DFE-R Investment of Funds DFE-R
The purpose of this policy is to set forth the investment objectives and parameters for the management of public funds of Walled Lake Consolidated 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.
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.
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 as authorized investments of this investment policy; and pre-qualifying the financial institutions, brokers/dealers, intermediaries and advisors with which the district will do business in accordance with the requirements of eligible authorized institutions 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. The funds shall be managed such that they are available to meet reasonably anticipated cash flow requirements. Investment portfolios shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs.
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 shorter-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.
The District is not authorized to invest in investments which have foreign currency risk.
Only firms meeting one of the following requirements shall be eligible to serve as Authorized Institutions:
A. The firm must comply with all of the following requirements.
i. Primary and regional dealers that qualify under Securities and Exchange Commission Rule 15C3-1 (uniform net capital rule);
ii. Capital of no less than $10,000,000;
iii. Registered as a dealer under the Securities Exchange Act of 1934;
iv. A member of the National Association of Securities Dealers (NASD);
v. Registered to sell securities in Michigan; and
vi. 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; or,
B. 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, certification of having read, understood and agreement to comply with this investment policy.
The superintendent, assistant superintendent of business services and the finance manager, as agents of the treasurer, are responsible for the safety, liquidity, and maximizing the yield/interest earnings of the district. Such authorized investments shall be restricted to:
1. bonds, bills or notes of the United States, obligations the principal and interest of which are fully guaranteed by the United States government, or obligations of the state;
2. certificates of deposit issued by a state or national chartered bank, savings bank or savings and loan association, or share certificates of a state or federal credit union whose deposits are insured by an agency of the United States government and which maintains a principal office or branch office located in this state under the laws of the state or the United States, and is eligible to be a depository of surplus funds belonging to this state under Section 6 of 1855 PA 105, MCL 21.146 of the Michigan Compiled Laws;
3. commercial paper denominated in U.S. dollars and issued by the United States branch or subsidiary of any company that is rated, at a minimum, at the time of purchase, Prime-2 by Moody’s and A-2 by Standard & Poor’s (prime commercial paper) and maturing not more than 270 days from the date of purchase. If the commercial paper is backed by a letter of credit (LOC), the long-term debt of the LOC provider must be rated AA or better by at least two nationally recognized rating agencies;
4. investment pools, as authorized by the Surplus Funds Investment Pool Act, PA 367 of 1982 . . . composed entirely of instruments that are legal for direct investment by a school district;
5. securities issued or guaranteed by agencies or instrumentalities for the United States government;
6. bankers’ acceptances created by a bank that is a member of the Federal Deposit Insurance Corporation;
7. money market mutual funds composed entirely of investment vehicles that are legal for direct investment by a school district; or
DFE-R Investment of Funds DFE-R-3
8. United States government or federal agency repurchase agreements where the agreements shall be secured by the transfer of title and custody of the obligations to which the repurchase agreements relate and an undivided interest in those obligations must be pledged to the school district for these agreements.
In determining the best investment, three factors shall be considered: (1) safety of the principal of funds, (2) accessibility of funds on short notice, and (3) interest rate available. Only prime one or two commercial paper shall be considered.
Consideration will also be given to the spread of interest rates between commercial paper and certificates of deposit (savings deposit receipts) issued by banks and U.S. Treasuries.
The board also authorizes the superintendent to open savings accounts for general fund monies to earn interest while not being used for operating purposes or invested otherwise. Such accounts shall be used when the cash flow pattern does not permit the purchases of longer-term investments or when the rate of return is comparable or greater than is available from other investments. The superintendent, assistant superintendent of business services, and/or the finance manager are authorized to make deposits and withdrawals from this account.
Interest from investments shall accrue to the fund from which the investment was made as determined by the board and permitted by current law.
The superintendent shall assume the responsibility of developing cash flow patterns for all funds in order to determine the availability of funds for investment. The superintendent shall report monthly to the board on the status of all investments.
Revised 10/3/02, 5/1/03, 6/2/2005
CERTIFICATION OF AUTHORIZED INSTITUTION
____________________________ acknowledges it has read, understands and agrees to comply with the Investment Policy of Walled Lake Consolidated School District.