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HomeMy WebLinkAboutInvestment Policy GuidelinesDeschutes County Administrative Finance Policy No. F-12 Effective Date: January 7, 2008 INVESTMENT POLICY GUIDELINES STATEMENT OF POLICY All Deschutes County investments must be made in accordance with State Law and in accordance with the Deschutes County Investment Policy. Investment policies must be approved by the State of Oregon Short -Term Fund Board. This policy was designed after the model investment policy recommended by the Oregon Short -Term Fund Board and incorporates State Law requirements and restrictions, and was approved by the Oregon Short -Term Fund Board. APPLICABILITY This policy applies to all Deschutes County investments. POLICY AND PROCEDURE The Deschutes County Treasurer is the portfolio manager. It is the policy of Deschutes County to invest public funds in a manner which will provide the maximum security while providing liquidity to meet the daily cash flow demands and receive the highest investment return while conforming to all State Statutes governing the investment of public funds and this Investment Policy. SCOPE: This investment policy applies to activities of Deschutes County with regard to investing the financial assets of all funds for which investment authorization has been given, including but not limited to the following funds: A. General Fund B. Special Revenue Funds C. Capital Project Funds D. Enterprise Funds E. Debt Service Funds F. Internal Service funds G. Unsegregated Tax Account H. County Service District Funds I. Trust and Agency Funds Funds held and invested by trustee or fiscal agents are excluded from these rules; however such funds are subject to the regulations established by the State of Oregon. Funds of Deschutes County will be invested in compliance with ORS 294 and other applicable statutes. Investments will be in accordance with this policy and any written administrative procedures. Investment. of any tax-exempt borrowing proceeds and any debt service funds will comply with the "arbitrage" restrictions of Section 148 of the Internal Revenue Code of 1986. Cash will be co -mingled for investment opportunities. Other than bond proceeds or other unusual situations, the total of all funds ranges from $80,000,000 to $150,000,000 over the fiscal year. Policy #F-12, Investment Policy Guidelines Page 1 of 7 Funds of other agencies, jurisdictions, district or entities for which the County Treasurer serves as custodian will not be invested without written authorization from their governing body, and the Deschutes Board of County Commissioners. OBJECTIVES: Deschutes County's Investment Objectives are: Preservation of capital and the protection of investment principal. Conformance with Federal, State and other legal requirements. Maintenance of sufficient liquidity to meet operating requirements. Diversification to avoid incurring unreasonable risks regarding specific security type or individual financial institutions. Attainment of a market rate of return throughout budgetary and economic cycles. DELEGATION OF AUTHORITY: The County Treasurer is designated as the Investment Officer for Deschutes County and is responsible for investment decisions and activities. The investment officer shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials. The administration of the cash management program is handled by the County Treasurer who is responsible to manage the day-to-day operations of the County's investment portfolio, place purchase orders and sell orders with dealers and financial institutions and prepare reports as required. INVESTMENT LIMITATIONS: Specific investment types shall not exceed the percentage of the total investment portfolio indicated below. All securities are also included on the list of "U.S. Government Agency Securities for Local Government Investments under ORS 294.035 and 294.040." This list is maintained by the Office of the Oregon State Treasurer. Securities issued by a single financial institution (Banker's Acceptance and Certificates of Deposit) will be limited to 30% of the total portfolio. SUITABLE AND AUTHORIZED INVESTMENTS The following investments will be permitted by this policy, ORS 294.035 and 294.810: • U.S. Treasury Obligation (bills, notes and bonds) • U.S. Government Agency Securities and Instruments of Government Sponsored Enterprises • Banker's Acceptances (BA's) from qualified institutions • State of Oregon Investment Pool Policy #F-12, Investment Policy Guidelines Page 2 of 7 • Certificates of Deposits (CD's) (Subject to ORS 295 collateralization) • Certificate of Deposit Account Registry Services (CDARS) • Repurchase Agreements • State and Local Government Securities • Corporate Indebtedness PORTFOLIO DIVERSIFICATION Diversification will be sought