FILE:  DFL

Cf:  DG

CASH MANAGEMENT AND INVESTMENTS

Strategies for proper cash management and investment of available funds shall be reviewed and evaluated on an annual basis to ensure that investment rules and guidelines expressed in this policy are being followed according to current statutory provisions.  The monetary assets of the School Board shall be held in trust by the fiduciary (fiduciaries} designated by the School Board.  Cash management and the investment of funds as mandated by La. Rev. Stat. Ann. §33:2955, shall be managed by the Superintendent and/or his/her designee.

CASH MANAGEMENT

All aspects of cash management operations shall be designed to ensure the absolute safety and integrity of the School Board's financial assets and to manage public funds prudently.

Cash management activities shall be conducted in full compliance with prevailing local, state and federal regulations.  Furthermore, such activities shall be designed to adhere to guidelines and standards promulgated by applicable professional organizations.

Operating within appropriately established administrative and procedural parameters, the School Board shall aggressively pursue optimum financial rewards, while simultaneously controlling its related expenditures.  Therefore, cash management functions which engender interaction with outside financial intermediaries shall be conducted in the best financial and administrative interests of the school system.  In pursuit of these interests, the School Board shall utilize competitive bidding practices whenever practicable, affording no special financial advantage to any individual or corporate member of the financial or investment community.

The School Board shall authorize the Superintendent and staff to design and enforce written administrative regulations, guidelines, and procedures relating to a variety of cash management issues such as the eligibility or selection of various financial intermediaries, documentation and safekeeping requirements, philosophical and operational aspects of the investment function, and such other functional and administrative aspects of the cash management program  which necessitate standard setting in pursuit of appropriate prudent, enhanced protection of assets or procedural improvements.

The School Board may opt to create separate investment accounts in order to segregate activity related to a specific purpose.  It is understood that the specific investment guidelines may vary from account to account depending on the designated use for each pool of funds.  Each account that is managed separately should have its own set of investment guidelines that specifically state the types of investments to be used, the maximum maturity of the allowable investments and any other limitation.  Such investment guidelines shall be developed by the Chief Financial Officer and approved by the Superintendent.

DEPOSITORY BANK

Louisiana statutes require School Boards to select a fiscal agent for purposes of receiving or depositing funds of the School Board.  The bank selected as fiscal agent shall be asked to enter into a fiscal agency contract or such other necessary instruments setting forth the duties, responsibilities, and agreements pertaining to said fiscal agency.

The fiscal agency bank, when selected, shall serve for a term as agreed to by the School Board and until its successor shall have been duly selected and qualified, and shall pledge approved securities, as provided for in the fiscal agency contract subject to the regulations under state law.

The School Board may select a qualified institution that offers combined services of investment management and custodial services, provided such firm meets or exceeds the qualifications above.

An annual review of the financial condition and registration of the investment manager and/or the broker/dealers and the custodial services provider will be conducted by the Chief Financial Officer.

Delivery Versus Payment

All trades, where applicable, will be executed by delivery versus payment (DVP).  This ensures that securities are deposited in the eligible financial institution simultaneously with the release of funds.  Securities will be held by the custodian selected by the School Board as evidenced by safekeeping receipts or by monthly asset statements.

PLEDGED SECURITIES

Funds on deposit shall be collateralized in an amount at all times equal to 100% by pledged "approved securities   in accordance with state law to adequately protect the funds of the School Board.  The School Board shall periodically monitor the amount of approved securities to assure that an amount not less than 100% on deposit with the depository bank, less any applicable Federal Deposit Insurance Corporation (FDIC) insurance is pledged.

The bank shall have the right and privilege of substituting approved securities only upon obtaining the prior written approval of the School Board.  Such approval may be granted by facsimile transmission.  The approved securities shall be valued at their market value.

INVESTMENT OPTIONS

The Lincoln Parish School Board may invest any funds which are available for investment and are above the immediate cash requirements of the School Board, from whatever source derived, in statutorily sanctioned investments.  Types of investments include, but are not limited to, Direct U.S. Treasury obligations, bonds, debentures, notes issued by or guaranteed by federal agencies; bonds, debentures, notes, or other evidence of indebtedness issued by the state of Louisiana or any other state of the United States, or any of the political subdivisions of any state, or by any domestic U.S. corporation, with limited exceptions noted in La. Rev. Stat. Ann. §33:2955; or certificates, or time certificates of deposit in any bank domiciled or having a branch office in Louisiana or any other federally insured investment.

The School Board shall authorize the Superintendent, as treasurer, and/or his/her designee, to invest any surplus funds in whatever type deposit that shall offer the School Board the most favorable rates of interest.

In managing the investments of the School Board, the Superintendent and/or his/her designee may seek the assistance of an outside agent (agency) to assist in the management and investment of surplus funds on behalf of the School Board. In seeking such assistance, the Superintendent or his/her designee shall formally solicit proposals for investment management services.  The recommended proposal shall be presented to the School Board for approval.  Once approved, the School Board shall require a written contract be entered into with the investment agent (agency) for all services to be rendered.  The Superintendent or his/her designee shall be responsible for supervising and assuring the performance of all contract provisions.

Investments of the School Board shall be guided by the following:

1. Cash management and investment activities shall be conducted in a manner consistent with prudent business practices applied by governmental entities and shall be in compliance with applicable statutes.
   
   

2. Funds as determined by the chief financial officer to be in excess of immediate cash requirement shall be invested only in statutorily permitted obligations.
   
