6144 - INVESTMENTS
SECTION 1: PURPOSE
The purpose of this policy is to set forth the investment objectives and parameters for the management of public funds of the Whiteford Agricultural School District. This investment policy is designed to safeguard funds on behalf of the District, to assure the availability of operating and capital funds when needed, and provide an investment return competitive with comparable funds and financial market indices.
SECTION 2: SCOPE
In accordance with The Revised School Code of Michigan, Act 451 380.622, 380.1221 and 380.1223, this investment policy applies to all cash and investments held or controlled by the Board on behalf of the District. This policy does not apply to funds related to the issuance of debt where there are other indentures in effect for such funds. Additionally, any future revenues, which have statutory investment requirements conflicting with this Investment Policy and funds held or controlled by Federal or State agencies (e.g., Department of Revenue), are not subject to the provisions of this policy.
SECTION 3: INVESTMENT OBJECTIVES
The primary objectives, in priority order, of investment activities shall be safety, liquidity and yield.
Safety of Principal
The foremost objective of this investment program is the safety of the principal of funds. Investment transactions shall be undertaken in a manner to ensure the preservation of capital in the overall portfolio. The objective will be to minimize credit risk and interest rate risk.
Credit Risk (Custodial Credit Risk and Concentration Credit Risk)
The District will minimize Custodial Credit Risk, which is the risk of loss due to the failure of the security issuer or backer, by: limiting investments to the types of securities listed in Section 9 of this Investment Policy, and pre- qualifying the financial institutions, broker/dealers, intermediaries and advisors with which the District will do business in accordance with Section 7 of this Investment Policy.
The District will minimize Concentration of Credit Risk, which is the risk of loss attributed to the magnitude of the District's investment in a single issuer, by diversifying the investment portfolio so that the impact of potential losses from any one type of security or issuer will be minimized.
Investment Rate Risk
The District will minimize Interest Rate Risk, which is the risk that the market value of securities in the portfolio will fall due to changes in market interest rates, by: structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities in the open market; and, investing operating funds primarily in short-term securities, liquid asset funds, money market mutual funds, or similar investment pools and limiting the average maturity in accordance with the District's cash requirements.
Foreign Currency Risk
The District is not authorized to invest in investments which have this type of risk.
Maintenance of Liquidity
The funds shall be managed such that they are available to meet reasonably anticipated cash flow requirements.
Yield/Return on Investment
Investment portfolios shall be designed with the objectives of attaining a market rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs. It is understood that return on investments is of secondary importance when compared to the safety and liquidity objectives described above.
SECTION 4: MANAGEMENT OF INVESTMENTS
The Business Manager shall be established as the Investment Officer and shall be responsible to oversee the day-to-day management of District investments. The Investment Officer shall be responsible for transferring of appropriate funds to affect investment transactions, for the investment of operating funds, operating reserves funds, and bond proceeds, consistent with the policy and actions of the Board. Should the Board elect to select an outside investment advisor, such advisor or firm must be registered under the Investment Advisor's Act of 1940.
SECTION 5: STANDARDS OF PRUDENCE
The standard of prudence to be used by the Investment Officer shall be the "Prudent Person" standard and shall be applied in the context of managing the overall investment program. The Prudent Person standard states:
"Investments shall be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived from the investment.
SECTION 6: ETHICS AND CONFLICTS OF INTEREST
The Investment Officer shall refrain from personal business activity that could conflict with proper execution of the investment program, or which could impair one's ability to make impartial investment decisions. Also, the Investment Officer shall disclose to the Board any material financial interest in Qualified Institutions that conduct business with the Board or the District, and they shall further disclose any material personal financial/investment positions that could be related to the performance of the District's investment program.
SECTION 7: AUTHORIZED INVESTMENT INSTITUTIONS AND DEALERS
Only firms meeting one (1) of the following requirements shall be eligible to serve as Authorized Institutions:
The firm must comply with all of the following requirements:
primary and regional dealers that qualify under Securities and Exchange Commission Rule 15C3-1 (uniform net capital rule);
capital of no less then $10,000,000;
registered as a dealer under the Securities Exchange Act of 1934;
a member of the National Association of Securities Dealers (NASD)
registered to sell securities in Michigan; and
the firm and assigned broker have been engaged in the business of effecting transactions in U.S. government and agency obligations for at least five (5) consecutive years.
