The philosophy of the College District Investment Department is to ensure that all available funds are invested to the maximum extent possible at the highest possible rates obtainable at the time of investment consistent with the legal and administrative guidelines of this Policy. The College District shall invest funds consistent with law, including, without limitation, the Public Funds Investment Act, as amended, Chapter 2256, Texas Government Code (the “Act”) and this Policy.
Effective cash management is recognized as essential to good fiscal management. A pro-active cash management and investment strategy will be pursued by the College District to take advantage of investment opportunities as a viable and material source of revenue to all funds of the College District. The investment of the College District's funds shall be designed and managed in a manner to promote the best interest of the College District and the public.
II. Standard of Care
In the investment of all District funds, the standard of care to be applied to all investments shall be the “prudent person” rule, which states:
College District investments shall be made with judgment and care under circumstances then prevailing that 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 and optimum liquidity required for operations in the College District.
III. Investment Strategy
Safety shall be the first priority, adequate liquidity the second, diversification the third, and yield, the fourth. All investments shall be made in a manner consistent with this Policy.
The investment portfolio may be commingled for investments purposes or structured in separate portfolios to address specific purposes. Commingled funds will recognize the specific uses and unique characteristics of the funds in the portfolio.
All investments will be made with a clear understanding as to the suitability of the investment to the financial requirements of the College District. Within all portfolios the goals of the College District shall be accomplished by purchasing high credit quality, short-to-medium term securities that will retain their marketability and complement each other in a laddered structure. Funds not needed for immediate cash flow needs may be extended to longer term investments to enhance overall yield. The strategy will be guided by cash flow needs as well as long term goals.
Maintenance, Auxiliary and Restricted Funds
These funds have as their primary objective to assure the cash flows in a forward rolling twelve months are matched with adequate liquidity while obtaining reasonable market yields. To allow for unanticipated expenditures the portfolios will retain a short-term liquidity buffer.
To the extent bond proceeds of the College District are invested in accordance with provisions of the instruments authorizing the issuance of such bonds, if there shall be a conflict between such authorizing instruments and this Policy (except as described in the following paragraph), the terms of such authorizing documents shall govern and control the investment of bond proceeds and any debt service or reserve funds therein created.
Renewal and Replacement Funds
These funds are specific to designated projects for renewal or replacement and as such must be matched to the related anticipated expenditure schedules. In order to allow for unanticipated project expenditures or accelerated project outlays the portfolios will retain a short-term liquidity buffer.
Interest and Sinking Funds
Funds designated for payment of debt service shall have as the primary objective the placement of investments to match debt service schedules as well as the ability to generate a dependable revenue stream as set forth by the individual bond ordinance or debt covenants. In no case will investments be extended until each subsequent debt service date is fully funded.
These funds shall be guided by the anticipated cash outflows. No funds shall be invested longer than the related anticipated expenditures and should have a liquidity buffer to allow for unanticipated project expenditures or accelerated project outlays.
Gas Royalty Scholarship Fund
The College District anticipates receiving royalty payments from the development of mineral rights, including specifically the development and extraction of natural gas, with moneys derived from royalty payments may be dedicated, as determined by the Board of Trustees, in a designated fund to provide scholarships to students of the College District (such fund is referred to in this Policy as the "Scholarship Fund").
Moneys dedicated to the Scholarship Fund remain the property of the College District but may be invested by the Tarrant County College Foundation ("Foundation") in accordance with the authority granted by the Uniform Prudent Management of Institutional Funds Act, Chapter 163, Texas Property Code ("UPMIFA"). To distinguish the different nature of these funds and the
ability to invest these funds under the UPMIFA an additional and separate Statement of Investment Parameters is established for these moneys. Investment authorizations and allocations as well as controls and requirements for the moneys shall be consistent with this Policy and the Tarrant County College Foundation Investment Policy under the direction of the Board of Directors. The separate investment of the moneys is designed to establish greater flexibility in the investment of the funds which are long-term by nature. The Investment Parameters are made a part of this Policy (Attachment A).
The investment strategy governing the Scholarship Fund shall be to (1) preserve the real purchasing power of the principal, and (2) provide a stable source of perpetual financial support.
