Okaloosa County BOCC — May 20, 2014 — reading text

governmental funds. Encumbrances at fiscal year-end do not constitute expenditures since the commitments will be honored during the subsequent year. B. DEFICIT FUND BALANCE/NET POSITION The Solid Waste Enterprise Fund reported deficit net position of $1,473,140 as of September 30, 2013. The deficit is caused by changes in reporting closure costs and long-term care costs for the solid waste landfills of the County. Further description of these costs and methods of funding them are discussed in Note 7. The Self Insurance Internal Service Fund reported deficit net position of $4,363,695. Claim liabilities for workers’ compensation, general and automobile liabilities and property damage are funded by actuarially projected budget requirements for expected yearly cash payouts. This funding method results in a deficit fund equity which will be charged back to the other funds over a reasonable period of time so that service fund revenues and expenses will be equal. The Sheriff’s Self-Insurance Fund is reflecting a deficit net position of $955,902. This is the result of the implementation of GASB 45 which requires the unfunded liability for future employee benefits (OPEB) to be recorded at September 30, 2013. NOTE 3 – DEPOSITS AND INVESTMENTS Deposits The County maintains a cash and investment management pool in which each fund participates on a dollar equivalent and daily transaction basis. The County’s cash and investment management pool is considered to be cash equivalent for reporting purposes because it is an internally managed fund, which allows individual funds to, at any time, deposit additional cash or make withdrawals without prior notice or penalty. The County’s cash and investment management pool includes pooled cash maintained in interest- bearing demand deposit accounts, certificates of deposit, and pooled investments of the Local Government 49 Packet Pg. 107  Okaloosa County, Florida NOTES TO FINANCIAL STATEMENTS Fiscal Year Ended September 30, 2013 NOTE 3 – DEPOSITS AND INVESTMENTS - CONTINUED Deposits - Continued Surplus Trust Fund. Interest income (which includes unrealized gains and losses) is distributed monthly based on balance at date of distribution. Custodial Credit Risk. The County maintains its deposits only with qualified public depositories as defined in Chapter 280, Florida Statutes. The provisions of this statute generally require public funds to be deposited in a bank or savings association designated by the State Chief Financial Officer as a “Qualified Public Depository”. All qualified public depositories must maintain deposit insurance. They also must place with or in the name of the Chief Financial Officer of the State of Florida, collateral in the amount of the greater of the average daily balance of public deposits multiplied by the average monthly balance of public deposits or 125 percent of the average daily balance of public deposits greater than capital. Collateral requirements may be increased according to statute if specified conditions exist. Eligible collateral includes federal, federally-guaranteed, state and local government obligations and corporate bonds. In the event of default by a qualified public depository excess losses over insurance and collateral will be recovered through assessments to all qualified public depositories of the same type as the depository in default. Under this method, all County deposits, including certificates of deposit, are considered fully insured. Investments As of September 30, 2013 the County had the following investments: Investment Type and Quantity Par/Principal Value Fair Value Maturity Repurchase Agreement $ 800,825 $ 800,825 10/1/2013 Florida Local Government Surplus Funds Trust investment pool - Fund B 538,569 609,995 As Available* Florida Local Government Investment Trust investment pool 28,518,035 28,518,035 On Demand Federal Home Loan Bank (3) 2,650,000 2,473,960 7/23/2027 2,045,000 1,918,190 8/22/2022 2,000,000 1,844,820 10/25/2024 Federal National Mortgage Assoc. (13) 1,469,356 1,375,291 4/1/2014 1,014,740 968,104 4/1/2017 1,851,447 1,710,791 12/1/2033 1,300,199 1,198,896 12/1/2021 1,102,855 1,032,685 7/1/2020 2,173,094 2,117,616 6/1/2017 803,990 783,822 2/1/2018 1,537,196 1,495,575 5/1/2018 1,228,405 1,264,863 8/25/2037 1,349,379 1,313,790 11/25/2018 245,389 2,201,491 9/25/2027 731,414 649,343 10/25/2027 253,086 226,154 10/25/2027 Government National Mortgage Assoc. (1) 893,774 891,146 9/16/2033 Total investments $ 52,506,753 $ 53,395,392 50 Packet Pg. 108  Okaloosa