensure adequate coverage. a In Treasury Policy No. 15, various technical improvements would be added in ord calculate the annual interest allocation. er to Submitted By: Paul S. Gibson, C.C.M.T., City Treasurer Approved By: Carlos L. • rte. ity Manager City of Palm Desert Treasury Policies and Procedures Revision No. 3 Adopted: POLICY NO.: 6 SUBJECT: "CUSTODY AND SAFEKEEPING" POLICY The purpose of this document is to outline the policy and procedure on the custody and safekeeping of securities. It is the policy of the: • City of Palm Desert; • Palm Desert Redevelopment Agency; • Palm Desert Housing Authority; • Palm Desert Financing Authority; and the • City of Palm Desert Golf Course Facilities Corporation (hereafter referred to collectively as the "City") that the City shall retain third - party bank trust companies as clearinghouses for the payment, delivery, receipt, and safekeeping of securities that the City buys or sells. 1.0 Selection of Custodian and of Trustee A third -party bank trust company shall serve as the City's custodian ("Custodian") for the purpose of settling all of the City's securities transactions that do not involve the investment of the gross proceeds of tax-exempt bonds. A third -party bank trust company shall serve as the City's trustee ("Trustee") for the purpose of settling all of the City's securities transactions that involve the investment of the gross proceeds of tax- exempt bonds. The City shall select both the Custodian and the Trustee through a Request for Proposals ("RFP") process. The City may initiate an RFP process every five years, unless there is an immediate need to fill a vacancy or to replace a trust company. 1 of 7 Palm Desert Treasury Policies and Procedures No. 6: "Custody and Safekeeping" Revision No. 3 Adopted: The City shall subsequently execute separate custody agreements with the selected Custodian and the selected Trustee in order to confirm all legal rights and obligations. The City shall only use safekeeping or custodial agents that are located within the State of California. 2.0 Qualifications of Custodian and of Trustee The Custodian and the Trustee shall, at a minimum, possess the following qualifications: 2.1 Safekeeping. The ability to clear and safekeep all securities that are authorized by California Government Code Section 53601. 2.2 Fiduciary Duty. The ability to hold all of the City's investments on a fiduciary basis and to segregate them from the trust company's other assets. 2.3 Bank Charter. Membership in the Federal Reserve System and status as a State of California- or federally -chartered commercial bank, with its accounts insured by the Federal Deposit Insurance Corporation. 3.0 Methods of Delivering Securities All of the City's securities transactions shall be done either on a receipt- versus -payment ("DVP") basis. Both the Custodian and the Trustee shall disburse City monies or deliver City -owned securities to an approved broker only after that broker has delivered to the Custodian or to the Trustee either the securities to be sold or the money to purchase the securities. Both the Custodian and the Trustee shall only process a security transaction after they have received a Bloomberg Trade Ticket from the City which either the City Treasurer or the Assistant Finance Director has signed. The only exceptions to RVP or DVP shall be the purchase or sale of securities that are connected with: (1) local government investment pools; (2) money market mutual funds; or (3) Federal Reserve Banks ("Treasury Direct Program"), since those securities are not deliverable. 2 of 7 Palm Desert Treasury Policies and Procedures No. 6: "Custody and Safekeeping" Revision No. 3 Adopted: When the City enters into a new custodial relationship, then the securities that the City already owns shall be delivered into safekeeping on a free -delivery basis. The countersignature of either the City Treasurer or the Assistant Finance Director shall be required for the free delivery of securities. Separate custodial accounts shall be maintained for the City of Palm Desert and for the Palm Desert Redevelopment Authority. 4.0 Credit Risk All of the securities that the City owns shall be registered in the City's name. The ownership of the securities is thus safeguarded by limiting their negotiability. Governmental Accounting Standards Board Statement No. 3, Paragraph 68 requires that all investments, excluding local government investment pools and mutual funds, be classified into one of three categories of credit risk, and disclosed on a governmental entity's balance sheet. The three categories are as follows: 4.1 "Category 1". This applies to investments that are: (1) insured by the Securities Investors Protection Corporation ("SIPC"); (2) physically held by the City or by the City's agent in the City's name; or (3) acquired through the Federal Reserve book -entry system where the broker is separate from the custodian, and the investments are recorded on the broker's book in the City's name. These transactions have the lowest degree of credit risk; they are preferred by the City. 4.2 "Category 2". This applies to uninsured investments that are acquired through a financial institution's trading department and held for safekeeping by the trust department of the same financial