Public Depositories qualified in accordance with MCL 380.1221, The revised School code of Michigan.
All brokers, dealers, and other financial institutions deemed to be Authorized Institutions shall be provided with current copies of this investment policy and shall provide in return to the Board, certifications of having read, understood, and agreement to comply with this investment policy.
SECTION 8: COMPETITIVE SELECTION OF INVESTMENT INSTRUMENTS
The Investment Officer shall obtain bids from at least two (2) brokers or financial institutions on all purchases of investment instruments on the secondary market. Overnight sweep investment instruments shall not be subject to this section.
SECTION 9: AUTHORIZED INVESTMENT AND PORTFOLIO COMPOSITION
Investments and Depositories are restricted to those complying with MCL 380.622, 380.1221, and 380.1223. These include:
U.S. Treasury obligations which are fully guaranteed by the U.S. government
United States Government Agency and Instrumentality obligations
Federal Instrumentalities (United States Government-Sponsored Enterprises)
certificates of deposit of a public corporation(s) (CDs) in insured depository institutions in accordance with the following conditions:
the funds are initially invested through a financial institution that is not ineligible to be a depository of surplus funds belonging to this State under (M.C.L.A. 21.146 (discriminatory lending practices)
the financial institution arranges for the investment of the funds in certificates of deposit in one (1) or more insured depository institutions, as defined in 12 U.S.C. 1813, for the account of the school district
the financial institution acting as custodian for the school district is insured by an agency of the United States
the financial institution acts as custodian for the school district with respect to each certificate of deposit
at the same time that the funds are deposited and the certificate or certificates of deposit are issued, the financial institution receives an amount of deposits from customers of other insured depository institutions equal to or greater than the amount of the funds initially invested by the school district through the financial institution
Repurchase Agreements
Commercial Paper
Bankers' Acceptances
Registered Investment Companies (Money Market Mutual Funds)
Investment pools, as authorized by the surplus funds investment pool act, 1982 PA 367, MCL 129.111 to 129.118, composed entirely of instruments that are legal for direct investment by a School District.
SECTION 10: REPORTING
Performance reports shall be prepared at least annually for the Board that shall include securities in the portfolio by class and type, income earned, and market value as of the reporting date. The annual report shall provide all, but not be limited to, the following: a complete list of invested funds, name or type of security in which the funds are invested, the amount invested (purchase price), the maturity date, interest income, maturity value and the interest/discount rate on each investment.
SECTION 11: POLICY CONSIDERATION
Any investment held at the time of the implementation of this policy that meets the requirements of MCL 380.622, 380.1221, and 380.1223 but does not meet the guidelines of this policy, shall be exempted from the requirements of this policy. At maturity or liquidation, such monies shall be reinvested only as provided by this policy.
Amendments: This policy shall be reviewed from time to time. The District Board of Education must adopt any changes to this policy.
The Board may adopt a resolution at its annual organizational meeting, authorizing electronic fund transfers and the Treasurer or the Electronic Transfer Officer (ETO) as authorized agent(s) to complete such transactions on behalf of the Board. The Automatic Clearing House (ACH) authorizing resolution shall include all of the following:
That an officer or employee designated by the Treasurer or ETO is responsible for the local unit’s ACH agreements, including payment approval, accounting, reporting, and generally for overseeing compliance with the ACH policy.
That the officer or employee responsible for disbursement of funds shall submit to the local unit documentation detailing the goods or services purchased, the cost of the goods or services, the date of the payment, and the department levels serviced by payment. This report can be contained in the electronic general ledger software system of the local unit or in a separate report to the governing body of the local unit.
A system of internal accounting controls to monitor the use of ACH transactions made by the local unit.
The approval of ACH invoices before payment.
Any other matters the Treasurer or ETO considers necessary.
(NOTE: Investment professionals utilized by the District should be advised of and consulted on this policy.)