2-Attachment A Policy DFL.pdf

GWINNETT

COUNTY

PUBLIC

SCHOOLS

Gwinnett County Board of Education

Level:

Policy D-Fiscal Management

Accompanying Procedure:

P.DFL

Descriptor Code:

DFL

Rescinds December 21, 2017

Descriptor Term:

Investment Earnings

Effective Date:

December 20, 2018

Last Reviewed Date:

July 18, 2023

PURPOSE

Effective cash management is recognized as essential to sound fiscal management. This is particularly true given the ever increasing burden placed on local school boards to fund expanding programs and meet rising costs while minimizing the effort required from local taxpayers. The extent to which Gwinnett County Public Schools (GCPS) can obtain investment returns on available funds can help to relieve this burden. This requires that investment policies be well founded and uncompromisingly applied in all aspects.

Public funds shall be invested in a manner which will provide the highest investment return with the maximum security, while meeting daily cash flow demands and conforming to all laws of the State of Georgia governing the investment of public funds. This policy establishes a framework for meeting these objectives through the selection, purchase, safekeeping, and management of investment instruments.

SCOPE

This investment policy applies to all funds under budgetary control or fiduciary responsibility of GCPS with the exception of the Gwinnett Retirement System (GRS) which is administered separately under the policies established by the GRS Plan Administrative Committee. All funds are accounted for in the GCPS Comprehensive Annual Financial Report and in the monthly Schedule of Investments submitted to the Board as a part of its monthly meeting agenda. These funds include:

General Fund

Special Revenue Fund

Capital Projects Funds

Debt Service Fund

Enterprise (Food Service) Fund

Fiduciary Fund (includes local school investments)

Any new fund created by GCPS, unless specifically exempted.

OBJECTIVE

Safety of principal is the foremost objective of the investment program of GCPS. It is 1.

the intent of GCPS to hold all investments until their stated maturity. However, security swaps are permitted when executed within the scope of this policy and the related investment procedures and only if "prudent analysis" were to deem it in the best interest of GCPS. Investment transactions shall first seek to ensure that capital losses are avoided, whether they be from securities defaults or erosion of market value.

The investment portfolio, as a whole, will remain sufficiently liquid to enable GCPS to 2.

meet all operating requirements which might be reasonably anticipated.

The investment portfolio shall be designed with the objective of attaining a market rate 3.

of return over a budgetary or economic cycle while giving the highest priority to objectives 1 and 2 above. A market rate of return shall be defined as a rate of return that is not less than the annual return of the Georgia Fund I.

The benchmark for each individual fund portfolio shall be commensurate with the 4.

investment objectives, risk constraints and cash flow needs of that fund.

Investment officials shall act responsibly as custodians of the public trust and shall avoid 5.

any transaction that might impair public confidence in GCPS' ability to govern effectively.

DELEGATION OF AUTHORITY

Under the authorization of Georgia Code Section 36-83-4(b), the Chief Financial Officer is responsible for the overall management of the investment program and delegates the day-to-day investment responsibilities to the Executive Director of Budgets and Financial Reporting and the Director of Treasury Services. The Executive Director of Budgets and Financial Reporting and the Director of Treasury Services shall submit for the Superintendent's approval, through the Chief Financial Officer, written procedures for the operation of the investment program, consistent with this investment policy. Such procedures shall include explicit delegation of authority to other positions responsible for investment transactions and records. No position may engage in an investment transaction except as provided under the terms of this policy and the procedures approved by the Superintendent.

The Chief Financial Officer and the Executive Director of Business & Finance shall establish a system of internal controls to regulate activities of subordinate officials. All internal controls, procedures, records, reports, and documentation shall be available for review annually by the external audit firm and by GCPS' Internal Auditor.

The Chief Financial Officer may recommend to the Superintendent for the Board's approval to select, contract for services, or otherwise engage Investment Managers, Investment Consultants and other professionals to assist in managing the investment programs of GCPS. Such Investment Managers must be registered under the Investment Advisors Act of 1940.

ETHICS AND CONFLICTS OF INTEREST

Employees involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions. These employees shall disclose to the Chief Financial Officer any personal business, investment activity, or material financial interests that could be related to the performance of GCPS' portfolio. Employees shall subordinate their personal investment transactions to those of GCPS, particularly with regard to the timing of purchases and sales.

No inducements will be solicited or received for conducting investment business. All gifts or gratuities should be of the kind generally given, and infrequent, unsolicited, and of nominal value. No gifts of cash will be accepted under any circumstances. All investment accounts with any counterparty by the Chief Financial Officer, Executive Director of Budgets and Financial Reporting, Director of Treasury Services, or any other staff member executing investment transactions will be reported on a periodic basis to the Superintendent and Board.

