city of philadelphia treasury management... · city of philadelphia office of innovation and...

CITY OF PHILADELPHIA

Office of Innovation and Technology

on behalf of

City Treasurer’s Office

REQUEST FOR INFORMATION

FOR

Treasury Management System

November 9, 2017

Deadline for questions, requests for

clarification, or requests for additional

information

November 22, 2017 before 5:00 PM

(Local Philadelphia Time)

City Responds to Questions December 1, 2017

Responses to RFI Due December 15, 2017 before 5:00 PM


JAMES F. KENNEY, Mayor

RASHEIA JOHNSON, City Treasurer, City Treasurer’s Office,

CHARLES J. BRENNAN, CIO, Office of Innovation and Technology

ii

Table of Contents

I. RESPONSE CALENDAR ................................................................................................... 1

II. PURPOSE OF REQUEST FOR INFORMATION.............................................................. 1

III. RFI CONTACT INFORMATION FOR QUESTIONS, REQUESTS FOR

INFORMATION .................................................................................................................. 2

IV. ABOUT THE CITY OF PHILADEPHIA, OIT, AND CTO ............................................... 3

V. RESERVED ......................................................................................................................... 3

VI. ANTICIPATED PROJECT REQUIREMENTS .................................................................. 3

VII. SUBMISSION GUIDELINES ............................................................................................. 4

VIII. USE OF RESPONSES ......................................................................................................... 5

IX. HOW TO SUBMIT RESPONSES ....................................................................................... 6

X. CONFIDENTIALITY AND PUBLIC DISCLOSURE ....................................................... 6

XI. RIGHTS AND OPTIONS RESERVED .............................................................................. 6

XII. PUBLIC DISCLOSURE ...................................................................................................... 7

Appendix A – TMS Current Process Flows .................................................................................... 8

Appendix B – TMS RFI Frequently Asked Questions ................................................................. 12

Appendix C – Investment Policy .................................................................................................. 14

Treasury Management System Page 1 of 21

TREASURY MANAGEMENT SYSTEM

REQUEST FOR INFORMATION

I. RESPONSE CALENDAR

Post Request for Information (RFI) November 9, 2017

Deadline for questions, requests for

clarification, or requests for additional

information (email [email protected]

[email protected])

November 22, 2017 before 5:00 PM


City Responds to Questions

(http://www.phila.gov/rfp/Pages/default.aspx

(“Additional Opportunities”)

December 1, 2017

Responses to RFI Due

(email [email protected]

[email protected])

December 15 before 5:00 PM


II. PURPOSE OF REQUEST FOR INFORMATION

The City of Philadelphia (“City”) is embarking on an initiative to modernize its administrative

business processes and related legacy technology systems that currently support its business

operations. As part of this initiative, the City intends to procure a new Treasury Management

System (TMS). The City, through its Office of Innovation and Technology (OIT) on behalf

of the City Treasurer’s Office (CTO), has issued this Request for Information (RFI) in order

to solicit statements of interest, capabilities, and Rough Order of Magnitude (ROM) cost

estimates from all Respondents interested in, and capable of, providing commercial off-the-

shelf (COTS) software as part of the City’s solution.

Respondents are asked to provide OIT/CTO with information regarding their available COTS

products and solutions, subject to the following guidelines:

Identify only COTS products that are modifiable or configurable to meet specific City

requirements, and that focus on interoperability, reliability, usability, capacity and

scalability

Present the software solution’s interoperability and operational requirements in

accordance with the International Organization for Standardization Open Systems

Interconnection (OSI) model

Include an architectural diagram of the solution with description of the solutions

scalability; responses may include one or more models or solutions

Describe the configurability of the software to meet specific user needs

mailto:[email protected]

http://www.phila.gov/rfp/Pages/default.aspx




Responses should not include the vendor’s implementation, integration, and configuration

services. The City intends to procure such services, if and to the extent required, through a

separate procurement after a COTS software solution is identified. If, however, the software

can be installed and configured only by the Respondent, that must be clearly stated in the

Response, including the reasons why that is the case.

