School Board Investment Policy # 6144

 Purpose

The purpose of this policy is to set forth the investment objectives and parameters for the management of public funds of the School Board.  These policies are designed to ensure the prudent management of public funds, the availability of operating and capital funds when needed, and an investment return competitive with comparable funds and financial market indices.  The designated backup for the Manager, Cash & Investments is the Cash & Investments Specialist.  All references to the roles and responsibilities of the Manager, Cash & Investments apply to the Cash & Investments Specialist as well.

 
Authority

The Superintendent is authorized to make transfers from financial institution to financial institution or within a financial institution for the purpose of investing or divesting Board funds.  For the purposes of this policy, the term "financial institution" has the same definition of F.S. 280.02(13).

The Manager, Cash & Investments, under the supervision of the Chief Financial Officer, is appointed as designee of the Superintendent and is authorized and empowered for and on behalf of the Board to a) conduct investment transactions in accounts at financial institutions as provided under Authorized Investment Institutions and Dealers, and b) conduct other banking/financial transactions in financial institutions designated as Qualified Public Depositories under F.S. 280.02(26).  Accounts at said institutions shall be established by two (2) signatures of the Chief Financial Officer; Executive Director, Budget and Resource Allocation; or Director, Accounting.

 
Investment Transactions

The Manager, Cash & Investments, under the supervision of the Chief Financial Officer, shall have the authority, under the conditions set forth herein, to make individual investment decisions and to direct the third party custodian to act on said decisions, consistent with this policy.

 

Banking/Financial Transactions

The Manager, Cash & Investments, under the supervision of the Chief Financial Officer, shall have the authority, under the conditions set forth herein, to establish services and execute transactions to, from, and between established Board accounts, consistent with this policy.

 

Facsimile Signatures

The Manager, Cash & Investments, under the supervision of the Chief Financial Officer, shall be designated, under the conditions set forth herein, as the custodian of the facsimile signatures of the Superintendent and Chairman of the Board.  As custodian, the Manager, Cash & Investments will oversee the creation of any device or mechanism to apply said facsimile signatures to warrants drawn on Board accounts.

Appropriate fidelity bonding will be maintained by the Board to cover the Manager, Cash & Investments, the Chief Financial Officer, and other designated staff members who are in any way involved in the movement of Board funds from one (1) financial institution account to another.

Scope

The investment policy shall apply to all funds held or controlled by the Board.

 
Investment Oversight Committee

The Superintendent shall establish an investment oversight committee whose members shall be comprised of a minimum of six (6) individuals, three (3) of whom shall be Board personnel and three (3) non-Board personnel with relevant financial expertise.  As an ex-officio resource, the Superintendent or designee shall serve on the committee.  The Manager, Cash & Investments shall serve as an ex-officio resource to the investment oversight committee.  The investment oversight committee will meet at least quarterly to review and advise regarding the control procedures and investment performance as set forth in this policy.

Investment Objectives

The investment objectives of the Board are safety of capital, liquidity of funds, and investment income, in that order.
 

Performance Measurement

The Board’s investment portfolio performance will be measured against two benchmarks.  To measure the Board’s investment portfolio performance against other pooled investments, a weighted average of rate of return will be calculated from Merrill Lynch and Bloomberg published indices.  To measure the Board’s investment portfolio performance against the District’s peers, the participate return will be used from the Florida Prime fund managed by the State Board of Administration.

Prudent and Ethical Standards

The Manager, Cash & Investments, under the supervision of the Chief Financial Officer, shall adopt and be guided by the "Prudent Person Rule," which states that, "Investments should 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 from the investment."  The "Prudent Person Rule" shall be applied in the context of managing Board funds.

While the standard of prudence to be used by District employees in the management of Board funds, is the "Prudent Person" standard, any person or firm hired or retained to invest, monitor, or advise concerning these assets shall be held to the higher standard of "Prudent Expert."  The standard shall be that in investing and reinvesting moneys and in acquiring, retaining, managing, and disposing of investments of these funds, the contractor shall exercise: the judgment, care, skill, prudence, and diligence under the circumstances then prevailing, which persons of prudence, discretion, and intelligence, acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of like character and with like aims by diversifying the investments of the funds, so as to minimize the risk, considering the probable income as well as the probable safety of their capital. (F.S. 218.415)

Ethics and Conflicts of Interest

Employees involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions.  Also, employees involved in the investment process shall disclose to the Board any material financial interests in financial institutions that conduct business with the Board, and they shall further disclose any material personal financial/investment positions that could be related to the performance of the Board's investment program.

