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145 possible, prepayment funds for long-term debt service shall be invested to ensure a rate of return at least 146 equal to the interest being paid on the bonds. 147 148 Delegation of Authority 149 The Finance Director is designated as investment officer of the City and is responsible for investment 150 decisions and activities, under the direction of the City Manager. 151 152 Prudence 153 The standard of prudence to be applied by the investment officer shall be the "prudent investor" rule. This 154 rule states, "Investments shall be made with judgment and care, under circumstances then prevailing, 155 which persons of prudence, discretion and intelligence exercise in the management of their own affairs, 156 not for speculation, but for investment, considering the probable safety of their capital as well as the 157 probable income to be derived." The prudent investor rule shall be applied in the context of managing the 158 overall portfolio. 159 160 The investment officer, acting in accordance with written procedures and exercising due diligence, shall 161 not be held personally responsible for a specific security's credit risk or market price changes, provided 162 that these deviations are reported immediately and that appropriate action is taken to control adverse 163 developments. 164 165 Monitoring and Adjusting the Portfolio 166 The investment officer will routinely monitor the contents of the portfolio, the available markets and the 167 relative values of competing instruments and will adjust the portfolio accordingly. 168 169 Internal Controls 170 The Finance Director shall establish a system of internal controls, which shall be reviewed annually by 171 an independent auditor. The controls shall be designed to prevent loss of public funds due to fraud, error, 172 misrepresentation, unanticipated market changes, or imprudent actions. Investments shall be done on a 173 pooled funds basis with interest allocated on a cash balance method. Those internal controls shall consist 174 of competitive bids on investments, and division of duties among the staffincluding: 175 176 Investments made by the investment officer 177 Records maintenance by a finance staff member other than the investment officer 178 Review and reconciliation by the assistant finance director 179 180 Portfolio Management 181 Under the Council-adopted Fiscal Policies, it shall be the City's procedure to restrict investments to only 182 Repurchase Agreements with national or state chartered banks, U.S. Treasury and U.S. Government 183 Agencies, Guaranteed Investment Contracts, Bankers Acceptances, State and Local government 184 securities and Certificates of Deposit. All investments shall carry a minimum credit rating of ‘AA’. So 185 long as the City is a “qualifying government” pursuant to Minnesota Statute 118A, it will have additional 186 investment authority per this policy and Minnesota Statute. See Equity Investments. 187 188 An exception to these restrictions is permitted with regard to the investment of proceeds received from 189 the 2011 and 2012 bonds due to extenuating economic circumstances and their effect on financial 190 institutions. Repurchase Agreements associated with the bonds can be placed with any bank, bank 191 holding company, savings and loan association, trust company or other financial institution including the 192 trustee or any of its affiliates. The financial institution shall carry a credit rating of ‘A’ or better, and is 193 required to pledge collateral from national or state chartered banks. Page 6 of 8