institution, and the investments are recorded on the trust department's books in the City's name. These transactions have a higher degree of credit risk. 4.3 "Category 3". This applies to uninsured investments that are: (1) acquired through a financial institution's trading department and held for safekeeping by the custodial department of the same financial institution; (2) acquired through a financial institution's trust department and held for safekeeping by the same trust 3 of 7 Palm Desert Treasury Policies and Procedures No. 6: "Custody and. Safekeeping" Revision No. 3 Adopted: department; (3) acquired through and held for safekeeping by the same broker; or (4) not recorded on the financial institution's or on the broker's books in the City's name. These transactions have the highest degree of credit risk. 5.0 Authorized Access The following City employees shall be authorized to interface with both the Custodian and the Trustee: 5.1 The City Treasurer. 5.2 The Deputy City Treasurer. 5.3 The Assistant Finance Director. When an authorized employee is no longer employed by the City, then the City shall immediately notify both the Custodian and the Trustee, by telephone, of the expected date and time of the separation, and of the subsequent revocation of the employee's authority to interface with both the Custodian and the Trustee on the City's behalf. The City shall also confirm this, in writing, with both the Custodian and the Trustee within two business days. The written confirmation should be sent to both the Custodian and the Trustee by return receipt, certified mail. No broker or investment advisor shall have access to City monies, accounts, or investments. Any transfer of monies to or through an outside broker must have the City Treasurer's prior written approval. if the City Treasurer is not available, then the Assistant Finance Director shall perform that task. 6.0 Liability of City Treasurer The City Treasurer shall not be liable for securities that are delivered to and received by the Custodian and/or the Trustee, until the City Treasurer has withdrawn them from the Custodian and/or the Trustee pursuant to California Government Code Section 53608. 4 of 7 Palm Desert Treasury Policies and Procedures No. 6: "Custody and Safekeeping" Revision No. 3 Adopted: 7.0 Monthly Audit The City Treasurer shall receive monthly account statements from both the Custodian and the Trustee that list all of the securities that the Custodian and the Trustee are safekeeping for the City. An Accounting Technician shall complete, prior to each month -end, an audit of the prior month's inventory to ensure that both the Custodian and the Trustee can properly account for all of the City's securities that they should be holding. The Accounting Technician shall retain the monthly account statements in her files. 8.0 Annual Confirmation of Instructions The City Treasurer shall send to both the Custodian and the Trustee annually, by 30 Juno 1 January, the following documents: (1) the current City "Statement of Investment Policy"; (2) delivery instructions for security purchases; and (3) a list of public employees who are authorized to initiate investment transactions. The cover letter shall specify that only the City Treasurer shall be authorized to modify the delivery instructions, in writing. 9.0 Annual Review The City Treasurer shall review all custodial and electronic funds transfer agreements, as needed, in order to ensure that all controls, security provisions, and the responsibilities are being and are in compliance with current law. properly followed, 10.0 Segregation of Broker and Custodial Functions The City shall seek to segregate the provision of brokerage services from the provision of custodial services. If the City, however, uses the same bank or brokerage firm to provide both brokerage and custodial services, then that bank or brokerage firm shall be required to carry liability insurance with the City named as a loss payee, up to the dollar amount of the securities that are held in safekeeping plus an allowance for legal costs in the event of a loss. Palm Desert Treasury Policies and Procedures No. 6: "Custody and Safekeeping" Revision No. 3 Adopted: PROCEDURE 1. Receipt -Versus -Payment ("RVP"). The following steps shall be taken when the City buys a security: a. The broker shall have a current set of delivery instructions for the City on file, in advance. b. After closing the trade, the Deputy City Treasurer shall fax a copy of the associated Bloomberg Trade Ticket that has been signed by either the City Treasurer or the Assistant Finance Director, to the Custodian or the Trustee, with City delivery instructions affixed to the Ticket. c. The Deputy City Treasurer shall then telephone the Custodian or the Trustee to confirm receipt of the facsimile transmission and settlement terms. d. The Custodian or the Trustee shall then debit the City's cash account in order to deliver cash to the broker in exchange for the underlying security that the broker simultaneously delivered by electronic funds transfer, to the Custodian or the Trustee. e. An Accounting Technician shall then review the next monthly account statement that the City receives from the Custodian or the Trustee for confirmation of the transaction, and shall retain and file that statement. 