In addition, the Manager, Cash & Investments shall not use the prestige or influence of their position, or District resources, to obtain personal financial, or political gain, or private advantage for themselves, their family, or an organization with which they are associated.  Employees responsible for managing the District’s investment portfolio are held in public trust and are obligated to maintain honesty and integrity in fulfilling their responsibilities.

Authorized Investments

 The Manager, Cash & Investments, under the supervision of the Chief Financial Officer shall be empowered to invest Board funds in:

1. the State Board of Administration's Local Government Surplus Funds Trust Fund or any intergovernmental investment pool authorized pursuant to the Florida Interlocal Cooperation Act as provided in F.S. 163.01;
2. Securities and Exchange Commission registered money market funds with the highest credit quality rating from a nationally recognized rating agency;
3. interest-bearing time deposits or savings accounts in qualified public depositories as defined in F.S. 280.02(26);
4. direct obligations of the United States Treasury;
5. obligations of Federal agencies, government-sponsored enterprises, and instrumentalities;
6. securities of, or other interest in, any open-end or closed-end management type investment company or investment trust registered under the Investment Company Act of 1940, 15 U.S.C. 80a-1 et seq., as amended from time-to-time, provided the investment objectives of said investment company or investment trust are similar to the investment objectives of this policy;
7. short-term obligations commonly referred to as "money market instruments", including, but not limited to commercial paper, provided such obligations carry the highest credit rating from a nationally recognized rating agency;
8. asset-backed securities are permitted when a) the underlying asset is guaranteed by the issuer, or b) the security carries the highest quality rating by a nationally recognized rating agency.

Investment instruments will have the highest quality as rated by a nationally recognized rating agency at the time of purchase.  If the rating of an investment should be downgraded to less than highest quality rating, the Manager, Cash & Investments, in consultation with the Investment Oversight Committee, will decide whether the investment will be sold or retained.  Mortgage-backed investments that do not carry an investment rating are permitted when the issuer falls under items "D" and "E" above.

The Manager, Cash & Investments will take reasonable steps to keep informed of any ratings changes on District investments.  In the event that a rating is downgraded, the Manager, Cash & Investments will notify the Investment Oversight Committee of the downgrade and, if known, the reason.  Within a reasonable time frame, approximately two weeks, the Manager, Cash & Investments will make a decision on whether to keep or sell the investment.  The Manager, Cash & Investments will notify the Investment Oversight Committee of the decision and its rationale.

The Manager, Cash & Investments, in consultation with the Investment Oversight Committee, shall have the discretion to invest in securities that do not fall under the above categories, provided the invested value of these securities does not exceed five percent (5%) of the total value of the Board funds, on the settlement date of said investment.  Such securities must not otherwise be prohibited by State statute or this policy.

Investment of Board funds shall be made 1) so as to provide sufficient liquidity to meet the obligations of the Board as they come due and 2) in accordance with the investment objectives listed under Investment Objectives above.  The Manager, Cash & Investments will comply with the "Prudent Person Rule" as outlined in Prudent and Ethical Standards above when evaluating investments for addition to the managed investment portfolio, particularly with regard to maturity, liquidity, risk, diversification, security type, and issuer.

Maturity and Liquidity Requirements

The maturity and liquidity characteristics of the investments in the Board's managed investment portfolio shall be structured to provide sufficient liquidity to meet obligations of the Board in a timely manner.  The weighted average "duration" of the investment portfolio shall not exceed five (5) years.  The maturity and liquidity characteristics of the managed investment portfolio as a whole and of each individual security shall be in accordance with Investment Objectives and Prudent and Ethical Standards above.

Portfolio Composition

The composition of the Board's managed investment portfolio, with regard to security type, issuer, and maturity, shall be diversified so as to 1) provide sufficient liquidity to meet obligations of the Board in a timely manner and 2) comply with Investment Objectives and Prudent and Ethical Standards above.

Risk and Diversification

The risk and diversification characteristics of the investments in the Board's managed investment portfolio shall be structured so as to 1) provide sufficient liquidity to meet obligations of the Board in a timely manner and 2) comply with Investment Objectives and Prudent and Ethical Standards above. 

