Click here to skip to main content.
scenic picture from Washington state
RESEARCH TOOLS › SAMPLE DOCS › Investment Policy
 
 
City of Clyde Hill Investment Policy

Town of Clyde Hill, Washington
INVESTMENT POLICY

July 1998

1.0 Policy
    It is the policy of the Town of Clyde Hill to invest public funds in a manner consistent with the greatest safety and protection for the Town's investments. This investing of funds will, while protecting the safety of the Town's investment, produce the highest investment return for meeting the cash flow requirements of the Town and conform to all Washington State statutes, Town ordinances and policies governing the investment of public funds.

2.0 Scope

    This investment policy applies to all financial assets of the Town of Clyde Hill. These funds are accounted for in the Town's Annual Report, and include:
    2.1 Funds

      2.1.1 General Fund (Number 001)
      2.1.2 Reserve Fund (Number 002)
      2.1.3 Projects Fund (Number 100)
      2.1.4 Trust and Agency Fund (Number 600)
      2.1.5 Any new Funds created by the Council, unless specifically exempted by the Town Council.

3.0 Prudence

    The standard of prudence to be applied by the Investment Officer in managing the Town's overall portfolio shall be the "Prudent Person Rule" which states:
    "Investments shall be made with 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."

    The Investment Officer, acting in accordance with the Investment Policy and exercising due diligence, shall be relieved of personal responsibility for an individual security's risk or market price changes, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments.

    3.1 Public Trust
      All participants in the investment process will seek to act responsibly as custodians of the public trust. Investment officials shall recognize that the investment portfolio is subject to public scrutiny and evaluation. In addition, the overall investment program shall be designed and administered with a degree of professionalism worthy of the public trust. Investment officials shall also refrain from any transaction that might knowingly impair public confidence in the Town's ability to govern effectively.
4.0 Objective
    The funds of the Town of Clyde Hill will be invested in accordance with the Constitution of the State of Washington, applicable statutes (Revised Code of Washington (RCW)), Town ordinances, resolutions, and Council direction. The objectives below are listed in order of importance.
    4.1 Safety
      Safety of principal is the primary objective of the Town's investment program. Investments of the Town shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. To achieve this objective, some diversification may be required in order that potential losses on individual securities do not exceed the income generated from the remainder of the portfolio.

    4.2 Liquidity

      The Town of Clyde Hill's investment portfolio will remain sufficiently liquid to enable the Town to meet all operating and capital requirements which might reasonably be anticipated.

    4.3 Return on Investment

      The Town's investment portfolio shall be designed with the goal of attaining a market rate of return throughout budgetary and economic cycles, taking into account the Town's investment risk constraints and the cash flow characteristics of the portfolio.

5.0 Delegation of Authority

    5.1 Investment Policy and Implementation
      The Town Council will annually review the overall Investment Policy as it relates to the Town's financial objectives and make any necessary modifications to the Policy. The Council will annually appoint the members of the Investment Committee and direct the Investment Committee as to the investment policies to be implemented for the next year.

    5.2 Investment Committee

      The membership of the Town's Investment Committee shall include the Treasurer, Deputy Treasurer, Mayor, and two members of the Town Council. The Committee shall meet quarterly to review the Town's current investments and provide the Treasurer with guidance on any further investment decisions. The Committee shall meet to determine general strategies and monitor results. The Investment Committee shall include in its deliberations such topics as: economic outlook; portfolio diversification and maturity structure; potential risks to the Town's funds; authorized depositories, brokers and dealers; and the target rate of return on the investment portfolio.
    5.3 Investment Officer
      The Town of Clyde Hill's Treasurer is designated as the Investment Officer of the Town and is responsible for implementing investment decisions and activities with the guidance of the Town's Investment Committee.
      The Treasurer shall establish and maintain written procedures for the operation of the investment program consistent with this Investment Policy. Such procedures shall include explicit delegation of authority to persons responsible for the implementation of the investment transactions. No person may engage in an investment transaction except as provided under the terms of this Policy, and the procedures established by the Treasurer. The Treasurer will be responsible for all transactions undertaken and will institute a system of controls to manage the actions of treasury employees. This system of controls will include protections such as dual signatures to transfer funds.

6.0 Ethics and Conflicts of Interest

    Officials and employees involved in the investment process shall refrain from personal business activity which could conflict with proper execution of the investment program, or which could impair their ability to make unbiased investment decisions. Employees and investment officials shall disclose to the Town Council any material financial interests in financial institutions that conduct business for the Town, and they shall further disclose any large personal financial/investment positions that could be related to the performance of the Town's portfolio. Employees and officers shall subordinate their personal investment transactions to those of the Town, particularly with regard to the timing of purchases and sales.

