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HomeMy WebLinkAbout19 CITY TREASURER 06-20-94 NO. 19 6-20-94 Inter-Com ..ATE: JUNE 15, 1994 TO: FROM: SUBJECT: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL WILLIAM A. HUSTON, CITY MANAGER CITY TREASURER Mayor Pro Tem Potts requested a report on how the City of Orange provides its treasury function. Attached is a 1992 report prepared for the City of Orange by the accounting firm of KPMG Peat Marwick concerning the City's investment policies and procedures. The.City of Orange elected Treasurer is currently working part time due to illness. It is Our understanding that after the Treasurer's investments are made they are reviewed by either the Assistant City Manager or Finance Director. In addition to the elected Treasurer, two full time City staff members are assigned to the treasury function. State law requires the Treasurer to be appointed by'the City Council or the option of an elected Treasurer. The City of Tustin's Finance Director, Mr. Nault, was appointed Tustin's Treasurer by Resolution 80- 122 pursuant to Section 1611 (c) of the Tustin Municipal Code. Mr. Nault currently manages an investment portfolio of fifty eight million dollars. In addition, he has oversight responsibility for approximately fifty million dollars of bond funds invested by the City's fiscal agents. Each month the City Council receives a report which documents current investments. All City investments are made pursuant to an investment policy that is reviewed and.approved by the City Council each year. ctyt resr. wah CITY OF ORANGE Report on Investment Balances, Policies and Procedures JUNE 2 7, 1992 Peat Marwick Peat IV arwick Certified Public Accountants Orange County Office Center Tower 650 Town Center Drive Costa Mesa. CA 92626 June 27,' 1992 Mayor Gene Beyer and Members of the City Council City of Orange 300 East Chapman Avenue Orange, California 92666-1591 Dear Mayor Gene Beyer and Members of the City Council: KPMG Peat Marwick is pleased to present this report on our review of the investment balances, policies and practices of the City of Orange. The report is divided into three sections. The fa-st section provides background information and a brief description of the manner in which we observed investment activities being managed at the City of Orange. The second section describes the scope of our work, while the third section discusses our findings accompanied by 'recommendations for changes in current operations, policies and procedures. . We appreciate the opportunity to be of assistance to the City of Orange. We would be pleased to discuss our review in further detail upon request. Very truly yours, KPMG PEAT MARWICK Margaret J. McBride, Partner Report on CITY OF ORANGE Investment Balances, Policies and PrOcedures Table of Contents Background and Xnnx~ucfion Scope of the Study F'mdings and Recommendations Compliance with the Current Investment Policy Content of the Current Investment Policy Internal Controls over Investments Confim'mtion of Investments 1 1 2 3 6 11 14 BACKGROUND AND INTRODUCTION The City of Orange has in excess of $100 million in investments, in addition to _amounts held by fiscal agents, and desires to establish policies and procedures to safeguard these assets again~ potential losses. Further, in December 1991 the City became aware of an invesmznt recorded in its fimneial records for approximately $7 million which may have had little or no value. In an effort to ensure' the safety of existing investments and the effectiveness of controls, surrounding future investment transactions, the City has commi-~j'oned a study to assist in reviewing investment holdings and the establishment of investment policies and procedures. The City's investment policy stipulates that investing be carried out in accordance with specific guidelines of the policy and based on the "prudent person" principle of investing. The policy identifies the types of invesmaents which may and may not be made, establishes broad guidelines for the manner in which investments should be evaluated and defines reporting requirements for investment activities. Treasurer's reports are provided to the City Council summ~zing investment activities on a monthly basis. The City has asked KPMG Peat Marwick to review investment balances and procedures within the City.in an effort to develop recommendations for changes in organization, policies, procedures, documentation and reporting of investment activities, to ensure compliance with City policies and directives and to safegUard the City's investment portfolio. Additionally, Pez~ Marwick was requested to test the City's investment balances as of December 31, 1991 in order to determine the accuracy of the City's records. .... ....... The law f'n'm of PhilliPs, Haglund, Haddan & Jeffers will be reporting separately on the legal review of current policies and procedures and related investment documents. Section H: SCOPE OF THE STUDY To gain an understanding of thc City's invesmmat practiees~ ~e performed the following steps: ... · Interviewed key personnel who are involved in thc investment