Adopted: 1996 District
599 Policy 705
Revised:
The purpose of
this policy is to establish guidelines for the investment of school district
funds.
It is the policy of this school district to comply with all state laws relating to investments and to guarantee that investments meet certain primary criteria.
This policy applies to all investments of the surplus funds of the school district, regardless of the fund accounts in which they are maintained, unless certain investments are specifically exempted by the school board through formal action.
A. The funds of the school district shall be
deposited or invested in accordance with this policy, Minn. Stat. Chapter 118A
and any other applicable law or written administrative procedures.
B. The primary criteria for the investment of
the funds of the school district, in priority order, are as follows
1. Safety
and Security. Safety of principal
is the first priority. The investments
of the school district shall be undertaken in a manner that seeks to ensure the
preservation of the capital in the overall investment portfolio.
2. Liquidity. The funds shall be invested to assure that
funds are available to meet immediate payment requirements, including payroll,
accounts payable and debt service.
3. Return
and Yield. The investments shall be
managed in a manner to attain a market rate of return through various economic
and budgetary cycles, while preserving and protecting the capital in the
investment portfolio and taking into account constraints on risk and cash flow
requirements.
V. DELEGATION OF AUTHORITY
A. The Superintendent of the school district is
designated as the investment officer of the school district and is responsible
for investment decisions and activities under the direction of the school
board. The investment officer shall
operate the school district's investment program consistent with this
policy. The investment officer may delegate
certain duties to a designee or designees, but shall remain responsible for the
operation of the program.
B. All officials
and employees that are a part of the investment process shall act
professionally and responsibly as custodians of the public trust, and shall
refrain from personal business activity that could conflict with the investment
program or which could reasonably cause others to question the process and
integrity of the investment program.
The investment officer shall avoid any transaction that could impair
public confidence in the school district.
The standard of conduct regarding school district investments to be applied by the investment officer shall be the "prudent person standard." Under this standard, the investment officer shall exercise that degree of judgment and care, under the circumstances then prevailing, that persons of prudence, discretion and intelligence would exercise in the management of their own affairs, investing not for speculation and considering the probable safety of their capital as well as the probable investment return to be derived from their assets. The prudent person standard shall be applied in the context of managing the overall investment portfolio of the school district. The investment officer, acting in accordance with this policy and exercising due diligence, judgment and care commensurate with the risk, shall not be held personally responsible for a specific security's performance or for market price changes. Deviations from expectations shall be reported in a timely manner and appropriate actions shall be taken to control adverse developments.
The investment officer shall routinely monitor existing investments and the contents of the school district's investment portfolio, the available markets and the relative value of competing investment instruments.
The investment officer shall establish a system of internal controls which shall be documented in writing. The internal controls shall be reviewed by the school board and shall be annually reviewed for compliance by the school district's independent auditors. The internal controls shall be designed to prevent and control losses of public funds due to fraud, error, misrepresentation, unanticipated market changes or imprudent actions by officers, employees or others. The internal controls may include, but shall not be limited to, provisions relating to controlling collusion, separating functions, separating transaction authority from accounting and record keeping, custodial safekeeping, avoidance of bearer form securities, clear delegation of authority to applicable staff members, limitations regarding securities losses and remedial action, written confirmation of telephone transactions, supervising and controlling employee actions, minimizing the number of authorized investment officials, and documenting transactions and strategies.
The school district may invest its available funds in those instruments specified in Minn. Stat. §§ 118A.04 and 118A.05, as these sections may be amended from time to time, or any other law governing the investment of school district funds.
A. Limitations on instruments, diversification
and maturity scheduling shall depend on whether the funds being invested are
considered short-term or long-term funds.
All funds shall normally be considered short-term except those reserved
for building construction projects or specific future projects and any
unreserved funds used to provide financial-related managerial flexibility for
future fiscal years.
B. The school district shall diversify its
investments to avoid incurring unreasonable risks inherent in over-investing in
specific instruments, individual financial institutions or maturities.
1. The investment officer shall prepare and present a table to the school board for review and approval. The table shall specify the maximum percentage of the school district's investment portfolio that may be invested in a single type of investment instrument, such as U.S. Treasury Obligations, certificates of deposit, repurchase agreements, banker's acceptances, commercial paper, etc. The approved table shall be attached as an exhibit to this policy and shall be incorporated herein by reference.
2. The investment officer shall prepare and
present to the school board for its review and approval a recommendation as to
the maximum percentage of the total investment portfolio that may be held in
any one depository. The approved
recommendation shall be attached as an exhibit or part of an exhibit to this
policy and shall be incorporated herein by reference.
3. Investment maturities shall be scheduled to
coincide with projected school district cash flow needs, taking into account
large routine or scheduled expenditures, as well as anticipated receipt dates
of anticipated revenues. Maturities for
short-term and long-term investments shall be timed according to anticipated
need. Within these parameters,
portfolio maturities shall be staggered to avoid undue concentration of assets
and a specific maturity sector. The
maturities selected shall provide for stability of income and reasonable
liquidity.
