Investment Policy
1.0 Policy:
It is the policy of the
Hinsdale Public Library (the Library) to invest idle public funds
in relatively risk-averse assets which will provide the highest
return possible while meeting the cash flow demands of the Library
and conforming to all State Statutes governing the investment of
public funds.
2.0 Scope:
This investment policy
applies to all cash and investments held for each of the funds maintained
by the Library including, but not limited to, the operating, statutory
reserve, bequests, special levy and special reserve funds. Monies
from individual Library funds may be commingled for investment purposes.
The policies set forth below apply to the activities of the Treasurer
and Assistant Treasurer of the Library and the Custodian of Library
Monies (hereafter "Custodian of Monies") as defined in
Section 5.4 of the Library bylaws.
3.0 Prudence:
1) The standard of prudence
to be used under this policy by the Custodian of Monies should be
the “prudent person” standard which states:
Investments shall 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 probable safety of their capital
as well as the possible income to be derived,
2) The above standard
is established for professional responsibility and should be applied
in the context of managing the Library’s overall portfolio.
The Custodian of Monies, acting in accordance with this investment
policy, should be relieved of personal responsibility for an individual
security’s credit risk or market price changes, provided that
deviations from expectation are reported in a timely fashion, and
appropriate action is taken to control adverse developments.
4.0 Objectives:
1) Risk Avoidance - The
primary objective of investing Library funds is preservation of
principal.
2) Liquidity - The types
and length of investments should be managed to enable the Library
to meet its cash flow requirements for operations and capital expenditures.
3) Yield - The Library
should strive to achieve a maximum return in consideration of the
foregoing risk avoidance and liquidity objectives.
4) Local Institutions
- Preference will be given to financial institutions located within
the Village of Hinsdale as long as yields are competitive with other
institutions for comparable instruments.
5.0 Delegation of Authority:
The Board may appoint
the Finance Director of the Village of Hinsdale, or another Village
official, the Custodian of Monies responsible for investing and
transferring funds. Said Custodian will be appointed by a resolution
of the Board, and actions taken by the Custodian with respect to
Library funds shall be subject to review and approval by the Treasurer
and Finance Committee as well as to the limitations established
by Library Bylaws, the authorizing Board resolution and Illinois
law. The Custodian of Monies shall be bonded in accordance with
Illinois Compiled Statutes (ICS), Chapter 75, Section 5/4-9.
The Treasurer, acting on behalf of the Board of Trustee, and after
approval by the Finance Committee is authorized to modify current
investment strategies, and allocation. Such changes will be submitted
to the Board of Trustees in writing for approval.
The Custodian of Monies
should submit any suggested changes in investment strategies, or
fund allocations in writing to the Treasurer and to the Library
Director.
6.0 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 and management
of the investment program, or that could impair their ability to
make impartial decisions. Employees and investment officials shall
disclose any material interests in financial institutions with which
they conduct business. They shall further disclose any personal
financial/investment positions that could be related to the performance
of the investment portfolio. Employees and officers shall refrain
from undertaking personal investment transactions with the same
individual with which business is conducted on behalf of their entity.
7.0 Authorized Financial
Dealers and Institutions:
The Custodian of Monies
will maintain a list of financial institutions authorized to provide
investment services. In addition, a list will also be maintained
of approved security broker/dealers selected by credit worthiness.
These may include “primary” dealers or regional dealers
that qualify under Securities and Exchange Commission Rule 15C3-1
(uniform net capital rule). No public deposit shall be made except
on a qualified public depository as established by State Statutes.
An annual review of the
financial condition and registration of qualified bidders will be
conducted by the Custodian of Library Monies.
A current audited financial
statement is required to be on file for each financial institution
and broker/dealer in which the Library invests.
Unless other institutions
are specifically approved by the Library Board, Library funds shall
be invested only in institutions that have been authorized by the
Village of Hinsdale.
