§ 2-6. Investment policy.
A.
Scope of investment policy. This Investment Policy applies to the investment activities of the city except for the police and fire pension funds which are subject to the board of trustees of those particular funds. All financial assets of other funds, including the General Fund, Special Revenue Funds, Capital Project Funds, Debt Service Funds, Enterprise Funds, Trust and Agency Funds, and any other funds that may be created, shall be administered in accordance with the provisions of this policy.
B.
Investment objectives. The overall direction of the City of Effingham Investment Policy may be found in the following objectives, which have been prioritized and explained to clearly identify the results expected.
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Safety of principal is the foremost objective of the Investment Policy. Investments of the city shall be undertaken in a manner that seeks to ensure the preservation of capital. Each investment transaction shall seek to first ensure that capital losses are avoided, whether they be from securities defaults or erosion of market value.
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Return on investment. The city's investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the city's investment risk constraints and the cash flow characteristics of the portfolio.
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Diversification. In order to further guarantee asset safety, the city shall diversify investments to avoid incurring unreasonable risks from the practice of concentrating investments in specific security types and/or individual financial institutions.
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Public confidence in the investment program is imperative. The city will avoid any transaction that might impair public confidence. 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. Such standard, therefore, avoids unwarranted speculation; emphasis is placed on the probable safety of capital rather than the probable income to be derived.
C.
Responsibility for the Investment Program. The establishment of investment policies is the responsibility of the mayor and city council of the city. Management and administrative responsibility for the investment program of the City of Effingham is hereby delegated to the city treasurer or his/her designate. The city treasurer or his/her designate shall prepare and follow written procedures for the operation of the investment program, be responsible for all transactions undertaken, and shall establish a system of accounting controls to safeguard city assets. The city treasurer or his/her designate, may from time to time amend the written procedures in a manner not inconsistent with this policy or with state law. The responsibility for investment activities of the Police and Fire Pension Funds rests with the board of trustees of those funds.
D.
Cash management. The city treasurer or his/her designate shall prepare written cash management procedures which shall include, but not be limited to, the following:
1.
Receipts: All monies due the city 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 city. Amounts that remain uncollected after a reasonable length of time shall be subject to any available legal means of collection previously approved by the city council. One of the objectives of the city's cash management procedures is to comply with the provisions of the Illinois Revised Statutes, which mandates prompt investment of funds.
2.
Disbursements: Any disbursement to suppliers of goods and/or services or to employees for salaries and wages shall be contingent upon available budget appropriations.
3.
Financial forecast: At least annually, a financial forecast will be prepared using expected revenue sources and items of expenditure to project cash requirements for future years of the city. An analysis will be prepared for both operating and non-operating revenues and expenditures. These analyses will provide a guide for determining the length and amount of investments.
4.
Pooling of cash: Except where otherwise provided by the city council, the city treasurer or his/her designate will be authorized to pool the cash of various funds to maximize investment earnings where in his/her opinion it is advantageous and prudent to do so. Investment income will be allocated to the various funds based upon their respective participation.
E.
Accounting. The assets, liabilities, revenues and expenditures of each fund are maintained as separate entities on the full or modified accrual basis. All investment transactions shall be recorded in accordance with generally accepted accounting principles as promulgated by the Government Accounting Standards Board. Accounting principles will include:
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Investments will be carried at cost or amortized cost which approximates market value.
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Any premium or discount on investment will be amortized over the life of the investment.
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Gains or losses of investments in all funds will be recognized at the time of disposition of the security.
F.
Financial institutions. It shall be city policy to select financial institutions on the following basis:
1.
Security: The city shall maintain funds in a financial institution only if that institution is federally insured or invests strictly in securities which have the full faith and credit of the U. S. Government.
2.
Location: Every attempt will be made to invest city funds locally provided local institutions are price competitive with respect to rates of return on comparable investment products.
3.