within the following guidelines with the purpose of reduction of overall portfolio risk. The investments shall be diversified by investment type, issuer and maturity: U.S. Treasury US Government Agencies State of Oregon Investment Pool Certificates of Deposit Banker's Acceptances Commercial Paper & Corporate Notes State & Local Government Securities Repurchase Agreements Corporate Indebtedness 100% 75% 50% in any single government sponsored enterprise 100% or the maximum imposed by statute 25% of total portfolio 30% in any single qualified financial institution 25% of total portfolio 30% in any single qualified financial institution 20% of total portfolio 5% in any one corporation, subsidiaries or affiliates 25% of total portfolio 25% of total portfolio 10% in any single qualified financial institution 10% of total portfolio Maximum 18 month maturity COMPETITIVE SELECTION OF BIDS OR OFFERS: Before the investment officer invests funds, competitive offers or bids will be sought from at least two institutions, or a decision to invest will be based on data received from at least two institutions. The most favorable offer or bid will be awarded the transaction. Policy #F-12, Investment Policy Guidelines Page 3 of 7 MATURITY SCHEDULING: To the extent possible, the County will attempt to match its investments with anticipated cash flow requirements. No investment security shall have a maturity of more than 18 months, with the exception that a maximum of 20% of the total portfolio may include investments beyond 18 months, but not more than 24 months. The investment portfolio operates on a policy of buying securities and holding them until their specified maturity date, but during certain market conditions when it becomes advantageous, the Portfolio Manager may sell securities prior to their maturity date. SAFEKEEPING AND COLLATERALIZATION: Investment securities purchased by the Portfolio Manager will be in safekeeping with the Bank's Investment Division Safekeeping Department. If it is felt necessary to safe keep with a third party, the Trust Department of the bank will be considered to be a third party for the purpose of safekeeping of securities purchased from that bank. Another permissible option would be to use a third party bank to provide safekeeping for all purchased securities. The purchase and sale of all securities will be on a payment versus delivery basis. The custodian shall issue a safekeeping receipt to the Treasurer listing the specific instrument, rate, maturity and other pertinent information. All other repurchase agreements shall require safekeeping and a master repurchase agreement. Deposit -type securities (i.e. certificates of deposit) shall be collateralized through the Collateral Pool Manager as required by ORS 295.015 for any amount exceeding FDIC coverage. Other investments will be held by the custodian as evidenced by safekeeping receipts. QUALIFIED INSTITUTIONS: The investment officer shall maintain a list of all authorized broker/dealers and financial institutions which are approved for investment purposes or investment dealings. Any firm is eligible to make an application to Deschutes County and upon due consideration and approval will be added to the list. Additions or deletions to the list will be made at the Portfolio Manager's discretion. At the request of Deschutes County, the firms performing investment services shall provide their most recent financial statements or Consolidated Report of Condition (call report) for review. Further, there should be in place, proof as to all the necessary credentials and licenses held by employees of the broker/dealers who will have contact with Deschutes County as specified by but not necessarily limited to the National Association of Securities Dealers (NASD), Securities and Exchange Commission (SEC), etc. Deschutes County shall conduct an annual evaluation of each firm's credit worthiness to determine if it should remain on the list. Securities broker/dealers not affiliated with a bank shall be required to have an office located in Oregon and/or be classified as reporting dealers affiliated with the Federal Reserve as primary dealers. PRUDENCE: The standard of prudence to be used by the County Treasurer in the context of managing the overall portfolio shall be the prudent investor rule, which states, "Investments shall be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercises 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." Policy #F-12, Investment Policy Guidelines Page 4 of 7 INDEMNITY CLAUSE: The County shall defend and indemnify the County Treasurer and staff from personal liability for losses that might occur pursuant to administering this investment policy as long as the County Treasurer and staff exercise prudence in accordance with this