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City of Roseville — 2006 Budget Funds held for future capital projects (i.e. bond proceeds) shall be invested to produce enough income to offset increases in construction costs due to inflation. Where possible, prepayment funds for long -term debt service shall be invested to ensure a rate of return at least equal to the interest being paid on the bonds. Delegation of Authority The finance director is designated as investment officer of the City and is responsible for investment decisions and activities, under the direction of the City manager. Prudence The standard of prudence to be applied by the investment officer shall be the "prudent investor" rule. This rule states, "Investments shall be made with judgment and care, under circumstances then prevailing, 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." The prudent investor rule shall be applied in the context of managing the overall portfolio. The investment officer, acting in accordance with written procedures and exercising due diligence, shall not be held personally responsible for a specific security's credit risk or market price changes, provided that these deviations are reported immediately and that appropriate action is taken to control adverse developments. Monitoring and Adjusting the Portfolio 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. 129