Respondents may, in the City’s discretion, be invited to engage in discussions with the City’s

project team and/or demonstrate their products, services and solutions.

No contract will be awarded pursuant to this RFI. Anyone who does not respond to this RFI

is not precluded from responding to any future solicitation issued by the City. The City intends

to procure software for this project within the next several months, in accordance with the

City’s procurement laws and practices for software purchases, which may include, but are not

limited to, the use of existing City contracts or certified cooperative purchase agreements.

Respondents will not be bound by the ROM cost estimates provided in their responses to this

RFI in a future procurement.

III. RFI CONTACT INFORMATION FOR QUESTIONS, REQUESTS FOR

INFORMATION

All questions and requests for clarification concerning this Request for Information (RFI) must

be in writing submitted via email no later than 5:00 pm, Local Philadelphia Time, on November

22, 2017 to:

Jon Malcarney


[email protected]

Gayle Ruggeri


[email protected]

Responses to questions and requests for additional information shall be at the sole discretion

of the City. Nothing in this RFI shall create an obligation on the City to respond to a

Respondent submitting a response.

The City may, in its sole discretion, issue addenda to this RFI containing responses to

questions, clarifications of the RFI, revisions to the RFI or any other matters that the City

deems appropriate. Addenda, if any, will be posted on the City’s website at

http://www.phila.gov/rfp/Pages/default.aspx (“Additional Opportunities”). It is the

Respondent’s responsibility to monitor the Additional Opportunities site for Addenda and to

comply with any new terms.

Oral responses made by any City employee or agent of the City in response to questions or

requests for information or clarification related to this RFI are not binding and shall not in any

way be considered as a commitment by the City.






If a Respondent finds any inconsistency or ambiguity in the RFI or an addendum to the RFI

issued by the City, the Respondent is requested to notify the City in writing by the above

deadline for questions and requests for information or clarification.

IV. ABOUT THE CITY OF PHILADEPHIA, OIT, AND CTO

The City of Philadelphia is the largest city in the Commonwealth of Pennsylvania and the

sixth-most populous city in the United States with over 1.5 million residents. Additionally,

due to its rich historic and cultural heritage, the region is visited by more than 40 million people

each year. Philadelphia is located in the southeastern section of Pennsylvania and the

coterminous city/county covers 143 square miles. The City is bordered by the following

counties: Bucks, Montgomery and Delaware in Pennsylvania, and Burlington, Camden and

Gloucester in New Jersey.

As an operating department of the City, OIT provides technology and telecommunication

services to the City, its employees and the community. There are over 25,000 city employees

in Philadelphia.

The CTO is responsible for the management and oversight of the City’s cash and investments

that total upwards of $2.0 billion, which is spread across more than thirty managed investment

accounts and approximately 270 bank accounts. This includes cash and investments for the

operations, capital and sinking reserve funds of the General, Aviation, Water and Gas funds

(the “Funds”). Furthermore, the General Fund includes cash and investments for almost every

department in the City government, such as, but not limited to, Revenue, Health, District

Attorney, lock boxes, City Council, Mayor’s Office, and other row offices.

V. RESERVED

VI. ANTICIPATED PROJECT REQUIREMENTS

The proposed solution should include the following functionality:

Cash Positioning

Cash Forecasting

Collateral Reporting

Bank Fee Analysis & Forecasting

Investment Manager Oversight & Compliance

Additional Benefits

Automated bank reporting process for daily bank activity

Ease of distribution of all banking information via email or PDF to all internal

parties cutting down on paper use

Common centralized database for all banking and investment reporting, with

controlled, segregated duties and traceable events


Ability to integrate into future ERP systems or expansion of software capabilities

into Payment factories, and electronic bank account management

The TMS will automate the cash reporting, positioning, forecasting and collateralization

processes, improve visibility into the City’s cash balances and investment positions; provide a

centralized system to assist with the management and analysis of the City’s Commercial

Banking relationships; provide for a secure, controlled environment; and automate the

department’s current paper and Excel based processes. Additionally, the TMS’s automation,

controls, and process enhancements will provide for timelier reporting and analysis providing

opportunities to increase future interest earnings from uninvested balances and minimize bank

fees.

