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HomeMy WebLinkAboutRes 38-85 07/02/1985 RESOLUTION NO. 38-85 A RESOLUTION ESTABLISHING AN INVESTMENT POLICY FOR THE VILLAGE OF MOUNT PROSPECT WHEREAS, the Village of Mount Prospect endorses sound financial practices which includes the investment of funds on a regular basis in order to earn interest income; and WHEREAS, it is essential that proper procedures are followed in selecting and safeguarding the investments of the Village; and WHEREAS, it is deemed necessary to require collateral for deposits and invested funds in excess of insured limits in order to safeguard the investments of the Village; and WHEREAS, the Mayor and Board of Trustees have reviewed the Investment Policy attached hereto as Exhibit "A", which Investment Policy establishes specified cash management and investment guidelines. NOW, THEREFORE, BE IT RESOLVED BY THE MAYOR AND BOARD OF TRUSTEES OF THE VILLAGE OF MOUNT PROSPECT, COOK COUNTY, ILLINOIS: SECTION ONE: That the Mayor and Board of Trustees have reviewed the attached Investment Policy for the Village of Mount Prospect and have determined that such a Policy be established to govern the investment of Village funds. SECTION TWO: That the Finance Director of the Village of Mount Prospect is hereby authorized and directed to invest Village funds as set forth in the Investment Policy attached hereto as Exhibit "A". SECTION THREE: That this Resolution shall be in full force and effect from and after its passage and approval in the manner provided by law. AYES. Arthur, Farley, Murauskis, Wattenburg NAYS: None ABSENT: Floros, Van Geem PASSED and APPROVED this 2nd day of July ,1985. ATTEST: ~~y~ Village Clerk ,/~ /J ¡¡ C {V({;J4tu - . Mayor ,. kl CG~ . ~ VILLAGE OF MOUNT PROSPECT INVESTMENT POLICY Scope of Investment Policy This Investment Policy applies to the investment activities of all funds of the Village of Mount Prospect, except fòr the Policemens' Pension Fund and the Firemen~' Pension Fund which are subject to the order of the Board of Trustees of each respective fund. All financial assets of other funds, including: the General Fund, Special Revenue Funds, Capital Project Funds, Debt Service Funds, Special Assessment Funds, Enterprise Funds, Internal Service Funds, Trust and Agency Funds, and other funds that may be created from time to time, shall be administered in accordance with the provisions of this Policy. Any monies received for the Pol icemens J PenSion Fund, the Firemens' Pension Fund and the Mount Prospect Public Library Fund will be administered by the written order of the respective Board of Trustees of each fund. In the absence of such orders, monies received and/or securities held by the Village of Mount Prospect on behalf of these funds shall be administered in accordance with the provisions of this Policy. " Objectives of Investment Policy The purpose of the Investment Policy of the Village of Mount Prospect is to establish cash management and investment guidelines for Village officials res- ponsible for the stewardship of public funds. Specific objectives include: - Safety of principal is the foremost objective of the Investment Policy of the Village of Mount Prospect. Except for the pension" funds, for which short-term market fluctuations are tolerable, each investment transaction shall seek to fi~st ensure that capital losses are avoided, whether they be from securities defaults or erosion of market value. - The Village shall diversify its investments to avoid incurring unreasonable risks regarding specific security types and/or individual financial institutions. - The Village's investment portfolio shall remain sufficiently liquid to enable the Village to meet all operating requirements which may be reasonably anticipated in any Village fund. - The investment portfolio of the Village, except for the pension funds, shall be designed with the objective of regularly exceeding " the average return of three month U. S. Treasury Bills. The investment program shall seek to augment returns above this threshold, consistent with risk limitations identified herein and prudent investment principles. Assets of the pension funds shall be invested in securities which, over the term of an economic cycle, equal or exceed market-average rates of return for comparable portfolios or categories of assets. - In managing its investment portfolio, Village officials shall avoid any transaction that might impair public confidence in the Government of the Village of Mount Prospect. Investments shall be made with judgement and care, under circumstances then prevailing, which persons of prudence, discretion and inte11igence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their cåpital as well as the probable income to be derived. Responsibi1 ity For the Investment Program Except for the Policemensl and Firemens' Pension Funds, management responsibility for the investment program of the Village of Mount Prospect is hereby delegated to the Director of Finance, who shall establish written procedures for the operation of the Investment Program consistent with this Policy. Such procedures shall include explicit delegation of authority to persons responsible for invest- ment transactions. No person may engage in an investment transaction except as provided under terms of this Policy and procedures established by the Director of Finance. The Director of Finance shall be responsible for all transactions undertaken, and shall establish a system. of controls to regulate the activities of subordinate officials. The responsibility for investment activities of the Policemens' and Firemens' Pension Funds rests with the respective Board of Trustees of each fund. Cash ~1anagement The Village's Policy regarding cash management is based upon the realization that there is a time-value to money. Temporarily idle cash may be invested for a period of one day to an excess of one year depending upon when the money is needed. Accordingly, the Director of Finance shall cause to be prepared written cash management procedures which shall. include, but not be limited to, the following: . ..' Receipts: All monies due the Village shall be collected as promptly as possible. Monies that are received shall be deposited in an approved financial institution no