[Ord. No. 3820, 1-10-2023]
This policy applies to the investment of all operating funds
of the City of Bolivar, Missouri.
[Ord. No. 3820, 1-10-2023]
Except for cash in certain restricted and special funds, the
City of Bolivar 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.
[Ord. No. 3820, 1-10-2023]
Investment through external programs, facilities and professionals
operating in a manner consistent with this policy will constitute
compliance.
[Ord. No. 3820, 1-10-2023]
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 of Bolivar will minimize credit risk,
the risk of loss due to the failure of the security issuer or backer,
by:
b.
Interest Rate Risk. The City of Bolivar will minimize the risk
that the market value of securities in the portfolio will fall due
to changes in general interest rates, by:
B.
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.
C.
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:
[Ord. No. 3820, 1-10-2023]
A.
Prudence. All participants in the investment process shall act responsibly
as custodians of the public trust. The standard of prudence to be
applied by the personnel of the Investment Division is the "prudent
investor" rule, which states, "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. 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
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 of Bolivar.
C.
Delegation Of Authority. Authority to manage the investment program
is granted to the City's Director of Finance (the "investment
officer") and City Administrator, with the supervision of the Board
of Aldermen for the City of Bolivar (the "Governing Body"). No person
may engage in an investment transaction except as provided under the
terms of this policy. 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. 3820, 1-10-2023]
A.
Authorized Financial Dealers And Institutions. All financial institutions
and broker/dealers who desire to become qualified for investment transactions
must supply the following as appropriate:
B.
Internal Controls.
1.
The investment officer is responsible for establishing and maintaining
an internal control structure that will be reviewed annually with
the City of Bolivar's independent auditor. The internal control
structure shall be designed to ensure that the assets of the City
of Bolivar 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 judgements by management.
2.
The internal controls shall address the following points:
a.
Control of collusion.
b.
Separation of transaction authority from accounting and record
keeping.
c.
Custodial safekeeping.
d.
Avoidance of physical delivery securities.
e.
Clear delegation of authority to subordinate staff members.
f.
Written confirmation of transactions for investment and wire
transfers.
g.
Development of a wire transfer agreement with the lead bank
and third-party custodian.
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 for the account of the
City of Bolivar and shall be held by a third-party custodian as evidenced
by safekeeping receipts.
[Ord. No. 3820, 1-10-2023]
A.
Investment Types. In accordance with and subject to restrictions
imposed by current statues, the following list represents the entire
range of investments that City of Bolivar will consider and which
shall be authorized for the investments of funds by the City of Bolivar.
1.
Governmental And Agency Debt. Those securities issued by and
or guaranteed by the Federal Government or an Agency or Instrumentality
of the Federal Government:
a.
United States Treasury Securities. The City of Bolivar 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.
Fixed Income Investments Secured By The FDIC Insurance And/Or
Collateral:
a.
Repurchase Agreements. The City of Bolivar may invest in contractual
agreements between the City of Bolivar 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.
b.
Collateralized Public Deposits (Certificates Of Deposit). Instruments
issued by financial institutions which state that specified sums have
been deposited for specific 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.
3.
Other Fixed Income Debt Issued By Commercial Enterprises:
a.
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 (NRSROs). 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 bankers' acceptances.
b.
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 (NRSROs). 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 the 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
(SIVs) 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 reviews
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 of Bolivar will consider
and which shall be authorized for the investment of funds by the City
of Bolivar. 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 with maturities of five (5)
years or less.
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 or less.
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 or less.
C.
Investment Restrictions And Prohibited Transactions. To provide for
the safety and liquidity of the City of Bolivar's 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 purpose 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 with five (5) business days from the
settlement date.
4.
The City of Bolivar shall have a depository 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 Bolivar's security interest
in collateral pledged to secure deposits is enforceable against the
receiver of a failed financial institution.
E.
Repurchase Agreements. These 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 Fedwire book entry system. Securities will be delivered to
the City of Bolivar's designated custodial agent. Funds and securities
will be transformed on a delivery vs. payment basis.
[Ord. No. 3820, 1-10-2023]
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. Diversification
strategies shall be established and periodically reviewed. At a minimum,
diversification standards by security type and issuer shall be:
1.
U.S. treasuries and securities having principal and/or interest
guaranteed by the U.S. government: one hundred percent (100%).
2.
Collateralized time and demand deposits: one hundred percent
(100%).
3.
U.S. government agencies, and government-sponsored enterprises:
no more than seventy percent (70%).
4.
Collateralization repurchase agreements: no more than fifty
percent (50%).
5.
U.S. government agency callable securities: no more than fifty
percent (50%).
B.
Maximum Maturities.
1.
To the extent possible, the City of Bolivar 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. The City of Bolivar
shall adopt weighted average maturity limitations that should not
exceed five (5) 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. 3820, 1-10-2023]
A.
Methods. The investment 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 Bolivar to ascertain whether
investment activities during the reporting period have conformed to
the investment policy. The report should be provided to the Governing
Body of the City of Bolivar. The report will include the following:
1.
Listing of individual securities held at the end of the reporting
period.
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]. [Note, this is only required
annually.]
3.
Average weighted yield to maturity of portfolio an investments
as compared to applicable benchmarks.
4.
Listing of investment by maturity date.
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 benchmarks
may be established against which portfolio performance shall be compared
on a regular basis.
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 Bolivar. This will ensure that review of the investment portfolio,
in terms of value and price volatility, has been performed.
