Investment of College Funds

Administrative Procedure 2.304

Scope 

This investment procedure applies to all funds of the College. These funds are accounted for in the College's annual financial report and include all current funds and any other funds that may be created from time to time. All transactions involving the College's funds and related activity of any funds shall be administered per the provisions of this procedure and the canons of the "prudent person rule."

Objectives 

  1. Safety of Principal - Investments shall be undertaken in a manner that seeks to ensure the preservation of the principal in the overall portfolio. To attain this objective, only appropriate investment instruments will be purchased, and insurance or collateral may be required to ensure the return on principal.
  2. Liquidity - The College's investment portfolio shall be structured in such a manner as to provide sufficient liquidity to pay obligations as they come due. 
  3. Return on Investment -The investment portfolio shall be designed to attain an average annual rate of return equal to or greater than the U.S. Treasury Bill rate for a given period for the average weighted maturity of the College's investments, considering the risk constraints, the cash flow characteristics of the portfolio, and legal restrictions for return on investments. 
  4. Maintaining the Public's Trust - The investment officers shall seek to act responsibly as custodians of the public trust. They shall avoid any transaction that might impair public confidence in the College, the Board, or the Treasurer. 

Investment Instruments 

The College may invest its funds only in those instruments listed below: 

  1. Bonds, notes, certificates of indebtedness, treasury bills, or other securities now or hereafter issued by the United States of America, its agencies, and allowable instrumentalities. 
  2. Money market mutual funds registered under the Investment Company Act of 1940, provided that the portfolio of such money market mutual fund is limited to obligations described in item C.1 above and agreements to repurchase such commitments. The College will only invest in AAA-rated money market mutual funds. 
  3. Interest-bearing bonds of any county, township, city, village, incorporated town, municipal corporation, or school district of the State of Illinois, of any other state, or of any political subdivision or agency of the State of Illinois or any other state, whether the interest earned thereon is taxable or tax-exempt under federal law. The bonds shall be rated at the time of purchase within the 4 highest general classifications established by a rating service of nationally recognized expertise in rating bonds of states and their political subdivisions. 
  4. Interest-bearing savings accounts, interest-bearing certificates of deposit or interest-bearing time deposits, or any other investments constituting direct obligations of any bank as defined by the Illinois Banking Act. 
  5. Certificates of deposit with federally insured institutions that are collateralized or insured at levels acceptable to the College over the coverage provided by the Federal Deposit Insurance Corporation.
  6. Collateralized repurchase agreements which conform to the requirements stated in paragraph 2(g) or 2(h) of the Public Funds Investment Act. 
  7. Obligations of corporations meeting the following requirements: 
    • The corporation must be organized in the United States. 
    • The corporation's assets must exceed $500,000,000. 
    • The obligations at the time of purchase must be rated within the two highest classifications by at least two of the four standard rating services (Standard and Poor's, Duff and Phelp's, Moody's, and Fitch Investors Service). 
    • The obligations cannot have a maturity longer than three years from the date of purchase. 
    • Not more than 33% of the total investment fund can be invested in commercial paper at any time. 
    • The total investment in any one corporation cannot exceed 10% of the corporation's outstanding obligations. 
    • The total investment in any one corporation cannot be more than one million dollars. 
  8. The Illinois Public Treasurer's Investment Pool. 
  9. Investments may be made only in those savings banks or savings and loan associations the shares, or investment certificates of which are insured by the Federal Deposit Insurance Corporation. 
  10. Illinois School District Liquid Asset Fund (authorized by Section 3-47 of the Public Community College Act). 
  11. Investment products that are considered derivatives are excluded explicitly from approved investments. 
  12. Any investment as authorized by the Public Funds Investment Act and Acts amendatory thereto.

