I. Purpose
This investment policy is intended to enhance the quality of decision-making and affirm the District's commitment to the fiduciary care of public funds.
This investment policy describes the parameters for investing District funds and identifies the investment objectives, preferences, and tolerance for risk, constrains on the investment portfolio, and how the investment program is to be managed and monitored. This policy is intended to serve as a communication tool for the State of Colorado, the Board of Education, the public, rating agencies, bondholders, and any other stakeholders on the District's investment guidelines and priorities.
It is the express intent of the District to prudently invest public funds in order to honor the public trust, protect public money, to assure continued operation of school services, and to maximize return on investments.
II. Scope
The policy shall apply to the investment of all funds of the District over which the District exercises financial control.
III. Objectives
Funds shall be invested in accordance with the following objectives and in a manner designed to accomplish the following objectives, which are stated in order of priority:
1. Legal Compliance. The first objective of this policy is to ensure that all funds are deposited and invested in accordance with all applicable statutes, regulations, and applicable resolutions enacted by the Board of Education.
2. Safety. Safety of principal is the foremost objective of the investment program. Investment of the district shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. To attain this objective, diversification may be required to reduce overall portfolio risk while attaining market rates of return.
3. Liquidity. The District's investment portfolio will remain sufficiently liquid to enable the district to meet all operating requirements which might be reasonably anticipated. The particular operating needs of each District fund shall be considered in determining investment maturities.
4. Yield. The District's investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the district;'s investment risk constraints and the cash flow characteristics of the portfolio.
IV. 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 of the investment program, or which could impair their ability to make impartial investment decisions. Employees involved in the investment process shall disclose to the Chief Financial Officer any material financial interests in financial institutions that conduct business with the district, and they shall further disclose any large personal/investment positions that could be related to the performance of the District's portfolio. Employees involved in the investment process shall subordinate their personal investment transactions to those of the district, particularly with regard to the time of purchases and sales.
V. Authority
The Board of Education designates the Chief Financial Officer as the presumed designee of the Superintendent, which individual shall be responsible for all investment decisions and case management activities consistent with the terms of the policy. No person may engage in an investment transaction except as provided under the terms of this policy. The buying, selling and trading of District investments is specifically limited to (1) employees designated by the Chief Financial Officer and (2) investment services firms authorized by contract and approved by the Board of Education.
VI. Prudence
The Chief Financial Officer and persons authorized by the Chief Financial Officer to invest on the District's behalf shall be guided by the "Prudent Investor Rule" [C.R.S. § 15-1.1-101 et seq.], applicable state law regarding investment of public funds (including, without limitation, C.R.S. § 24-75-901 et seq.) and this policy. Moreover, the Chief Financial Officer and persons authorized by the Chief Financial Officer to invest on the District's behalf shall be guided by the applicable edition of the "Financial Policies and Procedures Handbook" published by the Colorado State Board of Education.
Authorized persons who act within the guidelines of this policy and exercise due diligence shall not be held personally responsible for assuring sufficient liquidity of investments to meet daily operational needs, or for losses due to financial entity failures where respective funds and securities are held, or for an individual security credit risk or market price changes.
Deviations from expectations shall be reported in a timely fashion to the Superintendent and appropriate action shall be taken to control adverse developments.
The District's overall investment program shall be designed and managed with a degree of professionalism that is worthy of the public trust. The District recognizes that no investment is totally without risk and that its investments are a matter of public record.
VII. Authorized Financial Dealers and Institutions
The Fiscal Services department will maintain a list of financial institutions authorized to provide investment services. No District funds shall be deposited in any financial institution except as authorized by the Chief Financial Officer.
Any broker/dealer providing investment services under this policy must:
Securities that at the time of purchase which met or exceeded minimum ratings that subsequent to initial purchase were downgraded below the minimum ratings described herein may be sold or held at the District's discretion. The portfolio shall be brought back into compliance with policy guidelines as soon as is practicable. All securities and transactions shall be executed using generally accepted procedures and modern processes.
Authorized securities including diversification requirements under this policy are as follows:
1. U.S. Treasury Obligations: Any security with maturities not exceeding five years from the date of trade settlement issued by, fully guaranteed by, or for which the full credit of the United States Treasury is pledged for payment including, but not limited to, Treasury bills, Treasury notes, Treasury bonds and Treasury STRIPS. One hundred percent (100%) of the portfolio may be invested in U.S. Treasury Obligations.
2. Federal Agency and Instrumentality Securities: Any security with maturities not exceeding five years from the date of trade settlement issued by, fully guaranteed by, or for which the full credit of the following is pledged for payment: the federal farm credit bank, the federal land bank, a federal home loan bank, the federal home loan mortgage corporation, the federal national mortgage association, the export-import bank, the Tennessee Valley Authority, the government national mortgage association, the world bank, or an entity or organization that is not listed in this paragraph but that is created by, or the creation of which is authorized by, legislation enacted by the United States Congress and that is subject to control by the federal government that is at least as extensive as that which governs an entity or organization listed in this paragraph. Subordinated debt may not be purchased. The aggregate investment in Federal Agency and Instrumentality Securities shall not exceed one hundred percent (100%) of the portfolio, and no single issuer shall exceed 35% of the portfolio.