The CTO has begun a comprehensive initiative to implement a new TMS system. The

overarching goal of this initiative is to implement an automated TMS to improve the current

process to:

Enhancing the workflow process

Eliminate data entry redundancy

Cash positioning and forecasting

Robust reporting, analytics, and oversight / compliance

Adhere to best-practices while continuing to meet applicable local, state and federal

regulatory requirements

VII. SUBMISSION GUIDELINES

The City expects each Respondent to include in their response to this RFI the following items

in the order listed:

Company Overview:

Include company name, physical address, phone number, fax number, and web address, a brief

description of the company, its services, business size (total revenue and number of

employees), and point(s) of contact, including name, address, phone and email address. Note

the company’s operations including the number of years the company has been supporting this

solution; location of the office from which this effort will be managed and all other office

locations; and three years of financial data to ensure company stability.

Clients:

Identify your experience with clients of similar size and scope to the City of Philadelphia,

including client name, engagement title, description of engagement, cost, and start and

completion dates as well as the name, address and telephone number of a contact person.


Software

Identify one or more COTS software products that meet the City’s requirements. Responses

that describe solutions which are completely custom software may, in the City’s discretion, be

rejected without review.

A major goal of this RFI is to provide Respondent with an opportunity to inform OIT/CTO

about their respective software solution’s interoperability and operational requirements in

reference to the OSI model. Respondents are encouraged to include in their response an

architectural diagram of the solution with description of the solution’s scalability. Respondents

are welcome to provide one or more models or solution sets to meet this requirement for an

integrated interoperable solution set.

Service model:

Identify your service model provided and supported, whether on premise, off-premise

including Software-as-a-Service models.

Supplement this request with an interoperable architectural diagram outlining each OSI layer

requirement for enablement, sustainment, reliability, redundancy, and growth. Highlight

anticipated number of upgrades over an annual period.

Key Features:

Identify best of breed features included in the proposed COTS solution(s), including, at

minimum, the Key Features in Section VI. Anticipated Project Requirements.

Maintenance:

Provide anticipated ongoing software maintenance and support services required to sustain the

solution including estimated timeframes to complete. Identify whether software upgrades are

included in the maintenance offering.

Reporting and Key Performance Indicators (KPIs):

Provide the standard and custom reporting KPIs available from your solution.

Pricing/Licensing Model:

Include a general pricing model and cost for software based upon the information provided in

this RFI. This pricing should also indicate the licensing model, (i.e. licensing by individual

users, by core, by seat etc.) and descriptions of the hosting models available and estimates of

associated costs. Respondents will not be bound by any cost estimates included in responses

to this RFI.

VIII. USE OF RESPONSES

Responses to this RFI may be used by OIT/CTO to select a software product for a TMS

solution. Responses may also be used to assist OIT/CTO in gathering information for planning

purposes, and for purposes of identifying sufficient resources for an implementation initiative.


IX. HOW TO SUBMIT RESPONSES

Respondents must submit their responses electronically in MS Word or Adobe PDF format, as

a single document, to:

Jon Malcarney


[email protected]

Gayle Ruggeri


[email protected]

Responses are due December 15, 2017 before 5:00 pm, Local Philadelphia Time.

X. CONFIDENTIALITY AND PUBLIC DISCLOSURE

Respondents shall treat all information obtained from the City which is not generally available

to the public as confidential and/or proprietary to the City. Respondents shall exercise all

reasonable precautions to prevent any information derived from such sources from being

disclosed to any other person. No other party, including any Respondent, is intended to be

granted any rights hereunder.

