The College District and its investment officer shall ensure that all
available College District funds are invested to the maximum extent possible at the highest rates obtainable at the time of investment in conformance with the Public Funds Investment Act (PFIA)
and this policy. This policy is adopted in accordance with Texas law
and shall be reviewed at least annually, pursuant to relevant sections of the Texas Government Code. The Board shall annually
adopt a resolution stating that it has reviewed this policy and any
investment strategies developed in relation to and shall create a
record of any changes made to either this policy or the investment
strategy. The College District’s investment strategy is as follows:
- Preservation and safety of principal are most important.
- Maintenance of sufficient liquidity to meet operational needs.
- To the extent that principal is protected and there is liquidity,
the investment officer shall invest the funds to yield the highest possible rate of return in accordance with this policy.
- Diversification of investments to avoid unreasonable or avoidable risks.
The College District’s portfolio is designed and managed in a manner to promote the best interest of the College District and the public. The College District’s conservative investment strategy is rooted in the PFIA’s Standard of Care, which states: “Investments shall
be made with judgment and care, under prevailing circumstances,
that a person of prudence, discretion, and intelligence would exercise in the management of the person’s own affairs, not for speculation, but for investment, considering probable safety of capital
and probable income to be derived.
All investment transactions except investment pool funds and mutual funds shall be executed on a delivery-versus-payment basis.
This policy applies to all investment activity of the College District,
including Brookhaven College, Cedar Valley College, Eastfield College, El Centro College, Mountain View College, North Lake College, and Richland College.
The College District may make investments only in the following
types of instruments:
- Treasury bills, treasury notes, and treasury bonds of the United States and other direct obligations of the agencies and instrumentalities of the United States as permitted by Government Code 2256.009.
- Fully collateralized repurchase agreements and reverse repurchase agreements permitted by Government Code
- Certificates of deposit and share certificates that are fully
guaranteed or insured by the FDIC, through an authorized
broker/dealer, to one or more than one depository institution,
as permitted by Government Code 2256.010.
- Public funds investment pools as permitted by Government
- A securities lending program as permitted by Government
- No-load money market mutual funds as permitted by Government Code 2256.014.
- A guaranteed investment contract as an investment vehicle
for bond proceeds, provided it meets the criteria and eligibility
requirements established by Government Code 2256.015.
- Obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality
by a nationally recognized investment rating firm not less than
AA or its equivalent as permitted by Government Code
- Investments that are fully guaranteed or insured by the FDIC.
- Commercial paper with a maximum maturity of 181 days, rated A1/P1 by a nationally recognized rating agency.
Investment in any and all types of derivatives is prohibited.
All investments are prohibited unless expressly described in this
policy in the section, Authorized Investment Instruments, which are
made in conformity to the PFIA.
In accordance with Government Code 2256(b), the investment officer shall monitor investments acquired with public funds for market prices and rating changes. Monitoring shall be done monthly
and more often as economic conditions warrant by using appropriate reports, indices, or benchmarks for the type of investment, as
well as using nationally recognized rating agencies. The investment officer shall keep the Board informed of significant changes in
ratings and/or declines in the market value of the College District's
investment portfolio at least quarterly. Information sources may include financial/investment publications and electronic media, available software for tracking investments, depository banks, commercial or investment banks, financial advisers, and
representatives/advisers of investment pools or money market
The investment officer shall take all prudent measures that are
consistent with the investment policy to liquidate an investment if
- Does not have a minimum rating; or
- Significantly changes its rating or declines in market value.
The investment portfolio shall be diversified in terms of investment
instruments, maturity scheduling, and financial institutions to reduce risk of loss resulting from overconcentration of assets in a
specific class of investments, specific maturity, or specific issuer.
The following are guidelines for maximums:
- U.S. Treasury Securities 100%
- U.S. Agencies and Instrumentalities 85%
- Insured or collateralized Certificates of Deposit 100%
- Repurchase Agreements* 20%
- Money Market Mutual Funds 50%
- Authorized Investment Pools 85%
- Commercial paper with a maximum maturity of
181 days, rated A1/P1 by a nationally recognized rating agency, and not more than five
percent in any single issuer.
*Excluding flexible repurchase agreements for bond proceeds investments.
To maintain a sufficient level of liquidity, at least ten percent of the
portfolio will be maintained in investment pools.
The College District will only make investments as defined in this
policy, in the section Authorized Investment Instruments, for a term
of no greater than six years with the condition that the average maturity of the portfolio will be no more than four years. A reverse repurchase agreement may not exceed 90 days and may not be
used to purchase any investment whose final maturity date exceeds the expiration date of the reverse repurchase agreement.
The College District’s investment portfolio shall have sufficient liquidity to meet anticipated cash flow requirements.
To reduce exposure to changes in interest rates that could adversely affect the value of investments, the College District shall
use final and weighted-average-maturity limits and diversification.
The College District shall monitor interest rate risk using weighted
average maturity and specific identification.
The chief financial officer or associate chief of business affairs shall
serve as the investment officer of the College District and shall invest College District funds as directed by the Board and in accordance with the College District’s written investment policies.