Longer maturity investments have greater price volatility and generate increased risk. Therefore, it is the College District's policy to concentrate its investment portfolio in shorter- and intermediate term high credit quality securities.
For most investment purposes, the College District attempts to match its investments with anticipated cash flow requirements. The maximum maturity for any investment shall be five (5) years.
The maximum weighted average maturity of the total portfolio will not exceed one (1) year based on stated maturity. The risk and performance benchmark for the total portfolio shall be the one-year Treasury Bill for the comparable time period.
IV. Deposit of Funds
All funds received by the College District shall be promptly deposited with the College District's depository upon receipt. Funds may also be transferred instead into a pooled investment vehicle (investment pool) in order to avoid unnecessary collateralization requirements.
V. Delegation of Authority; Responsibilities; Training
In accordance with the Act, the Board of Trustees, by resolution, delegates management responsibility for the investment of the College District’s funds to the Vice Chancellor for Finance who shall be the Investment Officer for all College District funds (the “Investment Officer”). The Vice Chancellor for Finance has full authority for the daily investment of College District funds.
The Investment Officer for Finance may delegate the day-to-day responsibility for the investment of the College District funds to the Associate Vice Chancellor for Finance, the Director of Accounting, the Chief Accountant and other employees of the College District in the Finance Department. These individuals shall also be designated investment officers by resolution of the Board. The resolution by the Board will designate such individuals by name. No person other than the Investment Officer(s) named in the resolution may engage in an investment transaction and all transactions shall be executed as provided under the terms of this Policy and its supporting procedures.
Should at any time any Investment Officer have a personal or business relationship with any entity seeking to sell investments to the College District, the Officer will file a disclosure statement with the Chancellor and the Board of Trustees. Should that relationship exceed the limits as established in the Act, the Investment Officer shall also file a disclosure with the Texas Ethics Commission.
The Board may also contract with a non-discretionary, Investment Adviser (“Investment Adviser”) with the Securities and Exchange Commission under the Investment Advisers Act of 1940, or successor statute, to advise the Investment Officers and manage the funds of the portfolio(s). A contract entered into with such an Investment Adviser should be for an initial term of two years. Any renewal or extension of the contract must be made pursuant to a resolution adopted by the Board of Trustees.
In accordance with the Act, the fiduciary responsibility of the College District's funds is vested in the Board of Trustees and that fiduciary responsibility is extended by the Board of Trustees to the Investment Officers in its behalf.
It is the College District’s policy to provide training for Board members and Investment Officers as required by the Act. The Texas Higher Education Coordinating Board will provide training for Board members to be conducted within six (6) months of assuming office. All Investment Officers shall attend an investment training session of no less than ten (10) hours within one year of taking the position. Not less than once every two succeeding fiscal years, commencing on the first day of the fiscal year, all investment officers shall obtain five (5) hours of investment training. The investment training session shall be provided by an independent source approved by the Board of Trustees. For purposes of this Policy, an independent source from which training shall be obtained shall include a professional organization, an institute of higher learning or any other sponsor other than a business organization with whom the College District engages in an investment purchase or sale. A list of approved training sponsors shall be approved by the Board of Trustees.
Board of Trustees
The Board of Trustees is responsible for reviewing and adopting the Investment Policy on no less than an annual basis. The Board is responsible for designating Investment Officers or an
Investment Adviser responsible for the management of the portfolio(s), receiving and reviewing monthly and quarterly reporting, approving and providing for investment officer training, and annually approving broker/dealers. The Board holds ultimate fiduciary responsibility for all the District’s funds.
Related Party Investment Transactions
The Act and this Policy require that a disclosing statement be filed with the Texas Ethics Commission when certain investment transactions with related parties occur [Govt Code 2256.005(a)]1. Individuals who are responsible for filling a disclosing statement include members of the Board of Trustees and employees who are directly or indirectly responsible for establishing and executing this Policy. Personal or business relationships below the parameters of 2256.005(i) should be discussed to the Chancellor.
Related party transactions include, but are not limited to, transactions between responsible College District individuals and owners or employees representing entities seeking to engage in an investment transaction with the College District who have direct family relations or have common personal business interests, as well as personal business relationships of the nature described in the Act.
