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City of Roseville — 2004 Budget The investment officer will routinely monitor the contents of the portfolio, the available markets and the relative values of competing instruments and will adjust the portfolio accordingly. Internal Controls The Finance Director shall establish a system of internal conrols, which shall be reviewed annually by an independent audkor. The controls shall be designed to prevent loss of public funds due to fraud, error, misrepresentation, unanticipated market changes, or imprudent actions. Investments shall be done on a pooled funds basis with interest allocated on a cash balance method. Those internal controls shall consist of competitive bids on investments, and division of duties among the staff. ❑ Investments made by investment officer ❑ Records maintenance by a finance staff member other than investment officer ❑ Review and reconciliation by the assistant finance director Portfolio Mana ement Under the 1999 Fiscal Policies, it shall be the City's procedure to restrict investments to only Repurchase Agreements with national or state chartered banks, U.S. Treasury and U.S. Government Agencies. The procedures shall consist of yield curve analysis and implemented with the appropriate purchase of the above investments. Maturity scheduling shall be within those investments and in a manner that will maximize yield and liquidity and minimize interest rate risk. Competitive Selection of Investment Instruments Before the City invests any surplus funds, a competitive "bid" process shall be conducted. If a specific maturity date is required, either for cash flow purposes or for conformance to maturity guidelines, bids will be requested for instruments that meet the maturity requirement. If no specific maturity is required, a market trend (yield curve) analysis will be conducted to determine which maturities would be most advantageous. Bids will be requested from financial institutions for various options with regards to term and instrument. The City will accept the bid that provides the highest rate of return within the maturity required and within the parameters of these procedures. Bids for purchases through the treasury auctions are not required. Records will be kept of the bids offered, the bids accepted and a brief explanation of the decision that was made regarding the investment. ,settlement All settlements of investments shall be on a "Delivery vs. Payment" (DVP) basis. Physical delivery shall be avoided if at all possible, with book -entry being the preferred method of safekeeping. Safekeeping and Collateralization All investment securities purchased by the City shall be held in third -party safekeeping by an institution designated as primary agent. The primary agent shall issue a safekeeping receipt to the City listing the specific instrument, rate, maturity and other pertinent information. 117