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It is the policy of the City of Florence, Kentucky (“city”) to invest public funds in a manner which will provide the maximum security and highest investment of principle while meeting the daily cash flow demands of the city in accordance with KRS 91A.060 and KRS 66.480. This investment policy applies to all financial assets held directly by the city. These financial assets shall be accounted for in the city’s annual financial report and included in the city’s investment fund accounts.
(Ord. O-1-2024, passed 2-6-24)
(A) This investment policy applies to all financial assets held directly by the city. These financial assets are accounted for in the city’s annual financial report and include all moneys in the following funds:
(1) General Fund.
(2) Special Revenue Fund.
(3) Capital Projects Fund.
(4) Enterprise Fund.
(5) Agency Fund.
(6) Any new fund created by the city.
(B) Financial assets of the city held and invested by trustees or fiscal agents are excluded from these policies; however, such assets shall be invested in accordance with state laws applicable to the investment of local government funds and in accordance with the city’s primary investment objectives.
(Ord. O-1-2024, passed 2-6-24)
The city’s primary investment objectives, in order of priority, are the following:
(A) Statutory compliance. At all times, the city’s investment portfolio shall maintain strict compliance with all statutory requirements, including but not limited to KRS 91A.060 and KRS 66.480.
(B) Safety. Safety of principle is the foremost objective of the city's investment program. Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. The goal is to mitigate credit risk and interest rate risk.
(C) Liquidity. The city’s investment portfolio shall remain sufficiently liquid to enable the city to meet all operating requirements which might be reasonably anticipated.
(D) Return on investment. The city’s investment portfolio shall be designed with the objective of attaining a market rate of return throughout the budgetary and economic cycles, taking into account the city’s investment risk constraints and the cash flow characteristics of the portfolio.
(Ord. O-1-2024, passed 2-6-24)
(A) Management’s responsibility for the city’s investment program is the joint responsibility of the designated officials which shall be the Mayor and the Finance Director. Both shall share the authority, subject to the approval of the City Council, to establish additional specific written procedures for the operation of the investment program that are consistent with this investment policy. The procedures shall include explicit delegation of authority, if any, to persons responsible for investment transactions.
(B) No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the designated officials. These designated officials shall be ultimately responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials and employees. The controls shall be designed to prevent and control losses of public funds arising from fraud, employee error, misrepresentation by third parties, unanticipated changes in financial markets or imprudent actions by officers and employees.
(C) The designated officials shall maintain all records related to the entity’s investment program.
(D) The designated officials may, in their absolute discretion, hire professional advisors to assist them in carrying out their responsibilities outlined herein.
(Ord. O-1-2024, passed 2-6-24)
(A) Prudence. The actions of the designated officials in the performance of their duties as manager of the city’s funds shall be evaluated using the “prudent person” standard. Investments shall be made with judgment and care under prevailing circumstances 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. The designated officials, acting in accordance with written procedures, this investment policy, and exercising due diligence, shall be relieved of personal responsibility for an individual security’s performance, provided that deviations from expectations are reported in a timely fashion to the City Council and appropriate action is taken to control adverse developments.
(B) Ethics and conflicts of interest. City officials and employees involved in the investment process shall refrain from personal activity that could conflict with the proper execution and management of the investment program, or that could impair their ability to make impartial investment decisions. Employees and investment officials shall disclose any material interests in financial institutions with which they conduct business. Disclosure shall be made to the City Council. They shall further disclose any personal financial/investment positions that could be related to the performance of the investment portfolio. City officials and employees shall refrain from undertaking any personal investment transactions with the same individual with whom business is conducted on behalf of the city.
(C) Delegation of authority.
(1) Governing body. The City Council will retain ultimate fiduciary responsibility for the portfolios. The City Council will receive monthly reports, designate designated officials and review the investment policy making any changes necessary by adoption.
(2) Designated officials.
(a) Authority to manage the investment program is granted to the Mayor and the Finance Director, hereinafter referred to as designated officials as designated by this chapter. Responsibility for the operation of the investment program is hereby delegated to the designated officials who shall act in accordance with established written procedures and internal controls for the operation of the investment program consistent with this investment policy.
(b) City officials and/or employees will prepare monthly investment reports and other special reports as may be deemed necessary. All participants in the investment process shall seek to act responsibly as custodians of the public trust. No city official and/or employee may engage in an investment transaction except as provided under the terms of this policy and supporting procedures.
