HAMILTON-WENHAM REGIONAL SCHOOL DISTRICT

WENHAM, MA

D4026

CASH & INVESTMENT

Statement of Purpose:

The purpose of this document is to specify the policies and guidelines that provide for the prudent and productive investment of District funds.

The Hamilton-Wenham School District authorizes the Treasurer to act as the custodian and investment officer of District funds and to invest the following funds in accordance with this policy, and the provisions of applicable Massachusetts General Laws ("MGL").

The District Treasurer is the custodian and investment officer for the following funds:

*The investment procedures of grant funds are subject to grant or contractual terms.

Section I.

The Investment of General Funds, Special Revenue Funds, and Capital Projects Funds

A. Scope

This section of the policy applies only to short term operating funds such as general funds, special revenue funds, bond proceeds and capital project funds. Section two will deal with any other funds with special circumstances such as scholarship funds.

B. Objectives

District Treasurer will invest all public funds except those required to be kept uninvested for purposes of immediate distribution. Modern banking systems enable the District Treasurer to maintain even these funds in interest bearing form until the date a disbursement order clears through the banking system.

The state law further requires that invested funds are to be placed at the highest possible rate of interest reasonably available, taking into account the acceptable levels of safety, liquidity and yield. Therefore, these guidelines are intended to further the objective of securing the highest reasonable return available that is consistent with safety of principal while meeting the daily cash requirements for the operation of the District.

C. Investment Instruments

Public investments in Massachusetts are not protected through provisions in State law. Therefore, they are largely uncollateralized. Many banking institutions are willing to put up collateral, albeit at a cost to the entity resulting in a lower interest rate. The Treasurer negotiates for the highest rates possible, consistent with safety principles. All investments must be included in the Massachusetts List of Legal Investments pursuant to M.G.L. Chapter 167, Section 15A.  

The Treasurer may invest in the following instruments:

  1. Risk Tolerance

The District will manage credit risk several ways. There will be no limit to the amount of United States Treasury and United States Government Agency obligations.

In regards to other investments, the District will only purchase investment grade securities with a high concentration in securities rated A or better.

The District may invest in the Massachusetts Municipal Depository Trust (MMDT) with no limit to the amount of funds placed in the fund.

The District will review the financial institution’s financial statements and the background of the brokerage house and broker/dealer (Advisor). The intent of this qualification is to limit the District’s exposure to only those institutions with a proven financial strength, capital adequacy of the firm, and overall affirmative reputation in the municipal industry.

Further, all securities not held directly by the District, will be held in the District’s name and tax identification number by a third-party custodian approved by the Treasurer and evidenced by safekeeping receipts showing individual CUSIP numbers for each security.


The District will minimize concentration of credit risk by diversifying the investment portfolio so that the impact of potential losses from any one type of security or issuer will be minimized.

The District will manage interest rate risk by managing duration in the account.

The District will not invest in any instrument exposed to foreign currency risk.

E. Diversification

Diversification should be interpreted in two ways: in terms of maturity as well as instrument type and issuer. The diversification concept should include prohibition against over concentration of maturities, as well as concentration in a specific institution. With the exception of U.S. Treasury obligations or investments fully collateralized by U.S. Treasuries or agencies, and State pools (MMDT), no more than 10% of the District's investments shall be invested in a single financial institution.

F. Authorization

The Treasurer has authority to invest District funds, subject to the statutes of the Commonwealth Massachusetts General Law Chapter 44 Section 55,55A, & 55B.

G. Ethics

The Treasurer shall refrain from any personal activity that may conflict with the proper execution of the investment program or which could impair or appear to impair ability to make impartial investment decisions. The Treasurer shall disclose to the School Committee any material financial interest in financial institutions that do business with the District. The Treasurer shall also disclose any large personal financial investment positions or loans that could be related to the performance of the District's investments.

H. Relationship with Financial Institutions

Financial institutions should be selected first and foremost with regard to their financial soundness and stability. Brokers should be recognized, reputable dealers and members of the Financial Industry Regulatory Authority (FINRA).

 

The Treasurer should request the banking institution’s Veribanc rating from all of the banking institutions that are working with the District on a semi-annual basis.

When using the Veribanc Rating Service the Treasurer may invest in such banks that show a green rating in a particular report. If a rating is yellow the Treasurer should contact the appropriate banking institution and request in writing an explanation of the change in rating and the expected time table for it to be changed to green.

If for a second report such rating is not green, the Treasurer should consider removing all funds that are not collateralized, or carries y some form of depositors insurance.

If a rating moves to red all money should be immediately collateralized or covered by some form of depositors insurance or be removed from the banking institution.

The Treasurer shall require any brokerage houses and broker/dealers wishing to do business with the District to supply the following information to the Treasurer on an annual basis:

I. Reporting Requirements

On a semi-annual basis, a report containing the following information will be prepared by the Treasurer and distributed to the Superintendent, the Assistant Superintendent for Finance and Administration, and the Director of Accounting. The report will include the following information, as a minimum requirement:

J. Restrictions

There are several restrictions that the Treasurer must be aware of when making investment selections.

J. Legal References

M.G.L  Chapter 44, Section 55

M.G.L. Chapter 44, Section 55A

M.G.L. Chapter 44, Section 55B

M.G.L. Chapter 203C

M.G.L. Chapter 167, Section 15A

Section II.

