4.003 County Investment Policies Mr. G. Murphy Davis, Chairman, - - PDF document
Texas Counties 96 TH A NNUAL C OUNTY J UDGES AND C OMMISSIONERS A SSOCIATION OF at Their Best! T EXAS C ONFERENCE 96th Annual County Judges and Commissioners Association of Texas Conference Wednesday, Oct. 10, 2018 October 8-11, 2018 The
96th Annual County Judges and Commissioners Association of Texas Conference
October 8-11, 2018 The Woodlands Waterway Marriott Hotel & Convention Center
96TH ANNUAL COUNTY JUDGES AND COMMISSIONERS ASSOCIATION OF TEXAS CONFERENCE Wednesday, Oct. 10, 2018 1 – 1:50 p.m. Montgomery Ballroom
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County Investment Policies Murphy Davis, Sr. CFA 10/10/2018
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Investment Policy‐must be written to be compliant with the
Review and approve policies and strategies annually Investment officer must be designated Avoid conflicts of interest if possible Note: Selection of third party entities for investments does
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009. Authorized Investments: Obligations of, or Guaranteed by
Government Entities
The following are not Authorized Investments:
Interest only Mortgage‐Backed Collateral Securities Principal only Mortgage‐Backed Collateral Securities Collateralized Mortgage Obligation with a stated maturity greater than 10
years
Inverse Floater (indexed securities that adjust opposite to changes in a market
index) Collateralized Mortgage Obligations
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COUNTY INVESTMENT POLICY OBJECTIVES:
The objectives of the County (the County) Investment Policy shall be: To set forth methods, means, and goals of financial investment and debt management operation for the County. To insure the financial security and optimum liquidity of the County's funds at all times. To assist the County in achieving the maximum total investment of the County's funds in a prudent manner at all times. To assist the County in achieving the maximum interest yield on the County's funds at all times through methods allowed under Federal and State Law and in accordance with the current County's Bank Depository Contract.
STANDARD OF CARE:
The County's 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 and optimum liquidity required for operations in the County. Safety shall be the first priority, adequate liquidity the second, and yield, the third priority. Individual investments shall be made in a manner consistent with this Policy.
INVESTMENT STRATEGY:
The County maintains portfolios which utilize the following investment strategy considerations designed to address the unique characteristics of the fund groups represented in the portfolios.
General Operating Funds
INVESTMENT POLICY PAGE 2 The County's investment strategy for General Operating Funds shall be made to ensure that anticipated cash flows are matched with adequate investment liquidity.
Bond Operating Funds
The County shall utilize an investment policy for Bond Operating Funds to generate a dependable revenue stream for the appropriate debt service funds consistent with the County's Investment Policy and state law.
Debt Service Funds
The County shall utilize as the primary objective for the investment of Debt Service Funds adequate liquidity to cover the debt service obligation of the County on required payment dates. Investments shall not have a stated final maturity date which exceeds the appropriate debt service payment date.
Special and Trust Funds
The County shall invest Special and Trust Funds in accordance with state law and the County's Investment Policy to the maximum ability that such investments may benefit the County directly, or utilize said funds in a method that such funds may benefit the County indirectly.
County Clerk’s Trust Funds
County Clerk Trust funds are received by court order from either Commissioners Court, County Courts at Law, or County Courts. These funds must be deposited in the County depository and then invested according to the court orders. A court order is required from the County Courts and County Courts at Law prior to disbursement of the funds.
District Clerk Trust Funds
District Clerk Trust funds are received by court order from the District Courts. These funds must be deposited in the County depository and then invested according to the court orders. A court order is required from the District Courts prior to the disbursement of the funds.