3. Corporate Bonds. Corporate bonds with a maturity not exceeding three years from the date of trade settlement and issued by any corporation or bank organized and operating within the United States. Such securities must be dollar-denominated and rated at least AA- or the equivalent at the time of purchase by at least two NRSROs. No more than 50% of the portfolio may be invested in corporate debt, and no more than 5% may be invested in the obligations of any one issuer.
4. Municipal Bonds:
a. General Obligation Bonds and Revenue Obligation Bonds of state or local governments with maturities not exceeding five years from the date of trade settlement. Such obligations of the State of Colorado (or any political subdivision, institution, department, agency, instrumentality, or authority of the State of Colorado) shall be rated at least A or the equivalent by at least two NRSROs. Such obligations of any other governmental entity shall be rated at least AA or the equivalent by at least two NRSROs.
b. Certificates of participation or other security evidencing rights in payments to be made by a school district under a lease, lease-purchase agreement, or similar agreement if the security at the time of purchase is rated at least A or the equivalent by at least two (2) NRSROs.
The aggregate investment in Municipal Bonds shall not exceed 50% of the portfolio, with no more than 5% of the portfolio invested with a single issuer.
5. Non-Negotiable Time Certificates of Deposit ("Time CD"): A Time CD with a maturity not exceeding one year in any FDIC insured state or national bank located in Colorado that is an eligible public depository as defined in C.R.S. § 11-10.5-103. Certificates of deposit that exceed FDIC insurance limits shall be collateralized as required by the Public Deposit Protection Act. No more than 5% of the portfolio may be invested in Time CDs, and no single issuer shall be exceed 2% of the portfolio.
6. Negotiable Certificates of Deposit ("Negotiable CD"). A Negotiable CD with a maturity not exceeding three years from the date of trade settlement and issued by any corporation or bank organized and operating within the United States. Negotiable CDs must be dollar-denominated and must, at the time of purchase, have either: (a) a long-term rating of at least AA- or the equivalent by at least two NRSROs; or (b) short-term ratings of at least A-1 or the equivalent by two NRSROs. No more than 50% of the portfolio may be invested in Negotiable CDs, and no single issuer shall exceed 5% of the portfolio.
7. Commercial Paper. Commercial paper with an original maturity of 270 days or less from the date of trade settlement, issued by any corporation or bank organized and operating within the United States, and rated at least A-1 or the equivalent at the time of purchase by at least two NRSROs. No more than 50% of the portfolio shall be invested in commercial paper at the time of purchase, and no more than 5% may be invested in the obligations of any one issuer.
8. Local Government Investment Pools ("LGIPs"): LGIPs organized pursuant to the provisions of C.R.S. § 24-75-701 et seq. One hundred percent (100%) of the portfolio may be invested in LGIPs. The LGIP portfolios must be rated either AAAm or AAAf by any NRSRO.
9. Money Market Mutual Funds. Money market mutual funds registered under the Investment Company Act of 1940 that: (a) are "no load" (no commission or fee shall be charged on purchases or sales or shares); (b) seek a constant net asset value of $1.00 per share; (c) have a maximum stated maturity and weighted average maturity in accordance with Rule 2a-7 of the Investment Company Act of 1940; and (d) have a rating of AAAm or the equivalent by each NRSRO that rates that fund. One hundred percent (100%) of the portfolio may be invested in money market mutual funds.
10. Repurchase Agreements: Repurchase agreements with a maturity date of five years or less collateralized by the U.S. Treasury obligations or Federal Agency and Instrumentality securities as outlined herein. For the purpose of this section, the term collateral shall mean purchased securities under the terms of the Master Repurchase Agreement as modified by the District's Master Repurchase Agreement Annex. The purchased securities shall have a minimum market value including accrued interest of 102% of the dollar value of the transaction. Collateral shall be held in the District's third-party custodian bank as safekeeping agent, and the market value of the collateral securities shall be marked-to-the market daily.
Repurchase Agreements shall be entered into only with dealers that have executed a Master Purchase Agreement with the District and are recognized as Primary Dealers by the Federal Reserve Bank of New York or with firms that have a Primary Dealer within their holding company structure. Approved Repurchase Agreement counterparties shall have a short-term credit rating of at least A-1 or the equivalent and a long-term credit rating of at least A or the equivalent by each NRSRO that rates the firm. No more than 100% of the portfolio may be invested in repurchase agreements.
11. Banker's Acceptances: Baker's acceptances with maturities not exceeding 180 days from the date of trade settlement and issued by an FDIC insured state or national bank with combined capital and surplus of at least $250 million. Baker's Acceptances shall, at the time of purchase, be rated at least A-1 or the equivalent by at least two NRSROs. No more than 50% of the portfolio may be invested in Banker's Acceptances, and no more than 5% may be invested in the obligations of any one issuer.