process; · ' Performed a walk-through of certain invesmaent processes; · Reviewed the monthly reporting package provided to thc City Council; * Reviewed selected documentation relating to investment transactions and reconciliations; and · Reviewed the City's current investment policy (dated September 11, 1990). In addition to the above procedures, we confirmed the City's investments as of December 31, 1991 and reviewed the reconciliation of the investment listing to the City's general ledger. Our study did not extend to the City's Deferred Compensation investments. _ As a result of the procedures performed above, we have identified areas in which we believe the City can enhance their existing policies and procedures. We have discussed these areas in the following section entitled "Findings and Recommendations." Section. III: FINDINGS AND RECOMMENDATIONS We have organized our findings and reco~en~ons in the following manner:. 1. Compliance with the Current Investment Policy 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 U.S. Government Agency Securities Cesfificates of Deposit Bankers' Acceptances R~urchase Agreements Mutual Funds Medium Term Corporate Notes Local Agency Investment Fund (LAIF) 2. Content of the Current Investment Policy 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 2.11 2.12 2.13 2.14 2.15 ~ent Authority Invetament Options Inves~nt Concentrations Oafification of Concentration Restrictions Definition of Short-term Repurchase Agreements Collateral for Repurchase Agreements Investing Relationships Holding of Investments Monthly Treasurer's Report Internal Controls/Investment Authorization Investment Policy Review Competitive Bids Insured versus Collateralized Investments Approval of Investment Contracts Deferred Compensation Investments Internal Controls over inVestmen~s~ 3.1 3.2 3.3 3.4 3.5 Segregation of Duties Personnel Changes Fiscal Agent Statements Utilization of Investment Advisors Staffing Levels 4. Confirmation of Investments 1. Compffance with the Current Investment Policy The City's investment policy sets guidelines for allowable investments of the City's available funds. In this section we have addressed the various types of investments utiUzed by thc City and in each case whether or not thc City is in compliance with its Investment Policy. Based on our review of the City's investment portfolio as of Dex~mber 31, 1991 as well as the restrictions imposed by the investment policy, we have the following observations: 1,1 U.S, Government Agency Securities Thc City's investment policy allows for thc investment of available funds in U.S. Government Agency Securities and does not' impose any restrictions as to thc percentage of thc portfolio which can be invested in such securities. Government Agency securities represent approximately 27.1% of the total book value of investments held by the City. !,2 Certificates of Deposit The City's investment policy states that: No more than 10% of the investment portfolio may be invested in collateralized C.D.'s of any institution, and · . No more than 30% of the investment portfolio may' be invested in Negotiable C.D.'s, and · No more than $2 million may be invested in Negotiable C.D.'s with any one institution. The City has one collateralized certificate of deposit as of December 31, 1991 in the amount of $200,000, well within the investment policy guidelines. It is our understanding that this certificate of deposit matured on February 21, 1992. The City also has 60 FDIC insured certificates of deposit. Certificates of deposit comprise approximately 5.2% of the total book value of the investment portfolio. The City's Decem~ 31, 1991 investment portfolio does not include any negotiable certificates of deposit. It is our understanding that it is thc City's current practice to invest in certificates of deposit in amounts ranging from $97,000 to $100,000, in order to fall within FDIC insurance limits on individual deposits. We reconnnend the City's policy regarding the maximum amount of individual certificates of deposits be clarified. If the City determines that certificate of deposit balances should be within the limits of FDIC coverage throughout their term, we recommend that interest earnings on the certificates of deposit be calculated and considered when making the investment decisions in order to ensure that the balance of the investment along with such accrued amounts does not exceed the $100,000 limit, or that interest earnings be paid to the City periodically throughout the term of the investment. 1.3 Bankers' A ccet~tances - The City's investment policy states that: No more than 30% of the investment portfolio may be invested in Bankers' Acceptance Notes and no more than $5 million may be invested with any. one institution. The City has 14 Bankers' Acceptance Notes at December 31, 1991 with a total book value of $15,634,346. Bankers' Acceptances comprise 13.7% of the book value of the City's total investment portfolio. The City, however, has invested approximately $8,241,000 in Bankers' Acceptances with Dai Ichi Kangyo Bank, which exceeds the City's $5 million ceiling of allowable Bankers' Acceptance Notes investments with any one institution. However, the City is in compliance with State limitations. We recommend that, prior to making investment decisions, the City Treasurer review the resulting concentrations of investments by investment type and institution in order to ensure compliance with the City's Investment Policy. We understand that the situation noted above has been corrected subsequent to our review. 