(3) Investment adviser. The designated officials and/or city shall engage the services of one or more external investment managers or other professionals to assist in the management of the entity’s investment portfolio in a manner consistent with the city’s objectives. Such external managers may be granted discretion to purchase and sell investment securities in accordance with this investment policy. Such managers must be registered under the Investment Advisers Act of 1940.
(Ord. O-1-2024, passed 2-6-24)
A list will be maintained of financial institutions and depositories authorized to provide investment services. In addition, a list will be maintained of approved security broker/dealers selected by conducting a process of due diligence. These may include “primary” dealers or regional dealers that qualify under Securities and Exchange Commission (SEC) Rule 15C3-1 (uniform net capital rule).
(A) The designated officials may determine which financial institutions are authorized to provide investment services to city. Institutions eligible to transact investment business with city include:
(1) Primary government dealers as designated by the Federal Reserve Bank;
(2) Nationally or state-chartered banks;
(3) The Federal Reserve Bank;
(4) Direct issuers of securities eligible for purchase; and
(5) Kentucky League of Cities Investment Pool Plus.
(B) Selection of financial institutions and broker/dealers authorized to engage in transactions with the city shall be at the sole discretion of the city. The designated officials may, in their absolute discretion, select financial institutions for investment services by issuing Requests for Proposals (“RFP”). The designated officials shall be responsible for preparing an RFP as the designated officials may deem appropriate. Selection of a financial institution being selected through the RFP process shall be subject to approval by the City Council.
(C) All brokers/dealers who desire to become qualified for investment transactions must supply the following (as appropriate):
(1) Audited financial statements demonstrating compliance with state and federal capital adequacy guidelines;
(2) Proof of state registration;
(3) Completed broker/dealer questionnaire (not applicable to Certificate of Deposit counterparties);
(4) Certification of having read and understood and agreeing to comply with the entity’s investment policy; and
(5) Evidence of adequate insurance coverage.
(D) All financial institutions who desire to become depositories must supply the following (as appropriate):
(1) Audited financial statements demonstrating compliance with state and federal capital adequacy guidelines;
(2) Proof of state registration; and
(3) Evidence of adequate insurance coverage.
(E) A periodic review of the financial condition and registration of all qualified financial institutions and broker/dealers will be conducted by the designated officials.
(1) Minority, emerging and community financial institutions. From time to time, the designated officials may choose to invest in instruments offered by minority, emerging, and community financial institutions. All terms and relationships will be fully disclosed prior to purchase and will be reported to the appropriate entity on a consistent basis and should be consistent with state law and city ordinance.
(2) Competitive transactions.
(a) The designated officials shall obtain competitive bid information on all purchases of investment instruments purchased on the secondary market. A competitive bid can be executed through a bidding process involving at least three separate brokers/financial institutions or through the use of a nationally recognized trading platform.
(b) If the city is offered a security for which there is no readily available competitive offering on the same specific issue, then the designated officials shall document quotations for comparable or alternative securities. When purchasing original issue instrumentality securities, no competitive offerings will be required as all dealers in the selling group offer those securities as the same original issue price.
(c) When the city and/or designated officials hire an investment adviser to provide investment management services, the adviser must provide documentation of competitive pricing execution on each transaction. The investment adviser will retain documentation and provide upon request. The designated officials may, in their absolute discretion, select an investment adviser for investment services by issuing Requests for Proposals (“RFP”). The designated officials shall be responsible for preparing an RFP as the designated officials may deem appropriate. Selection of an investment adviser being selected through the RFP process shall be subject to approval by the City Council.
(Ord. O-1-2024, passed 2-6-24)
(A) Delivery vs. payment. All trades of marketable securities will be executed (cleared and settled) on a delivery vs. payment (DVP) basis to ensure that securities are deposited in the entity's safekeeping institution prior to the release of funds.
(B) Third-party safekeeping. Securities will be held by an independent third-party safekeeping institution selected by the city. All securities will be evidenced by safekeeping receipts in the name of the city. The safekeeping institution shall annually provide a copy of its most recent report on internal controls - Service Organization Control Reports (formerly 70, or SAS 70) prepared in accordance with the Statement on Standards for Attestation Engagements (SSAE) No. 16 (effective June 15, 2011).
(C) Internal controls. Designated officials shall establish a system of internal controls, which shall be documented in writing. Internal controls shall be reviewed by the city’s Investment Advisor and the city’s independent auditor when conducting the city’s annual audit as required by law. The controls shall be designed to prevent the loss of public funds arising from fraud, employee error, and misrepresentation by third parties, unanticipated changes in financial markets, or imprudent actions by employees and officers of the city.
(Ord. O-1-2024, passed 2-6-24)
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