It is the policy of the Town of Hancock to invest public funds
in a manner which will provide the highest investment return with
the maximum security while meeting the daily cash flow demands of
the Town and conforming to all state and local ordinances governing
the investment of public funds.
The investment policy applies to all financial assets of the
Town. These funds are accounted for in the Town's Comprehensive
Annual Financial Report and include all Town funds.
The primary objectives, in priority order, of the Town's
investment activities shall be:
A. Safe investments. Safety of principal and, in particular, safe investments,
is the foremost objective of the investment program. Investments of
the Town shall be undertaken in a manner that seeks to ensure the
preservation of capital in the overall portfolio. To attain this objective,
diversification is required in order that potential losses on individual
securities do not exceed the income generated from the remainder of
the portfolio.
B. Liquidity. The Town's investment portfolio will remain sufficiently
liquid to enable the Town to meet all operating requirements which
might be reasonably anticipated.
C. Returns on investments. The Town's investment portfolio shall
be designed with the objective of attaining a rate of return throughout
budgetary and economic cycles, commensurate with the Town's investment
risk constraints and the cash flow characteristics of the portfolio.
Management responsibility for the investment program is hereby
delegated to the Clerk-Treasurer, who shall establish written procedures
for the operation of the investment program consistent with this investment
policy. Procedures should include reference to safekeeping, PSA repurchase
agreements, wire transfer agreements, banking service contracts and
collateral/depository agreements. 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
Clerk-Treasurer. The Clerk-Treasurer shall be responsible for all
transactions undertaken and shall establish a system of controls to
regulate the activities of any subordinate officials.
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 which could impair their ability
to make impartial investment decisions. Employees and investment officials
shall disclose to the Mayor any material financial interests 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 Town, particularly
with regard to the time of purchases and sales.
No public deposit shall be made except in a qualified public
depository as established by state laws.
The Town is empowered by statute to invest in securities, including
but not limited to:
A. Obligations for which the United States has pledged its faith and
credit, including U.S. Treasury bills, notes, bonds and other direct
obligations of the U.S. government.
B. Obligations that a federal agency or federal instrumentality has
issued in accordance with an act of Congress, including but not limited
to the Federal Farm Credit Bank, Federal Home Loan Bank, Federal National
Mortgage Association, Government National Mortgage Association, Federal
Home Loan Mortgage Corporate and Student Loan Marketing Association.
C. Repurchase agreements collateralized in an amount not less than 102%
of the principal amount by an obligation of the United States or its
agencies or instrumentalities if the collateral is held by a custodian
other than the seller designated by the buyers.
D. Bank's acceptances guaranteed by a financial institution with
a short-term debt rating in the highest letter and numerical rating
by at least one nationally recognized statistical rating organization
as designated by either the SEC or the Treasurer.
E. Certificates of deposit or other interest-bearing time deposits or
savings accounts in any bank in the State of Maryland or savings and
loan association or building and loan association, provided such deposits
are insured or the bank or association has collateralized the deposit.
(1) Commercial banks must have a short-term rating of at least investment
grade from the appropriate bank rating agency. All banks shall provide
their most recent consolidated report of condition at the request
of the Town.
F. Commercial paper that has received the highest letter and numerical
rating by at least one nationally recognized statistical rating organization
as designated by the SEC. Not more than 5% of the total funds available
for investment may be invested in commercial paper.
G. Money market mutual funds registered under the Investment Company
Act of 1940, operated in accordance with Rule 2A-7 and having the highest
possible rating from at least one statistical rating organization
designated by the SEC. The management company of the fund must take
delivery of the collateral either directly or through an authorized
custodian.
H. An obligation or security of, or other interest in, any open-end
or closed-end management-type investment company or investment trust
registered under the Investment Company Act of 1940 if the portfolio
thereof is limited to direct obligations of the United States Government
and repurchase agreements fully collateralized thereby and the investment
company or trust or its custodian holds the collateral.
I. Any investment portfolio created under the Maryland Local Government
Investment Pool defined under the Local Government Article of the
Annotated Code of Maryland, § 17-301 et seq.
All security transaction, including collateral for repurchase
agreements, entered into by the Town shall be conducted on a delivery-versus-payment
basis. Securities will be held by the Town or the designated custodian
for the Town and evidenced by safekeeping receipts and/or identified
on the custodian's books as belonging to the Town. Further, if
held by a custodian, the custodian must be a third party, not a counterpart
(buyer or seller) to the transaction.
The Town will diversify its investments by security type and
institution. With the exception of U.S. Treasury securities and authorized
pools, no more than 50% of the Town's total investment portfolio
will be invested in a single security type or with a single financial
institution.
The Clerk-Treasurer shall establish an annual process of independent
review by an external auditor. This review will provide internal control
by assuring compliance with policies and procedures.
The investment portfolio shall be designed with the objective
of obtaining a rate of return throughout budgetary and economic cycles,
commensurate with the investment risk constraints and the cash flow
needs.
A review of all investments and investment results shall be
presented by the Clerk-Treasurer to the Mayor, or such parties as
he/she may designate, on a quarterly basis or as required. The report
will include the following:
A. A listing of individual securities held at the end of the reporting
period.
B. Unrealized gains or losses resulting from appreciation or depreciation
by listing the cost and market value of securities over one-year duration
that are not intended to be held until maturity.
C. Average weighted yield to maturity of portfolio on entity investments
as compared to applicable bench marks.
D. Listing of investment by maturity date.
E. The percentage of the total portfolio which each type of investment
represents.
The Town's investment policy shall be adopted by resolution
of the Town's Mayor and Council. The policy shall be reviewed
annually by the Mayor and Council, and any modifications thereto must
be approved by the Mayor and Council.
The Town shall not borrow money solely for the purpose of reinvesting
the loan proceeds.