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HomeMy WebLinkAbout1996-144 - Establishment of a Cash Management and Investment PolicyBILL NO. 96-144 ORDINANCE NO. 96- ~~7 AN ORDINANCE ESTABLISHING A CASH MANAGEMENT AND INVESTMENT POLICY FOR THE HANDLING OF MUNICIPAL FUNDS FOR THE CITY OF RIVERSIDE, MISSOURI. WHEREAS, the Board of Aldermen desires to diligently and efficiently manage the financial resources of the City in the most beneficial manner possible; and WHEREAS, the Board of Aldermen also desires to increase the revenues of the City by investing available cash when it is not needed for current obligations; and WHEREAS, the goals of the policy are to develop a written program of cash management, to increase the availability of case by improving the control on receipts and disbursements, and to increase the interest earnings of the City by better understanding the flow of cash and careful scheduling of cash disbursements. NOW, THEREFORE, BE IT RESOLVED by the Board of Aldermen of the City of Riverside, Missouri, as follows: CITY OF RIVERSIDE, MISSOURI CASH MANAGEMENT AND INVESTMENT POLICY SECTION 1. There is hereby established a cash management and investment policy as follows: OBJECTIVE - PURPOSE To obtain maximum investment income through prudent and conservative investments of the City's temporarily idle funds while maintaining sufficient fund balances to meet approved expenditures. The City will utilize those financing alternatives and techniques which produce positive financial advantages and security for its citizens. GENERAL POLICY OF INVESTMENT LIMITATIONS It is the policy of the City to only invest in those instruments eligible to be purchased by a City of the Fourth Class organized pursuant to the laws of the State of Missouri. The City, in general, should limit purchases to the following: A. Certificates of Deposit fully insured by the Federal Deposit Insurance Corporation or fully secured by the pledge of U.S. Treasury Securities or U.S. Government Guaranteed Securities. B. U.S. Treasury Securities or U.S. Government Guaranteed Securities by direct purchase or pursuant to a Repurchase Agreement with an FDIC insured financial institution. C. Agencies of the U.S. Government 1. Federal Farm Credit Bank Federal National Mortgage Association D. Mortgaged Backed Securities 1. Government National Mortgage Association 2. Federal National Mortgage Association 3. Federal Home Loan Mortgage Corporation PROCEDURE Basic idle fund investment planning will be accomplished through expenditure/revenue projections and plans prepared by the City Administrator with assistance from the City Finance Officer. City funds which are not currently needed to pay commitments will only be invested in the following types of investments: 1. Daily receipts shall be deposited into an interest bearing money market account at the highest interest rate available. Transfers shall be made as needed to pay checks which are presented on the City's account. 2. Certificates of Deposit for time periods up to one year, issued by a qualified bank or savings and loan association. A limitation of no more than thirty (30) percent of the City Funds to be invested in these instruments. 3. United States Treasury Bills for time periods up to one year. A limitation of no more than fifty (50) percent of the City funds be invested in any one Treasury Bill. 4. United States Government Agency Securities and instrumentalities of Government Sponsored Corporations. A limitation that no more than fifty (50) percent of the City funds be invested in any one agency at any given time. 5. United States Treasury Notes and Bonds for time periods to be determined at time of purchase, based on current available economic data. 6. Guaranteed Repurchase Agreements of United States Government securities, subject to the institution agreeing to purchase them back on specific date, time periods to be determined at time of purchase, based on current available economic data. LIQUIDITY POLICY It shall be the policy of the City to plan the investment of City funds in light of its budgetary needs so that the maturities will match the City's spending projection as closely as reasonably possible. Keeping this in mind, the City recognizes that maturity limits are appropriate. Consequently, the City shall limit its investments to a maximum maturity of one (1) year. COLLATERALIZATION - SAFEKEEPING All funds or investments purchased by the City from a qualified bank, saving and loan association or securities dealer on behalf the City must be held in third party safekeeping by a bank designated as primary agent or in the Federal Reserve Bank. The Trust Department of the bank designated as primary agent will be considered to be third party for the purposes of safekeeping of securities purchased from that bank. Securities may not be held in street name, they must be in the City's name. CERTIFICATES OF DEPOSIT safekeeping and collateralization shall be handled differently due to the FIRREA 1989 Act which is part of the FDIC Act 12 USC 1823 (e) and resulting from the decision of 1962 F. 2d 780 (8th Cir. 1992) court case. The following procedure will be followed: 1. The agreement shall be in writing and adopted by the institution as the approved agreement for deposit of public funds. 