Celina City auditor requests advice for investing funds

Celina Auditor Emily Steward is trying to get a better handle on the city's long term and short term investments.

The city currently has between $10.5 and $11 million, money the city gets from sales and income taxes, as well as assorted funds such as electric, water, and state, county, and federal grants or loans. They are parked, until they are needed for expenditures, in such places as money market accounts, bonds or other low risk investments. Interest from these investments brought in more than $350,000 in one year for city coffers.

But Stewart told Celina Council Finance Committee members last week that she is uncomfortable with UBS, the city's current investment broker for about half the city's investment funds. UBS, which is a national and international investment firm, is certified by the state of Ohio to handle public investments.

She said she noticed an increase in activity earlier in February. UBS made nearly 40 trades, including selling one before its maturity date. During the same time period the previous year, only seven trades were made.

"No one called to let me know or ask me for approval," Stewart told committee members. The Ohio Revised Code gives the city auditor full authority, as well as responsibility for investments.

"I became suspicious," she admitted.

She instructed UBS to make no further trades or buys for the time being and asked for a full accounting from the UBS compliance office. She also moved more cash (liquid assets) to the city's high interest money market account with Chase Bank.

UBS told Stewart, when she complained, that former auditor Pat Smith allowed them to trade without checking in with him. Smith told Stewart that they checked in with him first. Smith said the firm's representatives called him with suggestions and they made decisions together. He indicated it was an informal approach.

"But it was a different world then. Now things change from day to day," Smith said.

But Stewart told counselors she wants a more formal approach. She wants a statement telling her exactly how much the fee for any particular trade costs, for example. And she wants it in writing for record purposes. She said she would feel better about any firm if they can justify any moves in writing.

Investment firms certified by the state to handle public funds are under strict regulations. They must always protect the principle, so a real loss is unlikely. But she believes the city might make more with expert guidance.

She told counselors she wants to know how much a buy costs or if commissions are given on the trade.

"I want to know what the city is charged for each one," she said. "I want a written reply, not a phone call."

The UBS account statements are about 10 pages long, she said, but the fees - what the city pays for any particular trade - are deducted from the interest earned and never separated directly per transaction in the statement. Consequently, Stewart never knows how much of that growth money went to the brokerage company.

Stewart, who said investing knowledge is not her strongest suit, wants to hire a money management firm with an investment arm to provide advice to help guide her choices. She has researched investment firms that just deal with public investment accounts and has picked three that she likes.

"Their statements are simple - one or two pages," she said. The fee (cost to the city) is set in advance in basis points. She estimates the annual cost for the $6 million in the UBS account at about $9,000 per year.

City Council authorized the contracting of a money management firm last summer when they updated other financial and investment related laws to coincide with the Ohio Revised Code.

"But they didn't fund it," Stewart said. "There was never any appropriation for it."

She asked committee members again for their support to hire a firm to advise her office on investments again at the meeting last week.

But they indicated they are waiting the report from UBS before responding to Stewart's request.