VI. Authorized Investments
In Accordance with authorizing federal and laws of the State of Texas, including the Act and Section 45.209, Texas Education Code, the College District may invest in only the following investment securities/transactions. Should new investments be added by applicable law, such investments will not be authorized for the College District unless and until this Policy has been reviewed amended and adopted by the Board of Trustees.
- Obligations of the United States or its agencies and instrumentalities with a maximum maturity of five years, including mortgage-backed and CMO securities which pass the Federal Reserve’s “bank test”.
- Obligations, the principal and interest of which are unconditionally guaranteed or insured by, or backed by the full faith and credit of the United States or their respective agencies and instrumentalities, including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation (FDIC).
- Depository certificates of deposit issued by a state or national bank with a main or branch office in Texas which are guaranteed or insured by the FDIC, or its successor; or secured by collateral in accordance with this policy.
Share certificates of a Texas credit union insured by the National Credit Union Insurance Fund, or its successor.
Collateralized repurchase agreements as defined and authorized under Section 2256.011, Government Code and fully collateralized in accordance with this Policy. This includes flex repurchase agreements, direct security repurchase agreements and reverse security repurchase agreements.
Texas local government investment pools which strive to maintain a $1 net asset value and are rated AAA or equivalent rating by a nationally recognized credit rating agency. The investment pool shall be authorized by the Board of Trustees by resolution in order to become a member of the establishing cooperative.
- Commercial paper with a stated maturity of 90 days or less from the date of purchase that has been rated not less than A1/P1 or an equivalent rating by two nationally recognized credit rating agencies.
- Cash management and fixed income funds sponsored by organizations exempt from federal income taxation under Section 501(f), Internal Revenue Code of 1986 (26 U.S.C. Section 501(f)).
- Fully FDIC insured brokered certificates of deposit securities issued by a US national banking association or state bank that has a certificate of deposit rating of at least 1 or the equivalent rating by a nationally recognized credit rating agency. Before purchase the Investment Officer must verify the FDIC status of the bank and monitor ownership of the bank weekly.
- Corporate bonds, debentures, or similar debt obligations rated at least AA or equivalent rating by a nationally recognized credit rating agency.
- State and local obligations rated at least A by a nationally recognized credit rating agency.
- Money market mutual funds registered with the Securities and Exchange Commission which are rated AAA or equivalent rated by a nationally recognized credit rating agency and which strive to maintain a $1 net asset value.
SEC registered short term bond mutual funds with a maximum WAM of two years and restricted to the investments authorized under this Policy which are rated AAA or equivalent by a nationally recognized crediting agency. The funds may not be utilized for bond proceeds.
- Interest bearing accounts in any bank doing business in Texas which are fully insured by the FDIC or collateralized in accordance with this policy.
The following percentages for maximum holdings in the total portfolio are designed to promote diversification and minimize credit and market risk.
|Maximum Percentage of Portfolio|
|U.S. Treasury Obligations||90%|
|U.S. Gov. Agency Securities and Instrumentalities||80%|
|Local Gov. Investment Pools||80%|
|Depository Certificates of Deposit||40%|
|Brokered Certificate of Deposit Securities||20%|
*flex agreements 100% of bond proceeds
|Money Market Mutual Funds||50%|
|Commercial Paper (max 5% of issuer)||20%|
|Corporate Bonds (max 3% per issuer)||20%|
|State and Local Debt Obligations||40%|
VII. Policy Certification
A written copy of this Policy shall be presented to any business organization that seeks to engage in an investment transaction with the College District. The Qualified Representative (as defined in the Act) of the business organization shall certify in a written instrument, in language acceptable to both parties, indicating that the Qualified Representative has:
- Received and reviewed this Policy.
- Acknowledges in writing that the business organization has implemented reasonable procedures and controls in an effort to preclude investment transactions conducted between the College District and the business organization that are not authorized by this Policy.
Investment Officers may not buy any securities from a business organization which has not delivered to the College District a written instrument as set forth above. Material changes in this Policy will require re-certification by such business organizations.
VIII. Investment Reports
The Investment Officer, or Investment Adviser, shall prepare and submit to the Board of Trustees a written report of the College District's investment transactions each month and on a quarterly basis for the preceding reporting period. In addition to other information that may be required by the College District the report shall contain:
- A detail of the investment positions on the date of the report.