2. The agreement shall be approved by the Board of Directors of the Depository Institution or its loan committee, which approval shall be reflected in the minutes of said Board or committee. 3. The agreement shall be continuously, from the time of its execution, an official record of the Depository Institution. 4. A duplicate original of each agreement and appropriate documentation reflecting the City's interest in all such collateral shall be provided the City on timely basis. 5. The collateral shall be held by third party banking institution in the City's name or at the Federal Reserve Bank in the City's name. The above may seem restrictive, however, protection of the City's funds is of the highest priority. APPROVED SECURITY DEALERS The City of Riverside may buy or sell securities only from or to security dealers approved by the action of the Board of Aldermen. The City will use only reputable dealers when buying or selling securities. The City may select security dealers pursuant to the procedures listed uner COMPETETIVE SELECTION OF INVESTMENT INSTRUMENTS. LIMITATION ON INVESTMENT ACTIVITY All investments of City funds shall be on a cash basis only. No securities shall be purchased or sold on margin nor shall the City purchase or sell options on securities nor shall the City invest in any derivative security products. MECHANICS OF INVESTMENTS The City Administrator and Finance Officer shall be responsible for investment decisions and activities in order to expedite purchases and to take advantage of daily financial market changes. The City Finance Officer shall provide a monthly list of investments showing Name, Amount, Yield and Maturity date to the City Administrator who will provide this to the Board of Aldermen. PRUDENCE The standard of prudence to be applied shall be the "prudent investor" rule, which states, "Investments shall be made with judgement 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 probably safety of their capital as well as the probably income to the derived." The prudent investor rule shall be applied to the context of managing the overall portfolio. Investing personnel, acting in accordance with written procedures and exercising due diligence, shall not be held personally responsible for a specific security's credit risk of market price changes, provided that these deviations are reported and acted upon as soon as knowledge of the deviations are discovered. MATURITY SCHEDULING Investment maturities for operating funds shall be scheduled to coincide with projected cash flow needs, taking into account large routine expenditures as well as sizeable blocks of anticipated revenue. COMPETITIVE SELECTION OF INVESTMENT INSTRUMENTS A competitive rate request will be conducted with a minimum of three institutions before any investment. If a specific maturity date is required, rate quotes will be requested that meet that maturity requirement. If no specific maturity is required, a market trend (yield curve) analysis may be conducted to determine the most advantageous investment. The City will accept the bid which provides the highest rate of return within the maturity required. RECORDS - REPORT Records of the quotes received showing from whom received and the quote shall be kept by the Finance Officer. A summary report on current investments will also be maintained by the Finance Officer and City Administrator. The summary report will be provided to the City Administrator on a monthly basis for management and control purposes. The Board of Aldermen will be provided the summary report on a quarterly basis unless otherwise requested. SECTION 2. That the herein cash management and investment policy shall be in full force and effect from and after the date of passage of this resolution. SECTION 3. All other policies and resolutions of cash management and investment heretofore adopted by the City of Riverside are hereby revoked and rescinded and are without further effect. PASSED THIS 17TH DAY OF DECEMBER, 199 , _G/ yor Ed Rule C/ ATTEST: ~/ , Grace Kemerling, City Clerk APPROVED THIS /~~ ~~~H DAY OF DECE ER, 1996. ~> ayor E Rule