General Strategy
INVESTMENT POLICY PAGE 3 The County's investment portfolio shall consist of a variety of securities which may include any or all of the authorized investments listed in Authorized Investments of this Policy. It shall be the general practice of the County to utilize an investment strategy based on Standard of Care, of this Policy, which also defines yield objectives, as well as the Public Funds Investment Act, formerly Sub-chapter A of Chapter 2256
purchased securities to the stated maturity date and to have invested in such a manner to insure both the safety and liquidity of such transaction. In the event, however, the need arises to sell securities before the stated maturity date, said securities shall be analyzed to determine the appropriate time to liquidate said securities and minimize any potential real or book value loss to the County.
RESPONSIBILITIES:
The County Treasurer is the Investment Officer (IO) and is responsible for establishing operating policies which will ensure that investments are maintained in a proper and prudent maturity distribution, represent sound extensions of credit and are appropriate investments with regard to regulatory and legal
responsibility for management of the investment portfolio rests with the (IO). It is expected that the IO may wish to delegate one or more of the specific investment
Each month, the Commissioners Court shall review securities purchases and sales of the previous period to determine their adherence to the Investment Policy and applicable laws and regulations. Investment strategies should be formulated with special regard to the County’s liquidity needs, cash flow requirements, the projected economic environment, and policy guidelines as established by the Investment Policy. Summary information must be provided to the Commissioners Court on the composition, size, quality, maturity, yield, and current market valuations for the Investment Portfolio. Implementation of this policy is the responsibility of the Investment Officer.
INVESTMENT POLICY PAGE 4
AUTHORIZED INVESTMENTS:
In accordance with authorizing federal and state laws, the County's Depository Contract, and appropriate approved collateral provisions, the County may utilize the following types of investments for the County's funds: The IO shall be required to diversify maturities. The IO, to the extent possible, will attempt to match investments with anticipated cash flow requirements. Matching maturities with cash flow dates will reduce the need to sell securities prior to maturity, thus reducing market risk. Unless matched to specific requirements, the IO may not invest more than 30% of the portfolio for a period greater than two (2) years.
U.S. Treasury Securities
U.S. Treasury securities are direct obligations of the United States Government. U.S. Treasury obligations are the highest quality and are the most liquid and marketable of investment securities. Investments in this category will include Treasury bills, Treasury notes, and Treasury bonds. U.S. Treasury bills are sold
instruments with initial maturities from two to ten years for notes and ten to thirty years for bonds. The average life of the U.S. Treasury securities portfolio will not exceed 2.5 years and no individual security will exceed 5 years in maturity. Treasuries may comprise up to 100% of the Investment Portfolio.
Federal Agencies
After U.S. Treasury securities, Federal agency securities are generally regarded as the next highest quality investment suitable for the portfolio. Federal agency obligations are usually acceptable for pledging and other collateral requirements. Agencies generally offer a rate of return slightly higher than direct U.S. Treasury securities. The spread difference in yield will be effected by the general level of interest rate, markets, and economic conditions at any given time. Consideration should be given to the spread relationship existing when portfolio investment decisions are made. Securities included in this category are debt issuance by the Federal Farm Credit System (Farm Credits), Federal Home Loan Bank (FHLB), the Federal National Mortgage Association (FNMA), the Student Loan Marketing Association (SLMA),
INVESTMENT POLICY PAGE 5 the Federal Home Loan Mortgage Corporation (FHLMC or “Freddie Mac”), the Government National Mortgage Association (GNMA or “Ginnie Mae”), and Small Business Administration (SBA). The average life of the U.S. agency section of the portfolio will not exceed 2.5 years and no individual security will exceed 5 years in maturity. U.S. agencies may comprise up to 100% of the Investment Portfolio
Municipal Bonds
Any direct obligations of the State of Texas or its agencies and instrumentalities. The IO shall consider prudent diversification of investment holdings per obligor. Compliance with all legal and regulatory guidelines shall be adhered to in the purchase and holding of securities. Taxable municipal obligation purchases may be made but are subject to the same credit, maturity, and geographic distribution requirements that may be applicable as dictated by the Investment Policy. Credit information will be maintained sufficient for management of the County to exercise an informed judgment in determining whether the securities should be purchased and to enable regulators to determine that each security purchased meets all statutory and regulatory requirements. Credit information sufficient for the Commissioners Court to comply with all statutory and regulatory requirements relating to the approval of each