There is hereby established the following Investment and Financial Management Policy in the City of Plantation:
(A) General investment policy. It is the policy of the 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 on the city and conforming to both KRS 91A.060 and KRS 66.480. 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 investment fund accounts.
(B) Investment objectives. The city’s primary investment objectives, in order of priority, are the following:
(1) Safety. Safety of principle is the foremost objective of the city investment program. Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio.
(2) Liquidity. The city’s investment portfolio shall remain sufficiently liquid to enable the city to meet all operating requirements which might be reasonably anticipated.
(3) 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 investment risk constraints and the cash flow characteristics of the portfolio.
(C) Investment authority. Management responsibility for the investment policy is the joint responsibility of the Plantation Mayor, City Clerk/Treasurer and City Council. No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established. The City Mayor (with the assistance of the City Council) 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 funds arising from fraud; employees' error; misrepresentation by third parties; or imprudent actions by officers and employees.
(D) Prudent person rule.
(1) The actions of the city officials in the performance of their duties as managers of the city funds shall be evaluated using the "prudent man" 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.
(2) The city officials acting in accordance with written procedures 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 government body and appropriate action is taken to control adverse developments.
(E) Authorized investments.
(1) The funds of the city available for investment shall be invested in accordance with this policy and all applicable state statutes:
(a) Authorized investment instruments per KRS 66.480.
1. Obligations of the United States and its agencies and instrumentalities, including obligations subject to repurchase agreements, provided that delivery of these obligations subject to repurchase agreements is taken either directly or through an authorized custodian.
2. Obligations and contracts for future delivery or purchase of obligations backed by the full faith credit of the United States or a United States government agency, including but not limited to: United States Treasury; Export-Import Bank of the United States; Farmers Home Administration; Government National Mortgage Corporation; and Merchant Marine Bonds.
3. Obligations of any corporation of the United States government, including but not limited to: Federal Home Loan Mortgage Corporation; Federal Farm Credit Banks; Bank of Cooperatives; Federal Intermediate Credit Banks; Federal Land Banks; Federal Home Loan Banks; Federal National Mortgage Association; and Tennessee Valley Authority.
4. Certificates of deposit insured by or other interest-bearing accounts of any bank or savings and loan institution which are insured by the Federal Deposit Insurance Corporation or similar entity or which are collateralized, to the extent uninsured, by any obligations permitted by KRS 41.240(4).
5. Bonds or certificates of indebtedness of this state and of its agencies and instrumentalities.
6. Securities issued by a state or local government, or any instrumentality of agency thereof, in the United States, and rated in 1 of the 3 highest categories by a nationally recognized rating agency.
7. Shares of mutual funds and money markets, each of which will have the following characteristics:
A. The mutual funds shall be an open-end diversified investment company registered under the Federal Investment Company Act of 1940, as amended;
B. The management company of the investment company shall have been in operation for at least 5 years;
C. All of the securities in the mutual fund shall be eligible investments under this section.
8. Limitation on investment transactions. With regard to the investments authorized in this section, no investments shall be purchased for the city on a margin basis or through the use of any similar leveraging technique.
(F) Diversification of investments.
(1) The city recognizes that some level of risk is inherent in any investment transaction. Losses may be incurred due to market price changes or closing investments prior to maturity due to unanticipated cash flow needs. Diversification of the city investment portfolio by type of investment instrument and term to maturity is the primary method to minimize investment risk.
(2) To the extent possible, the city will attempt to match its investments with anticipated cash flow requirements. Reserve funds may be invested in securities exceeding 1 year, if maturities of the investments are made to coincide as nearly as practical with the expected use of the funds.
(G) Authorized financial dealers and institutions. No financial institution shall be selected as a depository of city funds if the city funds on deposit at any time will exceed 10% of the institution's capital surplus and stock. The Mayor shall evaluate the financial capacity and creditworthiness of financial institutions prior to the placement of the city funds and each shall comply with the requirements of KRS 91A.060 for qualifying Official Depositories. The Mayor (with assistance of the City Council) shall conduct an annual review of the financial condition and registrations of financial institutions and based on the review, make any recommendations regarding investment policy or program changes determined to be necessary.
(H) Safekeeping and custody. To protect against potential fraud and embezzlement, bearer instruments shall be held only through third-party institutions. Any officer or employee of the city authorized to engage in investment transactions shall be bonded in an amount established by the city.
