FILE:  DFL

Cf:  DG

 

CASH MANAGEMENT AND INVESTMENTS

 

 

Existing Louisiana statutes allow School Boards the legal authority to promulgate and implement standards and policies relative to cash management and investment activities.  Under provisions granted by such legal authority, the Cameron Parish School Board wishes to define its cash management and investment policies, as well as confer upon the Superintendent the power and responsibility for administering and interpreting this policy.  The Superintendent may designate one or more staff members to directly coordinate the day-to-day investment and cash management activities.  Said person shall report to the Superintendent.

 

It is anticipated that this policy shall be reviewed and evaluated on a regular basis, to ensure that the rules and guidelines expressed herein are responsive to the prevailing cash management and investment environment.  Since said environment is subject to change, care must be taken to ensure that such responsiveness is maintained.  This policy shall therefore be appropriately revised, amended, expanded, and adjusted on a continuing basis by the School Board upon recommendation from the Superintendent.

 

General Rules and Guidelines

 

  1. In general, the cash management and investment activities of the Cameron Parish School Board shall be conducted in a manner consistent with prevailing prudent business practices which may be applied by governmental entities of similar size and financial resources and, in compliance with applicable state investment statutes.  Investments of the School Board, or of funds held in its possession in a fiduciary capacity, shall be made with the exercise of that 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 probable income to be derived.  In summary, it shall be the philosophy of the School Board to maximize its return on investments while minimizing the risks associated with such investments.

  2. Specific rules promulgated by the School Board shall be designed in the best interest of the School Board and its citizens and taxpayers, and shall not under any circumstances afford a special financial advantage to any individual or corporate member of the financial or investment community.

  3. Expenditures incurred for banking or other financial services shall be evaluated in the same manner as other expenditures of School Board funds.

  4. Financial institutions (commercial banks, savings and loan associations, and credit unions) which serve as depositories of School Board funds shall comply with all prevailing provision of State statutes.  In addition, the School Board may establish criteria for the eligibility of such institutions in terms of financial strength, adequate capitalization, and appropriate liquidity.  Such criteria may include such standards of creditworthiness, liquidity, and overall financial strength as can be measured through recognized banking industry rating services.  Such financial institutions must be chartered and headquartered in the State of Louisiana.  In addition, deposits in such financial institutions, whether they be time deposits, demand deposits, or deposits in special interest bearing demand accounts (e.g., NOW accounts or Super NOW accounts) shall only be made with such institutions which qualify to accept public sector deposits which are protected under the terms of state statutes.

  5. Securities dealers with whom the School Board conducts business shall be subject to all School Board guidelines and criteria.  It shall be the policy of the School Board to restrict transactions relating to the purchase and sale of U.S. Government securities to major investment banking firms which are listed by the Market Reports Division of the Federal Reserve Bank of New York that are considered "primary" dealers.  This provision shall preclude the School Board from transacting business with other brokers and dealers whose financial strength and operational capabilities cannot be confidently determined, given the absence of "reporting" and "regulation" requirements.

    Furthermore, the fact that an individual broker/dealer seeks to conduct securities business with the School Board because he/she is employed by one of the aforementioned "primary" dealers is, in and of itself, an insufficient reason to assume that the School Board will automatically approve such broker/dealer for purposes of selling (or buying) securities to (or from) the School Board.

    In essence, the School Board, through the Superintendent, must satisfy itself that the individual broker/dealer with whom the School Board has direct day-to-day contact can demonstrate the prerequisite skill, experience, and reputation to deservedly conduct business with the School Board.  Therefore, only individuals who can clearly demonstrate this professionalism and business integrity will qualify as financial intermediaries with regard to the School Board's investment portfolio.

    While this policy on the surface may appear to be unduly restrictive, it shall be the School Board's policy to "err on the side of prudence" rather than accept even the slightest risk of loss of principal or investment earnings.

  6. The School Board shall limit its purchase of investment securities to those which are of the highest quality, including, but not limited to, the following instruments:

 

  1. Time certificates of deposit of any bank domiciled or having a branch office in Louisiana, savings accounts or shares of savings and loan associations and savings banks, as defined by La. Rev. Stat. Ann. §6:703, or share accounts and share certificate accounts of federally or state chartered credit unions issuing time certificates of deposit.  For those funds made available for investment in time certificates of deposit, the rate of interest paid shall be established by contract between the fiscal agent bank and the School Board; however, the interest rate at the time of the investment shall be at a rate not less than fifty basis points below the prevailing market interest rate on direct obligations of the U.S. Treasury with a similar length of maturity.

  2. The following obligations as specified in La. Rev. Stat. Ann. §33:2955:

 

  1.  

  1. Direct United States Treasury obligations, the principal and interest of which are fully guaranteed by the government of the United States.

  2.   (a)  Bonds, debentures, notes, or other evidence of indebtedness issued by or guaranteed by federal  agencies and provided such obligations are backed by the full faith and credit of the United States of America, which obligations include but are not limited to

 

  1. (U.S. Export-Import Bank;

  2. (Farmers Home Administration;

  3. (Federal Financing Bank;

  4. (Federal Housing Administration Debentures;

  5. (General Services Administration;

  6. (Government National Mortgage Association - guaranteed mortgage backed bonds and guaranteed pass-through obligations;

  7. (U.S. Maritime Administration - guaranteed Title XI financing; and

  8. (U.S. Department of Housing and Urban Development.

