| 1 | A bill to be entitled |
| 2 | An act relating to the Fund B Surplus Funds Trust Fund; |
| 3 | creating s. 218.418, F.S.; providing definitions; creating |
| 4 | s. 218.421, F.S.; providing for the purpose of the Fund B |
| 5 | Surplus Funds Trust Fund; providing rulemaking authority; |
| 6 | providing for administration of the trust fund; providing |
| 7 | for annual certification by the Trustees of the State |
| 8 | Board of Administration to the Joint Legislative Auditing |
| 9 | Committee that the trust fund has been reviewed and is in |
| 10 | compliance with the requirements of this section; |
| 11 | providing restrictions on the trust fund; providing |
| 12 | criteria for payment of accrued funds; restricting |
| 13 | participant transactions in the trust fund; providing for |
| 14 | investment policy criteria; providing procedures for |
| 15 | internal controls; providing duty to disclose material |
| 16 | impacts on the trust fund; providing for investment policy |
| 17 | implementation; providing criteria for payment of costs |
| 18 | and use of interest; providing for distribution of the |
| 19 | remaining reserve upon self-liquidation; providing |
| 20 | reporting requirements; requiring monthly reports to |
| 21 | certain persons and groups; providing criteria of the |
| 22 | report; providing for additional reporting; requiring |
| 23 | trustee review; creating s. 218.422, F.S.; requiring the |
| 24 | Auditor General to review the trust fund prior to the 2013 |
| 25 | Regular Session and provide a summary report to certain |
| 26 | persons and entities; providing for expiration of ss. |
| 27 | 218.418-218.422, F.S., upon termination or self- |
| 28 | liquidation of the trust fund; providing a contingent |
| 29 | effective date. |
| 30 |
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| 31 | Be It Enacted by the Legislature of the State of Florida: |
| 32 |
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| 33 | Section 1. Section 218.418, Florida Statutes, is created |
| 34 | to read: |
| 35 | 218.418 Definitions.--As used in ss. 218.421-218.422, the |
| 36 | term: |
| 37 | (1) "Board" means the State Board of Administration. |
| 38 | (2) "Surplus funds" means any funds in any general or |
| 39 | special account or fund of a unit of local government, or funds |
| 40 | held by an independent trustee on behalf of a unit of local |
| 41 | government, which in reasonable contemplation will not be |
| 42 | immediately needed for the purposes intended. |
| 43 | (3) "Trust fund" means the pooled investment fund known as |
| 44 | the Fund B Surplus Funds Trust Fund. |
| 45 | (4) "Trustees" means the Trustees of the State Board of |
| 46 | Administration. |
| 47 | (5) "Unit of local government" means any governmental |
| 48 | entity within the state not part of state government and |
| 49 | includes, but is not limited to, the following and the officers |
| 50 | thereof: any county, municipality, school district, special |
| 51 | district, clerk of the circuit court, sheriff, property |
| 52 | appraiser, tax collector, supervisor of elections, authority, |
| 53 | board, public corporation, or other political subdivision of the |
| 54 | state. |
| 55 | Section 2. Section 218.421, Florida Statutes, is created |
| 56 | to read: |
| 57 | 218.421 Fund B Surplus Funds Trust Fund; purpose; |
| 58 | rulemaking; administration; reporting.-- |
| 59 | (1)(a) The purpose of the Fund B Surplus Funds Trust Fund |
| 60 | is to maximize the payout of principal on invested surplus funds |
| 61 | of units of local government formerly in Fund B of the Local |
| 62 | Government Surplus Funds Trust Fund through a prudent work out |
| 63 | of the trust fund with the ultimate goal of self-liquidating the |
| 64 | trust fund through maturity and payout of the investments. |
| 65 | (b) The State Board of Administration may adopt rules |
| 66 | pursuant to ss. 120.536(1) and 120.54 to administer this |
| 67 | section. |
| 68 | (2)(a) The board or a professional money management firm |
| 69 | shall administer the trust fund on behalf of the participants |
| 70 | based on a written investment policy, approved by the trustees, |
| 71 | and shall have the power to work out, restructure, or invest |
| 72 | such funds. The trustees shall annually certify to the Joint |
| 73 | Legislative Auditing Committee that the trustees have conducted |
| 74 | a review of the trust fund and that the trust fund is in |
| 75 | compliance with the requirements of this section. Any new |
| 76 | investments must be made in money market or equivalent funds. |
| 77 | The board or a professional money management firm shall keep a |
| 78 | separate account, designated by name and number of each |
| 79 | participating local government. Individual transactions and |
| 80 | totals of all investments, or the share belonging to each |
| 81 | participant, shall be recorded in the accounts. Any moneys |
| 82 | accrued in the trust fund shall be subject to payment from the |
| 83 | trust fund on a monthly basis to the trust fund participants |
| 84 | according to their proportional interest in the trust fund so |
| 85 | long as at least $100,000 is in the trust fund at the end of |
| 86 | that month. After all securities have matured, been sold, or |
| 87 | worked out, a final distribution shall be made to the |
| 88 | participants in the trust fund. Participants may not conduct |
| 89 | transactions in the trust fund. |
| 90 | (b) The board or a professional money management firm and |
| 91 | all employees of the board or firm have an affirmative duty to |
