[R.O. 2016 § 120.170; R.O. 2011 § 120.090; Ord. No. 93-1 §§ 1 — 6, 1-20-1993; Ord. No. 01-50 § 1, 6-6-2001; Ord. No. 339 §§ 1 — 2, 8-3-2011]
A. Scope. This policy applies to the investment of all operating funds
of the City.
1.
Pooling Of Funds. Except for cash in certain restricted and
special funds, the City may 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.
2.
External Management Of Funds. Investment through external programs,
facilities and professionals operating in a manner consistent with
this policy will constitute compliance.
B. General Objectives.
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 minimize 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) Prequalifying the financial institutions, brokers/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 short-term
securities.
2.
Liquidity. The investment portfolio shall remain sufficiently
liquid to meet all operating requirements that may be reasonably anticipated.
This is to be accomplished by structuring the portfolio so that securities
mature concurrent with cash needs to meet anticipated demands.
3.
Yield. The investment portfolio shall be designed with the objectives
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 to the safety
and liquidity objectives described above. The core of investments
are to be 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 intended to improve the quality, yield, or target
duration;
c.
Liquidity needs of the portfolio require that the security be
sold.
C. Standards Of Care.
1.
Prudence. 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.
2.
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. Employee and investment officials shall disclose any material
interests in financial institutions in 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 officials shall refrain from undertaking personal investment
transactions with the same individual with which business is conducted
on behalf of the City.
3.
Delegation Of Authority. Authority to manage the investment
program is granted to the City Clerk, hereinafter referred to as "Investment
Officer" and derived from the State Statutes or Constitution. 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 and internal controls for the operation of the
investment program consistent with this investment policy. Procedures
should include references to: safekeeping, delivery versus 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.
D. Investment Transactions — Controls. 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.
1. The concept of reasonable assurance recognizes that:
a.
The cost of control should not exceed the benefits likely to
be derived; and
b.
The valuation of costs and benefits require estimates and judgments
by management.
2. The internal controls shall address the following points:
b. Separation of transaction authority from accounting and recordkeeping;
d. Clear delegation of authority to subordinate staff members;
e. Written confirmation of transactions for investments and wire transfers;
f. Development of a wire transfer agreement.
E. Suitable And Authorized Investments.
1.
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.
a.
U.S. Bonds/Obligations. The City may invest in bonds or other
obligations of the United States.
b.
U.S. Government Guaranteed Obligations. The City may invest
in any bonds or other obligations guaranteed as to payment of principal
and interest by the Government of the United States or any agency
or instrumentality thereof.
c.
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 Treasury and government agency
securities while simultaneously agreeing to resell the securities
at predetermined dates and prices.
d.
Collateralized Public Deposits. Instruments issued by financial
institutions which state that specified sums have been deposited for
specified periods of time and at specified rates of interest. Such
deposits are required to be backed by acceptable collateral securities
as dictated by State Statute.
e.
Missouri Bonds. The City may invest in State of Missouri bonds
or other obligations of the State of Missouri, including revenue bonds
issued by State agencies or by State authorities created by legislative
enactment.
f.
Other Investments Authorized By Current State Law. The City may invest in other accounts, bonds and securities as may be authorized from time to time under the provisions of State law relating thereto and in particular the provisions contained in Sections
110.010 and 30.270, RSMo.
2.
Investment Restrictions And Prohibited Transactions. To provide
for the safety and liquidity of the City's funds, the investment portfolio
will be subject to the following restriction:
a.
Borrowing for investment purposes ("leverage") is prohibited.
(1) Instruments known as "structured notes" (e.g.,
inverse floaters, leveraged floaters, and equity-linked securities)
are not permitted. Investment in any instrument which is commonly
considered a "derivative" investment (e.g., options, futures, swaps,
caps, floors, and collars) is prohibited.
(2) 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.
F. Collateralization.
1.
Collateralization will be required on two (2) types of investments:
certificates of deposit and repurchase agreements. In order to anticipate
market changes and provide a level of security for all funds, 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 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 safe kept 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.
The City shall have a depositary 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's security interest in collateral pledge to secure deposits
is enforceable against the receiver of a failed financial institution.
G. Repurchase Agreements. The securities for which repurchase agreements
will be transacted will be limited to Treasury and government agency
securities that are eligible to be delivered via the Federal Reserve's
Fedwire book-entry system. Securities will be delivered to the City's
designated custodial agent. Funds and securities will be transferred
on a delivery versus payment basis.
H. Investment Parameters.
1.
Maximum Maturities.
a.
To the extent possible, the City shall attempt to match its
investments with anticipated cash flow requirements. Investments in
bankers' acceptances and commercial paper shall mature and become
payable not more than one hundred eighty (180) days from the date
of purchases. All other investments shall mature and become payable
not more than three (3) years from the date of purchase.
b.
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.
I. Reporting Methods. The Investment Officer will prepare an investment
report 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 to ascertain whether investment
activities during the reporting period have conformed to the investment
policy. The report shall be provided to the Board of Aldermen.