House Bill 0303

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    Florida House of Representatives - 2000                 HB 303

        By Representative Andrews






  1                      A bill to be entitled

  2         An act relating to investment of public funds;

  3         amending s. 112.625, F.S.; revising and

  4         providing definitions under the Florida

  5         Protection of Public Employee Retirement

  6         Benefits Act; creating s. 112.661, F.S.;

  7         requiring that investment of the assets of any

  8         local retirement system or plan be consistent

  9         with a written investment policy; specifying

10         requirements for such policies with respect to

11         scope, investment objectives, performance

12         measurement, investment standards, maturity and

13         liquidity requirements, portfolio composition,

14         risk and diversification, rate of return,

15         third-party custodial agreements, master

16         repurchase agreements, bid requirements,

17         internal controls, continuing education

18         requirements, reporting and filing

19         requirements, and valuation of illiquid

20         investments; requiring that such policies list

21         authorized investments and prohibiting

22         investments not so listed; amending s. 218.415,

23         F.S.; revising requirements relating to local

24         governments' investment policies; revising the

25         funds to which written investment policies

26         apply and revising requirements relating to

27         bids, internal controls, and reporting;

28         specifying authorized investments for those

29         local governments that adopt a written

30         investment policy; prohibiting investments not

31         listed in such policy; requiring continuing

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  1         education for officials responsible for

  2         investment decisions; revising the list of

  3         authorized investments for those local

  4         governments that do not adopt a written

  5         investment policy; providing requirements with

  6         respect to the disposition and sale of

  7         securities, and funds subject to preexisting

  8         contracts; providing for preemption of

  9         conflicting laws; providing that audits of

10         local governments shall report on compliance

11         with said section; providing powers and duties

12         of the Joint Legislative Auditing Committee,

13         the Department of Revenue, the Department of

14         Banking and Finance, and the Department of

15         Community Affairs to enforce compliance;

16         amending ss. 28.33 and 219.075, F.S.; providing

17         for application of s. 218.415, F.S., to

18         investment of county funds by clerks of the

19         circuit courts and investment of surplus funds

20         by county officers; amending s. 159.416, F.S.;

21         providing for application of s. 218.415, F.S.,

22         to investments made in connection with a pool

23         financing program under the Florida Industrial

24         Development Financing Act; amending s. 236.24,

25         F.S.; deleting provisions which specify

26         requirements with respect to investment of

27         surplus funds by school boards; amending s.

28         236.49, F.S.; providing for application of s.

29         218.415(16), F.S., to investment of surplus

30         funds derived from school district bond issues;

31         amending s. 237.211, F.S.; correcting a

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  1         reference; repealing ss. 125.31, 166.261, and

  2         218.345, F.S., which specify requirements with

  3         respect to investment of surplus funds by

  4         counties, municipalities, and special

  5         districts, s. 230.23(10)(k), F.S., which

  6         provides requirements with respect to adoption

  7         of investment policies by school boards, and s.

  8         237.161(5), F.S., which authorizes school

  9         boards to invest surplus assets as obligations

10         for a period of 1 year; providing an effective

11         date.

12

13  Be It Enacted by the Legislature of the State of Florida:

14

15         Section 1.  Subsections (7) and (8) of section 112.625,

16  Florida Statutes, are amended, and subsection (9) is added to

17  said section, to read:

18         112.625  Definitions.--As used in this act:

19         (7)  "Statement value" means the value of assets in

20  accordance with s. 302(c)(2) of the Employee Retirement Income

21  Security Act of 1974 and as permitted under regulations

22  prescribed by the Secretary of the Treasury. Assets for which

23  a fair market value is not provided shall be excluded from the

24  assets used in the determination of annual funding cost.

25         (8)  "Named fiduciary," "board," or "board of trustees"

26  means the person or persons so designated by the terms of the

27  instrument or instruments, ordinance, or statute under which

28  the plan is operated.

29         (9)  "Plan sponsor" means the local governmental entity

30  that has established or that may establish a local retirement

31  system or plan.

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  1         Section 2.  Section 112.661, Florida Statutes, is

  2  created to read:

  3         112.661  Investment policies.--Investment of the assets

  4  of any local retirement system or plan must be consistent with

  5  a written investment policy adopted by the board. Such

  6  policies shall be structured to maximize the financial return

  7  to the retirement system or plan consistent with the risks

  8  incumbent in each investment and shall be structured to

  9  establish and maintain an appropriate diversification of the

10  retirement system or plan's assets.

11         (1)  SCOPE.--The investment policy shall apply to funds

12  under the control of the board.

13         (2)  INVESTMENT OBJECTIVES.--The investment policy

14  shall describe the investment objectives of the board.

15         (3)  PERFORMANCE MEASUREMENT.--The investment policy

16  shall specify performance measures as are appropriate for the

17  nature and size of the assets within the board's custody.

18         (4)  INVESTMENT AND FIDUCIARY STANDARDS.--The

19  investment policy shall describe the level of prudence and

20  ethical standards to be followed by the board in carrying out

21  its investment activities with respect to funds described in

22  this section. The board in performing its investment duties

23  shall comply with the fiduciary standards set forth in the

24  Employee Retirement Income Security Act of 1974 at 29 U.S.C.

25  s. 1104(a)(1)(A)-(C). In case of conflict with other

26  provisions of law authorizing investments, the investment and

27  fiduciary standards set forth in this section shall prevail.

