Investment Policy

I. Philosophy

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 of 1987, as amended, Chapter 2256, Texas Government Code (the “Act”) and this Policy. Effective cash management is recognized as essential to good fiscal management. An aggressive cash management and investment policy will be pursued by the College District to take advantage of investment interest as a viable and material source of revenue to all restricted and unrestricted funds of the College District as hereinafter described. 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

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. Safety shall be the first priority, adequate liquidity the second, and yield, the third priority. Individual investments shall be made in a manner consistent with this Policy.

III. Investment Strategy

The investment portfolio of the College District includes funds pooled together from all of the College District’s fund groups.

Maintenance Funds

Maintenance funds shall have as their primary objective to support the goals of the investment policy on these funds for safety and assure the cash flows are matched with adequate liquidity while obtaining reasonable market yields. This shall be accomplished by purchasing high quality, short-to-medium term securities that will complement each other in a laddered structure or utilizing an investment pool.

Auxiliary Funds

Auxiliary funds shall have as their primary objective to support the goals of the investment policy on these funds for safety and assure that cash flows are matched with adequate liquidity while obtaining reasonable market yields. This shall be accomplished by purchasing high quality, short-to-medium term securities that will complement each other in a laddered structure or utilizing an investment pool.

Restricted Funds

Restricted funds shall have as their primary objective to support the goals of the investment policy on these funds for safety and assure that cash flows are matched with adequate liquidity while obtaining reasonable market yields. This shall be accomplished by purchasing high quality, short-to-medium term securities that will complement each other in a laddered structure or utilizing an investment pool.

Renewal and Replacement Funds

These funds shall have as their primary objective to ensure that anticipated cash outflows are matched with adequate investment liquidity. No funds shall be invested longer than the related anticipated expenditures. These portfolios shall have liquid securities to allow for unanticipated project expenditures or accelerated project outlays due to a better than expected or changed construction schedule.

Sinking Fund

Investments shall have as the primary objective the ability to generate a dependable revenue stream to the appropriate debt service fund within the limits set forth by the bond ordinance or debt covenants specific to each individual bond issue.

Building Fund

These funds shall have as their primary objective to ensure that anticipated cash outflows are matched with adequate investment liquidity. No funds shall be invested longer than the related anticipated expenditures. These portfolios should have liquid securities to allow for unanticipated project expenditures or accelerated project outlays due to a better than expected or changed construction schedule.

Each individual investment shall be considered using the following priorities in order of importance:

  1. Understanding the suitability of the investment to the financial requirements of the College District;
  2. Preservation and safety of principal;
  3. Liquidity;
  4. Marketability of the investment;
  5. Diversification of the investment portfolio; and
  6. Yield.

Maximum Maturities

The longer the maturity of investments, the greater their price volatility. Therefore, it is the College District's policy to concentrate its investment portfolio in shorter-term securities in order to limit principal risk caused by changes in interest rates.

The College District attempts to match its investments with anticipated cash flow requirements. Unless matched to a specific cash flow, the College District shall not directly invest in securities maturing more than four years from the date of purchase.

For investment pools, the average dollar-weighted maturity shall not exceed two years.

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 to 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 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"). The investment strategy governing the Scholarship Fund shall be to (1) preserve the real purchasing power of the principal in the Scholarship Fund, and (2) provide a stable source of perpetual financial support. Asset allocation will be consistent with the Guidelines for Investments as approved by the Foundation board of directors. The investment of such moneys deposited to the credit of the Scholarship Fund in property or investments undertaken in accordance with UPMIFA shall be consistent with the foregoing investment strategy and the risk and return objections set forth in the investment strategy.

IV. Deposit of Funds

All funds received by the College District shall be deposited with the College District's depository promptly upon receipt.

V. Investment Officer

The Vice Chancellor for Finance shall be the Investment Officer for all available College District funds. The Vice Chancellor for Finance may delegate the day-to-day responsibility for the investment of the College District funds to the Associate Vice Chancellor for Finance and the Chief Accountant.

Should at any time the Vice Chancellor for Finance or his designee have a personal business relationship with any entity seeking to sell investments to the College District of the nature described in the Act, said person will file a Disclosing Statement with the Texas Ethics Commission, the Chancellor and the Board of Trustees.

It is understood at all times that the control and general fiduciary responsibility of the College District's funds is vested in the Board of Trustees and said right of investment or management is extended by the Board of Trustees to the Vice Chancellor for Finance in its behalf.

In the administration of the duties of Investment Officer, the Vice Chancellor for Finance shall exercise the judgment and care, under prevailing circumstances, that a prudent person would exercise in the management of the person’s own affairs.

VI. Investment Authorization

In order to allow the maximum flexibility for the investment of the College District's funds, the Board of Trustees extends the Vice Chancellor for Finance full authority for the investment of College District funds.

