Staff Report
PREPARED BY: STEPHEN CONWAY
FINANCE DIRECTOR
Reviewed by: Town Manager, Interim Assistant Town Manager, and Town Attorney
110 E. Main Street Los Gatos, CA 95030 ● 408-354-6832
www.losgatosca.gov
TOWN OF LOS GATOS
COUNCIL AGENDA REPORT
MEETING DATE: 12/06/2016
ITEM NO: 8
DATE: NOVEMBER 17, 2016
TO: MAYOR AND TOWN COUNCIL
FROM: LAUREL PREVETTI, TOWN MANAGER
SUBJECT: RECEIVE THE FIRST QUARTER INVESTMENT REPORT (JULY THROUGH
SEPTEMBER 2016) FOR FISCAL YEAR 2016/17 AND ACCEPT THE
RECONCILED DEMAND ACCOUNT BALANCES (FEBRUARY THROUGH JUNE
2016) AS RESTATED FOR JUNE 30, 2016.
RECOMMENDATION:
Receive the First Quarter Investment Report (July through September 2016) for Fiscal Year
2016/17 and accept the reconciled demand account balances (February through June 2016) as
restated for June 30, 2016.
BACKGROUND:
At its November 21, 2016 meeting, the Council Finance Committee heard public testimony,
reviewed, and discussed the First Quarter Investment Report (Attachment 1) and the corrected
February through June 2016 Reports (Attachment 2). Most of the written pub lic comments
(Attachment 3), verbal testimony, and Committee discussion focused on the corrected reports.
Attachment 4 contains staff responses to the questions raised in written public comments.
These responses were provided verbally to the Committee. The Committee acted to move
these Reports forward to the Town Council based on the information provided at the
Committee meeting.
PAGE 2 OF 3
SUBJECT: RECEIVE FIRST QUARTER INVESTMENT REPORT (JULY THROUGH SEPTEMBER
2016) FOR FISCAL YEAR 2016/17
DATE: NOVEMBER 17, 2016
S:\COUNCIL REPORTS\2016\12-06-16\08 Investment Report\08 Staff Report FINAL.docx 12/1/2016 6:14 PM SLL
DISCUSSION:
Attachment 1 contains the First Quarter Investment Report (July through September 2016).
The Town’s weighted portfolio yield of 0.84% for first quarter) is still outperforming the Local
Agency Investment Fund (LAIF) yield of 0.63% (difference of 21 basis points). Therefore, staff
continues to replace matured or called investments with similar investments with respect to
maturity and credit quality. For the quarter, the Town’s weighted average rate of return
lowered by 1 basis point from 0.85% rate earned in the fourth quarter of FY 2015/16.
The economic climate remains guardedly optimistic with signs of moderate growth in the gross
domestic product (GDP). The United States GDP expanded at a 1.4% rate in the second quarter
(April through June 2016), up from the first quarter’s rate of 1.1%. The increase beat analysts’
expectations. Consumer spending, the most important component of economic growth
remained nearly unchanged. The Federal Reserve governors continue to give signals that the
economy may warrant an interest rate increase as some point early next year.
Staff continues to concentrate on short-term (two years or less in maturity) for its new
investments with a potential shift from treasuries as they mature to high quality corporate
medium term notes (higher yield). All investments are consistent with the Council adopted
Investment Policy.
Corrected Demand Account Balances: Staff discovered through its own internal control bank
reconciliation process that there was an error in the treasurers’ cash worksheet beginning in
February 2016 that caused the demand account (checking) balances to be reported too low in
the Investment Reports submitted for February through June 30, 2016 of this year. The
spreadsheet column for bank wires for the month erroneously omitted the wired in cash
receipts for the monthly total cash receipts.
Specifically, in February 2016 staff created a separate column on the treasurer’s cash
worksheet for bank wire, breaking them out for tracking purposes for the Town’s books, but
this column was erroneously omitted from the formula determining monthly total cash re ceipts
shown on the investment report. As a result, cash receipt totals previously reported need to be
corrected by increasing 2016 calendar year receipts for February ($925K), March ($1.77M),
April ($4.55M), May ($1.1M), and June ($4.6M). The correction is for the cash receipts totals on
the Investment Reports only.
This error impacted the Investment Report only. There was no impact to the actual investment
balances presented in the Report or the actual general ledger cash account balances. There
was no loss of interest or any corrections required to be made to the invested balances
PAGE 3 OF 3
SUBJECT: RECEIVE FIRST QUARTER INVESTMENT REPORT (JULY THROUGH SEPTEMBER
2016) FOR FISCAL YEAR 2016/17
DATE: NOVEMBER 17, 2016
S:\COUNCIL REPORTS\2016\12-06-16\08 Investment Report\08 Staff Report FINAL.docx 12/1/2016 6:14 PM SLL
DISCUSSION (Continued):
reported on the prior quarterly reports. There was no impact or correction required for in the
Town’s official books and records. All receip ts, disbursements and demand account balances
for the year included the cash wires in were correctly stated on the Town’s books. The error
also had no impact on the actual investment balances (other than the demand accounts)
presented in the Report. They too were correctly stated for each month of the year on the
Town’s books.
Unrelated to the error discussed above, there is also a year-end revision to the historical cost of
cash and investments of $105,410.66 based on a final third party audit to recognize annual
amortization of premiums and discounts on the portfolio , prepaid interest adjustments, and
other standard bank reconciliation adjustments resulting from completed bank reconciliations
for the entire FY 2015/16.
This error and corrective actions to aid in preventing a future error were discussed in detail
with the Town Council Finance Committee at its meeting on November 21, 2016. Attachment 4
contains detailed staff responses to questions in this regard.
CONCLUSION:
Staff recommends that the Town Council receive the First Quarter Investment Report (July
through September 2016) for Fiscal Year 2016/17 and accept the corrected reports (February
through June 2016) as restated for June 30, 2016.
ENVIRONMENTAL ASSESSMENT:
This is not a project defined under CEQA, and no further action is required.
Attachments:
1. First Quarter Investment Report for FY 2016/17 (July through September 2016)
2. Updated FY 15/16 Investment Report second pages (February through June 2016) to
reflect cash wire receipts and year-end revision
3. Public comments received on November 21, 2016
4. Staff responses to questions received from the public
Weighted Average Portfolio Yield:
Town of Los Gatos
Summary Investment Information
July 31, 2016
0.86% Weighted Average Maturity (days) 437
This Month Last Month One year ago
Portfolio Balance $72,971,658 $74,913,936 $68,176,317
Benchmarks/ References:
Town's Average Yield
LAIF Yield for month
3 mo. Treasury
6 mo. Treasury
2 yr. Treasury
5 yr. Treasury (most recent)
10 Yr. Treasury
0.86%
0.57%
0.26%
0.38%
0.68%
1.06%
1.50%
0.85%
0.57%
0.26%
0.35%
0.58%
0.99%
1.44%
0.79%
0.28%
0.08%
0.14%
0.67%
1.54%
2.20%
3 - 5 years
2 - 3 years
25%
Portfolio Maturity Profile
1-2years
30%
0 - 1 year
30%
Compliance: The Town's investments are in compliance with the Town's investment policy dated November 1, 2016
and also in compliance with the requirements of Section 53601 of the California State Code. Based on the information available, the
Town has sufficient funds to meet the cash demands for the next six months.
Page 1
ATTACHMENT 1
Town of Los Gatos
Portfolio Allocation & Treasurer's Fund Balances
July 31, 2016
Cash Fund Balances - All Cash Accts G/L Beginning of Month/Period
Receipts Per Books
Disbursements Per Books
Fund Balances - End of Month/Period
Portfolio Allocation:
BNY MM
US Govt Agencies & Corp. Bonds
Local Agency Investment Fund
Subtotal - Investments
Demand Deposit Balances
Total Treasurer's Fund
Month YTD
74,913,936.39 * 74,913,936.39
3,189,703.76 3,189,703.76
(5,131,982.13) (5,131,982.131
$72,971,658.02 $72,971,658.02
$53,469.49
48,338,854.55
4,192,309.28
52,584,633.32
20,387,024.70
$72,971,658.02
Portfolio Investment Allocation
BNY MM
Local Agency Investment Fund 0.10%
7.97%
U5 Govt Agencies & Corp. Bonds
91.93%
74,000,000
72,000,000 •
70,000,000 68,000,000 •
66,000,000
64,000,000
62,000,000
60,000,000
58,000,000 -
56,000,000
O
Treasurer's Fund Balances
* adjusted June 30, 2016 to agree to final reconciled cash balance all funds per reconciliation prepared for 15/16 audit
page 2
Town of Los Gatos
Non -Treasury Restricted Fund Balances
July 31, 2016
Previous
Balance
Non -Treasury Funds:
Deposits
Ending
Interest Withdrawals Balance
Cert. of Participation 2002 Series A Reserve Fund $ 686,285.52 $ 5.66 $ - $ - $ 686,291.18 Note 1
Cert. Of Participation 2002 Ser A Lease Pymt Fund 0.35 501,181.35 0.00 0.00 501,181.70 Note 1
Cert. of Participation 2002 Series A Const. Fund 12.93 0.00 12.93 0.00 Note].