1.4 Commercial Paver - Thc City's investment policy states that: No more than 15% of the investment portfolio may be invested in Commercial Paper and no more than $5 million may be invested with any one institution. The City has three Commercial Paper holdings in the investment portfolio as of December 31, 1991 with a book value of approximately $4,732,000, which represent 4.2% of the book value of the City's total investment portfolio. The City appears to be within the limitations imposed by the Investment policy as they relate to Commercial Paper. We did not review the ratings of the commercial paper holdings. 1.5 Repurchase Agreements While the City's investment policy, allows for investments in Repurchase Agreements, the City does not have any investments in Repurchase Agreements as of December 31, 1991. 1.6 .Government Mutual Funds While the City's investment policy allows for investments in Government Mutual Funds, the City does not have any investments in Government Mutual Funds as of December 31, 1991. 1.7 Medium Term Corporate Notes The City's investment policy states that: · No more than 15% of the investment portfolio may be invested in Medium Term Corporate Notes. The City has 31 Medium Term Corporate Note holdings in its portfolio as of December 31, 1991 with a book value of approximately $26,463,000. The City's current holdings in Medium Term Corporate Notes represent 23.2% of the total book value of the investment portfolio, which is in excess .of the restrictions referred to above. However, the City is in compliance with State limitations. Again, we recommend that, prior to making investment decisions, the City Treasurer review concentrations of investments by investment type in order to insure compliance with the City's Investment Policy. We understand that the situation noted above has been corrected subsequent to our review. We did not review the ratings of the Medium Term Corporate Notes. 1.8 Local Agency Investment Fund (LAIF) The City's current investment policy does not address the allowability and limitations of investments in the State of California LAIF pool. It is our understanding that it is the City Council's desire that City and Redevelopment Agency funds be invested in the LAIF pool, however, the City's investment policy does not disclose that fact. Appendix A to the City's Investment Policy does, however, describe the nature of the LAIF pool. As of December 31, 1991, the City has invested $10 million of general City funds and $9.8 million of Redevelopment Agency funds in the LAW pool, representing approximately 17.4% of the total portfolio book value. As is recommended later in this report, we recommend that thc City's Investment Policy be as comprehensive as possible, and include all types of investments in which the City Council wishes to invest. 1.9 Liquidity The City's investment policy requires liquidity sufficient to meet one month's cash needs. For the months of December 1991 and January 1992 the City averaged approximately $7.75 million per month in warrants paid. As the City's LAIF investmeats are available for wi~wal on a daffy basis the City appears to be well within i~s liquidity requirements. 2. Content o_f the Current Investment Policy We have identified below specific areas in which we recommend the City consider modifying its existing Investment Policy. While some of these practices and controls may exist at thc City, we recommend such practices and controls be formalized and incorporated into the City's Investment Policy. Our f'mdings and recommendations are as follows: 2.1 Investment Authori~_ The City's Investment Policy grants the authority to make investments to the City Treasurer, who may in turn delegate some of those responsibilities to the Deputy Treasurer. Upon the retirement of the City Treasurer in October 1990, the City Council, as a temporary measure, appointed the Assistant City Manager as Treasurer and the Finance Director as Fiscal Officer (Resolution No. 7675). The City is currently in a positioa of having a somewhat inactive Treasurer and no Deputy Treasurer. Many of the City's investment transactions am being made by an employee with the rifle of Fiscal Agent. We understand that actions have been taken by the City Council to empow~' the l::mcal Agent to make investment transactions on behalf of the City subsequent to the adoption of the current investment policy. We recamunend that the City's Investment Policy be very specific as to who has the authority to effect investment tmn~ctions. We also recommend that the City seek a legal opinion on its authority to delegate investment responsibilities. 