PRUDENCE

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 primary objective of safety of capital as well as the secondary objective of obtaining a market rate of return.

The "prudent person" standard shall be applied by investment officials in the context of managing an overall portfolio of investments. Investment officials acting in accordance with written procedures 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 expected results are reported in a timely fashion, and appropriate action is taken to control adverse developments.

AUTHORIZED INVESTMENTS

With the exception of proceeds from bonds issued, GCPS is authorized to invest any money subject to its control in the following investments defined in Georgia Code Sections 36-83-4 and 36-80-3:

Obligations issued by the United States government;1.

Obligations fully insured or guaranteed by the United States government or a United 2.

States government agency;

Obligations of any corporation of the United States government;3.

The local government investment pool as established by Georgia Code Section 4.

36-83-8;

Repurchase agreements that are fully secured by investments 1, 2, or 3 listed 5.

above and which are purchased with approved counterparties under an approved Master Repurchase Agreement; and are collateralized at least by 102% of the repurchase agreement amount;

Certificates of deposit and demand deposit accounts of banks which are insured by 6.

the Federal Deposit Insurance Corporation (FDIC); provided that the portion of such certificates in excess of the amount insured by the FDIC shall be secured by direct obligations of this state or the United States which are of market value equal to 110% of that portion which would be uninsured;

Prime bankers' acceptances issued by a domestic bank or a federally chartered 7.

domestic office of a foreign bank with a short-term rating not lower than P-1 by Moody's Investors Services or A-1 by Standard & Poor's Corporation and the amount invested in any single bank will not exceed five percent (5%) of the total funds available for investment (based on book value on the date of acquisition).

In addition, GCPS may invest the proceeds of any bonds it issues in the following instruments defined in Georgia Code Section 36-82-7:

The local government investment pool as established by Georgia Code Section 1.

36-83-8;

Bonds or other obligations of the United States or of subsidiary corporations of the 2.

United States government which are fully guaranteed by such government;

Obligations of agencies of the United States government issued by the Federal 3.

Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, and the Central Bank for Cooperatives; and Securities or other interests in any no-load, open-end management type investment 4.

company or investment trust registered under the Investment Company Act of 1940 or any common trust fund maintained by any bank or trust company which holds such proceeds as trustee or by an affiliate thereof.

Certificates of deposit of national or state banks located within this state which have 5.

deposits insured by the Federal Deposit Insurance Corporation and certificates of deposit of federal savings and loan associations and state building and loan or savings and loan associations located within this state which have deposits insured by the Savings Association Insurance Fund of the Federal Deposit Insurance Corporation or the Georgia Credit Union Deposit Insurance Corporation, including the certificates of deposits of any bank, savings and loan association, or building and loan association acting as depository, custodian, or trustee for any such bond proceeds. The portion of such certificates of deposits in excess of the amount insured by the Federal Deposit Insurance Corporation, the Savings Association Insurance Fund of the Federal Deposit Insurance Corporation, or the Georgia Credit Union Deposit Insurance Corporation, if any, shall be secured by deposit, with the Federal Reserve Bank of Atlanta, Georgia, or with any national or state bank or federal savings and loan association or state building and loan or savings and loan association located within this state, of one or more of the following securities in an aggregate principal amount equal at least to the amount of such excess: direct and general obligations of this state or of any county or municipal corporation in this state, obligations of the United States or subsidiary corporations included in paragraph (2) of this code section (O.C.G.A. 36-82-7), obligations of the agencies of the United States government included in paragraph (3) of this code section (O.C.G.A 36-82-7), or bonds, obligations, or project notes of public housing agencies, urban renewal agencies, or municipalities included in paragraph (4) of this code section (O.C.G.A. 36-82-7).

Investments currently deemed unacceptable, although permitted by law include:

1. Obligations of the State of Georgia and any political subdivisions of the State of Georgia;

2. Mutual funds, with the exception of US Treasury Money Market Mutual Funds permitted for bond proceeds investment;

3. Asset-backed securities, including mortgage-backed securities;

4. Structured securities;

5. Interest rate options, forwards, or futures used as investments or to support investments;

6. Reverse repurchase agreements used as investments or to fund investment operations.

APPROVED BROKER/DEALERS AND BANKS

Any primary dealer authorized as a trading counterparty of the Federal Reserve Bank may provide brokerage/investment services to GCPS and/or the Investment Advisor. In addition, up to five financial institutions and security broker/dealers not designated as primary dealers may be authorized by the Chief Financial Officer to provide brokerage/investment services.

