INVESTMENT POLICY
Section 1. PURPOSE
The purpose of this Policy is to set forth the investment objectives and
parameters for the management of public funds of Benton Harbor Area
Schools. This investment policy is designed to safeguard funds on behalf
of the District, to assure the availability of operating and capital
funds when needed, and provide an investment return competitive with
comparable funds and financial market indices.
Section 2.
SCOPE
This investment policy applies to all cash and investments held or
controlled by the Board on behalf of the District. This policy does not
apply to funds related to the issuance of debt where there are other
indentures in effect for such funds. Additionally, any future revenues,
which have statutory investment requirements conflicting with this
Investment Policy and funds held or controlled by Federal or State
agencies (e.g., Department of Revenue), are not subject to the
provisions of this policy.
Section 3.
INVESTMENT OBJECTIVES
The primary objectives, in priority order, of investment activities
shall be safety, liquidity and yield.
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Safety
of Principal
The foremost objective of this investment program is the safety
of the principal of funds. Investment transactions shall be
undertaken in a manner to ensure the preservation of capital in the
overall portfolio. The objective will be to minimize credit risk
and interest rate risk.
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Credit
Risk (Custodial Credit Risk and Concentration Credit Risk)
The District will minimize Custodial Credit Risk, which is the
risk of loss due to the failure of the security issuer or backer,
by; limiting investments to the types of securities listed in
Section 9 of this Investment Policy; and pre-qualifying the
financial institutions, broker/dealers, intermediaries and
advisors with which the District will do business in accordance
with Section 7 of this Investment Policy.
The
District will minimize Concentration of Credit Risk, which is the
risk of loss attributed to the magnitude of the District’s
investment in a single issuer, by diversifying the investment
portfolio so that the impact of potential losses from any one type
of security or issuer will be minimized.
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Investment Rate Risk
The District will minimize Interest Rate Risk, which is the risk
that the market value of securities in the portfolio will fall due
to changes in market interest rates, by; structuring the
investment portfolio so that securities mature to meet cash
requirements for ongoing operations, thereby avoiding the need to
sell securities in the open market; and, investing operating funds
primarily in shorter-term securities, liquid asset funds, money
market mutual funds, or similar investment pools and limiting the
average maturity in accordance with the District’s cash
requirements.
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Foreign
Currency Risk
The District is not authorized to invest in investments which have
this type of risk.
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Maintenance of Liquidity
The funds shall be managed
such that they are available to meet reasonably anticipated cash
flow requirements.
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Yield/Return on Investment
Investment portfolios 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. It is understood
that return on investment is of secondary importance when compared
to the safety and liquidity objectives described above.
Section 4.
MANAGEMENT OF INVESTMENTS
The Board shall establish an Investment Officer to oversee the
day-to-day management of District investments. The Investment Officer
shall be responsible for the transferring of appropriate funds to affect
investment transactions, for the investment of operating funds,
operating reserves funds, and bond proceeds, consistent with this policy
and actions of the Board. Should the Board elect to select an outside
investment advisor, such advisor or firm must be registered under the
Investment Advisor's Act of 1940.
Section 5.
STANDARDS OF PRUDENCE
The standard of prudence to be used by the Investment Officer shall be
the "Prudent Person" standard and shall be applied in the context of
managing the overall investment program. The Prudent Person standard
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 from the investment."
Section 6.
ETHICS AND CONFLICTS OF INTEREST
The Investment Officer shall refrain from personal business activity
that could conflict with proper execution of the investment program, or
which could impair one’s ability to make impartial investment decisions.
Also, the Investment Officer shall disclose to the Board any material
financial interests in Qualified Institutions that conduct business with
the Board or the District, and they shall further disclose any material
personal financial/investment positions that could be related to the
performance of the District's investment program.
Section 7.
AUTHORIZED INVESTMENT INSTITUTIONS AND DEALERS
Only firms meeting one of the following requirements shall be eligible
to serve as Authorized Institutions:
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The
firm must comply with all of the following requirements:
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Primary and regional dealers that
qualify under Securities and Exchange Commission Rule 15C3-1
(uniform net capital rule);
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Capital of no less than $10,000,000;
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Registered as a dealer under the
Securities Exchange Act of 1934;
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A member of the National Association
of Securities Dealers (NASD);
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Registered to sell securities in
Michigan; and
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The firm and assigned broker have been
engaged in the business of effecting transactions in U.S.
government and agency obligations for at least five (5)
consecutive years; or,
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Public Depositories qualified in accordance with MCL 380.1221, The
Revised School Code of Michigan.
All brokers, dealers and other financial institutions deemed to
be Authorized Institutions shall be provided with current copies of
this investment policy and shall provide in return to the Board,
certification of having read, understood and agreement to comply
with this investment policy.
Section 8.
COMPETITIVE SELECTION OF INVESTMENT INSTRUMENTS
The Investment Officer shall obtain bids from at least two (2)
brokers or financial institutions on all purchases of investment
instruments on the secondary market. Overnight sweep investment
instruments shall not be subject to this section.
Section 9.
AUTHORIZED INVESTMENTS AND PORTFOLIO COMPOSITION
Investments and Depositories are restricted to those complying with MCL
380.622, 380.1221 and 380.1223. These include:
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United States Government Securities
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United States Government Agencies
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Federal Instrumentalities (United States
Government-Sponsored Enterprises)
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Certificates of Deposit
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Repurchase Agreements
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Commercial Paper
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Bankers' Acceptances
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Registered Investment Companies (Money
Market Mutual Funds)
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Investment pools, as authorized by the
surplus funds investment pool act, 1982 PA 367, MCL 129.111 to
129.118, composed entirely of instruments that are legal for direct
investment by an intermediate school district
Section 10. POLICY CONSIDERATIONS
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Any
investment held at the time of the implementation of this policy
that meets the requirements of MCL 380.622, 380.1221,and 380.1223
but does not meet the guidelines of this policy, shall be exempted
from the requirements of this policy. At maturity or liquidation,
such monies shall be reinvested only as provided by this policy.
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Amendments
This policy shall be reviewed from time to time. The District Board
of Education must adopt any changes to this policy.
CERTIFICATION OF AUTHORIZED INSTITUTION
____________________________ acknowledges it has read, understands and
agrees to comply with the Investment Policy of
Benton Harbor Area Schools.
By:
_________________________________
Title:
_________________________________
Date:
_________________________________