The Investment of Trust Funds and Stabilization Funds

A. Scope

This Policy applies to all accounts that are designated as Scholarship or Trust Funds. These funds include all accounts that are received as scholarships and perpetual care receipts.

All accounts will be maintained separately receiving their proportionate interest and any realized and unrealized gains or losses. The account will be established as a pooled investment portfolio unless otherwise stated. Any additional accounts will be maintained in this same manner.

B. Authority

MGL Chapter 44, section 54 pertains to the investment of Trust Funds. All trust funds shall fall under the control of the District Treasurer unless otherwise provided or directed by the donor.

C. Objective

MGL, Chapter 44, section 55B requires the District Treasurer to invest all public funds except those required to be kept un-invested for purposes of immediate distribution.

This section also requires that invested funds are to be placed at the highest possible rate of interest reasonably available, taking into account the acceptable levels of safety, liquidity and yield. Therefore, these guidelines are intended to further the objective of securing the highest reasonable return available that is consistent with the safety of principal while meeting the daily cash requirements for the operation of the District.

D. Investment Instruments

District funds should be deposited into savings banks or trust companies incorporated under the laws of the Commonwealth, banking companies incorporated under the laws of the Commonwealth which are members of the Federal Deposit Insurance Corporation, or national banks, or invested in participation units in a combined investment fund under section thirty-eight A of chapter twenty-nine, or in paid–up shares and accounts of and in co-operative banks, or in shares of savings and loan associations or in share or savings deposits of federal savings and loan associations doing business in the commonwealth.

Additionally the District may invest such funds in securities, other than mortgages or collateral loans, which are legal for the investment of funds of savings banks under the laws of the commonwealth; provided, that not more than fifteen percent (15%) of any such trust funds shall be invested in bank stocks and insurance company stocks, nor shall more than one and one-half percent (1 ½%) of such funds be invested in the stock of any one bank or insurance company. All investments must be represented by the Massachusetts List of Legal Investments pursuant to M.G.L. Chapter 167, Section 15A.  

The Treasurer may invest in the following instruments:

  1. Risk Tolerance

The District will manage credit risk several ways. There will be no limit to the amount of United States Treasury and United States Government Agency obligations.

In regards to other investments the District will only purchase investment grade securities with a high concentration in securities rated A or better.

The District may invest in the Massachusetts Municipal Depository Trust (MMDT) with no limit to the amount of funds placed in the fund.

The District may place funds in banking institutions as stated in Section D of this Cash and Investment Policy.

The District will review the financial institution’s financial statements and the background of the sales representative. The intent of this qualification is to limit the District’s exposure to only those institutions with a proven financial strength, capital adequacy of the firm, and overall affirmative reputation in the municipal industry.

Further, all securities not held directly by the District, will be held in the District’s name and tax identification number by a third party custodian approved by the Treasurer and evidenced by safekeeping receipts showing individual CUSIP numbers for each security.

The District will minimize concentration of credit risk by diversifying the investment portfolio so that the impact of potential losses from any one type of security or issuer will be minimized.

 

The District will manage interest rate risk by managing duration in the account.

The District will not invest in any instrument exposed to foreign currency risk.

F. Standards of Care

The standard of prudence to be used by the Treasurer shall be the “Prudent Person” standard and shall be applied in the context of managing an overall portfolio. The Treasurer acting in accordance with written procedures and this Policy, and exercising reasonable due diligence, shall be relieved of personal responsibility for an individual security’s credit risk or market price changes, provided the purchases and sale of securities is carried out in accordance with the terms of this Policy.

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. Compliance by the Treasurer with the terms of this Policy shall constitute “good faith” and the “exercise of care” within the meaning of

MGL Chapter 44 Section 55A, which refers to the liability of the Treasurer for losses due to bankruptcy.

G. Diversification

Diversification should be interpreted in two ways: in terms of maturity as well as instrument type and issuer. The diversification concept should include prohibition against over concentration of maturities, as well as concentration in a specific institution, with the exception of U.S. Treasury obligations or investments fully collateralized by U.S. Treasuries or agency obligations.

H. Ethics

The Treasurer shall refrain from any personal activity that may conflict with the proper execution of the investment program or which could impair or appear to impair his/her ability to make impartial investment decisions. The Treasurer shall disclose to the School Committee any material financial interest in financial institutions that do business with the District. The Treasurer shall also disclose any large personal financial investment positions or loans that could be related to the performance of the District's investments.

I. Relationship with Financial Institutions

Financial institutions should be selected first and foremost with regard to their financial soundness and stability. Brokers should be recognized, reputable dealers.

The Treasurer shall require any brokerage houses and broker/dealers, wishing to do business with the District, to supply the following information to the Treasurer:

J. Reporting Requirements

On a semi-annual basis, a report containing the following information will be prepared by the Treasurer and distributed to the Superintendent, and/or Business Manager, as appropriate. The report will include the following information, as a minimum requirement:

K. Legal References         

M.G.L  Chapter 44, Section 55

M.G.L. Chapter 44, Section 55A

M.G.L. Chapter 44, Section 55B

M.G.L. Chapter 203C

M.G.L. Chapter 167, Section 15A

Adopted: November 2, 2016

Reviewed: