1998-46RESOLUTION 98- 46
A RESOLUTION ADOPTING THE VILLAGE OF BUFFALO GROVE
POLICIES AND PRACTICES RELATIVE TO DEPOSITS AND INVESTMENTS
WHEREAS, the Village of Buffalo Grove is a public agency responsible for
the investment and management of public funds, and;
WHEREAS, the investment of public funds is articulated in the Public Funds
Investment Act, Chapter 30, Section 235 of the Illinois Complied Statutes, and;
WHEREAS, Public Act 90 -688, Senate Bill 1555, amended Section 235 by adding
Subsection 2.5 requiring a public agency to adopt written investment policies to
govern the investment of public funds.
NOW, THEREFORE, BE IT RESOLVED BY THE PRESIDENT AND BOARD OF TRUSTEES OF
THE VILLAGE OF BUFFALO GROVE, COOK AND LAKE COUNTIES, ILLINOIS that:
Section 1. The Village of Buffalo Grove Policies and Practices Relative to
Deposits and Investments dated November 25, 1998 is hereby adopted as
erquired by Senate Bill 1555.
Section 2. The Village's Director of Finance and General Services is
responsible for the management of this Policy as well as the compliance
with the reporting requirements of Public Act 90 -688. This Policy shall
be effective with the adoption of this Resolution and as it is amended
from time -to -time.
AYES: 6 - Marienthal, Reid, Rubin, Braiman, Hendricks, Glover
NAYES: 0 - None
ABSENT. 0 - None
ADOPTED: December 7 1998. APPROVED: December 7 1998.
ATTEST:
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VILLAGE OF BUFFALO GROVE
POLICIES AND PRACTICES
RELATIVE TO DEPOSITS AND INVESTMENTS
The Village of Buffalo Grove, as a public agency, has an inherent fiduciary
responsibility to properly account for and manage public funds. Public funds are
to be considered current operating funds, special funds, debt service and other
funds of any kind or character belonging to or in the custody of any public
agency (Chapter 30, paragraph 235/1 through 235/7, Public Funds Investment Act,
Illinois Complied Statutes). It will be the Village's policy to maintain the
highest level of invested cash balances not only as a good management practice,
but as a commitment of responsibility to the residents of the Village who have
entrusted these funds to us.
The overall direction of the Village's investment program may be found in the
following objectives, which have been prioritized and explained to clearly
identify the results expected.
Safety of Principal is considered of greatest priority to the Village.
Each investment that is to be made shall seek to insure that capital
losses are avoided, whether they be from securities defaults or erosion of
market values.
Liquidity is considered to be the next important objective. The Village's
investment portfolio shall remain sufficiently liquid to enable itself to
meet all operating requirements from time to time.
Maximum rate of return shall always be sought but shall be consistent with
both risk limitations identified herein and prudent investment principles.
Diversification is necessary in order to further guarantee asset safety.
Investments shall be diversified to the greatest extent possible to avoid
incurring unreasonable risks from the practice of concentrating
investments in specific security types and /or individual financial
institutions.
public confidence in the investment program is imperative. The Village
shall avoid any transaction that might impair its public confidence.
Investments shall be made with judgement and care, under circumstances
then prevailing, which persons of prudence, discretion, and intelligence
exercise in the management of their own affairs. Such a standard avoids
speculation, and emphasis is placed on the probable safety of capital
rather than the probable income to be derived. In addition, parties
related to the management process of the Village shall refrain from
personal business activities that could conflict with the proper execution
of the investment programs undertaken or which could impair their ability
to make impartial investment decisions.
The Village's policy regarding cash management is based upon the realization that
there is a time -value to money. Idle cash should be invested for a period
defined by normal cash flow needs. All receipts due the Village shall be
collected as promptly as possible. Monies that are received shall be deposited
no later than the next business day after receipt. Disbursements shall be made
according to established guidelines and approval schedules.
The types of deposits and investment instruments that will be authorized for use
by the Village of Buffalo Grove in managing its investment of public funds shall
be dictated by statute. The specific reference is Chapter 30, paragraph 235/2,
Illinois Complied Statutes. Specifically, the investments permitted are:
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Bonds, notes, certificates of indebtedness, treasury bills or other
securities now and hereafter issued, which are guaranteed by the full
faith and credit of the United States of America as to principal and
interest. Also, in bonds, notes, debentures or other similar obligations
of the United States of America or it's agencies (as defined in Section
235/2 (c)).