COP 2010 Library Reserve Fund 1,277,371.65 51.28 0.00 1,277,422.93 Note2
Total Restricted Funds: $1,963,670.45 $501,187.01 $51.28 $12.93 $2,464,895.81
These accounts are not part of the Treasurer's fund balances reported elsewhere in this report, as they are for separate and distinct
entities.
Note 1: The three original funds for the Certificates of Participation 2002 Series A consist of construction funds which will be expended over the
next few years, reserve funds which will guarantee the payment of lease payments, and a third fund for the disbursement of lease payments
and initial delivery costs.
Note 2: The 2010 COP Funds are all for the Library construction, reserves to guarantee lease payments, and a lease payment fund for the
life of the COP issue. The COI fund was closed in September 2010.
Page 3
Town of Los Gatos
Statement of Interest Earned
July 31, 2016
Interest by Month
July 2016
August 2016
September 2016
October 2016
November 2016
December 2016
January 2017
February 2017
March 2017
April 2017
May 2017
June 2017
$40,143.04
$40,143.04
Page 4
Town of Los Gatos
Investment Schedule
July 31, 2016
Maturity Yield to Interest Interest Interest Days
Deposit Par Original Market Date or Maturity Received Earned Earned to
Institution Security Date MAY Coat MIS Ca11Me ord to Data Prior Yrs. ILmM FY Maturity
PFIZER Corporate Note 03/11/15 750,000.00 753,037.50 750,595.50 5/15/2017 0.91% $ 9,602.08 $ 8,855.98 $ 581.64 288
Treasury Note 08/16/11 1,000,000.00 1,025,390.63 1,000,000.00 7/31/2016 0.97% $ 66,847.83 $ 48,194.68 $ 839.35 0
FNMA Callable Note 03/28/14 1,000,000.00 1,014,600.00 1,001,307.00 9/28/2016 0.66% $ 25,000.00 $ 15,089.49 $ 567.00 59
Toyota Motor Credit Coupon Note 01/00/00 500,000.00 502,200.00 501,510.00 10/5/2017 1.05% $ 4,600.69 $ 5,138.43 $ 447.45 431
Toyota Motor Credit Corporate Note 07/25/16 950,000.00 954,246.50 956,343.15 5/20/2019 124% $ (2,40139) $ - $ 193.87 1023
FNMA Callable Note 05/14/13 1,500,000.00 1,500,000.00 1,500,780.00 11/14/2016 0.55% $ 24,750.00 $ 25,834.93 $ 700.68 106
Treasury Note 06/10/14 1,000,000.00 1,000,000.00 1,000,877.00 11/15/2016 0.6396 $ 12,058.42 $ 12,859.59 $ 530.82 107
Treasury Note 06/10/14 1000,000.00 1,004,062.50 1,002,227.00 1/31/2017 0.72% $ 14,357.73 $ 14,845.10 $ 612.78 184
FNMA Callable Note 04/04/13 4,000,000.00 4,004,800.00 4,005,040.00 3/14/2017 0.72% $ 88,333.33 $ 93,289.54 $ 2,444.61 226
Treasury Note 05/27/14 2,000,000.00 2,015,156.25 2,006,586.00 3/31/2017 0.73% 5 36,885.25 $ 30,758.49 $ 1,246.42 243
Treasury Note 06/23/14 500,000.00 499,804.69 501,270.00 4/30/2017 0.89% $ 8,108.02 $ 8,984.22 $ 377.39 273
Berk 91a9. Coupon Note 01/11/13 500,000.00 509,280.00 502,893.50 5/15/2017 161% $ 26,755.56 $ ' 20,335.65 $ 497.95 288
FNMA Callable Note 10/19/12 1,500,000.00 1,504,050,00 1,505,433.00 9/20/2017 0.94% $ 51,291.67 $ 52,436.88 $ 1,204.11 416
FNMA Callable Note 11/30/12 1,000,000.00 1,003,200.00 1,003,622.00 9/20/2017 09356 $ 33,055.56 $ 33,450.66 $ 792.79 416
FNMA Callable Note 12/04/12 1,000,000.00 1,002,750.00 1,003,622.00 9/20/2017 0.94% $ 32,916.67 $ 33,651.06 $ 800.60 416
FFCB Coupon Note 10/18/12 20.00,000.00 I,996,960.00 2,003,620.00 9/21/2017 0.86% $ 56,855.00 $ 63,725.70 $ 1,462.25 417
F418 Coupon Note 12/12/12 2,000,000.00 1,998,710.00 2,000p20.00 12/8/2017 0.76% $ 51,0113.33 $ 54,170.75 $ 1,295.75 495
FNMA Callable Note 04/17/13 1,000,000.00 1,004,400.00 1,006,230.00 3/5/2018 1.03% $ 32,437.50 $ 33,174.38 $ 878.98 582
AAPL Corporate Note 05/16/13 1,000,000.00 991,680.01 1,001,774.00 5/3/2018 1.17% $ 29,638.89 $ 36,496.41 $ 991.58 641
FHLB Coupon Note 6/9/2015 1,000,000.00 997,710.00 1,007,710.00 8/27/2018 1.22% $ 8,241.66 $ 17,947.39 $ 1,037.13 757
Treasury Note 6/9/2015 1,000,000.00 1,000,468,75 1,001,445.00 6/30/2017 0.73% $ 7,935.08 $ 7,710.82 $ 617.66 334
Treasury Note 6/9/2015 1,003,000.00 1,004,140.63 1,004,219.00 9/15/2017 0.82% $ 7,663.04 $ 8,669.78 $ 694.48 411
Treasury Note 6/11/2015 1,000,000.00 990,468.75 1,001,328.00 4/15/2018 1.09% $ 6,331.97 $ 11,442.75 $ 921.36 623
FHLB Coupon Note 6/11/2015 2000.000.00 1,991,820.00 2,010,080.00 5/25/2018 1.19% $ 20533.33 $ 25,069.41 $ 2,018.58 663
Treasury Note 7/31/2015 1,000,000.00 1,010,625.00 1,013,28100 6/30/2018 10016 $ 12591.71 $ 9,277.73 $ 858.54 699
FFCB Coupon Note 7/30/2015 2,500,000.00 2,509,525.00 2,514,770.00 12/18/2017 0.96% $ 24,843.75 $ 22,220.23 $ 2,050.08 505
FHLB Coupon Note 8/20/2015 1,250,000.00 1,247,075.00 1,256,162.50 7/25/2018 1.13% $ 12,541.67 5 12,188.15 $ 1,199.47 724
FHLB Coupon Note 8/25/2015 1,000,000.00 999,500.00 1,004,930.00 7/25/2018 1.07% $ 9,887.50 $ 9,063.35 $ 906.33 724
FFCB Coupon Note 8/27/2015 1,000,000.00 1,002,060.00 1,001,460.00 4/20/2017 0.63% $ 7,437.50 $ 5,28177 $ 531.61 267
Warman Corporate Note 9/25/2015 1,000,000.00 998,960.00 1,005,248.00 4/11/2018 1.17% $ 6,125.00 $ 8,91165 $ 990.18 619
Disney Corporate Note 9/25/2015 995,000.00 995,298.50 998,69145 12/1/2017 1.0954 $ 7,479.08 $ 8,26182 $ 917.98 488
FFCB Coupon Note 10/27/2015 1,000,000.00 1,049,230.00 1,036,150.00 6/1/2018 0.8656 $ 16,347.22 $ 6,043.33 $ 75848 670
FHLB Coupon Note 10/27/2015 1,000,000.00 1,005,030.00 1,007,260.00 9/14/2018 0.95% $ 4,28125 $ 6,433.14 $ 807.40 775
FFCB Coupon Note 10/29/2015 1,500,000.00 1,494,840.00 1,501,470.00 10/9/2018 0.99% $ 5,833.33 $ 9,984.134 $ 1,263.39 800
Chevron Corporate Note 12/15/2015 1,250,000.00 1,252,262.50 1,254,912.50 11/9/2017 125% $ 7,068.33 $ 8,441.73 $ 1,321.69 466
Treasury Note 1/26/2016 1,500,000.00 1,494,902.34 1,502,167.50 2/28/2018 0.91% $ 10.50.82 $ 5,849.10 $ 1,162.32 577
Wells Fargo Corporate Note 7/2/2016 1,000,000.00 1,001,680.00 1,007,471.00 1/22/2018 1.565 $ 6112.50 $ 6,387.95 $ 1,329.04 540
FHIMC Coupon Note 4/29/2016 1,000000.00 1,008050.00 1,013,310.00 12/17/2018 1.04% $ 1,800.00 $ 1,774.34 $ 887.17 869
FFCB Coupon Note 4/29/2016 1,000,000.00 1,001,870.00 1,007,240.00 3/21/2019 1.09% $ (1,224.44) $ 1,860.62 5 930.31 963
Subtotal $ 48,338,854.55 $ 48,403,456.10 5 777,056.44 $ 779,11183 $ 37,669.20
BNY MM 53,469.49 53,469.49
LAIF N/A 12/31/14 4,192,309.28 4,192,309.28 2,123.22
552,584,633.32 552,649,234.87 $ 777,056.44 $ 779,111-63 $ 39,792.42
Banc of the West
Matured Assets
IBM Corporation Corporate Note 11/13/12 750,000.00 782,505.00
7/22/2016 0.76% $ 53,990.62 $ 21,116.64 $
350.62
Total Investments 'Matured" $782,505.00 $ 831,047.06 $ 800,228.47 $ 40,143.04
Matunity Profile
Amount
0-1 year $19,574,439.09
1-2 years $24,301,872.73
2-3 years $8,708,321.50
3-5 years 50.00
S52,5E4,633.32
Market to Cost Position Report
Amortized
Institution Cost
BNY Assets $48,338,854.55
BNY MM 53,469.49
LAIF 4,192,309.28
Totals: $52,584,633.32
Page 5
Weighted Average Portfolio Yield:
Town of Los Gatos
Summary Investment Information
August 31, 2016
0.88% Weighted Average Maturity (days) 458
This Month Last Month
Portfolio Balance $72,070,685 $72,971,658
Benchmarks/ References:
Town's Average Yield
LAIF Yield for month
3 mo. Treasury
6 mo. Treasury
2 yr. Treasury
5 yr. Treasury (most recent)
10 Yr. Treasury
0.88%
0.57%
0.26%
0.35%
0.58%
0.99%
1.44%
0.86%
0.57%
0.26%
0.38%
0.68 %
1.06%
1.50%
One year ago
$67,968,168
0.85%
0.30%
0.08 %
0.27%
0.74%
1.54%
2.21%
3 - 5 years
2 - 3 years
25%
Portfolio Maturity Profile
1 - 2 years
30%
0 - 1 year
30%
Compliance: The Town's investments are in compliance with the Town's investment policy dated November 1, 2016
and also in compliance with the requirements of Section 53601 of the California State Code. Based on the information available, the
Town has sufficient funds to meet the cash demands for the next six months.