7.0 Qualified Institutions

    The Treasurer will maintain a list of financial institutions and security dealers authorized to provide banking and investment services to the Town.
    7.1 Financial Institutions
      The selection of the Town's bank(s) will be made from the list of Qualified Public Depositories approved by the Washington Public Deposit Protection Commission as authorized to provide investment services. (R.C.W. 39.58.080)
      Banks having a deposit relationship with the Town shall provide the Treasurer with appropriate financial statements on a timely basis.
    7.2 Security Dealers
      The security dealers and financial institutions may include "primary" or regional dealers that qualify under Securities and Exchange Commission Rule 15C3-1 (See "Uniform Net Capital Rule" in Glossary) and investment departments of local banks, any of which have been subjected to the following evaluation by the Investment Committee:
      7.2.1 Financial condition, strength and capability to fulfill commitments
      7.2.2 Overall reputation with other dealers and investors
      7.2.3 Regulatory status of the dealer
      7.2.4 Background and expertise of the individual representative.
    Individuals representing firms doing business with the Town shall receive a copy of the Policy, and shall certify, in the format prescribed by the Government Finance Officers Association (GFOA), that they have read it and understand the provisions therein. A copy of such certification, along with financial statements (both current and annual audited), shall be kept on file and reviewed annually.

8.0 Authorized and Suitable Investments

    As contemplated in the Revised Code of Washington Section 35.39.032, the Treasurer of the Town is authorized on behalf of the Town and in accordance with the investment decisions of the Investment Committee to invest all money in the Town Treasury which, in the judgment of the Treasurer, are in excess of current Town needs. These excess funds can be invested in the following instruments:
    8.1
    Investment deposits, including certificates of deposit, with qualified public depositories as defined in RCW Chapter39.58. No more than $100,000 will be invested with any one institution.

    8.2
    Certificates, notes, bonds, or any other obligations of the United States, including Treasury bills and Treasury bonds. (RCW Section 43.84.080, 36.29.020)

    8.3 The State of Washington Local Government Investment Pool. (RCW Chapter 43.250)

9.0 Safekeeping and Custody

    All securities transactions entered into by the Town of Clyde Hill shall be conducted on a delivery-versus-payment (DVP) basis. Securities will be held by a financial institution designated by the Town Treasurer as primary agent to serve as a third-party custodian acting on the Town's behalf. The primary agent shall issue a safekeeping receipt to the Town listing the specific instrument, rate, maturity and all other pertinent information. All securities purchased by the Town shall be properly designated as an asset of the Town, and no withdrawal of such securities, in whole or in part, shall be made from safekeeping except by the Treasurer as authorized herein, or by the Treasurer's designee(s).

    The Town will execute third party custodial agreements with its banks or other custodial agents, which are chartered by the United States government or the State of Washington. Such agreements will include letters of authority from the Town, details as to responsibilities of each party, notification of security purchases, sales, delivery, repurchase and reverse repurchase agreements. The agreements will also include wire transfer, safekeeping and transaction costs, procedures in case of wire failure or other unforeseen mishaps, and the liability of each party.

10.0 Diversification
    It is the policy of the Town to diversify its investment portfolio to eliminate the risk of loss resulting from over concentration of assets in a specific maturity, a specific insurer, or a specific class of securities.
    Max. % of
    10.1 Diversification by Instrument Portfolio
10.1.1 Federally Insured Certificates of Deposit
    (Section 8.1)................. 20%

          It is the Policy of the Town to keep only minimal balances within its operating checking accounts to cover any outstanding checks and to maintain minimum bank balances. Because the actual balances within these accounts are constantly fluctuating and are used for short-term cash-flow purposes, the Town's operating accounts will not be considered as part of this calculation.

      10.1.2 U.S. Treasury Obligations (Section 8.2)............. 20%
      10.1.3 Local Government Investment Pool (Section 8.3) 100%

11.0 Maximum Maturities

    To the extent possible, the Town of Clyde Hill will attempt to match its investments with anticipated cash flow requirements. Unless matched to a specific cash flow, the Town will not directly invest in securities having a maturity date of more one-year from the date of purchase.

12.0 Internal Control

    The Treasurer shall establish an annual process of independent review by the State auditor or an external auditor. This review will provide internal control by assuring compliance with policies and procedures.

13.0 Performance Guidelines

    The Investment Portfolio shall be designed to meet the investment objectives as outlined in Section 4.0 of this policy. The Town's investment strategy shall lean toward conservative and passive investments. Given this strategy, the consideration of investment yields will use, as a benchmark, the average rate of return of the Local Government Investment Pool of the State of Washington. This performance standard shall take into account the Town's investment risk constraints and cash flow needs. Maturities of investments shall be kept relatively shorter in periods of rising interest and relatively longer in periods of declining interest rates.

14.0 Reporting

    The Treasurer is charged with the responsibility of monthly and quarterly reporting on the investment portfolio.
    14.1 Monthly Reports
      The Treasurer will provide a brief report to the Council regarding the current status of the portfolio, including investment activity, location and type of investment and evidence of investments acceptable to the Council.

    14.2 Quarterly Reports

      The Treasurer shall submit to the Investment Committee a quarterly investment report that summarizes the investment strategies employed in the most recent quarter, description of the portfolio in terms of investment securities, yields, maturities, risk characteristics and other features. The report shall explain the quarter's total investment activity, as well as compare the return on investment with both the target rate of return projections and budgetary expectations.

15.0 Investment Policy Adoption

    The Town's Investment Policy shall be adopted by Resolution of the Town Council. The Policy shall be reviewed periodically by the Treasurer. Any modifications made to the Policy must be approved by the Council.