Interest bearing savings accounts, interest bearing certificates of
deposit, interest bearing time deposits or any other investments
constituting direct obligations of any bank as defined by the Illinois
Banking Act. Investments may be made only in banks which are insured by
the Federal Deposit Insurance Corporation.
Short term obligations of corporations organized in the United States with
assets exceeding $500,000,000 if such obligations are rated at the time of
purchase within the three highest classifications established by at least
two standard rating services and which mature not later than 180 days from
the date of purchase, and such purchases do not exceed 10% of the
corporation's outstanding obligations. No more than one -third of the
Village's funds may be invested in short term obligations of corporations.
Short term discount obligations of the Federal National Mortgage
Association.
Shares or other forms of securities issuable by savings and loan
associations incorporated under the laws of the State of Illinois or any
other state or under the laws of the United States. Investments may be
made only in those savings and loan associations which are insured by the
Federal Deposit Insurance Corporation.
Money- market mutual funds registered under the amended Investment Company
Act of 1940 provided that the portfolio is limited to bonds, notes,
certificates of indebtedness, treasury bills or other securities which are
guaranteed by the full faith and credit of the United States of America or
agreements to repurchase these same types of obligations.
In addition to the above investment options, the Village may also invest any
public funds in the Illinois State Treasurers Investment Pool created under
Section 17 of the State Treasurer Act or the Illinois Metropolitan Investment
Fund, created under Sections 1 -1 -5 and 3.1 -35 -50 of the Illinois Municipal Code
and Section 5 of the Intergovernmental Cooperation Act of the State of Illinois.
The Village shall attempt whenever possible to diversify it's investment
portfolio in order to reduce the risk of loss resulting from the over -
concentration of assets in a specific maturity, a specific issuer, or a specific
class of securities.
All earnings accruing or paid on any investments or deposits made shall be
credited to the specific investment made, and such earnings shall be in turn
credited to and paid to the particular Village fund for which the investment has
been made. As to earnings realization, any premium or discount will be amortized
over the life of an investment subject to such amortization. Also, any gains or
losses in the sale of investments will be recognized at the time of disposition
of the security. Regardless, amortization of premium and /or discount as well as
the realization of any gains or losses, or deferred income or losses from the
sale or holding of securities, shall always follow generally accepted accounting
and investment principles.
It should be noted that while investments in chartered credit unions are
permitted, it will be the Village's policy not to invest public funds in such
institutions. Also, the Village will not invest in repurchase or reverse -
repurchase agreements.
All investments shall be made in the name of the Village of Buffalo Grove. In
addition, if such securities will be made from monies taken from specific Village
funds or accounts, the name of such fund or account shall be added to that of the
Village. All investments purchased shall be held for the benefit of the Village.
Money taken from a particular fund or account shall be credited to and deemed to
be a part of such fund or account, and shall be held for the benefit thereof.
All investments shall be deposited and held in safekeeping in the name of the
Village with proper evidence of safekeeping forwarded to the Village for use in
its internal accounting system.
The Village will secure deposit collateral from depository institutions when
deposits or investments are in excess of FDIC limits. Direct investments
guaranteed by the United States or an agency of the United States do not require
collateral. The amount of deposits not collateralized or insured by an agency
of the federal government shall not exceed 75% of the capital stock and surplus
of a banking institution. These values shall be reviewed on a quarterly basis
comparing actual deposits not insured or collateralized against the capital stock
and surplus measure. Values shall be taken from published regulatory agency
reports required by either the Comptroller of the Currency or the Commissioner
of Banks and Trust Companies.
If deposits are maintained with a savings and loan association, the amount of
deposits not collateralized or insured shall not exceed 75% of the net worth of
the institution as defined and reported to the regulatory agencies.