investment shall be provided. The County shall retain all records relating to transactions in its investment portfolio as may be required by statute or regulation. Additional consideration will be given to the increased yield spread of taxable municipals over all other taxable investment alternatives. Various political subdivisions of state and local government issue debt through municipal securities generally under two categories: general obligation (G.O.) and revenue bonds. G.O. bonds are issued for a variety of public financing needs. They are generally regarded as the most credit worthy of municipal securities as they are backed by the taxing authority of the issuing governmental entity. Revenue bonds are issued to finance specific projects (i.e. water and/or sewer revenues) and depend on the revenue or fee generated from the projects for repayment of principal and interest. Bonds with a minimum Moody’s Investor’s Service of A or Standard & Poor’s Service rating of A shall be considered as eligible portfolio investments. An exception may be made for local, well-known credit issues where the cost of
INVESTMENT POLICY PAGE 6 Geographical distribution of municipals is an effective method of diversifying the County's overall credit risk and maximizing income potential. The County will consider the following credit information on general obligation municipals to be purchased: 1) Relationship of debt burden to property valuation. 2) Reasonableness of debt burden on a per capita basis. 3) Sinking fund provisions. 4) Historical trends of debt. 5) Future debt service requirements. 6) Assessed valuation, including basis of assessment. 7) Relationship of tax burden to property valuation. 8) Tax collection record. 9) Recent trends in tax rates. 10) Economic background. 11) Debt paying ability. 12) Population trends. The County will consider the following credit information on revenue municipals to be purchased: 1) The number of times gross revenues covers debt service (coverage). 2) The segregation of revenue funds from general funds. 3) The flow of revenues to specific reserve accounts. 4) Special covenants that may limit default remedies. The average maturity of this section of the portfolio will be no greater than two years and comprise no more than 25% of the Investment Portfolio.
Certificates of Deposit and Share Certificates
A certificate of deposit or share certificate is an authorized investment if the certificate is issued by a depository institution that has its main office or a branch
Corporation or its successor or the National Credit Union Share Insurance Fund
mortgage-backed securities directly issued by, a federal agency
instrumentality that have a market value of not less than the principal amount of the certificates, but excluding those mortgage-backed securities of the nature described by the Act; or secured in any other manner and amount provided by law for deposits of the investing entity. Total collateralized Certificates of Deposits may comprise 100% of the Investment Portfolio. The average maturity
INVESTMENT POLICY PAGE 7 In addition to the authority to invest funds in certificates of deposit under Subsection (a), an investment in certificates of deposit made in accordance with the following conditions is an authorized investment under this subchapter: (1) the funds are invested by an investing entity through a depository institution that has its main office or a branch office in this state and that is selected by the investing entity; (2) the depository institution selected by the investing entity under Subdivision (1) arranges for the deposit of the funds in certificates of deposit in
account of the investing entity; (3) the full amount of the principal and accrued interest of each of the certificates of deposit is insured by the United States or an instrumentality of the United States; (4) the depository institution selected by the investing entity under Subdivision (1) acts as custodian for the investing entity with respect to the certificates of deposit issued for the account of the investing entity; and (5) at the same time that the funds are deposited and the certificates of deposit are issued for the account of the investing entity, the depository institution selected by the investing entity under Subdivision (1) receives an amount of deposits from customers of other federally insured depository institutions, wherever located, that is equal to or greater than the amount of the funds invested by the investing entity through the depository institution selected under Subdivision (1). (per Public Funds Investment Act Section 2256.010)
Repurchase Agreements
Fully collateralized repurchase agreements authorized under the Act, if the repurchase agreement has a defined termination date; is secured by obligations described by the Act; and requires the securities being purchased by the entity to be pledged to the entity, held in the entity’s name, and deposited at the time the investment is made with a third party selected and approved by the entity; and is placed through a primary government securities dealer, as defined by the Federal Reserve, or a financial institution doing business in the State of Texas. “Repurchase agreement” means a simultaneous agreement to buy, hold for a specified time, and sell back at a future date, obligations described by the Act at a market value at the time the funds are dispersed of not less than 102% of the principal amount of the funds dispersed. The term of the repurchase agreements may not exceed 180 days.