Diversification

It is the policy of the College to diversify its investment portfolio. Investments shall be diversified to eliminate the risk of loss resulting in over-concentration in a specific maturity, issuer, or class of securities. Diversification strategies shall be determined and revised periodically by the Treasurer. The diversification shall be as follows: 

  1. Up to 100% of C.1, C.2, C.8. 
  2. Up to 90% of C.4, C.5, C.9, C.10. 
  3. Up to 33% of C.3, C.6, C.7, C12. 

Collateralization 

  1. It is the policy of the College to require that all time deposits in excess of FDIC insurable limits, including time deposits, be collateralized by pledged securities (102%), Federal Home Loan Bank letter of credit (100%), or private insurance (100%) to protect public deposits in a single financial institution if it were to default. For time deposits, pledged securities, Federal Home Loan Bank letters of credit and private insurance collateralization percent calculations should be made using principal plus expected interest through maturity. 
  2. Eligible collateral instruments are any collateral instruments acceptable under the Act. The collateral must be placed in safekeeping at or before the time the College buys the investments so that it is evident that the investment purchase is predicated on securing collateral. 
  3. Safekeeping of Collateral 
    • Third-party safekeeping is required for all collateral. To accomplish this, the securities must be held at one of more of the following locations: 
      1. at a Federal Reserve Bank or its branch office; 
      2. at another custodial facility in a trust or safekeeping department through book-entry at the Federal Reserve; 
      3. by an escrow agent of the pledging institution; or 
      4. by the trust department of the issuing bank. 
    • Safekeeping will be documented by an approved written agreement between the Board of Trustees and the bank's governing board that complies with FDIC regulations. This may be in the form of a safekeeping agreement. 
    • Substitution or exchange of securities held in safekeeping for the College can be approved exclusively by the Treasurer and only if the market value of the replacement securities is equal to or greater than the market value of the replaced securities. 

Safekeeping of Securities 

  1. Third-party safekeeping is required for all securities and commercial paper. To accomplish this, the securities must be held only at one or more of the following locations: 
    • at a Federal Reserve Bank or its branch office; 
    • at another custodial facility, which shall be a trust or safekeeping department through book-entry at the Federal Reserve, unless physical securities are involved; or
    • in an insured account at a primary reporting dealer. 
  2. An approved written agreement between the Board of Trustees and the holder of the securities will document safekeeping. This may be in the form of a safekeeping agreement, trust agreement, escrow agreement, or custody agreement. 
  3. The originating bank will hold original certificates of deposits. A safekeeping receipt will be acceptable documentation. 

Qualified Financial Institutions and Intermediaries 

  1. Depositories - Demand Deposits 
    • Any financial institution selected by the College shall provide regular banking services, including, but not limited to, checking accounts, wire transfers, and safekeeping services. 
    • The College will not maintain funds in any financial institution that is not a member of the FDIC system. In addition, the College will not keep funds in any institution that does not first agree to post required collateral for funds or purchase private insurance over FDIC insurable limits and in amounts acceptable to the College. 
    • To qualify as a depository, a financial institution must furnish the Treasurer with copies of the latest two statements of condition, which it is required to provide to the Comptroller of Currency as the case may be. While acting as a depository, a financial institution must continue to deliver such statements to the Treasurer annually. 
    • Fees for banking services shall be mutually agreed to by an authorized representative of the depository bank and the Treasurer annually. A monthly account analysis shall substantiate fees for services. 
    • Each financial institution acting as a depository for the College must enter into a depository agreement with an authorized college official that incorporates this policy by reference. 
  2. Banks and Savings and Loans - Certificates of Deposits 
    Any financial institution selected to be eligible for the College's competitive certificate of deposit purchase program must: 
    • provide wire transfer and certificate of deposit safekeeping services; 
    • be a member of the FDIC system and be willing and capable of posting required collateral or private insurance for funds over FDIC insurable limits and amounts needed for the College; and 
    • meet at all times the financial criteria as established in the investment procedures of the College. 
  3. Intermediaries 
    Any financial intermediary selected to be eligible for the College's competitive investment program must: 
    • Provide wire transfer and deposit safekeeping services; 
    • maintain appropriate federal and state registrations for the type of business in which they are engaged; 
    • Provide an annual audit upon receipt 
    • maintain an office within the State of Illinois and be licensed to conduct business in this State; and 
    • Be familiar with the Board of Trustees's policy and accept financial responsibility for any investment not appropriate according to the policy. 