 Authorized Investment Institutions and Dealers

1. Any broker or dealer desiring to conduct securities transactions with the Board shall be required to submit a written response to the Board’s broker/dealer questionnaire.  The Manager, Cash & Investments shall be responsible for reviewing such requests and determining whether the requesting firm is qualified to conduct securities transactions with the Board.  In addition to the broker/dealer questionnaire, the Manager, Cash & Investments may also use other publicly available information necessary to evaluate the qualifications of the applicant.
2. The Manager, Cash & Investments shall maintain an approved broker list of those firms that have been reviewed and deemed qualified to conduct securities transactions with the Board.  The Investment Oversight Committee will periodically review the list and recommend changes if appropriate.  The Manager, Cash & Investments, shall be authorized to conduct securities transactions, in an established Board account, with any firm on the list of qualified firms.

 THIRD PARTY CUSTODIAL AGREEMENTS

Securities purchased, or otherwise acquired by the Board shall be properly designated as an asset of the Board and held in safe-keeping by a third party custodian.  Said custodian shall issue trust receipts for all purchases and sales of securities in the Board’s custody account.  Securities held in safekeeping shall not be withdrawn, in whole or in part, except by the Manager, Cash & Investments, under the supervision of the Associate Superintendent, Finance and Business Services.

The Board shall execute a third party custodial agreement with a bank or other depository institution, for the purpose of:

1. establishing a securities custody account in which securities are deposited and held by the custodian;
2. establishing the custodian as agent for the Board when settling purchases and sales of securities using the delivery versus payment method;
3. empowering the custodian to inspect all securities delivered to the account and to verify the description, negotiability and good delivery form prior to payment;
4. collecting and crediting interest and dividend payments to the Board’s security account due on securities held in the account as of the payable date;
5. acting on the Board’s behalf in the redemption of all matured and called securities and crediting such proceeds in the custody account as received;
6. establishing a mechanism for the wire transfer of temporarily idle funds held in the security account to Board accounts at other financial institutions;
7. establishing a mechanism of transmitting and receiving instructions via the custodian, securities broker, and the Board;
8. establishing the use of trust receipts as documentation for all securities transactions through the Depository Trust Company's Institutional Delivery System, the financial institution's Federal Reserve Account or a designated financial institution which has a correspondent relationship to the Board’s third party custodian;
9. providing the Board a detailed transaction statement indicating all cash entries to the security account, beginning and ending principal balances, and beginning and ending income balances for the period;
10. providing the Board (monthly and upon request) an asset statement indicating description, par value, book and market value of all securities held in the account.

 

MASTER REPURCHASE AGREEMENT

The Manager, Cash & Investments, under the supervision of the Chief Financial Officer, shall be required to have a fully executed master repurchase agreement from all approved banking institutions and securities dealers' transacting repurchase agreements.  All repurchase agreement transactions shall adhere to the requirements of the master repurchase agreement.

BID REQUIREMENT

When appropriate, feasible and practicable, the purchase and sale of investment securities shall be competitively bid.  Documentation will be retained for all bids, with the winning bid clearly identified.

 

INTERNAL CONTROLS

The following internal controls shall be implemented to prevent loss of funds from fraud, employee error, misrepresentation by third parties, or imprudent actions by Board employees.

1. Board accounts at financial institutions can only be opened and closed on two (2) signatures of the Chief Financial Officer; Executive Director, Budget and Resource Allocation; or the Director, Accounting. The Manager, Cash & Investments is prohibited from opening or closing Board accounts.
2. Transactions in, from and between Board accounts can only be executed by the Manager, Cash & Investments, or his/her backup.
3. The Board shall receive two (2) copies of all transaction confirmations and investment account statements. One (1) copy will be sent to the Manager, Cash & Investments and retained in the cash management department files. The second copy will be sent under separate cover to the Chief Financial Officer. The Chief Financial Officer will review the confirmations and statements, initial them and return them to the Manager, Cash & Investments for retention in the cash management department files.
4. When the Manager, Cash & Investments completes a trade with a broker, the broker will immediately send the trade details to both the Manager, Cash & Investments and the Board custodian.
5. On a monthly basis, the staff accountant will reconcile all Board money market accounts and the custodial account, the Manager, Cash & Investments will review the reconciliations and the Chief Financial Officer will review and approve them.  All three (3) individuals will sign the cover page and the document will be placed in the cash management files.
6. In addition to the annual audit of the Board, there will be a separate audit of the managed investment program.  This audit is presented to the Investment Oversight Committee and is available for Board review.
7. The Manager, Cash & Investments reports to the investment oversight committee ex-officio.  The committee reviews the investment activities of the Manager, Cash & Investments for compliance with this policy and the “Prudent Person Rule”.

