Magazine article Government Finance Review

The Value of an Investment Oversight Committee

Magazine article Government Finance Review

The Value of an Investment Oversight Committee

Article excerpt

As an increasing number of local governments are adopting written investment policies, the importance of having an investment oversight committee is taking hold, as well. Government Finance Review invited three GFOA members to discuss the operations of the investment committee in their community and to assess its usefulness and value. Their comments follow.

Evaluation of Treasurer's Practices and Procedures

Conny Jamison, city treasurer, City of San Diego, California and member of GFOA's Executive Board

The City of San Diego has an investment oversight committee which currently has three members: the finance director, the city auditor/comptroller (who reports to the mayor and council) and a private citizen who is an investment manager. There are no written qualifications for this committee; however, it is the policy of the city manager that no member of the committee shall be in a position to benefit financially from membership on the committee. The original members were appointed by the city manager. The city manager is in the process of expanding the number of members on the committee.

The committee is charged with the responsibility to oversee and advise the city treasurer and to report to the city manager and to the city council. At the direction of the city manager, the committee meets quarterly; the committee is under direction to report quarterly to the city manager and annually to the city council.

The treasurer asks for input from the committee on any substantive changes to policy or procedures and incorporates the committee's suggestions as appropriate. The committee and the treasurer understand their respective roles, and the interaction is cordial and respectful on both sides.

The committee has been very helpful to the treasurer by asking good questions and recommending modifications to, or expansion of, certain investment programs. The committee also evaluates the city treasurer's practices and procedures in comparison to other jurisdictions and places the mayor, council, and manager in a proactive position on investment issues. It also is helpful to the treasurer to have the explicit support of the committee when engaging in activities which might be misunderstood by the public or elected officials, such as reverse repurchase agreements.

The committee was created more than five years ago at the urging of the city treasurer. She felt that it was important that if the time should come when investment practices or policies should become a sensitive political issue, it would be helpful to have had the policies and procedures both challenged and supported by a third party. In addition, the treasurer convinced the manager several years ago that such a committee was important for him and the city, in that he could be held accountable for any problems which might arise since the treasurer reports to the city manager.

I believe it is important that the membership of the committee not be made by political appointment if at all possible. Under such a scenario, it is very easy for persons with a separate agenda, such as some brokers and bankers, to be appointed to the committee. However, this may be impossible to avoid in those cases where the treasurer reports directly to a political body.

A Focus on Financial Management for a Smaller Town

Ronald J. Hill, director of finance, Town of Normal, Illinois

The Town of Normal, a growing community with a population of 41,500 located in the heart of central Illinois, operates under a council/manager form of government. In 1985, an investment committee was established, consisting of the finance director, who also performs the role of treasurer, two bankers, and a professor from the finance and law department of Illinois State University. (Because of restrictive Illinois law on investment by public agencies, a broader variety of financial advisors was not selected.) A healthy balance in the committee between the professor and the bankers provides for analysis from both theoretical and practical viewpoints. …

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