Page 1
Town of Los Gatos
Portfolio Allocation & Treasurer's Fund Balances
August 31, 2016
Month YTD
Fund Balances - Beginning of Month/Period $72,971,658.02 $74,913,936.39
Receipts 2,320,202.60 5,509,906.36
Disbursements (3,221,176.10) (8,353 158.23)
Fund Balances - End of Month/Period $72,070,684.52 $72,070,684.52
Portfolio Allocation:
BNY MM $48,262.39
US Govt Agencies & Corp. Bonds 48,333,981.42
Local Agency Investment Fund 4,192,309.28
Subtotal - Investments 52,574,553.09
Reconciled Demand Deposit Balances 19,496,131.43
Total Treasurer's Fund
$72,070,684.52
Portfolio Investment Allocation
BNY MM
Local Agency Investment Fund 0.09%
7.97%
US Govt Agencies & Corp. Bonds
91.93%
74,000,000
72,000,000
70,000,000
68,000,000
66,000,000
64,000,000
62,000,000
60,000,000
58,000,000
56,000,000
Treasurer's Fund Balances
m a ~ u1-1
Q N 0 Z 8 �.° LL < m
N
c
.4
page 2
Town of Los Gatos
Non -Treasury Restricted Fund Balances
August 31, 2016
Previous
Balance
Non -Treasury Funds:
Deposits
Ending
Interest Withdrawals Balance
Cert. of Participation 2002 Series A Reserve Fund $ 686,291.18 $ - $ 5.84 $ $ 686,297.02 Note 1
Cert. Of Participation 2002 Ser A Lease Pymt Fund 501,181.70 0.00 1.86 501,168.75 14.81 Note 1
Cert. of Participation 2002 Series A Const. Fund 0.00 0.00 0.00 Note'.
COP 2010 Library Reserve Fund 1,277,422.93 0.00 37.79 0.00 1,277,460.72 Note2
Total Restricted Funds: $2,464,895.81 $0.00 $45.49 $501,168.75 $1,963,772.55
These accounts are not part of the Treasurer's fund balances reported elsewhere in this report, as they are for separate and distinct
entities.
Note 1: The three original funds for the Certificates of Participation 2002 Series A consist of construction funds which will be expended over the
next few years, reserve funds which will guarantee the payment of lease payments, and a third fund for the disbursement of lease payments
and initial delivery costs.
Note 2: The 2010 COP Funds are all for the Library construction, reserves to guarantee lease payments, and a lease payment fund for the
life of the COP issue. The COI fund was closed in September 2010.
Page 3
Town of Los Gatos
Statement of Interest Earned
August 31, 2016
Interest by Month
July 2016
August 2016
September 2016
October 2016
November 2016
December 2016
January 2017
February 2017
March 2017
April 2017
May 2017
June 2017
$40,143.04
41, 290.98
$81,434.02
Page 4
Town of Los Gatos
Investment Schedule
August 31, 2016
Orginal Issue Maturity Yield to Interest Interest Interest Days
Deposit Par Original (Discount) Market Date or Maturity Received Earned Famed to
Institution 9acurkv Date YAM Cost Premium value fall or Call to Date r_rs. Current FY Maturity
PFIZER Corporate Note 03/11/15 750,000.00 753,037.50 3,037.50 750,682.13 5/15/2017 0.91% $ 9,602.08 $ 8,855.98 $ 1,163.29 257
Freddie Mac Coupon Note 08/01/16 1,030,000.00 1,005,560.00 5,560.00 1,003,920.00 4/15/2019 0.92% $ (4,062.50) $ - $ 755.66 957
FNMA Callable Note 03/28/14 1,000,000.00 1,014,600.00 14,600.00 1,000,671.00 9/28/2016 0.66% $ 25,000.00 $ 15,089.49 $ 1,134.00 28
Toyota Motor Credit Coupon Note 07/10/15 503,000.00 502,200.00 2,200.00 501,323.50 10/5/2017 L05% $ 4,600.69 $ 5,138.43 $ 894.90 400
Toyota Motor Credit Corporate Note 07/25/16 950,000.00 954,246.50 4,246.50 952,679.95 5/20/2019 124% $ (2,40L39) $ - $ 1,195.53 992
FNMA Callable Note 05/14/13 1,500,000.00 1,500,000.00 0.00 1,500,450.00 11/14/2016 0.55% $ 24,750.00 $ 25,834.93 $ 1,40137 75
FNMA Callable Note 04/04/13 4,003,000.00 4,004,800.00 4,800.00 4,004,040.00 3/14/2017 0.72% $ 88,333.33 $ 93,289.54 $ 4,889.22 195
Treasury Note 05/27/14 2,000,000.00 2,015,156.25 15,156.25 2,005,000.00 3/31/2017 0.73% $ 36,885.25 $ 30,758.49 $ 2,492.84 212
Treasury Note 06/23/14 500,000.00 499,804.69 (195.31) 500,996.00 4/30/2017 0.89% $ 8,108.02 $ 8,984.22 5 754.77 242
Berk Math Coupon Note 01/11/13 500,000.00 509,280.00 9,280.00 502,093.00 5/15/2017 161% $ 26,755.56 $ 20,335.65 $ 995.90 257
FNMA Callable Note 10/19/12 1,500,000.00 1,504,050.00 4,050.00 1,504,887.00 9/20/2017 0.94% $ 51,291.67 $ 52,436.88 $ 2,408.21 385
US Bancorp Corporate Note 8/8/2016 1,030,000.00 1,019,550.00 19,550.00 1,015,459.00 10/15/2018 1.08% $ 14,495.83) $ - $ 665.30 775
Microsoft s Corporate Note 8/13/2016 1,000,000.00 999,470.00 (530.00) 998,050.00 8/8/2019 1.12% $ $ - $ 704.28 1072
FNMA Callable Note 11/30/12 1,000,000.00 1,003,200.00 3,200.00 1,003,258.00 9/20/2017 0.93% $ 33,055.56 $ 33,450.66 $ 1,585.58 385
FNMA Callable Note 12/04/12 1,003,000.00 1,002,750.00 2,750.00 1,003,258.00 9/20/2017 0.94% $ 32,916.67 $ 33,65106 $ 1,601.20 385
FFCB Coupon Note 10/18/12 2,000,00 .00 1,996,960.00 (3,040.00) 1,999,780.00 9/21/2017 0.86% $ 56,855.00 $ 63,725.70 $ 2,924.50 386
FHLB Coupon Note 12/12/12 2,000,000.00 1,998,720.00 (1,280.00) 1,999,000.00 12/8/2017 0.76% $ 51,083.33 $ 54,170.75 $ 2,591.50 464
FNMA Callable Note 04/17/13 1,030,000.00 1,004,400.00 4,400.00 1,004,100.00 3/5/2018 3.03% $ 32,437.50 $ 33,174.38 5 1,757.96 551
AAPL Corporate Note 05/16/13 1,000,0)0.00 991,680.01 (8,319.99) 999,833.00 5/3/2018 1.17% $ 29,638.89 5 36,496.41 $ 1,983.15 610
FHLB Coupon Note 6/9/2015 1,000,000.00 997,710.00 (2,290.00) 1,004,830.00 8/27/2018 1.22X $ 13,99L66 $ 12,947.39 $ 2,074.26 726
Treasury Note 6/9/2015 1,000,000.00 1,000468.75 468.75 1,000,859.00 6/30/2017 0.7314 $ 7,935.08 $ 7,710.82 $ 1,235.33 303
Treasury Note 6/9/2015 1,030,030.00 1,004,140.63 4,140.63 1,003,047.00 9/15/2017 0.82% $ 7,663.04 $ 8,669.78 $ 1,388.96 380
Treasury Note 6/11/2015 1,000,000.00 990,468.75 (9,53125) 999,531.00 4/15/2018 109% $ 6,33197 $ 11,442.75 $ 1,842.73 592
FHLB Coupon Note 6/11/2015 2,000,000.00 1,991,820.00 (8,180.00) 2,005,140.00 5/25/2018 119% $ 20,533.33 $ 25,069.41 $ 4,037.15 632
