[HISTORY: Adopted by the City Council of the City of Franklin 3-3-1991.
Amendments noted where applicable.]
A.
The foremost objective is to ensure against capital losses.
In the context of the legally permissible investments under New Hampshire
state law, the principal assurance will be to have collateralization held
by a third party when possible. This procedure generally is to apply to all
investments exceeding amounts beyond Federal Deposit Insurance Corporation
(FDIC) insurance coverage. Given the realities of the marketplace, when collateralization
is not possible, due diligence will be exercised in the choice of a financial
institution by adherence to the investment guidelines provided herein.
B.
The objective is also to develop an investment process
which will avoid any transaction that might impair public confidence in the
city's ability to govern effectively. The authorized individuals shall
seek to act responsibly as custodians of the public trust. Given the delegation
of authority and the separation of responsibilities of those individuals in
city government who are participants in the investment process, the city will
enforce an internal control program which will be examined annually by external
auditors and is subject to public review and evaluation.
C.
The investment process shall support the overall operation
of the City of Franklin in providing services to its citizens. The cash management
systems shall integrate with the investment process to ensure that cash is
available to support operations. Cash management systems shall be implemented
to maximize cash flow through efficient collection of revenue and proper timing
of expenditures.
In accordance with the applicable provisions of the City Charter and
the Administrative Code, the responsibility for conducting investment transactions
shall reside with the Finance Officer, subject to the approval of the City
Manager and City Treasurer. New Hampshire Revised Statutes Annotated 48:16
is the legal authority under which the City Treasurer operates.
The standard of prudence to be used by authorized individuals shall
be the "prudent person rule" and shall be applied in the context of managing
an overall portfolio. The authorized individuals acting in accordance with
written procedures, exercising due diligence and acting in good faith shall
be relieved of personal responsibility for an individual investment's
credit risk or market price changes, provided that derivations from expectations
are reported in a timely fashion and appropriate action is taken to control
adverse developments.
The City Treasurer and Finance Officer shall refrain from personal business
activity that could conflict with the city's proper execution of the
investment program or which could impair their ability to make impartial decisions.
A.
The Finance Officer shall establish a system of internal
controls, which shall be documented in writing. See Appendixes A and B.
B.
The internal controls shall be reviewed by the external
auditor. The controls shall be designed to prevent loss through fraud, employee
error, misrepresentation by third parties, market changes or imprudent action
by city employees and officers.
The Finance Officer shall submit a quarterly investment report which
summarizes investment strategies employed in the most recent quarter and describes
the portfolio in terms of investment securities, maturities, risk characteristics
and other features. The report shall explain the quarter's total investment
return and compare return with revenue expectations. The report shall include
an appendix that discloses all transactions during the past quarter. Each
quarterly report shall indicate any areas of policy concern and suggested
or planned revision of investment strategies. Copies shall be transmitted
to the external auditors.
The funds shall be invested only by deposit in a savings bank or in
the savings department of a national bank or trust company in this state or
in certificates of deposit of banks incorporated under the laws of the State
of New Hampshire or in national banks located within this state or the State
of Massachusetts or notes or other obligations of the United States government
(RSA 48:16).
Investments of the City of Franklin shall be limited to instruments
maturing within one year at the time of purchase.
Selection criteria for banks or bank holding companies shall be as follows:
A.
Overview. A bank on the list of qualified banks for investment
and banking services must meet minimum criteria, which are defined below.
Banks failing to meet the minimum criteria or which, in the judgment of the
Treasurer and/or the Finance Officer, fail to offer adequate safety to the
city will be removed from the qualified list. Although a bank is on the qualified
list, it may still be required to pledge collateral on all deposits and investments.
The city plans to use call reports of banking institutions and pertinent information
from the office of State Treasurer, Banking Commissioner and others to implement
financial statement evaluation criteria. Bank rating criteria are calculated
using publicly available financial information obtained from the release of
the preliminary reports of condition and reports on income from the federal
government. Data obtained will include factors covering the following:
B.
Minimum criteria for selection. The Finance Officer may
approve a bank if all the following criteria are met:
(1)
The financial institution must be insured by the Federal
Deposit Insurance Corporation or Federal Saving and Loan Insurance Corporation
(FSLIC).
(2)
Only banking corporations incorporated under the laws
of the State of New Hampshire or of the United States shall be appointed as
depositories of funds for the city.
There shall be no placement in excess of $1,000,000 (subject to competitive
bidding) in any one financial institution. Additional limits apply as follows:
A.
Short term. Maturities of seven to 45 days: aggregate
investment position not to exceed $1,500,000 without formal review.
B.
Medium term. Maturities up to 12 months: aggregate investment
position not to exceed $750,000 without formal review; acceptance of only
government securities as collateral (where the Treasurer or Finance Officer
deems necessary) for those investments in excess of FDIC maximum insurance
($100,000 under current law).
A.
Financial institutions bidding on City of Franklin investments
will provide the Finance Officer with quarterly financial reports regarding
paid-up capital and surplus in order that a determination may be made regarding
total investments in each institution.
B.
Financial institutions will prepare safekeeping receipts
or certificates of deposit for each investment made and transmit the same
to the City of Franklin no later than the following day as proof of purchase.
C.
Automatic transfer of principal and interest to city
accounts as defined in the service agreement shall be provided.
D.
No City of Franklin deposits will be transferred out
of New Hampshire and Massachusetts.
E.
Out-of-state banks and non-primary government securities
dealers must conform to RSA 48:16, which requires that deposits be fully collateralized
with the State Treasurer with the delivery of United States government obligations,
United States government agency obligations or obligations of the State of
New Hampshire in market value at least equal to or in excess of the amount
of the deposit in each case.
It is the goal of the city to induce competition both in the depository
as well as bidding for investment funds. Lacking such competition the city
will negotiate an acceptable agreement to be signed by both parties. Where
competition is available it is the intent of the city to have all institutions
or dealers cognizant of the city's investment policies. In order to achieve
this end, all persons or firms receiving city investment funds shall certify
that they have received a copy of these policies and agree to disclose potential
conflicts or risks to public funds that might arise out of business transactions
between the firm and the City of Franklin.
To protect against potential fraud and embezzlement, the assets of the
City of Franklin shall be secured through third-party custody and safekeeping
procedures. Bearer instruments shall be held only through third-party institutions.
Authorized investment personnel shall be bonded to protect the public against
possible embezzlement and malfeasance. Collateralized securities such as repurchase
agreements shall be purchased using the delivery vs. payment procedure. Unless
prevailing practices or economic circumstances dictate otherwise, ownership
shall be protected through third-party custodial safekeeping. Safekeeping
procedures shall be reviewed annually by the external auditor. The external
auditor shall conduct periodic surprise audits of safekeeping and custodial
systems.
The quarterly and annual investment reports submitted to the governing
body shall contain sufficient information to permit an independent organization
to evaluate the performance of the investment program. Every three years,
the City of Franklin shall retain an independent firm to evaluate investment
performance and to conduct an operations audit. The purpose of these examinations
shall be to obtain suggestions for improved future performance and to verify
that authorized investment officials have acted in accordance with the investment
policy and written investment procedures.
A.
Legal basis. The legal basis for this section is applicable
provisions of the Code of the City of Franklin and the investment policies
approved by the Franklin City Council.
B.
General procedures.
(1)
The Finance Officer is responsible for conducting all
investment transactions for the city. In doing so, the Finance Officer must
follow the below steps:
(a)
All investments which exceed 14 days in length and $100,000
in amount must be solicited from no fewer than three institutions dealing
in repurchase agreements, certificates of deposit, United States treasury
bills or as required by the New Hampshire state statutes.
(b)
The Finance Officer shall provide to the City Council
a written report of all such solicitations, whether they were verbal or in
writing from the institutions.
(2)
The bidding procedure for all qualified financial institutions
shall be as follows:
(a)
The Finance Officer will telephone all qualified institutions
on the bid list telling them the maturity and amount on which bids are being
solicited.
(b)
Institutions will call back bids by the time designated,
normally 10:30 a.m.
(c)
The award of investment will be determined as follows:
[1]
Award will be made to the highest percentage bid, provided
that the financial institution meets all other investment criteria. A tie
bid will be broken with a coin toss or drawing of lots in the event that there
are more than two tie bids.
[2]
Wire transfer of funds will be made to the winning bidder
the same business day.
[3]
All bidders will be notified by telephone following the
award. If not notified, bidders may call the Finance Officer by 1:00 p.m.
of same day.
[4]
Financial institutions will prepare safekeeping receipts
or certificates of deposit for each investment made and transmit the same
to the City of Franklin no later than the following day as proof of purchase.
(3)
The Finance Officer is responsible for reflecting all
such investments in the system, thereby causing an audit trail of all cash
and investment transactions.
