3-1-1: SCOPE:

This investment policy applies to the investment activities of all funds of the village, except for the police pension fund which is subject to the written order of the board of trustees of the police pension fund. In the absence of such orders, monies received and/or securities held by the village on behalf of these funds shall be administered in accordance with the provisions of this policy. The village policies for cash management are based upon the realization that there is a time value to money. Cash management procedures shall include the following:

   A.   Receipts: All monies due the village shall be collected as promptly as possible. Monies that are received shall be deposited in an approved financial institution no later than the next business day after receipt by the village to comply with the public funds deposit act 1 , which mandates prompt investment of funds.

   B.   Disbursements: Any disbursement to suppliers of goods and/or services or to employees for salaries and wages shall be contingent upon available budgeted funds. Disbursements shall be made in accordance with the village purchasing policy.

   C.   Cash Forecast: At least annually, a cash forecast shall be prepared using expected revenue sources and items of expenditure to project cash requirements over the fiscal year of the village. The forecast shall be updated from time to time to identify the probable investable balances that will be available. (Ord. 1166, 3-15-1999)

 

Notes

1	1. 30 ILCS 225/0.01.

3-1-2: PURPOSE AND OBJECTIVES:

The purpose of the investment policy of the village is to establish cash management and investment guidelines for village officials responsible for the stewardship of public funds. The primary objectives, in priority order, of investment activities shall be safety, liquidity, and yield:

   A.   Safety: Safety of principal is the foremost objective of the investment program of the village. Except for the pension funds, for which short term market fluctuation is tolerable, each investment transaction shall seek to first ensure that capital losses are avoided, whether they be from securities default or erosion of market value. Market speculation is not appropriate in the investment of funds. Normally a "buy and hold" approach to investment will be used. Investments are intended to be purchased so they will mature when funds are needed. The objective will be to mitigate credit risk and interest rate risk.

      1.   Credit Risk: The village will minimize credit risk, the risk of loss due to the failure of the security issuer or backer, by:

         a.   Limiting investments to the safest types of securities.

         b.   Prequalifying the financial institutions, broker/dealers, intermediaries, and advisors with which the village will do business.

         c.   Diversifying the investment portfolio so that potential losses on individual securities will be minimized.

      2.   Interest Rate Risk: The village will minimize the risk that the market value of securities in the portfolio will fall due to changes in general interest rates by:

         a.   Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity.

         b.   Investing operating funds primarily in shorter term securities, money market mutual funds, or similar investment pools.

   B.   Liquidity: The village investment portfolio shall remain sufficiently liquid to enable the village to meet all operating requirements that may be reasonably anticipated in any village fund. This is accomplished by structuring the portfolio so that securities mature concurrent with cash needs to meet anticipated demands (static liquidity). Furthermore, since all possible cash demands cannot be anticipated, the portfolio should consist largely of securities with active secondary or resale markets (dynamic liquidity). A portion of the portfolio also may be placed in local government investment pools which offer same day liquidity for short term funds.

   C.   Yield: The investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs. Return of investments is of secondary importance compared to the safety and liquidity objectives described in this section. The core of investments are limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed. Securities shall not be sold prior to maturity, with the following exceptions:

      1.   A security with declining credit may be sold early to minimize loss of principal.

      2.   A security swap would improve the quality, yield, or target duration in the portfolio.

      3.   Liquidity needs of the portfolio require that the security be sold. (Ord. 1166, 3-15-1999)

3-1-3: STANDARDS OF CARE:

   A.   Prudence:

      1.   The standard of prudence to be used by investment officials shall be the "prudent person" standard and shall be applied in the context of managing an overall portfolio. Investment officers acting in accordance with written procedures and this investment policy and exercising due diligence shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectations are reported in a timely fashion, and the liquidity and the sale of securities are carried out in accordance with the terms of this policy.

      2.   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 probable income to be derived.

   B.   Ethics And Conflicts Of Interest:

      1.   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. Employees and investment officials shall disclose any material interests in financial institutions with which they conduct business.

      2.   They shall further disclose any personal financial/investment positions that could be related to the performance of the investment portfolio. Employees and officers shall refrain from undertaking personal investment transactions with the same individual with whom business is conducted on behalf of the village.

   C.   Delegation Of Authority:

      1.   Authority to manage the investment program is granted to the treasurer pursuant to the provisions of title 1, chapter 6, article B of this code. Responsibility for the operation of the investment program is hereby delegated to the treasurer, who shall act in accordance with established written procedures and internal controls for the operation of the investment program consistent with this investment policy. Procedures should include references to: safekeeping, delivery versus payment, investment accounting, repurchase agreements, wire transfer agreements, and collateral/depository agreements. No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the treasurer. The treasurer shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials. The internal controls shall be reviewed by an independent certified public accountant in conjunction with the annual examination of the financial statements of the village. The controls shall be designed to prevent losses of public funds arising from fraud, employee error, misrepresentation by third parties, unanticipated changes in financial markets, or impudent actions by employees and officers of the village.

      2.   One of the required elements of the system of internal controls shall be the timely reconciliation of all village bank accounts. Bank reconciliations shall be performed on a monthly basis and shall be completed no later than thirty (30) days after the end of the monthly cycle. (Ord. 1166, 3-15-1999)

3-1-4: SAFEKEEPING AND CUSTODY:

   A.   The village will not maintain funds in any financial institution that is not a member of the FDIC or SAIF system. Furthermore, the village will not maintain funds in any financial institution not willing or capable of posting required collateral for funds in excess of the FDIC or SAIF insurable limits.

