City of Broken Arrow updates investment policy

Image

By John Dobberstein, Editor

The Broken Arrow City Council approved updates this week to the city government's investment policy, the first time that task has been completed in more than a decade.

The policy, which governs how various categories of city funds are invested, hadn’t been updated since 2009 when it was revised to conform with federal, state and local laws.

The Municipal Research and Services Center says establishing and adopting a written investment policy is a good financial practice and can help governments improve financial security. “It also provides protection for elected officials and staff by spelling out a jurisdiction's investment goals and responsibilities,” MRSC says.

The city of Broken Arrow looked at several communities to compare its investment policy with others “and discovered that ours was out of date” and needed updating.

In the future, the policy will be reviewed on a yearly basis and brought back to the city council if there are any necessary changes.

Highest return

The city says its policy is to invest all public funds, “in a manner which will provide the highest investment return with the maximum security while meeting the daily cash flow demands of the city, and conforming to all federal, state, and local statutes governing the investment of public funds.”

Highlights of the changes:

  • The standard of prudence to be used by investment officials is a “prudent person” and/or “prudent investor” and this pertains to managing an overall portfolio. Investment officers acting in accordance with written procedures and the investment policy and exercising due diligence are 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.”
  • Bonding is required of all city staff who have authority to invest city funds, make wire transfers, or who have signatory authority for depository accounts shall be required in accordance with the City Code.
  • Investment officials “shall subordinate their personal investment transactions to those of the City, particularly with regard to the timing of purchases and sales.”

Suitable investments

The city treasurer is empowered by the City Council to invest in any of the securities authorized by Oklahoma law, including:

1. Obligations of the U.S. government, its agencies and instrumentalities.

2. Collateralized or insured certificates of deposit and other evidence of deposit at banks, savings banks, savings-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 located out of state.

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 cannot exceed 10% of the surplus funds of the city which may be invested pursuant to this section. Not more than half of the 10% limit shall be invested in any one financial institution specified in this paragraph.

4. Prime banker's acceptances which are eligible for purchase by the Federal Reserve System and which do not exceed 270 days' maturity. Purchases of prime banker's acceptances shall not exceed 10% of the surplus funds of the city which may be invested pursuant to this section. Not more than half of the 10% limit shall be invested in any one commercial bank pursuant to this paragraph.

5. Prime commercial paper which shall not have a maturity that exceeds 180 days nor represent more than 10% of the outstanding paper of an issuing corporation. Purchases of prime commercial paper shall not exceed 7½% of the surplus funds of the City which may be invested pursuant to this section.

6. Repurchase agreements that have underlying collateral consisting of those items specified in paragraphs 1 through 5 of this subsection.

7. Money market funds regulated by the SEC and whose investments consist of those items and those restrictions specified in paragraphs 1 through 6 of this subsection.

The policy update requires the city treasurer to provide the City Council with a quarterly investment activity report. The report shall include a listing of individual securities, earnings rate and maturity schedules.

I'm interested
I disagree with this
This is unverified
Spam
Offensive

Replies