Treasury Note 7/31/2015 1,000,000.00 1,010,625.00 10,625.00 1,010,352.00 6/30/2018 1.00% $ 12,591.71 $ 9,277.73 $ 1,717.07 668
FFCB Coupon Note 7/30/2015 2,500,000.00 2,509,525.00 9,525.00 2,510,095.00 12/18/2017 0.96% $ 24,843.75 5 22,220.23 $ 4,100.16 474
FHL8 Coupon Note 8/20/2015 1,250,000.00 1,247,075.00 (2,925.00) 1,252,825.00 7/25/2018 11396 $ 12,54167 $ 12,188.15 5 2,398.94 693
FHLB Coupon Note 8/25/2015 1,000,000.00 999,500.00 (500.00) 1,002,260.00 7/25/2018 107% $ 9,867.50 $ 9,063.35 $ 1,812.67 693
FFCB Coupon Note 8/27/2015 1,000,000.00 1,002,060.00 2,060.00 1,001,170.00 4/24/2017 0.63% $ 7,437.50 $ 5,281.77 $ 1,063.21 236
Walmart Corporate Note 9/25/2015 1,000,000.00 998,960.00 (1,040.00) 1,003,323.00 4/11/2018 117% $ 6,125.00 $ 8,91L65 $ 1580.37 588
Disney Corporate Note 9/25/2015 995,000.00 995,298.50 298.50 995,238.80 12/1/2017 109% $ 7,479.08 $ 8,26182 $ 1,835.96 457
FFCB Coupon Note 10/27/2015 1,000,0E0.00 1,048,230.00 48,230.00 1,030,600.00 6/1/2018 0.86% $ 16,347.22 $ 6,043.33 $ 1,516.95 639
FHLB Coupon Note 10/27/2015 1,000,000.00 1,035,030.00 5,030.00 1,003540.00 9/14/2018 0.95% $ 4,281.25 $ 6,433.14 $ 1,614.80 744
FFCB Coupon Note 10/29/2015 1500,000.00 1,494,840.00 (5,160.00) 1,497,345.00 10/9/2018 0.99% $ 5,1333.33 $ 9,984.84 $ 2,526.78 769
Chevron Corporate Note 12/15/2015 1,250,000.00 1,252,262.50 2,262.50 1,254,270.00 11/9/2017 1.25% $ 7,068.33 $ 8,44173 $ 2,643.37 435
Treasury Note 1/26/2016 1500,000.00 1,494,902.34 (5,097.66) 1,499,590.50 2/28/2018 0.91% $ 6,675.82 $ 5,849.10 $ 2,324.64 546
Wells Fargo Corporate Note 2/2/2016 1,000,0E0.00 1,001,680.00 1,680.00 1005,946.00 1/22/2018 1.56% $ 8,112.50 $ 6,387.95 $ 2,658.07 509
FHLMC Coupon Note 4/29/2016 1,000,000.00 1,008,050.00 8,05000 1,010,100.00 12/17/2018 1.04% $ 1830.00 $ 1,774.34 $ 1,774.34 838
FFCB Coupon Note 4/29/2016 1000,000.00 1,001,870.00 1,870.00 1,003470.00 3/21/2019 109% $ (1,224.44) $ 1,860.62 $ 1,880.62 932
Subtotal $ 48,333,981.42 $ 138,981.42 $ 48,343,012.88 $ 686,609.13 $ 703,212.45 $ 74,305.52
BNY MM 48,262.39 48,262.39
LAIF N/A 12/31/14 4,192,309.28 4,192,309.28 4,246.45
$52,574,553.09 552,583,58455 $ 686,609.13 $ 703,212.45 $ 7855197
Bank of the West
Matured Assets
IBM Corporation Corporate Note 11/13/12 750,000.00 782,505.00 32,505.00 7/22/2016 0.76% $ 53,990.62 $ 21,116.64 $ 350.62
Treasury Note 08/16/11 1,000,000.00 1,025,390.63 25,390.63 8/1/2016 0.97% $ 74,347.83 $ 48,194.68 $ 1,273.97
Treasury Note 06/10/14 1,000,000.00 1,000,000.00 0.00 8/4/2016 0.00% $ 12,058.42 $ 12,859.59 $ 599.32
Treasury Note 06/10/14 1,000,000.00 1,004,062.50 4,062.50 8/4/2016 0.42% $ 18,732.73 $ 14,12182 $ 658.14
Total Investments"Matured" $3,811,958.13 5 845,738.73 $ 799,505.19 $ 81,434.02
Maturity Profile
Amount
0-1 year $16,539,778.86
1-2 years $26,548,447.73
2-3 yearn 59,486,326.50
3-5 years $0.00
$52,574553.09
Market to Cost Position Report
Amortized
Institution
BNY Assets $48,333,98142
BNY MM 48,262,39
LAIF 4,192,309.28
Totals: $52,574,553.09
Weighted Average Portfolio Yield:
Town of Los Gatos
Summary Investment Information
September 30, 2016
0.84% Weighted Average Maturity (days) 430
This Month Last Month One year ago
Portfolio Balance $69,818,409 $72,070,685 $67,716,336
Benchmarks/ References:
Town's Average Yield
LAIF Yield for month
3 mo. Treasury
6 mo. Treasury
2 yr. Treasury
5 yr. Treasury (most recent)
10 Yr. Treasury
0.84%
0.57%
0.26%
0.35%
0.58%
0.99%
1.44%
0.86%
0.57%
0.26%
0.35%
0.58%
0.99%
1.44%
0.81%
0.30%
0.00%
0.08%
0.64%
1.37%
2.06%
Portfolio Maturity Profile
3 - 5 years
15% ---------------
2 - 3 years
25%
1-2years
30%
0-1year
`---...., 30%
Compliance: The Town's investments are in compliance with the Town's investment policy dated November 1, 2016
and also in compliance with the requirements of Section 53601 of the California State Code. Based on the information available, the
Town has sufficient funds to meet the cash demands for the next six months.
Page 1
Town of Los Gatos
Portfolio Allocation & Treasurer's Fund Balances
September 30, 2016
Fund Balances - Beginning of Month/Period
Receipts
Disbursements
Fund Balances - End of Month/Period
Portfolio Allocation:
BNY MM
US Govt Agencies & Corp. Bonds
Local Agency Investment Fund
Subtotal - Investments
Reconciled Demand Deposit Balances
Total Treasurer's Fund
Local Agency Investment Fund
7.96%
Month YTD
$72,070,684.52 $74,913,936.39
2,469,598.82 7,979,505.18
(4,721,874.72) (13 075,032.95j
$69,818,408.62 $69,818,408.62
$1,127,413.27
47,319,381.42
4,192,309.28
52,639,103.97
17,179,304.65
$69,818,408.62
Portfolio Investment Allocation
BNY MM
2.14%
US Govt Agencies & Corp. Bonds
89.89%
74,000,000
72,000,000
70,000,000
68,000,000
66,000,000
64,000,000
62,000,000
60,000,000
58,000,000
56,000,000
O
Ln
tj
Treasurer's Fund Balances
0
O.
'o
c
3
0
page 2
Town of Los Gatos
Non -Treasury Restricted Fund Balances
September 30, 2016
Previous
Balance
Non -Treasury Funds:
Deposits
Ending
Interest Withdrawals Balance
Cert. of Participation 2002 Series A Reserve Fund $ 686,279.67 $ - $ 5.85 $ - $ 686,285.52 Note 1
Cert. Of Participation 2002 Ser A Lease Pymt Fund 0.35 0.00 0.00 0.00 0.35 Note 1
Cert. of Participation 2002 Series A Const. Fund 12.93 0.00 12.93 Note 1
COP 2010 Library Reserve Fund 1,277,312.72 0.00 58.93 0.00 1,277,371.65 Note 2
Total Restricted Funds: $1,963,605.67 $0.00 $64.78 $0.00 $1,963,670.45
These accounts are not part of the Treasurer's fund balances reported elsewhere in this report, as they are for separate and distinct
entities.
Note 1: The three original funds for the Certificates of Participation 2002 Series A consist of construction funds which will be expended over the
next few years, reserve funds which will guarantee the payment of lease payments, and a third fund for the disbursement of lease payments
and initial delivery costs.