   B.   The village will not select as depository a financial institution in which the village funds on deposit will exceed fifty percent (50%) of the institution's capital stock and surplus. Priority for investing local funds may be given to banking institutions which exhibit compliance with the community reinvestment act such as:

      1.   Assist the village in achieving neighborhood redevelopment objectives.

      2.   Actively market lending programs in older, lower income neighborhoods.

      3.   Develop programs which better meet credit needs of specified neighborhoods.

      4.   Assist the village in developing programs which promote reinvestment and revitalization of specified neighborhoods (e.g., risk lending pool). (Ord. 1166, 3-15-1999)

3-1-5: SUITABLE AND AUTHORIZED INVESTMENTS:

   A.   Types Of Investments:

      1.   The village may invest in any type of security allowed by law as set out in the public funds investment act of the state of Illinois (the "investment act") 1 . A summary of allowable securities is as follows:

         a.   Bonds, notes, certificates of indebtedness, treasury bills, or other securities, which are guaranteed by the full faith and credit of the United States Of America.

         b.   Interest bearing savings accounts, interest bearing certificates of deposit or interest bearing time deposits or any other investments constituting direct obligations of any bank as defined by the Illinois banking act and only those banks with insurance managed and regulated by the federal deposit insurance corporation (FDIC).

         c.   Shares or other forms of securities legally issued by savings and loan associations incorporated under laws of the state of Illinois or any other state or under laws of the United States and only in those savings and loan associations insured by SAIF.

         d.   Short term obligations of corporations (commercial paper) organized in the United States with assets exceeding five hundred thousand dollars ($500,000.00) if:

            (1)   Such obligations are rated at the time of purchase at the highest classification established by at least two (2) standard rating services and which mature not later than one hundred eighty (180) days from the date of purchase; and

            (2)   No more than ten percent (10%) of village funds are invested in such obligations at any time; and

            (3)   Such purchases do not exceed ten percent (10%) of the corporation's outstanding obligations.

         e.   Short term discount obligations of federal agencies.

         f.   Illinois public treasurer's investment pool or other similar investments that are made within the parameters set by the Illinois investment of public funds act.

      2.   Investment in derivatives of the above instruments is prohibited.

   B.   Collateralization:

      1.   It is the policy of the village to require that funds on deposit with banks and savings and loans in excess of FDIC or SAIF insurance limits be secured by some form of collateral. The village will accept any of the following assets as collateral:

         a.   U.S. government securities.

         b.   Obligations of agencies of the United States of America, including: (i) the federal land banks, federal intermediate credit banks, banks for cooperative, federal farm credit banks, or any other entity authorized to issue debt obligations under the Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.) and Acts amendatory thereto; (ii) the federal home loan banks and the federal home loan mortgage corporation; and (iii) any other agency created by Act of Congress, as defined and permitted by paragraph (c) of Section 2 ‘’Authorized Investments” of the Illinois Public Funds Investment Act. 30 ILCS 235(c)(2).

         c.   Obligations of federal instrumentalities.

         d.   Obligations of the state of Illinois.

         e.   Obligations of the village.

      2.   The amount of collateral provided will be not less than one hundred five percent (105%) of the fair market value of the net amount of public funds secured. The ratio of fair market value of collateral to the amount of funds secured will be reviewed quarterly, and additional collateral will be held by the village or in safekeeping and evidenced by a safekeeping agreement. If collateral is held in safekeeping, it may be held by a third party or by an escrow agent of the pledging institution. Collateral agreements will preclude the release of the pledged assets without an authorized signature from the village. Substitution or exchange of securities held in safekeeping cannot be done without prior approval of the village.

(Ord. 1166, 3-15-1999; amd. Ord. 1786, 7-15-2024)

 

Notes

1	1. 30 ILCS 235/1 et seq.

3-1-6: INVESTMENT PARTNERS:

   A.   Diversification:

      1.   In order to reduce the risk of default, the investment portfolio of the village shall not exceed the following diversification limits: No financial institution shall hold more than twenty percent (20%) of the village investment portfolio, exclusive of U.S. treasury securities held in safekeeping, unless specifically authorized by the board of trustees or unless such investments are collateralized in accordance with the provisions of this chapter.

      2.   Commercial paper shall not exceed ten percent (10%) of the village investment portfolio.

      3.   The Illinois public treasurer's investment pool shall not exceed twenty five percent (25%) of the investment portfolio.

   B.   Maximum Maturities: To the extent possible, the village shall attempt to match its investments with anticipated cash flow requirements. Unless matched to a specific cash flow, the village will not directly invest in securities maturing more than five (5) years from the date of purchase or in accordance with state and local statutes and ordinances.

   C.   Investment In Readily Available Funds: Because of inherent difficulties in accurately forecasting cash flow requirements, a portion of the portfolio should be continuously invested in readily available funds such as LGIPs, money market funds, or overnight repurchase agreements to ensure that appropriate liquidity is maintained to meet ongoing obligations. (Ord. 1166, 3-15-1999)

3-1-7: EXEMPTIONS:

Any investment currently held that does not meet the guidelines of this policy shall be exempted from the requirements of this policy. At maturity or liquidation, such monies shall be reinvested only as provided by this policy. (Ord. 1166, 3-15-1999)