2.2 Investment Options The City's Investment Policy docs not specifically authorize investments in the County of Orange Investment Pool, however, such investments have been authorized by City Council resolution. As of December 31, 1991, the City had over $10 million invested in this pool. If it is the City Council's continuing desire to invest in the County of Orange Investment Pool, we recommend that this investment option be incorporated into the City's Investment Policy. 6 2.3 Investment Concentrations The City's Investment Policy sets forth concentration limits for ccrm_ i, types of investments in order to maintain a desired level of diversification within the investment portfolio. The policy, however, does not address maximum concentration levels for investments in U.S. Government Agency Securities (as stated under 1.1 above), the ~ Agency Investment Fund (as stated under 1.8 above), or Money Market Accounts. It is very possible that the City Council's intent was not to place limits on these types of investments due to a perceived level of security when purchasing these investments. We recommend that the City's Investment Policy address allowed concentrations for all authorized investments rather than leave the issue open to interPretation. ,. 2.4 Clari_ffcation of Concentration Restrictions.' As is noted above, the City's Investment Policy restricts investments in certain investment vehicles to a stated percentage of the total portfolio. The Investment Policy does not, however, specify the basis to be used when calculating the percentage (i.e., book value, market value, number of securities, or some other criteria). We recommend that the Investment Policy be amended to specifically state the basis on which concentration restrictions are intended to be based. 2,5 Definition of Short-term Repurchase Agreements The Investment Policy identifies Short-term Repurchase Agreements as allowable investments. The Investment Policy, however, does not define-what is considered to be short-term. We recommend that the Investment POlicy further define Short-term Repurchase Agreements, including a maximum number of days such investments may be held. In addition, we recommend the Policy include a statement concerning frotn whom repurchase agreements may be purchased and where the collateral is to be held. 2.6 Collateral for Revurchase A~reements A Repurchase Agreement is a contractual agreement between a financial institution or dealer and the City in which the City lends its funds to the f'mancial institution for a certain number of days at a stated rate of interest. In return, the City takes rifle to securities as collateral until funds and interest are repaid. The City's current Investment Policy does not restrict the types of securities that can be accepted as collateral. This would be important in the possible case that the financial institution or dealer was unable to repay the City's funds. We recommend that minimum guidelines be established and included in thc Investment Policy for the types of securities acceptable as collateral for repurchase agreements, and the minimum collatexal to repro'chase agreement market value ratio. In addition, we recommend procedttres be implemented to require the monitoring of the collateral received in order to ensure that the market value of the securities does not fall below the amount of the repurchase agreement plus accrued interest. 2.7 Investing Relationships The City's Investment Policy does not designate the financial institutions, dealers~ investment managers and/or brokers with which the City may do business, nor does it provide guidelines on how to select such a party. Establishing solid relationships with sound institutions is an essential step in safeguarding the City's investment portfolio. We recommend guidelines be established for interviewing and evaluating new institutions, as well as periodically monitoring existing relationships. We also recommend the establishment of minimum guidelines for those with whom the City is willing to do business. Such guidelines could include consideration of the following: the ability of the dealer/10ank to full'ill commitments as evidenced by capital strength, liquidity and operating results. Such information can be determined by a review of current financial data, annual repons, credit repons and various other sources. the dealer/bank's general reputation for financial stability as well as fair and honest dealings with customers. Other cities that have been or currently are customers of the dealer/bank could be contacted. information available from banking or securities industry regulators as well as State and Federal regulators concerning any regulatory violations or formal enforcement against the broker or any of its affiliates. · the background of the broker including his/her expertise and experience. We understand that the City is utiliz~g some of the guidelines noted above at the present time. We recommend the formalization and documentation of such policies. 