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The investment officer,acting in accordance with written procedures and exercising due diligence,shall not <br /> be held personally responsible for a specific security's credit risk or market price changes, provided that <br /> these deviations are reported immediately and that appropriate action is taken to control adverse develop- <br /> ments. <br /> Monitoring and Adjusting the Portfolio <br /> The investment officer will routinely monitor the contents of the portfolio, the available markets and the <br /> relative values of competing instruments and will adjust the portfolio accordingly. <br /> Internal Controls <br /> The Finance Director shall establish a system of internal controls,which shall be reviewed annually by an <br /> independent auditor. The controls shall be designed to prevent loss of public funds due to fraud, error, <br /> misrepresentation, unanticipated market changes, or imprudent actions. Investments shall be done on a <br /> pooled funds basis with interest allocated on a cash balance method. Those internal controls shall consist of <br /> competitive bids on investments, and division of duties among the staff. <br /> ❑ Investments made by investment officer <br /> ❑ Records maintenance by a finance staff member other than investment officer <br /> ❑ Review and reconciliation by the assistant finance director <br /> Portfolio Management <br /> Under the Council-adopted Fiscal Policies, it shall be the City's procedure to restrict investments to only <br /> Repurchase Agreements with national or state chartered banks, U.S. Treasury and U.S. Government <br /> Agencies, Guaranteed Investment Contracts, and Bankers Acceptances. All investments shall carry a <br /> minimum credit rating of `AA'. An exception to these restrictions is permitted with regard to the <br /> investment of proceeds received from the 2011 and 2012 bonds due to extenuating economic circumstances <br /> and their effect on financial institutions. Repurchase Agreements associated with the bonds can be placed <br /> with any bank, bank holding company, savings and loan association, trust company or other financial <br /> institution including the trustee or any of its affiliates. The financial institution shall carry a credit rating of <br /> `A' or better, and is required to pledge collateral from national or state chartered banks. <br /> The procedures shall consist of yield curve analysis and implemented with the appropriate purchase of the <br /> above investments. <br /> Maturity scheduling shall be within those investments and in a manner that will maximize yield and <br /> liquidity and minimize interest rate risk. <br /> Competitive Selection of Investment Instruments <br /> Before the City invests any surplus funds, a competitive "bid" process shall be conducted. If a specific <br /> maturity date is required,either for cash flow purposes or for conformance to maturity guidelines,bids will <br /> be requested for instruments that meet the maturity requirement. If no specific maturity is required, a <br /> market trend (yield curve) analysis will be conducted to determine which maturities would be most <br /> advantageous. Bids will be requested from financial institutions for various options with regards to term <br /> and instrument. The City will accept the bid that provides the highest rate of return within the maturity <br /> required and within the parameters of these procedures. <br /> Page 3 of 5 <br />