Section 3000: Fiscal Management
Investments
Board Policy: 3200 |
Board of Education (BE)
Approval: 3/8/06 |
Mt. Hood Community College (MHCC) may invest district funds in excess of operating requirements. Even if not expressly referenced or cited, this policy is intended to comply with all applicable statutes or other regulations governing Oregon public agencies. The policy will be reviewed periodically to maintain currency with statutory developments and College objectives.
Investment Objectives
The objectives of this investment policy (the policy) are listed in the following priority order:
- Preservation of capital and the protection of investment principal;
- Maintenance of liquidity that sufficiently enables MHCC to meet all operating requirements that might be reasonably anticipated;
- Diversification to avoid incurring unreasonable and avoidable risks regarding specific security types, industries or individual financial institutions; and
- Management to maintain a reasonable rate of return throughout budgetary and economic cycles given the constraints and spirit of this policy.
Investment Officer
The director of fiscal operations will function as the investment officer and will maintain the right to approve staff members to authorize transactions on behalf of MHCC subject to the investment policies contained herein. The investment officer and staff members approved to authorize transactions must be bonded individuals. The investment officer may recommend an investment adviser for Board approval.
Prudence
The standard of prudence to be applied by the investment officer will be the "prudent investor" rule, which states, "Investments will 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 safety of their capital as well as the income to be derived." The prudent investor rule will be applied in the context of managing the overall portfolio.
The investment officer, acting in accordance with written procedures and exercising due diligence, will not be held personally responsible for a specific security's credit risk or market price changes.
Investment Maturity
Investments will be limited to those which, based on MHCC's then-current projected cash requirements, can be held to maturity. Investments will not be made predicted upon selling the security prior to maturity. Investment maturities for operating funds will be scheduled to coincide with projected cash flow needs. Except for special situations, as approved by a majority vote of the MHCC District Board, investments will be limited to maturities not exceeding 18 months.
Default Risk
MHCC will not assume default risk in an attempt to enhance return. MHCC will comply with state and federal law in its investment activities.
Sovereign Risk
MHCC will invest only in obligations of the U.S. government, government agencies or domestic corporations and financial institutions that are domiciled and regulated in the United States
Exchange Rate Risk
MHCC will invest only in dollar-denominated assets.
Report
A report of outstanding investments will be prepared on a regular basis by the investment officer and distributed to the chief operating officer and president.
Total Prohibitions
Purchase of standby or forward commitments of any sort are specifically prohibited as are those investments prohibited by ORS 293.850.
Rating of Securities
All securities must be rated by either Standard and Poor's or Moody's. If the rating is split, the lower rating will prevail. Limitations by Type of Security:
- Authorized U.S. Securities
The following U.S. Government and Federal Agency securities are authorized for purchase:
- U.S. Treasury Bills;
- U.S. Treasury Notes (held to maturity);
- U.S. Treasury Bonds (held to maturity);
- Federal Home Loan Bank (FHLB) Bonds, Notes and Discount Notes;
- Federal National Mortgage Assn. (FNMA) Notes, Debentures and Discount Notes; and
- Student Loan Marketing Association (Sallie Mae) Notes.
- Prohibited Securities
The following securities are not authorized for purchase:
- Banks for Cooperatives (COOPS);
- Sallie Mae Discount Notes
- Sallie Mae Floating Rate Notes;
- Federal Intermediate Credit Banks (FICB);
- Federal Farm Credit Banks (FFCB) Bonds and Discount Notes;
- Federal Home Loan Mortgage Corporation (FHLMC) Mortgage Certificates;
- Federal Land Banks (FLB);
- Farm Credit Consolidated System-wide Discount Notes;
- Federal Housing Administration (FHA) Debentures;
- Department of Housing and Urban Development:
- New Communities Debentures
- Project Notes;
- Local Authority Bonds;
- Export-Import Bank of the United States Debentures; and
- General Services Administration Participation Certificates.
- Repurchase Agreements
Investments in repurchase agreements must be for no more than seven (7) days and must be at least 100 percent collateralized by direct U.S. Government or U.S. Government agency securities. Banking institutions from which repurchase agreements are purchased must have above average return ratios and have holding company assets of at least $5 billion. Investment bankers must be approved by the investment officer. MHCC will not enter into any reverse repurchase agreements.
- States and Municipalities
MHCC will limit its purchase of securities to municipalities which have obtained a rating of A (Standard and Poor's) or A2 (Moody's) or better on Revenue Bonds and a BBB+ (Standard and Poor's) or BAA-1 (Moody's) rating or better on General Obligation Bonds.
- Money Market Funds
Cash management money market funds offered through investment banks, brokerage firms or commercial banks which in turn invest pooled funds in high-quality diversified money market securities and offer a high level of liquidity, to include bank trust agency funds and money market funds, are authorized, subject to the following limitations. Cash management money market fund investments will be only those funds which have their own investment restrictions of no less than:
- Long-term investment securities in the fund must have ratings averaging no less than A by Standard and Poor's or Moody's
- No more than 25 percent of the fund's portfolio may be in repurchase agreements
- The fund risk characteristics must be equal or superior to these stated characteristics
- Any fund will be previously approved in writing by the investment officer
- Bank Deposits and Acceptances
Time deposits, certificates of deposit or bankers acceptances issued by approved commercial banks (must meet the same requirements as those discussed under Repurchase Agreements) are authorized. The bank deposits must be rated at least an A-1 rating from Standard and Poor's and a P-1 rating from Moody's. Generally, investments will be made so as to secure the maximum return. Deposits may, however, be made at lower rates in community banks which have satisfactory ratings if it is deemed by the president to be pertinent to the College's financial and operational interests.
- Commercial Paper
Commercial paper issued by domestic corporations, finance companies and bank holding companies is authorized for investment purposes, provided it has received at least an A-1 rating from Standard and Poor's and a P-1 rating from Moody's.
- Other Securities
Securities not specifically addressed by this policy are prohibited for investment purposes.
Delivery of Securities
All securities purchased pursuant to this policy will be held in safekeeping. The primary agent will issue a safekeeping receipt to MHCC listing the specific instrument, rate, maturity and other pertinent information. Repurchase agreements will be subject to the safekeeping requirements.
Primary Agents
Primary agents should be licensed investment brokers with a good reputation in the community. The Investment Officer will be responsible for ensuring that all primary agents are presented with a copy of this policy prior to the transaction and informed that all investments must be in accordance with the policy. If a primary agent does not comply with the policy, they will not be considered for future services.
END OF POLICY
Legal Reference:
ORS 294.035