2.8 Holding of Investments The .accounting industry has recognized that there are risks beyond the risks of the' actual investment purchased, most notably the risk of how investments are being held. The investments can be held in the City's name, in the City's agent's name, or possibly in the name of an agent's agent. In addition, the investment can be held at City Hall, at the City's financial institution, or there are a number of other possibilities. The physical placement of securities and in whose name the securities are held impacts the effectiveness of the City's claim to such securities. The City's Investment Policy does not address this risk. We recommend that the Investment Policy clearly identify in whose name investments are to be held and where such investments are to be domiciled. _ 2.9 Monthly Treasurer's Report It is the City's practice to report to Council on a monthly basis the outstanding investments as. of each month-end. The City's Investment Policy does not address this reporting, nor does it provide any guidelines on the type of information that should be provided to the Council or when it should be presented. We recommend the Investment Policy be expanded to include the types of information that will be disclosed to Council on a monthly basis and when such reporting will take place. In addition, we recommend that the Current reporting package be expanded to include: A certification by the City Treasurer which states that all investment transactions and all investments held as of month-end have been and are in compliance with the City's adopted Investment Policy. Such a report might include the concentration of investments by classification as compared to the investment policy limitations. · A summary of the month's investment transactions by security type. · Current and year-to-<ta~ investment earnings. 2.10 A su.~.nunary of Treasurer's cash. Internal Controls/Investment Authorigation While it is undoubtedly the City Council's desire to have in place a strong system of internal Controls and a clear investment authorization process, the City's Investment Policy is silent on this topic. We recommend the Investment Policy state specifically that a strong system of internal controls be in place for the handling and safeguarding of City investments, including the segregation of incompatible functions (i.e., purchasing, recording, and reconciling investment transactions) and the establishment of an investment authorization process.....- '"' 2.11 Investment Policy Review As the economy changes and investment instruments become more and more complex, it is important that the City's Investment Policy remain responsive to the current legal and economic environments, industry trends, and financial needs of the City. The City's Investment Policy does not state how often a review of the policy by the City Council should take place. We recommend that, in an effort to keep the Investment Policy current and relevant, a review of the Investment Policy take place at least annually. We also recommend that it be stipulated in the Investment Policy when and how often such reviews will take place. " 2.'i2 Competitive Bids Obtaining informal competitive bids is an accepted method of ensuring the City is paying a fair amount for securities purchased. 'I'ne City's Investment Policy does not state in which circumstances competitive bids are reqtfired, whetheror not the City is required to purchase from the lowest bidder, and how long documentation supporting the bids obtained is to be retained. We believe that it is a prudent practice to obtain competitive bids, either by telephone or through formal solicitations, when purchasing marketable securities. Such a process evidences the City's efforts to obtain the best value for its money. It is our understanding that the City is currently obtaining informal bids on some investment purchases. We recommend the City's Investment Policy identify how and when the competitive bid process will be utilized and how the bid process will be documented, as well as the retention period for such documentation. 2.13 Insured versus Collateralized Det~osits Federal insurance is maintained by many financial institutions to insure each depositor up to $100,000. In addition, financial institUtions are required by state law to collateralize public funds using U.S. Government Securities or first mortgage loans. Accordingly, the fn'st $100,000 of deposits with each financial institution is both insured and collateralized. It is our understanding that it has been the City's policy to routinely waive the collateralizafion requirement for the first $100,000 on deposit as such amounts are covered by Federal insurance. The City's Investment'Policy does not address this issue. We recommend the City's policy regarding insured and collateralized deposits be formalized and included in the Investment Policy. 2,14 Approval of Investment Contracts The complexity of the investing market in today's economy makes it difficult for any one person to remain current on all tdpics. This is especially relevant as the City considers new investing relationships. Investment contracts and agreemeats are becoming more complex and include a great deal of technical language. The City's Investment Policy has not addressed what process is appropriate for the rewew of new investment contracts and agreements. We recommend provisions be added to the Investment Policy requiring the review of new investment agreements and contracts by the City Attorney prior to the signing of such agreements. 