A current audited financial statement is required to be on file for each of the institutions on this list.

SAFEKEEPING AND COLLATERALIZATION

Investment securities of GCPS shall be secured through custodial and safekeeping agreements with the Board's custodial, bid or authorized bank. In cases where the Board's custodial, bid or authorized bank is a counter-party to the investment transaction, a third-party custodial agreement shall be utilized. All transactions will be settled using the delivery versus payment method or via tri-party agreement method.

GCPS shall conform to the Georgia Code Sections 45-8-12 and 50-17-59 which govern the collateralization of the deposit of public funds in banks or depositories.

PORTFOLIO DIVERSIFICATION

Prudent investing necessitates that a portfolio be diversified as to instrument, maturity schedule, and financial institution. The following guidelines represent maximum limits established for each investment instrument:

1. Diversification by Instrument:

a. Fully insured obligations of the U.S. government 100%

b. Fully insured obligations of U.S. agencies 100%

c. State of Georgia local government investment pool -- 100% unless S&P money market fund rating falls below AAA or the average maturity of the fund exceeds 90 days 50%

d. Obligations of U.S. government sponsored corporations 75%

e. Certificates of deposit 75%

f. Repurchase agreements 75%

g. Collateralized interest bearing demand deposits 75%

h. Prime bankers' acceptances 10%

2. Diversification by maturity :

All investment maturities shall be scheduled to coincide with projected cash flow needs, taking into consideration large, routine expenditures (i.e., payroll and bond payments) as well as anticipated revenues (i.e., property tax collections and state QBE receipts).

With the exception of repurchase agreements, investment maturities shall not exceed three years. Repurchase agreements shall not have a maturity greater than sixty days.

3. Diversification by financial institution /and broker dealer :

The maximum amount which may be invested with any one financial institution or any one broker dealer as a counterparty shall not be greater than 50% of the total portfolio. Investment Advisors shall grant investment execution using best execution standards and shall not be held to the diversification by financial institution and broker/dealer limit.

COMPETITIVE BIDDING OF INVESTMENT INSTRUMENTS

With the exception of the daily repurchase agreement, a competitive "bid" process shall be conducted for the investment of all available funds. Under normal operating conditions the daily repurchase agreement shall also be put out for bid. However, the repurchase agreement may be purchased through the Board's bid bank, without receiving another bid, when the amount is less than $10 million, or with the prior approval of the Chief Financial Officer. When the repurchase agreement is purchased through a bank other than the Board's bid bank, the additional interest earned should exceed the fees charged by the bid bank for the outgoing and the incoming wire transfers.

Bids will be requested from authorized broker/dealers and financial institutions for various options with regard to term and instrument, according to GCPS' investment procedures.

GCPS will accept the bid which provides the highest rate of return within the requested parameters. Records will be kept of the bids offered, the bid(s) accepted, and a brief explanation of the decision made regarding the investment instrument. Registered investment advisors with whom GCPS has contracted for services are exempt from these competitive bidding requirements when purchasing or selling investment instruments on behalf of GCPS.

Primary fixed price federal agency offerings may be purchased from authorized broker/dealers and financial institutions without competitive bidding if it is determined that no agency obligations meeting GCPS' requirements are available in the secondary market at a higher yield.

Additionally, U.S. Treasury securities may also be purchased directly from authorized broker/dealers without competitive bidding at a price less than or equal to the published ask price listed on an industry accepted, real-time electronic trading platform such as Bloomberg or Reuters at the time of purchase.

REPORTING

A schedule of outstanding investments depicting purchase and maturity dates, interest rates, and number of days will be included in the Monthly Financial Report that is presented to the Board.

EXCEPTIONS

Any exceptions will be approved in advance by any two of the following persons: Chief Financial Officer, Executive Director-Treasury Services, Executive Director of Business & Finance, and/or Director of Internal Audit. Such exceptions will be reported to the Superintendent and the Board at the next regularly scheduled board meeting.

INVESTMENT OVERSIGHT COMMITTEE

A committee consisting of the Chief Financial Officer, the Executive Director of Budgets and Financial Reporting, the Director of Treasury Services, the Director of Internal Audit, and two

(2) investment community members to be recommended by the Superintendent shall be appointed to review GCPS' compliance with existing policy, compliance with Georgia Code, and to make recommendations to the Board regarding future policy revisions. The committee will submit a formal report of their findings at least annually to the Board.

IMPLEMENTATION

Investment Procedure DFL provides the detailed framework necessary for the effective implementation of this policy.