STATE BOARD OF ADMINISTRATION
PARTICIPANT LOCAL GOVERNMENT ADVISORY COUNCIL MEMBER HANDBOOK
FEBRUARY
2009
CONTENTS SECTION I: SBA ORGANIZATION Background, Board of Trustees, Summary of Investment Responsibilities, Authority to Investment, Total Fund Investment Policy Statements, Organizational Chart
SECTION II: PLGAC DRAFT OPERATING PROCEDURES Creation, Term of Members, Election of Officers, Term of Officers, Removal of Officers, Members Responsibilities, Meeting Schedules, Agendas, Quorum, Voting, Location of Meetings and Travel
SECTION III: FLORIDA’S SUNSHINE LAW State of Florida Sunshine Law Applicability, Scope, Basic Requirements
SECTION IV: STANDARDS OF CONDUCT FOR PUBLIC OFFICERS
invest i n g f o r
Conflicts of Interest, Standards of Conduct
f ut ure
SECTION V: COMPARISON OF STATUTORY PROVISIONS: PLGAC AND IAC
FLORID A’S
SECTION VI: FIDUCIARY STANDARDS Applicability to SBA and its Advisors
SECTION VII: TRAVEL INFORMATION Planning and Approval, Per Diem, Classes of Travel, Transportation, Incidental Expenses, State Contracts
SECTION VIII: FLORIDA STATUTES ON THE LGIP AND FUND B
SBA
PARTIC IPAN T L O CAL G O VE RN M E N T ADVISORY C O U N CIL ME MBE R HAN DB O O K
SECTION I: SBA ORGANIZATION
BACKGROUND In November of 1942, the voters adopted a constitutional provision creating the State Board of Administration as a constitutional body, which succeeded to the power, control and authority of the statutory Board of Administration. See the Florida Constitution of 1885, art. IX, §16, which was incorporated by reference into the Florida Constitution of 1968 Article XII, §9(c)(2). The initial duty of the State Board of Administration, as set forth in the relevant constitutional provisions, was to administer the Second Gas Tax. The Constitution further provides that the State Board of Administration “Board” or “SBA” should also have “such powers as may be conferred upon it by law.” Throughout the last sixty years, the Legislature has added to the responsibilities of the SBA. BOARD OF TRUSTEES The SBA (Board) is comprised of the Governor, the Chief Financial Officer, and the Attorney General. The Board appoints the Executive Director and, pursuant to Section 215.441, F.S., reaffirms the appointment each year. The three members of the Board have delegated authority to the Executive Director. The Executive Director is responsible for managing and directing all investment policy and investment management functions, including the strategic and tactical allocation of investment assets, as well as administrative, personnel and budgeting functions. In addition, the Executive Director is charged with developing specific asset class investment portfolio objectives and policy guidelines. Specific duties are outlined in Rules 19-3.016 and 19-3.0161, Florida Administrative Code. SUMMARY OF INVESTMENT RESPONSIBILITIES The SBA is the state’s long-term investment and money management organization, investing in stocks, bonds, real estate, alternative investments, and cash equivalents. The principal laws conferring investment responsibilities are found in: • Section 121.151, F.S. - The Florida Retirement System, Defined Benefit Trust Fund • Section 121.450, F.S. - The Florida Retirement System, Defined Contribution Trust Fund • Section 215.5601, F.S. - The Lawton Chiles Endowment Fund. • Chapter 218. Part IV - The Local Government Surplus Funds Trust Fund & Fund B Surplus Funds Trust Fund • Section 215.69-215.73, F.S. - The Division of Bond Finance. • Section 215.555, F.S. - The Florida Hurricane Catastrophe Fund. • Section 24.120(2), F.S. - The Department of the Lottery.
State Attorney General, as Secretary BILL MCCOLLUM ST ATE BOARD OF ADM IN ISTRATIO N
Governor, as Chairman CHARLIECRIST
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State Chief Financial Officer, as Treasurer ALEX SINK
SBA
PARTIC IPAN T L O CAL G O VE RN ME N T ADVISORY C O U N CIL ME MBE R HAN DB O O K
SBA ORGANIZATION
AUTHORITY TO INVEST (Pension Plan, Investment Plan and Local Government Pool) Section 215.47, F.S., provides the umbrella investment authority for the SBA. Investment guidelines are developed for each portfolio that describes the authorized securities and constraints unique to each mandate. TOTAL FUND INVESTMENT POLICY STATEMENTS The SBA adopts specific investment policy guidelines for the management of its funds that reflect the appropriate risk, yield, and diversification requirements to meet its fiduciary obligations. For the Florida Retirement System (FRS), the SBA has adopted a Total Fund Investment Policy Statement (IPS), establishing asset allocation policy and investment guidelines to be utilized in the management of the FRS. With respect to the IPS for the Defined Benefit Plan (Pension Plan), Section 215.475(2), F.S., requires that “Prior to any recommended changes in the plan being presented to the board, the Executive Director of the board shall present such changes to the Investment Advisory Council for review. The council shall present the results of its review to the board prior to the board’s final approval of the plan or changes in the plan.”
MISSION STATEMENT The SBA is committed to providing superior investment and trust services while adhering to the highest ethical, fiduciary and professional standards.
For the Defined Contribution Plan (Investment Plan), Section 121.4501(14)(b), F.S., states that “Prior to presenting the statement, or any recommended changes thereto, to the state board, the Executive Director of the board shall present such statement or changes to the Investment Advisory Council for review. The council shall present the results of its review to the board prior to the board’s final approval of the IPS or changes in the IPS.” For the Local Government Investment Pool, Section 218.409 (2), F.S. , requires a investment policy for the LGIP which is annually updated to confirm with best investment practices. The investment policy must be reviewed by the Investment Advisory Council and the Participant Local Government Advisory Council.