Before the school district invests any surplus funds in a specific investment instrument, a competitive bid or quotation process shall be utilized. If a specific maturity date is required, either for cash flow purposes or for conformance to maturity guidelines, quotations or bids shall be requested for instruments which meet the maturity requirement. If no specific maturity is required, a market trend analysis, which includes a yield curve, will normally be used to determine which maturities would be most advantageous. Quotations or bids shall be requested for various options with regard to term and instrument. The school district will accept the quotation or bid which provides the highest rate of return within the maturity required and within the limits of this policy. Generally all quotations or bids will be computed on a consistent basis, i.e., a 360-day or a 365-day yield. Records will be kept of the quotations or bids received, the quotations or bids accepted and a brief explanation of the decision that was made regarding the investment. If the school district contracts with an investment advisor, bids are not required in those circumstances specified in the contract with the advisor.
A. The school district shall maintain a list of
the financial institutions that are approved for investment purposes.
B. Prior to completing an initial transaction
with a broker, the school district shall provide to the broker a written
statement of investment restrictions which shall include a provision that all
future investments are to be made in accordance with Minnesota statutes
governing the investment of public funds.
The broker must annually acknowledge receipt of the statement of
investment restrictions and agree to handle the school district's account in
accordance with these restrictions. The
school district may not enter into a transaction with a broker until the broker
has provided this annual written agreement to the school district. The notification form to be used shall be
that prepared by the State Auditor. A
copy of this investment policy, including any amendments thereto, shall be
provided to each such broker.
A. All investment securities purchased by the school district shall be held in third-party safekeeping by an institution designated as custodial agent. The custodial agent may be any federal reserve bank, any bank authorized under the laws of the United States or any state to exercise corporate trust powers, a primary reporting dealer in United States Government securities to the Federal Reserve Bank of New York, or a securities broker-dealer defined in Minn. Stat. § 118A.06. The institution or dealer shall issue a safekeeping receipt to the school district listing the specific instrument, the name of the issuer, the name in which the security is held, the rate, the maturity, serial numbers and other distinguishing marks, and other pertinent information.
B. Deposit-type securities shall be collateralized as required by Minn. Stat. § 118A.03 for any amount exceeding FDIC, SAIF, BIF, FCUA, or other federal deposit coverage.
C. Repurchase agreements shall be secured by the physical delivery or transfer against payment of the collateral securities to a third party or custodial agent for safekeeping. The school district may accept a safekeeping receipt instead of requiring physical delivery or third-party safekeeping of collateral on overnight repurchase agreements of less than $1,000,000.
XIV. REPORTING REQUIREMENTS
A. The investment officer shall generate daily and monthly transaction reports for management purposes. In addition, the school board shall be provided a monthly report that shall include data on investment instruments being held as well as any narrative necessary for clarification.
B. The investment officer shall prepare and submit to the school board a quarterly investment report that summarizes recent market conditions, economic developments, and anticipated investment conditions. The report shall summarize the investment strategies employed in the most recent quarter, and describe the investment portfolio in terms of investment securities, maturities, risk characteristics and other features. The report shall explain the quarter's total investment return and compare the return with budgetary expectations. The report shall include an appendix that discloses all transactions during the past quarter. Each quarterly report shall indicate any areas of policy concern and suggested or planned revisions of investment strategies. Copies of the report shall be provided to the school district's auditor.
C. Within forty-five (45) days after the end of each fiscal year of the school district, the investment officer shall prepare and submit to the school board a comprehensive annual report on the investment program and investment activity of the school district for that fiscal year. The annual report shall include 12-month and separate quarterly comparisons of return and shall suggest revisions and improvements that might be made in the investment program.
D. If necessary, the investment officer shall establish systems and procedures to comply with applicable federal laws and regulations governing the investment of bond proceeds and funds in a debt service account for a bond issue. The record keeping system shall be reviewed annually by the independent auditor or by another party contracted or designated to review investments for arbitrage rebate or penalty calculation purposes.
XV. DEPOSITORIES
The school board shall annually designate one or more official depositories for school district funds. The treasurer or the chief financial officer of the school district may also exercise the power of the school board to designate a depository. The school board shall be provided notice of any such designation by its next regular meeting. The school district and the depository shall each comply with the provisions of Minn. Stat. § 118A.03 and any other applicable law, including any provisions relating to designation of a depository, qualifying institutions, depository bonds, and approval, deposit, assignment, substitution, addition and withdrawal of collateral.
The school district may make electronic fund transfers for investments of excess funds upon compliance with Minn. Stat. § 471.38.
Legal
References: Minn.
Stat. § 118A.01 (Public Funds; Depositories and Investments)
Minn.
Stat. § 118A.02 (Authorization for Deposit and Investment)
Minn.
Stat. § 118A.03 (Depositories and Collateral)
Minn.
Stat. § 118A.04 (Investments)
Minn.
Stat. § 118A.05 (Contracts and Agreements)
Minn.
Stat. § 118A.06 (Delivery and Safekeeping)
Cross
References: Policy
703 (Annual Audit)
MSBA
Service Manual, Chapter 9, Public School Finance
Minnesota
Legal Compliance Audit Guide Prepared by the Office of the State Auditor
705-6