2. Delivery -Versus -Payment ("DVP"). The following steps shall be taken when the City sells a security: a. The broker shall have a current set of delivery instructions for the City on file, in advance. b. After closing a trade, the Deputy City Treasurer shall fax a copy of the associated Bloomberg Trade Ticket that has been signed by either the City Treasurer or the Assistant Finance Director, to the Custodian or the Trustee, with City payment instructions affixed to the Ticket. 6 of 7 Palm Desert Treasury Policies and Procedures No. 6: "Custody and Safekeeping" Revision No. 3 Adopted: c. The Deputy City Treasurer shall then telephone the Custodian or the Trustee to confirm receipt of the facsimile transmission and payment terms. d. The Custodian or the Trustee shall then debit the City's securities account in order to deliver the underlying security to the broker in exchange for cash that the broker simultaneously delivers by electronic funds transfer, to the Custodian or to the Trustee. e. An Accounting Technician shall then review the next monthly account statement that the City receives from the Custodian or the Trustee for confirmation of the transaction, and shall retain and file that statement. 7 of 7 City of Palm Desert Treasury Policies and Procedures Revision No. 3 Adopted: POLICY NO.: 8 SUBJECT: "REQUESTS FOR PROPOSALS" POLICY The purpose of this document is to outline the policy and procedure on Requests for Proposals ("RFP"). It is the policy of the: ➢ City of Palm Desert; ➢ Palm Desert Redevelopment Agency; ➢ Palm Desert Housing Authority; ➢ Palm Desert Financing Authority; and the ➢ City of Palm Desert Golf Course Facilities Corporation (hereafter referred to collectively as the "City") that the City Treasurer may periodically issue RFPs for banking, custodial, and trustee services to any firms that wish to provide financial services to the City. The City may issue such RFPs every five years unless there is an immediate need to fill a vacancy or to replace an existing financial cDeputy (ces City Treasurer der. The in January. RFP process should normally beginY. The shall be responsible for the development of these RFPs. Firms that wish to bid for the City's banking, custodial, and trustee business, may bid for that business in its entirety, or as separate product lines. PROCEDURE 1. Proposal Process. The Deputy City Treasurer shall maintain an active file on all prospects that wish to bid for the City's banking, trustee, and/or custodial service contracts. In January of every fifth year, the Deputy City Treasurer may begin the RFP process. It should consist of the following steps: 1 of 2 Palm Desert Treasury Policies and Procedures No. 8: "Requests for Proposals" Revision No. 3 Adopted: a. Distribution of RFP b. Pre -Proposal Conference c. Proposal Submission d. Proposal Review e. Interview with Top Bidders f. Proposals Accepted by City Council g. Notification to Bidders h. Implementation 2. Technical Evaluation. The Deputy City Treasurer shall be responsible for doing a comparative technical evaluation of all RFPs that the City receives. 3. Fin n e r^m "'ittee Investment an ance Committee Review. The Deputy City Treasurer shall present the results of the technical evaluation, along with recommendations, to the Finance and Investment Committer nnvestmen an84' finance Committee for review and approval. 4. City Council Review. The City Treasurer shall present the Finance and Investment Committee's recommendations to the City Council for review and approval. 5. Updating City Approved List. If the City Council approves the retention of a new banker, custodian, or trustee, then the Eligible List in the City's "Statement of Investment Policy" shall be amended annually in order to reflect any such changes. 2 of 2 City of Palm Desert Treasury Policies and Procedures Revision No. 3 Adopted: POLICY NO.: 9 SUBJECT: "BANK ACCOUNTS" POLICY The purpose of this document is to outline the policy and procedure on bank accounts. It is the policy of the: ➢ City of Palm Desert; ➢ Palm Desert Redevelopment Agency; ➢ Palm Desert Housing Authority; ➢ Palm Desert Financing Authority; and the ➢ City of Palm Desert Golf Course Facilities Corporation (hereafter referred to collectively as the "City") to establish bank accounts for the deposit and disbursement of public monies, and to maintain a complete set of bank contracts, including signature cards, for purposes of control, accountability, limitation, and authorization. The City shall establish as few bank accounts as possible in order to minimize banking costs. All monthly bank statements shall be mailed directly to and processed by the City accounting function. Two signatures shall be required for each bank account. 1.0 Authorized Signers Only the City Treasurer or, in the City Treasurer's absence, the Assistant Finance Director, shall be authorized to sign as the "Signer of Contract" on bank documents. Certain City Council members, public employees, and employees of private management companies that contract with the City, shall be authorized as signers on various City bank accounts. The current account signers are as follows: 1 of 4 Palm Desert Treasury Policies and Procedures No. 9: "Bank Accounts" Revision No. 3 Adopted: 1.1 City Council 1.1.1 The Mayor. 