County, Florida NOTES TO FINANCIAL STATEMENTS Fiscal Year Ended September 30, 2013 NOTE 3 – DEPOSITS AND INVESTMENTS - CONTINUED Investments - Continued * Fund B cash holdings are being distributed to participants as they become available from maturities, sales and received income. The investment objective for Fund B is to maximize the present value of the distributions. State Statutes and the formal investments and portfolio policies adopted by the Board of County Commissioners restrict the types of investments that can be made by the County. A description of the requirements and the types of investments allowed as well as information about valuation and other investment policies can be found in Note 1.D.1. The investment policy manual details the methods used to manage the risks inherent to the investment process. The authority for investment of County funds rests with the Clerk of the Circuit Court who has delegated management of the investment program to the Finance Director. Investments can only be made by majority vote of the investment committee appointed by the Clerk. Although the policies allow investments in many types of instruments, the investment committee has chosen to limit investment risks by investing mainly in allowed investment pools. The pools are 2a7-like investment pools and manage interest rate risk by limiting the weighted average maturity of their portfolios, manage credit risk by investing in mainly governmental and other highly rated securities, manage concentration of credit risk by limiting investment in any one issuer to less than 5% of the portfolio and manage custodial credit risk by requiring collateral for investments held by counterparties. Interest rate risk. In accordance with the investment policy, the exposure to declines in fair value of investments outside of the pools is managed by matching the investments to a specific cash flow requirement. The repurchase agreement and instrumentalities are matched to the timing of required debt service payments. On November 29, 2007, the State Board of Administration implemented a temporary freeze on the assets held in the Florida Local Government Investment Trust Pool due to an unprecedented amount of withdrawals from the Fund coupled with the absence of market liquidity for certain securities within the Pool. On December 4, 2007, based on recommendations from an outside financial advisor, the State Board of Administration restructured the Pool into two separate pools. Pool A consisted of all money market appropriated assets, and Pool B consisted of assets that either defaulted on a payment, paid more slowly than expected, and/or had any significant credit and liquidity risk. Credit risk. As of September 30, 2012, Standard & Poor’s rated the investment in Florida Local Government Investment Trust investment pool AAAf, Florida Local Government Investment Day to Day AAAm, Florida Local Government Surplus Fund Trust AAAm, and STI Classic Institutional Cash Management AAAm. The Florida Local Government Surplus Fund Trust Fund B investment pool was not rated by any nationally recognized statistical rating agency as of September 2013. As of September 30, 2013 all U.S. Instrumentalities held by the County were rated AAA. The investment policies of the County manage credit risk by limiting investments in U. S. Instrumentalities to the two highest ratings issued by nationally recognized statistical rating organization. Concentration of credit risk. The investment policies of the County diversify the portfolio by limiting the maximum percentage of various types of investments that can be purchased. The investment policy maximum percentages for the current portfolio are 50% for U.S. agencies and instrumentalities and 50% for repurchase agreements. More than 5% of the County’s investments are in the Federal Home Loan 51 Packet Pg. 109  Okaloosa County, Florida NOTES TO FINANCIAL STATEMENTS Fiscal Year Ended September 30, 2013 NOTE 3 – DEPOSITS AND INVESTMENTS - CONTINUED Investments - Continued Bank, Federal National Mortgage Association, and Government National Mortgage Association. These investments are 12%, 31%, and 2% respectively, of the County’s total investments. Custodial credit risk. Okaloosa County has a perfected first security interest in the collateral underlying the repurchase agreement. STI Classic Institutional Cash Management, U.S. Treasury bills, and U.S. instrumentalities are held by the County’s agent in the County’s name in accordance with the Okaloosa County Investment Policy requiring third party custody