It is the policy of Cecil County, Maryland (hereinafter referred
to as "the County"), to invest public funds in a manner which will
conform to all State of Maryland and County statutes governing the
investment of public funds by providing maximum security of those
funds, and meeting the daily cash flow demands of the County while
seeking the highest investment return. This policy prohibits the borrowing
of money for the sole purpose of investment. The investment manager
is required to use competitive purchasing practices, except where
impractical.
The primary objectives, in priority order, of the County's
investment activities shall be as follows:
A. Legality. All investments will be in compliance with all applicable
State of Maryland statutes governing the investment of public funds
and will comply with the Code of Cecil County, Maryland.
[Amended 11-13-2012 by Ord. No. 2012-12]
B. Safety. Safety of principal is the foremost objective of the investment
program. Investments of the County shall be undertaken in a manner
that seeks to ensure the preservation of capital in the overall portfolio.
To attain this objective, the County will maintain appropriate diversification
of investments and financial institutions.
C. Liquidity. The County's investment portfolio will remain sufficiently
liquid to enable the County to meet all operating requirements which
might be reasonably anticipated.
D. Yield. The County's investment portfolio shall be designed with
the objective of attaining a rate of return appropriate during budgetary
and economic cycles, considering the County's investment risk
constraints and the cash flow characteristics of the portfolio.
[Amended 11-13-2012 by Ord. No. 2012-12]
Officials and employees involved in the investment process shall
refrain from personal business activity that could conflict with proper
execution of the investment program or which could impair their ability
to make impartial investment decisions. Employees and investment officials
shall disclose to the County and to the Ethics Board any material
financial interest in financial institutions that conduct business
within this jurisdiction, and they shall further disclose any large
personal financial/investment positions that could be related to the
performance of the County's portfolio. Employees and officers
shall subordinate their personal investment transactions to those
of the County, particularly with regard to the time of purchases and
sales.
[Amended 5-17-2011 by Ord. No. 2011-07]
The County will diversify to avoid incurring unreasonable risk
inherent in overinvesting in specific instruments, individual financial
institutions or maturities.
A. Diversification by instrument. (Note: See Default Risk and Liquidity
Scales, Exhibits D and E.
|
Instrument
|
Maximum Percent of Portfolio
|
---|
|
U.S. Treasury obligations
|
100%
|
|
U.S. government agency and U.S. government-sponsored instrumentalities
|
100%
|
|
Repurchase agreements (master repurchase agreement required)
|
100%
|
|
Maryland Local Government Investment Pool
|
100%
|
|
Collateralized, nonnegotiable certificates of deposit (only
Maryland commercial banks)
|
80%
|
|
Bankers' acceptances (from domestic banks which also include
the United States affiliates of large international banks; short-term
rating of A1 from Standard and Poor's Corporation and P1 from
Moody's Investor Service)
|
40%
|
|
Money market mutual funds (with highest possible rating from
at least one nationally recognized statistical rating organization)
|
60%
|
|
Commercial paper (must have a minimum of an A1/P1 rating by
at least one nationally recognized rating agency)
|
5%
|
B. Diversification of maturities.
(1) In order to meet the objectives of the County's investment activities as listed in §
56-4 of this policy, the majority of the investments of the County will be on a short-term basis. However, a portion of the portfolio can contain investments with longer maturities (up to five years) without jeopardizing adequate safety and liquidity standards of the portfolio and at the same time increasing the overall yield of the portfolio. The investments in long-term maturities will be limited to direct federal government obligations and to securities issued by United States government agencies. The length of maturity of the security will not exceed five years from the time of the County's purchase.
[Amended 11-13-2012 by Ord. No. 2012-12]
(2) The maximum level of long-term investments in the portfolio is determined
by the following method: The Director of Finance will perform an analysis
of the investment portfolio for the last three years to determine
the investment balance low point for each of those years. An average
low balance amount will then be computed for the three-year period.
The maximum level of long-term investments will be set at 30% of this
average. A low balance average will be performed at the end of each
fiscal year. If the amount of long-term investments exceeds the thirty-percent
maximum, then no new investments can be purchased in the ensuing fiscal
year.
All security transactions, including collateral for repurchase
agreements, entered into by the County shall be conducted on a delivery-versus-payment
(DVP) basis. Securities will be held by a third-party custodian designated
by the Director of Finance. All repurchase agreements will be governed
by a master repurchase agreement (public securities associations,
as amended) signed by the appropriate officials of the County and
the primary government dealer.
The Director of Finance is responsible for establishing and
maintaining an internal control structure designed to ensure that
the invested assets of the entity are protected from loss, theft or
misuse. The internal control structure shall be designed to provide
reasonable assurance that these objectives are being met, while recognizing
that the cost of a control should not exceed the benefits likely to
be derived; and the valuation of costs and benefits requires estimates
and judgments by management. Accordingly, the Director of Finance
shall establish a process for annual independent review by an external
auditor to assure compliance with policies and procedures. The internal
controls shall address the following points:
A. Control of collusion. Collusion is a situation where two or more
employees are working in conjunction to defraud their employer.
B. Separation of transaction authority from accounting and recordkeeping.
By separating the person who authorizes or performs the transaction
from the people who record or otherwise account for the transaction,
a separation of duties is achieved.
C. Custodial safekeeping. Securities purchased from any bank or dealer,
including appropriate collateral (as defined by state law), shall
be placed with an independent third party for custodial safekeeping.
D. Avoidance of physical delivery securities. Book entry securities
are much easier to transfer and account for since actual delivery
of a document never takes place. Delivered securities must be properly
safeguarded against loss or destruction. The potential for fraud and
loss increases with physical delivery securities.
E. Clear delegation of authority to subordinate staff members. Subordinate
staff members must have a clear understanding of their authority and
responsibilities to avoid improper actions. Clear delegation of authority
also preserves the internal control structure that is contingent on
the various staff positions and their respective responsibilities.
F. Written confirmation of telephone transactions for investments and
wire transfers. Due to the potential for error and improprieties arising
from telephone transactions, all telephone transactions should be
supported by written communications and approved by the appropriate
person. Written communications may be via fax if on letterhead and
the safekeeping institution has a list of authorized signatures.
The investment portfolio will be managed in accordance with
the parameters specified within this policy. The portfolio should
obtain a market average rate of return during a market/economic environment
of stable interest rates. Portfolio performance will be compared to
appropriate benchmarks on a regular basis.
The Director of Finance shall generate monthly reports for inclusion
in the monthly Director of Finance's cash report. The investment
reports will include data on investment instruments being held, performance
and interest earnings.
The County's investment policy shall be adopted by resolution
of the Cecil County Council. The policy shall be reviewed annually
by the Director of Finance, and any modifications made thereto must
be approved by the Cecil County Council.