The intent of the Investment Policy of the Township of Pine
is to define the parameters within which funds are to be managed.
In methods, procedures and practices, the policy formalizes the framework
for the Township's investment activities that must be exercised to
ensure effective and judicious management of the Township's funds.
The guidelines are intended to be broad enough to allow the Board
of Supervisors or their designees to function properly within the
parameters of responsibility and authority, yet specific enough to
adequately safeguard the Township's financial assets.
The Investment Policy shall be executed in compliance with the
Pennsylvania Second Class Township Code, the Township of Pine Home
Rule Charter, Pennsylvania Act 72 of 1971 (pertaining to collateralization
of deposits exceeding insurable limits) and all other applicable federal,
state and local requirements.
The primary objectives of this Investment Policy, in order of
priority, are:
A. Safety. Preservation of principal is the foremost objective. Investments
shall be undertaken in a manner that seeks to ensure the preservation
of capital in the overall portfolio. The goal will be to mitigate
credit risk and interest rate risk.
B. Liquidity. Investments shall remain sufficiently liquid to meet all
operating requirements that may be reasonably anticipated.
C. Return on investment. Funds shall be invested with the objective
of attaining a market rate of return throughout budgetary and economic
cycles, taking into account the investment risk constraints of safety
and liquidity needs.
The Financial Management Team will consider the following factors
when making investment decisions:
A. Diversification: The purpose of diversification is to reduce the
overall risk within the investment portfolio while attaining market/benchmark
rates of return. The Township of Pine shall diversify its investments
among institutions to prevent over-concentration in an entity. As
a guideline, no more than 60% of the Township's total financial assets
should be invested in a single financial institution or security type.
This percentage limit is a guideline to insure diversification; however,
a reasonable temporary imbalance will not significantly impair this
strategy as long as it is monitored regularly.
[Amended 5-7-2018 by Res. No. 990; 3-21-2022 by Res. No. 1099]
B. Maximum maturities: The Financial Management Team will attempt to
match maturity dates of investments as closely as possible with anticipated
cash flow requirements. In the General Fund, investments will be limited
to those with maturity dates of one year or less. In the other funds,
a longer maturity date may be used only if the rate of return is advantageous
and the maturity date coincides with the expected use of the funds.
C. Performance standards:
(1) The financial assets of the Township will be managed in accordance
with the parameters specified within this policy, but the expectation
is that the assets should obtain a market average rate of return during
an economic environment of stable interest rates. When interest rates
are forecast to rise in the near future, the "prudent person" standard
dictates that care be taken not to tie up large amounts of funds at
a fixed interest rate that is expected to be lower than the expected
future market rate. Conversely, when interest rates are forecast to
decline, it is prudent to take advantage of investments bearing an
interest rate that is higher than the expected future market rate.
(2) Financial performance should be gauged against an appropriate benchmark,
such as the three-month U.S. Treasury Bill Rate or the monthly average
federal funds rate.
Custodial credit risk is the risk that, in the event of a bank
failure, the government's deposits may not be returned to it. Bank
balances up to $250,000 per bank are insured by the Federal Deposit
Insurance Corporation (FDIC). Investments of Township financial assets
shall first conform to the requirements of the Second Class Township
Code. In addition, when the value of the Township's deposits exceeds
the insurable limits of the institution, the additional sums shall
be secured by collateral pledged by the depository pursuant to Pennsylvania
Act 72 of 1971 (72 P.S. § 3836-1 et seq., "Standardizing
the Procedures for Pledges of Assets") which requires banks to pledge
collateral for Township deposits in excess of $250,000. Act 72 of
1971 was amended by Act 139 of 2000 to permit the depository institution
to secure its public deposits with a Federal Home Loan Bank letter
of credit rather than with a pledge of collateral.
The Township of Pine Investment Policy shall be adopted by resolution
of the Board of Supervisors. The policy shall be reviewed at least
annually and modifications made thereto must be approved by the Board
of Supervisors.