Management of Program 

  1. Management responsibility for the investment program is hereby delegated to the Treasurer and Assistant Vice President, Business and Finance, who shall establish a system of internal controls and written operational procedures designed to prevent losses of funds that might arise from fraud, employee error, misrepresentation by third parties, or imprudent actions by employees of the entity. Such procedures shall include explicit delegation of authority to persons responsible for the execution under the direction of the Treasurer of specific financial transactions, including: investment transactions; check signing, check reconcilement, deposits, bond payments, report preparation and wire transfers. No person may engage in any investment transaction except as provided for under the terms of this policy. The Treasurer shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinates. 
  2. The following individuals are authorized to purchase and sell investments, authorize wire transfers, authorize the release of pledged collateral, and to execute any documents required under this procedure: 
    • Treasurer 
    • Assistant Vice President, Business and Finance 
    • Managing Director of Accounting and Grant Compliance 

      These documents include: 
      1. Wire Transfer Agreement 
      2. Depository Agreement 
      3. Safekeeping Agreement 
      4. Custody Agreement 
      5. Collateral Agreement 
  3. The wording of agreements necessary to fulfill the investment responsibilities is the responsibility of the Treasurer, who shall periodically review them for their consistency with College policy and State law and who shall be assisted in this function by the Controller, College legal counsel and auditors. These agreements include but are not limited to: 
    • Wire Transfer Agreement 
    • Depository Agreement 
    • Safekeeping Agreement 
    • Custody Agreement 
    • Collateral Agreement 
  4. The Treasurer may use financial intermediaries, brokers, and/or financial institutions to solicit bids for securities and certificates of deposit. The Treasurer or any financial intermediaries, brokers, and or financial institutions will make every effort to solicit bids for investments from financial institutions that have made an effort to qualify as a depository and have a presence in District 509. These intermediaries shall meet the criteria outlined in Section G.3 above and shall be approved by the Board of Trustees. 
  5. All wire transfers made by the Treasurer shall require a secondary authorization by the Assistant Vice President, Business and Finance or Managing Director of Accounting and Grant Compliance. 
  6. The Treasurer shall be further authorized to enter into joint investment agreements as authorized under Section 8-7 of the Code. 

Performance

The Treasurer will seek to earn a rate of return appropriate for the type of investments being managed, given the portfolio objectives defined in Section B of this document for all funds. In general, the Treasurer will strive to earn an average annual rate of return equal to or greater than the U.S. Treasury Bill rate for a given time for the average weighted maturity of the College's investments. 

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 of the investment program or which could impair their ability to make impartial investment decisions. Further, except as permitted under Section 3.2 of the Public Officer Prohibited Practices Act, no officer involved in the investment process shall have any interest in, or receive any compensation from, any investments in which the College is authorized to invest, or the sellers, sponsors or managers of those investments. 

Indemnification 

Investment officers and employees of the College acting following this Investment Procedure and such written operational policies as may be established by the College, and who otherwise exercise due diligence and work with reasonable prudence, shall be relieved of personal liability for an individual security's credit risk or market changes. 

Reporting

The Treasurer shall submit a monthly investment report to the Board of Trustees, which shall include information regarding securities in the portfolio by class or type, book value, income earned, and market values as of the report date. Generally accepted accounting principles shall be used for valuation purposes. The report shall indicate any areas of policy concern and planned revision of investment strategies. 

Amendment

This procedure shall be reviewed from time to time by the Treasurer with regards to the procedure's effectiveness in meeting the College's needs for safety, liquidity, rate of return, diversification, and general performance. Any substantive changes will be adopted by the Board of Trustees

This policy was last reviewed on 12/09/2024.

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