28         (5)  AUTHORIZED INVESTMENTS.--

29         (a)  The investment policy shall list investments

30  authorized by the board. Investments not listed in the

31  investment policy are prohibited. Unless otherwise authorized

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  1  by law or ordinance, the investment of the assets of any local

  2  retirement system or plan covered by this part shall be

  3  subject to the limitations and conditions set forth in s.

  4  215.47(1), (2), (3), (4), (5), (6), (7), (8), (10), and (16).

  5         (b)  If a local retirement system or plan has

  6  investments that, on October 1, 2000, either exceed the

  7  applicable limit or do not satisfy the applicable investment

  8  standard, such excess or investment not in compliance with the

  9  policy may be continued until such time as it is economically

10  feasible to dispose of such investment. However, no additional

11  investment may be made in the investment category which

12  exceeds the applicable limit, unless authorized by law or

13  ordinance.

14         (6)  MATURITY AND LIQUIDITY REQUIREMENTS.--The

15  investment policy shall require that the investment portfolio

16  be structured in such manner as to provide sufficient

17  liquidity to pay obligations as they come due. To that end,

18  the investment policy should direct that, to the extent

19  possible, an attempt will be made to match investment

20  maturities with known cash needs and anticipated cash-flow

21  requirements.

22         (7)  PORTFOLIO COMPOSITION.--The investment policy

23  shall establish guidelines for investments and limits on

24  security issues, issuers, and maturities. Such guidelines

25  shall be commensurate with the nature and size of the funds

26  within the custody of the board.

27         (8)  RISK AND DIVERSIFICATION.--The investment policy

28  shall provide for appropriate diversification of the

29  investment portfolio. Investments held should be diversified

30  to the extent practicable to control the risk of loss

31  resulting from overconcentration of assets in a specific

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  1  maturity, issuer, instrument, dealer, or bank through which

  2  financial instruments are bought and sold. Diversification

  3  strategies within the established guidelines shall be reviewed

  4  and revised periodically, as deemed necessary by the board.

  5         (9)  EXPECTED ANNUAL RATE OF RETURN.--The investment

  6  policy shall require that, for each actuarial valuation, the

  7  board determine the total expected annual rate of return for

  8  the current year, for each of the next several years, and for

  9  the long term thereafter. This determination must be filed

10  promptly with the Department of Management Services and with

11  the plan's sponsor and consulting actuary. The department

12  shall use this determination only to notify the board, the

13  plan's sponsor, and consulting actuary of material differences

14  between the total expected annual rate of return and the

15  actuarial assumed rate of return.

16         (10)  THIRD-PARTY CUSTODIAL AGREEMENTS.--The investment

17  policy shall provide appropriate arrangements for the holding

18  of assets of the board. Securities should be held with a third

19  party, and all securities purchased by, and all collateral

20  obtained by, the board should be properly designated as an

21  asset of the board. No withdrawal of securities, in whole or

22  in part, shall be made from safekeeping except by an

23  authorized member of the board or the board's designee.

24  Securities transactions between a broker-dealer and the

25  custodian involving purchase or sale of securities by transfer

26  of money or securities must be made on a "delivery vs.

27  payment" basis, if applicable, to ensure that the custodian

28  will have the security or money, as appropriate, in hand at

29  the conclusion of the transaction.

30         (11)  MASTER REPURCHASE AGREEMENT.--The investment

31  policy shall require all approved institutions and dealers

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  1  transacting repurchase agreements to execute and perform as

  2  stated in the Master Repurchase Agreement. All repurchase

  3  agreement transactions shall adhere to the requirements of the

  4  Master Repurchase Agreement.

  5         (12)  BID REQUIREMENT.--The investment policy shall

  6  provide that the board determine the approximate maturity date

  7  based on cash-flow needs and market conditions, analyze and

  8  select one or more optimal types of investment, and

  9  competitively bid the security in question when feasible and

10  appropriate. Except as otherwise required by law, the most

11  economically advantageous bid must be selected.

12         (13)  INTERNAL CONTROLS.--The investment policy shall

13  provide for a system of internal controls and operational

14  procedures. The board shall establish a system of internal

15  controls which shall be in writing and made a part of the

16  board's operational procedures. The policy shall provide for

17  review of such controls by independent certified public

18  accountants as part of any financial audit periodically

19  required of the board's unit of local government. The internal

20  controls should be designed to prevent losses of funds which

21  might arise from fraud, error, misrepresentation by third

22  parties, or imprudent actions by the board or employees of the

23  unit of local government.

24         (14)  CONTINUING EDUCATION.--The investment policy

25  shall provide for the continuing education of the board

26  members in matters relating to investments and the board's

27  responsibilities.

28         (15)  REPORTING.--The investment policy shall provide

29  for appropriate annual or more frequent reporting of

30  investment activities. To that end, the board shall prepare

31  periodic reports for submission to the governing body of the

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  1  unit of local government which shall include investments in

  2  the portfolio by class or type, book value, income earned, and

  3  market value as of the report date. Such reports shall be

  4  available to the public.

