Adopts investment guidelines for local governments

BILL NUMBER:S2112

Title of bill

An act to amend the state finance law and the general municipal law, in relation to the adoption by the state comptroller of investment guidelines to be disseminated to local government entities

Summary of bill

The purpose of the bill is to require the Comptroller to establish investment guidelines for local governments, who subsequently adopt their own investment guidelines.

The Comptroller shall adopt by April 1, in the year next succeeding the year in which this bill takes effect, comprehensive investment guidelines which detail the Department of Audit and Control's advisory policy and instructions to counties, cities, education services and district corporations. Local governments shall adopt, by January 1, in the year next succeeding the year in which this bill takes effect, comprehensive investment guidelines which conform with those. issued by the Comptroller.

The investment guidelines shall include:

(1) a detailed list of permitted investments;

(2) procedures and provisions to fully secure the local government's financial interest in investments;

(3) a requirement that the local government enter into written contracts pursuant to which investments are made;

(4) standards for the diversification of investments, including diversification with respect to types of investments and firms with which the local government entity transacts business;

(5) standards for the qualification of investment agents; and

(6) provisions for reporting on the investments of the local government including provisions for an annual independent audit of all investment practices.

This bill requires both the Comptroller and local governments to review the investment guidelines and procedures at least annually. The bill amends the State Finance law and the general municipal law to provide investment guidelines for local governments to reflect ever-changing market conditions.

Justification

With the recent problems of certain local governments facing the possibility of losing taxpayers' money due to the bankruptcy of an

investment firm, it appears that legislative action is necessary. Said action should provide and maintain investment guidelines to aid our local governments in their investment decisions in a rapid changing marketplace with a variety of investment instruments and a large and changing group of investment companies.

Fiscal implications

There may be minimal administrative costs, but this is a potential savings that may be realized from avoidance of future loss due to bankruptcy of investment firms.

Effective date

Immediately.