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Littleton Public Schools Regulation |
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Policy Code DFA-R Policy Name Investments Adoption November 17, 1992 Revised August 28, 2008 |
In order to achieve the investment and cash management objectives established by the Board of Education, the following regulations are to be followed in implementing Board of Education policy.
Investment Officer
The Chief Financial Officer, or his/her designee, is designated as the investment officer for the District and is responsible for all investment decisions and investment activities.
The investment officer will be guided by the “prudent investor rule” which states that 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.
The investment officer will establish written administrative procedures for the operation of the District’s investment program consistent with the Investment Policy. The investment officer acting in accordance with Colorado statutes, the resolution enacted by the Board of Education, and the written Investment Policy, while exercising proper due diligence in making investment decisions, shall be relieved of personal responsibility for an individual security’s credit risk or market price changes. The investment officer will be covered by the District’s errors and omissions policy.
The investment officer may engage the support services of outside professionals so long as it can be demonstrated that these services produce net financial advantage and necessary financial protection of the District’s resources. Such services may include engagement of financial advisors in conjunction with debt issuance, portfolio management support, special legal representation, third party custodial services, and independent rating services.
Eligible Depositories
The following institutions shall be designated as eligible depositories for District investments:
1. All state and national banks with headquarters in Colorado which are insured by the Federal Deposit Insurance Corporation (FDIC) and which are approved as eligible public fund depositories by the state banking commissioner.
2. All state and federally chartered savings and loan associations with headquarters in Colorado which are insured by the Federal Deposit Insurance Corporation and which are approved as eligible public depositories by the State of Colorado Division of Financial Services.
Eligible Securities Brokers/Dealers
The District shall maintain a list of authorized broker/dealers and financial institutions which are approved for investment purposes. It shall be the policy of the District to purchase securities only from those authorized institutions and firms.
The following will be designated eligible brokers/dealers for governmental securities purchases allowed under Board of Education policy and state law:
1. Securities dealers and/or banks (primary dealers) which are designated as reporting dealers by the Market Reports Division of the Federal Reserve Bank of New York.
2. Securities dealers, savings and loans, and/or Colorado banks (primary dealers) in good standing with the National Association of Securities Dealers and registered with the state of Colorado, Department of Regulatory Agencies.
Each broker/dealer or financial institution will be sent a copy of this policy and a list of those persons authorized to execute investment transactions. Each firm must acknowledge receipt of such materials to qualify for the Approved List of Broker/Dealers and Financial Institutions.
Broker/dealers and other financial institutions will be selected by the District on the basis of their expertise in public cash management and their ability to provide service to the District’s account. Each broker/dealer, bank, and savings and loans that has been authorized shall be required to submit and annually update a District-approved Broker/Dealer Information Request Form which includes the firm’s most recent financial statements. The District shall maintain a file of the most recent Broker/Dealer Information Request Forms submitted by each firm approved for investment purposes.
Eligible Investments
The following are eligible instruments or methods for investment of District funds:
1. U.S. Treasury Obligations: Treasury bills, treasury notes, treasury bonds, and treasury strips with maturities not exceeding five years from the date of purchase.
2. Federal Instrumentality Securities: Debentures, discount notes, callable securities, step-up securities and stripped principle or coupons with maturities not exceeding five years from the date of trade settlement issued by the following only: Federal National Mortgage Association (FNMA), Federal Farm Credit Banks (FFCB), Federal Home Loan Banks (FHLB), and Federal Home Loan Mortgage Corporation (FHLMC).
3. Repurchase Agreements with a termination date of 180 days or less collateralized by U.S. Treasury obligations or Federal Instrumentality Securities listed in 1 and 2 above with a final maturity not exceeding ten years. Repurchase agreement collateral shall be delivered to a third party safekeeping account to ensure that the School District has clear title to the securities. Repurchase agreements will be collateralized at a minimum of 103 percent of the purchase price of the repurchase agreement and marked to market price every 30 days.
Repurchase agreements shall be entered into only with broker/dealers recognized as primary dealers by the Federal Reserve Bank of New York, or with firms that have a primary dealer within their holding company structure. Approved repurchase agreement counterparties shall have a short-term credit rating of at least A-1 or the equivalent and a long-term credit rating of at least A or the equivalent by a Nationally Recognized Statistical Rating Organization (NRSRO). Repurchase agreement counterparties shall execute a District-approved master repurchase agreement with the District. The chief financial officer shall maintain a copy of the District’s approved master repurchase agreement along with a list of broker/dealers who have executed same.
4. Time Certificates of Deposit or savings accounts in state or national banks or state or federally chartered savings and loans which are state approved depositories per C.R.S. 24-75-603 et seq. (as evidenced by a certificate issued by the State Banking Board) and are issued by the FDIC. Certificates of Deposit will have a maximum maturity of five years. Certificates of Deposit which exceed the FDIC insured amount shall be collateralized in accordance with the Colorado Public Deposit Protection Act. The aggregate amount of Certificates of Deposit purchased from any one bank or savings and loan shall not exceed 25 percent of the District’s portfolio at the time of purchase.
The investment officer shall take steps on a routine basis to obtain copies from the bank of the periodic certification of collateral which is sent to the banking board.
5. Local Government Investment Pools authorized under the provisions of C.R.S. 24 -75-701, 702 as amended which: 1) are “no-load” (i.e., no commission fees shall be charged on purchases or sales of shares); 2) have a constant daily net asset value of $1.00 per share; 3) limit assets of the fund to those securities authorized by state statute; 4) have a maximum stated maturity in accordance with Federal Securities Law Regulation 2a-7; and 5) have a rating of AAA or equivalent by one or more NRSROs.