Note 2: The 2010 COP Funds are all for the Library construction, reserves to guarantee lease payments, and a lease payment fund for the
life of the COP issue. The COI fund was closed in September 2010.
Page 3
Town of Los Gatos
Statement of Interest Earned
September 30, 2016
Interest by Month
July 2016
August 2016
September 2016
October 2016
November 2016
December 2016
January 2017
February 2017
March 2017
April 2017
May 2017
June 2017
$40,143.04
41,290.98
39,945.53
$121,379.55
Page 4
Town of Los Gatos
Investment Schedule
September 30, 2016
Orglnallssue Maturity Yield to Interest Interest Interest Days
Deposit Par Original (Discount) Market Date or Maturity Received Famed Famed to
Institution Security 2at4 ygt a Cost Premium Ma ue Call Date or Call to Date Prior Yrs. rtent FY Matu
PFIZER Corporate Note 03/11/15 750000.00 753,037.50 3,037.50 750,621.38 5/15/2017 0.91% $ 9,602.08 $ 6,855.98 $ 1,726.17 227
Freddie Mac Coupon Note 08/01/16 1,000,000.00 1,005,560.00 5,560.00 1,004,44100 4/15/2019 0.9296 $ (4,062.50) $ - $ 1,511:32 927
Toyota Motor Credit Coupon Note 07/10/15 500,000.00 502,200.00 2,200.00 500,445.00 10/5/2017 105% $ 4,600.69 $ 5,138:43 $ 1,327,91 370
Toyota Motor Credit Corporate Note 07/25/16 950,000.00 954,246.50 4,246.50 951,193.20 5/20/2019 L24% $ (2A01.39) $ $ 2,164.87 962
FNMA Callable Note 05/14/13 1,500,000.00 1,500,000.00 0.00 1,5OO,135.00 11/14/1016 0,55% $ 24,750.00 $ 25,834.93 $ 2,079.45 45
FNMA Callable Note 04/04/13 4,000,000.00 4,004,800.00 4,800.00 4,005,040.00 3/14/2017 0.72% $ 103,333.33 $ 93,289.54 $ 7,254.98 165
Treasury Note 05/27/14 2,000060.00 2,015,156.25 15,156.25 2,005,004.00 3/31/2017 0.73% $ 36,885.25 $ 30,756.49 $ 3,699.06 182
Treasury Note 06/23/14 500000,00 499,804.69 (195.31) 503,986.50 4/30/2017 0.89% $ 8,108.02 $ 8,984,22 5 1,119.98 212
Berk Hath Coupon Note 01/11/13 So0,OW.00 503,280.00 9,280.00 501,705.50 5/15/2017 16156 5 26,755.56 $ 20,335.65 $ 1,477.79 227
FNMA Callable Note 10/19/12 1,500,000.00 1,504,050.00 4,050.00 1,503,882.00 9/20/2017 0.94% $ 58,791.67 $ 52,436.88 $ 3,573.48 355
US Bancorp Corporate Note 8/8/2016 1,000,000.00 1,019,550.00 19,550.00 1,012,703.00 10/15/2018 LO8% $ (4A95.83) $ - $ 1,533.07 745
Microsoft Corporate Note 8/8/2016 1,030,000.00 999,470.00 (530.00) 9%,811.00 8/8/2019 1.12% $ - $ - $ 1,622.91 1042
FNMA CaIla0le Note 11/30/12 1,O0O,O0O.O0 1,003,200.00 3,200.00 Sp02,58&00 9/20/2017 0.93% $ 38,055.56 $ 33A50.66 $ 2,352.80 355
FNMA Callable Note 32/04/12 1,000,000.00 1,002,750.00 2,750.00 1,002,58&OD 9/20/2017 0.94% $ 37,916.67 $ 33,651.06 $ 2,375.98 355
FFCB Coupon Note 10/18/12 2,000,000.00 1,996,960.00 (3,040.00) 2,001,060.00 9/21/2017 0.86% 5 65,155.00 $ 63,725.70 $ 4,339.57 356
FHLB Coupon Note 12/12/12 2A00,000.00 1,998,T20.00 (1,280.00) 2,000A40.00 12/8/2017 0.7656 $ 51,083.33 $ 54,170.75 $ 3,845.45 434
FNMA Callable Note 04/17/13 1,000,000.00 1,004,400.00 4,400.00 1,004,500.03 3/5/2018 1039L $ 38,062.50 $ 33,174.38 $ 2,608.58 521
AAPL Corporate Note 05/16/13 1,000,000.00 991,680.01 (8,319.99) 998,606.00 5/3/2018 L17% $ 29,638,89 $ 36,496.41 5 2,942.74 580
FHLB Coupon Note 6/9/2015 1,000,030.00 997,710.00 (2,290.00) 1,005,510.00 8/27/2018 1.22% $ 13,99166 $ 12,947.39 $ 3,077.93 696
Treason/ Note 6/9/2015 1000,000.00 1,000,468.75 468.75 1,001,092.00 6/30/2017 0.73% $ 7,935.08 $ 7,710.82 $ 1,833.06 273
Treasury Note 6/9/2015 1,000,000.00 1,004,140.63 4,140.63 1,003,086.00 9/15/2017 0.82% $ 12,663.04 $ 8,669.78 $ 2,061.03 350
Treasury Note 6/11/2015 1.00,000.00 990,468.75 (9,53125) 1,000,156.00 4/15/2018 1.09% $ 6,33197 $ 11,442.75 $ 2,734.37 562
FHLB Coupon Note 6/11/2015 2,000,000.00 1,991,820.00 (8,180.00) 2,OO7,O80.00 5/25/2018 1.19% $ 20,533.33 $ 25,069A1 $ 5,990.61 602
Treasury Note 7/31/2015 1,000,000.00 3A10,625.00 10,625.00 1010,469.00 6/30/2018 1.0096 5 12,59171 $ 9,277.73 $ 2,547.91 638
FFCB Coupon Note 7/30/2015 2,500,000.00 2,509,525.00 9,525.00 2,510,845.00 12/18/2017 0.96% $ 24,843.75 $ 22,220.23 $ 6,084.11 444
FHLB Coupon Note 8/20/2015 1,250,000.00 I,247,075.00 (2,925.00) 1,254,200.00 7/25/2018 1.13% $ 12,54167 $ 12,188.15 $ 3,559.71 663
FMB Coupon Note 8/25/2015 1,000,000.00999,500.00 (500.00) 1,003,360.00 7/25/2018 107% $ 9,887.50 $ 9,063.35 $ 2,689,77 663
FFCB Coupon Note 8/27/2015 1p00,000.00 1,002,060,00 2,060.00 1,001,200.03 4/24/2017 0.6354 $ 7,437.50 $ 5,281.77 $ 1,577.67 206
Walmart Corporate Note 9/25/2015 1,000,000.00 998,960.00 (1,040.00) 1,002,146.00 4/11/2018 L17% $ 6,125.00 $ 8,911.65 $ 2,93&61 558
Disney Corporate Note 9/25/2015 995,000.00 995,298.50 298.50 995,688.54 12/1/2017 1.09% $ 7,479.08 $ 8,261.82 $ 2,724.33 427
FFCB Coupon Note 10/27/2015 1,000,000.013 1,048,230.00 48,230.00 1,030,170.00 6/1/2018 0.8556
$ 16,34T.22 8
6,043.33 $ 2,250.96 609
FHLB Coupon Note 10/27/2015 1,000,000.00 1,005,030.00 5,030.00 1,004,376.00 9/14/2018 0.95% $ 9,906.15 $ 6,433.14 $ 2,396.15 714
FFCB Coupon Note 10/29/2015 1,500,000.00 1,494,840.00 (5,160.00) 1,499,460.00 30/9/2038 0.99% $ 5,833.33 $ 9,984.84 $ 3,749.41 739
Chevron Corporate Note 12/15/2015 1,250,000.00 1,252,262.50 2,262.50 1,252,418.75 11/9/2017 12556 $ 7,068.33 $ 8,44173 $ 3,922.42 405
Treasury Note 1/26/2016 1,500,000.00 1494,902.34 (5,097.66) 1,500,468.00 2/28/2018 0.91% $ 6,675.82 $ 5,849.10 $ 3,449.47 516
Wells Fargo Corporate Note 2/2/2016 1,000,000.00 1,001,680.00 1,680.00 1,002,899.00 1/22/2018 1.56% $ 8,112.50 $ 6,387.95 $ 3,944.24 479
FHLMC Coupon Note 4/29/2016 1,000,000.00 1,OO8,O5O.O0 8,050.00 1,010,760.00 12/17/2018 1.04% $ 1,800.00 $ 1,774.34 $ 2,632.89 600
FFCB Coupon Note 4/29/2016 1,000,000.00 1,001,870.00 1,870.00 1,004,460.00 3/21/2019 1.09% $ 4,575.56 $ 1,860.62 $ 2,760.92 902
Subtotal 5 47,319,381.42 $ 124,38142 $ 47,342,893.87 $ 724,459.13 $ 688,122.96 $ 110,481.70
BNY MM 1,127,413.27 1,127,413.27
LAIF N/A 12/31/14 4,192,309.28 4,192,309.28 6,369.67
$52,639,103.97 $52,662,616.42 $ 724A59.13 $ 688,122.96 $ 116,851.37
Bank of the West
Matured Asse1F
IBM Corporation Corporate Note 11/13/12 750,000.00 782,505.00 32,505.00 7/22/2016 0.76% $ 53,990.62 $ 21,116.64 $ 350.62