  5         (16)  FILING OF INVESTMENT POLICY.--Upon adoption by

  6  the board, the investment policy shall be promptly filed with

  7  the Department of Management Services and the plan's sponsor

  8  and consulting actuary. The effective date of the investment

  9  policy, and any amendment thereto, shall be the 31st calendar

10  day following the filing date with the plan sponsor.

11         (17)  VALUATION OF ILLIQUID INVESTMENTS.--The

12  investment policy shall provide for the valuation of illiquid

13  investments for which a generally recognized market is not

14  available or for which there is no consistent or generally

15  accepted pricing mechanism. If those investments are utilized,

16  the investment policy must include the criteria set forth in

17  s. 215.47(6), except that submission to the Investment

18  Advisory Council is not required. The investment policy shall

19  require that, for each actuarial valuation, the board must

20  verify the determination of the fair market value for those

21  investments and ascertain that the determination complies with

22  all applicable state and federal requirements. The investment

23  policy shall require that the board disclose to the Department

24  of Management Services and the plan's sponsor each such

25  investment for which the fair market value is not provided.

26         Section 3.  Section 218.415, Florida Statutes, is

27  amended to read:

28         218.415  Local government investment

29  policies.--Investment activity by a unit of local government

30  must be consistent with a written investment plan adopted by

31  the governing body, or in the absence of the existence of a

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  1  governing body, the respective principal officer of the unit

  2  of local government and maintained by the unit of local

  3  government or, in the alternative, such activity must be

  4  conducted in accordance with the investment guidelines set

  5  forth in subsection (17) (15).  Any such unit of local

  6  government shall have an investment policy for any public

  7  funds in excess of the amounts needed to meet current expenses

  8  as provided in subsections (1)-(16) (1)-(14), or shall meet

  9  the alternative investment guidelines contained in subsection

10  (17) (15). Such policies shall be structured to place the

11  highest priority on the safety of principal and liquidity of

12  funds. The optimization of investment returns shall be

13  secondary to the requirements for safety and liquidity.  Each

14  unit of local government shall adopt policies that are

15  commensurate with the nature and size of the public funds

16  within its their custody.

17         (1)  SCOPE.--The investment policy shall apply to funds

18  under the control of the unit of local government in excess of

19  those required to meet current expenses. The investment policy

20  shall not apply to pension funds, including those funds in

21  chapters 175 and 185,; trust funds; or funds related to the

22  issuance of debt where there are other existing policies or

23  indentures in effect for such funds.

24         (2)  INVESTMENT OBJECTIVES.--The investment policy

25  shall describe the investment objectives of the unit of local

26  government. Investment objectives shall include safety of

27  capital, liquidity of funds, and investment income, in that

28  order.

29         (3)  PERFORMANCE MEASUREMENT.--The investment policy

30  unit of local government shall specify develop performance

31  measures as are appropriate for the nature and size of the

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  1  public funds within the its custody of the unit of local

  2  government.

  3         (4)  PRUDENCE AND ETHICAL STANDARDS.--The investment

  4  policy shall describe the level of prudence and ethical

  5  standards to be followed by the unit of local government in

  6  carrying out its investment activities with respect to funds

  7  described in this section.  The unit of local government shall

  8  adopt the Prudent Person Rule, which states that: "Investments

  9  should be made with judgment and care, under circumstances

10  then prevailing, which persons of prudence, discretion, and

11  intelligence exercise in the management of their own affairs,

12  not for speculation, but for investment, considering the

13  probable safety of their capital as well as the probable

14  income to be derived from the investment."

15         (5)  LISTING OF AUTHORIZED INVESTMENTS.--The investment

16  policy shall list investments authorized by the governing body

17  of the unit of local government, subject to the provisions of

18  subsection (16) investments. Investments not listed in the

19  investment policy are prohibited. If the policy authorizes

20  investments in derivative products, the policy must require

21  that must be specifically authorized in the investment plan

22  and may be considered only if the unit of local government's

23  officials responsible for making investment decisions have

24  chief financial officer has developed sufficient understanding

25  of the derivative products and have has the expertise to

26  manage them.  For purposes of this subsection, a "derivative"

27  is defined as a financial instrument the value of which

28  depends on, or is derived from, the value of one or more

29  underlying assets or index or asset values. If the policy

30  authorizes investments in The use of reverse repurchase

31  agreements or other forms of leverage, the policy must limit

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  1  the investments shall be prohibited or limited by investment

  2  policy to transactions in which where the proceeds are

  3  intended to provide liquidity and for which the unit of local

  4  government has sufficient resources and expertise.

  5         (6)  MATURITY AND LIQUIDITY REQUIREMENTS.--The

  6  investment policy shall require that the investment portfolio

  7  is structured in such manner as to provide sufficient

  8  liquidity to pay obligations as they come due. To that end,

  9  the investment policy should direct that, to the extent

10  possible, an attempt will be made to match investment

11  maturities with known cash needs and anticipated cash-flow

12  requirements.

13         (7)  PORTFOLIO COMPOSITION.--The investment policy

14  shall establish guidelines for investments and limits on

15  security issues, issuers, and maturities.  Such guidelines

16  shall be commensurate with the nature and size of the public

17  funds within the custody of the unit of local government.