VII. Authorized Investments

In Accordance with authorizing Federal and State Laws, including, but not by way of limitation, the Act, and Section 45.209, Texas Education Code, the College District's Depository Contract, and appropriate approved collateral provisions, the College District may utilize the following methods for the investment of College District funds:

  1. Obligations of the United States or its agencies and instrumentalities.
  2. Other obligations, the principal of 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 or by the explicit full faith and credit of the United States.
  3. Certificates of deposit issued by a state or national bank, domiciled in the State of Texas or a Savings and Loan Association domiciled in the State of Texas which is guaranteed or insured by the Federal Deposit Insurance Corporation, or its successor; or secured by obligations described in Section 2256.009(a), Government Code, including mortgage-backed securities directly issued by, a federal agency or instrumentality that have a market value of not less than the principal amount of the certificates, but excluding those mortgage-backed securities of the nature described by Section 2256.009(b) Government Code; or secured in any other manner and amount provided by law for deposits of the investing entity. Bid for certificates of deposit may be solicited either in writing, electronically, or a combination of the two.
  4. Fully collateralized repurchase agreements authorized under Section 2256.011, Government Code, if the repurchase agreement has a defined termination date; is secured by obligations described by Sections 2256.009(a)(1); and requires the securities being purchased by the entity to be pledged to the entity, held in the entity’s name, and deposited at the time the investment is made with the entity or with a third party selected or approved by the entity; and is placed through a primary government securities dealer, as defined by the Federal Reserve, or a financial institution doing business in the State of Texas. "Repurchase agreement' means a simultaneous agreement to buy, hold for a specified time, and sell back at a future date, obligations described by Section 2256.009(a)(1) at a market value at the time the funds are dispersed of not less than the principal amount of the funds dispersed. The term includes a direct security repurchase agreement and reverse security repurchase agreement.
  5. The College District may invest its funds and funds under its control through an eligible investment pool if the Board of Trustees by resolution or order authorizes investment in the particular pool. An investment pool shall invest the funds it receives from entities in authorized investments permitted by State Statutes. The investment pool shall provide to the College District the following information prior to the investment of College District funds therein:

    1. The types of investments in which money is allowed to be invested

    2. The maximum average dollar-weighted maturity allowed, based on he stated maturity date, of the pool

    3. The maximum stated maturity date any investment security within the portfolio has

    4. The objectives of the pool

    5. The size of the pool

    6. The names of the members of the advisory board of the pool and the dates their terms expire

    7. The custodian bank that will safekeep the pool's assets

    8. Whether the intent of the pool is to maintain a net asset value of $1 and the risk of market price fluctuation

    9. Whether the only source of payment is the assets of the pool at market value or whether there is a secondary source of payment, such as insurance or guarantees, and a description of the secondary source of payment

    10. The name and address of the independent auditor of the pool

    11. The requirements to be satisfied for an entity to deposit funds in and withdraw funds from the pool and any deadlines or other operating policies required for the entity to invest funds in and withdraw funds from the pool

    12. The performance history of the pool, including yield, average dollar-weighted maturities, and expense ratios.

To be eligible to receive funds from and investments on behalf of the College District, an investment pool must be rated no lower than AAA or AAA-m or at an equivalent rating of at least one nationally recognized rating service.

To maintain eligibility to receive funds from and invest funds on behalf of an entity, an investment pool must furnish to the investment officer:

  1. Investment transaction confirmations

  2. A monthly report that contains, at a minimum, the following information:

    1. The types and percentage breakdown of securities in which the pool has invested

    2. The current average dollar-weighted maturity, based on the stated maturity date, of the pool

    3. The current percentage of the pool's portfolio in investments that have stated maturities more than one year

    4. The book value versus the market value of the pool's portfolio, using amortized cost valuation

    5. The size of the pool

    6. The number of participants in the pool

    7. The custodian bank that is safekeeping the assets of the pool

    8. A listing of daily transaction activity of the entity participating in the pool

    9. The yield and expense ratio of the pool

    10. The portfolio managers of the pool

    11. Any changes or addenda to the offering circular

An entity by contract may delegate to an investment pool the authority to hold legal title as custodian of investments purchased with its local funds.

For purposes of investment in an investment pool, "yield" shall be calculated in accordance with regulations governing the registration of open-end management investment companies under the Investment Company Act of 1940, as promulgated from time to time by the federal Securities and Exchange Commission. In addition, an investment pool created to function as a money market mutual fund shall report yield in accordance with regulations of the federal Securities and Exchange Commission applicable to reporting by money market funds.

  1. Commercial paper notes that have a stated maturity of 270 days or fewer from the date of their issuance that have been rated not less than A-1 or P-1 or an equivalent rating by at least (i) two nationally recognized credit rating agencies or (ii) one nationally recognized credit rating agency, and is fully secured by an irrevocable letter of credit issued by a bank organized and existing under the laws of the United States or any state.
  2. (i) 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)); (ii) negotiable certificates of deposit issued by a bank that has a certificate of deposit rating of at least 1 or the equivalent by a nationally recognized credit rating agency or that is associated with a holding company having a commercial paper rating of at least A-1, P-1, or the equivalent by a nationally recognized credit rating agency; and (iii) corporate bonds, debentures, or similar debt obligations rated by a nationally recognized investment rating firm in one of the two highest long-term rating categories, without regard to gradations within those categories.