ORGANIZATIONAL CHART BOARD OF TRUSTEES Governor Chief Financial Officer Attorney General INVESTMENT ADVISORY COUNCIL
AUDIT COMMITTEE
PARTICIPANT LGIP ADVISORY COUNCIL Executive Director & Chief Investment Officer
General Counsel
Chief of Internal Audit
Deputy Executive Director
Inspector General
Director of Communications
Chief Operating Officer
Senior Investment Policy Officer
Senior Officer Defined Contribution Programs
*Executive Director of Florida Prepaid College Programs
*Director of Bond Finance *Reports to other Boards
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Chief Operating Officer of Florida Hurricane Catastrophe Fund
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Senior Officer Corporate Governance
SBA
PARTIC IPAN T L O CAL G O VE RN M E N T ADVISORY C O U N CIL ME MBE R HAN DB O O K
SBA ORGANIZATION
SBA CONTACT INFORMATION Name
Title
Phone
Email
Ash Williams
Executive Director
413-1250
[email protected]
Kevin SigRist
Deputy Executive Director
413-1005
kevin sigrist@sbafla com
Dennis MacKee
Communications Director
413-1251
[email protected]
James Francis
Local Government Client Coordinator
413-1382
james francis@sbafla com
Gwenn Thomas
Chief Operating Officer
413-1393
[email protected]
Robert Copeland
Senior Operating Officer Financial Operations & Accounting
413-1212
[email protected]
Lori Guido
Director of Financial Operations
413-1240
lori guido@sbafla com
Susan Crowswell
Investment Operations Specialist
413-1259
[email protected]
Nina Sellars
Investment Operations Manager
413-1252
[email protected]
SBA TRAVEL SUPPORT TEAM Carol Lawyer
Travel Manager
413-1215
carol lawyer@sbafla com
Suzette Parramore
Travel Analyst
413-1239
[email protected]
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PARTIC IPAN T L O CAL G O VE RN ME N T ADVISORY C O U N CIL ME MBE R HAN DB O O K
SECTION II: PLGAC DRAFT OPERATING PROCEDURES
PARTICIPANT LOCAL GOVERNMENT ADVISORY COUNCIL CREATION The Participant Local Government Advisory Council was created in 2008 in Senate Bill 2422, which amended section 218 of the Florida Statutes. The members of the Council are appointed by the Board and are subject to confirmation by the Senate. Members must possess special knowledge, experience, and familiarity obtained through active, long-standing, and material participation in the dealings of the trust fund. Members are appointed for 4-year terms. A vacancy is filled for the remainder of the unexpired term. The Council annually elects a chair and a vice chair from its membership. A member may not be elected to consecutive terms as chair or vice chair. The Council reviews the administration of the trust fund and makes recommendations regarding such administration to the trustees. The Council shall prepare and submit a written biennial report to the Trustees, the Investment Advisory Council, and the Joint Legislative Auditing Committee that describes the activities and recommendations of the council. TERM OF MEMBERS The six members of the Participant Local Government Advisory Council, pursuant to Section 218.409, F.S., be appointed by the Trustees subject to confirmation by the Florida Senate for four-year terms. Resignations, death, incapacity, or other inability to serve shall be brought to the attention of the Board by the Executive Director of the SBA as soon as possible. A vacancy shall be filled for the remainder of the term. ELECTION OF OFFICERS The first quarter of each calendar year, the Participant Local Government Advisory Council shall elect a Chair and a Vice Chair from its membership. A majority vote is required to elect an officer. If an officer’s position becomes vacant, an election shall be held as soon as possible to fill the position. Officers duties are: The CHAIR shall: a) Preside at all meetings. b) Set quarterly meeting dates that accommodate a quorum of the Participant Local Government Advisory Council members and appropriate senior staff representation, including investment consultants. c) Coordinate with the Executive Director on meeting agendas. The VICE CHAIR shall: a) In the absence of the Chair, preside at all Participant Local Government Advisory Council meetings and have the duties, responsibilities and prerogatives of the Chair. TERM OF OFFICERS The term of office is one year and a member may not be elected to consecutive terms as Chair or Vice Chair. Once elected, the Chair and Vice Chair shall serve until such officer resigns, is removed, is unable to serve or the officer’s term of office expires. REMOVAL OF OFFICERS A majority of the Participant Local Government Advisory Council members may vote to remove an officer. MEMBERS GENERAL RESPONSIBILITIES It is an Participant Local Government Advisory Council member’s duty and responsibility to: a) Prepare for and participate in each Participant Local Government Advisory Council meeting. b) Attend regular meetings and special meetings when possible. c) Provide SBA staff with at least 24 hours notice prior to the meeting if he or she has confirmed attendance for a meeting and later realizes that he or she must cancel. The same advance should be given when a member will need to leave a meeting early. d) Inform the Executive Director when participation in a meeting will be by phone. e) Adhere to the highest standards of ethical behavior. f) Abide by the requirements of Florida’s Sunshine Law. A summary of the requirements of this law is contained on page 7.
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PARTIC IPAN T L O CAL G O VE RN M E N T ADVISORY C O U N CIL ME MBE R HAN DB O O K
PLGAC DRAFT OPERATING PROCEDURES
MEETING SCHEDULES The Participant Local Government Advisory Council meets quarterly. The Chair, at the end of each meeting, will attempt to schedule the next meeting by confirming the date and polling the members to obtain confirmation as to whether a quorum will be present. If the next meeting cannot be scheduled at that time, the SBA staff will later contact members to schedule the next meeting. AGENDAS Agendas listing discussion topics and issues shall be furnished to each member approximately seven days prior to the meeting. In the interest of adhering to scheduled meeting times, members are encouraged to focus on approved agenda items. Any member who wishes to add an item to the agenda should contact the Executive Director at least three (3) weeks prior to the next scheduled meeting and provide all pertinent information on the issue. All items subject to a vote should be listed on the Agenda as “Action Required” in order to ensure that all members and the public have advance notice. QUORUM A quorum (i.e. four (4) members) of the Participant Local Government Advisory Council is required when the Participant Local Government Advisory Council votes on any matter to be taken before the Trustees. For the purpose of determining whether there is a quorum, attendance shall be defined as either a physical presence or as participation by any other means that allows the Participant Local Government Advisory Council members to communicate simultaneously with those members who are present (i.e. via telephone, video conference, etc). In addition, if a member must abstain from voting on an issue for ethical reasons, that member may be counted for purposes of computing a quorum for a vote on that question. Once a quorum is present, a majority of those members actually voting is sufficient to decide the issue. VOTING All voting shall be by roll call vote and all issues subject to a vote will be decided by a majority of those voting. A member shall be deemed to have a conflict of interest, and shall refrain from voting or influencing decisions on any issue that the member knows would inure to the private gain or loss of the member, or any principal or parent organization or subsidiary of a corporate principal by whom the member is retained, or which the member knows would inure to the special private gain or loss of a relative or business associate of the member. Agenda Items Requiring a Vote a) Election and removal of officers. b) Items noted “Action Required.” c) Items the Chair would like to take action on. d) Other matters where there is a need for clarity with regard to the Participant Local Government Advisory Council’s position. LOCATION Meetings shall be held in Tallahassee, Florida, unless special circumstances arise. TRAVEL Members will be reimbursed for reasonable travel expenses in accordance with the travel guidelines provided in Section VII of this handbook.
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SBA
PARTIC IPAN T L O CAL G O VE RN ME N T ADVISORY C O U N CIL ME MBE R HAN DB O O K
SECTION III: FLORIDA’S SUNSHINE LAW
APPLICABILITY Section 286.011, F.S., a/k/a “The Sunshine Law,” applies to the activities of the Participant Local Government Advisory Council. The Florida Supreme Court, in the Town of Palm Beach v. Gradison, 296 So.2d 473 (Fla. 1974), in response to an argument that an advisory council should not be subject to the Sunshine Law because it had no power to bind the state, held that “advisory boards whose powers are limited to making recommendations to a public agency and which possess no authority to bind that agency in any way are subject to the Sunshine Law.” The Florida Supreme Court has held that the Sunshine Law, since it was enacted to protect the public, should be so construed to give the law broad application while the exemptions from the law should be narrowly construed. Board of Public Instruction of Broward County v. Doran, 224 So.2d 693 (Fla. 1969). SCOPE OF THE SUNSHINE LAW The Sunshine Law applies to any gathering, including by telephone, of two or more advisory council members where such members discuss matters that will foreseeably come before the Council. BASIC REQUIREMENTS a) Members should not discuss information or issues likely to come before the Participant Local Government Advisory Council with any other member outside of a regularly scheduled and noticed meeting; b) Members should not discuss issues brought or likely to be brought before the Participant Local Government Advisory Council at social events at which another PLGAC member may be present; and c) Members should not use a memorandum, email or similar communications to solicit comments from other members of the Participant Local Government Advisory Council on issues brought or likely to be brought before the Participant Local Government Advisory Council as this would be viewed as a communication subject to the Sunshine Law. ALL “MEETINGS” SUBJECT TO THE SUNSHINE LAW MUST BE: OPEN TO THE PUBLIC; NOTICED; AND, MINUTES MUST BE TAKEN AND PRESERVED. Open to the Public Any member of the public shall have access to all Participant Local Government Advisory Council meetings. The SBA ensures that all meetings of the PLGAC are held in a location that is readily accessible to the general public and, upon notice of the need, accommodations are provided for those with disabilities. Noticed The SBA staff will ensure that all meetings of the Participant Local Government Advisory Council are properly and timely filed for public notice in the Florida Administrative Weekly. Minutes The official minutes of the Participant Local Government Advisory Council meetings will consist of a transcript unless special circumstances arise. The transcript will be available to the public electronically. There will be a nominal charge to the public for copies of transcripts in paper form or on a disk. Minutes will be distributed at the subsequent regularly scheduled meeting.
