Council Policy 4-4 Investment Policy

City of Lawton
Investment Policy
Table of Contents
Policy ........................................................................................................................................ 2
Scope ....................................................................................................................................... 2
Prudence .................................................................................................................................. 2
Objectives ................................................................................................................................ 2
Delegation of Authority ............................................................................................................. 3
Review Committee ................................................................................................................... 3
Ethics and Conflicts of Interest ................................................................................................ 3
Authorized Financial Institutions and Dealers .......................................................................... 3
Local Preference ...................................................................................................................... 4
Authorized and Suitable Investments ...................................................................................... 4
Collateralization ........................................................................................................................ 5
Safekeeping and Custody ........................................................................................................ 5
Diversification ........................................................................................................................... 5
Maximum Maturities ................................................................................................................. 5
Internal Control ......................................................................................................................... 5
Performance Standards ........................................................................................................... 6
Reporting .................................................................................................................................. 6
Investment Policy Adoption/Amendment ................................................................................. 6
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City of Lawton
Investment Policy
Policy:
It is the policy of the City of Lawton to invest all public funds in a manner which will provide the maximum security of principal, while meeting the daily cash flow demands of the City, conforming to all state and local statutes governing the investment of public funds, and providing the highest practical investment return within these guidelines.
Scope:
This investment policy applies to all financial assets of the City of Lawton. These funds include the following existing accounting fund types:
General Fund
Capital Project Funds
General Debt Service Funds Special Revenue Funds Enterprise Funds
Internal Service Funds
This policy does not apply to non-invested funds of the City of Lawton. For example, demand deposit accounts and cash on hand; or to the assets of municipal trusts (for which separate investment policies may be adopted).
Prudence:
Investments shall be made with judgment and care under circumstances 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 probable income derived.
The standard of prudence to be used by the investing official shall be this "prudent person" standard and shall be applied in the context of managing an overall portfolio. Investing officials acting in accordance with written procedures and this 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.
Objectives:
The primary objectives, in priority order, of the City of Lawton investment activities shall be:
1. Safety Safety of principal is the foremost objective of the investment program. Investments of the City shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. To attain this objective, diversification is required such that any realized losses on individual securities do not exceed income generated from the remainder of the portfolio.
2. Legality All investment transactions will be in accordance with all applicable State and Federal statutes, City Charter and Municipal code restrictions and the tenets of this investment policy.
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3. Liquidity The City of Lawton's investment portfolio will remain sufficiently liquid to enable the City to meet all day-to-day cash flow requirements.
4. Return on Investment The portfolio shall be designed with the objective of attaining a market average rate of return throughout budgetary and economic cycles, taking into account the City's investment risk constraints and the cash flow characteristics of the portfolio.
Delegation of Authority:
The City Finance Director has the authority to manage the City of Lawton's investments as delineated in Resolution 91-79, adopted by the City Council in August 1991. This policy shall supersede Resolution 91-79.
The City Finance Director shall establish written procedures for the operation of the investment program consistent with this investment policy. Procedures should include reference to: safekeeping, bid practices and reporting, wire transfer agreements, collateral/depository agreements, and banking service contracts. 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 City Finance Director. The City Finance Director shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials.
Bonding of all City staff and appointed officials who have authority to invest City funds, make wire transfers, or who have signatory authority for depository accounts shall be required.
Review Committee:
The City shall establish an investment committee to review investment transactions and procedures. The City Finance Director shall give a written report to the committee quarterly. The committee shall consist of the City Finance Director, Financial Services Supervisor, Assistant City Manager, a council member and two citizens selected by the Mayor.
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 officers shall disclose to the City Manager any material financial interests in financial institutions that conduct business within this jurisdiction, and they shall further disclose any large personal financial or investment positions that could be related to the of the City's portfolio. Employees and officers shall subordinate their personal investment transactions to those of the City, particularly with regard to the timing of purchases and sales.
Authorized Financial Institutions and Dealers:
The City Finance Director shall maintain a list of financial institutions and broker/dealers authorized by the Investment Committee to provide investment services to the City of Lawton. Before investments of funds are placed, a competitive 'bid' process will be conducted among eligible financial institutions and broker/dealers.
 Bids will be secured from at least three institutions for all investments.
 Bids will be conducted by way of email, fax, or other form of written communication that serves as a “proof of bid.”
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 The written bid will contain the quoted yield or interest rates and dollar prices, or discount rates.
Bidders are required to bid a firm price or yield which will remain effective for a reasonable period of time (approximately 15 minutes), given market fluctuations, for further bids to be received and tabulated. Typically, awards will be made to the bidder offering the highest effective yield consistent with policy restrictions (for purchases, lowest effective yield for sales). However, transaction costs, diversification requirements, and maximum FDIC insurance coverage, as well as other factors may be considered when awarding investments.