18         (8)  RISK AND DIVERSIFICATION.--The investment policy

19  shall provide for appropriate diversification of the

20  investment portfolio. Investments held should be diversified

21  to the extent practicable to control the risk of loss

22  resulting from overconcentration of assets in a specific

23  maturity, issuer, instrument, dealer, or bank through which

24  financial instruments are bought and sold.  Diversification

25  strategies within the established guidelines shall be reviewed

26  and revised periodically, as deemed necessary by the

27  appropriate management staff.

28         (9)  AUTHORIZED INVESTMENT INSTITUTIONS AND

29  DEALERS.--The investment policy should specify the authorized

30  securities dealers, issuers, and banks from whom the unit of

31  local government may purchase securities.

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  1         (10)  THIRD-PARTY CUSTODIAL AGREEMENTS.--The investment

  2  policy shall provide appropriate arrangements for the holding

  3  of assets of the unit of local government.  Securities should

  4  be held with a third party; and all securities purchased by,

  5  and all collateral obtained by, the unit of local government

  6  should be properly designated as an asset of the unit of local

  7  government. No withdrawal of securities, in whole or in part,

  8  shall be made from safekeeping, except by an authorized staff

  9  member of the unit of local government.  Securities

10  transactions between a broker-dealer and the custodian

11  involving purchase or sale of securities by transfer of money

12  or securities must be made on a "delivery vs. payment" basis,

13  if applicable, to ensure that the custodian will have the

14  security or money, as appropriate, in hand at the conclusion

15  of the transaction.

16         (11)  MASTER REPURCHASE AGREEMENT.--The investment

17  policy unit of local government shall require all approved

18  institutions and dealers transacting repurchase agreements to

19  execute and perform as stated in the Master Repurchase

20  Agreement. All repurchase agreement transactions shall adhere

21  to the requirements of the Master Repurchase Agreement.

22         (12)  BID REQUIREMENT.--The investment policy shall

23  require that the unit of local government's staff determine

24  the approximate maturity date based on cash-flow needs and

25  market conditions, analyze and select one or more optimal

26  types of investment, and competitively bid the security in

27  question when feasible and appropriate. Except as otherwise

28  required by law, the most economically advantageous bid must

29  be selected. After the unit of local government staff has

30  determined the approximate maturity date based on cash-flow

31  needs and market conditions and has analyzed and selected one

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  1  or more optimal types of investment, the security in question

  2  shall, when feasible and appropriate, be competitively bid.

  3         (13)  INTERNAL CONTROLS.--The investment policy shall

  4  provide for a system of internal controls and operational

  5  procedures.  The unit of local government's officials

  6  responsible for making investment decisions chief financial

  7  officer shall, by January 1, 1996, establish a system of

  8  internal controls which shall be in writing and made a part of

  9  the governmental entity's operational procedures.  The

10  investment policy shall provide for review of such controls by

11  independent auditors as part of any financial audit

12  periodically required of the unit of local government.  The

13  internal controls should be designed to prevent losses of

14  funds which might arise from fraud, employee error,

15  misrepresentation by third parties, or imprudent actions by

16  employees of the unit of local government.

17         (14)  CONTINUING EDUCATION.--The investment policy

18  shall provide for the continuing education of the unit of

19  local government's officials responsible for making investment

20  decisions. Such officials must annually complete 8 hours of

21  continuing education in subjects or courses of study related

22  to investment practices and products.

23         (15)(14)  REPORTING.--The investment policy shall

24  provide for appropriate annual or more frequent reporting of

25  investment activities.  To that end, the governmental entity's

26  officials responsible for making investment decisions chief

27  financial officer shall prepare periodic reports for

28  submission to the legislative and governing body of the unit

29  of local government, which shall include securities in the

30  portfolio by class or type, book value, income earned, and

31

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  1  market value as of the report date. Such reports shall be

  2  available to the public.

  3         (16)  AUTHORIZED INVESTMENTS; WRITTEN INVESTMENT

  4  POLICIES.--Those units of local government electing to adopt a

  5  written investment policy as provided in subsections (1)-(15)

  6  may by resolution invest and reinvest any surplus public funds

  7  in their control or possession in:

  8         (a)  The Local Government Surplus Funds Trust Fund or

  9  any intergovernmental investment pool authorized pursuant to

10  the Florida Interlocal Cooperation Act as provided in s.

11  163.01.

12         (b)  Securities and Exchange Commission registered

13  money market funds with the highest credit quality rating from

14  a nationally recognized rating agency.

15         (c)  Savings accounts in, or certificates of deposit

16  of, any bank, savings bank, or savings and loan association

17  that is incorporated under the laws of this state or organized

18  under the laws of the United States, and that is doing

19  business in and is situated in this state, and whose accounts

20  are insured by the Federal Government or an agency thereof,

21  provided that such savings accounts and certificates of

22  deposit are secured in the manner prescribed in chapter 280.

23         (d)  Direct obligations of the United States Treasury.

24         (e)  Federal agencies and instrumentalities.

