[Adopted 7-8-2019 by Res. No. 2143]
The intent of the Investment Policy is to define the parameters
within which funds are to be managed. 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. These guidelines are intended to be broad enough to allow the
Board of Commissioners or their designees to function properly within
the parameters of responsibility and authority, yet specific enough
to adequately safeguard the Township's financial assets.
This Investment Policy shall be executed in compliance with
the Township of Haverford Home Rule Charter, Pennsylvania Act 72 of
1971[1] (pertaining to collateralization of deposits exceeding
insurable limits), Act 10 of 2016 (pertaining to permitted investments),
and all other applicable federal, state and local requirements.
[1]
Editor's Note: See 72 P.S. § 3836-1 et seq.
A.
This Investment Policy applies to all financial assets of the Township
of Haverford accounted for in the Township's audited financial
statements and includes the following funds:
A.
Prudence.
(1)
The standard of prudence to be used by designated employees shall
be the "prudent person" standard. Designated employees, acting in
accordance with 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 and appropriate action is taken to
control adverse developments.
(2)
The "prudent person" standard states that, "investments 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 probable income to be derived."
B.
Ethics and conflicts of interest.
(1)
Designated employees involved in the investment process shall refrain
from personal activity that could conflict with the proper execution
and management of the investment program, or that could impair their
ability to make impartial investment decisions.
(2)
Designated employees making investment decisions must file the statement
of financial interests form pursuant to the provisions of the Public
Official and Employee Ethics Law[1] no later than May 1 of each year.
(a)
Delegation of authority and responsibilities. The Township of Haverford Administrative Code delegates authority to the Finance Director in Chapter 4, Article XXXI, § 4-1006, Investment of funds. The Board of Commissioners retains ultimate fiduciary responsibility and decision making authority for investments and cash management. As such, the Board will receive performance updates on a quarterly basis and will review the investment policy as needed.
[1]
Editor's Note: See 65 Pa.C.S.A. § 1101 et seq.
A.
The Finance Director will consider the following factors when making
investment decisions:
(1)
Diversification. The purpose of diversification is to reduce overall
risk. The Township of Haverford will diversify its investments among
institutions to prevent over-concentration in an entity. As a guideline,
no more than 50% of the Township's total financial assets should
be invested in a single financial institution. This percentage limit
is a guideline to ensure diversification; however, a reasonable temporary
imbalance will not significantly impair this strategy as long as it
is monitored regularly.
(2)
Maximum maturities. The Finance Director will attempt to match maturity
dates as closely as possible with anticipated cash flow requirements.
In the General Fund, investments will be limited to those with maturity
dates of two years (24 months) or less. In 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.
(3)
Performance standards. 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.
B.
Financial performance should be gauged against an appropriate benchmark,
such as the three-month US Treasury Bill rate or the monthly average
federal funds rate.
B.
More specifically, the Board of Commissioners preauthorizes investment
with the Pennsylvania Local Government Investment Trust (PLGIT). PLGIT
is a financial services organization sponsored by seven statewide
associations, including the Pennsylvania State Association of Township
Supervisors and the Pennsylvania State Association of Township Commissioners.
PLGIT fully complies with all statutes and regulations issued by the
Commonwealth of Pennsylvania regarding allowable investments of public
funds.
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). 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 Haverford Investment Policy shall be adopted
by resolution of the Board of Commissioners. The policy shall be reviewed
periodically and modifications made thereto must be approved by the
Board of Commissioners.