IX. Safekeeping and Custody
The Chief Financial Officer shall approve one or more banks to provide safekeeping and custodial services for the District. A District approved safekeeping agreement shall be executed with each custodian bank. The District's safekeeping banks shall qualify as eligible public depositories as defined in C.R.S. § 11-10.5-103 and be a Federal Reserve member financial institution.
The purchase and sale of securities and repurchase agreement transactions shall be settled on a delivery versus payment basis. All investment securities purchased by the District shall be delivered by book entry and will be held in third party safekeeping by the District approved custodian bank, its correspondent bank, or the Depository Trust Company ("DTC"). The District's custodian will be required to furnish the District with a monthly report of safekeeping activity, including a list of month-end holdings.
X. Maximum Credit Exposure
The portfolio will be limited to an aggregate exposure of 50% for the following investment types: Corporate Bonds, Banker's Acceptances, Commercial Paper, and Negotiable Certificates of Deposit.
XI. Maximum Maturities and Liquidity Requirements
The portfolio shall remain sufficiently liquid to meet all cash requirements that may be reasonably anticipated. To the extent possible, investments shall be matched with anticipated cash flows and known future liabilities. Investments shall be limited to maturities not exceeding five (5) years from the date of trade settlement.
XII. Investment Agreements
The District may enter into investment contracts pursuant to C.R.S. § 24-75-601 et seq.
XIII. Competitive Transactions
All investment transactions shall be executed competitively with authorized brokers/dealers. At least three (3) brokers/dealers shall be contacted for each transaction and their bid or offering prices shall be recorded. If the District is offered a security for which there is no other readily available competitive offering, quotations for comparable or alternative securities will be documented.
XIV. Reporting
The Board of Education shall receive quarterly investment performance reports.
XV. Summary of Authorized Securities
Complete investment requirements for each authorized security can be found in the Authorized Securities section of this policy. However, a table summarizing those authorized securities follows. The investment requirements including diversification requirements contained in the table below are those published by S&P.
* The aggregate exposure to municipal bonds may not exceed 50% of the portfolio, and no more than 5% may be invested with a single issuer.
XVI. Performance Benchmarks and Reporting
The portfolio shall be designed to attain a market rate of return throughout budgetary and economic cycles, taking into account prevailing market conditions, risk constraints for eligible securities, and cash flow requirements. The performance shall be compared to a total return index that meets the duration target of the portfolio.
XVII. Procedure Review
The Chief Financial Officer shall annually review this policy and all actions contemplated herein, and as warranted, modifications to be made hereto for approval by resolution by the Board of Education.
Adoption Date: October 11, 1993
Last Revised: December 11, 2017
- Be recognized as a Primary Dealer by the Federal Reserve Bank of New York or maintain an office within the Denver metropolitan area; and
- Qualify under Securities and Exchange Commission Rule 15c3-1 (Uniform Net Capital Rule); and
- Provide written certification of having read and understood the District's investment policies and procedures.
|
Long Term Ratings |
||
| S&P | Moody's | Fitch |
| AAA | Aaa | AAA |
| AA+ | Aa1 | AA+ |
| AA | Aa2 | AA |
| AA- | Aa3 | AA- |
| A+ | A1 | A+ |
| A | A2 | A |
| A- | A3 | A- |
|
Short Term Ratings |
||
| S&P | Moody's | Fitch |
| A-1+ | P-1 | F1+ |
| A-1 | P-1 | F1 |
|
Pool/Fund Ratings |
||
| S&P | Moody's | Fitch |
| AAAm | Aaa-mf | AAAmmf |
| AAAf | Aaa-bf | AAAf |
| Security Type | Maximum Portfolio % | Maximum Issuer % | Maturity Restrictions | Rating Requirements |
| U.S Treasuries | 100% | 100% | 5 years | N/A |
| Federal Agencies and Instrumentalities | 100% | 35% | 5 years | AA- by 2 NRSROs |
| Corporate Bonds | 50% | 5% | 3 years | AA- by 2 NRSROs |
| Municipal Bonds of a Colorado Issuer | 50%* | 5%* | 5 years | A by 2 NRSROs |
| Municipal Bonds of a Non-Colorado Issuer | 50%* | 5%* | 5 years | AA by 2 NRSROs |
| Municipal Bonds, School District Certificates of Participation | 50%* | 5%* | 5 years | A by 2 NRSROs |
| Time CDs | 5% | 2% | 1 year | N/A |
| Negotiable CDs | 50% | 5% | 3 years | AA- or A-1 by 2 NRSROs |
| Commercial Paper | 50% | 5% | 3 years | AA- or A-1 by 2 NRSROs |
| LGIPs | 100% | 100% | N/A | AAAm or AAAf by any NRSRO |
| Money Market Mutual Funds | 100% | 100% | N/A | AAAm by any NRSRO |
| Repurchase Agreements | 100% | 100% | 5 years | N/A |
| Banker's Acceptances | 50% | 5% | 180 days | A-1 by 2 NRSROs |
| Cross References: | DG - Banking Services Deposit of Funds, Authorized Signatures and Check Writing |