25         (f)  Securities of, or other interests in, any open-end

26  or closed-end management-type investment company or investment

27  trust registered under the Investment Company Act of 1940, 15

28  U.S.C. ss. 80a-1 et seq., as amended from time to time,

29  provided that the portfolio of such investment company or

30  investment trust is limited to obligations of the United

31  States Government or any agency or instrumentality thereof and

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  1  to repurchase agreements fully collateralized by such United

  2  States Government obligations, and provided that such

  3  investment company or investment trust takes delivery of such

  4  collateral either directly or through an authorized custodian.

  5         (g)  Other investments authorized by law or by

  6  ordinance.

  7         (17)(15)  AUTHORIZED INVESTMENTS; NO WRITTEN INVESTMENT

  8  POLICY ALTERNATIVE INVESTMENT GUIDELINES.--Those units of

  9  local government electing not to adopt a written investment

10  policy in accordance with investment policies developed as

11  provided in subsections (1)-(15) may invest or reinvest any

12  surplus public funds in their control or possession in: In

13  addition to or in lieu of establishing a written investment

14  plan in accordance with investment policies developed pursuant

15  to subsections (1)-(14), a unit of local government electing

16  to conduct investment activity outside the framework provided

17  by this part shall do so under the guidelines set forth in

18  this section.  The unit of local government may invest in the

19  following instruments and may divest itself of such

20  investments, at prevailing market prices or rates, subject to

21  the limitations of this section:

22         (a)  The Local Government Surplus Funds Trust Fund, or

23  any intergovernmental investment pool authorized pursuant to

24  the Florida Interlocal Cooperation Act, as provided in s.

25  163.01.

26         (b)  Securities and Exchange Commission registered

27  money market funds with the highest credit quality rating from

28  a nationally recognized rating agency.

29         (c)  Savings accounts in, or certificates of deposit

30  of, any bank, savings bank, or savings and loan association

31  that is incorporated under the laws of this state or organized

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  1  under the laws of the United States, that is doing business in

  2  and is situated in this state, and whose accounts are insured

  3  by the Federal Government or an agency thereof, provided that

  4  such savings accounts and certificates of deposit are secured

  5  in the manner prescribed in chapter 280 in state-certified

  6  qualified public depositories, as defined in s. 280.02.

  7         (d)  Certificates of deposit in state-certified

  8  qualified public depositories, as defined in s. 280.02.

  9         (d)(e)  Direct obligations of the U.S. Treasury.

10         (f)  Federal agencies and instrumentalities.

11

12  The securities listed in paragraphs (c) and, (d), (e), and (f)

13  shall be invested to provide sufficient liquidity to pay

14  obligations as they come due match investment maturities with

15  current expenses.

16         (18)  SECURITIES; DISPOSITION.--

17         (a)  Every security purchased under this section on

18  behalf of the governing body of a unit of local government

19  must be properly earmarked and:

20         1.  If registered with the issuer or its agents, must

21  be immediately placed for safekeeping in a location that

22  protects the governing body's interest in the security;

23         2.  If in book entry form, must be held for the credit

24  of the governing body by a depository chartered by the Federal

25  Government, the state, or any other state or territory of the

26  United States which has a branch or principal place of

27  business in this state as defined in s. 658.12, or by a

28  national association organized and existing under the laws of

29  the United States which is authorized to accept and execute

30  trusts and which is doing business in this state, and must be

31

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  1  kept by the depository in an account separate and apart from

  2  the assets of the financial institution; or

  3         3.  If physically issued to the holder but not

  4  registered with the issuer or its agents, must be immediately

  5  placed for safekeeping in a secured vault in a financial

  6  institution in this state which maintains adequate secured

  7  vault insurance.

  8         (b)  The unit of local government's governing body may

  9  also receive bank trust receipts in return for investment of

10  surplus funds in securities. Any trust receipts received must

11  enumerate the various securities held, together with the

12  specific number of each security held. The actual securities

13  on which the trust receipts are issued may be held by any bank

14  depository chartered by the Federal Government, this state, or

15  any other state or territory of the United States, which has a

16  branch or principal place of business in this state as defined

17  in s. 658.12, or by a national association organized and

18  existing under the laws of the United States which is

19  authorized to accept and execute trusts and which is doing

20  business in this state.

21         (19)  SALE OF SECURITIES.--When the invested funds are

22  needed in whole or in part for the purposes originally

23  intended, the unit of local government's governing body may

24  sell such investments at the then-prevailing market price and

25  place the proceeds into the proper account or fund of the unit

26  of local government.

27         (20)  PREEXISTING CONTRACT.--Any public funds subject

28  to a contract or agreement existing on October 1, 2000, may

29  not be invested contrary to such contract or agreement.

30         (21)  PREEMPTION.--Any provision of any special act,

31  municipal charter, or other law which prohibits or restricts a

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  1  local governmental entity from complying with this section or

  2  any rules adopted under this section is void to the extent of

  3  the conflict.

  4         (22)  AUDITS.--Certified public accountants conducting

  5  audits of units of local government pursuant to s. 11.45 shall

  6  report, as part of the audit, whether or not the unit of local

  7  government has complied with this section.