CONTINUING EDUCATION

The Manager, Cash & Investments shall complete eight (8) hours annually of continuing education classes in subjects or courses of study related to cash management and/or investment practices and products.

INVESTMENT PERFORMANCE AND REPORTING

The investment portfolio's performance shall be reported to the Investment Oversight Committee through a set of reports, the contents of which are described below, on a quarterly basis.  Said reports shall also be presented to the Board at a regularly scheduled Board meeting. Reports shall include the following:

1. asset value and income statement for the current quarter, fiscal year-to-date, and prior fiscal year
2. notes to value and income statement
3. period ending portfolio statement inclusive of security type and description, book value, market value, book value versus market value comparison, prepaid and accrued interest to date, and the total value of each security as well as the total value of all securities
4. management investment program income and rate of return statement for the current quarter, fiscal year-to-date, and prior fiscal year
5. pro forma income and rate of return statement for the alternative State Board of Administration investment for the current quarter, fiscal year-to-date, and prior fiscal year
6. any other reports the investment oversight committee or Board deems necessary, as well as those required by regulatory agencies

 

SALE OF SECURITIES

When the Board invested funds are needed in whole or part for the purposes originally intended or for more optimal investments, the Manager, Cash & Investments may sell such investments at the then prevailing market prices and place the proceeds into the proper Board account or fund.

 

REVERSE REPURCHASE AGREEMENTS

The Board may enter into a reverse repurchase agreement with any firm on the list of qualified firms as defined in Authorized Investment Institutions and Dealers above or a qualified public depository as defined under section F. S. 280.02(26), not for the purposes of increase leverage, but for legitimate funds management purposes only.  The use of reverse repurchase agreements shall be limited to transactions in which the proceeds are intended to be used for liquidity and for which the Board staff has sufficient resources and expertise to manage.

 

ELECTRONIC TRANSFER OF FUNDS

Board funds may be moved into, out of, and between any Board account by electronic means, including Fedwire, ACH, or any other method as may be developed and put into practice by financial institutions for the purposes of transferring money between accounts or between financial institutions.  Movement of Board funds by electronic means shall comply with F.S. Chapter 668.

Board funds shall only be electronically transferred for the following reasons:

1. payment of legitimate obligations incurred in the course of Board business
2. receipt of Board revenue from local, State, and Federal sources
3. settlement of investment transactions, e.g. purchases, sales, or principal and interest distributions
4. transfers between Board accounts as needed for legitimate funds management activities

The Manager, Cash & Investments, or his/her backup, will execute electronic transfers of funds through qualified financial institutions as defined in Authority above.  The Manager, Cash & Investments shall properly account for such transactions in the Board’s general ledger system.

 A. Fedwires

1. Fedwires between Board accounts can be initiated and approved by the Manager, Cash & Investments.
2. Repetitive templates of Fedwire instructions to non-Board accounts shall be established by a Board employee, who is not a member of the Cash Management Department, using software provided by the Board’s financial institution.  The Manager, Cash & Investments shall be prohibited from altering such repetitive templates.
3. Fedwires to non-Board accounts can be initiated and approved by the Manager, Cash & Investments, provided repetitive templates, as established in paragraph "2" above, are used.

1. Authorized Board vendors will be paid only via ACH Credit transactions.  An ACH Credit transaction is where money is sent from a Board account to the Board vendors' appropriate bank account.
2. ACH Debit transactions are prohibited, unless the counterparty to the transaction is another governmental entity.  An ACH Debit transaction is where money is retrieved from a Board account by the counterparty’s financial institution.
3. Authorized Board vendors to be paid via ACH will be set up to receive such payments in the Board’s general ledger system by accounting department personnel.
4. Payment of employees' wages via direct deposit will comply with procedures established by the payroll department.

C. Other Electronic Funds Transfer Transaction Types
Other electronic funds transfer transactions, through either an established method or any method that may be developed in the future, are permitted, so long as such transactions are structured so that Board funds may not be transferred to non-Board accounts at the sole discretion of the Manager, Cash & Investments.  Instructions to transfer funds electronically, to non-Board accounts, shall be established by a Board employee who is not a member of the Cash Management Department.  Said instructions can then be used by the Manager, Cash & Investments to execute an electronic transfer of funds.

 

F.S. 1001.32(2), 1001.41, 1001.42, 1001.43, 1011.18
F.A.C. 6A-1.085