6. Money Market Mutual Funds registered under the Investment Company Act of 1940 that: 1) are “no-load” as previously defined; 2) have a constant net asset value of $1.00 per share; 3) limit assets of the fund to those securities authorized by state statute; 4) have a maximum stated maturity and weighted average maturity in accordance with Federal Securities Law Regulation 2a-7; and 5) have a rating of AAA or equivalent by one or more NRSROs. The District’s investment shall not exceed 10 percent of the outstanding shares of any one money market mutual fund at the time of purchase.
If the District uses a “sweep” account at the bank so that any remaining balances at the end of the day in any District’s bank accounts can be captured in one account and invested overnight in a money market mutual fund designated by the District, the District’s “sweep” account will not be subject to the limits described in the preceding paragraph because of the short-term (overnight) nature of the investment.
7. Commercial Paper with an original maturity of 180 days or less that is rated at least A1+, P-1 or equivalent at the time of purchase by at least two NRSROs and rated not less by all NRSROs that rate the commercial paper. If the commercial paper issuer has senior debt outstanding, it must be rated at least AA-, Aa3 or equivalent at the time of purchase by at least two NRSROs and rated not less by all NRSROs that rate the issuer.
8. Municipal Notes or Bonds that are an obligation of any State of the United States, the District of Columbia, or any territorial possession of the United States or of any political subdivision, institution, department, agency, instrumentality, or authority of any such governmental entities which qualify under Colorado statutes. The municipal bonds or notes must be general obligation or revenue bonds with an effective final maturity of five years or less (the maturity for a pre-refunded bond will be its refunding date) and a rating of Aa or better by Moody’s or AA or better by Standard and Poors; original obligation or revenue bonds that are insured by the MBI, FGIC, or AMBAC Indemnity Corporation (as long as MBIA, FGIC, and AMBAC maintain their AAA rating), or are escrowed to maturity in the U.S. Treasury collateral.
9. Any other investment vehicle which is authorized by state law and is determined by the investment officer to be a prudent investment.
Safekeeping Account
The District will establish a safekeeping account with one or more financial institutions to be a custodian for marketable securities owned by the District. Custodian banks will be selected on the basis of their ability to provide service to the District’s account and the competitive pricing of their safekeeping related services.
Except for Certificates of Deposit, Local Government Investment Pools, and Money Market Funds, all investment securities purchased by the District will be delivered by either book entry or physical delivery and will be held in third-party safekeeping by a District approved custodian bank, its correspondent New York bank, or the Depository Trust Corporation (DTC).
It is the objective of the District that all owned securities be perfected in the name of the District. The District’s perfected ownership of all book entry securities will be evidenced by a safekeeping receipt issued to the District by the custodian bank who acts as the District’s safekeeping agent.
Allocation of Assets
It is the intent of the District to diversify the investments within the investment portfolio to avoid incurring unreasonable risks inherent in overinvesting in specific instruments, individual financial institutions or maturities. Nevertheless, the asset allocation in the investment portfolio should be flexible depending upon the outlook for the economy, the securities markets, and the District’s anticipated cash flow needs.
Maturity Schedule
District personnel shall develop a cash flow forecast which will provide a guideline of how to structure the maturing investments to meet the cash flow needs of the District. The investment portfolio shall remain sufficiently liquid to meet all cash requirements that may be reasonably anticipated. To the extent possible, investments shall be matched with anticipated cash flows and known future liabilities. Investments shall be limited to maturities not exceeding five years from the date of the trade settlement.
The District shall maintain a minimum cash balance equal to the 3 percent emergency reserve required by Article X, Section 20 of the Colorado Constitution (The Taxpayer’s Bill of Rights).
Competitive Quotes
The District will seek a minimum of two competitive quotes on all single instrument investments, unless it is a new issuance. If the District is offered a security for which there is no other readily available competitive offering, quotes for comparable or alternative securities will be documented. A record of all offering prices and bids shall be maintained by the District in order to ensure that the District receives competitive pricing. Investments will be made on the basis of the safety, legality, liquidity, and yield of invested cash.
Documentation
All purchases and sales of investments shall be authorized or confirmed in writing by the issuer. Internal controls (for example, separation of duties) will be established to ensure the integrity of the investment process. For investment transactions which are conducted electronically, confirmation in the form of annotated documentation and confirmation received should be retained.
Reporting
The Board of Education shall receive a regular quarterly listing of the investments of the District. The report will include a summary of investment during the reporting period. The report will be presented so as to show the level of investments in securities and various investment institutions. An annual report shall be provided which also will give the rate of return for the period.
Auditing
The District shall conduct regular and/or unscheduled reviews of all of the investment transactions. Problems or concerns found in these reviews will be reported to the appropriate District personnel. The audit of financial statements of the District shall, in addition to all other requirements, include a supplemental listing of all investments held by the District at the date of the financial statement.
Legal Reference: C.R.S. 11-10.5-101 et seq.
C.R.S. 11-47-101 et seq.
C.R.S. 11-60-101 et seq.
C.R.S. 15-1-304
C.R.S. 22-32-107
C.R.S. 22-40-105
C.R.S. 24-75-601 et seq.
C.R.S. 24-75-701 et seq.
This regulation was titled Investment Procedures. When we discovered this name was different than the policy name (Investments), we revised the regulation title on 12-05-01. Scott Murphy and Donna Holstlaw updated Scott’s title and change the word “and” to “or” in paragraph two on 01/15/02 (no approval needed). Major updates per Scott Myers on 5/28/08. This regulation did not go to the BOE for approval but was put in final on 8/28/08 along with DIE and DBGA.