8.0 Allowable Investments - Investments shall be made in accordance with Illinois Compiled
Statutes (ICS), Chapter 30, Section 235, “Public Funds Investment
Act,” but shall be limited to the following types of investments:
1) U. S. Treasury and
Agency obligations held to maturity
2) Certificates of Deposit
at commercial banks and insured by the Federal Deposit Insurance
Corporation (FDIC)
3) Money Market mutual
funds
Illinois Public Treasurers
Investment Pool (IPTIP) or any other local government investment
pool approved by the Illinois Department of Insurance
9.0 Collateral Requirements - Cash deposit accounts and Certificates
of Deposit shall be collateralized within the following requirements:
1) All deposit balances
in excess of FDIC limits shall be collateralized.
2) Collateral instruments
shall be U. S. Treasury and Agency obligations.
3) Collateral shall have
a market value of at least 105% of the applicable deposit balance.
4) The collateral shall
be held in the Library’s name by a third party institution
satisfactory to the Custodian of Monies.
10.0 Safekeeping and
Custody:
All security transactions
entered into by the Custodian of Monies shall be conducted on a
delivery-versus-payment basis. Securities will be held by a third
party custodian designated by the Custodian of Monies in the name
of the Library and evidenced by safekeeping receipts.
11.0 Diversification:
In addition to the limitations
set forth in State Statutes, the investment portfolio of the Library
shall not exceed the following diversification limits unless specifically
authorized by the Board:
1) No financial institution
shall have on deposit more than 40% of the Library’s investment
portfolio, exclusive of U.S. Treasury securities in safekeeping.
2) Monies deposited at
a financial institution shall not exceed 10% of the capital stock
and surplus of that institution.
3) Deposits in any Public
Treasurer’s Investment Pool shall not exceed 75% of the Library’s
investment portfolio.
4) Brokered certificates
of deposit shall not exceed 10% of the Library’s investment
portfolio.
12.0 Maximum Maturities:
To the extent possible,
the Library will attempt to match its investments with anticipated
cash flow requirements. Term of investments shall not exceed five
years, unless the Library Board specifically authorizes otherwise
13.0 Internal Controls:
The Custodian of Monies
is responsible for establishing and maintaining an internal control
structure designed to insure that the assets of the Library are
protected from loss, theft, or misuse.
Accordingly, the Custodian
of Monies shall establish a process for annual independent review
by an external auditor to assure compliance with policies and procedures.
The review of internal controls shall address the following points:
1) Control of collusion
2) Separation of transaction authority from accounting and record
keeping
3) Avoidance of physical delivery securities
4) Clear designation of authority to subordinate staff members
5) Written confirmation of telephone transactions for investment
and wire transfers
6) Development of a procedure for making wire transfers
Quotes for investments
shall be received in accordance with normal Village of Hinsdale
procedures.
14.0 Performance Standards:
The investment portfolio
will be managed in accordance with the parameters specified within
this policy. The portfolio should obtain a market average rate of
return during a market/economic environment of stable interest rates.
Portfolio performance
should be compared to an appropriate benchmark on a regular basis.
The benchmark used by the Custodian of Monies to determine whether
market yields are being achieved shall be the three-month U.S. Treasury
Bill.
15.0 Reporting:
The Custodian of Monies
shall prepare an investment report at least semi-annually, including
a succinct management summary that provides a clear picture of the
status of the current investment portfolio. This management summary
will be prepared in a manner, which will allow the Board to ascertain
whether investment activities during the reporting period have conformed
to the investment policy.
The Custodian of Monies
will present such a report to the Finance Committee annually, at
a mutually agreed upon meeting.
The report should be
provided to the Treasurer and the Library Director. The report will
include the following:
1) A list of individual
investments held at the end of the reporting period, including book
value and current market value by type of investments.
2) Average weighted yield
to maturity of portfolio on Library investments as compared to the
benchmark
3) Listing of investments
by maturity date
4) Percentage of the
total portfolio which each type of investment represents
5) Percentage of the
total portfolio which each institution is holding
6) Percentage of the
total portfolio broken down by defined maturity periods.
16.0 Investment Policy
Adoption:
The Library’s
investment policy shall be adopted by resolution of the Board.
This policy shall be reviewed on an annual basis by the Custodian
of Monies and any modifications made thereto must be approved
by the Library Board.