| 92 | immediately disclose any material impact to the trust fund to |
| 93 | the participants. To ensure such disclosure, a system of |
| 94 | internal controls shall be established by the board, which shall |
| 95 | be documented in writing as part of the investment policy. The |
| 96 | controls shall be designed to prevent the loss of public funds |
| 97 | arising from fraud, employee error, and misrepresentation by |
| 98 | third parties, unanticipated changes in financial markets, or |
| 99 | imprudent actions by employees and officers of the board or a |
| 100 | professional money management firm. The controls shall also |
| 101 | include formal escalation reporting guidelines for all |
| 102 | employees. The guidelines shall establish procedures to address |
| 103 | material impacts on the trust fund that require reporting and |
| 104 | action. |
| 105 | (c) The investment policy shall be reviewed and approved |
| 106 | by the trustees or when market changes dictate, and in each |
| 107 | event, the investment policy shall be reviewed by the Investment |
| 108 | Advisory Council and by the Participant Local Government |
| 109 | Advisory Council. |
| 110 | (d) Administrative costs incurred in carrying out the |
| 111 | provisions of this section, which shall be prorated among the |
| 112 | participants in the percentage that each participant's deposits |
| 113 | bear to the total trust fund, may be deducted from any interest |
| 114 | earned in the trust fund. The board or a professional money |
| 115 | management firm may not transfer the interest or use the |
| 116 | interest for any other purpose, including, but not limited to, |
| 117 | making up investment losses. |
| 118 | (e) After the trust fund self-liquidates, any remaining |
| 119 | reserve shall be distributed on a pro rata basis in the |
| 120 | percentage that each participant's deposits bear to the total |
| 121 | trust fund. |
| 122 | (3)(a) The board or a professional money management firm |
| 123 | shall provide a report at a minimum, monthly, or upon the |
| 124 | occurrence of a material event, to every participant having a |
| 125 | beneficial interest in the trust fund, the board's executive |
| 126 | director, the trustees, the Joint Legislative Auditing |
| 127 | Committee, the Investment Advisory Council, and the Participant |
| 128 | Local Government Advisory Council. The report shall include: |
| 129 | 1. Reports of any material impacts on the trust fund, and |
| 130 | any actions or escalations taken by staff to address such |
| 131 | impacts. The trustees shall provide quarterly a report to the |
| 132 | Joint legislative Auditing Committee that the trustees have |
| 133 | reviewed and approved the monthly reports and actions taken, if |
| 134 | any, to address any impacts. |
| 135 | 2. A management summary that provides an analysis of the |
| 136 | status of the current investment portfolio and the individual |
| 137 | transactions executed over the last month. This management |
| 138 | summary shall be prepared in a manner that will allow anyone to |
| 139 | ascertain whether investment activities during the reporting |
| 140 | period have conformed to investment policies. Such reporting |
| 141 | shall be in conformance with best market practices. |
| 142 | 3. The board or a professional money management firm shall |
| 143 | furnish upon request the details of an investment transaction to |
| 144 | any participant, the trustees, the Investment Advisory Council, |
| 145 | and the Participant Local Government Advisory Council. |
| 146 | (b) Additional reporting may be made to participants in |
| 147 | the trust fund through regular and frequent ongoing multi-media |
| 148 | educational materials and communications, including, but not |
| 149 | limited to, historical performance, investment holdings, |
| 150 | amortized cost and market value of the trust fund, credit |
| 151 | quality, and average maturity of the trust fund investments. |
| 152 | (4) The trustees shall review the board's progress in |
| 153 | returning the principal in the trust fund to the participants at |
| 154 | each meeting of the board until the trust fund self-liquidates |
| 155 | or is terminated by law. |
| 156 | Section 3. Section 218.422, Florida Statutes, is created |
| 157 | to read: |
| 158 | 218.422 Fund B Surplus Funds Trust Fund; review.--Unless |
| 159 | the Fund B Surplus Funds Trust Fund has been terminated by law |
| 160 | or through self-liquidation, prior to the 2013 Regular Session |
| 161 | of the Legislature, the Auditor General shall review the trust |
| 162 | fund and the steps taken up to that time to return as much of |
| 163 | the principal to the participants as possible and provide a |
| 164 | summary report to the board, the trustees, the President of the |
| 165 | Senate, the Speaker of the House of Representatives, the |
| 166 | Investment Advisory Council, and the Participant Local |
| 167 | Government Advisory Council. |
| 168 | Section 4. Sections 218.418, 218.421, and 218.422, Florida |
| 169 | Statutes, as created by this act, shall expire at the time the |
| 170 | Fund B Surplus Funds Trust Fund is terminated by law or self- |
| 171 | liquidates as determined and announced by the executive director |
| 172 | of the State Board of Administration, whichever occurs first. |
| 173 | Section 5. This act shall take effect upon becoming a law, |
| 174 | if House Bill 7097 or similar legislation is adopted in the same |
| 175 | legislative session or an extension thereof and becomes law. |