  8         (23)  AUDITOR GENERAL; REVIEW.--During the Auditor

  9  General's review of audit reports of units of local

10  government, the Auditor General shall notify the Joint

11  Legislative Auditing Committee of any unit of local government

12  not in compliance with this section. Following notification of

13  failure by a local government to comply with this section, a

14  hearing may be scheduled by the committee. If a hearing is

15  scheduled, the committee shall determine which units of local

16  government will be subjected to further state action. If the

17  committee finds that one or more units of local government

18  should be subjected to further state action, the committee

19  shall:

20         (a)  In the case of a county, municipality, or district

21  school board, request the Department of Revenue and the

22  Department of Banking and Finance to withhold any funds

23  payable to such entity until the entity has complied with this

24  section.

25         (b)  In the case of a special district, notify the

26  Department of Community Affairs that the special district has

27  failed to comply with this section. Upon receipt of

28  notification, the Department of Community Affairs shall

29  proceed pursuant to the provisions specified in ss. 189.421

30  and 189.422.

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  1         Section 4.  Section 28.33, Florida Statutes, is amended

  2  to read:

  3         28.33  Investment of county funds by the clerk of the

  4  circuit court.--The clerk of the circuit court in each county

  5  shall invest county funds in excess of those required to meet

  6  expenses as provided in s. 218.415. make an estimate of his or

  7  her projected financial needs for the county and shall invest

  8  any funds in designated depository banks in interest-bearing

  9  certificates or in any direct obligations of the United States

10  in compliance with federal laws relating to receipt of and

11  withdrawal of deposits.  All investments shall be open for bid

12  to all qualified depositories in the county. The clerk shall

13  select the highest and best bid for deposit.  All bids

14  received by the clerk shall include, but not be limited to,

15  the interest rate to be earned and the total amount of dollar

16  return to be paid to the clerk. In the event of a like bid

17  between two or more banks, the moneys shall be divided and

18  deposited in each bank, so long as the total interest income

19  from the divided deposits will not be less than the total

20  interest income had the deposits not been divided. If at the

21  time of bid the dollar return on direct obligations of the

22  Federal Government is greater than the highest bank return,

23  then the clerk shall invest in the higher return security.

24  Moneys deposited in the registry of the court shall be

25  deposited in interest-bearing certificates at the discretion

26  of the clerk, subject to the above guidelines. No clerk

27  investing such funds shall be liable for the loss of any

28  interest when circumstances require the withdrawal of funds

29  placed in a time deposit and needed for immediate payment of

30  county obligations.  In any county where local banks refuse to

31  bid on securing such money on interest-bearing certificates,

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  1  the clerk may request and receive bids from banks in other

  2  counties within the state and make such deposits to the

  3  successful bidder. Except for interest earned on moneys

  4  deposited in the registry of the court, all interest accruing

  5  from moneys deposited shall be deemed income of the office of

  6  the clerk of the circuit court investing such moneys and shall

  7  be deposited in the same account as are other fees and

  8  commissions of the clerk's office.  The clerk may invest

  9  moneys deposited in the registry of the court and shall retain

10  as income of the office of the clerk and as a reasonable

11  investment management fee 10 percent of the interest accruing

12  on those funds with the balance of such interest being

13  allocated in accordance with the interest of the depositors.

14  Each clerk shall, as soon as practicable after the end of the

15  fiscal year, report to the county governing authority the

16  total interest earned on all investments during the preceding

17  year.

18         Section 5.  Subsection (9) of section 159.416, Florida

19  Statutes, is amended to read:

20         159.416  Pool financings.--

21         (9)  Proceeds of bonds and moneys held for the payment

22  of debt service on bonds, including, but not limited to,

23  amounts held in the loan fund, any reserve fund, or debt

24  service fund for the bonds, may be invested in investments

25  authorized by or pursuant to an ordinance or resolution

26  providing for the issuance of the bonds or any trust agreement

27  or trust indenture or other instrument approved by such

28  ordinance or resolution, including, but not limited to,

29  investments described in s. 218.415 ss. 28.33, 125.31,

30  166.261, 218.345, 219.075, and 236.24 and chapter 280.  The

31  acquisition of any debt obligation or investment contract or

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  1  investment agreement of any bank, savings and loan

  2  association, insurance company, registered broker-dealer, or

  3  other financial institution shall be deemed to be an

  4  investment and not a loan and therefore need not meet the

  5  criteria of subsections (5), (6), and (7).

  6         Section 6.  Section 219.075, Florida Statutes, is

  7  amended to read:

  8         219.075  Investment of surplus funds by county

  9  officers.--

10         (1)(a)  Except when another procedure is prescribed by

11  law or by ordinance as to particular funds, a tax collector or

12  any other county officer having, receiving, or collecting any

13  money, either for his or her office or on behalf of and

14  subject to subsequent distribution to another officer of state

15  or local government, while such money is in excess of that

16  required to meet current expenses surplus to current needs of

17  his or her office or is pending distribution, shall invest

18  such money, without limitation, as provided in s. 218.415. in:

19         1.  The Local Government Surplus Funds Trust Fund, as

20  created by s. 218.405;

21         2.  Bonds, notes, or other obligations of the United

22  States guaranteed by the United States or for which the credit

23  of the United States is pledged for the payment of the

24  principal and interest or dividends;

