(A) Policy. It is the policy of the city to invest public funds in a manner that will provide the highest investment return with the maximum security while meeting the daily cash flow demands of the city and conforming to all state and local statutes governing the investment of public funds.
(B) Scope. This policy shall include all funds governed by the City Council, and its procedure is applicable to the Director of Finance in making investment decisions and managing the cash flow of funds.
(C) 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 to be used by investment officials shall be the “prudent person” standard in the context of managing an overall portfolio.
(D) Objectives.
(1) The primary objectives, in order of priority, shall be:
(a) Legality. Conformance with federal, state and other legal requirements;
(b) Risk avoidance. The primary objective shall be to preserve investment principal;
(c) Safety. Preservation of capital and protection of investment principal;
(d) Liquidity. Maintenance of sufficient liquidity to meet operating requirements;
(e) Yield. Attainment of market rates of return; and
(f) Support of local financial institutions. The city is committed to support its local financial institutions and will, whenever practical, place its investments with these local businesses. The concept is that retention of funds in the city could fund economic growth and enhance the tax base.
(2) The portfolio shall be reviewed periodically as to its effectiveness in meeting the city’s needs for safety, liquidity, rate of return, diversification and its general performance.
(E) Delegation of authority. Management and administrative responsibility for the investment program is hereby delegated to the Director of Finance, who, under the direction of the Mayor and the City Council, shall establish written procedures for the operation of the investment program.
(F) Ethics and conflicts of interest. Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with the proper execution and management of the investment program, or that could impair their ability to make impartial decisions.
(G) Authorized financial dealers and institutions. The Director of Finance will maintain a list of financial institutions authorized to provide investment services. Additionally, a list will also be maintained of approved security broker/dealers selected by credit worthiness.
(H) Authorized and suitable investments. Investments may be made in any type of security allowed by law as set out in the Illinois Compiled Statutes regarding the investment of public funds. All investments shall be made that reflect the cash flow needs of the fund type being invested.
(I) Collateralization. Funds on deposit (checking accounts, certificates of deposit and the like) in excess of FDIC limits must be secured by some form of collateral, witnessed by a written agreement, and held at an independent third-party institution in the name of the city.
(J) Safekeeping and custody. All security transactions, including collateral for repurchase agreements, entered into by the city shall be conducted on a delivery-versus-payment (DVP) basis. Securities will be held by an independent third-party custodian designated by the Director of Finance and evidenced by safekeeping receipts and a written custodial agreement.
(K) Diversification. The city shall diversify its investments to the best of its ability based on the type of funds invested and the cash flow needs of those funds. Diversification can be by the type of investment, number of institutions invested in, and the length of maturity. The city shall diversify its investments to avoid incurring unreasonable risks regarding specific security types and/or individual financial institutions.
(L) Maximum maturities.
(1) To the extent possible, the city shall attempt to match its investments with anticipated cash flow requirements. Unless matched to specific cash flow, the city will not directly invest in securities maturing more than two years from the date of purchase.
(2) Reserve funds may be invested in securities exceeding two years if the maturity of investments is made to coincide as nearly as practicable with the expected use of the funds.
(M) Internal control. The Director of Finance is responsible for establishing and maintaining an internal control structure designed to insure that the assets of the city are protected from loss, theft or misuse. The internal control structure shall be designed to provide reasonable assurance that these objectives are met. The internal controls shall address the following points:
(1) Control of collusion;
(2) Separation of transaction authority from accounting;
(3) Custodial safekeeping; and
(4) Written confirmation of telephone transactions for investments and wire transfers.
(N) Performance standards. The investment portfolio will be managed in accordance with the parameters specified within this policy. The portfolio should obtain a comparable rate of return during a market/economic environment of stable interest rates. Portfolio performance should be compared to benchmarks with similar maturity, liquidity and credit quality as the portfolio.
(O) Reporting. The Director of Finance shall prepare an investment report on a monthly basis. This report will be provided to the Mayor and the City Council and shall be available upon request. The report should be in a format suitable for review by the general public.
(P) Quarterly statement. A statement of the market value of the portfolio shall be issued to the Mayor and the City Council quarterly.
(Q) Adoption of policy; annual review. This investment policy shall be adopted by the Mayor and City Council. This policy shall be reviewed on an annual basis by the Director of Finance and any modifications made hereto shall be approved by the Mayor and City Council. Any investment purchased before the date of the implementation of this policy that is not within the parameters of this policy will be held to maturity or to the time that it is deemed appropriate to sell the investment.
(1999 Code, § 228.13) (Ord. 00-01, passed 1-11-2000; Ord. 01-06, passed 4-10-2001)