XI. RIGHTS AND OPTIONS RESERVED

In addition to the rights reserved elsewhere in this RFI, the City reserves and may, in its sole

discretion, exercise any or more of the following rights and options with respect to this RFI if

the City determines that doing so is in the best interest of the City:

1. Decline to consider any response to this RFI (“response”); cancel the RFI at any time; elect

to proceed or not to proceed with discussions or presentations regarding its subject matter

with any Respondent and with firms that do not respond to the RFI; to reissue the RFI or

to issue a new RFI (with the same, similar or different terms);

2. Select a COTS package from a vendor that does not respond to this RFI, or elect not to

proceed with any procurement;

3. Waive, for any response, any defect, deficiency or failure to comply with the RFI if, in the

City’s sole judgment, such defect is not material to the response;

4. Extend the Submission Date/Time and/or to supplement, amend, substitute or otherwise

modify the RFI at any time prior to the Submission Date/Time, by posting notice thereof

on the City web page(s) where the RFI is posted;

5. Require, permit or reject amendments (including, without limitation, submitting

information omitted), modifications, clarifying information, and/or corrections to

responses by some or all Respondents at any time before or after the Submission

Date/Time;




6. Require, request or permit, in discussion with any Respondent, any information relating to

the subject matter of this RFI that the City deems appropriate, whether it was described in

the response to this RFI;

7. Discontinue, at any time determined by the City, discussions with any Respondent or all

Respondents regarding the subject matter of this RFI, and/or initiate discussions with any

other Respondent or with vendors that did not respond to the RFI;

8. To conduct such investigations with respect to the financial, technical, and other

qualifications of the Respondent as the City, in its sole discretion, deems necessary or

appropriate;

9. Do any of the foregoing without notice to Respondents or others, except such notice as the

City, in its sole discretion, may elect to post on the City web page(s) where this RFI is

posted.

This RFI and the process described are proprietary to the City and are for exclusive benefit of

the City. Upon submission, responses to this RFI shall become the property of the City, which

shall have unrestricted use thereof.

XII. PUBLIC DISCLOSURE

By submitting a response to this RFI, Respondent acknowledges and agrees i) that the City is

a “local agency” under and subject to the Pennsylvania Right-to-Know Law (the “Act”), 65

P.S. §§ 67.101-67.3104, as the Act may be amended from time to time; and ii) responses may

be subject to public disclosure under the Act. In the event the City receives a request under the

Act for information that a Respondent has marked as confidential, the City will use reasonable

efforts to consult with Respondent regarding the response and, to the extent reasonably

practicable, will give Respondent the opportunity to identify information that Respondent

believes to be confidential proprietary information, a trade secret, or otherwise exempt from

access under Section 708 of the Act.

Notwithstanding anything to the contrary contained in this RFI, nothing in this RFI shall

supersede, modify, or diminish in any respect whatsoever any of the City’s rights, obligations,

and defenses under the Act, nor will the City be held liable for any disclosure of records,

including information that the City determines in its sole discretion is a public record and/or

information required to be disclosed under the Act.


Appendix A – TMS Current Process Flows


Appendix B – TMS RFI Frequently Asked Questions

#r Question Response

1

Is this RFI seeking information for other related Projects and City initiatives or is this a separate/independent project?

This is a separate project.

2

Is there a legacy system or incumbent vendor that the City is still under contract with for this system or any related services?

No. The City does not have a legacy technology application nor an incumbent vendor under contract. The City’s current system involves a series of interrelated processes and workflows that are highly manual and Excel dependent.

3 Is there an anticipated solicitation release or project start date?

No. Project start date is to be determined.

4

Has funding been secured? If so, does the city have an estimated spend amount?

Yes. Funding has been secured, but the City respectfully declines to answer the estimated spend amount.

5

What are the Collateral Reporting requirements of the system, type of collateral and approximate volume?

The City is required by The City Charter to have all our DDA balances collateralized with securities such as bonds or notes of the United States government, or United States Treasury obligations, or United States Agency obligations, or municipal bonds issued within the Commonwealth of Pennsylvania. The Market value of the securities is compared to the total value of cash on deposit with each counterparty and should be sufficient to cover the total deposited values.


