[Ord. No. 2021-3013, 1-12-2021]
A. This
policy applies to the investment of all operating funds of the City
of Greenwood, Missouri, hereafter known as "the City."
B. External
Management Of Funds. Investment through external programs, facilities
and professionals operating in a manner consistent with this policy
will constitute compliance.
[Ord. No. 2021-3013, 1-12-2021]
A. 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 will minimize credit risk, the risk of loss
due to the failure of the security issuer or backer, by:
(1)
Pre-qualifying the financial institutions, broker/dealers, intermediaries,
and advisors with which the City will do business.
(2)
Diversifying the portfolio so that potential losses on individual
securities will be minimized.
b. Interest Rate Risk. The City will minimize the risk that the market
value of securities in the portfolio will fall due to changes in general
interest rates, by:
(1)
Structuring the investment portfolio 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.
(2)
Investing operating funds primarily in shorter-term, lower duration,
securities.
2. Liquidity. The investment portfolio shall remain sufficiently liquid
to meet all fiduciary requirements from case related activity 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 core of investments
is 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.
[Ord. No. 2021-3013, 1-12-2021]
A. Prudence.
1. All participants in the investment process shall act responsibly
as custodians of the public trust. 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.
Investment 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.
2. Investments shall be made with the judgement 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. 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.
2. Employees and investment officials shall disclose any material interests
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.
C. Delegation
Of Authority. Authority to manage the investment program is granted
to the City of Greenwood Finance Department, hereinafter referred
to as Investment Officer. Responsibility for the operation of the
investment program is hereby delegated to the Investment Officer,
who shall act in accordance with the established written procedures
an internal control 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
Investment Officer. The Investment Officer shall be responsible for
all transactions undertaken and shall establish a system of controls
to regulate the activities of subordinate officials.
[Ord. No. 2021-3013, 1-12-2021]
A. Internal
Controls.
1. The Investment Officer is responsible for establishing and maintaining
an internal control structure that will be reviewed annually with
the City's independent auditor. The internal control structure shall
be designed to ensure that the assets of the City 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.
2. Internal control procedures shall address the following points:
b. Separation of transaction authority from accounting and record keeping.
c. Custodial safekeeping monitoring and controls.
d. Avoidance of physical delivery of securities receipts to City personnel.
e. Clear delegation of authority to subordinate staff members.
f. Written confirmation of transactions for investments and wire transfers.
B. 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 and
shall be held by a third-party custodian as evidenced by safekeeping
receipts. The third-party custodian may be a branch or division of
the same institution where the City transacts its depository and/or
investing activity.
[Ord. No. 2021-3013, 1-12-2021]
A. Investment
Types. In accordance with and subject to restrictions imposed by current
Statutes, the following list represents the entire range of investments
that the City will consider and which shall be authorized for the
investments of funds by the City.
1. United States Treasury Securities. The City 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.
2. United States Agency Securities. The City may invest in obligations issued or guaranteed by any agency of the United States Government as described in Subsection
(B).
3. Repurchase Agreements. The City may invest in contractual agreements
between the City and commercial banks or primary government securities
dealers. The purchaser in a repurchase agreement (repo) 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.
4. 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.
5. Bankers' Acceptances. Bills of exchange or time drafts on and accepted
by a commercial bank, otherwise known as bankers' acceptances. An
issuing bank must have received the highest letter and numeral ranking
(i.e., A1/P1) by at least two (2) nationally recognized statistical
rating organizations (NRSRO's). Must be issued by domestic commercial
banks. Purchases of bankers' acceptances may not exceed one hundred
eighty (180) days to maturity. No more than five percent (5%) of the
total market value of the portfolio may be invested in the bankers'
acceptances of any one (1) issuer and no more than twenty-five percent
(25%) of the entire portfolio may be invested in banker's acceptances.
6. Commercial Paper. Commercial paper which has received the highest
letter and numeral ranking (i.e., A1/P1) by at least two (2) nationally
recognized statistical rating organizations (NRSRO's). Eligible paper
is further limited to issuing corporations that have a total commercial
paper program size in excess of two hundred fifty million dollars
($250,000,000.00) and have long term debt ratings, if any, of "A"
or better from at least one (1) NRSRO. Purchases of commercial paper
may not exceed one hundred eighty (180) days to maturity. Approved
commercial paper programs should provide some diversification by industry.