The Board shall review its investment policy and investment strategy at least once each year and adopt a resolution that evidences
the review. The Board shall, at least annually, review, revise, and
adopt a list of qualified brokers who are authorized to engage in
investment transactions with the College District.
Each member of the Board and the investment officer shall attend
at least one training session relating to the person’s responsibilities
under the PFIA within six months after taking office or assuming
duties. In addition, the investment officer shall attend a training
session during each state fiscal biennium and may receive training
from any independent source approved by the Board. The investment officer may also require other staff members to complete investment training during each state fiscal biennium. The investment officer shall prepare a report describing changes in the law
and their impact on the College District’s investment policy and
strategy. The report shall be delivered to the Board no later than
the 180th day after the last day of each regular session of the legislature.
The administration and procedures for investing College District
funds and for requiring ethics disclosures of investment advisers
shall be prescribed by the chief financial officer in the appropriate
section of the College District business procedures manual, as
amended. The administration and procedures shall be consistent
with this policy.
Investments of the following fund categories shall be consistent
with this policy and in accordance with the strategy defined below.
For pooled investments, the College District will consolidate cash
balances from all funds in the pool to maximize investment earnings. The earnings will be allocated to the various funds participating in the pool based on their respective participation and in accordance with generally accepted accounting principles.
Operating Funds: Investment strategies for operating funds (including any commingled pools containing operating funds) shall have
as their primary objectives safety, investment liquidity, and maturity
sufficient to meet anticipated cash flow requirements.
Debt Service Funds: Investment strategies for debt service funds
shall have as their objective sufficient investment liquidity to timely
meet debt service payment obligations in accordance with provisions in the bond documents. Reserve funds for revenue debt may
be invested for long-term maturity in order to maximize return on
investment. Maturities longer than one year are authorized provided legal limits are not exceeded. Debt service funds shall be kept
separate from other funds.
Unexpended Plant Funds: Investment strategies for capital projects
in the unexpended plant funds shall have as their objective sufficient investment liquidity to timely meet capital project obligations.
Unexpended plant funds transferred from operating funds may be
commingled with operating funds.
Bond Proceeds: Investment strategies for bond proceeds shall
have as their objective sufficient investment liquidity to meet capital
project obligations. Bond proceeds shall be kept separate from all
The College District shall retain clearly marked receipts providing
proof of the College District’s ownership. The College District may
delegate, however, to an investment pool the authority to hold legal
title as custodian of investments purchased with College District
funds by the investment pool. The College District shall contract
with a bank or banks for the safekeeping of securities either owned
by the College District as part of its investment portfolio or held as
collateral to secure demand or time deposits. Securities owned by
the College District shall be held in the College District’s name as
evidenced by safekeeping receipts of the institution holding the securities.
Collateral for deposits will be held by a third-party custodian designated by the College District and pledged to the College District as
evidenced by safekeeping receipts of the institution with which the
collateral is deposited. Original safekeeping receipts shall be obtained. Collateral may be held by the depository bank’s trust department, a Federal Reserve Bank or a branch of a Federal Reserve Bank, or a third-party bank approved by the College District.
Prior to handling investments on behalf of the College District, brokers/dealers must submit required written documents in accordance with law. Representatives of brokers/dealers shall be registered with the Texas State Securities Board and must have
membership in the Securities Investor Protection Corporation
(SIPC), and be in good standing with the Financial Industry Regulatory Authority (FINRA). Those firms that request to become qualified bidders for securities transactions will be required to provide
(1) a completed broker/dealer questionnaire that provides information regarding creditworthiness, experience, and reputation and
(2) a certification stating the firm has received, read, and understood the College District’s investment policy and agree to comply
with the policy. Authorized firms may include primary dealers or
regional dealers that qualify under Securities Exchange Commission Rule 15C3-1(Uniform Net Capital Rule), and qualified depositories.
In order to get the best return on its investments, the College District may solicit bids for certificates of deposit or other securities in
writing, by telephone, or electronically, or by a combination of these
methods. It is the policy of the College District to require competitive bidding for all individual security purchases and sales except
for: (a) transactions with money market mutual funds and local
government investment pools and (b) treasury and agency securities purchased at issue through an approved broker/dealer or financial institution.
A system of internal controls shall be established and documented
in writing and must include specific procedures designating who
has authority to withdraw funds. Also, controls shall be designed to
protect against losses of public funds arising from fraud, employee
error, misrepresentation by third parties, unanticipated changes in
financial markets, or imprudent actions by employees and officers
of the College District. Controls deemed most important shall include:
- Separation of transaction authority from accounting and
recordkeeping and electronic transfer of funds.
- Avoidance of collusion.
- Custodial safekeeping.
- Clear delegation of authority.
- Written confirmation of telephone transactions.
- Documentation of dealer questionnaires, quotations and bids,
evaluations, transactions, and rationale.
- Avoidance of bearer-form securities.
These controls shall be reviewed by the College District’s independent auditing firm during the College District’s annual financial