City of Beaumont Audit
The June 4, 2013 City of Beaumont Council Meeting Agenda lists Item 5.a.8 – Investment Policy  This agenda item contains the following Material Misstatements and is illegal in content.. 

The Investment Policy document creates a 'Finance Committee' consisting of the City Manager, Treasurer, Finance Director, Mayor, and two Councilmen. The City Manager designates himself as 'Investment Officer' of the Finance Committee. This paper allows the City Manager access to LAIF funds without prior notification to Committee.

The City states the funds will be invested according to California Government Codes 53601 and 53635. Govt. Code 53601 clearly states .. “The legislative body of a local agency having moneys in a sinking fund or moneys in its treasury not required for the immediate needs of the local agency may invest any portion of the moneys that it deems wise or expedient in those investments set forth below.”

The City of Beaumont is $300 Million in debt and has no additional funds to invest.

California Govt. Code 53635 states “A local agency that is a county, a city and county, or other local agency that pools money in deposits or investments with other agencies may invest in commercial paper pursuant to subdivision (h) of Section 53601, except that the local agency shall be subject to the following concentration limits:

      (1) No more than 40 percent of the local agency's money may be invested in eligible commercial paper.

     (2) No more than 10 percent of the total assets of the investments held by a local agency may be invested in any one issuer's commercial paper.

 The Diversification by Instrument Chart lists all of the various types of funds the Finance committee plan to invest. The chart should be showing the percentage of funds each investment will contain. This amount should total 100% - not 400%.

The chart includes the following misstatements: 

General Fund Checking and Savings – General Fund is for immediate needs of the City and is not included in investments.  

Guaranteed Investment Contracts – This is not a legitimate or secure investment source. California Government Code 53651 does not allow for this type of investment with taxpayer dollars.

Local Agency Bonds, Notes, Warrants, or other evidence of Indebtness – This is not investment, this is debt. The City can not continue to keep $300 Million in debt on the books as a financial investment. The debt is a $15 Million/year expense that is suppose to be derived from incremental property taxes. The revenue generated from the bonds is only a fraction needed as the City's total property tax revenue is only $3 Million.

The City of Beaumont is attempting to create the appearance of investments, but the term investment implies the original funds will be returned with interest earned.  

Govt. Code 53600.3 states: '.....When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence ...'

The term 'trustee' applies to the City Manager, Finance Director, and every memeber of Council.  


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