#r Question Response

6

What are the Investment Manager Oversight & Compliance requirements including a description of type of investment securities and approximate volume of outstanding securities maintained with the more than thirty managed investment accounts?

The City has specific allowable investments per The City Charter. These investments and the diversification table can be found in the City’s Investment Policy. The CTO is looking to leverage their TMS investment to be able to monitor the portfolio of the system within it’s given guidelines from the City’s Investment Policy.

7

Are there existing data flows including automated bank reporting processes for daily bank activity, sources of cash and transaction data and targets for data delivery/interfaces (e.g., order management system, point of sale (revenue collection) system, accounting system, etc.)

In reply to this question, a current process flow document titled “TMS Current Process Flow v1.0.pdf” has been uploaded along with this response document.

9

Can you quantify the average number of external investment manager relationships established with the City Treasurer’s office?

The City respectfully declines to answer at this time.

10

Can you state whether assets are managed internally by the City Treasurer’s office and the average amount of such assets under internal management?

The City respectfully declines to answer at this time.


Appendix C – Investment Policy

City of Philadelphia

Investment Policy

September 2014

I. INTRODUCTION

This investment policy establishes guidelines for the administration and management of all City

investments except for the City’s Municipal Pension Fund and the Philadelphia Gas Works (PGW)

Retirement Reserve Fund, the PGW OPEB Trust, and the PGw worker’s Compensation Reserve

Fund. Investments covered under this investment policy include all operating, capital, debt service,

and debt service reserve accounts of the City’s General Fund, Water Department, Aviation

Division, and Philadelphia Gas Works. City investments need to conform to all legal requirements

including applicable provisions of the City Code and City bond resolutions. This policy is meant

to supplement the requirements of these existing policies. All investments will be judged by the

standards of this policy. Activities that violate the spirit and intent will be deemed to be contrary

to the policy.

This policy has been adopted by the Investment Committee, which consists of the

Director of Finance, the City Treasurer, and a representative from the Water Department, Aviation

Division, and the Philadelphia Gas Works. The policy should be reviewed annually and updated

as needed.

II. DELEGATION OF AUTHORITY

The City Treasurer and representatives from the Water Department, Aviation Division, and the

Philadelphia Gas Works meet quarterly with the investment managers to review portfolio results.

The Director of Finance meets at least annually with the City Treasurer to monitor portfolio results,

ensure the adequacy of maturity restrictions, and perform other duties deemed necessary. The

Treasurer is responsible for the oversight of the relationship between the City and its investment

managers and for reviewing the investment manager’s performance on a regular basis. The City

Treasurer’s staff reviews the investment holdings reports monthly and ensures that money

managers indicate in writing on a monthly basis that they are in full compliance with City

investment policies. In addition, City Treasurer’s staff communicates any changes in the City’s

investment policies to the investment managers and reports all transactions to the City’s

Accounting Department. PGW has historically managed its own operating funds so has retained

the delegation of authority for these funds.

The City Treasurer generally attempts to group related accounts by risk tolerance and cash flow

patterns for each manager. The City Treasurer, together with the Finance Director and a

representative from the particular fund that has money to invest, such as the Water Department for

water bond proceeds, may from time to time assign new accounts to existing managers, relieve a

manager of responsibility for one or all of its existing accounts, and/or add new managers.


III. PRUDENCE

Investment officials in the management of the City’s funds should use the “prudent person” rule;

i.e investments should be made with judgment and care, under circumstances then prevailing,

which persons of prudence, discretion, and intelligence exercise in the management of their own

affairs not in regard to speculation, but for investment, considering the probable safety of their

capital as well as the probable income to be derived. Portfolio managers (internal or external)

acting in accordance with this policy and/or any written procedures pertaining to the administration

and management of the City’s funds and who exercise the proper due diligence, shall be relieved

of personal responsibility for any individual security’s credit risk or market price change, provided

that these deviations are reported immediately to the City Treasurer and that appropriate action is

taken to control and prevent further adverse developments.

