County treasurer says money lost under predecessor

Tuesday, July 28, 1998 | 8:25 a.m.

The previous policy, in which about 38 percent of the $2 billion portfolio was placed in mutual funds, was unnecessarily conservative, Fitzpatrick said.

Fitzpatrick, who was appointed in March to fill the unexpired term of disgraced former Treasurer Mark Aston, said she intends to slice the amount of money in mutual funds to about $100 million, or 5 percent of the portfolio. That's the amount the county needs to have in liquid assets to cover payroll and other bills, according to both internal and external studies of the cash flow.

Money market mutual funds provide the quickest access to money and the lowest risk, yielding an average return of 5.3 percent in interest over the past two years, county records show. By contrast, Fitzpatrick said other short-term investments with almost the same limited risk have yielded about 5.6 percent interest Q a difference that can mean millions of dollars.

Internal county Auditor Jeremiah Carroll first recommended the shift away from mutual funds when he discovered during a 1997 probe that Aston increased the amount invested in mutual funds from $374 million in July 1996 to $711 million in August 1997. An external look this spring by four investment analysts backed up Carroll's view.

Aston, who resigned in March after admitting to embezzling $21,497 from the state's County Fiscal Officers Association, defended his investment policy in November after Carroll's audit. In a memo, he urged the Clark County Commission to "not succumb to the voices that would encourage them to chase interest rates to obtain an unrealistic rate of return."

He also said his conservative style would not lose tax dollars the way managers in Orange County, Calif., did when the market soured and bankrupted that county.

Fitzpatrick said her policy exposes the county to almost as little risk and invests money that is not immediately needed in longer-term vehicles such as certificates of deposit.

The change was enthusiastically endorsed Monday by outgoing state Treasurer Bob Seale.

"I think it's outstanding," Seale said. "It's something that's been needed to be done."

The new policy, approved last week by the County Commission, also calls for the creation of a review committee to oversee county investments. The panel, whose meetings Fitzpatrick said might be open to the media, would include the county manager, comptroller and finance director and possibly a community representative unrelated to county government.

The move is an effort to improve the tarnished reputation left by Aston, who also was reprimanded by other internal audits and by the state Ethics Commission for his conduct as treasurer. Aston often was criticized for viewing his department as distinct from the rest of county government and for not seeking advice or guidance from other divisions.