Size: The city will not maintain deposits in any financial institution in which the city funds on deposit will exceed fifty (50) percent of the institution's capital stock and surplus.
4.
Statement of condition: The city will maintain 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 city to be insufficient, the city may request additional information.
G.
Investment selection. The city may invest in any type of security allowed for in Illinois Statutes regarding the investment of public funds. Approved investments include:
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Bonds, notes, certificates of indebtedness, treasury bills, or other securities, including obligations of the Government National Mortgage Association and Federal National Mortgage Association which are guaranteed as to principal by the full faith and credit of the government of the United States of America.
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Interest bearing savings accounts, interest bearing certificates of deposit or interest bearing time deposits or any other investment constituting direct obligations of any institution as defined by the Illinois Banking Act and that is insured by the Federal Deposit Insurance Corporation.
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Illinois Public Treasurer's Investment Pool.
H.
Bidding procedures on certificates of deposit. In obtaining competitive quotations for certificates of deposit at least three (3) qualified institutions will be contacted each time an investment is placed. In no instance shall an investment be placed without the authority of the city treasurer.
Investments shall be placed with the institution that best exhibits the ability to meet the investment criteria and objectives in this policy.
I.
Diversification and maturities. In order to reduce the risk of default, no financial institution shall hold more than fifty (50) percent of the city's investment portfolio at the current time of investment placement, exclusive of United States Treasury securities or Government National Mortgage securities held in safekeeping.
Maturities of investments shall be selected to enable the city to have available sufficient cash for all operating purposes.
J.
Collateral. It shall be city policy to encourage that all funds on deposit in banks in excess of FDIC limits be secured by some form of collateral. Direct investments guaranteed by the United States or an agency of the United States do not require collateral.
The city shall enter into a collateral agreement with any financial institution willing to pledge paid collateral; this agreement shall outline the types of assets that may be pledged as collateral, the amount of collateral required and the placement procedures. The city shall accept any of the following securities as collateral:
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Negotiable obligations of the United States government.
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Negotiable obligations of any agency or instrumentality of the United States government guaranteed by the full faith and credit of the United States government.
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Irrevocable letters of credit issued by the Federal Home Loan Bank.
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State of Illinois General Obligation Bonds.
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Bonds of any Illinois municipality carrying a Moody's Triple A rating.
Pledged collateral will be held by the city or in safekeeping and evidenced by a safekeeping agreement. The collateral agreement will preclude the release of the pledged assets without authorized signatures of the city treasurer, but the agreement may allow for an exchange of collateral of like value.
K.
Internal controls. Where deemed necessary, the city treasurer or his/her designate shall establish a system of internal controls, which shall be documented in writing. These internal controls and this Investment Policy shall be reviewed by an independent, certified public accountant in conjunction with the annual examination of the financial statements of the city. The controls shall be designed to prevent losses of the city funds arising from fraud, employee error, misrepresentation by third parties, unanticipated changes in financial markets, or imprudent actions by employees.
L.
Reporting. The city treasurer shall submit a bi-monthly cash and investment report to the city council for review.
The Comprehensive Annual Financial Report shall include all investment information as promulgated by the Government Accounting Standards Board.
The city treasurer or his/her designate shall periodically suggest policies and improvements that might be made in the investment program.
M.
Standards of prudence. The standard of prudence to be used by the employees responsible for the investment of public funds shall be the "prudent person" standard, subject to the foregoing limitations, which states:
Investments shall be made with judgment and care, under circumstances than prevailing, which persons knowledgeable of investment practices, and 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 possible income to be derived. The above standard is established as the standard of professional responsibility and shall be applied in the context of managing the city investment portfolio. This policy recognizes that there are circumstances beyond the control of even the most prudent investor which impact the return obtained. However, officials and employees of the city acting in accordance with this investment policy and written procedures as may be established and exercising due diligence shall 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.
(Ord. No. 72-98, § 1, 8-18-98; Ord. No. 49-2001, § 1, 4-17-2001)