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PARTIC IPAN T L O CAL G O VE RN M E N T ADVISORY C O U N CIL ME MBE R HAN DB O O K
SECTION IV: STANDARDS OF CONDUCT FOR PUBLIC OFFICERS
Participant Local Government Advisory Council members are to adhere to the highest ethical standards and must not engage in activities that would impair the confidence of the public, the members of the SBA, the SBA’s beneficiaries or the Legislature, or impair the ability of the PLGAC to carry out its duties or the ability of the PLGAC to support the SBA in accomplishing its mission and purpose. CONFLICTS OF INTEREST A member shall be deemed to have a conflict of interest as to any issue which the member knows would inure to his or her private gain or loss, which the member knows would inure to the private gain or loss of any principal or parent organization or subsidiary of a corporate principal, by whom the member is retained, or which the member knows would inure to the special private gain or loss of a relative or business associate of the member. A member shall promptly give notice of any conflicts of interest. If a conflict of interest arises and is apparent before the meeting, the member must give advance notice to the SBA staff. If a conflict of interest becomes apparent during a meeting, the member should immediately inform the Chair or Vice Chair or member presiding as Chair. The conflicted member shall recuse him or herself from any activity of the PLGAC in the area of the conflict. If a member is unsure whether a conflict of interest in fact exists, the member should consult with the Executive Director of the SBA. If it is determined that an advisory opinion from the Florida Commission on Ethics is appropriate, the request will be submitted either directly by the member or by the SBA on behalf of the member. STANDARDS OF CONDUCT Florida has been a leader among the states in establishing ethics standards for public officials. The State Constitution was revised in 1968 to require that a code of ethics for all state employees and non-judicial officers prohibiting conflict between public duty and private interests be prescribed by law. The “Code of Ethics for Public Officers and Employees” adopted by the Legislature is found in Chapter 112 (Part III) of the Florida Statutes. The Code ensures that public officials conduct themselves independently and impartially, not using their offices for private gains other than compensation provided by law. The “Code of Ethics for Public Officers and Employees” apply generally to all public officers and employees, State and local, including members of advisory bodies. The following descriptions of these laws are generalized. Therefore, we strongly suggest that you review the wording of the actual law. A. PROHIBITED ACTIONS OR CONDUCT 1. Solicitation and Acceptance of Gifts PLGAC Members are prohibited from soliciting or accepting anything of value, such as a gift, loan, reward, promise of future employment, favor, or service that is based on an understanding that their vote, official action, or judgment would be influenced by such gift. 2. Unauthorized Compensation PLGAC Members and their spouses and minor children are prohibited from accepting any compensation, payment, or thing of value when they know, or with the exercise of reasonable care should know, that it is given to influence a vote or other official action. 3. Misuse of Public Position PLGAC Members are prohibited from corruptly using or attempting to use their official positions to obtain a special privilege for themselves or others. 4. Disclosure or Use of Certain Information PLGAC Members are prohibited from disclosing or using information not available to the public and obtained by reason of their public positions for the personal benefit of themselves or others.
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PARTIC IPAN T L O CAL G O VE RN ME N T ADVISORY C O U N CIL ME MBE R HAN DB O O K
STANDARDS OF CONDUCT FOR PUBLIC OFFICERS
B. PROHIBITED EMPLOYMENT AND BUSINESS RELATIONSHIPS 1. Doing Business with the PLGAC or SBA (a) PLGAC members acting in an official capacity are prohibited from purchasing, renting, or leasing any realty, goods, or services for the PLGAC or SBA from a business entity in which the PLGAC member, his or her spouse, or child own more than a 5% interest. (b) A PLGAC member, acting in a private capacity, also is prohibited from renting, leasing, or selling any realty, goods, or services to the PLGAC or SBA. 2. Conflicting Employment or Contractual Relationship (a) A PLGAC member is prohibited from holding any employment or contract with any business entity or agency regulated by or doing business with the PLGAC or SBA. (b) A PLGAC member is prohibited from holding any employment or having a contractual relationship which will pose a frequently recurring conflict between private interests and public duties or which will impede the full and faithful discharge as a member of the PLGAC. C. DISCLOSURES (a) Members of the PLGAC are not required to file a financial disclosure because their charge is solely advisory in nature and there is no budget or appropriation allocated to carry out such charge.
D. PENALTIES FOR VIOLATIONS OF THE CODE OF ETHICS There are no criminal penalties for violation of the Sunshine Amendment and the Code of Ethics. Penalties for violation of those laws may include: • Impeachment • Removal from office • Suspension • Public censure, reprimand, demotion • Reduction in salary level, forfeiture of no more than one third salary per month for no more than twelve months • Civil penalty not to exceed $10,000 • Restitution of any pecuniary benefits received
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PARTIC IPAN T L O CAL G O VE RN M E N T ADVISORY C O U N CIL ME MBE R HAN DB O O K
SECTION V: COMPARISON OF STATUTORY PROVISIONS: PLGAC AND IAC
Issue
Participant Local Government Advisory Council
Investment Advisory Council
1
Creation
Established pursuant to 2008 session legislation.
Established pursuant to 1983 session legislation. Ch. 83-270, L.F.
2
Purpose
“There is created a six-member Participant Local Government Advisory Council for the purposes of regularly reviewing the administration of the trust fund and making recommendations regarding such administra ion to the trustees.” s. 218.409(10)(a)
“There is created a six-member Investment Advisory Council to review the investments made by the staff of the Board of Administration and to make recommendations to the board regarding investment policy, strategy, and procedures.” s. 215.444(1)
3
Appointment
“The members of the council shall be appointed by the board and subject to confirmation by the Senate.” s. 218.409(10)(a)
Identical, in s. 215.444(2), F.S.
4
Prerequisites
“Members must possess special knowledge, experience, and familiarity obtained through active, long-standing, and material participation in the dealings of the trust fund.” s. 218.409(10)(a)
“These individuals [IAC members] shall possess special knowledge, experience, and familiarity with financial investments and portfolio management.” s. 215.444(2)
5
Term
“Each member shall serve a 4-year term. Any vacancy shall be filled for the remainder of the unexpired term.” s. 218.409(10)(a)
Members shall be appointed for 4-year terms. A vacancy shall be filled for the remainder of the unexpired term.” s. 215.444(2)
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Officers
“The council shall annually elect a chair and vice chair from within its membership. A member may not serve consecutive terms as chair or vice chair.” s. 218.409(10)(a)
Identical, in s. 215.444(2), F.S.
7
Policy Review LGIP
“The investment policy [for the LGIP] shall be reviewed and approved annually by the trustees or when market changes dictate, and in each event the investment policy shall be reviewed by the Investment Advisory Council and by the Participant Local Government Advisory Council.” s. 218.409(2)(d)
Applies identically.