As noted above, the Village will require that all deposits in excess of the
appropriate regulatory agency limits, i.e. $100,000 per account, be
collateralized. The form of collateral shall consist of readily marketable
municipal or United States governmental primary or agency securities maintained
in a trust safekeeping relationship for the benefit of the Village of Buffalo
Grove, all under a collateral agreement with a financial institution willing to
pledge said collateral. While not retaining ownership of pledged securities, the
Village will reserve the right to release such securities and to review
replacement securities. The targeted level of collateral maintained will be equal
to 100.00% of the deposit balances of the Village when combined with the deposit
insurance afforded by the governmental regulatory agencies. The collateral
balances will be reviewed on a quarterly basis for compliance with these
policies. Additional insurable balances are provided relative to total actuarial
beneficial interest for the police and fire pension programs based on membership
parameters.
The collateral requirements for deposits within the Illinois State Treasurers
Investment Pool are the same as required for the deposit of state funds by the
State Treasurer. See Illinois Complied Statutes, Chapter 15, paragraphs 505/17
and 520/1- 520/23.
The transfer of ready cash balances for operating and investment purposes will
be directed through policies and procedures established from time to time by the
Department of Finance and General Services. An operating procedure is currently
in effect with National City Bank, First Midwest Bank of Buffalo Grove, N.A.,
First American Bank of Lake County, Harris Bank - Barrington, N.A., LaSalle Bank,
N.A., and American Enterprise Bank that governs either wire transfers or requests
for cashier's checks from any Village savings or checking account. The policy
names the appropriate individuals within the Department of Finance and General
Services that have such withdrawal authority. Also, the named individuals have
additional authority to roll -over Certificates of Deposit, to cash same in and
deposit in the appropriate Village fund account and to use the services of the
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Illinois State Treasurer's Pool (Illinois Funds) or the Illinois Metropolitan
Investment Fund for investment purposes.
As formally articulated in the letters of direction to the local financial
institutions, only the following can be performed by named individuals of the
procedure:
Transfer funds to the Village's Disbursement Account at the First Midwest
Bank, N.A.
Transfer funds to or from the Village's account with the Illinois State
Treasurer's Investment Pool (Illinois Funds) at the Mercantile Bank -
Springfield.
Request wire transfers or cashier's checks to transfer funds between
Village -only accounts maintained either at National City Bank, First
Midwest Bank of Buffalo Grove, N.A., First American Bank of Lake County,
Harris Bank - Barrington, N.A., LaSalle Bank, N.A., American Enterprise Bank
and American Enterprise Bank. Proper identification of the receiving
account must be provided in the instructions. Periodically, both
institutions will be provided with lists of currently opened and
authorized Village demand and savings accounts.
Request debit /credit transfers of Village funds between Village accounts
within the same institution due to deposit or withdrawal errors.
Roll -over and /or cash in Certificates of Deposit by either authorized
staff or at the direction of the of the Director of Finance and General
Services.
Transfer funds to the Northwest Water Commission operating account
established at the Mercantile Bank - Springfield (Illinois Funds) in
conformance with the Commission's bond ordinance.
Transfer funds to or from the Village's accounts with the Illinois
Metropolitan Investment Fund maintained at the NBD /First National Bank of
Chicago.
Transfer funds to certain Village money market accounts noted on the
submitted list of Village operating and investment accounts.
Any transaction outside of the above will be requested only by the Village's
Director of Finance and General Services. In all cases, any transaction will be
followed -up with written correspondence within 24 hours of the transaction. The
institutions have been instructed to notify the Village in case there is no
notification within the deadline parameters.
Management responsibility for the Village's deposit and investment program shall
rest with the Director of Finance and General Services. The Director shall
manage the deposit and investment program in a manner that is consistent with
this Policy. Internal procedures shall be reviewed and modified from time to
time in order to insure that this Policy maintains its integrity and workability.
A system of controls shall be established to monitor and regulate the activities
of all employees dealing with any aspect of this Policy.
Village Pension Funds The investment programs of the Village's Police and Fire
Pension Funds will be directed by the statutory language of Chapter 40 of the
Illinois Compiled Statutes. The specific Sections are 5/3 -135 for Police Pension
investments and 5/4 -128 for Fire Pension. The language for these activities is
separate from other general investment activities in that the appointed and
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elected pension boards have statutory powers and duties under the Pension Code.
While such investment programs will be directed by the respective Board's, the
Village will maintain the internal accounting for same.
Accounting All investment transactions shall be recorded in accordance with
generally accepted accounting principles as promulgated. Accounting principles
will include:
Investments will be carried at cost or amortized cost which approximates
market value.