1.1.2 The Mayor Pro-Tempore. 1.2 City Employees 1.2.1 The City Treasurer. 1.2.2 The Assistant Finance Director. 1.2.3 nformation Systems 1.3 Kemper Sports Management, Inc. 1.3.1 J. Rodney Young. 1.3.2 Brian Miller. 1.3.3 Michael Osgood. 1.4 RPM Company 1.4.1 David W. Fisher. 1.4.2 Barton R. Robertson. 1.4.3 Donnie Garibaldi. 1.4.4 Robert Pfeil. 2.0 Annual Review anage The City Treasurer shall review all bank contracts and signature cards, as needed. 2 of 4 Palm Desert Treasury Policies and Procedures No. 9: "Bank Accounts" Revision No. 3 Adopted: PROCEDURE 1. Opening A Bank Account. The City Treasurer shall determine whether or not a new City bank account is required, and who shall be authorized as an account signer. If a new City account is to be opened, then: a. The Deputy City Treasurer shall request signature cards from the bank; prepare them; and send them to the authorized signers for completion. b. After the authorized signers have completed the signature cards, they shall return them to the City Treasurer for the "Signer of Contract" authorization. c. The Deputy City Treasurer shall then return the original signature cards to the bank, along with the account contract(s). d. The Deputy City Treasurer shall retain and file a photocopy of each account contract and each signature card. 2 Adding Or Deleting A Signer. When an authorized signer is hired, terminated, or transferred, then the Deputy City Treasurer or, in the Deputy City Treasurer's absence, the City Treasurer, shall immediately review all bank signature cards, account contracts, and Funds Transfer Agreements to determine if they require modification. If a modification is necessary, then the Deputy City Treasurer or, in the Deputy City Treasurer's absence, the City Treasurer, shall do the following: a. Prepare a letter instructing the bank to add or delete a signer. This letter shall be signed by the City Treasurer and countersigned by the affected signer, whenever possible. (1) In the case of a terminating employee, the letter shall be sent to the bank by facsimile machine on the same date that notice is received of the employee's forthcoming termination. The original letter shall also be sent to the bank in the mail. (2) In the case of a new employee, the Deputy City Treasurer shall request a new bank signature card or an addendum card from the bank; obtain the necessary signatures; and return the card to the bank. 3 of 4 Palm Desert Treasury Policies and Procedures No. 9: "Bank Accounts" Revision No. 3 Adopted: b. In all cases, the Deputy City Treasurer shall retain and file a photocopy of the bank documentation. 3. Closing A Bank Account. Only the City Treasurer or, in the City's Treasurer's absence, the Assistant Finance Director, shall be authorized to close a City bank account. a. The Deputy City Treasurer shall draft a letter to the bank for signature by the City Treasurer or, in the City's Treasurer's absence, by the Assistant Finance Director, approving the closure of the account on an effective date. b. The Deputy City Treasurer shall send the original, signed letter to the bank, and retain and file a photocopy of the letter. c. The City accounting function shall confirm the closing of the bank account, and the termination of all related services, upon receipt of the next monthly bank statement. d. The City accounting function shall then notify the City Treasurer that the bank account has been closed; remove the bank account from the general ledger; and retain a file on the closed bank account for the annual financial audit. 4 of 4 City of Palm Desert Treasury Policies and Procedures Revision No. 3 Adopted: POLICY NO.: 15 SUBJECT: "INTEREST ALLOCATION" POLICY The purpose of this document is to outline the policy and procedure on interest allocation. It is the policy of the: ➢ City of Palm Desert; ➢ Palm Desert Redevelopment Agency; ➢ Palm Desert Housing Authority; ➢ Palm Desert Financing Authority; and the • City of Palm Desert Golf Course Facilities Corporation that all interest income which the aforementioned entities have accrued and received within a fiscal year should be allocated to individual accounting funds in the City of Palm Desert ("City") and the Palm Desert Redevelopment Agency ("RDA") investment portfolios, so that annual audited financial statements may be prepared. 1.0 Deduction of Management Fee The Deputy City Treasurer's salary and fringe benefits shall be deducted from each accounting fund in order to reflect the cost of investment portfolio management. If any portion of the Deputy City Treasurer's compensation is allocated to the assessment districts as a cost, then it shall be deducted from the amount that is charged to the accounting funds. 2.0 Retention of Work Papers The Assistant Finance Director shall be responsible for retaining and filing all work papers pertaining to interest allocation so that the City's external auditor will have the requisite documentation for the City's annual financial audit. 