policy, and act within the boundaries of this Policy. ETHICS & CONFLICTS OF INTEREST: Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with the proper execution and management of the investment program, or that could impair their ability to make impartial decisions. Employees and investment officials shall disclose any material interests in financial institutions with which they conduct business. They shall further disclose any personal financial/investment positions that could be related to the performance of the investment portfolio. Employees, officers and their families shall refrain from undertaking personal investment transactions with the same individual with whom business is conducted on behalf of the County. Officers and employees shall, at all times, comply with the State of Oregon Government Standards and Practices code of ethics set forth in ORS 244. PERFORMANCE EVALUATION: The performance of the County's portfolio shall be measured against the performance of the Oregon Local Government Investment pool, and the three-month and twelve-month Treasury Bills. ACCOUNTING METHOD: Deschutes County shall comply with all required legal provisions and Generally Accepted Accounting Principles (GAAP). The accounting principles are those contained in the pronouncements of authoritative bodies including but not necessarily limited to, the American Institute of Certified Public Accountants (AICPA); the Financial Accounting Standards Board (FASB); and the Government Accounting Standards Board (GASB). An investment fee of 5% of the total interest earned on all invested funds will be deducted and credited to the County Finance Internal Service Fund each month. After deducting the investment fee, interest earnings will be credited on a last day of each month to the funds from which the investment was made based on the average daily balance in the fund. INTERNAL CONTROLS The investment officer is responsible for establishing and maintaining an adequate internal structure designed to reasonably protect the assets of the County from loss, theft or misuse. The concept of reasonable assurance recognizes that (1) the cost of a control should not exceed the benefits likely to be derived and (2) the valuation of costs and benefits requires estimates and judgments by management. Accordingly, the investment officer shall establish a process for an annual independent review by an external auditor to assure compliance with policies and procedures. The internal controls shall address the following points: - Control of collusion. Policy #F-12, Investment Policy Guidelines Page 5 of 7 - Separation of transaction authority from accounting and record keeping. - Custodial safekeeping - Avoidance of physical delivery of securities whenever possible and address control requirements for physical delivery where necessary. - Clear delegation of authority to subordinate staff members. - Written confirmation of transactions for investments and wire transfers. - Compliance and oversight with investment parameters including diversification and maximum maturities. REPORTING REQUIREMENTS: The Deschutes County Treasurer will provide a monthly report to the County Commissioners and the County Administrator. This report will include but not necessarily be limited to: portfolio activity, individual securities held at the end of the reporting period, average weighted yield to maturity of portfolio on investments as compared to applicable benchmarks, and investments by maturity date. Additionally, in accordance with Generally Accepted Accounting Principles, investments are reported in the County's Comprehensive Annual Financial Report at market value. REVIEW: This policy shall be reviewed and modified, if appropriate, by the Deschutes County Board of Commissioners or if market changes warrant review. Annual readoption by the reviewing authority is required by ORS 294.135a. In addition an Investment Committee consisting of five members will meet and review any changes to this Policy. This committee will consist of one County Commissioner and four additional members with backgrounds such as a Banker, Security Broker, Controller/Chief Financial Officer, or Government Finance Manager. AUTHORIZED FINANCIAL INSTITUTIONS: BANKS Bank of America Bank of the Cascades Columbia River Bank Community First Bank Key Bank Liberty Bank Sterling Savings Bank South Valley Bank & Trust Umpqua Bank Policy #F-12, Investment Policy Guidelines Page 6 of 7 OTHER US Bank Washington Mutual Wells Fargo Oregon Local Government Investment Pool Piper Jaffray RBC Dain Rauscher Seattle -Northwest Securities Corporation UBS Financial Services Approved by the Deschutes County Board of Commissioners January 7, 2008. Dave Kanner County Administrator Policy #F -I 2, Investment Policy Guidelines Page 7 of 7