(A) Policy. It is the policy of the village through its Board of Trustees (hereinafter referred to as the Board) to invest public funds in a manner which will provide the highest investment return with the maximum security while meeting the daily cash flow demands of the entity and conforming to all state and local statutes governing the investment of public funds.
(B) Scope. This investment policy applies to all financial assets of the village. These funds are accounted for in the Village Annual Financial Report and include, if applicable:
(1) General fund;
(2) Special revenue funds;
(3) Capital project funds;
(4) Enterprise funds;
(5) Trust and agency funds;
(6) Retirement/pension funds; and
(7) Debt service funds.
(C) Prudence.
(1) 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.
(2) 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 the 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 appropriate action is taken to control adverse developments.
(D) Objective. The primary objectives, in priority order, of the village investment activities shall be:
(1) Safety. Safety of principal is the foremost objective of the investment program. Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. To attain the objective, diversification is required in order that potential losses on individual securities do not exceed the income generated from the remainder of the portfolio.
(2) Liquidity. The village's investment portfolio will remain sufficiently liquid to enable the village to meet all operating requirements which might be reasonably anticipated.
(3) Return on investments. The investment portfolio shall be designed with the objective of attaining a rate of return throughout budgetary and economic cycles, commensurate with the investment risk constraints and the cash flow characteristics of the portfolio.
(E) Delegation of authority. Authority to manage the village's investment program is derived from ordinances, statutes, and the like. Management responsibility for the investment program is hereby delegated to the Treasurer who shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials, with the advice and consent of the Village Board.
(F) Investment procedures. The Board shall establish written investment policy procedures for the operation of the investment consistent with this policy. The procedures should include reference to safekeeping, banking service contracts and collateral/depository agreements. Such procedures shall include explicit delegation of authority to persons responsible for investment transactions. No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the Board.
(G) Ethics and conflicts of interest. Officers and employees 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. Employees and investment officials shall disclose to the Village Board any material financial interests in financial institutions that conduct business within their jurisdiction, and they shall further disclose any large personal financial/investment positions that could be related to the performance of the village.
(H) Authorized financial dealers and institutions.
(1) The Treasurer will maintain a list of financial institutions authorized to provide investment services. In addition, a list will also be maintained of approved security brokers/dealers selected by credit worthiness who are authorized to provide investment services in the State of Illinois. These may include primary dealers or regional dealers that qualify under Securities and Exchange Commission Rule 15C3-1 (uniform net capital rule). No public deposit shall be made except in a qualified public depository as established by state laws. All financial institutions and brokers/dealers who desire to become qualified for investment transactions must supply the Treasurer with the following:
(a) Audited financial statements;
(b) Proof of National Association of Security Dealers certification;
(c) Trading resolution;
(d) Proof of state registration;
(e) Certification of having read entity's investment policy; and
(f) Depository contracts.
(2) An annual review of the financial condition and registrations of qualified bidders will be conducted by the Treasurer.
(3) A current audited financial statement is required to be on file for each financial institution and broker/dealer in which the village invests on an annual basis.
(I) Authorized and suitable investments.
(1) From the governing body perspective, special care must be taken to ensure that the list of instruments includes only those allowed by law and those that local investment managers are trained and competent to handle.
(2) The village is empowered by statutes to invest in the following types of securities:
(a) Bank certificates of deposit;
(b) State of Illinois Treasurer Pool (IPTIP);
(c) U.S. government and agencies securities; and
(d) Investment pools/mutual funds (retirement funds only).
(J) Investment pools/mutual funds.
(1) If governmental sponsored pools and/or mutual funds are included in authorized investments, a section on investigation and due diligence must be included.
(2) A thorough investigation of the pool/fund is required prior to investing and on a continual basis. There shall be a questionnaire developed which will answer the following general questions:
(a) A description of eligible investment securities and a written statement of investment policy and objectives.
(b) A description of interest calculations, how it is distributed, and how gains and losses are treated.
(c) A description of how the securities are safeguarded (including the settlement processes) and how often the securities are priced and the program audited.
(d) A description of who may invest in the program, how often, what size deposit and withdrawal are allowed.
(e) A schedule for receiving statements and portfolio listings.
(f) A fee schedule and when and how is it assessed.
(K) Collateralization.
(1) Collateralization will be required on two types of investments: certificates of deposit and repurchase agreements. In order to anticipate market changes and provide a level of security for all funds, the collateralization level will be 102% of market value of principal and accrued interest.
(2) The village chooses to limit collateral to the following:
(a) U.S. securities; and
(b) U. S. agencies securities and securities backed by the full faith and credit of the U.S.
(3) Collateral will always be held by an independent third party with whom the village has a current custodial agreement. A clearly marked evidence of ownership must be supplied to the village and retained.
(4) The right of collateral substitution is granted.
(L) Safekeeping and custody. All security transactions, entered into by the village shall be conducted on a delivery-versus-payment (DVP) basis. Securities will be held by a third party custodian designated by the Board and monthly statements and evidenced by safekeeping receipts.
(M) Diversification. The village will diversify its investments by security type. With the exception of U.S. Treasury securities and authorized pools, no more than 50% of the village total investment portfolio will be invested in a single security type.
(N) Maximum maturities.
(1) To the extent possible, the village will 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 the five years from the date of purchase. However, the village may collateralize its repurchase agreements using longer-dated investments not to exceed two years to maturity.
(2) Reserve funds may be invested in securities exceeding five years if the maturity of such investments is made to coincide as nearly as practicable with the expected use of the funds.
(O) Internal control. The Board shall establish an annual process of independent review by an external auditor. This review will provide internal control by assuring compliance with policies and procedures.
(P) Performance standards. The investment portfolio shall be designed with the objective of obtaining a rate of return throughout budgetary and economic cycles, commensurate with the investment risk constraints and the cash flow needs.
(Q) Market yield. The village's investment strategy is passive. Given this strategy, the basis used by the Treasurer to determine whether market yields are being achieved shall be the average Fed Funds rate.
(R) Reporting.
(1) The Treasurer shall provide the Board monthly Treasurer’s reports which provide a total amount of the current investment portfolio. If requested, the Treasurer will provide the Board copies of the detailed investments including rates of return and maturities.
(2) Schedules in the report may include the following:
(a) A listing of individual securities held at the end of the reporting period by authorized investment category;
(b) Average life and final maturity of all investments listed;
(c) Coupon, discount or earnings rate;
(d) Par value, amortized book value and market value; and/or
(e) Percentage of the portfolio represented by each investment category.
(Ord. passed 12-6-1999)