[R.O. 2011 §145.010; Ord. No. 2008-40 §1, 3-4-2008]
A. To
obtain maximum investment income through prudent and conservative
investments of the City's temporarily idle funds while maintaining
sufficient fund balances to meet approved expenditures. The City will
utilize those financing alternatives and techniques which produce
positive financial advantages and security for its citizens. The primary
objectives in priority order of investment activities shall be safety,
liquidity and yield.
1. Safety. Safety of principal is the foremost objective
of the investment program. Investments shall be undertaken in a manner
that seeks to ensure the preservation of capital in the overall portfolio.
The objective will be to mitigate credit risk and interest rate risk.
a. Credit risk. The City of Riverside will minimize
credit risk, the risk of loss due to the failure of the security issuer
or backer, by:
(1)
The financial institutions, broker/dealers, intermediaries and
advisors with which the City of Riverside will do business will be
pre-qualified; and
(2)
The portfolio will be diversified so that potential losses on
individual securities will be minimized.
b. Interest rate risk. The City of Riverside will minimize
the risk that the market value of securities in the portfolio will
fall due to changes in general interest rates by:
(1)
The investment portfolio will be structured so that securities
mature to meet cash requirements for ongoing operations, thereby avoiding
the need to sell securities on the open market prior to maturity;
and
(2)
Investing operating funds primarily in shorter-term securities.
2. Liquidity. The investment portfolio shall remain
sufficiently liquid to meet all operating requirements that may be
reasonably anticipated. This is accomplished by structuring the portfolio
so that securities mature concurrent with cash needs to meet anticipated
demands (static liquidity). Furthermore, since all possible cash demands
cannot be anticipated, the portfolio should consist largely of securities
with active secondary or resale markets (dynamic liquidity). A portion
of the portfolio also may be placed in bank deposits or repurchase
agreements that offer same-day liquidity for short-term funds.
3. Yield. The investment portfolio 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. Return on investment is of secondary
importance compared to the safety and liquidity objectives described
above. The investments are limited to relatively low risk securities
in anticipation of earning a fair return relative to the risk being
assumed. Securities shall not be sold prior to maturity with the following
exceptions:
a. A security with declining credit may be sold early to minimize loss
of principal.
b. A security swap would improve the quality, yield or target duration
in the portfolio.
c. Liquidity needs of the portfolio require that the security be sold.
[R.O. 2011 §145.020; Ord. No. 2008-40 §1, 3-4-2008]
A. It
is the policy of the City to only invest in those instruments eligible
to be purchased by a City of the Fourth Class organized pursuant to
the laws of the State of Missouri.
1. Investment types. In accordance with and subject
to restrictions imposed by current Statutes, the following list represents
the entire range of investments that City of Riverside, Missouri,
will consider and which shall be authorized for the investments of
funds by the City of Riverside, Missouri.
a. United States Treasury Securities. The City of Riverside,
Missouri, may invest in obligations of the United States Government
for which the full faith and credit of the United States are pledged
for the payment of principal and interest.
b. United States Agency Securities. The City of Riverside,
Missouri, may invest in obligations issued or guaranteed by any agency
of the United States Government as described in Section 145.020(2).
c. Repurchase agreements. The City of Riverside, Missouri,
may invest in contractual agreements between the City of Riverside,
Missouri, and commercial banks or primary government securities dealers.
The purchaser in a repurchase agreement enters into a contractual
agreement to purchase U.S. Treasury and government agency securities
while simultaneously agreeing to resell the securities at predetermined
dates and prices.
d. Collateralized Public Deposits (Certificates of Deposit.) Instruments issued by financial institutions which state that specified
sums have been deposited for specified periods of time and at specified
rates of interest. The certificates of deposit are required to be
backed by acceptable collateral securities as dictated by State Statute.
2. Security selection. The following list represents
the entire range of the Untied States Agency Securities that the City
of Riverside will consider and which shall be authorized for the investment
of funds. Additionally, the following definitions and guidelines should
be used in purchasing the instruments:
a. U.S. Government Agency Coupon and Zero Coupon Securities. (Bullet
coupon bonds with no embedded options.)
b. U.S. Government Agency Discount Notes. (Purchased at a discount with
maximum maturities of one (1) year.)
c. U.S. Government Agency Callable Securities. (Restricted to securities
callable at par only with final maturities of two (2) years.)
d. U.S. Government Mortgage Backed Securities. Restricted to securities
with final maturities of two (2) years.
