R-90-1462 - 6/14/1990ATTEST:
WHEREAS, pursuant to Art. 842a -2, V.A.T.S. (Public Funds
Investment Act) the City Council desires to adopt a written policy for
the investment of City funds, and
WHEREAS, the City Council has reviewed the attached written
policy and wishes to approve same, Now Therefore
BE IT RESOLVED BY THE COUNCIL OF THE CITY OF ROUND ROCK, TEXAS,
That the attached written policy for the investment of City funds
is hereby approved and adopted.
RESOLVED this 14th day of June, 1990.
C- RS06140B
i id JLII .'
LAND, City Secretary
RESOLUTION NO. / (/ c
Ai di,-
MIKE ROBINSON, Mayor
City of Round Rock, Texas
City of Round Rock, Texas
Investment Policy
June 6, 1990
1
City of Round Rock, Texas
Investment Policy
June 6, 1996
I Introduction
II Scope and Legal Requirements
Scope
State Statute
Delegation of Authority
Prudence
III Purpose and Objectives
Overall Investment Strategy
IV Authorities
Limitation of Liability
V Authorized Investment Securities
Acceptable Securities
Relationships with Financial Institutions
Custodial Safekeeping
VI Investment Strategy
VII Selection and Compliance of Brokers
Qualified Institutions
VIII Contractual Trading Requirements
Wire Transfer Authorization
Collateralization Requirements
IX Portfolio Evaluation and Reporting
Reporting
Internal Controls
Ethics
X Conclusion
2
"I'm not as concerned about the return on my principal as I am about the
return of my principal."
I. INTRODUCTION
The investment policy of the City of Round Rock, Texas, is adopted to define
investment policy guidelines and authority of the Investment Officer and his
deputies. This policy will identify various policies and procedures that
enhance opportunities for a prudent and systematic investment process.
II. SCOPE AND LEGAL REQUIREMENTS
City of Round Rock, Texas
Investment Policy
June 6, 1990
Will Rogers
SCOPE
This investment policy for the City of Round Rock, Texas, applies to the
financial assets of all funds, including the following City funds:
1) General Fund
2) Special Revenue Funds
3) Capital Project Funds
4) Enterprise Funds
a) Water and Wastewater Fund
b) Oversize Fund
c) Repair and Replacement Fund
5) Debt Service Funds
6) Special Assessment Funds
7) Trust and Agency Funds
8) any new funds created by the governing body and any funds managed
by the City of Round Rock, Texas, as trustee or agency, unless
exempted by law.
STATE STATUTE
All funds covered by this investment policy shall be invested in accordance
with the Public Funds Investment Act of 1987 as amended from time to time
(Article 842a - 2).
DELEGATION OF AUTHORITY
The Director of Finance is designated as the Investment Officer of the City.
of Round Rock, Texas, and is responsible for investment decisions and
activities. The Director of Finance may designate deputies to assist with
the management of the investment portfolio.
The Investment Officer shall be responsible for all transactions and
compliance with the internal controls, insure all safekeeping, custodial,
and collateral duties consistent with this investment policy, as well as
establishing and maintaining written procedures for cash management. The
Investment Officer shall maintain timely, accurate and systematic records of
all securities, maturities and earnings.
Bonding of all Finance staff with signatory authority is required and such
bonding requirements will also apply to those individuals authorized to
place, purchase or sell investment instruments. Bonding will protect the
public against possible embezzlement and malfeasance.
PRUDENCE
Investments shall be made with judgment and care under circumstances
then prevailing that 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 standard of prudence shall be applied to the context of managing an
overall portfolio.
III. PURPOSE AND OBJECTIVES
OVERALL INVESTMENT STRATEGY
The Investment Officer will develop and maintain a cash flow analysis for
all public funds for the purpose of determining the availability of
investable funds.
The Investment Officer shall invest the funds with the object of ensuring
safety, liquidity and yield.