INVESTMENT POLICY PAGE 8 Not withstanding any other law, the term of any reverse security repurchase agreement may not exceed 90 days after the date the reverse security repurchase agreement is delivered. Money received by an entity under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments, but the term of authorized investments acquired must mature not later than the expiration date stated in the reverse security repurchase agreement. Total investment in repurchase and reverse repurchase agreements may not exceed 25% of the Investment Portfolio.
Bankers’ Acceptances
Bankers’ Acceptances are an authorized investment under the Act, which has a stated maturity of 270 days or fewer from the date of its issuance; will be, in accordance with its terms, liquidated in full at maturity; is eligible for collateral for borrowing from a Federal Reserve Bank; is accepted by a bank organized and existing under the laws of the United States or any state, if the short-term
largest subsidiary, are rated not less than A-1+ or P-1 or an equivalent rating of at least one nationally recognized credit rating agency. Such individual transactions shall not exceed 5% of the total County's Investment Portfolio, and all such endorsing banks shall come only from a list of entities who are constantly monitored as to financial solvency. Total Bankers’ Acceptances may not exceed 15% of the Investment Portfolio.
Commercial Paper
Commercial Paper with a stated maturity of 270 days or fewer from the date of issuance; which is rated not less than A-1+ or P-1 or an equivalent rating by at least two nationally recognized credit rating agencies or one nationally recognized credit rating agency and is fully secured by an irrevocable letter of credit issued by a bank organized and existing under the laws of the United States or any state. Such transactions shall not exceed 15% of the total County's Investment Portfolio with no more than 5% in any one name, and all such providers of letters of credit shall come only from a list of entities who are constantly monitored as to financial solvency.
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Mutual Funds
No-load money market mutual funds regulated by the Securities and Exchange Commission which has a dollar-weighted average stated maturity of 90 days or fewer and includes in its investment objectives the maintenance of a stable net asset value of $1 for each share. A no-load mutual fund is an authorized investment under this Subchapter if the mutual fund is registered with the Securities and Exchange Commission; has an average weighted maturity of less than two years; is invested exclusively in obligations approved by the Act; is continuously rated as to investment quality by at least one nationally recognized investment firm of not less than AAA or its equivalent; and conforms to the requirements set forth in the Act, relating to the eligibility of investment pools to receive and invest funds of investing entities. The County is not authorized to invest in the aggregate more than 80% of its monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service, in money market mutual funds as set forth herein above, or mutual funds as herein set forth above, either separately or collectively; invest in the aggregate more than 15% of its monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service, in mutual funds as herein above described; invest any portion of bond proceeds, reserves and funds held for debt service, in mutual funds herein described above; or invest its funds or funds under its control, including bond proceeds and reserves and other funds held for debt service, in any one mutual fund as herein set out above in an amount that exceeds 10% of the total assets of the mutual fund. Additionally, the County may invest in a public investment pool meeting the requirements of the Act if the Commissioners Court authorizes the investment in the particular pool. Investment in this type of pool may not exceed 70% of the Investment Portfolio.