1 of 11 Palm Desert Treasury Policies and Procedures No. 15: "Interest Allocation" Revision No. 3 Adopted: PROCEDURE 1. Start of Fiscal Year. At the beginning of each new fiscal year, the Deputy City Treasurer should begin the process of allocating interest income. a. Interest Allocation Workbook. Retrieve the Interest Allocation Workbook of the prior fiscal year from the Excel>Investments> Interest Allocation subdirectory in the Deputy City Treasurer's personal network directory, and access the "Cash Adjustment Worksheet" (see Exhibit "A"). b. Cash Adjustment Worksheet. Update the "Cash Adjustment Worksheet" by changing column dates; deleting individual monthly balances; reviewing adjustment formulas; and renaming and saving the workbook for the target fiscal year. 1) For each account, take the interest rate for the prior June, and copy it as the interest rate for July 1 of the subsequent fiscal year. Otherwise, SymPro will not allow data to be entered for each month of the target fiscal year. c. Pooled Fund Portfolios. Retrieve the City and the RDA Pooled Fund Portfolios of the prior fiscal year, and copy and rename them for the target fiscal year. The SymPro commands would be: Utility > Portfolio Copy/Deletion > Copy (Archive) Portfolio> Code (e.g., PC01 and PR01) > Name (e.g., 2001 CITY POOLED FUNDS and 2001 RDA POOLED FUNDS) > Path (CISYMPROIDATAIPOOLED). d. Prior -Year June SymPro Cash Balances. Print the June 30 SymPro cash balances for the prior fiscal year for the unedited City and RDA Pooled Fund Portfolios. The SymPro commands would be: Fixed Income> Reports > Investment Listings > Investments by Fund (FI) > Ending Date (6/30/(prior fiscal year)) > Book a ue> Select All >Print. e. Fiscal Year -End Close o oo ed Fund ort oio , Perform a fiscal year- end close on the new Pooled Fund Portfolios. The SymPro commands would be: Utility> Setup > Fiscal Year End Close> (check box that data has been archived and backed up) > (enter prior fiscal year-end). This will clear all prior fiscal year transactions; create a beginning balance for the target fiscal year; and reset the portfolio for the target fiscal year. 2 of 11 Palm Desert Treasury Policies and Procedures No. 15: "Interest Allocation" Revision No. 3 Adopted: Check "yes" when asked if the year-end of each portfolio should be processed. Data Entry of Prior -Year June SymPro Cash Balances. Enter the June 30 book value cash balances, as calculated in Procedure 1.d. of this policy, by fund number, into Column C of the "Cash Adjustment Worksheet." g. Data Entry of June Audited Cash Balances (15"' Period). Enter the audited cash balances, by fund number, from the June Bank Reconciliation (Period 15) of the prior fiscal year into Column D of the "Cash Adjustment Worksheet." 1) All cash that is listed, by fund number, for Activity Code Number 101-0000 under the "Active Cash Cumulative" column of each Cash Work Sheet, should be entered. 2) All 110-0000-101 sub -accounts should be added together and entered. 3) The preliminary total in the "Cash Adjustment Worksheet" should match the preliminary total in the Cash Work Sheet. 4) The "Active RDA" cash balance in the Statement of Cash Transactions should be entered into the RDA 110 line item in the "Cash Adjustment Worksheet." h. Data Entry of Other Monthly Cash Balances. Enter the cash balances, by fund number, from the Cash Work Sheets for the months of the target fiscal year into the appropriate monthly columns of the "Cash Adjustment Worksheet." The ending month of June will be 12th Period. 1) All cash that is listed, by fund number, for Activity Code Number 101-0000 under the "Active Cash Cumulative" column of each Cash Work Sheet, should be entered for each month. 2) All 110-0000-101 sub -accounts should be added together and entered. 3 of 11 Palm Desert Treasury Policies and Procedures No. 15: "Interest Allocation" Revision No. 3 Adopted: 3) The preliminary total in the Cash Adjustment Worksheet should reconcile to the preliminary total in the Cash Work Sheet for that month. 4) The "Active RDA" cash balance in the Statement of Cash Transactions should be entered into the RDA 110 line item in the Cash Adjustment Worksheet. After cash balances have been entered into the "Cash Adjustment Worksheet," the "Adjustment to SymPro" column that is adjacent to each month, will automatically calculate an adjustment. i. Backup of Interest Allocation Workbook. Backup the "Interest Allocation Workbook" by using the following Excel commands: c:lbackup1(target fiscal year) INTEREST ALLOCATION. j. Data Entry into Pooled Fund Portfolios. Enter each cash adjustment, by month, from thee;"Cash :4"Tstment for s eet' as a deposit or a withdrawal in the Transactions Field of the a ant in the City and the RDA Pooled Fund Portfo/ios roThet resultinge cash Fand balance in the Participant Fund should match the corresponding cash balance in the "Cash Adjustment Worksheet." The monthly interest rates will be calculated automatically later in the process. 1) No Cash Adjustment. If the cash adjustment is zero, then no data for that month should be entered into the Participant Fund. 2) RDA Cash Balance. In the case of RDA 110 (Active), the opposite sign convention (e.g., a positive for a negative in the "Cash Adjustment Worksheet"should be used when entering data into the Transactions Field of the Participant Fund, awn vIceverrsa). k. Backup of Pooled Fund Portfolios. Backup the City and the RDA Poled Fund Portfolios by using the following SymPro commands: Utility> Portfolio Copy/Deletion > Copy (Archive) Portfolio > Code (e.g., and 1 PR) > Name (e.g., BACKUP-2001 CITY POOLED FUND and 1 PC BACKUP-2001 RDA POOLED FUND) > Path (H:1(personal directory)1SYMPROIDATAIBACKUP). 