3. Investment restrictions and prohibited transactions. To provide for the safety and liquidity of the City of Riverside's
funds, the investment portfolio will be subject to the following restrictions:
a. Borrowing for investment purposes ("leverage") is prohibited.
b. Instruments known as structured notes (e.g., inverse floaters, leveraged
floaters and equity-linked securities) are not permitted. Investment
in any instrument which is commonly considered a "derivative" instrument
(e.g., options, futures, swaps, caps, floors and collars) is prohibited.
c. Contracting to sell securities not yet acquired in order to purchase
other securities for purposes of speculating on developments or trends
in the market is prohibited.
4. Collateralization. Collateralization will be required
on two (2) types of investments: certificates of deposit and repurchase
agreements. The market value (including accrued interest) of the collateral
should be at least one hundred percent (100%).
a. For certificates of deposit, the market value of collateral must
be at least one hundred percent (100%) or greater of the amount of
certificates of deposits plus demand deposits with the depository,
less the amount, if any, which is insured by the Federal Deposit Insurance
Corporation or the National Credit Unions Share Insurance Fund.
b. All securities, which serve as collateral against the deposits of
a depository institution, must be safekept at a non-affiliated custodial
facility. Depository institutions pledging collateral against deposits
must, in conjunction with the custodial agent, furnish the necessary
custodial receipts within five (5) business days from the settlement
date.
c. The City of Riverside, Missouri, shall have a depositary contract
and pledge agreement with each safekeeping bank that will comply with
the Financial Institutions, Reform, Recovery and Enforcement Act of
1989 (FIRREA). This will ensure that the City of Riverside's security
interest in collateral pledged to secure deposits is enforceable against
the receiver of a failed financial institution.
d. The Finance Office shall maintain a list of the securities designated
by the Board of Aldermen as acceptable collateral of the deposit of
City funds. The listing is not intended to serve as, and should not
be considered as, a listing of legally authorized investment instruments.
The City of Riverside reserves the right to refuse to accept as collateral
any security or securities on this list, or to request the submission
of an alternate acceptable security or securities, if, in the sole
discretion of the Finance Officer, he/she determines that such action
will provide greater security for the deposit of City funds.
5. Repurchase agreements. The securities for which
repurchase agreements will be transacted will be limited to U.S. Treasury
and government agency securities that are eligible to be delivered
via the Federal Reserve's Fedwire book entry system. Securities will
be delivered to the City of Riverside's designated custodial agent.
Funds and securities will be transferred on a delivery vs. payment
basis.
6. Pooling of funds. Except for cash in certain restricted
and special funds, the City of Riverside, Missouri will consolidate
cash balances from all funds to maximize investment earnings. Investment
income will be allocated to the various funds based on their respective
participation and in accordance with generally accepted accounting
principles.
7. External management of funds. Investment through
external programs, facilities and professionals operating in a manner
consistent with this policy will constitute compliance.
[R.O. 2011 §145.030; Ord. No. 2008-40 §1, 3-4-2008]
A. Diversification.
1. The investments shall be diversified to minimize the risk of loss
resulting from over concentration of assets in specific maturity,
specific issuer or specific class of securities. Diversification strategies
shall be established and periodically review.
2. At a minimum, diversification standards by security type and issuer
shall be:
|
Investment Type
|
Maximum % Of Total Portfolio
|
Maximum In Any One Instrument
|
---|
|
U.S. Treasuries and Securities having principal and/or interest
guaranteed by the U.S. Government
|
100%
|
50%
|
|
Collateralized time and demand deposits
|
75%
|
20% per bank
|
|
U.S. Government agencies and government sponsored enterprises
|
100%
|
50%
|
|
Collateralized repurchase agreements
|
50%
|
50%
|
|
U.S. Government agency callable securities
|
20%
|
20%
|
B. Maximum Maturities.
1. To the extent possible, the City of Riverside, Missouri, shall attempt
to match its investments with anticipated cash flow requirements.
Investments in bankers' acceptances and commercial paper shall mature
and become payable not more than one hundred eighty (180) days from
the date of purchase. All other investments shall mature and become
payable not more than two (2) years from the date of purchase. However,
no more than twenty percent (20%) of the portfolio should have a maturity
greater than one (1) year from the date of purchase.
2. Because of inherent difficulties in accurately forecasting cash flow
requirements, a portion of the portfolio should be continuously invested
in readily available funds such as bank deposits or overnight repurchase
agreements to ensure that appropriate liquidity is maintained to meet
ongoing obligations.
[R.O. 2011 §145.040; Ord. No. 2008-40 §1, 3-4-2008]
A. Authorized Financial Dealers And Institutions.
1. A list will be maintained of financial institutions authorized to
provide investment transactions. In addition, a list also will be
maintained of approved security broker/dealers selected by credit
worthiness as determined by the Finance Officer and approved by the
Governing Body. These may include "primary" dealers or regional dealers
that qualify under Securities and Exchange Commission (SEC) Rule 15C3-1
(uniform net capital rule).