SAFEKEEPING AND COLLATERALIZATION:
The laws of the State and prudent treasury management require that all purchased securities be bought on a delivery versus payment basis and be held in safekeeping by either the County, an independent third party financial institution, or the County's designated depository. All safekeeping arrangements shall be designated by the IO and an agreement of the terms executed in writing. The third party custodian shall be required to issued safekeeping receipts to the County listing each specific security, rate, description, maturity, cusip number, and other pertinent information. Each safekeeping receipt will be clearly marked that the security is held for the County
Collateralization shall be required on two types of investments:
INVESTMENT POLICY PAGE 10 a) certificates of deposits over the FDIC insurance coverage. b) repurchase agreements. In order to anticipate market changes and provide a level of additional security for all funds, the collateralization level required will be 102% of the market value
EVALUATION AND REPORTING:
The IO shall submit no less than quarterly reports to the Commissioners Court containing sufficient information to permit an informed outside reader to evaluate the investment program. At a minimum, this report shall contain: Beginning and ending market value of the portfolio by market sector and total portfolio, Beginning and ending carrying (Book) value of the portfolio by market sector and total portfolio, Transactions which change market and book value, detail reporting on each asset (book, market, and maturity dates at a minimum), Overall current yield of the portfolio, Overall weighted average maturity of the portfolio, and maximum maturities in the portfolio. The report will be prepared jointly by all involved in the investment activity and be signed by the staff involved.
PRUDENCE:
The standard of prudence to be used in the investment function shall be the “prudent person” standard and shall be applied in the context of managing the
“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 expected income to be derived.”
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SECURITIES DEALERS/TRANSACTIONS:
The County has employed Sentry Management, Inc. (SMI) to provide professional investment advice for the County's investment portfolio and other related investment areas such as asset/liability and interest rate risk analysis. SMI is registered with the Securities and Exchange Commission, the Texas State Securities Board and the Municipal Securities Rulemaking Board as an investment adviser. SMI may be employed on a set fee basis only, and may not act as a dealer. The IO and Commissioners Court recognize the importance of receiving
however it is explicitly understood the Commissioners Court, through the IO, does not delegate responsibility for the portfolio to SMI. All acquisitions and/or sales of securities will be directly at the discretion of the County. SMI places dealers in competition on purchases and sales and maintains records
precludes limiting any individual dealer’s securities’ volume with the County. Setting maximum volume quotas could force the County to purchase or sell securities at less than the best price and would not be in the best interest of the County. Further, SMI may not execute a transaction for the County without specific authorization from the County. The County may have transactions with any Federal Reserve Reporting Government Dealer (Primary Dealer). The Federal Reserve requires all Primary Dealers to maintain large capital and be financially solvent. In addition to Primary Dealers, the County may have security transactions with the dealers listed on Exhibit A. Current financial information is maintained by SMI on the dealers listed on Exhibit A and is made available to the County. Additionally, the County will maintain information on each dealer listed. The County may purchase or sell any of the approved investments listed in the Investment Policy from or to any of the approved securities dealers. It shall be the Commissioners Court and the IO’s responsibility to review the dealers’ financial condition. Considerations of each dealer will be the dealer’s capital and financial strength and general reputation with other financial institutions and investment dealers. Whenever available and possible, the County will consider information from state or federal securities regulators and securities industry self-regulatory
such as the National Association of Securities Dealers, concerning any formal enforcement actions against the dealer, its affiliates or associated personnel.
INVESTMENT POLICY PAGE 12 Every dealer with whom the County transacts business will be provided a copy of this Investment Policy to assure that they are familiar with the goals and
return a signed copy of the Certification Form certifying that the policy has been received and reviewed. To further insulate the County from dealer exposure, the County will permit delivery-versus-payment settlement only on security transactions. Further, all securities will be held in safekeeping at the County's primary depository bank or another third party bank. All personal securities transactions by the IO with the County's approved securities dealers are prohibited unless specific Commissioners Court approval is received prior to the transaction. Periodic review of personal transactions with approved securities dealers will be performed by the Commissioners Court. All of the County's records are available for unannounced, on-site inspection at SMI offices by any representative of the County.