(I) Collateral.
(1) It is the policy of the city to require that all cash and investments in excess of the amount insured by the FDIC maintained in any financial institution named as a depository be collateralized. In order to anticipate market changes and provide a level of security for all funds, the collateralization level shall be 100% of the market value of principal, plus accrued interest in accordance with KRS 91A.060. Collateral shall be limited to the types of instruments authorized as collateral for state funds in KRS 41.240.
(2) Collateral shall always be held by an independent third-party custodian with whom the city has a current custodial agreement. A clearly marked evidence of ownership (safekeeping receipt) must be supplied to the city and retained by the City Clerk/Treasurer. The right of collateral substitution is hereby granted.
(J) Investment reporting. The city shall prepare and submit to the Council report regarding the status of the entity's investment program. As to each investment, the report should include the following information:
(1) Name of financial institution from which the investment was purchased or in which assets are deposited.
(2) Type of investment.
(3) Certificate or other reference number, if applicable.
(4) Percentage yield on an annualized basis.
(5) Purchase price and maturity date.
(6) Current market value of the investment.
(K) Financial management policy. The city hereby establishes that all city officials shall apply the following policies and internal financial controls when dealing with the day to day financial affairs of the city:
(1) Purpose. The City Council, Mayor and all officials and employees are responsible to manage the funds of the city effectively and to ensure the financial management of these funds is properly controlled. All city officials have a duty to care for and protect the funds and assets of the city and may use those funds and assets only for the good of the city and for properly authorized purposes.
(2) Internal controls. Oversight of the day-to-day expenditures are the responsibility of the Mayor and Clerk/Treasurer and shall be subject to the following internal controls:
(a) All invoices/expense vouchers must be approved in writing by the Mayor (or Mayor Pro-Tem) and the City Clerk/Treasurer. Two signatures are required on the invoice/expense voucher. The approved invoice/expense voucher will be forwarded to a third party accountant, who will then issue the check. The check will be forwarded to the City Clerk/Treasurer for signature and distribution. If the City Clerk/Treasurer is unable to sign the check, the Mayor (or Mayor Pro-Tem), will be authorized to sign.
(b) Checks require one signature, which should be that of the Mayor or Clerk/Treasurer. If the Mayor is not available the second signature may be supplied by the Appointed Mayor Pro-Tem. Whenever possible, any and all persons who are handling or have primary access to the money of the city should be bonded and/or insurance coverage for theft loss obtained in the city's insurance package. Whenever possible, any person to whom a check is made payable should not be one of the signatories.
(c) Expenditures that exceed any line item classification in the budget must be reviewed and approved by the City Council at least once prior to the end of the fiscal year.
(d) Debit/credit cards are to be monitored carefully and used sparingly. Whenever possible, the maximum credit limit for each debit card or credit card should be reduced to its lowest possible amount. Any person desiring to use the city's credit or debit card must first receive the approval of the Mayor and then return to the office a receipt for any purchase.
(e) Request for reimbursement for any personal expenditure must be accompanied by adequate documentation and explanation and must be approved as an invoice as set out above. When possible, reimbursement to a city employee should be avoided in favor of direct payment by the city to the vendor, based on an approved invoice.
(3) Monitoring. Monitoring of city finances is an ongoing process. The Mayor and Clerk/Treasurer will work closely to monitor the finances. A comprehensive monthly report will be presented to the City Council for review and approval, which includes reports of actual income and expenditure and comparison with budget, along with commentary on any material variance.
(a) It is the intent of the city to separate specific work items relating to finances, so that the same person is not able to make deposits, record deposits and expenditures and make out checks.
(b) Any member of the City Council may demand detailed accounting for all receipts and payments.
(c) Salaries and wages shall be paid to non-elected staff in accordance with a pay scale, which shall be adopted by the City Council as part of its annual budget. There shall be no changes or deviations from the adopted pay scale for the year without the specific approval of the City Council.
(d) It is the responsibility of the Mayor, City Council and Clerk/Treasurer to establish an inventory of all the equipment, goods and personal property owned by the city and to safeguard those assets. The inventory must be provided to the city's insurance carrier so that risk of loss may be mitigated. Any item (of any kind) surplus to the needs of the city, must be disposed of in a way that complies with Kentucky Revised Statutes. This includes selling the item if the item has resale value.
(Ord. 7, Series 2015, passed 10-28-2015)