2. All financial institutions and broker/dealers who desire to become
qualified for investment transactions must annually supply the following
as appropriate:
a. Audited financial statements.
b. Proof of National Association of Securities Dealers (NASD) certification.
c. Proof of State registration.
d. Completed broker/dealer questionnaire.
e. Certification of having read and understood and agreeing to comply
with the City of Riverside's investment policy.
3. An annual review of the financial condition and registration of qualified
financial institutions and broker/dealers will be conducted by the
Finance Officer.
B. Internal Controls. The Finance Officer is responsible for
establishing and maintaining an internal control structure that will
be reviewed annually with the City of Riverside's independent auditor.
The internal control structure shall be designed to ensure that the
assets of the City of Riverside are protected from loss, theft or
misuse and to provide reasonable assurance that these objectives are
met. The concept of reasonable assurance recognizes that:
1. The cost of control should not exceed the benefits likely to be derived,
and
2. The valuation of costs and benefits require estimates and judgments
by management.
C. Delivery vs. Payment. All trades where applicable will be
executed by delivery vs. payment (DVP) to ensure that securities are
deposited in eligible financial institutions prior to the release
of funds. All securities shall be perfected in the name or for the
account of the City of Riverside, Missouri, and shall be held by a
third-party custodian as evidenced by safekeeping receipts.
D. Investment Review Committee. The Investment Review Committee
will meet quarterly to discuss investment reports, investment strategy
and investments. Members of the Investment Review Committee shall
include a member of the Board of Aldermen, the City Administrator
and the Finance Officer.
[R.O. 2011 §145.050; Ord. No. 2008-40 §1, 3-4-2008]
A. Prudence. The standard of care to be used by investment
officials shall be the "prudent person" standard and shall be applied
in the context of managing an overall portfolio. Finance Officers
acting in accordance with written procedures and this investment policy
and exercising due diligence shall be relieved of personal liability
for an individual security's credit risk or market price changes,
provided deviations from expectations are reported in a timely fashion
to the Governing Body and the liquidity and the sale of securities
are carried out in accordance with the terms of this policy. Investment
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 probably income to be derived.
B. Ethics And 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 interest 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 and officers shall refrain from undertaking personal
investment transactions with the same individual with which business
is conducted on behalf of the City of Riverside.
C. Delegation Of Authority. Responsibility for the operation
of the investment program is hereby delegated to the Finance Officer
who shall act in accordance with the established written procedures
and internal controls for the operation of the investment program
consistent with this investment policy. Procedures should include
references to safekeeping, delivery vs. payment, investment accounting,
repurchase agreements, wire transfer agreements and collateral/depository
agreements. No person may engage in an investment transaction except
as provided under the terms of this policy and the procedures established
by the Finance Officer. The Finance Officer shall be responsible for
all transactions undertaken and shall establish a system of control
to regulate the activities of subordinate officials.
[R.O. 2011 §145.060; Ord. No. 2008-40 §1, 3-4-2008]
A. Methods. The Finance Officer shall prepare an investment
report at least quarterly, including a management summary that provides
an analysis of the status of the current investment portfolio and
transactions made over the last quarter. This management summary will
be prepared in a manner that will allow the City of Riverside, Missouri,
to ascertain whether investment activities during the reporting period
have conformed to the investment policy. The report shall be provided
to the Governing Body of the City of Riverside, Missouri, on a quarterly
basis unless otherwise required. The report will include the following:
1. Listing of individual securities held at the end of the reporting
period; and
2. Realized and unrealized gains or losses resulting from appreciation
or depreciation by listing the cost and market value of securities
over one (1) year duration (in accordance with Government Accounting
Standards Board (GASB) 31 requirements and only required annually);
and
3. Average weighted yield to maturity of portfolio on investments as
compared to applicable bench marks; and
4. Listing of investment by maturity date; and
5. Percentage of the total portfolio which each type of investment represents.
B. Performance Standards. 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. A series of
appropriate bench marks may be established against which portfolio
performance shall be compared on a regular basis. Commercial paper
and bankers' acceptances must be reviewed monthly to determine if
the rating level has changed. The commercial paper and bankers' acceptances
should be reviewed for possible sale if the securities are downgraded
below the minimum acceptable rating levels.
C. Marking To Market. The market value of the portfolio shall
be calculated at least quarterly and a statement of the market value
of the portfolio shall be issued at least annually to the Governing
Body of the City of Riverside, Missouri. This will ensure that review
of the investment portfolio, in terms of value and price volatility,
has been performed.