IV. INVESTMENT OBJECTIVES

Investment of the funds covered in this policy shall be governed by the following investment

objectives, in order of priority:

Preservation of Principal

Safety of principal is the primary objective of the investment program. Investment of the City’s

funds should be undertaken in a manner that seeks to ensure the preservation of capital for each

portfolio of funds.

Liquidity

The City’s investment portfolio should remain sufficiently liquid to enable the City to meet all

payment requirements of the City, including but not limited to payroll, accounts payable, capital

projects, debt service and other payments as communicated by the Treasurer’s Office.

Return on Investments

The City’s investment portfolio shall be designed with the objective of maximizing return

commensurate with the City’s investment risk constraints and the cash flow characteristics of the

portfolio. Return on investment, while important, is subordinate to the safety and liquidity

objectives described above.

V. AUTHORIZED AND SUITABLE INVESTMENTS

Section 19-202 of the Philadelphia Code entitled “Authorized Investments” authorizes the Director

of Finance, the City Treasurer, and the City Controller to invest money in the City Treasury which

is not required for immediate use in specific securities. Investments described below are authorized

by the City Code and are allowable under this Investment Policy:

Bonds or notes of the United States Government.


United States Treasury Obligations including STRIPs; receipts indicating an

undivided interest in such United States Treasury Obligations; and stripped coupons

held under book-entry with the New York Federal Reserve Bank.

Obligations of United States government-sponsored agencies listed below:

o Government National Mortgage Association (GNMA)

o Federal National Mortgage Association (FNMA)

o Federal Home Loan Mortgage Corporation (FHLMC)

o Federal Farm Credit System

o Federal Home Loan Bank

o Resolution Funding Corporation

o Tennessee Valley Authority

Collateralized banker’s acceptances and certificates of deposit denominated in U.S.

dollars and issued by a City Code authorized depository. Certificates of deposit must

be secured by acceptable collateral with a total market value equal to 102% of the

deposit.

Commercial paper with a stated maturity of 270 days or less which is rated P1 by

Moody’s or A1+ by Standard & Poor’s. The senior long term debt of the commercial

paper issuer, or the entity providing an explicit guarantee, must be rated not lower

than ‘A2’ by Moody’s or ‘A’ by Standard & Poor’s. Asset backed commercial paper

(ABCP), which does not have a long term rating, is an allowable investment if it

meets the short term rating requirements but is only allowed up to the ABCP sublimit

listed on page seven.

General obligation bonds of corporations rated ‘Aa2’ or better by Moody’s or ‘AA’

or better by Standard & Poor’s, with a final maturity of two years or less.

Collateralized mortgage obligations and pass-through securities directly issued by a

federal agency or instrumentality of the United States, the underlying security for

which is guaranteed by an agency or instrumentality of the United States and with a

final maturity of two years or less. The rating must be no lower than ‘Aa2’ by

Moody’s or ‘AA’ by Standard & Poor’s. Investment managers purchasing these

securities must prepare monthly reports indicating cost, market value and final

maturity. If market values fall 5% below cost, a written report must be filed with the

City Treasurer describing the reasons for the decline in value and outlining the steps

if any that are needed to correct the situation.

Money market mutual funds, as defined by the Securities and Exchange Commission.

Money market funds must have assets over $15 billion, have the highest rating from

Moody’s, S&P and Fitch, and contain only government securities.


Repurchase agreements which are fully collateralized in bonds or notes of the United

States government pledged to the City and held in the City’s name and deposited at

the time the investment is made with an entity or a third party selected and approved

by the City. The market value of the collateral shall be at least 102% of the funds

being disbursed. A Master Repurchase Agreement must be signed between the City

and the primary dealer or financial institution that is the counterparty to the

repurchase trading before any repurchase trading can begin. The Master Repurchase

Agreement must detail acceptable types of collateral, standards for collateral custody

and control, collateral valuation and initial margin, marking to market, and margin

calls, condition for agreement termination, and acceptable methods for delivery of

securities and collateral. The maximum maturity for repurchase agreements is 30

days.