Treasury Note 08/16/11 1,000,000.00 1,025,390.63 25,390.63 8/1/2016 0.97% $ 74,347.83 $ 48,194.68 $ 1,273.97
Treasury Note 06/10/14 1,000,000.00 1,000,000.00 0.00 8/4/2016 0.0096 $ 12,058.42 $ 12,859.59 $ 599.32
Treasury Note 06/10/14 1,000,000.00 1,004,062.50 4,062.50 8/4/2016 0.42% $ 18,732.73 $ 14,12182 $ 658.14
FNMA Callable Note 03/28/14 1,000,030.00 1,014,600.00 14,600.00 9/28/2016 0.6650 $ 31,250.00 $ 15,089.49 $ 1,646.13
Total Investments"Matured" $4,826,558.13 $ 914,838.73 $ 799,505.19 $ 121,379.55
Matunity Profile
0-1 year
1-2 years
2-3 years
3-5 years
Market to Cost Position Report
Amount
$23,115,430.37
$22,040,087.10
$7,483,586.50
$0.00
$52,639,103.97
Amortized
Institution Cog_
BNY Assets $47,319,381A2
BNY MM 1,127,413.27
LAIF 4,192,309.28
Totals, $52,639,103.97
Page 5
Town of Los Gatos
Portfolio Allocation & Treasurer's Fund Balances
February 29, 2016 Month YTD
Month CORRECTED YTD CORRECTED
Fund Balances - Beginning of Month/Period $70,618,926.85 $70,618,926.85 $70,832,337.72 $70,832,337.72
Receipts 1,215,053.18 2,138,790.39 24,881,603.21 25,805,340.42
Disbursements (2,835,731.84) (2,835,731.84) (26,715,692.741 (26,715,692.741
Fund Balances - End of Month/Period $68,998,248.19 569,921,985.40 $68,998,248.19 $69,921,985.40
Portfolio Allocation:
BNY MM
US Govt Agencies & Corp. Bonds
Local Agency Investment Fund
Subtotal - Investments
Reconciled Demand Deposit Balances
Total Treasurer's Fund
74,000,000
72,000,000
70,000,000
68,000,000
66,003,000
64,000,000
62,000,000
60,000,000 •
58,000,000 •
56,000,000
$42,913.19 $42,913.19
48,167,385.57 48,167,385.57
4,181,786.38 4,181, 786.38
52,392,085.14 52,392,085.14
16,606,163.05 17, 529,900.26
$68,998,248.19 569,921,985.40
Portfolio Investment Allocation
BNY MM
Local Agency Investment Fund 0.08%
7.98%
US Govt Aaendes & Corp. Bonds
91.94%
FEB 2016 page 2 ATTACHMENT 2
Town of Los Gatos
Portfolio Allocation & Treasurer's Fund Balances
March 31, 2016 Month YTD
Month CORRECTED YTD CORRECTED
Fund Balances - Beginning of Month/Period 668,998,248.19 $69,921,985.40 $70,832,337.72 $70,832,337.72
Receipts 1,569,849.86 3,340,077.40 26,451,453.07 29,145,417.82
Disbursements (2,623,642.07) (2,623,642.07) f 29,339,334.81) 129,339 334.81)
Fund Balances - End of Month/Period $67,944,455.98 $70,638,420.73 $67,944,455.98 $70,638,420.73
Portfolio Allocation:
BNY MM
US Govt Agencies & Corp. Bonds
Local Agency Investment Fund
Subtotal • Investments
Reconciled Demand Deposit Balances
Total Treasurer's Fund
$117,378.95 $117,378.95
48,164,885 57 48,164,885.57
4,181,786.38 4,181,786.38
52,464,050.90 52,464,050.90
15,480,405.08 18,174,369.83
$67,944,455.98 $70,638,420.73
Portfolio Investment Allocation
BNY MM
local Agency Investment Fund 0.22%
7.97%
US Govt Agencies & Corp. Bonds
91.81%
74,000,000
72,000,000
70,000,000
68,000,000
66,000,000
64,000,000
62,000,000
60,000,000
58,000,000
56,000,000
Treasurer's Fund Balances
6
5
0
MAR 2016 page 2
Town of Los Gatos
Portfolio Allocation & Treasurer's Fund Balances
April 30,2016 Month YTD
Month CORRECTED YTD CORRECTED
Fund Balances - Beginning of Month/Period $67,944,455.98 $70,638,420.73 $70,832,337.72 $70,832,337.72
Receipts 1,467,266.49 6,030,503.08 27,918,719.56 35,175,920.90
Disbursements (3,279,285.84) (3,279,285.84) 132,618,620.65) (32,618,620.65)
Fund Balances - End of Month/Period $66,132,436.63 $73,389,637.97 $66,132,436.63 $73,389,637.97
Portfolio Allocation:
BNY MM
US Govt Agencies & Corp. Bonds
Local Agency Investment Fund
Subtotal - Investments
Reconciled Demand Deposit Balances
Total Treasurer's Fund
80,003,000
78,000,000
76,000,000
74,000,000
72,000,000
70,000,000
68,000,000
66,000,000
64,000,000
62,000,000
60,000,000
S133,721.00 $117,378.95
48,174,731.66 48,164,885.57
4,186, 613.48 4,181, 786.38
52,495,066.14 52,464,050.90
13,637,370.49 20,925,587.07
$66,132,436.63 $73,389,637.97
Portfolio Investment Allocation
BNY MM
Local Agency Investment Fund 0.25%
7.98%
US Govt Agencies & Corp. Bonds
91.77%
APR 2016 page 2
Town of Los Gatos
Portfolio Allocation & Treasurer's Fund Balances
May 31, 2016 Month `LgT
Month CORRECTED YTD CORRECTED
Fund Balances - Beginning of Month/Period $66,132,436.63 $73,389,637.97 $70,832,337.72 $70,832,337.72
Receipts 1,515,551.49 2,517,668.21 29,434,271.05 37,693,589.11
Disbursements (2,348,767.35) (2,348,767.35) 134,967,388.001
134,967,388.001
Fund Balances - End of Month/Period $65,299,220.77 $73,558,538.83 $65,299,220.77 $73,558,538.83
Portfolio Allocation:
BNY MM
US Govt Agencies & Corp. Bonds
Local Agency Investment Fund
Subtotal -Investments
Reconciled Demand Deposit Balances
Total Treasurer's Fund
$174,844.84 $174,844.84
48,173,424.99 48,173,424.99
4.186.613.48 4.186.613.48
52,534,883.31 52,534,883.31
12,764,337.46 21.023.655.52
$65,299,220.77 573,558,538.83
Portfolio Investment Allocation
BNY MM
Local Agency Investment Fund 0.33%
7.97%
US Govt Agencies & Corp. Bonds
91.70%
74,000,000
72,000,000
70,000,030
69,000,000
66,000,003
64,000,000
62,0oo,002
60,000,000
58,000,000
56,000,000
Treasurer's Fund Balances
A
8
3
MAY 2016 page 2
Town of Los Gatos
Portfolio Allocation & Treasurer's Fund Balances
June 30, 2016 Month no
Month CORRECTED YTD CORRECTED
Fund Balances - Beginning of Month/Period $65,299,220.77 $73,558,538.83 $70,832,337.72 $70,832,337.72
Receipts 1,292,406.21 5,551,888.89 30,726,677.26 43,245,478.00
Disbursements (4,091,080.67) (4,091,080.67) 139,058.468.67) 139.058,468.67)
FY 15/16 Final Audit Adjustments • (105,410.66) (105,410.66)
Fund Balances - End of Month/Period $62,500,546.31 $74,913,936.39 $62,500,546.31 $74,913,936.39
Portfolio Allocation:
BNY MM
US Govt Agencies & Corp. Bonds
Local Agency Investment Fund
Subtotal - Investments
Reconciled Demand Deposit Balances
$233,030.26 $233,030.26
48,168,474.99 48,168,474.99
4,186,613.48 4,186,613.48
52,588,118.73 52,588,118.73
9,912,427.58 22,325,817.66
Total Treasurer's Fund $62,500,546.31 524,913,336.33
Standard year end adjustments to adjust to amorti,ed rosi and_other misc.adiuswtents nrr monthly bank reconciliations completed for the FY 15/16.