4 of 11 Palm Desert Treasury Policies and Procedures No. 15: "Interest Allocation" Revision No. 3 Adopted: I. Report Production. The Deputy City Treasurer should then print the City and the RDA Pooled Funds Reports for the City Treasurer. All reports should be produced on both a cash basis ("CP") and an accrual basis ("AP"). 1) Portfolio Summary and Portfolio Details Reports. The SymPro commands are: Fixed Income> Report> Portfolio Management> Portfolio (PM). These reports should be printed, by month try -lit for the target fiscal year (Exhibit "B"). m. Creation of Non -Restricted Funds Reports. The Deputy City Treasurer should then retrieve the current "CITY" and "RDA" investment portfolios, and copy and rename them for the target fiscal year. The SymPro commands are: Utility> Portfolio Copy/Deletion > Copy (Archive) Portfolio > Code (e.g., NC01 and NR01) > Name (e.g., 2001 CITY NON- RESTRICTED FUNDS and 2001 RDA NON -RESTRICTED FUNDS) > Path (C:ISYMPROIDATAINON-RES): n. Report Production. The Deputy City Treasurer should then provide the City Treasurer with the following reports from the unedited City and RDA Non -Restricted Funds Portfolios. 1) Portfolio Reports. The SymPro commands are: Fixed Income> Report> Portfolio Management> Portfolio (PM). Print the "Portfolio Summary" and "Portfolio Details -Investments" reports, by month, for the target fiscal year (see Exhibit "C"). Place a tick mark next to each individual security that is listed, avoiding duplication. 2) Investment Position Reports. The SymPro commands are: Fixed Income> Report> Reference> Investment Position Report (SP). Print the "Investment Position Reports" for all individual securities, except for State and Local Government Series; mutual funds; and local agency investment pools (see Exhibit "D"). The purpose of this report is to identify trustee securities that should be deleted from the City and the RDA Non -Restricted Funds Portfolios. 3) Delete Trustee Records. "Forward" through the SymPro investment records (using Search > Investment Number), and delete all records of trustee -held ("Restricted") securities, except for the following: 5of11 Palm Desert Treasury Policies and Procedures No. 15: "Interest Allocation" Revision No. 3 Adopted: a) City: Main Checking Account; ; all custodian -held securities; CAMP; and LAIF. b) RDA: All custodian -held securities, CAMP; and LAIF. Also delete "City" SymPro Nos. 18040 and 18041 (Retiree Health investments); all individual securities that have matured prior to the target fiscal year; LAIF (Housing); LAIF (Bond Proceeds); City loan to RDA; and all State and Local Government Series Gil. All interest income for the deleted records should have been previously booked (as trustee transactions) by the Senior Financial Analyst. 4) print eEdited on es r cted Funds Portfolio Reports. The SymPro commands are: Fixed Income>Report>Portfolio Management> Portfolio (PM). Print the "Portfolio Summary" and the "Portfolio Details -Investments" reports, on°an accrual basis, by month, for the targeted fiscal year (see Exhibit "C"). The Deputy City Treasurer should give them to the Finance Operations Manager Assistan` Finance DireCtoror tree SentFinancialjnefigaTrnilciifor review and verification. n. Backup of Non -Restricted Funds Portfolios. Backup the City and the RDA Non -Restricted Funds Portfolios by using the following SymPro commands: Utility> Portfolio Copy/Deletion> Copy (Archive) Portfolio > Code (e.g., 01 NC and 01 NR) > Name (e.g., BACKUP-2001 CITY NONRESTRICTED and BACKUP-2001 RDA NONRESTRICTED) > Path (H:1(personal directory)1SYMPROIDATAIBACKUP). 1) Accrued Interest Report. Print the "Accrued Interest (Al) Report" for the City an. RD lon-Restricted Funds Portfo, ros by using the following SymPro commands: Fixed Income> Report> Interest> Aa*fatYnte'YeVtTAO. The reporting period should be from 7/01 /(target fiscal year) through 6130/(target fiscal year). o. Report Production. The Deputy City Treasurer should then provide the City Treasurer with the following reports from the edited City and RDA Non -Restricted Funds Portfolios. All reports should be on both a cash basis ("CP") and an accrual basis ("AP"). 6 of 11 No. 3 Palm Desert Treasury Policies and Procedures RevRevision No. No. 15: "Interest Allocation" 1) Portfolio Summary and Portfolio Details Reports. The SymPro commands are: Fixed Income> Report> Portfolio Management> Portfolio (PM). Print these reports, by month, for the target fiscal year (see Exhibit "E"). 2) Interest Earnings Reports. The SymPro commands are: Fixed Income > Report> Interest> Interest Earnings (IE) > Issuer> Average Value/Annualized Yield. Print these reports for a 12-month period, from July 1 through June 30 of the target fiscal year (see Exhibit F") 3) Allocation Account Activity Reports. The SymPro commands are: Earnings Allocation > Report > Allocation Account Activity (L01. Print the Allocation Accounts Activity Reports for a 12-month period, from the 2nd calendar day at the beginning of the target fiscal year through the 2nd calendar day after the end of the target fiscal year, in order to exclude June interest income on the front end, and to add it on the back end (see Exhibit "G") . p. Preparatory Work Prior to Interest Allocation. Prior to allocating interest earnings, either the City Treasurer or the Assistant Finance Director should take the following steps: 1) Accrual Worksheet. Prepare an Excel worksheet which calculates the amount of interest income that was earned in the prior fiscal period but received in the target fiscal period. Since debt securities with interest coupons typically pay interest every six months, interest received up to 31 December might include some accrued interest. 