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.

Anything herein to the contrary notwithstanding, the College District shall not invest its funds in collateralized mortgage obligations.

Diversification by Investment Instrument shall not exceed the following guidelines for each type of instrument:

Percentage of Portfolio
(Maximum)
 
U.S. Treasury Obligations 100%
U.S. Gov. Agency Securities and Instrumentalities Of Gov.-Sponsored Corp. 80%
Auth. Local Gov. Investment Pools 100%
Certificates of Deposit (other than negotiable Certificates) 100%
Repurchase Agreements 50%
Money Market Mutual Funds 50%
Commercial Paper 20%
Cash Management Funds 20%
Corporate Bonds (max 3% per issuer) 20%
Negotiable Certificates of Deposit 20%

 

VIII. Business Organizations

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 such term is defined in the Act) of the Business Organization seeking to engage in an investment transaction with the College District shall execute a written instrument indicating that the Qualified Representative has:

  1. Received and reviewed this Policy.
  2. Acknowledges in writing as prescribed by the College District 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.

The Vice Chancellor for Finance or any designee thereof may not buy any securities from a Business Organization which has not delivered to the College District a written instrument as set forth hereinabove. The receipt of the written instrument does not relieve the Vice Chancellor for Finance of the responsibility for monitoring the investments of the College District’s funds to determine that the investments are in compliance with this Policy.

A Qualified Representative shall be those persons identified as such in the Act. A Business Organization includes any investment pool.

IX. Investment Reports

Not less than quarterly the Vice Chancellor for Finance shall prepare and submit to the Board of Trustees a written report of the College District's investment transactions for the preceding reporting period, in addition to other information that may be required by the College District. The report shall contain:

  1. A detail of the investment position of the College District on the date of the report.
  2. A summary statement, prepared in accordance with generally accepted accounting principles, of each pooled fund group which states:

    1. The beginning market value for the reporting period;

    2. The ending market value for the period; and

    3. The fully accrued interest for the period.

  3. 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.
  4. The maturity date of each separately invested asset that has a maturity date.
  5. The account or fund or pooled group fund of the College District from which each individual investment was acquired.
  6. Compliance of the Portfolio as it relates to the investment strategy expressed in Section III, Investment Strategy, of this Policy, as well as other relevant provisions of this Policy.
  7. The report shall be signed by the Vice Chancellor for Finance, as Investment Officer.

It is the policy of TCCD that all security transactions entered into with TCCD shall be conducted on a "DELIVERY VERSUS PAYMENT" (DVP) basis through the Federal Reserve System, with the exception of investment pools and mutual funds. By doing this, TCCD funds are not released until TCCD has received, through the Federal Reserve wire, the securities purchased. TCCD shall authorize the release of funds only after the purchased security has been received in the safekeeping account of TCCD.

The College District shall have performed as a part of its Annual External Financial Audit a compliance audit of management controls on investments and adherence to the College District's established investment policies. To the extent the Act requires review of the reports by an independent auditor, the Vice Chancellor for Finance shall provide such reports to the auditor performing the Annual External Financial Audit for review thereby, 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.

X. Monitoring Rating Changes

The College District is not required to liquidate investments that were authorized investments at the time of purchase, if they subsequently are downgraded by a nationally recognized rating agency below the statutorily-required rating for eligibility for investment of College District Funds. The Investment Officer, the Associate Vice Chancellor for Finance and the Chief Accountant will meet to discuss any investment of College District funds which has been placed on credit-watch or has been downgraded 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.

XI. Continuing Education

The Investment Officer, the Associate Vice Chancellor for Finance and the Chief Accountant shall attend an investment training session no less often than once every two fiscal years, commencing September 1, 1997. 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 investment training shall be obtained shall include (i) the Texas Higher Education Coordinating Board and (ii) a sponsoring entity of the investment training session that is an entity other than a Business Organization with whom the District may engage in an investment transaction.

XII. Related Party Investment Transactions

The Act and this Policy require that a Disclosing Statement be filed with the Texas Ethics Commission when investment transactions with related parties occur. 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.

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.

Tarrant County College District Investment Disclosure

  1. Does the institution employ outside investment advisors or managers? No
  2. Does the institution use soft dollar, directed brokerage or directed commission, commission recapture, or similar arrangements? No
  3. Is the institution associated with an independent endowment or foundation? Yes

    Tarrant County College Foundation
    Name: Mr. C. Joe McIntosh
    Title: Executive Director
    Address: 1500 Houston Street, Fort Worth, Texas 76102
    Market Value at August 31, 2014: $8,676,756

Date of the Board's most recent reaffirmation of Investment Policy or most recent approval of change to Investment Policy: 08/18/2014

Name: Nancy H. Chang,
Title: Associate Vice Chancellor for Finance
Phone Number: 817-515-5222
Email: nancy.chang@tccd.edu

Address:
Tarrant County College District
1500 Houston Street
Fort Worth, Texas 76102

 

Updated September 11, 2014

 

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