Portfolio Investment Allocation
BNY MM
Local Agency Investment Fund 0.44%
7.96%
US Govt Agencies & Corp. Bonds
91.60%
84,.,w
82,000,000
80,000,000
78,000,000
76,000,000 74,000,000
72,000,000
70,000,000
68,000,000 66,000,000
64,000,000 -
62,000,000 •
60,000,000 58,000,000
56,000,000
Treasurer's Fund Balances
JUNE 2016 page 2
November 19, 2016
Re: Agenda Item #2 — Accept the Reconciled Demand Account Balances
Dear Council Finance Committee,
I cannot overstate the severity of having the Total Treasurer's Fund Balance for Q3 and Q4 2016 as
reported in Quarterly Investment Reports understated by $2.6m and $12.4m respectively. Both of
these reports were previously submitted to the Town Council and were accepted by resolutions passed
on June 21, 2016 and August 2, 2016. The amount of understatement is simply stunning.
It should also be pointed out that these Quarterly Investment Reports were never reviewed by the
Council Finance Committee. Rather they were submitted directly to the Town Council and were
accepted by unanimous vote on the consent agenda. There was no rigorous review or discussion
regarding these critical financial reports prior to passing the resolution.
I am writing to urge you not to accept the Staff recommendation to "accept the reconciled Demand
Account Balances (February through June 2016)" until the Staff has provided written answers to at
least the following questions: 1) how did this material error occur; 2) who prepared the Quarterly
Investment Reports; 3) are there written accounting desk procedures requiring the Treasurer's Fund
Balance as reported in the Investment Report to be reconciled on a monthly basis to the Town's
accounting records and bank balances; 4) when was the error first discovered, 5) who discovered the
error and under what circumstances; 6) in what demand accounts was the unreported cash deposited;
and 7) what corrective actions have been taken in terms of retraining personnel and implementing
additional control procedures to insure this never occurs again.
The transmittal letter by the Town Manager with regard to Item 2 is silent with regard to answering
these questions or providing any assurance there have been changes made to insure this mistake will
not occur again. Even more troubling is the fact that the Town Manager never mentions the
cumulative magnitude of the error. The only way the reader could determine that the cumulative effect
of this error was $12.4m was to dig through the many pages of Attachment 2 and find it. A $12.4m error
should never be deeply buried in Attachments, rather it should be boldly highlighted so this
Committee fully understands the magnitude of the error.
Lastly, I truly hope that the Finance Committee reflects on what has occurred and finally recognizes that
the committee needs to add knowledgeable residents who can provide additional oversight. Having
three knowledgeable residents on the committee, who are professionally trained in finance and
accounting, who know the right questions to ask about a Quarterly Investment Report, is in itself a
strong internal control procedure. A $12.4m understatement in the Treasurer's Fund which went
undetected for at least 5 months, should be a wakeup call for immediate change.
Sincerely,
Phil Koen
CC: Town Council
ATTACHMENT 3
11 -21 -16
Finance Committee Meeting re year end 2015 -2016, and 1Q 2016 -2017
Attached is a short list and also a full list of questions that we have regarding the
financial information to be discussed in the 11 -21 -16 meeting. The full list are
additional questions, but those may be modified depending on the answers we get
today. If this is the only opportunity we have to present questions, then the full list is
attached at the bottom of this letter.
We think the end result of this work between Staff, the Finance Committee and us will
help to bring the Los Gatos financials into compliance with GASB standards. Though we
would like to have all questions answered in this session, we think our total list would
look like we were piling on. We're not. We're concerned residents of Los Gatos.
One of our goals is to have a constructive and thought - provoking session, the answers
of which will bring the town closer to full compliance with GASB, and eliminate errors in
the future. Our other goal is to be helpful in solving the problems we have found and
not to be viewed as a thorn in Staff's side. We all want to be proud of Los Gatos, and
though the finances are generally not something the general public seeks to
understand, they are very critical to the success of our town.
We feel that all of these questions, once answered, and any mistakes corrected, could
help to make the Los Gatos financial reporting more valuable to the Council in the
management of town finances. These answers and the corrections they should bring to
the statements will provide more clarity and transparency for the citizens of Los Gatos.
This was promised to the town by both the Mayor Sayoc and Vice -Mayor Rennie in their
acceptance speeches.
Jak VanNada, Lee Fagot, Terry Duryea, Peter Hertan
The Abbreviated List:
Agenda Item 2: First Quarter Investment Report AND Restated Demand Account
Balances (February through June 2016)
We would like to understand how the misclassification between the demand
account and the fund balance that was $12.4M by June 30, 2016 could go
undetected for 5 months.
o We view this as serious for a number of reasons:
If it was due to a lack of timely account reconciliations, the
foundation of any system of internal control, this represents a
serious breakdown in the Town's system of internal control
If the money was sitting in a non - interest bearing demand account,
the error resulted in a loss of investment return
Although the Town missed it, why didn't the financial institution or
more importantly, the investment manager catch the error?
Does the independent auditor feel he will need to disclose this as a
material inadequacy in internal controls "?
What changes in process and oversite are to be implemented to
preclude similar future errors?
Agenda Item 3: Quarterly Budget Performance & Operating Report
o The following questions relate to the "box" in the Executive Summary that
provides the detail of the General Fund Reserves as of June 30, 2016 in
accordance with GASB #54
Both the Almond Grove Reserve and the CalPERS Reserve were
established by TC resolutions, yet the former is reported as
Committed and the latter is presented as Assigned. Why are they
reported differently?
Where is the reserve for Compensated Absences ($1,692K after
being reduced by $589K to fund Almond Grove) and Vasona Land
Sale ($411K) per the Oct 28, 2015 Council Resolution?
Why is there not a reserve for post- retirement medical when this
was recorded $400,000 as an assigned general fund reserve as of
June 30, 2015. Has there been a change in spending intent?
o How do the reported Q1 '16/'17 amounts reflect the unresolved employee
wage negotiations? If an estimate is not provided, will the numbers be
restated at a later date?
o Page 3 of the Executive Summary, next to last paragraph before the US
Economic Outlook indicates that $1.4 of the $3.7M Capital Improvement
reserve is already committed for capital projects. What are the capital
projects?
The Full List (if there is time — the abbreviated list is included with the
longer list that follows):
Agenda Item 2: First Quarter Investment Report AND Restated Demand
Account Balances (February through June 2016)
There's one issue that over shadows all others. The narrative "Corrected
Demand Account Balances" attempts to explain it. I will leave it up to each TC
member if they think the explanation is sufficient once they understand what
happened. The error is reflected in multiple places in the report when compared
to the prior period reports.
o On page 1, the July 31, 2016 Summary of Investment Information shows
a "Last Month" balance (i.e. as of June 30, 2016) of $74,913,946. The
problem is that if you look at the July 15, 2016 Fourth Quarter Investment
Report that the Council approval, the June 30, 2016 balance is
62,500,546. In summary, the TC accepted a report that had bad
numbers. You will see the month by month effect for the 5 months on
the last 5 pages of the November 17, 2016 investment report. The
collective error at June 30, 2016 was $12,413,400.
o This raises the question of what happened?
It appears that the staff was not reconciling the bank accounts on a
regular basis. This is the most basic requirement to insure good
internal accounting controls. If accounts are reconciled monthly, it
should have been identified as part of the monthly closing
processing. In this case, it took the Town at least 6 months to
identify the problem.
o It appears significant money was sitting in a "demand deposit" account,
earning no interest.
o Even if the Town missed it, why didn't the financial institution or more
importantly, the investment manager catch the error —there was an extra
12M sitting in a demand account at 6/30/16 and no one identified it or at
least called it to the Town's attention?
o Fortunately, no one took advantage of the situation so no money was lost
other than the opportunity loss of the interest sitting in a demand account
Item 2 of the Agenda asks the Finance Committee to "receive" the fiscal Q1
16/17 report and the 5 months of Reconciled Demand Account Balances. Their
appears to be a significant inadequacy of internal controls. At a minimum I
would expect the Finance Committee would want to report this to the TC. I
would expect the Finance Committee would want to get greater assurance that
the restated numbers are now accurate.
I could imagine the Finance Committee would want to talk with the
Town's independent auditors to get their take on how this happened.
If this is a material inadequacy in internal control, I believe the
independent account needs to report it as such. The Finance Committee
would want to know if this was going to happen
I would expect the Finance Committee to issue a written or oral report to
the TC explaining the restatements for 5 months.
It would be hard to accept the report without getting comfortable in some
way that the restated numbers are accurate and that new procedures are
in place to ensure this does not happen again
Agenda Item 3: Quarterly Budget Performance & Operating Report
On a positive note - -the unaudited fiscal 15/16 showed an operating surplus of
2.66M after setting aside $2.88M of other uses (which included $2.52M to the
Almond Grove Reserve"
o But a question: Where is the additional $300K to be set aside in the
CaIPERS Reserve" per TC authorization?
o Why is there not a reserve for post- retirement medical when this was
recorded $400,000 as an assigned general fund reserve as of June 30,
2015. Has there been a change in spending intent?
On a positive note —the Town is reporting the components of the General
Fund Reserve in accordance with GASB #54, separately identifying Committed
and Assigned Reserves and the remaining Unassigned Reserve (See "Box ")
o But a question —Why is the Almond Grove Reserve so much less that the
12.2M adopted at the October 28, 2015 Council Meeting? Has the Town
already spent $3.7M?
o Another question —Both the Almond Grove Reserve and the CaIPERS
Reserve were established by TC resolutions, yet the former is reported as
Committed and the latter is presented as Assigned. Why are they
reported differently and how can we establish consistency?
o In the 6/30/16 General Fund balance , where is the reserve for
Compensated Absences ($1,692K after being reduced by $589K to fund
Almond Grove) and Vasona Land Sale ($411K) per the Oct 28, 2015
Council Resolution?
