Policies and Procedures

B0108p Cash and Investment Management


I.  Limitations and Guidelines


Legality
All investments made by the district shall be made in conformity with Section 66.0603(1m), Wis. Stats., and as hereafter specifically referred to in this procedure.

Under no circumstance shall district funds be deposited in any financial institution that has not been declared as a public depository under Section 34.09 Wis. Stats.  

II. Scope


This policy applies to the investment of all funds.

Pooling of Funds
Except for cash in certain restricted and special funds, the district will consolidate cash and reserve balances from all funds to maximize investment earnings and to increase efficiencies with regard to investment pricing, safekeeping and administration. 
Investment income will be allocated to the various funds based on their respective participation and in accordance with generally accepted accounting principles.  

III. General Objectives


The primary objectives of investment activities shall be safety, liquidity, and yield:

1. Safety
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 district will minimize credit risk, which is the risk of loss of all or part of the investment due to the failure of the security issuer or backer, by:
       • Limiting investments to the types of securities listed in Section V
       • Conducting ongoing due diligence of the financial institutions, broker/dealers, intermediaries, and advisers with which the district will do business
       • Diversifying the investment portfolio so that the impact of potential losses from any one type of security or from any one individual issuer will be minimized.
  
     b. Interest 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 security maturities match cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity
       • Investing operating funds primarily in shorter-term securities, money market mutual funds, or similar investment pools and limiting individual security maturity as well as the average maturity of the portfolio.

2. 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).  Alternatively, a portion of the portfolio may be placed in money market mutual funds or local government investment pools which 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.  Yield is of secondary importance compared to the safety and liquidity objectives described above.  The core investments are limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed.  Securities shall generally be held until maturity with the following exceptions:
     • A security with declining credit may be sold early to minimize loss of principal;
     • Selling a security and reinvesting the proceeds that would improve the quality, yield, or target duration in the portfolio may be undertaken;
     •  Unanticipated liquidity needs of the portfolio require that the security be sold.

IV.  Standards of Care 


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, in accordance with applicable laws.  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 whom business is conducted on behalf of the district.

V. Permissible Investments


The district may purchase securities which are permissible investments from available funds which are not required for the immediate needs of the district, and may sell or exchange for other eligible securities and reinvest the proceeds of the securities so sold or exchanged. In accordance with Section 66.0603(1m), Wis,Stats,, funds not immediately needed by the district may be invested in any of the following:
  1. Time deposits in any credit union, bank, savings bank, trust company or savings and loan association which is authorized to transact business in the State of Wisconsin if the time deposits mature in not more than three years.
  2. Bonds or securities issued or guaranteed as to principal and interest by the federal government, or by a commission, board or other instrumentality of the federal government.
  3. Bonds or securities of any county, city, drainage district, technical college district, village, town or school district of the State of Wisconsin.
  4. Any security which matures or which may be tendered for purchase at the option of the holder within not more than seven years of the date on which it is acquired, if that security has a rating which is the highest or second highest rating category assigned by Standard and Poor’s Corporation, Moody’s Investors Service, or other similar nationally recognized rating agency or if that security is senior to, or on a parity with, a security of the same issuer which has such a rating.
  5. Securities of an open-end management investment company or investment trust, if the investment company or investment trust does not charge a sales load, if the investment company or investment trust is registered under the investment company act of 1940, and if the portfolio of the investment  company or investment trust is limited to the following:
    1. Bonds and securities issued by the federal government or a commission, board or other instrumentality of the federal government.
    2. Bonds that are guaranteed as to principal and interest by the federal government or a commission, board or other instrumentality of the federal government.
    3. Repurchase agreements that are fully collateralized by bonds or securities.
  6. Repurchase agreements with public depositories as defined in Section 34.01(5), Wis.Stats., in which the depository agrees to repay funds advanced to it, plus interest, if the repurchase agreement is secured by bonds or securities issued or guaranteed as to principal and interest by the federal government.
  7. State of Wisconsin Local Government Pooled Investment Fund.
 

VI. Risk Control


All district funds deposited in financial institutions, with the exception of commercial paper, must be fully insured or collateralized.  United States Treasury bills and repurchase agreements are secured by definition by faith in the United States government securities which back them.  All collateral on fixed-term investments shall be maintained by an independent third party.
 
For certificates of deposit or other bank time deposits:
  1. The first $250,000 of funds on deposit with the financial institution is insured by the Federal Deposit Insurance Corporation (FDIC) or the Federal Savings and Loan Insurance Corporation  (FSLIC).
  2. The next $400,000 of funds on deposit with a financial institution is insured by the state of Wisconsin Deposit Guarantee Fund.
  3. Funds in excess of $650,000 on deposit with a financial institution require additional collateralization either in the form of segregated cash or U.S. government securities or agencies and shall be evidenced in writing and maintained by an independent third party.