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Policy Review – Fund B
“The investment policy [for the Fund B Surplus Funds Trust Fund] shall be reviewed and approved by the trustees upon the transfer of the funds into the trust fund or when market changes dictate, and in each event, the investment policy shall be reviewed by the Investment Advisory Council and by the Participant Local Government Advisory Council.” s. 218.421(2)(c)
Applies identically.
9
Policy Review – FRS DB
n/a
“Prior to any recommended changes in the [FRS Pension Plan Investment Policy Statement] being presented to the board, the executive director of the board shall present such changes to the Investment Advisory Council for review. The council shall present the results of its review to the board prior to the board’s final approval of the IPS or changes in the IPS.” s. 215.475(2)
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Policy Review – FRS DC
n/a
“Prior to presenting the [FRS Investment Plan Investment Policy] statement, or any recommended changes thereto, to the state board, he executive director of the board shall present such statement or changes to the Investment Advisory Council for review. The council shall present the results of its review to the board prior to the board’s final approval of the statement or changes in the statement. s. 121.4501(14)(b)
11
Assistance – FRS DC
n/a
“The Investment Advisory Council shall assist the board in implementing and administering the Public Employee Optional Re irement Program [a.k.a. FRS Investment Plan].” s. 121.4501(12)
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Exception Review – All Funds
n/a
Notwithstanding the investment limitations of s. 215.47, F.S., the Board may invest up to 5 percent of any fund in any manner deemed appropriate by the board. “Prior to the board engaging in any investment activity not otherwise authorized under ss. 215.44215.53, excluding investments in publicly traded securities, options, financial futures, or similar instruments, the board shall present to the Investment Advisory Council a proposed plan for such investment… The Investment Advisory Council may obtain independent investment counsel to provide expert advice with regard to such proposed investment activity by the board, and the board shall defray such costs. s. 215.47(6)
ST ATE BOARD OF ADM IN ISTRATIO N
Ch. 2008-59, L.F.
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SBA
PARTIC IPAN T L O CAL G O VE RN ME N T ADVISORY C O U N CIL ME MBE R HAN DB O O K
COMPARISON OF STATUTORY PROVISIONS: PLGAC AND IAC
Issue
Participant Local Government Advisory Council
Investment Advisory Council
13
Issue Report
“The council shall prepare and submit a written biennial report to the board, trustees, the Investment Advisory Council, and the Joint Legislative Auditing Committee that describes the activities and recommendations of the council.” s. 218.409(10)(b)
IAC (et al) receives biennial report from PLGAC.
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Receive Report - LGIP
“The board or a professional money management firm shall provide a report, at a minimum monthly or upon the occurrence of a material event, to every participant having a beneficial interest in the [LGIP] trust fund, the board’s executive director, the trustees, the Joint Legislative Auditing Committee, the Investment Advisory Council, and the Participant Local Government Advisory Council.” s. 218.409(6)(a)
Applies identically.
15
Request Information - LGIP
“The board or a professional money management firm shall furnish upon request the details of an investment transaction [in the LGIP] to any participant, the trustees, the Investment Advisory Council, and the Participant Local Government Advisory Council.” s. 218.409(6)(a)2.
Applies identically.
16
Receive Notice - LGIP
If the Executive Director limits contributions to or withdrawals from the LGIP (limited to 48 hours) “Such action shall be immediately disclosed to all participants, the trustees, the Joint Legislative Auditing Committee, the Investment Advisory Council, and the Participant Local Government Advisory Council.” s. 218.409(8)(a)
Applies identically.
17
Receive Audit LGIP
“The Auditor General shall conduct an annual financial audit of the [LGIP] trust fund, which shall include testing for compliance with the investment policy. The completed audit shall be provided to the participants, the board, the trustees, the Investment Advisory Council, the Participant Local Government Advisory Council, and the Joint Legislative Auditing Committee. As soon as practicable, but no later than 30 days after completion of the audit, the trustees shall report to the Joint Legislative Auditing Committee that the trustees have reviewed the audit of the trust fund and shall certify that any necessary items are being addressed by a corrective action plan that includes target completion dates.” s. 218.409(9
Applies identically.
18
Receive Report – Fund B
“The board or a professional money management firm shall provide a report at a minimum, monthly, or upon the occurrence of a material event, to every participant having a beneficial interest in the [Fund B] trust fund, the board’s executive director, the trustees, the Joint Legislative Auditing Committee, the Investment Advisory Council, and the Participant Local Government Advisory Council.” s. 218.421(3)(a)
Applies identically.
19
Request Information – Fund B
“The board or a professional money management firm shall furnish upon request the details of an investment transaction [in Fund B] to any participant, the trustees, the Investment Advisory Council, and the Participant Local Government Advisory Council.” s. 218.421(3)(a) 3.
Applies identically.
20
Receive Auditor Report – Fund B
“Unless the Fund B Surplus Funds Trust Fund has been terminated by law or through self-liquidation, prior to the 2013 Regular Session of the Legislature, the Auditor General shall review the trust fund and the steps taken up to that time to return as much of the principal to the participants as possible and provide a summary report to the board, the trustees, the President of the Senate, the Speaker of the House of Representatives, the Investment Advisory Council, and the Participant Local Government Advisory Council.” s. 218.422
Applies identically.
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SBA
PARTIC IPAN T L O CAL G O VE RN M E N T ADVISORY C O U N CIL ME MBE R HAN DB O O K
SECTION VI: FIDUCIARY STANDARDS
ADVISORS TO FIDUCIARIES • To advise a fiduciary, one must understand fiduciary standards and prohibitions • Using lower or different standards can lead to problems • This applies to fiduciary and non-fiduciary advisors AN UNUSUALLY HIGH STANDARD • In a corporation, the “business judgment rule” applies to the Board of Directors – except for ERISA matters • A higher standard, the ERISA fiduciary standard, applies to the SBA under Florida law • In particular, the ERISA fiduciary prudence standard reflects an evolution of trust law and is considered the highest standard of care • The boards of corporations and non-profit organizations are not the standards to be followed THE LAW - FLORIDA S. 215.47(10), Florida Statutes • The board shall discharge its duties with respect to a plan solely in the interest of its participants and beneficiaries. • The board in performing the above investment duties shall comply with the fiduciary standards set forth in the Employee Retirement Income Security Act of 1974 at 29 U.S.C. s. 1104(a)(1)(A) through (C). • In case of conflict with other provisions of law authorizing investments, the investment and fiduciary standards set forth in this subsection shall prevail. THE LAW - ERISA (U.S.C. S. 1104(A)(1)(A) THROUGH (C)) § 1104. Fiduciary duties (a) Prudent man standard of care (1) Subject to sections 1103 (c) and (d), 1342, and 1344 of this title, a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and— (A) for the exclusive purpose of: (i) providing benefits to participants and their beneficiaries; and (ii) defraying reasonable expenses of administering the plan; (B) with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; [and] (C) by diversifying the investments of the plan so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so BASIC FIDUCIARY DUTIES • The duty of loyalty • The duty of prudence LOYALTY TO WHOM? Fiduciaries are to act solely for the benefit of the beneficiaries of the trust in question No fiduciary duty is owed to: • the general population of Florida • taxpayers • special interest groups LOYALTY • The SBA’s job is not to “balance the interests” of the State or the taxpayers • The SBA’s job is not to please everyone who wants money from the SBA • Under trust law, the SBA must act solely in the interest of the beneficiaries of the applicable trust CONFLICTS OF INTEREST • Avoid self-dealing • Doing business with the trust • Avoid self-enrichment • Monetary gain for yourself, your family, your employer, or business partners or associations • Avoid the appearance of impropriety • Undue pressure or influence • Full disclosure cures most problems ST ATE BOARD OF ADM IN ISTRATIO N
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PARTIC IPAN T L O CAL G O VE RN ME N T ADVISORY C O U N CIL ME MBE R HAN DB O O K
FIDUCIARY STANDARDS
THE ERISA PRUDENCE STANDARD • Fiduciaries must discharge their duties “… with the care, skill, prudence, and diligence • under the circumstances then prevailing • that a prudent man acting in a like capacity • and familiar with such matters would use • in the conduct of an enterprise of a like character and with like aims…” PRUDENCE • The ERISA standard calls for expertise • Fiduciaries need to be experts or hire experts • Delegation to or input from experts (in-house or outside) is required under the law • Delegation of responsibility is not the same as abdication of responsibility • A prudent process of delegating duties is what the law requires THE DUTIES OF LOYALTY AND PRUDENCE • Fiduciaries must act for the exclusive benefit of the beneficiaries • Careful, thorough, and scrupulous behavior is expected • A good process is more important than a good outcome • “A pure heart and an empty head” are not enough • Expertise is required, not mere good faith WHO ARE THE FIDUCIARIES? A person’s fiduciary duty is limited to the scope of responsibility they assume • Trustees have the broadest scope of responsibility • The Executive Director has nearly the same broad scope • Some SBA staff members have more specific fiduciary duties and responsibilities HOW • • • •
DOES ONE BECOME A FIDUCIARY FOR THE SBA? By being named a trustee in the statute By accepting certain responsibilities as staff By agreeing to fiduciary standards in a contract By becoming a “de facto” fiduciary by assuming a decision-making role
CONSEQUENCES OF A FIDUCIARY BREACH If a court finds that a fiduciary failed in his duty of prudence or loyalty, there are serious potential consequences. These include: • Removal of the fiduciary • Order to repay the fund for its losses (which could possibly include lost profits, etc.) or other damages • In Florida, the Trustees, the Executive director, SBA staff and probably IAC and PLGAC members are entitled to sovereign immunity, except with respect to acts or omissions involving bad faith, malicious purpose, or wanton/willful disregard of property SUMMARY • Fiduciary standards are very high • The duties of loyalty and prudence are non-negotiable • Anyone who advises fiduciaries needs to understand • What is required • What is prohibited • What are the risks
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SECTION VII: TRAVEL INFORMATION
PLANNING AND APPROVAL OF TRAVEL Proper planning is essential to ensure that reimbursement for travel expenses will comply with the Board’s policy. In areas where clarity is necessary, please refer to the Florida Statutes 112.061, the specific contract agreement, and/or the State Board of Administration’s Office of Travel Services. As part of the pre-audit procedure, the State of Florida contracts are used as a measuring tool for determining if air transportation expenses incurred are within the guidelines. On occasion, the need to purchase a ticket at a fare other than a regular coach fare or the contract rate (when applicable) may arise and additional expenses may be incurred. In these situations, a brief description and justification for the variance should be attached to the travel reimbursement form. Personal preference for a particular airline is not sufficient justification for failure to utilize the contract rate (when available) or regular coach fares when additional expenses are incurred. Adequate planning is a necessity in order to determine the most appropriate departure and return times. Travelers are allowed reasonable but not excessive travel time for departure to and from business engagements. Rental cars should be used in instances when it is more effective or economical than taxi fares. In determining the necessity of renting a vehicle, the daily cost, parking expense and fuel charge should be considered. The Board realizes that travel occurrences are not always the same and that unique incidents occur. In the event that unusual situations occur, the traveler should include an explanation describing the incident in order to justify additional expenses incurred. PER DIEM AND SUBSISTENCE ALLOWANCE The traveler has the option of selecting one of the following methods for calculating the amount of reimbursement for travel expenses: a) Up to eighty dollars ($80) per day ($20.00 per six hour quarter); or b) If actual expenses exceed $80 per day, the amount permitted is up to the maximum standard meal allowance plus actual expenses for lodging at a single occupancy rate. The maximum meal allowances are as follows: a) Breakfast $6.00 . . .
travel begins before 6:00 a.m. and extends beyond 8:00 a.m.
b) Lunch $11.00 . . . travel begins before 12:00 p.m. and extends beyond 2:00 p.m. c) Dinner $ 19.00 . . . travel begins before 6:00 p.m. and extends beyond 8:00 p.m. CLASSES OF TRAVEL Class A Travel (Continuous travel of 24 hours or more from headquarters) Section 112.061(5)(a), Florida Statutes, defines a travel day for Class A travel as a calendar day (midnight to midnight). Each calendar day will consist of four (4) quarters (six hours each). Travelers in Class A status may claim reimbursement based on the per diem rate (four (4) quarters per day) for some days and lodging cost at the single occupancy rate plus the standard meal allowances for other days while on the same trip. The traveler must select a travel reimbursement option at the beginning of each travel day. Any change(s) in the reimbursement option must also be effective at the beginning of a travel day (midnight). Class B Travel (Continuous travel of less than 24 hours which requires overnight stay) Class B travel day will begin at the same time as the departure time. The day will consist of four (4) quarters (six hours each). The first quarter shall begin at the time of departure. Travelers in Class B status may claim reimbursement based on per diem (four (4) quarters per 24 hours) or lodging cost at the single occupancy rate plus the standard meal allowances. However, only one method of calculating the amount of reimbursement may be used per trip.