- A summary statement, prepared in accordance with generally accepted accounting principles,
- The beginning and ending market value for the reporting period,
- The beginning and ending amortized book value for the period,
- The total earnings (accrued interest plus net amortization) for the period,
- The weighted average maturity and weighted average yield of the portfolio, and
- The benchmark yield for the comparable period
- The book value and market value of each separately invested asset at the end of the reporting period by the type of asset and fund type invested.
- The stated (and call) maturity date of each separately invested asset that has a maturity date.
- The portfolio for which each individual investment was acquired.
- A statement of compliance of the report and portfolio as it relates to the investment strategy and provisions in this Policy.
- The report shall be signed by the Investment Officers.
Market prices shall be obtained from an independent source.
The Investment Officers shall provide the quarterly investment reports to the auditor performing the annual external financial audit for review and take such steps as may be reasonable to cause said auditor to report the results of its review of the investment reports to the Board of Trustees.
To the extent required by the Act, no later than 180 days after the last day of each regular session of the Texas Legislature, the Investment Officer shall prepare and deliver to the Board of Trustees a report reciting the changes, if any, made to the Act that were enacted into law by the recently concluded regular session of the Texas Legislature.
IX. Internal Controls
Delivery versus Payment Settlement
All security transactions shall be conducted on a "DELIVERY VERSUS PAYMENT" (DVP) basis, with the exception of investment pools and mutual funds. Funds shall not be released until the College District’s safekeeping agent has received the securities purchased.
The Investment Officers shall annually perform a compliance audit of management controls on investments and adherence to the Investment Policy and procedures in addition to the compliance audit provided by the District’s external auditor.
The College District shall not use any soft dollar arrangements, directed brokerage or directed commission, commission recapture, or similar arrangements in any investment transaction.
Monitoring Rating Changes
The Investment Officer, or Investment Adviser, shall monitor on no less than a monthly basis the credit rating on all authorized investments in the portfolio based upon independent information from a national recognized credit rating agency. If an investment is downgraded by a nationally recognized rating agency below the Policy required rating for eligibility it must be liquidated in a prudent manner. The Investment Officers shall report the downgrade to the Chancellor and Chairperson of the Audit and Finance Committee within three business days after the Investment Officer becomes aware of the downgrade.
The Investment Officers will meet to discuss the downgrade to evaluate and take any necessary and prudent measures to assure the safety of College District funds. It is the policy of the College District to liquidate as quickly as is prudently possible any investment that loses its required credit rating while held in the College District’s portfolio.
Previously Authorized Investments
Except as provided in this Policy, the College District is not required to liquidate investments that were authorized investments at the time of purchase or gift to the College District but have
become unauthorized by law or Policy; provided however the Investment Officers shall determine whether it is prudent not to liquidate such investment. If the investment is not liquidated, the proceeds from its sale or maturity shall be reinvested only in authorized investments in this Policy.
Cash Flow Forecasting
Cash flow forecasting is designed to protect and sustain cash flow requirements of the College District. The Investment Officer will analyze and maintain a cash flow plan to monitor and forecast cash positions for investment purposes.
All security transactions will be made on a competitive basis to assure the College District is receiving good market rates. “When-issued” agency securities should also be compared to other securities available in the secondary market before purchase.
Monitoring FDIC Status for Mergers and Acquisitions
The Investment Officer, or Investment Adviser, shall monitor, on no less than a weekly basis, the status and ownership of all banks issuing brokered certificates of deposit owned by the College District based upon information from the FDIC (fdic.gov). If any bank has been acquired or merged with another bank in which brokered certificates of deposit are owned by the College District, any brokered certificate of deposit which places the College District above the FDIC insurance level shall be immediately liquidated.
X. Financial Counter-Parties
At least every six years, a primary banking services depository shall be selected through a competitive request for proposal or bid process. In selecting a depository, the services, cost of services, credit worthiness, earnings potential, and collateralization by the institutions shall be considered. The depository contract will provide for collateral in accordance with this Policy if balances exceed the FDIC insurance balance, currently $250,000 per tax identification number.
All time and demand deposits in any depository shall be insured or collateralized at all times in accordance with this Policy.