Obligations of the Commonwealth of Pennsylvania or any municipality or other

political subdivision of the Commonwealth with a final maturity of two years or less

and a rating of at least ‘AA’ by Moody’s or Standard & Poor’s.

Investments in U.S. treasury and U.S. agency floating rate securities are allowed. The

maturity limitation is two years and ten days from the trade date.

Note: Next bullet point applies only to the managed consolidated cash account.

The purchase of overnight maturities of commercial paper (CP) will be temporarily

excluded from the 25% restriction, on such purchases, as is stated in the City’s

Investment Policy with the caveat that the total amount of CP as defined and

overnight CP will not exceed 50% of the "Total Consolidated Cash Portfolio". Total

Consolidated Cash Portfolio will equal the sum of the managed consolidated cash

account plus the cash held at Wells Fargo in non-interest bearing accounts (earnings

credits) plus the cash held at PNC in non-interest bearing accounts (earning credits).

The City will communicate to the manager via email the amount held in the non-

interest bearing accounts at least monthly.

All references to specific rating requirements are requirements at the time of purchase. If after

purchase, ratings decline below the thresholds set forth, the Investment Manager must bring this

to the attention of the City Treasurer in writing and provide a recommendation as to whether the

security should be held or sold.

All references to maturity limitations are from the trade date. If not otherwise noted, the maturity

limitation for all investments is two years and ten days from the trade date.

Authorized investments for Sinking Fund Reserve Portfolios are dictated by the First Class City

Revenue Bond Act and specific Bond Indentures and include any investment vehicle permitted for

any state agency.


VI. INVESTMENT RESTRICTIONS

For the avoidance of doubt, this policy specifically prohibits the following:

Any investment not listed under Authorized and Suitable Investments;

Leverage the portfolio, i.e. lending or selling city-owned securities with an agreement to

buy them back after a stated period of time (reverse repurchase agreements from the

perspective of the City);

Purchase securities on margin;

Make short sales of securities, maintain short positions, or purchase or sell puts, calls,

straddles and spreads or any combinations thereof;

Make investments for the purpose of exercising control or management of an issuer;

Mortgage, pledge, hypothecate or in any manner transfer as security any securities owned

or held;

Invest in securities (except for repurchase agreements) with legal or contractual

restrictions on resale or for which no readily available market exists;

Act as an underwriter of securities;

Buy or sell any authorized investment when it is a party or any related or affiliated party

in the transaction on both sides.

Invest funds in any derivatives;

Invest funds in any security whose yield or market value does not follow the normal

swings of interest rates. Examples of these types of securities include, but are not limited

to: structured notes, floating rate (excluding US Treasury and US agency floating rate

securities) or inverse floating rate instruments, securities that could result in zero interest

accrual if held to maturity, and mortgage derived interest and principal only strips.

Invest more than 15% of funds in securities of a particular industry other than U.S.

Government securities or agency securities.

Invest funds in non-dollar denominated investments.

VII. DIVERSIFICATION REQUIREMENTS


It is the policy of the City to diversify its investments portfolios. Portfolio diversification is

employed as a way to control risk. Investments shall be diversified as to maturities and as to kind

of investments to minimize the risk of loss which might result from over concentration of assets

in a specific maturity, in a specific kind of security or from a specific issuer or industry.

Security and Issuer Diversification is as follows:

Authorized Investment Instrument

Percent of Portfolio Allowed

Percent of Portfolio per

Issuer

Percent of Outstanding

Securities

per Issuer

U.S. Government 100% 100% NA

U.S. Treasury 100% 100% NA

Repurchase Agreements 25% 10% NA

U.S. Agencies and Instrumentalities 100% 33% NA

Money Market Mutual Funds 25% 10% 3%

Commercial Paper 25% 3% 3%

Corporate Bonds 25% 3% 3%

Commonwealth of PA and subdivisions 15% 3% 3% of Commonwealth of PA

Banker's Acceptances and Certificates 15% 3% 3%

of Deposit

Collateralized Mortgage Obligations and 5% 3% 3% Passthrough Securities

For the avoidance of doubt, debt backed by the Federal Deposit Insurance Corporation (FDIC)

under the debt guarantee program, the principal and interest of which are unconditionally backed

by the full faith and credit of the United States Government, should be included under the agency

limitations.