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TRAVEL INFORMATION
Class C Travel (One day travel) Section 112.061(5)(a), Florida Statutes, defines a travel day for Class C travel as travel in which all official business is complete within one day. Travelers in Class C status may be reimbursed for business incidental expenses only, not including meals. METHODS OF TRANSPORTATION A direct or commonly traveled route and/or method should be used when traveling. If a traveler uses an indirect route for personal convenience, any extra costs incurred will be at the traveler’s expense. Air Travel The traveler must use the State of Florida’s Scheduled Aircraft Transportation Contract when available, unless a more economical rate is attainable. If the traveler chooses to use a class other than coach, reimbursement will be adjusted to the coach fare. Written documentation regarding the coach fare at the time of travel, should be provided to assist in the reimbursement process - other wise, adjustments will be made using the most recent published coach airfares. Commercial Car Rental The State of Florida’s rental vehicle contract is used as a measuring tool for determining if rental expenses incurred are within the Board’s guidelines. The traveler should request a compact class vehicle unless the number of passengers, the distance of travel, and/or materials transported makes use of a compact car impractical. If a traveler chooses to use a class of vehicle other than compact for personal preference, reimbursement will be based on actual cost, not to exceed $75 per day. Private Vehicle Travelers may use a privately owned vehicle when the mileage costs would be less than the amount expended for commercial air transportation or commercial vehicle rental charges. The allowance for use of a private vehicle is $.445 per mile. Map mileage in Florida is based on the official state road map published by the Department of Transportation. Map mileage outside of Florida is estimated based on official mileage charts and other map sources. Private Aircraft Travelers may use privately owned aircraft if desired. Travel reimbursement will be based on the amount requested up to the cost of the most economical direct coach fare or the mileage rate as specified by Florida Statute 112.061(7). Other Transportation Services Public transportation, such as train, subway, taxi service or bus may be used for business purposes. If a traveler chooses to use private car services, the reimbursement will be adjusted to the comparable rate of a taxi service. This adjustment will be based on information that is available at the time of reimbursement. In situations where only private car services are available, please note this when requesting reimbursement. INCIDENTAL EXPENSES The following ordinary incidental expenses may be reimbursed by the Board under Section 112.061(6)(a); Florida Statutes • Lodging costs (standard room rate) • Taxi fares (business purposes only) • Ferry fares • Bridge, road, and tunnel tolls • Storage or parking fees • Communications (business calls, fax, remote services and express mail) • Registration fees
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TRAVEL INFORMATION
Reasonable tips and gratuities under the following conditions: 1) Actual tips paid to taxi drivers up to 15% of the base fare. 2) Actual tips paid for mandatory valet parking not to exceed $1 per occasion. 3) Actual portage charges paid not to exceed $1 per bag. The maximum reimbursement per occasion is $5 based on a maximum of five bags. An occasion is defined as any circumstance in which business baggage is required to be moved from one location to another location. Other incidental expenses under the following special conditions: 1) Actual laundry and pressing expenses when official business exceeds seven days and such expenses are necessarily incurred to complete the official business portion of the trip. 2) Actual passport and visa fees required for official travel. 3) Actual and necessary fees charged to purchase traveler checks for official business. Actual fees charged to exchange currency necessary to pay official travel expenses. 4) Actual cost of maps necessary to conduct official business. A written explanation is required for in-state lodging when the base hotel cost exceeds $200 and out-of-state lodging when the base hotel cost exceeds $300. Original receipts are required for any incidental expenses that exceed $25.00 STATE TRAVEL CONTRACTS STATE OF FLORIDA RENTAL VEHICLE CONTRACT The State of Florida has a rental vehicle contract with Avis effective through June 30, 2009. When using vendors other than Avis, the contract is used as a measuring tool to ensure that a comparable rental rate is obtained. For additional information, you may view the State of Florida contract at: http://www.myflorida.com/st_contracts/518020991. For reservations, call 1-800-338-8211 and refer to Avis No. A113400. STATE OF FLORIDA AIRCRAFT CONTRACT Presently, the State of Florida does not have an aircraft contract. When making reservations, a regular coach fare should be used as a measuring tool to ensure that the most economical rate is obtained.
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SECTION VIII: FLORIDA STATUTES ON THE LGIP AND FUND B
PART IV INVESTMENT OF LOCAL GOVERNMENT SURPLUS FUNDS 218.40 Short title. 218.401 Purpose. 218.403 Definitions. 218.405 Local Government Surplus Funds Trust Fund; creation; objectives; certification; interest; rulemaking. 218.407 Local government investment authority. 218.409 Administration of the trust fund; creation of advisory council. 218.417 Fund B Surplus Funds Trust Fund. 218.418 Definitions. 218.421 Fund B Surplus Funds Trust Fund; purpose; rulemaking; administration; reporting. 218.422 Fund B Surplus Funds Trust Fund; review.
218.40 Short title.-This part shall be known, and may be cited, as the “Investment of Local Government Surplus Funds Act.”
218.401 Purpose.-It is the intent of this part to promote, through state assistance, the maximization of net interest earnings on invested surplus funds of local units of government, based on the principals of investor protection, mandated transparency, and proper governance, with the goal of reducing the need for imposing additional taxes. 218.403 Definitions.--The following words or terms, when used in this part, shall have the following meanings: (1) “Board” means the State Board of Administration. (2) “Chief Financial Officer” means the mayor, manager, administrator, clerk, comptroller, treasurer, director of finance, or other local government official, regardless of the title of his or her office, charged with administering the fiscal affairs of a unit of local government. (3) “Current expenses” means expenses to meet known cash needs and anticipated cash-flow requirements for the short term. (4) “GASB” means the Governmental Accounting Standards Board. (5) “GFOA” means the Government Finance Officers Association. (6) “Governing body” means the body or board in which the legislative power of a unit of local government is vested. (7) “Short term” means a maximum of 6 months of operation. (8) “Surplus funds” means any funds in any general or special account or fund of a unit of local government, or funds held by an independent trustee on behalf of a unit of local government, which in reasonable contemplation will not be immediately needed for the purposes intended. (9) “Trust fund” means the pooled investment fund created by s. 218.405 and known as the Local Government Surplus Funds Trust Fund. (10) “Trustees” mean the Trustees of the State Board of Administration. (11) “Unit of local government” means any governmental entity within the state not part of state government and shall include, but not be limited to, the following and the officers thereof: any county, municipality, school district, special district, clerk of the circuit court, sheriff, property appraiser, tax collector, supervisor of elections, authority, board, public corporations, or any other political subdivision of the state.
218.405 Local Government Surplus Funds Trust Fund; creation; objectives; certification; interest; rulemaking.-(1) There is hereby created a Local Government Surplus Funds Trust Fund to be administered by the board and to be composed of local government surplus funds deposited therein by units of local government under the procedures established in this part. The board may contract with a professional money management firm to manage the trust fund. (2) The primary objectives, in priority order, of investment activities shall be safety, liquidity, and competitive returns with minimization of risks. (3) The trustees shall annually certify to the Joint Legislative Auditing Committee that the trust fund is in compliance with the requirements of this part and that the trustees have conducted a review of the trust fund and determined that the management of the trust fund is in accord with best investment practices. (4) The board may adopt rules to administer the provisions of this section.
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218.407 Local government investment authority.-(1) Prior to any determination by the governing body that it is in the interest of the unit of local government to deposit surplus funds in the trust fund, the board or a professional money management firm must provide to the governing body enrollment materials, including a trust fund profile containing impartial educational information describing the administration and investment policy of the trust fund, including, but not limited to: (a) All rights and conditions of participation, including potential restrictions on withdrawals. (b) The historical performance, investment holdings, credit quality, and average maturity of the trust fund investments. (c) The applicable administrative rules. (d) The rate determination processes for any deposit or withdrawal. (e) Any fees, charges, penalties, and deductions that apply to the account. (f) The most recently published financial statements or independent audits, if available, prepared under generally accepted accounting principles. (g) A disclosure statement for signature by the appropriate local government official. (2) Upon review of the enrollment materials and upon determination by the governing body that it is in the interest of the unit of local government to deposit surplus funds in the trust fund, a resolution by the governing body and the signed acceptance of the disclosure statement by the local government official, who may be the chief financial or administrative officer of the local government, shall be filed with the board and, if appropriate, a copy shall be provided to a professional money management firm authorizing investment of its surplus funds in the trust fund established by this part. The resolution shall name: (a) The local government official, who may be the chief financial or administrative officer of the local government, or (b) An independent trustee holding funds on behalf of the unit of local government, responsible for deposit and withdrawal of such funds. (3) The board or a professional money management firm shall, upon the filing of the resolution, invest the moneys in the trust fund in the same manner and subject to the same restrictions as are set forth in s. 215.47. All units of local government that qualify to be participants in the trust fund shall have surplus funds deposited into a pooled investment account. (4) The provisions of this part shall not impair the power of a unit of local government to hold funds in deposit accounts with banking or savings institutions or to invest funds as otherwise authorized by law.
