WASHINGTON -- The Government Finance Officers Association is seeking information from its members about their experiences with derivatives.
"The attention now being paid to the use of derivatives by public entities also has increased GFOA's need for information about these products," the association said in a recent newsletter, Public Investor, that was sent to about 1,400 of the 10,000 state and local finance officials it serves.
Specifically, the association asked the members to provide information about:
how often broker-dealers contact them to market derivatives products.
* whether their jurisdictions have proposed or adopted legislation or policies with regard to derivatives.
* whether they are using derivatives with positive or negative results.
The association also asked for any other information that might be useful in understanding the role that derivatives products play in cash or debt management strategies.
The GFOA assured the finance officers that the information would not be published and would only be used to respond to any derivatives-related queries from Congress or federal agencies.
The association's request for derivatives information comes as the General Accounting Office is conducting a survey of derivatives sales practices for Rep. Edward Markey, D-Mass, and Rep. Mike Synar, D-Okla.
Markey chairs the House Energy and Commerce Committee's subcommittee on telecommunications and finance, and Synar is a member of the subcommittee.
The GFOA has been interviewing derivatives dealers and users for the survey. It plans to provide Markey and Synar with some informal preliminary results from the survey late next month, one agency official said yesterday.
The new survey will be an extension of an earlier survey the association did for its derivatives report that was issued to Markey and other members of Congress last May, the GAO official said.
For that report, the GAO surveyed about 4,600 state and local governmental entities and 156 large pension funds and found that only about 4% of 3,400 localities used derivatives.
The association found also that only about 4% of the survey's 3,727 total respondents indicated they had "unintended consequences as a result of using any derivative products."
However, the survey showed that about 71% of the respondents that used derivatives used them to increase their rate of return -- a speculative use of such products. About 74% of the same group said they used derivatives for hedging.
The association's report and survey did not cover structured notes such as inverse floaters and collateralized mortgage obligations that have caused problems for several state and local governments.
Instead, the report was limited to swaps, forwards, futures, options, and other over-the-counter derivatives products.
The survey for Markey and Synar will be limited the same group of products and will not cover structured notes, the agency official said.