1) With foremost emphasis on safety of principal (i.e. avoidance of
capital losses), the Investment Officer will ensure that
preservation of capital and protection of principal in the
overall portfolio is maintained through the erosion of market
value or security defaults. Speculation is prohibited.
2) Liquidity will be maintained to ensure that there are constantly
available funds to meet obligated requirements as they become
due. Maturity schedules shall be timed according to anticipated
needs.
3) Yield or return on investment will be optimized on investments
within the constraints of safety and liquidity. The investment
IV. AUTHORITIES
portfolio shall be designed to attain a market - average rate of
return throughout budgetary and economic cycles, taking
into account investment risk constraints and the cash flow
characteristics of the portfolio.
LIMITATION OF LIABILITY
The Investment Officer and designated deputies acting in accordance with
written procedures and exercising due diligence shall be relieved of
personal responsibility for an individual security's performance provided
that deviations from expectations are reported in a timely fashion and
appropriate action is taken to control adverse developments.
V. AUTHORIZED INVESTMENT SECURITIES
ACCEPTABLE SECURITIES
The following is a list of authorized and legal investment options:
1. U.S. Treasury or its agency obligations.
2. Insured Certificates of Deposits issued by institutions
domiciled in this state and insured by the Federal Deposit
Insurance Corporation (FDIC) or the Federal Savings & Loan
Insurance Corporation (FSLIC).
3. Collateralized Certificates of Deposits issued by institutions
domiciled in this state and which are fully collateralized with
U. S. Treasury or its agency issues, pledged and held with the
City's custodial agent or unconditional letters of credit from
the Federal Home Loan Bank or the Federal Reserve Bank.
4. Repurchase Agreements collateralized by D.S. Treasury or its
agency obligations which are at least equal to 102% of
the market value of the City's investment, pledged and held
with the City's custodial agent.
Repurchase
government
accordance
documented
agreements can only be
entered into with primary
dealers or banks domiciled in the State of Texas
with State
law.
Repurchase
in
agreements must be
by a written agreement, the Public Securities
Agreement (PSA) Master Repurchase Agreement.
5. Interlocal government investment pools as established under State
Law.
6. Any other securities which are approved or may be added by the
State of Texas as authorized investments for municipal
governments and as further approved by the Investment
City Attorney.
RELATIONSHIPS WITH FINANCIAL INSTITUTIONS
Depositories shall be selected through the banking
process, which shall include a' formal request for
Officer and
services procurement
proposals every two
(2) years. In selecting the depository, the creditworthiness of
institutions shall be considered and the Investment Officer shall conduct a
comprehensive review of prospective depositories' credit characteristics and
financial history.
The City depository contract and other financial relationships for banking
services are outside the scope of this investment policy.
CUSTODIAL SAFEKEEPING
To protect against potential fraud and embezzlement, investments shall be
secured through third party custody and safekeeping procedures. All
security purchases and trades conducted for the City of Round Rock will be
settled and protected by the City's third party custodial agent, unless
prevailing practices or economic circumstances dictate otherwise.
The City shall contract with a third party custodial agent for the
safekeeping of securities either owned by the City as part of its investment
portfolio or held as collateral to secure deposits or repurchase agreements.
The use of the Delivery versus Payment (DVP) procedure will be continually
used for collateralized security transactions, purchases and sales. The City
shall authorize the release of its funds only after its safekeeping agent
has received securities or receipt for same into the City's safekeeping
account.
Safekeeping procedures shall be reviewed annually by the independent
'auditor.
VI. INVESTMENT STRATEGY
The City shall maintain a comprehensive cash management program which
includes collection of accounts receivable on a timely basis, vendor payment
in accordance with invoice terms and State law, and prudent investments of
its available cash. Effective cash management is recognized as essential to
good fiscal management. An active cash management and investment policy
will be pursued by the City in order to maximize investment interest as a
viable and material revenue source to all operating and capital project
funds. Earnings from investments will be used in a manner that will best
serve the interest of the City of Round Rock.