2.15 Deferred Compensation Investments While we understand that the City's deferred compensation plan 'is governed by documents independent of the Investment Policy, we recommend the Investment Policy reference the existence of such documents and the party or parties with whom the investment responsibilities rest. 10 3. Internal Controls over Investments The City's formal documentation of internal policies and procedures relating to the handling and control of investments is very limited. Currently, thc primary-foxmal policy and procedural guidelines governing investment activities are those included in the City's Investment Policy. Our observations relating to the City's investment procedures and practices are sttmmari~ below: 3.1 Segregation Of Duties Due 'to a relatively small staff within the F'mance and Treasury Departments, it is difficult for the City to segregate all incompatible functions. We observed the following:. The City's investment policy strictly addresses the City Treasurer's role in the investment decisions of the City. However, the Assistant City Manager is currently the acting City Treasurer and is not involved in the investment decisions of the City as spedfied in the investment policy. Accordingly, the Fiscal Agent is originating some investment transactions for the City without formal, documented approval of the Treasurer or the Finance Director. Our recommendation is that the City Cotmeil's specific intentions regarding the authorization of investment transactions be formalized within the InveStment Policy..' The Fiscal Agent' who purchases the City's investments, also reconciles the daily trade tickets (remittances from the bank or broker as evidence of the completed transaction) to the Treasurer's subsidiary ledger. The Fiscal Agent reconciles the monthly asset listing received from Bank of America (the custodian of the majority of the City's investments) to the investment subsidiary ledger. We recommend the recon~fion of the investment subsidiary ledger to the daily trade tickets be formalized and performe~ by someone outside of the Treasury function. We recomn~nd that the accounting staff perform the reconciliation as this would ensure not only the accuracy of the recording of investments, but would verify .the existence of investments as well In addition, we recommend the monthly reconciliation be performed by Finance Department personnel who do not have responsibility for effecfing investment transactions. In short, we recommend that investment transactions be carried out by the Treasurer's office, and verification of those transactions be performed by Finance Department personnel. 11 We also recommend that an additional manager be involved in the investment decision making process as well as the investment management process. Having a second person involved should help to add perspective and provide a check that the City's investments arc in compliance with the City's goals of safety, liquidi~ and yield. We recommend that it be mandatory that investment purchases be approved by no less than two City officials in order to pracfi~y meet this objective. 3.2 Personnel Chances -- The City has recently experienced thc retirement of the City Treasurer. We did not observe any policy or control that caused investment agreements to be updated, authorized signatures to be changed, and addressees omsmtements to be changed to the new Treasurer. Accordingly, we observed ~at the fdrmer City Treasurer still shows as an authorized signor on thirteen of the City's investments (see Section 4). We also noted that some statements are mailed to the attention of the former City Treasurer (see discussion under Confin'nafions). We recommend the City develop specific procedures to be followed immediately in the event personnel with signing authority leave the City's employ. Such procedures should help to ensure the safeguarding of City assets and the appropriate responses to correspondence. In conjunction with this study, the City is conducting a thorough review of all of the contractual banking and investment agreements to which the City is currently a party in order to ensure that only .appropriately authorized personnel are able to conduct the City's banking and mvesung transactions. This review process should allow the City to update outdated agreements, ensure appropriate personnel are authorized under the current contracts, and reduce the City's potential liability should a bank complete an unauthorized transaction. We recommend a periodic review of signature cards and other investment documents be conducted in order to ensure the continuing accuracy of such documents. $.3 Fiscal Agent Statements The City utilizes outside fiscal agents to administer and disburse amounts received as bond proceeds. The City is notified via monthly statements from these fiscal agents as to the a~tivity within the accounts. These bond proceeds and subsequent transactions are recorded in the City's financial records. We determined the City is reconciling these statements to the general ledger on a consistent basis. However, the City's procedures for such reconciliations are not formalized and documented. We recommend that the accounting and reconciliation procedures relating to fiscal agent activities be formalized and documented. Such a step should help to standardize the processes and ensure the accurate recording of these transactions. 