Town of South Berwick, ME Chapter 22 Investment Policy

[HISTORY: Adopted by the Town Council of the Town of South Berwick 12-14-2010. Amendments noted where applicable.]

GENERAL REFERENCES

Asset capitalization policy — See Ch. 5.

Cash management policy — See Ch. 8.

Fund balance policy — See Ch. 17.

Tax payment application policy — See Ch. 45.

§ 22-1 Policy.

It is the policy of the Town of South Berwick to invest public funds in a manner that will provide safety of principal, obtain a market rate of return, meet the daily cash flow demands of the Town and conform to all state and local laws governing the investment of public funds.

§ 22-2 Scope.

This investment policy applies to all financial assets of the Town as approved by the Town Council and approved Town warrants. These funds include but are not limited to:

A. Accounts payable.

B. Payroll accounts.

C. Capital project funds.

D. Enterprise funds including TIF accounts.

E. Trust and agency funds.

F. Cemetery accounts.

G. Endowments and trusts.

H. CDBG accounts.

I. Custodial or escrow accounts.

§ 22-3 Prudence.

A. All Town investments must be made with the judgment and care that persons of prudence, discretion and intelligence, under circumstances then prevailing, exercise in the management of their own affairs, not for speculation but for investment, considering:

(1) Safety: the safety of principal and preservation of capital in the overall portfolio;

(2) Maintenance of liquidity: maintenance of sufficient liquidity to meet all operating and other cash requirements with which a fund is charged that are reasonably anticipated; and

(3) Income: the income to be derived throughout budgetary and economic cycles, taking into account prudent investment risk constraints and the cash flow characteristics of the portfolio.

B. This standard shall be applied to the Town's overall investment portfolio and not to individual items within the Town's diversified portfolio.

§ 22-4 Objectives.

The primary objectives, in priority order, of the Town's investment activities shall be:

A. Safety: Safety of principal is the foremost objective of the investment program. Investments shall be made by the Treasurer in a manner that seeks to ensure preservation of capital in the overall portfolio. To obtain this objective, the Treasurer shall use basic techniques to diversify the investment portfolio. He/she shall utilize FDIC-insured bank deposits and/or obtain collateralized investments that guarantee the Town a perfected security interest in the underlying security. Further, the Treasurer shall invest Town funds only in highly capitalized and highly rated financial institutions.

B. Liquidity: The Town's investment portfolio will remain sufficiently liquid to enable the Town to meet all operating requirements that might be reasonably anticipated through cash flow analysis.

C. Return on investment: The Town's investment portfolio shall be designated with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the Town's investment risk constraints and the cash flow characteristics of the portfolio.

§ 22-5 Delegation of authority.

Authority to manage the Town's investment program is derived from state law, 30-A MRSA §§ 5706 through 5719, and the Town Charter. Upon approval of this document, the Treasurer shall provide written procedures for the operation of the investment program consistent with the investment policy. Such procedures shall include explicit delegation of authority to persons responsible for investment transactions. No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the Treasurer. The Treasurer shall be responsible for all investment or cash management transactions undertaken and shall keep the Council fully apprised of the same.

§ 22-6 Ethics and conflicts of interest.

Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or that could impair their ability to make impartial investment decisions. Employees and investment officials shall disclose to the Treasurer and the Council any material financial interests in financial institutions that conduct business within the Town, and they shall further disclose any personal financial/investment positions that could be related to the performance of the Town's investment portfolio.

§ 22-7 Prohibited interest.

No Town employee shall invest Town funds in any instrument or institution in which he/she has a direct or indirect financial interest, nor shall be/she accept any gift, free service, or payment of any kind for performing his/her duties under this policy.

§ 22-8 Authorized financial dealers and institutions.

The Treasurer shall maintain a list of financial institutions authorized to provide investment services. No public deposit shall be made except in a qualified public depository as established by state law. An annual review of the financial condition and registrations of qualified bidders will be conducted by the Treasurer with the results provided to the Council.

§ 22-9 Safekeeping and custody.

All security transactions, including collateral for repurchase agreements, entered into by the Town shall be conducted on a delivery versus payment basis. Securities will be held by a third party custodian agreed to by the Treasurer, provided it meets or exceeds the minimum risk category classification of GASB (Governmental Accounting Standards Board).

§ 22-10 Maximum maturities.

A. To the extent possible, the Treasurer will match investments with anticipated cash requirements. Unless matched to a specific cash flow, the Town will not directly invest in securities maturing more than one year from date of purchase. At least annually, the Treasurer, at a time preceding the annual Town meeting, will present a cash flow analysis showing the past year's performance and the projected next year's performance using submitted budget figures. At this time, the Treasurer shall also recommend what amount of surplus revenue should be used to offset the next year's tax rate.

B. Trust and endowment funds may be invested in securities exceeding one year if the maturity of such investments are made to coincide as nearly as practicable with the expected use of the funds.

§ 22-11 Internal controls.

The Treasurer shall establish an annual process of independent review by an external auditor, selected by the Council during the annual Town audit. This review will enhance internal control by assessing compliance with policies and procedures.

§ 22-12 Accounting method.

Investments will be carried on the Town's books at cost. Interest on securities will be credited to investment income at the time of the sale. The values of investment securities will be accrued as of each fiscal year end.

§ 22-13 External management.

The Council may contract with a qualified external money management company in order to benefit from portfolio diversification, credit research, full-time portfolio management and economies of scale that are unavailable from the Town's staff. Any such contract will define and control the risks of the portfolio and establish performance criteria for monitoring and evaluating results.

§ 22-14 Investment policy adoption.

The Town's investment policy shall be adopted by the Council. The policy shall be reviewed by the Treasurer with the Council no less frequently than once a year.

§ 22-15 Statutory compliance.

Nothing in the Town's investment policy shall be read to contravene with state law, 30-A MRSA §§ 5706 through 5719 (the "Act").