Additionally, purchases of commercial paper in industry sectors that
may from time to time be subject to undue risk and potential illiquidity
should be avoided. The only asset-backed commercial paper programs
that are eligible for purchase are fully supported programs that provide
adequate diversification by asset type (trade receivables, credit
card receivables, auto loans, etc.) No securities arbitrage programs
or commercial paper issued by Structured Investment Vehicles (SIV's)
shall be considered. No more than five percent (5%) of the total market
value of the portfolio may be invested in the commercial paper of
any one (1) issuer. No more than twenty-five percent (25%) of the
entire investment portfolio may be invested in commercial paper. Commercial
paper issuers must be subject to weekly credit review and daily news
research and analysis and a monitoring program must be established
to promulgate best practices credit monitoring.
B. Security
Selection. The following list represents the entire range of United
States Agency Securities that the City will consider and which shall
be authorized for the investment of funds by the City. Additionally,
the following definitions and guidelines should be used in purchasing
the instruments:
1. U.S. Govt. Agency Coupon And Zero-Coupon Securities. Bullet coupon
bonds with no embedded options. Restricted to securities with final
maturities of five (5) years.
2. U.S. Govt. Agency Discount Notes. Purchased at a discount with maximum
maturities of one (1) year.
3. U.S. Govt. Agency Callable Securities. Restricted to securities callable
at par only with final maturities of five (5) years.
4. U.S. Govt. Agency Step-Up Securities. The coupon rate is fixed for
an initial term. At coupon date, the coupon rate rises to a new, higher
fixed term. Restricted to securities with final maturities of five
(5) years.
C. Investment
Restrictions And Prohibited Transactions. To provide for the safety
and liquidity of the City funds, the investment portfolio will be
subject to the following restrictions:
1. Borrowing for investment purposes ("Leverage") is prohibited.
2. Instruments known as variable rate demand notes, floaters, 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.
3. 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.
D. Collateralization.
1. 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%).
2. 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.
3. 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.
4. Acceptable securities for collateralization will be those allowed
by the State Treasurer according to the State Treasurer's Collateral
Policy.
E. Repurchase
Agreements. These securities for which repurchase agreement will be
transacted will be limited to U.S. Treasury and government agency
securities that are eligible to be delivered via the Federal Reserve
Fedwire book entry system. Securities will be delivered to the City
designated Custodial Agent. Funds and securities will be transferred
on a delivery vs. payment basis.
[Ord. No. 2021-3013, 1-12-2021]
A. Diversification.
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.
B. Maximum
Maturities.
1. To the extent possible, the City shall attempt to match its investments
with anticipated cash flow requirements. Investments in repurchase
agreements shall mature and become payable not more than ninety (90)
days from the date of purchase. All other investments shall mature
and become payable not more than five (5) years from the date of purchase.
The City shall adopt weighted average maturity limitations that should
not exceed three (3) years and is consistent with the investment objectives.
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 in bank deposits or overnight repurchase
agreements to ensure that appropriate liquidity is maintained to meet
ongoing obligations.
[Ord. No. 2021-3013, 1-12-2021]
A. Methods.
The Investment Officer shall prepare an investment report at least
quarterly 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 to ascertain
whether investment activities during the reporting period have conformed
to the investment policy.
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 similar to a passively-managed
bond portfolio such as an Exchange Traded Fund. A series of appropriate
benchmarks may be established against which portfolio performance
shall be compared on a regular basis.
[Ord. No. 2021-3013, 1-12-2021]
A. Exemption.
Any investment currently held that does not meet the guidelines of
this policy shall be exempt from the requirements of this policy.
At maturity or liquidation, such monies shall be reinvested only as
provided by this policy.
B. Adoption.
This policy shall be adopted by ordinance of the City of Greenwood's
governing body. The policy shall be reviewed annually by the Investment
Officer and recommended changes will be presented to the governing
body for consideration.