Investment of Funds
Scope
This investment policy applies to activities of the district with regards to investing the financial assets of all funds, except deferred compensation funds held under annuity contracts for the employees of the district. In addition, funds held by trustees or fiscal agents are excluded from these rules; however, all funds are subject to regulations established by the state of Oregon. This policy provides direction for the following funds:
1. General Fund
2. Capital Projects Funds
3. Debt Service Funds
4. Other Funds
Funds of the district will be invested in compliance with Oregon Revised Statutes (ORS), Chapter 294, other applicable statutes, and this policy and its related rules and procedures. Investment of any tax-exempt borrowing proceeds and any debt service funds will comply with the arbitrage restrictions in all applicable Internal Revenue Codes.
Objectives
The district will limit investment activities in order to ensure safety, legality, liquidity, diversity, and yield. Preservation of capital and the protection of investment principal are accomplished by limiting types of risk. These objectives are listed in order of highest priority.
1. Legality - The district shall comply with all federal and state laws including applicable Oregon Revised Statutes regarding investment of public funds.
2. Credit Risk - Risk is defined as risk of failure of a security issuer or backer. Credit risk is minimized by limiting investments to the safest types of securities and by diversifying the investment portfolio; this is by limiting the district's exposure to an individual security issuer or backer. The credit worthiness of a security issuer or backer prior to an investment being purchased will be a major factor and lessens credit risk.
3. Interest Rate Risk - Defined as the risk that the value of the portfolio will decline due to an increase in the general level of market interest rates. Interest rate risk is lessened by generally matching investment maturities with cash requirements so that sales prior to maturities (and the possibility of loss of principal) are minimized.
4. Liquidity - The district shall maintain sufficient daily operating cash to pay obligations when due while maximizing the amount of monies invested.
5. 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. Return on investment is of secondary importance compared to the safety and liquidity objectives described above. The majority of the portfolio is limited to highly rated, low risk security in anticipation of earning a fair return relative to the risk being assumed. Securities shall not be sold prior to maturity with the following exception:
a. A security with declining credit may be sold early to minimize loss of principal.
b. A security swap would improve the quality, yield, or target duration in the portfolio.
c. Liquidity needs of the portfolio require that the security be sold.
Delegation of Authority
The Chief Financial Officer is designated as investment officer for the district and is responsible for investment decisions and activities, in consultation with the chief financial officer, and under the direction of the superintendent. The Chief Financial Officer shall follow the written Rules and Procedures related to policy DFA as the administrative procedures for the operation of the investment program. In order to optimize total return through active portfolio management, resources shall be allocated to the cash management program. This commitment of resources shall include financial and staffing considerations.
The standard of prudence to be applied by the investment officer shall be the "prudent investor" rule, which 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." The prudent investor rule shall be applied in the context of managing the overall portfolio.
The chief financial officer, superintendent, and staff, acting in accordance with written procedures and exercising due diligence, shall not be held personally responsible for a specific security's credit risk or market price changes, provided that these deviations are reported to the Board as soon as known and that appropriate action is taken to control adverse developments.
END OF POLICY