Page 48 - Yucaipa Valley Water District

Director Memorandum No. 17-042 Page 2 of 6

Local Agency Investment Fund

Program Description

The Local Agency Investment Fund (LAIF) is a voluntary program created by statute; began in
1977 as an investment alternative for California's local governments and special districts and it
continues today. The enabling legislation for the LAIF is Section 16429.1 et seq. of the
California Government Code.

This program offers local agencies the opportunity to participate in a major portfolio, which
invests hundreds of millions of dollars, using the investment expertise of the Treasurer's Office
investment staff at no additional cost to the taxpayer. This in-house management team is
comprised of civil servants who have each worked for the State Treasurer's Office for an
average of 20 years.

The LAIF is part of the Pooled Money Investment Account (PMIA). The PMIA began in 1953
and oversight is provided by the Pooled Money Investment Board (PMIB) and an in-house
Investment Committee. The PMIB members are the State Treasurer, Director of Finance, and
State Controller.

The Local Investment Advisory Board (LIAB) provides oversight for LAIF. The Board consists of
five members as designated by statute. The Chairman is the State Treasurer or his designated
representative. Two members qualified by training and experience in the field of investment or
finance, and the State Treasurer appoints two members who are treasurers, finance or fiscal
officers or business managers employed by any county, city or local district or municipal
corporation of this state. The term of each appointment is two years or at the pleasure of the
appointing authority.

All securities are purchased under the authority of Government Code Section 16430 and
16480.4. The State Treasurer's Office takes delivery of all securities purchased on a delivery
versus payment basis using a third party custodian. All investments are purchased at market
and a market valuation is conducted monthly.

Additionally, the PMIA has Policies, Goals and Objectives for the portfolio to make certain that
our goals of Safety, Liquidity and Yield are not jeopardized and that prudent management
prevails. These policies are formulated by investment staff and reviewed by both the PMIB and
the LIAB on an annual basis.

The State Treasurer’s Office is audited by the Bureau of State Audits on an annual basis and
the resulting opinion is posted to the STO website following its publication. The Bureau of State
Audits also has a continuing audit process throughout the year. All investments and LAIF
claims are audited on a daily basis by the State Controller’s Office as well as an in-house audit
process involving three separate divisions.

Under Federal Law, the State of California cannot declare bankruptcy, thereby allowing the
Government Code Section 16429.3 to stand. This Section states that “moneys placed with the
Treasurer for deposit in the LAIF by cities, counties, special districts, nonprofit corporations, or
qualified quasi-governmental agencies shall not be subject to either of the following: (a) transfer
or loan pursuant to Sections 16310, 16312, or 16313, or (b) impoundment or seizure by any
state official or state agency.”

Yucaipa Valley Water District - May 16, 2017 - Page 46 of 64