later than "the next business day after receipt by the Village. Amounts that remain uncoll ected after a reasonable 1 ength of time shall be subject to any available legal means of collection. Disbursements: Any disbursement to suppliers of goods and/or services or to employees for salaries and wages shall be con- tingent upon an avail&ble budget appropriation~ Disbursements shall be made subject to the following limitations: 1) payments from a petty cash fund may not exceed $50 and must be authorized by a Department Director; 2) payments for goods or services up to -2- $500 must be authorized by the Finance Director and the Department Director; and 3) payments for goods or services over $500 must be authorized by the Village Manager, Finance Director and the Depart- ment Director. Such payments shall be supported by documentation as specified in written procedures referred to above. Cash Forecast: At least annually, a cash forecast shall be pre- pared using expected revenue sources and items of expenditure to project cash requirements over the fiscal year of the Village. The forecast shall be updated from time to time to identify the probable investable balances that will be available. Pooling of Cash: Except for cas~ in certain restricted and special accounts, the Village will pool the cash of various funds to maximize investment earnings. Investment income will be allocated to the various funds based upon their respective participation. One of the objectives of the Villagel,s cash management procedures is to comply with III i noi s Revi sed Statutes, Chapter 102-34-1 wh i ch states: IIWhen depos its of Village monies become collected funds and are not needed for immediate dis- bursement, they shall be invested within two working days at prevailing rates or better. 11 Accounting The Village of Mount Prospect maintains its accounting records on the basis of funds and account groups, each of which is considered a separate accounting entity. All investment transactions shall be recorded in the various funds of the Village in accordance with generally accepted accounting principles as pro- mulgated by the Government Accounting Standards Board. Accounting treatment will i ncl ude: - Investments will be carried at cost or amortized cost which approximates market. - Premium or discount will be amortized over the life of the investment. - Gains or losses of investments in all funds except the pension funds will be recognized at the time of disposition of the security. - Gains or losses on the exchange of fixed-income securities in the pension funds will use t~e deferral and amortization method of accounting. Gains or losses on the disposition of fixed-income securities other than exchanges will use the complsted transaction method of accounting. -3- Financial Institutions It shall be the policy of the Village of Mount Prospect to select financial institutions on the following basis: - Security: The Village will not maintain funds in any financial institution that is not a member of the FDIC or the FSLIC systems. Furthermore, the Village of Mount Prospect will not maintain funds in any financial institution not willing or capable of posting required collateral for funds in excess of the FDIC or FSLIC insurable limits. - Size: The Village of Mount Prospect will not select as deposi- tory, any financial institution in which the Village funds on deposit will exceed 50% of the institution's capital stock and surplus. - Location: The Village of Mount Prospect will maintain operating and investment accounts in the financial institutions within the' Village of Mount Prospect whenever possible, and not precluded by other standards of this Policy. However, the Village may approve qualified depositories regardless of location. - Statement of Condition: The Village of Mount Prospect will main- tain for public and managerial inspection current statements of condition for each financial institution named as depository. If, for any reason the information furnished is considered by the Finance Director or the Village Treasurer to be insufficient, the Village may request additional data. The refusal of any insti- tution to provide such data upon request may serve as sufficient cause for the withdrawal of Village funds. - Services and Fees: Any financial institution selected by the Village of Mount Prospect shall provide normal banking services, including, but not limited to: checking accounts, wire transfers, purchase and sale of investment securities and safekeeping services. Fees for banking services shall be mutually agreed to by an authorized representative of the depository bank and the Finance Director of the Village on an annual basis. Fees for services shall be substantiated by a mont~ly account analysis and shall be reimbursed by means of compensating balances. Investment Selection The Village of Mount Prospect may invest in any type of security allowed by law as set out in Illinois Revised Statutes, Chapter 85-902-2. A summary of all owab 1 e securiti es follows: - Bonds, notes, certificates of indebtedness, treasury bills, or other securities, which are guaranteed by the full faith and credit of the United States of America. -4- - Interest-bearing savings accounts, interest-bearing certificates of deposit or interest-bearing time -deposits constituting direct obligations of any bank as defined by the Illinois Banking Act and only those insured by the Federal Deposit Insurance Corpor- ration (FDIC). - Short-term discount obligations of the Federal National Mortgage Association or in shares or other forms of security legally issuable by savings and loan associations incorporated under the laws of the State of Illinois or any other state or under the laws of the United States and only in those savings and loan associations insured by Federal Savings and Loan Insurance Corporation (FSLIC). - Short-term obligations of corporations (commercial paper) organized in the United States with assets exceeding $500,000,000 if (a) such obligations are rated at the time of purchase with the highest classification established by at least one standard rating service and which mature not later than 180 days from the date of purchase, (b) and no more than 25% of any fund is invested in such obligations at any time and (c) such