EXCEPTIONS TO POLICY:
It is anticipated that, in the course of business, it may be prudent to make investment decisions which may differ from current operating policy when it is impossible for the Commissioners Court to convene. In the event of this
Commissioners Court may act for the entire Commissioners Court. All actions taken in the absence of all the Commissioners Court shall be reported in full to the next regularly scheduled Commissioners Court Meeting. A permanent file of all exceptions will be maintained by the IO. Exhibit B lists Prohibited Investments which the County will not undertake. This policy is intended to be flexible to deal with rapidly changing conditions in the County's economic environment and the global bond and money markets. Therefore, this policy can be amended by a majority vote of the Commissioners
Commissioners Court meeting. This policy shall be reviewed by the Commissioners Court at least annually.
IO’s INTEREST ONLY STRIPPED SECURITIES WITH UNDERLYING MORTGAGE-BACKED SECURITY COLLATERAL. PO’s PRINCIPAL ONLY STRIPPED SECURITIES WITH UNDERLYING MORTGAGE-BACKED SECURITY COLLATERAL. CMO’s COLLATERALIZED MORTGAGE OBLIGATIONS WITH A MATURITY GREATER THAN TEN (10) YEARS. CMO’s COLLATERALIZED MORTGAGE OBLIGATIONS WHICH HAVE AN INVERSE FLOATING RATE (COUPON).
Public Funds Investment Act Compliance Checklist (Texas Counties)
The following questionnaire should be used as a limited guide to evaluating the requirements of the Public Funds Investment Act (Chapter 2256, Government Code). This checklist does not imply that an Investment Policy or Investment Program is in compliance with the PFIA. Each entity should review its own investment program with its attorneys and auditors to determine its compliance with the Act. [Section 2256.005(a)(b)] - Policy items Does entity have a written investment policy approved by your governing body? Present Not Present Do the policies specifically identify a list of public funds in its custody (See CAFR) which it has authority to invest individually or combined? Section 2256.002(3)(B) and 2256.002(9) Present Not Present Does the policy list the authorized investments for the investment of the entity’s funds? Present Not Present Does the policy state the maximum stated maturity of any individual investment and, for pooled fund groups, the maximum dollar-weighted average maturity? Present Not Present Does the policy include procedures to monitor the market price or rating changes of investments and the requirement that all transactions, excluding investment pools and mutual funds, be settled on a delivery versus payment basis? Present Not Present [Section 2256.005(c) and Section 2256.015(c)(2)] – Bidding Has the entity adopted a requirement that bids for certificates of Deposit (statutory MAY) must be solicited? (bidding optional unless policy indicates SHALL) Present Not Present Does the entity prior to purchasing bonds receive bids from at least three separate providers (SHALL) with no material financial interest in the bonds from which proceeds were received Present Not Present [Section 2256.005(d)] - Strategy Items Has the entity adopted a written investment strategy for each fund or group of funds under its control? Present Not Present Does the strategy describe the objectives for the fund using the priorities of suitability, preservation and safety of principal, liquidity, marketability, diversification, and yield in that order? Present Not Present [Section 2256.005(e)] - Policy & Strategy Review Does the entity review the investment policy and investment strategy at least annually? Present Not Present Does the entity adopt a written instrument stating that it has reviewed the policy and strategy? Present Not Present [Section 2256.005(f-i)] - Investment Officers Has the entity designated one or more officers or employees as Investment Officers? Present Not Present Does the entity require its Investment Officer to disclose personal business relationships with a business organization offering to sell investments to the organization and have forms been completed? Present Not Present Does the entity require its Investment Officer to disclose whether he/she is related within the second degree by affinity or consanguinity to an individual seeking to sell an investment to the entity? Present Not Present [Section 2256.005(k-l)] - External Business Policy Certification Has a written copy of the investment policy been presented to every business
investment pools, banks, and investment management firms? Present Not Present Has a written instrument from each business organization been received acknowledging that the investment policy has been received and reviewed and that procedures and controls have been implemented to preclude unauthorized transactions? Present Not Present Has a qualified representative as defined in Section 2256.002(10) of each business