25         3.  Interest-bearing time deposits or savings accounts

26  in banks organized under the laws of this state, in national

27  banks organized under the laws of the United States and doing

28  business and situated in this state, in savings and loan

29  associations which are under state supervision, or in federal

30  savings and loan associations located in this state and

31  organized under federal law and federal supervision, provided

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  1  that any such deposits are secured by collateral as may be

  2  prescribed by law; or

  3         4.  Securities of, or other interests in, any open-end

  4  or closed-end management type investment company or investment

  5  trust registered under the Investment Company Act of 1940, 15

  6  U.S.C. ss. 80a-1 et seq., as amended from time to time,

  7  provided the portfolio of such investment company or

  8  investment trust is limited to obligations of the United

  9  States Government or any agency or instrumentality thereof and

10  to repurchase agreements fully collateralized by such United

11  States Government obligations and provided such investment

12  company or investment trust takes delivery of such collateral

13  either directly or through an authorized custodian.

14         (b)  These investments shall be planned so as not to

15  slow the normal distribution of the subject funds.  The

16  investment earnings shall be reasonably apportioned and

17  allocated and shall be credited to the account of, and paid

18  to, the office or distributee, together with the principal on

19  which such earnings accrued.

20         (2)  Except when another procedure is prescribed by

21  law, ordinance, or court order as to particular funds, the tax

22  collector shall, as soon as feasible after collection, deposit

23  in a bank designated as a depository of public funds, as

24  provided in s. 658.60, all taxes, fees, and other collections

25  received by him or her and held prior to distribution to the

26  appropriate taxing authority. Immediately after such funds

27  have cleared and have been properly credited to the tax

28  collector's his or her account, the tax collector shall invest

29  such funds according to the provisions of s. 218.415 this

30  section.  The earnings from such investments shall be

31  apportioned at least quarterly on a pro rata basis to the

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  1  appropriate taxing authorities.  However, the tax collector

  2  may deduct therefrom such reasonable amounts as are necessary

  3  to provide for costs of administration of such investments and

  4  deposits.

  5         (3)  The State Board of Administration may establish a

  6  schedule and guidelines to be followed by tax collectors

  7  making deposits and investments under the provisions of

  8  subsection (2).

  9         (4)  The provisions of this section are subject to the

10  provisions of s. 218.415.

11         Section 7.  Section 236.24, Florida Statutes, is

12  amended to read:

13         236.24  Sources of district school fund.--

14         (1)  The district school fund shall consist of funds

15  derived from the district school tax levy; state

16  appropriations; appropriations by county commissioners; local,

17  state, and federal school food service funds; any and all

18  other sources for school purposes; national forest trust funds

19  and other federal sources; and gifts and other sources.

20         (2)(a)  Unless otherwise authorized by law or by

21  ordinance, each school board shall, by resolution to be

22  adopted from time to time, invest and reinvest any surplus

23  public funds in its control or possession in:

24         1.  The Local Government Surplus Funds Trust Fund;

25         2.  Negotiable direct obligations of, or obligations

26  the principal and interest of which are unconditionally

27  guaranteed by, the United States Government at the then

28  prevailing market price for such securities;

29         3.  Interest-bearing time deposits or savings accounts

30  in qualified public depositories as defined in s. 280.02;

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  1         4.  Obligations of the federal farm credit banks; the

  2  Federal Home Loan Mortgage Corporation, including Federal Home

  3  Loan Mortgage Corporation participation certificates; or the

  4  Federal Home Loan Bank or its district banks or obligations

  5  guaranteed by the Government National Mortgage Association;

  6         5.  Obligations of the Federal National Mortgage

  7  Association, including Federal National Mortgage Association

  8  participation certificates and mortgage pass-through

  9  certificates guaranteed by the Federal National Mortgage

10  Association; or

11         6.  Securities of, or other interests in, any open-end

12  or closed-end management type investment company or investment

13  trust registered under the Investment Company Act of 1940, 15

14  U.S.C. ss. 80a-1 et seq., as amended from time to time,

15  provided the portfolio of such investment company or

16  investment trust is limited to obligations of the United

17  States Government or any agency or instrumentality thereof and

18  to repurchase agreements fully collateralized by such United

19  States Government obligations, and provided such investment

20  company or investment trust takes delivery of such collateral

21  either directly or through an authorized custodian.

22         (b)1.  Securities purchased by any such school board

23  under the authority of this law shall be delivered by the

24  seller to the school board or its appointed safekeeper.  The

25  safekeeper shall be a qualified bank or trust company

26  chartered to operate as such by the State of Florida, any

27  other state or territory of the United States, or the United

28  States Government, that has a branch or principal place of

29  business in this state as defined in s. 658.12. The safekeeper

30  shall issue documentation for each transaction, and a monthly

31  statement detailing all transactions for the period.

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  1         2.  Securities physically delivered to the school board

  2  shall be placed in a safe-deposit box in a bank or other

  3  institution located within the county and duly licensed and

  4  insured.  Withdrawals from such safe-deposit box shall be only

  5  by persons duly authorized by resolution of the school board.

