NCLGIA Summer Conference 7/21/2016 LGC UPDATE 2016 NCLGIA – Summer Conference July 20, 2016 Becky Dzingeleski

Announcements / Reminders LGC-203 and COLL 91 (INV 91) AGENDA Announcements / Reminders LGC-203 and COLL 91 (INV 91) Deposits and Investment Issues Custody & Safekeeping Statistical Reports

NCLGIA Summer Conference Announcement 7/21/2016 New LGC Staff Debt Section Jennifer Wimmer – Assistant Manager Fiscal Section Accounting and Financial Management Advisors Ryan Chapman, MBA Jim Agar Ann Cutler, CPA - Coach Team David Erwin, CPA - Coach Team Retired Dianne Kelly - Debt Section Senior Financial Analyst

Announcement 2016 Sample Financial Statements including sample GASBS 72 implementation have been posted to the DST website Soon to be completed - Carolina County City of Dogwood Board of Education Charter School Public Housing Authority

LGC-203 – Report of Deposits and Investments NCLGIA Summer Conference LGC-203 – Report of Deposits and Investments 7/21/2016 Required for NC Local Governments / Public Authorities G.S. 159-33 and for *Public Schools G.S. 115C-446 Report form is updated each report cycle – Updated list of Pooling Banks New Units added ** Please use updated report form every cycle Report is due twice a year: July 25 and January 25 * Not required for Charter Schools

LGC-203 – Report of Deposits and Investments NCLGIA Summer Conference LGC-203 – Report of Deposits and Investments 7/21/2016 Please send your Completed current LGC 203 report in Excel workbook format - helps with automated processing Finistar, CDARs ICS or collateral statements As of the report date Supplemental Schedule that includes all of the Information we need for our review - Custodian (s), Specific name of Investment, amount, Purchase date & maturity date, market value at report date, (CP) rating at time of purchase Excel workbook converted to PDF Ticker statements Supplemental Schedule Issues – Some unusual Abbreviations make it difficult to determine the CP or agency

ABC Board’s LGC-203 – Report of Deposits and Investments LGC-203 report forms are reviewed by and accessed at the NC ABC Commission Website

COLL-91 (INV 91)– Notification of Public Deposit June 14, 2016 COLL-91 (INV 91)– Notification of Public Deposit Required by Administrative Code 20 NCAC 07.0103 20 NCAC 07.0103 Notification By Depositor (b) As of June 30 of each year, or when requested by the State Treasurer, the public depositor shall provide the depository Form INV-91 "Notification of Public Deposit ", listing the current account names and numbers of all public deposit accounts, and shall provide a duplicate copy to the State Treasurer. Form INV-91 shall be certified by the public depositor that the statements are correct.

COLL 91 (INV-91) – Notification of Public Deposit NCLGIA Summer Conference COLL 91 (INV-91) – Notification of Public Deposit 7/21/2016 NEW COLL 91 report and related instructions on DST website. NEW submission process for the June 2016 COLL 91 report cycle. Prepare, sign and email directly to Department of State Treasurer Banking operations (NEW email) - sbu.collateral@nctreasurer.com Keep a copy for the Unit’s records Both the LGC-203 and the COLL 91 reports are required to be filed by all public depositors, except Charter Schools It is prudent for the unit to assist the depository in keeping its records current is the public depositor provides each depository with the COLL-91 “Notification of Public Deposit,” The Depository can do an annual check of the Public Accounts to make sure the accounts are coded properly and protected by collateralization.

DEPOSIT AND INVESTMENT ISSUES NCLGIA Summer Conference DEPOSIT AND INVESTMENT ISSUES 7/21/2016 Issue - As of LGC-203 report date there is insufficient collateralization (Market Value) or no collateralization for deposit accounts in NON-pooling Banks that are required to collateralize public funds by use of the dedicated method. “Appropriate forms needed for the Bank to collateralize the deposits had not been filed” Use of Credit Union’s as a Depository – not specified in the NC Statutes

June 14, 2016 INVESTMENT ISSUES - NC ST HSG FIN AGY HOMEOWNERSHIP – not a municipal corporation, local government agency, or an obligations of the State of NC - G.S.159-30(c)(3) NORTH CAROLINA CAPITAL FACILITIES FINANCE AGENCY - Educational Facilities Revenue and Revenue Refunding Bonds –NCCFFA is conduit issuer that permits an entity (University) to borrow on a tax-exempt basis. Bonds are not an obligation of the State of NC but are an obligation of the University. UNIVERSITY REVENUE BONDS must be evaluated on a case by case basis. Revenue Bonds are often backed by Dorm fee revenue & normally are not obligations of the State of NC - G.S.159-30(c)(3) Review Investment bond documents carefully to see who is obligated to pay these bonds.