Commonwealth managed state investment pools, with the highest ratings from either

S&P or Moody’s, will be counted towards the money market mutual fund limitations related to

diversification.


Asset Backed Commercial Paper is a subset of commercial paper listed above and can be invested

up to 10% of the portfolio which will be counted towards the 25% commercial paper limitation

as long as the final maturity does not exceed 90 days.

Accounts with values under $2 million can be kept 100% in a money market mutual fund composed

of governmental obligations, including treasuries and agencies.

III. SAFEKEEPING AND CUSTODY GUIDELINES

The City selects custodian banks that are members of the Federal Reserve System to hold its

investments. Custodial banks are generally different institutions than the investment managers

assigned to any given account. Delivery of the applicable investment documents (i.e. contracts,

securities, and safekeeping receipts) to the City’s custodian is required for all investments. For

secured transactions, such as repurchase agreements, either the title to or a perfected security

interest in the securities, along with any necessary transfer documents, must be transferred to the

custodian. Such transactions will always be done on a delivery-versus-payment (DVP) basis.

Safekeeping procedures of the custodian shall be reviewed annually by independent auditors and

a copy of their report shall be supplied to the City for review.

IX. MONITORING INVESTMENTS

Those responsible for the day-to-day management of City funds shall review trading activity on a

daily basis. The holdings reports shall be reviewed monthly by the Treasurer’s Office.

X. PORTFOLIO REVIEWS

The investment managers shall meet with the City, including the Treasurer and a representative

from the Water Department, Aviation Division, and the Philadelphia Gas Works at least quarterly

to review investment results. A general agenda for these meetings should include (but is not limited

to):

A review of investment results net of fees achieved over the last three quarters, one

year, three years, and five years compared with the assigned benchmark;

The manager’s current outlook for the financial markets over the next six through

twelve months;

The manager’s internal investment policies that have been adopted in response to

these market expectations;

The appropriateness of the present portfolio given the market expectations, internal

policy, and the City’s requirements;

A review of the City’s guidelines including the assigned benchmark relative to any

constraints which the manager feels are limiting its ability to respond to developments

within the markets in a manner considered most appropriate given the investment

objectives; and


A review of the previous year cash inflows and outflows for each account and

discussion of the upcoming year’s cash flow forecasts.

Investment performance will be evaluated at each quarterly meeting. Each manager should

maintain investment performance net of fees above the assigned benchmark for each quarter and

for one year, three year, and five year performance. Any deviance from benchmark should be

closely evaluated to determine if the money manager is using appropriate investments and

strategies. A manager’s failure to be above the benchmark for three successive quarters merits

probationary status. A manager’s failure to meet the benchmark for four successive quarters should

generally result in termination. Upon further review, the City may grant further quarters for

improvement to take place.

Benchmarks are set by the Treasurer’s Office based on duration and risk profile of the account.

XI. SELECTION OF MONEY MANAGERS

The City through a competitive Request for Proposal (RFP) process, shall establish a pool of

eligible investment managers to manage city funds. Money managers shall be selected from this

pool on as needed basis to replace existing money managers or to manage new funds which arise

from time to time.

XII. INTERNAL CONTROLS

The Treasurer shall establish internal controls governing the administration and management of

investments covered under this policy and these controls shall be documented in writing. Such

controls shall be designed to prevent and control losses of City funds arising from fraud, employee

error, misrepresentation by third parties, and imprudent actions by any personnel. Many of the

controls applicable to the investment of City funds by the money managers are listed in the

investment manager contracts. An annual process of independent review shall be conducted by the

City Controller.

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