12 3.4 Utilization of Investment Advisors The City is currently not utilizing investment advisors. However, investment advisors can provide a number of services and lend expertise to the City's investment proem. Investment advisors can be used to periodically review the City's portfolio, make investment recommendations, and comment on the quality of the City's holdings. Should the City decide to utilize an investment advisor in the future, we reconvnend the following: · The City retain investment decision responsibility and all transactions require an approval by a City official prior to consummating the transaction. · The City investigate the background and past performance of the investment advisor. · The City research the methods utilized by the investment advisor and his/her past experience with these methods. The City require that custody and control of all assets be with a custodial bank of the City's choice. The bank should be under contract with the City and not the investment advisor, and should act only upon instruction from a designated City official The City instruct the custodian to execute security transactions only on a delivery basis, rather than a payment basis. The City require that confumation of trades be sent directly to the City by the broker or dealer and the custodian. 3.5 Sta£ffn~_ Levels Increased internal controls and segregation of duties can be expected to impact the work load requirements of the Accountihg'Department. Lack of time to thoroughly perform internal control procedures or an inability to perform such'procedures on a timely basis decreases the effectiveness of the control environment. We recommend that staffing levels be reviewed by City personnel in order to ensure that staffing levels are adequate to implement and maintain approved control procedures on a timely basis. 13 4, Con_firmation o_f Investments We obtained the City's investment listing as of December 31, 1991 and reconciled it to .the general ledger. We mailed cOnfu'mafion requests to the banks £or the certificate of deposits and to custodians for other City deposits. The results of our confirmation effort are depicted in the table below: Number of Confirmations 9f Investments Confixmafions received which agreed to the City's records 63 $113,940,616 Confirmations received which originally did not agree to the City's records but were later reconciled with thc City's records 1 99,000 Total 64 $114,039,616 In addition to requesting confirmation of the existence of the investments, we also requested .additional information regarding characteristics of the investment and other investment features. Many 'of the respondents did not provide us with all of the information requested, however some did. We did not further pursue obtaining - this information from each of the respondents as it was determined that such a task could take a great deal of time and delay the issuance of this report., Of those who did respond, however, we did obtain so,me information we thought would be useful to the City. We have summarized this information below. · · ACcounts exist where the former City Treasurer.remains on the signature card (thirteen accounts);' · Accounts exist where the bank statement is mailed to the former City Treasurer (by name) at City Hall (three accounts); Minor differences in interest rates as confirmed versus those reported in the December 31, 1991 Treasurer's report (four investments); Maturity dates as confirmed were different than those reported in the December 31, 1991 Treasurer's report (three investments, two of which were minor differences); · Accounts exist where the Fiscal Agent is the only authorized signor on the account (eight accounts); · Accounts exist where Bertha Rawlings, an assistant to the Fiscal Agent, is included as an authorized signor (five accounts); 14 * Account exists where the previous Deputy Treasurer is included as an authorized signor (one account); - -. Banks responded that they act on instructions from a broker (three accounts). We recommend the City notify in writing all financial institutions, brokers, dealers, and custodians with whom they currently have an investing relationship of the individuals authorized to initiate investment transactions. In addition, we recommend thc City instruct each of its financial institutions to transact only upon authorization of an authorized City official. Lastly, we recommend the City resolve differences identified in interest rates and maturity dates with the appropriate financial institutions and custodian. 15