Present Not Present [Section 2256.005(m-n)] – Compliance Audit Is a compliance audit of management controls on investments and adherence to the entity’s established investment policies performed in conjunction with the annual financial audit? Present Not Present
Public Funds Investment Act Compliance Checklist (Texas Counties)
[Section 2256.008] - Investment Officer Training Have the applicable training requirements been met by the Investment Officer and each employee involved in the investment process? Present Not Present Has each investment officer attended a training session at least once every two years and received training from an independent source approved by the governing body? Present Not Present Has the investment officer presented a report to the governing body on changes to the Public Funds Investment Act, if any, within six months after the end of each regular legislative session? Present Not Present Has the treasurer, the chief financial officer, and the investment officer attended at least
taking office or assuming duties? Present Not Present Has each official attended a training session at least once every two years and received at least 10 hours of instruction from an independent source approved by the governing body or a designated investment committee? Present Not Present Has an independent source of investment training been approved by the governing body
Present Not Present Investment Type Restrictions/Qualifications Obligations Issued, Guaranteed, or Insured by the U.S. or its Agencies and Instrumentalities, including letters of credit [Section 2256.009(a)(1)(4)] None Obligations Issued, Guaranteed, or Insured by the State of Texas or its Agencies and Instrumentalities [Section 2256.009(a)(2)(4)] None Collateralized Mortgage Obligations [Section 2256.009(a)(3) and (b)(1-4)]* 10 yr. or less stated final maturity date Cannot be either an Interest-Only or Principal-Only CMO Cannot be an inverse floater Obligations of States (other than Texas), Agencies, Counties, Cities and Other Political Subdivisions [Section 2256.009(a)(5)] Rated not less than A or its equivalent by at least one nationally recognized investment rating firm State of Israel Bonds [Section 2256.009(a)(6)] None Certificates of Deposit (Section 2256.010) Issued by a depository institution that has its main office
insured by FDIC or National Credit Union Share Insurance Fund and secured as described in the PFIA or
Issued by one or more federally insured depository institutions, wherever located, provided that the funds are invested through a depository institution that has its main
deposit is insured by the U.S. or an instrumentality of the U.S. The depository institution through which the entity’s funds are invested shall receive an amount of deposits from customers of other federally insured depository institutions that is equal to or greater than the amount of funds invested. Repurchase Agreements (Section 2256.011) Must be fully collateralized as described in the PFIA Must have a defined termination date
Public Funds Investment Act Compliance Checklist (Texas Counties)
Repurchase Agreements (Section 2256.011)-Continued Securities purchased must be pledged to the entity, held in the entity’s name, and deposited with the entity or with a third party selected and approved by the entity Placed through a primary dealer or a financial institution doing business in Texas Reverse agreements must not exceed 90 days; securities held as collateral must not mature later than the agreement’s expiration date Securities Lending Program (Section 2256.0115) Must be collateralized at not less than 100%, including accrued income Loans may be terminated at any time Loans must be secured as described in the PFIA Securities held as collateral must be pledged to the entity, held in the entity’s name and deposited with the entity or with a third party selected and approved by the entity Placed through a primary dealer or a financial institution doing business in Texas Securities lending agreement may not have a term greater than one year Bankers’ Acceptances (Section 2256.012) 270 day or less stated maturity from date of issuance Accepted by a bank rated not less than A-1 or P-1 or an equivalent rating by at least one nationally recognized rating agency Commercial Paper (Section 2256.013) 270 day or less stated maturity from date of issuance Rated not less than A-1 or P-1 or an equivalent by at least two nationally recognized rating agencies, or; Rated not less than A-1 or P-1 or an equivalent by one nationally recognized rating agency plus fully secured by an irrevocable letter of credit issued by a domestic bank No-Load Money Market Mutual Fund [Section 2256.014 (a) and (c)] Registered with and regulated by the Securities and Exchange Commission Provide a prospectus and other information required by the Securities Exchange Act of 1934 or the Investment Company Act of 1940 Must have a dollar-weighted average stated maturity of 90 days or less Must include in its objectives maintenance of a stable net asset value of $1 per share Investing entity may not own more than 10% of the fund’s total assets Mutual Fund [Section2256.014 (b) and (c)] Registered with the Securities and Exchange Commission Must have an average weighted maturity of less than two years Can only invest in obligations approved by the Act Rated not less than AAA or its equivalent by at least one nationally recognized investment rating firm