218.409 Administration of the trust fund; creation of advisory council.-(1) Upon receipt of the items specified in s. 218.407 from the local governing body, the board or a professional money management firm shall accept all wire transfers of funds into the trust fund. The board or a professional money management firm shall also wire-transfer invested local government funds to the local government upon request of the local government official named in the resolution. (2)(a) The trustees shall ensure that the board or a professional money management firm administers the trust fund on behalf of the participants. The board or a professional money management firm shall have the power to invest such funds in accordance with a written investment policy. The investment policy shall be updated annually to conform to best investment practices. The standard of prudence to be used by investment officials shall be the fiduciary standards as set forth in s. 215.47(9), which shall be applied in the context of managing an overall portfolio. Portfolio managers acting in accordance with written procedures and an investment policy and exercising due diligence shall be relieved of personal responsibility for an individual security’s credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and the liquidity and the sale of securities are carried out in accordance with the terms of this part. (b) Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with the proper execution and management of the investment program or that could impair their ability to make impartial decisions. Employees and investment officials shall disclose any material interests in financial institutions with which they conduct business on behalf of the trust fund. They shall further disclose any personal financial or investment positions that could be related to the performance of the investment portfolio. Employees and officers shall refrain from undertaking personal investment transactions with the same individual with whom business is conducted on behalf of the board. (c) The board or a professional money management firm and all employees have an affirmative duty to immediately disclose any material impact to the trust fund to the participants. To ensure such disclosure, a system of internal controls shall be established by the board, which shall be documented in writing as part of the investment policy. The controls shall be designed to prevent the loss
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of public funds arising from fraud, employee error, and misrepresentation by third parties, unanticipated changes in financial markets, or imprudent actions by employees and officers of the board or a professional money management firm. The controls shall also include formal escalation reporting guidelines for all employees. The guidelines shall establish procedures to address material impacts on the trust fund that require reporting and action. (d) The investment policy shall be reviewed and approved annually by the trustees or when market changes dictate, and in each event the investment policy shall be reviewed by the Investment Advisory Council and by the Participant Local Government Advisory Council. (3) The board or a professional money management firm may purchase such surety or other bonds as may be necessary for its officials in order to protect the trust fund. A reserve fund may be established to fulfill this purpose. However, any reserve must be a portion of the management fee and must be fully disclosed, including its purpose, in the enrollment materials at the time a unit of local government considers participation. Further, any change in the amount to be charged for a reserve must have a reasonable notice period to allow any participant to withdraw from the trust fund prior to the new reserve charge being imposed. (4) The board or a professional money management firm shall purchase investments for a pooled investment account in which all participants share pro rata in the capital gain, income, or losses, subject to any penalties for early withdrawal. Any provisions for penalties, including their purpose, must be disclosed in the enrollment materials. Any change in the amount to be charged for a penalty must have a reasonable notice period to allow any participant to withdraw from the trust fund prior to the new penalty charge being imposed. A system shall be developed by the board, and disclosed in the enrollment materials, subject to annual approval by the trustees, to keep account balances current and to apportion pooled investment earnings to individual accounts. (5) The board shall keep a separate account, designated by name and number of each participating local government. A maximum number of accounts allowed for each participant may be established by the board. Individual transactions and totals of all investments, or the share belonging to each participant, shall be recorded in the accounts. (6)(a) The board or a professional money management firm shall provide a report, at a minimum monthly or upon the occurrence of a material event, to every participant having a beneficial interest in the trust fund, the board’s executive director, the trustees, the Joint Legislative Auditing Committee, the Investment Advisory Council, and the Participant Local Government Advisory Council. The report shall include: 1. Reports of any material impacts on the trust fund and any actions or escalations taken by staff to address such impacts. The trustees shall provide quarterly a report to the Joint Legislative Auditing Committee that the trustees have reviewed and approved the monthly reports and actions taken, if any, to address any impacts. 2. A management summary that provides an analysis of the status of the current investment portfolio and the individual transactions executed over the last month. This management summary shall be prepared in a manner that will allow anyone to ascertain whether investment activities during the reporting period have conformed to investment policies. Such reporting shall be in conformance with best market practices. The board or a professional money management firm shall furnish upon request the details of an investment transaction to any participant, the trustees, the Investment Advisory Council, and the Participant Local Government Advisory Council. (b) The market value of the portfolio shall be calculated daily. Withdrawals from the trust fund shall be based on a process that is transparent to participants and will ensure that advantages or disadvantages do not occur to parties making deposits or withdrawals on any particular day. A statement of the market value and amortized cost of the portfolio shall be issued to participants in conjunction with any deposits or withdrawals. In addition, this information shall be reported monthly with the items in paragraph (a) to participants, the trustees, the Investment Advisory Council, and the Participant Local Government Advisory Council. The review of the investment portfolio, in terms of value and price volatility, shall be performed with practices consistent with the GFOA Recommended Practice on “Mark-to-Market Practices for State and Local Government Investment Portfolios and Investment Pools.” In defining market value, consideration shall be given to GASB Statement 31. Additional reporting may be made to pool participants through regular and frequent ongoing multimedia educational materials and communications, including, but not limited to, historical performance, investment holdings, amortized cost and market value of the trust fund, credit quality, and average maturity of the trust fund investments. (7) Costs incurred in carrying out the provisions of this part shall be deducted from the interest earnings accruing to the trust fund. Such deductions shall be prorated among the participant local governments in the percentage that each participant’s deposits bear to the total trust fund. The remaining interest earned shall be distributed monthly to participants according to the amount invested. Except for costs, the board or a professional money management firm may not transfer the interest or use the interest for any other purpose, including, but not limited to, making up investment losses.
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(8)(a) The principal, and any part thereof, of each and every account constituting the trust fund shall be subject to payment at any time from the moneys in the trust fund. However, the executive director may, in good faith, on the occurrence of an event that has a material impact on liquidity or operations of the trust fund, for 48 hours limit contributions to or withdrawals from the trust fund to ensure that the board can invest moneys entrusted to it in exercising its fiduciary responsibility. Such action shall be immediately disclosed to all participants, the trustees, the Joint Legislative Auditing Committee, the Investment Advisory Council, and the Participant Local Government Advisory Council. The trustees shall convene an emergency meeting as soon as practicable from the time the executive director has instituted such measures and review the necessity of those measures. If the trustees agree with such measures, the trustees shall vote to continue the measures for up to an additional 15 days. The trustees must convene and vote to continue any such measures prior to the expiration of the time limit set, but in no case may the time limit set by the trustees exceed 15 days. (b) An order to withdraw funds may not be issued upon any account for a larger amount than the share of the particular account to which it applies; and if such order is issued, the responsible official shall be personally liable under his or her bond for the entire overdraft resulting from the payment if made. (9) The Auditor General shall conduct an annual financial audit of the trust fund, which shall include testing for compliance with the investment policy. The completed audit shall be provided to the participants, the board, the trustees, the Investment Advisory Council, the Participant Local Government Advisory Council, and the Joint Legislative Auditing Committee. As soon as practicable, but no later than 30 days after completion of the audit, the trustees shall report to the Joint Legislative Auditing Committee that the trustees have reviewed the audit of the trust fund and shall certify that any necessary items are being addressed by a corrective action plan that includes target completion dates. (10)(a) There is created a six-member Participant Local Government Advisory Council for the purposes of regularly reviewing the administration of the trust fund and making recommendations regarding such administration to the trustees. The members of the council shall be appointed by the board and subject to confirmation by the Senate. Members must possess special knowledge, experience, and familiarity obtained through active, long-standing, and material participation in the dealings of the trust fund. Each member shall serve a 4-year term. Any vacancy shall be filled for the remainder of the unexpired term. The council shall annually elect a chair and vice chair from within its membership. A member may not serve consecutive terms as chair or vice chair. (b) The council shall prepare and submit a written biennial report to the board, trustees, the Investment Advisory Council, and the Joint Legislative Auditing Committee that describes the activities and recommendations of the council.