 

(b)  Bonds, debentures, notes and other evidence of indebtedness issued or guaranteed by U.S. government instrumentalities, which are federally sponsored, and such obligations include but are not limited to

 

  1. Federal Home Loan Bank System;

  2. Federal Home Loan Mortgage Corporation;

  3. Federal National Mortgage Association;

  4. Student Loan Marketing Association; and,

  5. Resolution Funding Corporation.

 

(c)   Notwithstanding the forgoing list of investments, in no instance shall the School Board invest in obligations described in (a) or (b) above which are:

 

  1. collateralized mortgage obligations that have been stripped into interest only or principal only obligations.

  2. inverse floaters, or * structured notes.  For purposes of this section, "structured notes" shall mean securities of U.S. Government agencies, instrumentalities, or government-sponsored enterprises which have been restructured, modified, and/or reissued by private entities.

    * Direct security repurchase agreements of any federal book entry only securities enumerated in Sections (a) and (b) above.  "Direct security repurchase agreement" shall mean an agreement under which the political subdivision buys, holds for a specific time, and then sells back those securities and obligations enumerated in Sections (a) and (b).

 

(d)  Bonds, debentures, notes, or other evidence of indebtedness issued by the state of Louisiana or any other state of the United States, or any of the political subdivisions of any state, or any domestic U.S. Corporation, with limited exceptions noted in La. Rev. Stat. Ann. §33:2955.

 

  1. The Louisiana Asset Management Pool.

 

  1. In no event shall monies be considered available for investment unless and until such funds are determined by the Superintendent or chief financial officer, in the exercise of prudent judgment, to be in excess of the immediate cash requirements of the fund to which the monies are credited.  As a criteria in making such a determination, any amount of money exceeding ten thousand dollars which is on demand deposit to the credit of the School Board, or to the credit of any fund and which is not required to meet an obligation for at least forty-five (45) days, or any amount of money exceeding one hundred thousand dollars which is on demand to the credit of the School Board or to the credit of any fund and which is not required to meet an obligation for at least fifteen (15) days shall be construed available for investment.

  2. Under no circumstances shall any investment instrument be selected until and unless the Superintendent is fully convinced that School Board personnel have full familiarity and knowledge of the nature and nuances associated with such instruments.  Furthermore, the Superintendent shall endeavor to make available appropriate professional training to School Board personnel in the performance of their cash management duties and responsibilities.

  3. Generally, the School Board shall only invest in "money market instruments," which are defined as creditworthy, highly liquid investments with maturities of one (1) year or less.  Although there may be certain circumstances in which longer term investments may be considered such as for bond sinking funds, or maturity matched construction funds, the general use of instruments with maturities in excess of one (1) year shall be avoided since such maturities typically have much higher market fluctuations than do shorter term investments.

  4. The School Board shall always strive to avoid investment losses.  However, the incurrence of a "book" or "accounting" loss does not necessarily indicate an inappropriate investment activity or faulty portfolio management.  There may be circumstances in times of rising interest rates when it is more prudent to liquidate an investment at a lower yield at a loss and purchase a new instrument bearing a higher rate of return for an overall gain to the School Board.  Such instances shall be fully documented by the Superintendent and reported to the School Board should they arise.  Therefore, the School Board does not prohibit the incurrence of a portfolio loss as long as the transaction can be justified in the overall portfolio management process.

  5. Investment securities generally take the form of either "physical" or "book entry only."  "Physical" securities are in written form and bear the name of the owner on the security itself.  These are typically of the form of certificates of deposit from financial institutions.  "Book entry only" securities are of the form that they have no physical document, and are recorded as an accounting entry by the issuing agency or government.  In the case of "book entry only" instruments, it is imperative that the School Board have written evidence of both the existence of the security and its registration in the name of the School Board.  This shall be accomplished through the issuance of a "safe keeping receipt" by a third party designated by the School Board.  Under no circumstances shall both the issuing agency (or its parent, subsidiary, or holding company) and the safe keeping agent be the same entity.  Therefore, all ownership of securities shall be evidenced by either the physical security itself, or by an acceptable safe keeping receipt issued by a third party financial institution acceptable to the School Board.

  6. All investment (or divestment) transactions shall be implemented on a "delivery versus payment" (or payment versus delivery) basis.  In the absence of acceptable evidence of delivery, the School Board shall refuse to enter the transactions.

 

Revised:  July, 2008 Revised:  November, 2010
Revised:  December, 2009 Revised:  March 9, 2015

 

 

Ref:     La. Rev. Stat. Ann. §§6:703, 17:99, 33:2955, 39:1211, 39:1212, 39:1213, 39:1214, 39:1215, 39:1216, 39:1217, 39:1218, 39:1219, 39:1220, 39:1221, 39:1222, 39:1223, 39:1224, 39:1225, 39:1226, 39:1227, 39:1228, 39:1229, 39:1230, 39:1231, 39:1232, 39:1233, 39:1234, 39:1235

Board minutes, 4-14-08, 3-8-10, 1-10-11, 3-9-15

 

Cameron Parish School Board