  6         3.  The school board may also receive bank trust

  7  receipts in return for investment of surplus funds in

  8  securities.  Any trust receipts received must enumerate the

  9  various securities held together with the specific number of

10  each security held.  The actual securities on which the trust

11  receipts are issued may be held by any bank depository

12  chartered by the United States Government, the State of

13  Florida, or any other state or territory of the United States,

14  that has a branch or principal place of business in this state

15  as defined in s. 658.12, or their designated agents.

16         (c)  When the money invested in such securities is

17  needed in whole or in part for the purposes originally

18  intended, the school board is authorized to sell such security

19  or securities at the then prevailing market price and to pay

20  the proceeds of such sale into the proper account or fund of

21  the school board.

22         (d)  For the purposes of this law, the term "surplus

23  funds" is defined as funds in any general or special account

24  or fund of the school board, held or controlled by the school

25  board, which funds are not reasonably contemplated to be

26  needed for the purposes intended within a reasonable time from

27  the date of such investment.

28         (e)  Any surplus public funds subject to a contract or

29  agreement on the date of this enactment shall not be invested

30  contrary to such contract or agreement.

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  1         (f)  The provisions of this subsection are supplemental

  2  to any and all other laws relating to the legal investments by

  3  school boards.

  4         (3)  Investments made pursuant to this section may be

  5  in book-entry form and may be under repurchase agreements.

  6         (4)  The provisions of this section are subject to the

  7  provisions of s. 218.415.

  8         Section 8.  Paragraph (a) of subsection (2) of section

  9  236.49, Florida Statutes, is amended to read:

10         236.49  Proceeds; how expended.--The proceeds derived

11  from the sale of said bonds shall be held by the school board

12  and shall be expended by the board for the purpose for which

13  said bonds were authorized for said school district, and shall

14  be held and expended in the manner following:

15         (2)  All or any part of the fund derived from the

16  proceeds of any such bond issue that in the judgment of the

17  school board is not immediately needed may be placed in the

18  following securities maturing not later than the time when the

19  funds are reasonably expected to be needed:

20         (a)  In investments listed in s. 218.415(16) authorized

21  in s. 236.24(2)(a) for the district school fund.

22         Section 9.  Paragraph (b) of subsection (6) of section

23  237.211, Florida Statutes, is amended to read:

24         237.211  School depositories; payments into and

25  withdrawals from depositories.--

26         (6)  EXEMPTION FOR SELF-INSURANCE PROGRAMS AND

27  THIRD-PARTY ADMINISTERED EMPLOYEES' FRINGE BENEFIT PROGRAMS.--

28         (b)  The school board is authorized to contract with an

29  insurance company or professional administrator who holds a

30  valid certificate of authority issued by the Department of

31  Insurance to provide any or all services that a third-party

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  1  administrator is authorized by law to perform.  Pursuant to

  2  such contract, the school board may advance or remit money to

  3  the administrator to be deposited in a designated special

  4  checking account for paying claims against the school board

  5  under its self-insurance programs, and remitting premiums to

  6  the providers of insured benefits on behalf of the school

  7  board and the participants in such programs, and otherwise

  8  fulfilling the obligations imposed upon the administrator by

  9  law and the contractual agreements between the school board

10  and the administrator.  The special checking account shall be

11  maintained in a designated district school depository. The

12  school board may replenish such account as often as necessary

13  upon the presentation by the service organization of

14  documentation for claims or premiums due paid equal to the

15  amount of the requested reimbursement.  Such replenishment

16  shall be made by a warrant signed by the chair of the board

17  and countersigned by the superintendent. Such replenishment

18  may be made by electronic, telephonic, or other medium, and

19  each transfer shall be confirmed in writing and signed by the

20  superintendent or his or her designee.  The provisions of

21  strict accountability of all funds and an annual audit by an

22  independent certified public accountant as provided in s.

23  230.23(10)(k)(l) shall apply to this subsection.

24         Section 10.  Sections 125.31, 166.261, and 218.345,

25  Florida Statutes, paragraph (k) of subsection (10) of section

26  230.23, Florida Statutes, and subsection (5) of section

27  237.161, Florida Statutes, are repealed.

28         Section 11.  This act shall take effect October 1,

29  2000.

30

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  1            *****************************************

  2                          HOUSE SUMMARY

  3
      Requires that investment of the assets of any local
  4    retirement system or plan be consistent with a written
      investment policy and specifies requirements for such
  5    policies.  Requires that such policies list authorized
      investments and prohibits investments not so listed.
  6

  7    Revises requirements relating to local governments'
      investment policies.  Specifies a list of authorized
  8    investments for those local governments that adopt a
      written investment policy and prohibits investments not
  9    listed in the written policy.  Revises various
      requirements for such written investment policies and
10    requires continuing education for officials responsible
      for investment decisions.  Revises the list of authorized
11    investments for those local governments that do not adopt
      a written policy.  Provides requirements relating to
12    disposition and sale of securities by local governments.
      Provides that audits of local governments shall report on
13    compliance with these requirements.  Provides for notice
      to the Joint Legislative Auditing Committee regarding
14    local governments not in compliance, for hearings by the
      committee, and for actions by specified agencies to
15    enforce compliance.  Revises various statutes to delete
      specific investment requirements and provide for
16    application of these requirements.

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