218.417 Fund B Surplus Funds Trust Fund.-(1) There is created the Fund B Surplus Funds Trust Fund within the State Board of Administration. Funds credited to the trust fund shall consist of the investments, interest earned, and reserve in Fund B of the Local Government Surplus Funds Trust Fund. Those funds shall be transferred from the Local Government Surplus Funds Trust Fund to the Fund B Surplus Funds Trust Fund within 30 days after the effective date of this act. (2) Notwithstanding s. 216.301 and pursuant to s. 216.351, any balance in the trust fund at the end of the fiscal year shall remain in the fund and be available for carrying out the purposes of the trust fund. (3) Pursuant to the provisions of s. 19(f)(3), Art. III of the State Constitution, the Fund B Surplus Funds Trust Fund is exempt from the termination provisions of s. 19(f)(2), Art. III of the State Constitution. The trust fund shall be terminated upon self-liquidation, if not terminated sooner by law.
218.418 Definitions.-As used in ss. 218.421 and 218.422, the term: (1) “Board” means the State Board of Administration. (2) “Surplus funds” means any funds in any general or special account or fund of a unit of local government, or funds held by an independent trustee on behalf of a unit of local government, which in reasonable contemplation will not be immediately needed for the purposes intended. (3) “Trust fund” means the pooled investment fund known as the Fund B Surplus Funds Trust Fund. (4) “Trustees” means the Trustees of the State Board of Administration. (5) “Unit of local government” means any governmental entity within the state not part of state government and includes, but is not limited to, the following and the officers thereof: any county, municipality, school district, special district, clerk of the circuit court, sheriff, property appraiser, tax collector, supervisor of elections, authority, board, public corporation, or other political subdivision of the state.
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218.421 Fund B Surplus Funds Trust Fund; purpose; rulemaking; administration; reporting.-(1)(a) The purpose of the Fund B Surplus Funds Trust Fund is to maximize the payout of principal on invested surplus funds of units of local government formerly in Fund B of the Local Government Surplus Funds Trust Fund through a prudent work out of the trust fund with the ultimate goal of self-liquidating the trust fund through maturity and payout of the investments. (b) The State Board of Administration may adopt rules pursuant to ss. 120.536(1) and 120.54 to administer this section. (2)(a) The board or a professional money management firm shall administer the trust fund on behalf of the participants based on a written investment policy, approved by the trustees, and shall have the power to work out, restructure, or invest such funds. The trustees shall annually certify to the Joint Legislative Auditing Committee that the trustees have conducted a review of the trust fund and that the trust fund is in compliance with the requirements of this section. Any new investments must be made in money market or equivalent funds. The board or a professional money management firm shall keep a separate account, designated by name and number of each participating local government. Individual transactions and totals of all investments, or the share belonging to each participant, shall be recorded in the accounts. Any moneys accrued in the trust fund shall be subject to payment from the trust fund on a monthly basis to the trust fund participants according to their proportional interest in the trust fund so long as at least $100,000 is in the trust fund at the end of that month. After all securities have matured, been sold, or worked out, a final distribution shall be made to the participants in the trust fund. Participants may not conduct transactions in the trust fund. (b) The board or a professional money management firm and all employees of the board or firm have an affirmative duty to immediately disclose any material impact to the trust fund to the participants. To ensure such disclosure, a system of internal controls shall be established by the board, which shall be documented in writing as part of the investment policy. The controls shall be designed to prevent the loss of public funds arising from fraud, employee error, and misrepresentation by third parties, unanticipated changes in financial markets, or imprudent actions by employees and officers of the board or a professional money management firm. The controls shall also include formal escalation reporting guidelines for all employees. The guidelines shall establish procedures to address material impacts on the trust fund that require reporting and action. (c) The investment policy shall be reviewed and approved by the trustees upon the transfer of the funds into the trust fund or when market changes dictate, and in each event, the investment policy shall be reviewed by the Investment Advisory Council and by the Participant Local Government Advisory Council. (d) Costs incurred in carrying out the provisions of this section, which shall be prorated among the participants in the percentage that each participant’s deposits bear to the total trust fund, may be deducted from any interest earned in the trust fund. The board or a professional money management firm may not transfer the interest or use the interest for any other purpose, including, but not limited to, making up investment losses. (e) After the trust fund self-liquidates, any remaining reserve may be transferred by the trustees at their sole discretion back to the trust fund from which the assets were originally separated. (3)(a) The board or a professional money management firm shall provide a report at a minimum, monthly, or upon the occurrence of a material event, to every participant having a beneficial interest in the trust fund, the board’s executive director, the trustees, the Joint Legislative Auditing Committee, the Investment Advisory Council, and the Participant Local Government Advisory Council. The report shall include: 1. Reports of any material impacts on the trust fund, and any actions or escalations taken by staff to address such impacts. The trustees shall provide quarterly a report to the Joint Legislative Auditing Committee that the trustees have reviewed and approved the monthly reports and actions taken, if any, to address any impacts. 2. A management summary that provides an analysis of the status of the current investment portfolio and the individual transactions executed over the last month. This management summary shall be prepared in a manner that will allow anyone to ascertain whether investment activities during the reporting period have conformed to investment policies. Such reporting shall be in conformance with best market practices. 3. The board or a professional money management firm shall furnish upon request the details of an investment transaction to any participant, the trustees, the Investment Advisory Council, and the Participant Local Government Advisory Council. (b) Additional reporting may be made to participants in the trust fund through regular and frequent ongoing multimedia educational materials and communications, including, but not limited to, historical performance, investment holdings, amortized cost and market value of the trust fund, credit quality, and average maturity of the trust fund investments. (4) The trustees shall review the board’s progress in returning the principal in the trust fund to the participants at each meeting of the board until the trust fund self-liquidates or is terminated by law.
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218.422 Fund B Surplus Funds Trust Fund; review.-Unless the Fund B Surplus Funds Trust Fund has been terminated by law or through self-liquidation, prior to the 2013 Regular Session of the Legislature, the Auditor General shall review the trust fund and the steps taken up to that time to return as much of the principal to the participants as possible and provide a summary report to the board, the trustees, the President of the Senate, the Speaker of the House of Representatives, the Investment Advisory Council, and the Participant Local Government Advisory Council. Note.--Section 11, ch. 2008-59, provides that “[s]ections 218.418, 218.421, and 218.422, Florida Statutes, as created by this act, shall expire at the time the Fund B Surplus Funds Trust Fund is terminated by law or self-liquidates as determined and announced by the executive director of the State Board of Administration, whichever occurs first.”
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TRUSTEES
Governor Charlie Crist, Chairman Chief Financial Officer Alex Sink, Treasurer Attorney General Bill McCollum, Secretary
EXECUTIVE DIRECTOR & CHIEF INVESTMENT OFFICER Ash Williams
PARTICIPANT LOCAL GOVERNMENT ADVISORY COUNCIL John Mark Peterson Daniel Wolfson MaryEllen Elia Roger B. Wishner Patsy Heffner Karen Nicolai
STATE BOARD OF ADMINISTRATION
PARTICIPANT LOCAL GOVERNMENT ADVISORY COUNCIL
I NV ES T I NG F O R
F LO R ID A’S
FUTURE
1801 Hermitage Boulevard, Suite 100 Tallahassee, Florida 32308 (850) 488-4406 www.sbafla.com