NC MED CARE COMMISSION BONDS June 14, 2016 INVESTMENT ISSUES - NC MED CARE COMMISSION BONDS MCC Is an agency of the State of NC, their bonds are not obligations of the State of NC as required under §159-30 (c)(3). CERTIFICATES OF PARTICIPATION (COPs) of NC local governments are not “bonds and notes” as required by the statutes. Not issued by the local government or public authority but by a nonprofit corporation. Review Investment bond documents carefully to see what organization is obligated to pay these bonds.

NCLGIA Summer Conference INVESTMENT CONCERNS - 7/21/2016 Condition - 100% of Units Investments are held in Government Agency Bonds All purchased in 2012 and early 2013 and have 10 - 15 year maturities From Units Audit report Risk Note Unit “does not have a formal investment policy that limits investment maturities as a means on managing its exposure to fair value loses arising from increased interest rates.” Unit “places no limit on the amount that the District may invest in any one issuer”

DEPOSIT AND INVESTMENT ISSUES Safety – Liquidity – Yield – IN THAT ORDER If cash is suddenly needed market may be adverse to liquidating these long term securities Risk of Investing too heavily in a specific maturity Securities with long-term yields may be tempting but are subject to market fluctuations. If interest rates rise, the value of the portfolio will decline – possible loss of public funds

DEPOSIT AND INVESTMENT ISSUES NCLGIA Summer Conference DEPOSIT AND INVESTMENT ISSUES 7/21/2016 Formal Cash Management & Investment Policy Unit’s investing in products other than the NCCMT should have a formal investment policy approved by governing Board. The North Carolina Department of State Treasurer Policies Manual Section #30 on Cash & Investments provides guidance regarding Cash & Investments of Local Governments including a Sample Cash Management and Investment Policy – Section 30F Resolution Adopting Cash Management and Investment Policy – Section 30G Broker Dealer Questionnaire / Agreement – Section 30H

CUSTODY AND SAFEKEEPING June 14, 2016 Custody has to do with the physical safety of the securities. In “book-entry” system there are no physical documents so investment securities must be held by custodians in Third Party safekeeping or trust accounts in the name of the Unit of Government. Best Practice: Signed Third Party safekeeping contract directly between the Unit and the custodian.

CUSTODY AND SAFEKEEPING June 14, 2016 Condition: A signed contract / custodial safekeeping agreement that is not clearly identifiable as to be directly between the third party custodian and the Unit. Best Practice: Signed Third Party safekeeping contract directly between the Unit and the custodian.

DEPOSIT AND INVESTMENT ISSUES NCLGIA Summer Conference DEPOSIT AND INVESTMENT ISSUES 7/21/2016 Condition: A government’s public funds being held in a temporary custodian deposit account or mutual fund for a period of time until they are wired to the Unit. Matured funds or earnings are legally required to be wired directly into a statutorily allowable (§159-30 and/or §159-31) account in the name of the Unit – no detours to a Brokerage deposit account, not even temporarily. Units’ Official Depository NC Cash Management Trust G.S. 159-30 (c)(8) NCCMT is an allowable investment account Not allowable: Federated Government Obligation First American Treasury Obligation

115 Units Invest in other than the NCCMT 42 Municipalities at June 30, 2015 42 Counties Government Securities 15 8 Government Agencies 27 32 Commercial Paper 16 26 “Other”: Bond Proceeds or expanded Investment authority 23 “Other”: Bond Proceeds or expanded Investment authority 21 Repurchase Agreements 1

County & Municipal Combined portfolio’s at June 30, 2015

Comparison of total combined County & Municipal Deposits & Investments at June 30, 2015 - 2014 - 2013

Comparison of total County Deposits & Investments at June 30, 2015 – 2014 - 2013

Comparison of total Municipal Deposits & Investments at June 30, 2015 - 2014 - 2013

Percent Change from 2014 to 2015

Percent Change from 2013 to 2014

Total County & Municipal Portfolio Mix - June 30, 2015

Investment Questions? Local Government & Public Authority Cash & Investment questions? Becky Dzingeleski 919-814-4287 Becky.Dzingeleski@nctreasurer.com Paru Patel 919-814-4292 Paru.Patel@nctreasurer.com

Stay informed by the LGC NCLGIA Summer Conference Stay informed by the LGC 7/21/2016 Add additional or new Local Government staff or officials to the LGC_News listserve Mayor or Board Chairman Manager Finance Officer Clerk . Please give Paru or Becky a business card or send an email requesting to be registered.

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