Local Preference:
When possible, preference will be given to local vendors first, followed by State vendors, then all others. "Local vendor" means any person or business whose primary place of business is located and operating within the corporate limits of the City who submits bids for securities in response to the City's solicitation for bids. This preference will be based on the local bid matching or exceeding any other bidder offering the highest effective yield consistent with policy restrictions and matching or lowering transaction costs. Award to local vendor will also depend on diversification requirements, maximum FDIC insurance coverage, as well as other factors that may be considered relevant to the awarding of the investment.
(ref. Lawton City Code §10-1-102, §10-1-108, §10-1-116)
A securities dealer wishing to bid on investments must be approved by the Investment Committee prior to accepting any bids from that vendor. In order for a bidder to be approved the vote must consist of a ‘YES’ vote from the appointed councilmember and at least one of the two appointed citizens.
The dealer must meet the following requirements:
1. Either be a primary U.S. Government securities dealer or comply with the New York Federal Reserve Bank's capital adequacy guidelines as evidenced by audited financial statements; and
2. Completion of a Certification of Compliance with tenets of this Investment Policy; and
3. Deliver most recently audited financial statements to the City of Lawton Finance Department prior to the placement of investments and on an annual basis.
Authorized and Suitable Investments:
The City of Lawton is authorized by Oklahoma Statutes Title 62, Section 348.3, to invest in the following types of securities: ·
1. Obligations of the United States Government, its agencies or instrumentalities; or
2. Collateralized or insured certificates of deposit and other evidences of deposit at banks, savings banks, saving and loan associations and credit unions located in this state, or fully insured certificates of deposit at banks, savings banks, savings and loan associations and credit unions out of state; or
3. Negotiable certificates of deposit issued by a nationally or state-chartered bank, a savings bank, a savings and loan association or a state-licensed branch of a foreign bank. Purchases of negotiable certificates of deposit shall be fully collateralized when exceeding the federally insured amount.
4. Repurchase agreements that have underlying collateral consisting of those items specified in paragraph 1 of this section.
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5. Money market funds regulated by the Securities and Exchange Commission and whose investments consist of those items specified in paragraph 1 above.
Collateralization:
All collateral pledged to secure public deposits in excess of FDIC insured amount shall be valued at no more than their market value. In order to protect against market changes and to provide a greater level of security for all funds, market value of the securities pledged to secure public deposits will equal at least 102% of the value of the funds on deposit. The City of Lawton chooses to limit collateral to:
1. U.S. Treasury Securities or Federally Insured Obligations.
2. Direct debt; obligations of municipalities, counties, and school districts in Oklahoma.
Safekeeping and Custody:
All security transactions entered into by the City of Lawton shall be conducted on a delivery versus payment (DVP) basis. Securities will be held by the City Finance Director or by a third party custodian designated by the Finance Director. Evidence of ownership (safekeeping receipt) on behalf of the City of Lawton is required in either case.
According to Governmental Accounting Standards Board statement number 3, paragraph 68, the three categories of credit risk for investments, depending on safekeeping arrangements are:
a. Insured or registered, or securities held by the entity (the City) or its agent in the entity's name.
b. Uninsured and unregistered, with securities held by the counterparty's (seller's) trust department or agent in the entity's name; and
c. Uninsured and unregistered, with securities held by the counterparty (seller) or by its trust department or agent, but not in the entity's (City's) name.
Investments will be carried in accordance with category (a) or (b) above, insofar as compatible with applicable law; the Finance Director shall arrange safekeeping procedures so that investments fall into category (a) whenever possible.
Diversification:
The City of Lawton will diversify its investments by institution. With the exception of U.S. Treasury and agency securities and authorized pools, no more than 50% of the entity's total investment portfolio will be placed through a single financial institution.
Maximum Maturities:
To the extent possible, the City of Lawton will attempt to match its investments with anticipated cash flow requirements. Unless matched to a specific cash flow, the City of Lawton will not directly invest in securities maturing more than three years from the date of purchase.
Internal Control:
The City Finance Director shall establish an annual process of independent review by an external auditor (as part of the required fiscal year audit). The review will provide internal control by assuring compliance with policies and procedures.
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Performance Standards:
The investment portfolio will be designed to obtain a market average rate of return during budgetary and economic cycles, taking into account the City of Lawton's investment risk constraints and cash flow needs.
Reporting:
The City Finance Director shall provide the City Manager and City Council with documentation of the bidding process conducted along with a monthly investment activity report within fifteen days of the closing of financial transactions for the month of which the report is made. The report shall include a listing of the investment transactions made and the amounts, the interest earned on each investment within the month, the current investment and maturity schedules, and the overall performance compared to the previous year. These documents shall be considered “provided” to the City Manager and City Council by placing them in the City of Lawton Dropbox account or equivalent within a folder marked Investment Committee.
Investment Policy Adoption/Amendment:
The City of Lawton's Investment Policy shall be adopted by resolution of the City Council of the City of Lawton. The policy shall be reviewed annually by the Investment Committee and if determined modifications are necessary thereto, the modifications must be approved by the City Council.
This Investment Policy was adopted by Resolution 04-57 dated the 11th day of May 2004 and amended on this 28th day of March 2017 by Resolution 17-33.