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Treasurer should take responsibility for loss | Letter
On July 10, the three Island County treasurer candidates participated in the League of Women Voters’ forum in Coupeville.
Six questions were asked and answered by all candidates. Challenges were made in response to answers given; in response to statements made during one of those challenges, I followed up with the Island County Auditor’s Office for clarification of a statement made by Ana Maria Nunez.
During my answer to one of the questions, I reported that the market value of the long-term investment portfolio administered by the treasurer had incurred a $1.7 million loss, 3 percent of the portfolio’s face value, for the year ended Dec. 31, 2013.
Nunez challenged my statement and stated that the loss had been reduced to $350,000.
This seemed questionable, so I contacted the auditor’s office, which confirmed that Nunez’s claim is not true. The market loss of the portfolio is indeed $1.7 million.
Nunez’s figure of $350,000 has netted the interest income for the year against the market value decrease. The question was related to the investment policies that resulted in the market loss, not the net investment income for the period.
Interest income and market value adjustments are reported separately in the financial statements; one is revenue and the other is an adjustment to an asset account — this is Accounting 101. As a CPA, Nunez should be aware of the difference.
The $1.7 million loss resulted from purchases of bonds with extended maturity dates.
When interest rates increased at the end of 2013, the value of those bonds dropped because the market interest rate on that date exceeded the interest rate on the bonds owned.
In addition to the loss in market value, the county has also suffered lost opportunity cost in its inability to purchase bonds at current higher interest rates, as it is locked into the longer maturities of the bonds it now holds.
There are those who will say that any investment officer makes assumptions about future interest rate increases or decreases when considering investment choices.
However, I am sure all will agree that if interest rates had decreased, Nunez would be bragging about her intuitive investing providing the county with a market gain. As that is not what happened, it is therefore appropriate that she assume responsibility for the actual market loss of $1.7 million in the current situation.
Wanda Grone, CPA, CFE
Candidate for Island County treasurer