Code: DFA-AR
Adopted: 9/9/02
Readopted: 6/12/06
Investment of Funds
Monitoring and Adjusting the Portfolio
The investment officer will routinely monitor the contents of the portfolio, the available markets and the relative values of competing instruments, and will adjust the portfolio accordingly.
Internal Controls
Under the direction of the superintendent, the investment officer shall establish a system of written internal controls. The internal control procedures shall be designed to prevent loss of public funds due to fraud, error, misrepresentation, unanticipated market changes or imprudent actions. These procedures shall be reviewed and tested by the independent auditor annually or upon any extraordinary event i.e., turnover of key personnel, or the discovery of inappropriate activity, according to generally accepted auditing standards and this policy.
Short Term Versus Long Term Portfolio
Limitations on instruments, diversification and maturity scheduling shall depend upon whether the funds being invested are considered short term or long term funds. All funds shall be considered short term investments of up to a maximum of 18 months except those reserved for capital projects and special assessment prepayments being held for debt retirement.
Short Term Portfolio Investments
The district will diversify use of investment instruments to avoid incurring unreasonable risks inherent in overinvesting in specific instruments, individual financial institutions or maturities.
1. Diversification by Instrument Maximum % of Portfolio
U.S. Treasury Obligations (Bills, Notes, Bonds) 100%
U.S. Government Agency Securities and Instrumentalities
of Government sponsored Corporations 100%
Bankers' Acceptances (BA's) 25%
Repurchase Agreements (Repo's) 25%
Certificates of Deposit (CD's) at Commercial 25%
Banks or Savings & Loan Associations.
(Must meet Oregon depository and collateralization
requirements under ORS Chapter 294. Bank or S&L
must have a head office or branch in Oregon)
State and Local Government Securities subject to 50%
ORS Chapter 294.035(2), (3) as amended 1995
Passbook Savings Accounts 10%
Local Government Investment Pool 100%
2. Diversification by Financial Institution
Bankers' Acceptances (BA's) - no more than 25% of the total portfolio with anyone institution.
Certificates of Deposit, Commercial Banks or Savings and Loan Associations (CD's) - no more than 25% of the total portfolio with anyone institution.
Local Government Investment Pool, State Pool- no more than the prevailing dollar limit allowed by ORS 294.810.
The total investment in anyone commercial banking institution shall not exceed 60% of the District's total portfolio and shall be limited to no more than 159 of the institution's capital and surplus as defined by Oregon Revised Statutes.
3. Maturity Scheduling
Investment maturities for operating funds shall be scheduled to coincide with projected cash flow needs, taking into account large routine expenditures (payroll, bond payments) as well as considering sizeable blocks of anticipated revenue (tax turnover, Impact Aid payments)
4. Rules for diversification shall not apply to pass-through funds when the pass-through is completed within 10 working days of the receipt of funds.
Long Term Portfolio Investments
The long term portfolio shall be comprised of funds reserved for capital projects and special assessment prepayments being held for debt retirement. Long term portfolio investment in any one commercial banking institution shall not exceed 15% of the institution's capital and surplus as defined by Oregon Revised Statutes.
Long term investments are defined as having maturities over 18 months and up to a maximum of 36 months. Maturity scheduling shall be timed according to anticipated need as provided by ORS 294.135. For example, investment of capital project funds shall be timed to meet contractor payments. Investment of prepaid assessment funds shall be tied to bond payment dates, after cash flow projections are made using a forecasting model which considers prepayment rate, delinquency rate, interest on bonds and income on investments.
Maturities over 18 months shall be allowed following review and approval of the district's investment policy by the Oregon Short Term Funds Board.
Competitive Selection of Investment Instruments
If the district determines not to put surplus funds into the Local Government Investment Pool, then quotations will be requested from a minimum of three financial institutions for various options with regards to term and instrument. The district will accept the quotation which best fits with the district's investment objectives, provides the highest rate of return within the maturity required, and within the parameters of these policies. Records will be kept of the quotations offered, the quotation accepted and a brief explanation of the decision which was made regarding the investment.
No additional competitive offers will be sought for investment of bond proceeds if a financial institution has already been awarded a contract, on a competitive basis, for the bond sale transaction.
Safekeeping and Collateralization
All investment securities purchased by the district shall be held in third party safekeeping. The third
party shall issue a safekeeping receipt listing the specific instrument, rate, maturity and other pertinent information.
Deposit-type securities (i.e., certificates of deposit) shall be collateralized through the state collateral pool or as required by ORS 294.015 for any amount exceeding FDIC or FSUC coverage. Other investments shall be collateralized by the actual security held in safekeeping by the primary agent.
Depository of Funds
The selection of the official depository or treasury for the district funds shall be in the following manner.
1. Each year, the Board shall appoint the custodian of funds, in accordance with Oregon law.
2. The Board has authority to designate where all or any part of the funds will be deposited within the limits of this policy. The allocation of funds, or portions thereof, to depositories will be reviewed annually.
The depository or treasury selected by the Board shall protect the district funds as provided by Oregon law and shall submit necessary data for approval by the custodian of funds.
The interest from investments shall be deposited to the General Fund, except for interest earned from fund groups 300 and 400, which shall be credited to each of the respective accounts.
Reporting Requirements
The investment officer shall generate periodic reports as needed for management purposes.
Investment Policy Adoption
Annually, the Board shall review and re-adopt this policy providing any changes made are minor and not requiring additional review by the Oregon Short Term Funds Board.