2) Calculation of Accrued Interest Earnings. Review the "Interest Earnings Report" in order to determine what portion of interest earnings that were received in the target fiscal period should be allocated as accrued interest from the prior fiscal period. Then prepare and post all accrued interest to the general ledgers of the edited City and RDA Pooled Fund Portfolios. 3) Calculation of Total Interest Earnings. Then add this accrued interest to interest received during the target fiscal period, in order to calculate the amount of total interest earnings that will be allocated if 7 of 11 Palm Desert Treasury Policies and Procedures No. 15: "Interest Allocation" Revision No. 3 Adopted: to all accounting funds in the edited City and RDA Pooled Fund Portfolios. 4) Final Allocation Activity Report. The Deputy City Treasurer should then print "Allocation Account Activity Reports" for the edited City and RDA Pooled Fund Portfolios. The time period would be from 7/1/(target fiscal year) thorough 7/2/(subsequent fiscal year)). q. Allocation of Total Interest Earnings. The Deputy City Treasurer should then allocate total interest earnings to the accounting funds in the edited Pooled Fund Portfolios. All reports should be on a cash basis ("CP"). The SymPro commands are: 1) Select the. Earnings Allocation> Utility> Select Investment Types For Allocation Pool menu options. Type "Y" in the "Include in Pool?" if active Column' and "Active" columns for Ayes Is -mar ed in the "Participant Accounts." 2) Select the Utility>Setup Account Properties menu options if 3) Select the following Activity>Allocate Earnings menu options: a) Amount to Allocate. Enter the beginning and ending dates for each month of the target fiscal year for the appropriate edited Pooled Fund Portfolio. Then enter total earnings for the month in "Amount To Allocate." Total earnings is taken from the intersection, of the "Current Month" and `Interest Earnings"" co urns rvin`the "Portfolio Summary" report for the related edited Non -Restricted Funds Portfolio for each month of the target fiscal year, except for June. b) June Total Earnings. Total earnings for the month of June for both the City and the RDA may be calculated as follows: (1) Adjusted Annual Total Earnings. Reconcile the annual total earnings figure that SymPro has calculated in June with the annual total earnings figure that the Assistant Finance Director has calculated for the same time period. 8 of 11 Palm Desert Treasury Policies and Procedures No. 15: "Interest Allocation" Revision No. 3 Adopted: (2) Adjusted June Total Earnings. Add or subtract the difference from the total earnings figure that SymPro has calculated for the month of June. (3) Amount to Allocate. Enter the adjusted total earnings figure into "Amount to Allocation" for the month of June. c) Imputed Interest Rate. SymPro will impute an interest rate for each month of the target fiscal year, based upon the total earnings that have been entered. r. Report Production. The Deputy City Treasurer should then provide the City Treasurer with the following report from the edited City and the RDA Pooled Funds Portfolios. All reports should be on a cash basis ("CP") only. 4) Allocation Account Activity Report. The SymPro commands are: Earnings Allocation > Report > Allocation Account Activity. Print the Allocation Account Activity Reports for a 12-month period, from the 2nd calendar day at the beginning of the target fiscal year through the 2nd calendar day after the end of the target fiscal year. Interest is posted on the first day of each subsequent month. These reports are needed in order to verify the final interest earnings allocation for each month. s. Allocation of Management Fee. The Deputy City Treasurer's services should be charged as a monthly fee to each accounting fund in the City and RDA Pooled Fund Portfolios. This fee shall be defined as the Deputy City Treasurer's salary plus fringe benefits (equivalent to 29.63 percent of salary). The basis for allocating the management fee should be the dollar amount of each accounting fund as a percentage of the dollar amount of all accounting funds within the Pooled Fund Portfolios. The management fee should be allocated to: (1) assessment district trust funds; (2) RDA trust funds; (3) all other City funds; and (4) all other RDA funds. The allocation of the management fee to all RDA funds shall be done concurrently with the allocation of City staff time that has been devoted to RDA projects. t. Posting of Interest Allocation. The City Treasurer or the Assistant Finance Director shall then post the interest earned to all accounting funds in the City and the RDA Pooled Fund Portfolios. The RDA Trust 9 of 11 Palm Desert Treasury Policies and Procedures No. 15: "Interest Allocation" Revision No. 3 Adopted: Fund shall be subdivided in order to subdivide individual pass -through accounts. 