I have some questions about tonight’s audit repot that I wish to share with you in advance. Asset Backed Commercial Papers.
1. What was the maximum amount of ABCP that we owned at any one time?
Approximately $9 million. It was supposed to be a short term investment. The majority of the investment was redeemed on schedule. The existing $2.3 million was frozen as part of a restructuring plan, approximately 2 weeks before maturity. Staff
2. . Exactly what do we own now – term to maturity, interest rate and most importantly, the underlying asset securing the paper
$2,312,612.75. Original interest rate was to be 4.37%. The underlying assets are providing a small amount of revenue which are being flowed through to investors. For 2008 we received $83,500 in income and a further $34,000 in 2009. For 2010 we haven’t received anything substantial yet. The assets could have a market as early as 2016, but may need to be held for a longer period. Over time we will be monitoring the market in determining what action should be taken on the investments. Staff
3. . We own more than $100 million worth of investments – I want to know how much of that was invested in non-government credit – i.e. which ones do not have the principal amount guaranteed by either a federal or provincial government (Tbills….etc).
About $21 million is in provincial and municipal investments. $2.3 million is in the ABCP and the remainder is in investments in the GIC’s, Bankers Acceptance and Notes of Chartered Banks.
4. The City was aware of this problem in August of 2007. Why did we not disclose this earlier regardless of whether or not the auditor required it.
The ACBP has been discussed with audit committee as part of the year end audits for the past three years and has also been reported in the City’s investment reports. In 2008, we reviewed with our investment advisors the Investment Policy, and changes were recommended in the March 2009 investment report to Council. Council approved the changes in the policy. The changes did provide for reducing the risk associated with ABCP. We have not invested in new ACBP since the initial purchase. The additional note disclosure that we have included in the 2009 financial reports relates to the allowance that we have taken as a provision for possible write-down. Staff