To maximize the effective investment of assets, this policy allows for the
pooling of funds into one account for investment purposes with income
earned allocated to each of the various funds participating at the time of
purchase.
The Investment Officer will develop and maintain cash flow analysis for all
public funds for the purpose of determining the availability of investment
funds.
Assets of the City shall be invested in instruments whose maturities do not
exceed two years from the time of purchase.
VII. SELECTION AND COMPLIANCE OF BROKER /DEALERS
QUALIFIED INSTITUTIONS
1) Security Dealers and Dealer Banks which are the approved and
designated Dealers of the Federal Reserve Bank of New York- -
"Primary Dealers ".
2) Security Dealers, Dealer Banks and Savings and Loans which are
not designated as "Primary Dealers" but which are approved
individually by the City Council.
DomIc1L6D W
3) Banks and Savings and Loan Associations the State of
Texas. (for the placement of insured certificates of deposits)
VIII. CONTRACTUAL TRADING REOUIREMENTS
WIRE TRANSFER AUTHORIZATIONS '
Whenever possible, the City will use pre- formatted wire transfers to
restrict the transfer of funds to pre - authorized accounts only. Dual
authorization forms shall be in continual use for all wire transfers. Call-
backs, (i.e. bank confirmation from a second employee), for all wires will
be required by the City.
COLLATERALIZATION REQUIREMENT
The City, in accordance with State Statute, requires all City funds held by
financial institutions above the FDIC or FSLIC 'insurable limit to be
collateralized with securities pledged to the City. Those
securities shall have a market value equaling at least the market value of
City funds held and shall be placed with a third party custodial agent.
Collateral may be substituted only with the written authorization of the
Investment Officer.
IX. PORTFOLIO EVALUATION AND REPORTING
REPORTING
As required by law, the Investment Officer shall submit a written
investment report at least annually to the City Council detailing the
investment position as of the date of the report. The investment report will
summarize market conditions, economic development and anticipated investment
conditions. The report will also summarize the investment strategies
employed in the most recent period and will describe the portfolio in terms
of investment securities, maturities, risk characteristics and other
features. The report shall explain the total investment return and compare
that return to budgetary expectations.
The Investment Officer will routinely monitor the contents of the investment
portfolio, the available markets and the relative values of competing
instruments and will adjust the investment portfolio accordingly.
1 0
INTERNAL CONTROLS
The Investment Officer shall establish a system of internal controls, which
shall be documented in writing and reviewed periodically by the City
auditors. The controls shall be designed to prevent and control losses of
public funds arising from fraud, employee error, misrepresentation by third
parties, unanticipated changes in financial markets or imprudent actions.
Dual controls of all investment activities will consistently be maintained
by the Investment Officer.
ETHICS
The Investment Officer and delegated deputies 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.
X. CONCLUSION
The Investment Officer and his deputies will adhere to this investment
policy in all investment decisions for the City of Round Rock, Texas.
The City will review the Investment policy every year because of the dynamic
nature of the financial markets. If changes are necessary because of
changes to the financial markets and State law, the City Council will
consider the changes recommended by the Investment Officer.
EZ20082
11
DATE: June 12, 1990
SUBJECT: CITY COUNCIL MEETING, June 14, 1990
ITEM: 25B. Consider a resolution
policy for all city funds.
adopting
an investment
In the past the City's investment program has consisted entirely of
placing available funds in bank Certificates of Deposit. The compe-
titiveness of the local banking industry provided the City with above
market interest rates as well as a very convenient investment process.
However, significant changes in the banking industry have reduced
the capability of local banks to provide a single source for the City's
investment portfolio. As a result of this change the City's $25
million investment portfolio will be diversified as the requirements
of safety, liquidity and yield dictate.
To facilitate this new investment procedure and provide utmost pro-
tection to the City's funds the attached investment policy is recom-
mended for adoption. The investment policy is required by law and
provides the City an objective set of criteria for accepting invest-
ment institutions and investment instruments.
PLEASE SEE ITEM 6C FOR A COPY OF THE INVESTMENT POLICY