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Revenues from Investments: DFA-R

  • Fiscal Management: D
Revenues from Investments: DFA-R
Updated

In order to achieve the cash management objectives established by the Superintendent, the following regulations are to be followed in implementing the Superintendent policy.

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 have 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. Annually, the Director shall require each approved Securities Dealer to provide audited financial Statements demonstrating financial stability and minimum of $25 million in capitalization.

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 (i.e.: CATS, TIGRS, TRs, etc.) 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.
    • Additionally, 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 shall be 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 CRS 24- 75-601, as amended. 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, 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 exceed the insured amount ($100,000) shall be collateralized by eligible securities in accordance with PDPA. This collateral will have a market value equal to or exceeding 100 percent of the difference between the insured amount and the District's total deposits.
  5. Shares of government entity investment pools (money market mutual funds) authorized under the provisions of CRS 24-75-701, as amended. Such funds shall be invested in U.S. Treasury and 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 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.

Security Maturity Schedule

All investments made by the District are intended to maximize income while meeting cash management requirements. Therefore, all investments shall be matched, to the extent practical, to anticipated shortfalls within the District’s cash flow budget. Additionally, the Director shall determine a minimum cash balance that shall be maintained to meet unanticipated cash requirements or revenue shortfalls.

Surplus cash, in excess of the minimum cash balance, shall be invested such that total cash flows, principal and interest are sufficient to meet the District’s cash flow budget. This is best accomplished by developing an appropriate ladder maturity schedule, avoiding undue concentrations of maturities that would expose the District to excessive reinvestment or liquidity risk.

Under no circumstances, shall the District invest funds in securities exceeding a maturity of five years, or in expectation of liquidating the security prior to maturity to meet budgeted needs.

The District may elect to liquidate securities prior to maturity if, for market reasons, the funds may be reinvested in a similar quality and maturity security generating an economic gain. The District shall not liquidate securities, or delay investment of surplus funds more than 30 days for the purpose of market timing.

Safekeeping of Securities

The district will establish a safekeeping account with the bank or registered securities dealer to be a custodian for marketable securities owned by the district. Securities shall be held by the custodian in the District's name, and segregated from that institutions own securities. The Custodian shall provide the District with safekeeping receipts and/or monthly statements detailing all securities held for the District.

Institutions issuing certificates of deposit will keep the certificates of deposit and send the District a safekeeping receipt.

Local Participation

The intent of the district is to support the financial institutions located in Adams-Weld School District 27 J. Investments in institutions located outside of the District will be made when competitive rates, lack of collateral available, allocation of assets, or financial stability from the district's financial institutions make this decision in the best interest of the district.

Competitive Participation

The district shall seek competitive quotes on its investments. The District shall determine the current level of interest rates available in the market prior to purchasing investments, insuring that purchases are made at competitive rates.

Investment Selection:

Based on the investment quotes obtained, the District shall purchase the investment which provides the highest net yield. Net yield will be the investment income, less costs of executing the investment. Costs will include the following: brokerage fees, wire transfer fees, safekeeping fees, staff time to purchase and redeem the investment and other cost factors needed to manage the investment.

Documentation

All purchases and sales of investments will be authorized or confirmed in writing with the issuer/dealer. Internal controls will be implemented, including separation of duties, balancing of internal records against custodian statements and tracking of cash flow and interest income.

Financial Institutions To Be Used By The District:

  • Commercial Federal Bank of Brighton
  • First National Bank of Brighton
  • Norwest Bank of Brighton
  • Union Colony
  • Valley Bank and Trust

Money Market Mutual Funds:

  • Colotrust
  • CSAFE

Security Dealers And Broker Dealers:

  • Gill and Associate
  • Norwest Bank of Colorado

District Signatures for Certificates of Deposit:

  • Finance System Coordinator
  • Accounting Technician (Investment Custodian)

Auditing

The district shall conduct regular and/or unscheduled reviews of all of the investment transactions. Problems or concerns found in these reviews will be reported to the appropriate district personnel. 

Reporting

The Superintendent will receive a quarterly report of investment earnings, as a part of the financial reports.