Public Funds Investment Act Compliance Checklist (Texas Counties)
Mutual Fund [Section2256.014 (b) and (c)]-Continued Comply with information and reporting requirements for investment pools as described in the Act Amount limited to 15% of investing entity’s monthly average fund balance, excluding bond proceeds, reserves, and debt service funds. Ineligible for investment of bond proceeds, reserves, and debt service funds Investing entity may not own more than 10% of the fund’s total assets Guaranteed Investment Contracts (Section 2256.015) Authorized for bond proceeds investment only Must have a defined termination date Must be secured by U.S. Government direct or agency
the bond proceeds Security must be pledged to the entity and deposited with the entity or a third party Term must be limited to five years from the date of bond issuance, excluding reserves and debt service funds Must comply with terms and conditions concerning eligibility as an authorized investment as specified in Section 2256.015(c) of the Act Must receive bids from at least three separate providers with no material financial interest in the bonds from which proceeds were received as specified in Section 2256.015(c)(2) of the Act Investment Pools [Section 2256.016] Governing body must authorize investment in pool Can only invest in obligations approved by the Act Provide an offering circular containing information required by the Act Provide investment transaction confirmations Provide a monthly report containing information required by the Act Pool created to function as a money market mutual fund must mark its portfolio to market daily and stabilize at a $1 net asset value. Must have an advisory board as specified by the Act Rated not less than AAA or an equivalent rating by at least one nationally recognized rating service. [Section 2256.023] - Investment Reports Is the investment report prepared jointly by all investment officer(s), investment employees and submitted to the governing body at least quarterly? Present Not Present Do the reports contain the information required by the Act? Present Not Present Does the report describe in detail the investment position of the entity on the date of the report? Present Not Present Does the report include a summary statement of each pooled fund group that states the beginning market value, additions and changes, ending market value, and accrued interest? Present Not Present Does the report include book and market value of each separately invested asset at the beginning and end of the reporting period by the type of asset and fund type invested? Present Not Present Does the report include the maturity date of each invested asset? Present Not Present Does the report reflect the account or fund in the local government for which each investment was acquired? Present Not Present
Public Funds Investment Act Compliance Checklist (Texas Counties)
[Section 2256.023] - Investment Reports-Continued Does the report include a statement on the compliance of the investment portfolio of the local government as it relates to the investment policy strategy and PFIA? Present Not Present Do all investment officers and all employee(s) involved in the investment process sign the reports? Present Not Present It the report presented to the governing body within a reasonable time after the end of the period? Present Not Present Do the reports include a statement of compliance of the investment portfolio with the Act and the investment strategy? Present Not Present Does an independent auditor review the reports at least annually if your investments include obligations other than money market mutual funds, investment pools, or depository bank investment accounts and is it reported to the governing body by the auditor? Present Not Present [Section 2256.003(b)] - Investment Management Firm If the entity has contracted with an investment management firm to provide for the investment and management of its public funds or other funds under its control, is the investment management firm registered either under the Investment Advisers Act of 1940 or with the State Securities Board? Present Not Present Is the contract with the investment management firm limited to a maximum term of two years with renewal or extension subject to approval of the governing body by order,
Present Not Present [Section 2256.025] - Qualified Brokers List Has the governing body or designated investment committee adopted a list of qualified brokers? Present Not Present Does the governing body or designated investment committee review, revise, and approve the list at least annually? Present Not Present