3. Fiscal Year -End Close. After monthly data has been entered for June, (the end of the target fiscal year), the Deputy City Treasurer should begin the fiscal year-end close for the "City" and the "RDA" SymPro portfolios by doing the following: a. Verify Updated Interest Schedule. The SymPro commands are: Fixed Income > Activity > Update Interest Schedule by Due Date. Verify that all interest payments have been posted for the target fiscal year. b. Data Backup. Backup SymPro data for the City and the RDA by using the procedures listed in the yellow Monthly Investment Report - Instructions manual. This only needs to be done once. c. Archive Portfolios. The SymPro commands are: Utility> Portfolio Copy/Deletion> Copy (Archive) Portfolio > Code (e.g., FC03 and FRO3) > Name (e.g., 2003 CITY PORTFOLIO FYEC and 2003 RDA PORTFOLIO FYEC)>Path (C:ISYMPRO\DATAIFYEC). This will archive the City and the RDA portfolios for the target fiscal year. d. Backup Archive Portfolios. The SymPro commands are: Utility> Portfolio Copy/Deletion> Copy(Archive) Portfolio > Code (e.g., 03FC and 03FR) > Name (e.g., BACKUP-2003 CITY FYEC and BACKUP-2003 RDA FYEC)> Path (H:1(personal directory)1SYMPRO\BACKUP). This will create an archive copy of the City and the RDA portfolios for the target fiscal year. e. Reindex Portfolio Files. The SymPro commands are: Fixed Income> Utility>Reindex Files. Reindex to remove any deleted records before proceeding with the close. f. The Close. The SymPro commands are: Fixed Income>Utility> Setup> Fiscal Year End Close. Non -amortizing discount instruments should not be converted to amortizing ones. 1) Check box that questions whether data files have been archived and backed up. 2) Enter the last day of the target fiscal year as the "close date". 10 of 11 Palm Desert Treasury Policies and Procedures No. 15: "Interest Allocation" Revision No. 3 Adopted: 3) Hit "OK." 4) Confirm the new fiscal year-end date. The SymPro commands are: Fixed Income> Utility > Setup > Portfolio Setup/Preferences. 11 of 11 City of Palm Desert Treasury Policies and Procedures Revision No. 3 Adopted: POLICY NO.: 16 SUBJECT: "CASH AND INVESTMENTS AUDIT" POLICY The purpose of this document is to outline the policy and procedure on the audit responsibilities of the Treasury function. It is the policy of the: ➢ City of Palm Desert; ➢ Palm Desert Redevelopment Agency; ➢ Palm Desert Housing Authority; ➢ Palm Desert Financing Authority; and the ➢ City of Palm Desert Golf Course Facilities Corporation (hereafter referred to collectively as the "City") that the City shall engage an external auditor to conduct a cash and investments audit every three years, unless there have been significant prior audit findings or a change in Treasury personnel. If either of the foregoing conditions occurs, then the City Treasurer or the Investment and Finart`ce Committee may increase the frequency of the audits, as needed. A cash and investments audit shall include among its objectives, a review of: ➢ The effectiveness of the internal controls for the City's investment program. ➢ Staff compliance with treasury policies and procedures ➢ The description and classification of investments, by fund type, on the City's balance sheet, as well as related disclosures, including restrictions and commitments. ➢ Custody and safekeeping arrangements. Palm Desert Treasury Policies and Procedures No. 16: "Cash and Investments Audit" Revision No. 3 Adopted: The City Treasurer and the Deputy City Treasurer shall cooperate fully with the external auditor, in terms of willingly producing all information and documents requested, as well as responding honestly to all inquiries. The City's annual audit includes certain audit procedures that are related to cash and investments, such as the confirmation of the year-end balances. It is the City's policy, however, to have the external auditor perform additional procedures related to cash and investments. Consequently, the Finance and Investment Committee ;Investment andFinance C�ommitt: a shall identify and communicate to the external auditor what additional testing procedures will be required. The external auditor shall submit its report on these additional procedures to the Ananoe w , and In, stm nt C -•tt nvestment an Finance Committee; by 31 December of that years v. PROCEDURE 1. Required Audit Documentation. The Deputy City Treasurer shall provide the external auditor With the following documents for the fiscal year being audited: a. "Statement of Investment Policy". b. Treasury Policies and Procedures Manual. c. Trade Book. d. Wire Log. e. All bank account signature cards. f. All monthly investment reports and schedules. g. All competitive offering documents. h. All broker qualification and requalification documents. i. All trustee, custodian, and bank administrative fee documents. j. All money market fund qualification documents. 2. Confirmation Letters. The Deputy City Treasurer shall ensure that "Confirmation of Marketable Securities Held By A Third Party" letters are prepared for the external auditor to send to the City's custodian and to the City's trustee. 2 of 2