purchases do not exceed 10% of the corpo- ration's outstanding obligations. - Illinois PublicTreasurers~ Investment Pool. The Village will specifically avoid any purchase of financial forwards or futures, any leveraged investments, lending securities or reverse repurchase agreements. Repurchase agreements will only be purchased if specific securities are under the control of the Village of Mount Prospect. All Investments except the Illinois Public Treasurers' Investment Pool shall be selected on the basis of competitive bids. Financial institutions located within the Village of Mount Prospect will be awarded the bid if the local bid is within 1/8 of 1% of the best bid and the local bid will not result in a dollar loss to the Village of more than $500 on an annualized basis. Diversification and Maturities In order to reduce the risk of default, the investment portfolio of the Village shall not exceed the following diversification limits: - No financial institution shall hold more than 20% of the Village of Mount Prospect's investment portfolio, exclusive of U. S. Treasury securities held in safekeeping. ' ----- ---"-~'~~-'- Commetci al paper shall not exceed 10% of the Vi 11 age's investment portfolio. - Illinois Public Treasurers' Investment Pool shall not exceed 25% of the investment portfolio. -5- Maturities of investments of the various funds of the Village shall be determined to enable the Village to have available sufficient cash for all operating purposes. Investment maturities in the General Fund and Special Revenue Funds shall be limited to a.maximum maturity of fifteen months from the date of purchase. Invest- ments in other funds may be purchased with maturities to match future project or liability requirements.. However, any investment purchased with a maturity longer than two years must be supported by written documentation explaining the reason for the purchase and must be specifically pre-authorized by the Finance Director. Notwithstanding the provisions of the above paragraph, no investment in any fund shall have a maturity date greater than the period all owed by III inois Revised Statutes, by Village Ordinance or by other standards of this policy. Co11 atera 1 It is the policy of the Village of Mount Prospect to require that funds on deposit in excess of FDIC or FSLIC limits be secured by some form of collateral. The Village will accept any of the following assets as collateral: - U. S. Government Securities Obligations of Federal Agencies Obligations of Federal Instrumentalities Obligations of the State of Illinois Obligations of the Village of Mount Prospect General Obligation Municipal Bonds rated nAil or better Any other collateral identified in III inois Revised Statutes as acceptable for use by the Treasurer of the State of Illinois The amount of collateral provided will be not less than 110% of the fair market value of the net amount of public funds secured. The ratio of fair market value of collateral to the amount of funds secured will be reviewed quarterly and additional collateral will be requested when the ratio declines below the level required. Pledged collateral will be held by the Village of Mount Prospect or in safekeeping and evidenced by a safekeeping agreement. If collateral is held in safekeeping, it may be held by a third party or by an escrow agent of the pledging institution. Collateral agreements will preclude the release of the pledged assets without an authorized signature from the Village of Mount Prospect, but they wi 11 allow for an exchange of co 11 atera 1 of like value. -6- Internal Controls The Director of Finance shall establish a system of internal controls, which shall be documented in writing. The internal controls shall be reviewed by an indepen- dent certified public accountant in conjunction with the annual examination of the financial statements of the Village. The controls shall be designed to prevent losses of public funds arising from fraud, employee error, misrepresentation by third parties, unanticipated changes in financial markets, or imprudent actions by employees and officers of the Village of Mount Prospect. One of the required elements of the system of internal controls shall be the timely reconciliation of all Village bank accounts. Bank reconciliations shall be performed on a monthly basis and shall be completed no later than thirty (30) days after the end of the monthly cycle. Reporting The Director of Finance shall submit a monthly investment report that provides the following information: - Principal and type of investments by Fund - Earnings for the Current Month and Year to Date - Annualized Yield - Ratio of Cash to Investments - Weighted-average life The Annual Financial Report of the Village of Mount Prospect shall include a list of all investments by fund and the interest rate of each investment. Additionally, a summary report of cash and investments maintained in each financial institution will be included. From time to time the Director of Finance shall suggest policies and improvements that might be made in the investment pro.gram. Indemnification The standard of prudence to be used by investment officials of the Village of Mount Prospect shall be the IIprudent person" standard which states: Investments shall be madè with judgement and care, under circumstances then prevailing~ which persons of prudence, discretion and intell igence .. 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 possible income to be derived. -7- The above standard is establ ished as the standard for. professionalresponsibi1 ity and shall be applied in the co~text of managing the Village1s overall portfolio. " Investment Officers of the Village of Mount Prospect acting in accordance with this Investment Policy and written procedures as may be established and exercising due diligence shalT be relieved of personal responsibility for an individual security's credit risk or market price changes, provided that deviations from expectation are reported in a timely fashion, and appropriate action is taken to control adverse developments. Amendment This Policy shall be reviewed from time to time and any changes shall be presented to the Board of Trustees for their approval. Adoption Adopted by the Village Board by Resolution 3885 , July 2, 1985. -8-