Recent allegations of negligence and fraud being perpetrated by the Idaho State Treasurer caused me to think about the investments overseen by the Kootenai County Treasurer's Office. Out of professional curiosity, I made inquiries as to the safety and soundness of taxpayers' cash and investments controlled by the Treasurer's Office ($147,388,641 as of Dec. 31, 2013). What I learned was not reassuring.
A cursory review of some public records requests of our county's investment portfolios revealed the following: (1) the investment policy used by the county is woefully outdated; (2) current investments do not follow fundamental investing and asset management principles.
The lack of a sound investment policy would be alarming in its own right. No rational person would dream of ignoring their investment plans for over a decade. Factor in the recent turmoil in financial markets, the shockwaves following 9/11, two wars, a housing collapse, Bernie Madoff, a global recession, the collapse of Wall Street, three different Federal Reserve Chairmen, two different Presidents ... even successful investors were rocked in recent years, much less a county treasury like ours. The consequences of such poor strategies are significant.
In examining the county's past investments I noticed some examples of faulty investment strategies resulting in substandard returns. In one instance, had the county more wisely invested the $3.2 million which covers a portion of the Fighting Creek Landfill maintenance costs, resulting returns could have been improved. With a better investment duration plan, the investment could have resulted in an increased return of approximately $1,075,000 over the last 10 years. This unfortunate example represents what can potentially happen when investment decisions are made without a proper understanding of investment theory.
My intent is not to disparage the Treasurer's office. I am confident there are many capable, dedicated and hardworking employees who do their best each day. However, I am deeply disappointed with the lack of financial management expertise displayed by those in charge. I agree with our County Treasurer that qualifications are indeed important; in fact, qualifications are paramount for a position with such extensive financial responsibilities. Our next Treasurer should be capable of competently handling these serious fiduciary responsibilities. Our county is ready to move beyond simple appointments based on tenure and camaraderie and instead choose leaders whose training, education, and experience have rendered them truly ready for the job.
As a concerned taxpayer, I have formally requested and received written approval from the Kootenai County Board of Commissioners to examine financial records from the Treasurer's office. My professional background in finance could cause me to be cynical about what I might discover about our current situation. Fortunately, my pride in living here in Kootenai County makes me optimistic that we can find the proper methods, and the right people, to improve our future.
Steve Matheson, a Kootenai County resident, is a senior executive with 28 years financial management experience.