   

3. Appropriate emphasis in making any investment shall be in the following order:

In no event shall monies be considered available for investment unless and until such funds are determined by the Superintendent or chief financial officer, in the exercise of prudent judgment, to be in excess of the immediate cash requirements of the fund to which the monies are credited.  As a criteria in making such a determination, any amount of money exceeding ten thousand dollars which is on demand deposit to the credit of the School Board, or to the credit of any fund and which is not required to meet an obligation for at least forty-five (45) days, or any amount of money exceeding one hundred thousand dollars which is on demand to the credit of the School Board or to the credit of any fund and which is not required to meet an obligation for at least fifteen (15) days shall be construed available for investment.

Interest Earning

The interest earned on any such investment shall be credited to the fund from which the investment was acquired or it may be applied to the payment of the principal and interest of the outstanding bonded indebtedness of that fund.

Safety

Safety of principal is the foremost objective of the investment program.  Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio.  The objective will be to mitigate credit risk and interest rate risk while avoiding the erosion of principal by inflation.

1. Credit risk of the School Board’s investment portfolio will be low because Louisiana Rev. Stat. Ann. §33:2955 limits a political subdivision’s permissible investments to U.S. Government instrumentalities, Investment grade (A-1/P-1) commercial paper of domestic United States corporations, debt issued by the state of Louisiana or any of its political subdivisions, certain mutual or trust funds and other allowable short-term obligations including repurchase agreements.  The School Board shall not be permitted to invest in mutual or trust funds, except for money market mutual funds.  The School Board shall not invest over twenty five percent of its total portfolio with the same issuer to decrease the possibility of credit risk, unless the issuer is backed by the full faith and credit of the U.S. Government.
   
   

2. Interest rate risk is the risk that the market value of the securities in the portfolio will fall due to the changes in the general level of interest rates.  Interest rate risk may be mitigated by:

3. Inflation risk is the risk that the purchasing power of the portfolio will fall due to inflation being higher than the portfolio returns over sustained periods of time.  This investment policy seeks to minimize inflation risk through the use of permissible investments that are shorter than or equal to the maximum allowable maturity (3 years).

Liquidity

The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated by the Superintendent of the School Board.  This is accomplished by structuring the portfolio so that securities mature concurrent with cash needs to meet anticipated demands.  To meet or partially offset unanticipated cash demands of the School Board, a minimum of 5% of the total investment portfolio shall be held in cash, money market funds.  Furthermore, since all possible cash demands cannot be anticipated, the portfolio should consist largely of securities with active secondary or resale markets.

Yield

The investment portfolio shall be designed with the objective of attaining a fair rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs.  In order to compare the rate of return of the investment portfolio to the market return throughout budgetary and economic cycles, the investment portfolio will be benchmarked against an available index or combination of indexes that is reflective of the investment portfolio composition and characteristics.  However, return on investment is of least importance compared to the safety and liquidity objectives described above.

FINANCIAL REPORTING AND PORTFOLIO REVIEW

1. Responsibilities of the Investment Advisor
   
   If the School Board determines that it is in their best interest to seek the investment management advice of a broker/dealer, the Investment Advisor shall prepare an investment report on a quarterly basis, or more frequently at the request of the School Board or its internal / external auditor, that provides adequate detail as to the investment activity (purchases, sales, income, unrealized gains/losses, weighted average current yield, etc) occurring during the time frame of the report.  At all times, the Investment Advisor shall maintain adequate documentation supporting all transaction activity and the valuation of the investment securities for review by the internal / external auditor.
   
   

2. Responsibilities of the Investment Management Firm
   
   If the School Board determines that it is in their best interest to hire an investment management firm to act as investment manager, the Investment Management Firm shall provide a monthly report to the School Board of all investment activity that gives adequate information about the following:

3. Performance Standards
   
   The investment portfolio will be managed in accordance with the parameters specified within this policy.  In order to compare the rate of return of the investment portfolio to the market return throughout budgetary and economic cycles, the investment portfolio will be benchmarked against an available index or combination of indexes that is reflective of the investment portfolio composition and characteristics.  Portfolio performance should be compared to appropriate benchmarks on a regular basis and analyzed within the context of all the risk constraints on the portfolio.
   
   

4. Marking to Market
   
   A statement of the market value of the portfolio, including current credit risk information disclosing the credit quality ratings of the individual securities in the portfolio, shall be issued at least quarterly.  This will ensure that the minimal amount of review has been performed on the investment portfolio in terms of value and subsequent price volatility.
   
   An independent pricing source is an important part of a sound investment process.  The custodial agent of the investment securities shall provide independent pricing on a regular basis.  Should broker pricing be required for some securities such as mortgages, the custodial agent shall verify the accuracy through some other market pricing mechanism such as Bloomberg Financial Services.

LIQUIDATION OF INVESTMENTS

At any time that may be advisable, the School Board may cash or liquidate any of the investments authorized herein, which are purchased for any particular fund.  The proceeds of any such liquidation shall be credited to the fund from which the authorized investments were originally purchased.

PROHIBITED TRANSACTIONS

The following arrangements are expressly prohibited:

1. Any transactions not specifically authorized by this policy.
   
   

2. The purchase of securities on margin.
   
   

3. Direct purchases of single family or commercial mortgages.
   
   

4. Purchases of foreign bonds.
   
   

5. Collateralized mortgage obligations that have been stripped into interest only or principal only obligations.
   
   

6. Inverse floaters or structured notes.  For purposes of this section, structured notes shall mean securities of U.S. Government agencies, instrumentalities, or government-sponsored enterprises which have been restructured, modified, and/or reissued by private entities.

Ref:    La. Rev. Stat. Ann. §§6:703, 17:99, 33:2955, 39:1211, 39:1212, 39:1219, 39:1221, 39:1222, 39:1223, 39:1225, 39:1226

Board minutes, 3-4-03, 3-2-10, 1-4-11, 2-3-15, 12-7-21

Lincoln Parish School Board