Other banking institutions from which the College District may purchase certificates of deposit will also be designated as a depository for depository/collateral purposes. All depositories will execute a depository agreement and require that the Bank’s Board or Bank Loan Committee pass a resolution approving the agreement if collateral is required.
All pools, financial institutions, and broker/dealers who desire to transact business with the College District must supply the following documents to the Investments Officers.
- (if brokers) Financial Industry Regulatory Authority (FINRA) certification and CRD #
- (if brokers) proof of Texas State Securities registration
- policy review certification
- completed College District broker/dealer questionnaire
Each pool/bank/broker must be provided a copy of the current Investment Policy and certify to a review of the Policy stating that the firm has controls in place to assure only Policy approved investments will be sold to the College District. Material changes to the Policy will require re- certification of such review.
A list of qualified broker/dealers will be reviewed at least annually by the Board. In order to perfect the required DVP process the banking services depository, or its brokerage subsidiary, will not be used as a broker.
Time and Demand Deposits with Pledged Collateral
All bank time and demand deposits shall be collateralized above the FDIC coverage by pledged collateral. In order to anticipate market changes and provide a level of security for all funds, collateral will be maintained and monitored by the pledging depository at 102% of market value of principal and accrued interest on the deposits. The bank shall monitor and maintain the margins on a daily basis.
Collateral pledged to secure deposits shall be held by an independent financial institution/custodian outside the holding company of the depository. The collateral agreement with the depository shall be approved by resolution of the Bank Board or Bank Loan Committee. The custodian shall provide a monthly report of collateral directly to the College District.
All collateral shall be subject to inspection and audit by the College District and its independent auditors.
Only the following securities are authorized as collateral for time and demand deposits or repurchase agreements:
- FDIC insurance coverage.
- Obligations of the United States, its agencies or instrumentalities, or evidence of indebtedness of the United States guaranteed as to principal and interest including mortgage-backed securities (MBS) and collateralized mortgage obligations (CMO) which pass the Federal Reserve Bank Test.
- Obligations of any US state or of a county, city or other political subdivision of any state having been rated as investment grade no less than “A” or its equivalent by two nationally recognized rating agencies, and
- Letter of Credit from the Federal Home Loan Bank.
Collateral under a repurchase agreement is owned by the College District and must be defined under the executed Master Repurchase Agreement governing the transaction. Collateral will be maintained and monitored by the counter-party at 102% of market value of principal and accrued interest. The counter-party and custodian shall monitor and maintain the margins on a daily basis.
Collateral shall be held by an independent financial institution/custodian outside the holding company of the counter-party. The custodian shall provide, at a minimum, a weekly report of collateral directly to the College District and daily mark-to-market of the securities. The acceptable collateral will be restricted to:
- Obligations of the United States, its agencies or instrumentalities, or evidence of indebtedness of the United States guaranteed as to principal and interest including MBS and CMO which pass the Federal Reserve Bank Test.
- Obligations of any US state or of a county, city or other political subdivision of any state having been rated as investment grade no less than “A” or its equivalent by two nationally recognized rating agencies, and
All collateral shall be subject to inspection and audit by the College District or its independent auditors.
All securities owned by the College District shall be held in safekeeping by a safekeeping agent, which may be the College District’s depository bank or a third party safekeeping institution approved by the Board of Trustees. All safekeeping arrangements shall be evidenced by a written agreement between the safekeeping institution and the College District and approved by the Investment Officer. All securities owned by the College District shall be cleared into the safekeeping institution on a DVP basis. The safe-keeping agent shall be required to issue original safekeeping receipts/reports to the College District listing each specific security, rate, description, maturity, cusip number, and other pertinent information.
XIII. Investment Policy Adoption
The College District’s Investment Policy shall be reviewed and adopted by resolution of the Board of Trustees no less than annually. Any changes made to the Policy must be noted in the adopting resolution.
Date of the Board's most recent reaffirmation of Investment Policy or most recent approval of change to Investment Policy: September 24, 2015
Name: Nancy H. Chang,
Title: Associate Vice Chancellor for Finance
Phone Number: 817-515-5222
Tarrant County College District
1500 Houston Street
Fort Worth, Texas 76102
Updated October 03, 2015