Any premium or discount will be amortized over the life of the investment
using proper accounting methods of accretion.
Gains or losses of investments in all funds will be recognized at the time
of disposition of the security.
Gains or losses in equity investments within pension funds will be carried
at market value with gains above market realized as unrealized unless
assets are disposed of. Losses of market value will be written down when
realized.
Delegation of Authority The management responsibility for the Village's
investment programs is the responsibility of the Village staff, most specifically
the Director of Finance and General Services or in the case of pension
activities, the pension fund boards.
The Village and pension boards may hire or appoint, as necessary, a financial
institution(s) as custodian of investment assets. All investment securities held
by a custodian shall be clearly held and accounted for to indicate the ownership
by the Village or pension fund. To be appointed or hired as custodian, the
financial institution must meet statutory criteria approving same to be a
depository of public funds.
Further, the Village and pension boards may also hire or appoint, as necessary,
investment advisors or money managers to administer certain aspects of the
Village's investment and deposit strategies and objectives as set forth in this
Policy. Such hiring or appointment to manage assets will only occur after
written direction from the Village or pension fund Board. Any selection will
only occur after a diligent review of an advisor's or manager's background,
investment style, client service, communications and support capability, past
investment performance and risk tolerance as well as acknowledgment by any
advisor /money manager of fiduciary responsibility. Additional criterion may also
be part of any independent review. Any advisor or money manager so retained must
acknowledge that they are a fiduciary, registered under the Investment Advisors
Act of 1940, and acknowledge in writing that this Policy is acceptable. Such
acceptance and inclusion as a component of any contract or agreement with the
Village will be a condition of acceptance of such contract or agreement.
Internal Written Reporting The Department of Finance and General Services will
provide, at least quarterly, reporting to the Corporate Authorities and the
Pension Boards on any and all investment activities. Portfolio reporting will
be by fund and further delineated by investment type or class, which will include
cash and savings balances. Information to be included within any reporting will
also incorporate book value, income earned (as measured against budget) and
estimated market value of investments held. Specialized reporting will be made
available upon request.
Internal Controls Where deemed necessary, the Village shall establish a system
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of internal controls, which shall be documented in writing. These internal
controls and this Policy shall be reviewed annually as part of the Village's
independent audit. The controls shall be designed to prevent losses of Village
funds arising from fraud, employee error, misrepresentation by third parties,
unanticipated changes in financial markets, or imprudent actions by Village
employees. The Village will implement control standards that can be administered
in a cost effective manner based in inherent limitations that may exist
organizationally.
Standards of Prudence The standard of prudence to be used by the Village and the p
staff resonsible for the investment of public funds shall be the "prudent
person" standard, subject to the foregoing limitations, which states:
Investments shall be made with judgment and care, under
circumstances then prevailing, which persons knowledgeable of
investment practices, and 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 possible income to be derived.
The above standard is established as the standard of professional responsibility
and shall be applied in the context of managing the Village's overall portfolio.
This policy recognizes that there are circumstances beyond the control of even
the most prudent investor which impact the return obtained. However, officials
and employees of the Village acting in accordance with this Deposit and
Investment Policy and written procedures as may be established and exercising due
diligence shall be relieved of personal responsibility for an individual
security's credit risk or market price changes, provided that deviations from
expectations are reported in a timely fashion, and appropriate action is taken
to control adverse developments.
Ethics and Conflict of Interest All Village employees, agents, officials or
representatives of the Village involved in the investment and deposit process
will avoid transactions prohibited by federal, state or local law. All such
persons will avoid any personal business activity that, directly or indirectly,
may cause personal financial benefit as a result of the Village's investment and
deposit program, that may cause financial loss or insecurity to the Village's
investment and deposit program, or that would cause an appearance of impropriety
among reasonable persons if generally known to the public. Furthermore, such
persons will promptly advise the appropriate Village officials in writing if any
investment or deposit activity planned by the Village would conflict with
existing personal business, and if so, will abstain from any activity concerning
such investment or deposit decisions by the Village.
This Policy has been prepared under the statutory requirements of P.A. 90 -688
(S.B. 1555) which amended the Public Funds Investment Act at ILCS Chapter 30,
Section 235/2.5.
Dated November 25, 1998
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