Okaloosa County BOCC — October 18, 2016 — County Investment Policy final — reading text

deducted from the redemption price of a mutual fund. Tax-exempt mutual funds shall be limited to S.E.C. - registered, no-load money market mutual funds whose portfolios consist of tax-exempt securities and repurchase agreements. The maturities or optional redemption dates of securities in the fund's portfolio may not exceed one year, and shares of the 5  mutual fund must be rated in the two highest categories by a nationally recognized rating service. Portfolio securities may not be invested in bonds subject to the federal alternative minimum tax, and 98 percent of the fund's securities or dividends must be tax-exempt. 6. Florida Local Government Investment Trust (FLGIT), authorized by County Ordinance No. 92-03 and Resolution No. 92-10. 7. Investment of Surplus Balances for Special County Purposes and Projects- Surplus balances of the County may be utilized for the funding of Special County Purposes and Projects (“Special Projects”) and shall be treated as a loan and investment of the County’s surplus funds. The use of surplus balances for these Special Projects shall comply with the following requirements: (a) The terms of the investment of surplus balances for these purposes, including the principal amount used to be loaned for the Special Project, the interest rate and repayment date of the loan and the revenue source to be used for the repayment of the loan, shall be approved by the Board as included in an authorizing resolution. (b) The total amount of all loans for Special Projects from the County’s surplus balances shall not exceed one percent (1%) of the total amount of that surplus funds. In no event shall the total amount loaned for Special Projects exceed the amount of legally available revenues to repay, if required. (c) Each request for Board approval of a loan for the funding of a Special Project shall include the Clerk’s determination that the investment is authorized by the county investment policy. (d) Each Special Project to be funded from the County’s surplus balances shall have a scheduled repayment date that does not restrict, impede, or limit implementation or fulfillment of the original purposes for which the surplus funds are designated. The Board, in approving use of the County’s surplus balances shall include within the resolution a specific 6  finding that the transfer will not restrict, impede, or limit implementation or fulfillment of the original purposes for which the surplus funds are designated. Further, the resolution shall provide that the County may repay loan from any available revenue source in the event that the surplus funds are required for their original purposes. (e) The use of surplus balances for Special Projects shall bear interest at a rate equal to or greater than the County's rate of return on the investment of the surplus funds from which the transfer is made. (f) The loan of surplus balances used for Special Projects may be re-paid early at any time and without penalty. VI. MATURITY AND LIQUIDITY To the extent possible, the Clerk to the Board will attempt to match investments with anticipated cash flow requirements. Unless matched to a specific cash flow requirement, funds of the Board of County Commissioners will not be directly invested in securities maturing more than five (5) years from the date of purchase, except for eligible mortgage-backed securities reasonably expected to be paid down within a five- year period or approved by the Board by resolution. VII. RISK AND DIVERSIFICATION It is the policy of Okaloosa County to diversify its investment portfolio. Assets held shall be diversified to control the risk of loss resulting from over-concentration of assets in a specific maturity, issuer, class of security, and/or dealers through whom these instruments are bought and sold. The portfolio shall consist of all investments that the Clerk's Director of Finance directs, including investments purchased under advisement of a third-party investment advisor under contract to the Clerk, with the approval of the Board, and shall be considered as one portfolio for the diversification calculation. Overnight repurchase agreements, however, are excluded from the diversification calculation. The maximum percentage of the total portfolio in each eligible security is as follows: Diversification by instrument: 1. United States Treasuries/Agencies/Instrumentalities 50% maximum 7  2. Local Government Surplus Funds Trust Fund 75% maximum 3. Repurchase Agreements* 50% maximum 4. Mutual Funds 75% maximum 5. Florida Local Government Investment Trust 75% maximum 6. Other (CDs and BAs individually) 25% maximum *Repurchase agreements purchased from any one broker cannot exceed 30% of the portfolio. The Board recognizes that investment risks can result when the issuer defaults, market price changes or various technical complications leading to temporary illiquidity. Portfolio diversification is employed as a way to control risk. The Board may approve, under separate cover, an increase or decrease to any of the above limits. Investment managers are expected to display prudence in the selection of securities as a way to minimize default risk. No individual investment transaction shall be undertaken that jeopardizes the total capital position of the overall portfolio. In the event of a default by a specific issuer, the Director of Finance shall review and, if appropriate, proceed to liquidate securities having comparable credit risks. To control the risk of illiquidity within the pooled cash area, an average minimum dollar amount equivalent to eight weeks of expenditures shall be held in a liquid investment (i.e., overnight repurchase agreements, mutual funds, SBA, FLGIT and any other approved, short term instrument with a maturity not to exceed sixty days). However, the dollar amount placed in a liquid investment has no maximum restrictions. VIII. CRITERIA FOR SELECTION OF FINANCIAL INTERMEDIARIES AND ISSUERS Financial intermediaries allowed are as follows: (a) Financial institutions which qualify under Florida law as public depositories - interest bearing time deposits; (b) Primary securities dealers as designated by the New York Federal Reserve Bank - government securities and repurchase agreements. The Florida State Board of Administration Local Government Surplus Funds Trust Fund (SBA) and the Florida Counties Investment Trust (FLGIT) are other investment sources. These institutions, dealers, and issuers must meet capital adequacy guidelines as determined by their respective regulatory agencies. All repurchase agreements (term and overnight) shall be negotiated with primary securities brokers/dealers as designated by the New York Federal Reserve Bank and banks with which the Clerk to the Board has master repurchase agreements on file. All 8 repurchase agreement transactions shall adhere to the Master Repurchase Agreement. All securities purchased shall be only those securities of authorized issuers of the various security types. Lists of authorized institutions, dealers and issuers of the various security types will be maintained by the Clerk of the Board. Criteria for addition or deletion from the lists will be based on the following: (1) State law, Board of County Commissioners resolution and ordinance code, or investment policy requirements where applicable; (2) perceived financial difficulties; (3) consistent lack of competitiveness; (4) lack of experience or familiarity of the account representative in providing service to large institutional accounts; (5) request of the institution or dealer; and/or (6) when deemed in the best interest of the Board of County Commissioners. The Clerk may require each bank, thrift, and securities dealer otherwise qualified under the provisions of this policy who wishes to conduct business with the County to submit a copy of its latest financial statement on an annual basis. In addition, the Clerk may require banks to provide a copy of their call report (Consolidated Reports of Condition and Income) including all appropriate schedules (Form FFIEC-032 or 03l, as applicable). The Clerk's Finance Division shall send a copy of the current edition of the Board’s investment policy to all institutions which are approved to handle Okaloosa County's investments. Receipt of the policy shall be acknowledged by mailing the policy via certified, return receipt. IX. SAFEKEEPING AND THIRD-PARTY CUSTODIAL AGREEMENTS To protect against possible fraud and embezzlement, the collateral and securities held by Okaloosa County shall be secured through third-party custody and safekeeping procedures. Public employees shall be bonded by either an independent surety or through the County's Self-Funded Insurance Fund to protect the public against possible embezzlement and malfeasance. Safekeeping procedures shall be reviewed annually by the independent auditors performing the annual financial audit of the County. The majority of securities purchased for the Board of County Commissioners under this section shall be properly designated as an asset of the Board of County Commissioners and held in safekeeping by a third- party custodial bank, chartered by the United States Government or the State of Florida; and no withdrawal/sale of such securities, in whole or in part, shall be made from safekeeping except by the Clerk to the Board's 9 designated employees. The exceptions to safekeeping are mutual funds, SBA, CDs, SLGS, and FLGIT. The Clerk to the Board will execute third-party custodial agreement(s) with depository institution(s). Such agreement will include letters of authority from the Clerk to the Board with details as to responsibilities of each party, notification of security purchases, sales, delivery, repurchase agreements, wire transfers, safekeeping, transactions agreements and costs and procedures in case of wire failure. All securities purchased or sold will be transferred when possible only under delivery versus payment (D.V.P.) method and payment versus delivery (P.V.D.) methods, respectively, to insure that funds or securities are not released until all criteria relating to the specific transactions are met. All overnight repos purchased from the depository bank must be collateralized by securities in Section V (A)(l, 2, or 3) which the depository bank has placed in a separate account in the County's name in its trust department. Third-party overnight repurchase agreements will also require collateral to be held in the County's name at the custodial bank. Collateral must be valued in accordance with the following schedules: U.S. Maturity of Purchased U.S. Treasury Securities Agency/Instrumentality Securities Discount and Coupon Securities* Under 1 Year 101% 1 – 5 Years 101% 102% Over 5 Years 101% 102%