Do we therefore need to make up that difference, and if so, how and
when will that happen?
The June 2016 General Fund Reserve Report reflects the components in
accordance with GASB #54 while the 2015 report reflects the components
using a former standard —Could we please receive a reconciliation from
the 2015 reserve presentation /classification to the 2016 reserve
presentation /classification?
How do the reported QI '16/'17 amounts reflect the unresolved employee
wage negotiations? If an estimate is not provided, will the numbers be
restated at a later date?
Since the fiscal 15/16 audit has not been complete the reported numbers
are unaudited, are there any remaining open audit issues at this point and
if so, what are they? When do you expect the 2015/16 numbers to be
finalized?
What do you see as the area of greatest financial risks for the remainder
of fiscal 16/17? General [Possible answers could be i) continuing decline is
sales tax, ii) legal fees on North 40, iii) increased expense related to
employee post- retirement benefits (pensions & OPEB), iv)...
Just to note:
o Per page 6, the Q1 16/17 sales tax income of $2,081K includes a one -time
triple flip'true up" payment of $900K. If this is netted out, the apples
to apples Q1 numbers for 2015 and 2016 are $871K for fiscal 2015 and
1,182K for 2016
o Per page 14, the left most column reflects the unaudited fiscal 2015/16
excess of revenues over expenses of $2.666M
o Per page 14, the 3rd column from left and 6th column from left compare
Q1 fiscal 2016 to Q1 fiscal 2017. 2016 had a deficit of $1,406K and 2017
had a deficit of $1,185K. The Q1 2016 deficit would have been $2,085K if
it weren't for the one -time $900K triple flip payment explained on page 6.
I don't know if Q1 2016 had any unusual items or the year to year
increase in Q1 deficit of $679K is significant or if it's even an apples to
apples comparison.
o Per page 14, the 16/17 annual budget includes a revenue source of
8,459K for Almond Grove Project and $1.4M for Capital Projects
0
If the answers to the questions make sense, I see no reason why the Finance
Committee should not "receive" the fiscal Q1 16/17. But then I'm not sure what
receive" means. I would expect the Finance Committee to issue a written or
oral report to the TC to explain the major changes in Q1 2016/17 which would
include:
o Unaudited 2015/16 results show an excess of revenue over expenditures
of $2.666M
Adoption of GASB 54 for General Fund reserve reporting to Town Council
to be consistent with audited CAFR reporting which adopted GASB 54 in
the 2012 CAFROne time $900K triple flip sale tax revenue
An apples to apples year over year Q1 comparison showing a $679K
greater Q1 deficit
Anticipated employee costs do (do not) reflect the expected outcome of
union negotiations.
Report that the audit is not completed and that it is expected that it would
be completed approximately XXXX
On page 16 of the budget performance report, the GFAR Fund beginning
balance is $14.7m. If you add the budgeted revenues of $11.3m and
deduct the budgeted expenditures of $25.3m from the beginning balance,
this suggests the ending balance will be $807k. Does the Town think that
this is sufficient fund level to fund the future capital requirements for the
Town? What should a "normal" level be for the GFAR balance be as we
exit FY 2016?
Why we would focus on this is that the Town has already disclosed in the
2016 Capital Plan that there is over $10m in unfunded street maintenance
projects. It is hard for us to believe that drawing the GRAR down to
807,880 is prudent management. We are assuming that the entire
budgeted expenditures actually get spent this year.
Terry Duryea, Jak VanNada, Peter Hertan, Lee Fagot
Staff Responses to Questions Posed in Public Comments
1
Question: How did this material error occur?
Answer: The error only occurred in the Investment Report, with no effect on the Town’s books or
investment balances as accounted for in the Town’s financial system . The Town’s independent
audit firm would unlikely consider this to be a “material” error.
The mistake occurred when a column was added to the Treasurer’s cash reconciliation
worksheet to break out “wires in.” Adding a column for increased visibility of cash wires
allowed the Finance staff to ensure proper recording of the “wires in” receipts on the Town’s
books. Unfortunately, this action caused the Treasurer’s cash reconciliation worksheet to
erroneously omit the column for “wires in” as a part of the total monthly cash receipts on the
worksheet. The column was added in February 2016 so it affected the cash receipts presented
on the prior Investment Reports for the months of February through June 2016.
In summary, the cash balances were correctly accounted for on the Town books, but an error
occurred on the amount presented in the Investment Report which is why it is being brought
forward for correction to Town Council.
Question: Who prepared the Quarterly Investment Reports?
Answer: Steve Conway, the Director of Finance, gained this responsibility upon the retirement of
the former elected Town Treasurer who had previously been responsible for preparing the
Investment Reports. Mr. Conway prepared the recent Investment Reports and made the error in
the treasurer’s cash reconciliation worksheet total column. The running cash reconciliation
would typically have been cross checked against the standard monthly bank reconciliations;
however, due to the staff vacancy in the Accountant position, these monthly bank
reconciliations were not available by the deadline for the quarterly Investment Reports.
Question: Are there written accounting desk procedures requiring the Treasurer’s Fund Balance
as reported in the Investment Report to be reconciled on a monthly basis to the Town’s
accounting records and bank balances?
Answer: Yes. The Finance Department has written procedures for many finance processes,
including bank reconciliations, daily cash receipts, and accounts receivable reconciliation.
The Finance department lost two key staff positions in FY 2015/16. The most critical one was
the Town’s Accountant position, leaving a six month “catch up” on the standard bank
reconciliations. During this time of transition, the Director used the Treasurer’s cash
reconciliation worksheet to track the daily cash balances until the bank reconciliations could be
brought up to date. Unfortunately, that spreadsheet had an error but it was discovered by staff
through the Town’s internal controls once the bank reconciliations were brought up to date.
Attachment 4
2
Question: Who discovered the error and under what circumstances?
Answer: The Director of Finance discovered the error when preparing the First Quarter
Investment Report because the cash balances reported on the prior quarter Investment Report
were too low based on the completed total Town cash and investment reconciled balances.
Immediately upon discovery of the error, the Director informed the Town Manager and the
Town’s independent audit firm of the mistake and advised that a correction of the report would
be necessary and would be further explained in the First Quarter Investment Report for FY
2016/17.
The circumstances were related to staff vacancies and delayed work associated with bank
reconciliations as described above.
Question: In what demand account were the balances deposited? Is there a loss of interest?
Were the bank records correct?
Answer: There was no loss of interest due to the error. The cash “wires in” were all deposited to
the Town’s main checking account at Bank West Los Gatos. Interest is earned in the account
and credited to the account and is used to pay for monthly bank fees. The Town needs to keep
an average of $15 million in demand account compensating balances each month to avoid
being charged banking fees. As stated earlier, with the error affecting the Report only, all the
“wires in” were correctly accounted for by Bank West and also in the Town’s general ledger. All
demand account balances were credited with interest on the correct balances to offset the
monthly banking fees.
Question: Should the Town’s Investment Manager have noticed the error in the Investment
report?
Answer: The Town reconciles its investments (not checking account balances) to the monthly
Investment Manager’s reports and also the Town’s Investment Custodian (Bank of New York).
The Investment Managers do not manage or reconcile the Town’s demand (checking) accounts
so it is likely they would have observed the error as they have no access to the checking account
balances.
Question: Should the auditor make it a material finding on inadequacy of internal controls?
Answer: Town staff has not received a material finding from the auditor to date. The error was
discovered through the Town’s own internal control process which requires a full bank
reconciliation of all bank accounts. The error was discovered by the Director in comparing the
prior quarter’s investment report cash balances to the updated bank reconciliations for June 30,
2016. The mistake was limited to the Investment Report total only, it did not affect the audited
Town’s books, including the cash balances or investment balances as of June 30, 2016 and had
no impact to investments or investment earnings. Once the error on the report was discovered,
it was immediately reported to the auditors and Town management.
3
Question: What corrective actions have been taken in terms of retraining personnel and
implementing additional control procedures to insure this never occurs again.
Answer: Prior to discovering the error on the Investment Report, the Director of Finance had the
opportunity to work with Finance staff to bring the bank reconciliations up to date (to meet the
Town’s internal control requirements and also to have accounts reconci led for the FY 2015/16
audit). The Director changed the reconciliation process from a manually intensive process on
the Treasurer’s cash worksheet to an updated reconciliation process taking advantage of
monthly downloads from the Town’s general ledger database and secured data monthly
downloads from the Town’s bank. Finance also documented the steps in more detail in its desk
procedures to aid the new staff to successfully complete the bank reconciliation in a timely
manner.
The First Quarter budget reports for FY 2016/17 were prepared using these revised procedures
for the Town’s standard bank reconciliation of cash balances. Staff believes this type of error is
unlikely to happen again under the revised desk procedures for reconciling the Investment
Report.