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Revenue from Investments: DFA

  • Fiscal Management: D
Revenue from Investments: DFA
Updated

The District investment policy closely follows Colorado Statutes. In order to effectively make use of the District’s cash resources, all funds available for investment purposes are pooled. All District funds allocated to a specific use, but temporarily not needed, shall be invested by the Executive Director of Finance in accordance with Colorado statutes and in a manner designed to accomplish the following objectives:

To insure the legality and safety of all District funds, the District will not enter into investment transactions which will expose itself to any undue credit risk or an issuer or a broker/dealer.

To insure that adequate funds are available at all times to promptly pay all of the District’s financial obligations. Transactions will be entered into taking into account the liquidity needs of the District and minimizing exposure to interest rate risks.

To earn the maximum return possible on the funds available for investment while complying with state statutes and Superintendent policy.

The income derived from any pooling is distributed to the various District funds as directed by the Superintendent. The following regulations are to be followed in implementing the cash management objectives of the Superintendent:

Eligible Depositories

  1. All state and national banks with offices in the State of Colorado which are insured by the Federal Depository Insurance Corporation (FDIC) and which are approved as eligible public fund depositories by the State of Colorado Banking Board.
  2. All state and federally chartered savings and loan associations with headquarters in the State of Colorado which are insured by the Federal Depository Insurance Corporation (FDIC) and which are approved as eligible public fund depositories by the State of Colorado Savings and Loan Commissioner.

Eligible Securities Broker/Dealers

  1. Securities dealers and banks which are designated as reporting dealers by the Federal Reserve Bank of New York (primary dealers), or regulated by the National Association of Securities Dealers, maintain a local office in Colorado, and are approved by the Superintendent.
  2. Broker Dealer divisions or subsidiaries of National and state banks, which has their principal offices in the State of Colorado, are regulated by either the Municipal Securities Rule Making Board (MSRB) or the National Association of Securities Dealers (NASD) and which are approved by the Superintendent.

Eligible Investments

  1. Obligations of the United States Government or its agencies, including but not limited to the following: (CRS 24-75-601)
    • United States Treasury Obligations, including Bills, Notes, Bonds, Strips and other zero coupon securities of appropriate maturity.
    • Federal Farm Credit Bank (FFCB), discount notes, notes and bonds.
    • Federal Home Loan Bank (FHLB), discount notes, notes and bonds.
    • Federal Home Loan Mortgage Corporation (FHLMC), discount notes, notes and bonds
    • Federal National Mortgage Association (FNMA), discount notes, notes and bonds
    • Student Loan Marketing Association (SLMA), discount notes, notes and bonds
    • Resolution Funding Corporation, Refcorp strips.
      • Other Government Agencies that may hereafter be created by an act of Congress which are under the control of the Federal Government. Additional, where deemed appropriate, the District may invest in mortgage backed assets issued and guaranteed by the above listed Government Agencies, within the Growth Impact Fund, Self Insurance Fund and Building Fund. Such investments are evaluated based upon ultimate maturity of five years or less, stability of cash flows, and consistent yield exceeding comparable Treasury securities.
  2. Repurchase agreements (repos) on the above securities made in compliance with state statute. All repos must be settled on a “Delivery Versus Payment basis,” with collateral perfected and delivered to a third party safekeeping account. Repos will be collateralized at a minimum of 102 percent of the purchase price of the repurchase agreement. The Director of Finance, or designee, shall execute the Public securities Association Master Repurchase Agreement to govern all Repo relationships.
  3. Time certificates of deposit of savings accounts in state or national banks which are insured by the Federal Deposit Insurance Corporation (FDIC) and which are approved by the State of Colorado Banking Commissioner.
    • Under the Colorado Public Deposit Protection Act, (PDPA) certificates of deposit which exceeded the insured amount ($100,000) shall be collateralized by eligible government securities having a market value equal to or exceeding 100 percent of the difference between the insured amount and the District’s total deposit.
  4. Time certificates of deposit of savings accounts in state or federally chartered savings and loans with headquarters in Colorado, which are insured by the Federal Savings and Loan Insurance Corporation (FSLIC) or FDIC which are approved by the State of Colorado Savings and Loan Commissioner.
    • Under the Colorado Public Deposit Protection Act, (PDPA) certificates of deposit which exceeded the insured amount ($100,000) shall be collateralized by eligible government securities having a market value equal to or exceeding 100 percent of the difference between the insured amount and the District’s total deposit.
  5. Shares of government entity investments pools (money market mutual funds) authorized under the provisions of CRS 24-75-701, as amended. Such funds shall be invested in US Treasury Agency obligations and be managed to maintain a constant net asset value, with a maximum maturity of 360 days and weighted average maturity not to exceed 180 days.

Allocation of Assets

  1. With the exception of the United States Treasury securities, not more than 25 percent of the District’s portfolio, shall be in aggregate, invested in the securities of any “one” Government Agency.
  2. District investments in deposit accounts, (Certificates of deposit or savings accounts or demand deposit accounts) shall be diversified such that no institution will hold more than 25 percent of the District’s total portfolio, or so much of the District’s total investments that failure of the institution would prevent the District from continuing operations for at least 60 days. Institutions will be selected on the combined factors of security and yield.
  3. District investments in Money Market Mutual Funds shall be diversified such that no fund shall hold more than 50% of the District’s portfolio and that combined fund investments do not exceed 75% of the total portfolio.
  4. District Investments in Repurchase Agreements shall not exceed 25% of the District’s total portfolio.

The Executive Director of Finance will be guided by the “prudent investor rule” which states that investments “shall be made using the judgment and care, under circumstances then prevailing, which (persons) of prudence, discretion and intelligence exercise in the management of the property of another, not in regard to speculation by in regard to the permanent disposition of funds, considering the probable income as well as the probable safety of their capital.”

The Executive Director of Finance, provided he or she acts within the guidelines of Superintendent policy and state law and exercises due diligence, shall not be held personally responsible for loss of public funds resulting from specific investment transactions. The Executive Director of Finance and designee will be held responsible for insuring sufficient liquidity of investments so that District operations can be maintained with minimal borrowing requirements in the event of bank or other institutional failures.

Maturity Schedule – The Executive Director of Finance shall develop a cash flow forecast at least annually as part of the budget process which will provide a guideline of how to structure the maturing investments to meet the cash flow needs of the District.

Competitive Quotes – The District will seek competitive quotes on all investments. Investments will be made on the basis of the safety, legality, liquidity and yield of invested cash.

Reporting – The superintendent shall receive quarterly reports listing all the investments of the District. The report will include a summary of investment earnings during the reporting period.

Auditing – The District’s Comprehensive Annual Financial Report (CAFR) shall, in addition to all other requirements, include a of all investments held by the District at the date of the financial statement.