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It is the policy of Howard Community College (hereinafter referred to as “the college”) to invest public funds in a manner which will conform to all State of Maryland and Howard County statutes governing the investment of public funds while meeting the daily cash flow demands of the college and providing an investment return with the maximum security.  The college may not borrow funds for the sole purpose of investment.

Scope

This investment policy applies to all financial assets of the college and those funds held temporarily by the college in trust for other entities and/or organizations.  The funds that are held temporarily in trust for other entities and/or organizations may vary from time to time and include, but are not limited to, the Howard Community College Educational Foundation, Inc., any student organizations or activity and/or other affiliated organizations of the college.

Funds

The financial assets of the college include all funds accounted for in the college’s annual financial audit:

1.  All Unrestricted Funds, including:

  • General Operating Funds
  • Continuing Education Funds
  • Auxiliary Funds
  • Special Activities Funds
  • Any Funds so designated in the future by the Board of Trustees

2.  The Restricted Funds, including:

  • All grants (federal, state, local or private)
  • Any funds given to the college which are restricted by donor
  • The Loan Fund

3.  The Plant Fund, including:

  • All student building fees
  • All Capital Project Funds (including bond funds)

Prudence

Investments shall be made with judgment, skill, 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 standard of prudence to be used by the investment officers shall be the “prudent person” standard and shall be applied in the context of managing the overall portfolio.  Investment officers acting in accordance with written procedures and the investment policy and exercising due diligence shall be relieved of personal responsibility for an individual security’s credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments.

Objective

The primary objectives, in priority order, of the college’s investment shall be:

Safety - Safety of principal is the foremost objective of the investment program.  Investments of the college shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio.  To attain this objective, third party collateralization and safekeeping, diversification and delivery versus payment will be required.

Liquidity - The college’s investment portfolio will remain sufficiently liquid.  The portfolio should be operated to reasonably match the anticipated cash flow of the college so that sufficient funds are available to pay obligations upon proper presentation for payment and so that a reasonable amount of cash or cash equivalents is available for unanticipated cash needs.

Return on Investments - The college’s investment portfolio shall be designed with the objective of attaining a rate of return throughout budgetary and economic cycles, commensurate with the college’s investment risk constraints and the cash flow characteristics of the portfolio.  The investment officer shall exercise due regard for minimizing risk while maximizing return.

Delegation of Authority

Authority to manage the college’s investment program is derived from state law (Article 95 and Title 6 of the Finance and Procurement Article of the Annotated Code of Maryland) and the Howard County Code Title 20, Subtitle 10.

The vice president of administration and finance shall establish written procedures for the operation of the investment program consistent with this investment policy.  Procedures should include reference to:

  • Explicit delegation of authority to persons responsible for 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 vice president of administration and finance
  • Safekeeping, PSA repurchase agreements, wire transfer agreements, banking service contracts and collateral/depository agreements
  • The vice president of administration and finance shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate staff (investment officers)

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.  Employees (involved in the investment process) shall disclose to the president and board of trustees any material financial interests in financial institutions that conduct business with the college, and they shall further disclose any large personal financial/investment positions that could be related to the performance of the college’s portfolio.  Employees (involved in the investment process) shall subordinate their personal investment transactions to those of the college, particularly with regard to the time of purchases and sales.

Authorized Financial Dealers and Institutions

The college will maintain a list of financial institutions authorized to provide investment services; competitive purchasing practices will be used except when impractical.  The following is a list of types of financial institutions:

  • Primary government dealers
  • Other Security Dealers and Dealer Banks that market securities
  • Commercial banks located in the State of Maryland
  • Money Market Treasury Funds including the Maryland Local Government Investment Pool which functions as a U.S. Treasury Money Market Fund

All financial institutions and broker/dealers who desire to become qualified bidders for investment transactions must agree to the following.

  • The dealers must agree to the college’s policy of delivery versus payment
  • The dealers must provide copies of audited financial statements
  • The dealer must be registered in the State of Maryland with a record for responsible business practices and professional integrity
  • The dealer must send the college an annual report on a yearly basis
  • The dealer must comply with any other requirements that the college may deem necessary for sound financial management of the college’s funds

Authorized & Suitable Investments

The college is empowered by statute to invest in the following types of securities:

  • Certificates of Deposit (only with Maryland Commercial Banks and must be collateralized if more than $100,000 in college funds is held by the bank)
  • Direct Federal Obligations
  • Federal Agency Obligations
  • Repurchase agreements with required Master Repurchase Agreement
  • Banker’s Acceptances from domestic banks which also include United States affiliates of large international banks with a short-term rating of A1 from Standard and Poor’s Corporation and P1 from Moody’s Investor Service
  • Commercial Paper with a short-term rating of A1 from Standard and Poor’s Corporation and P1 from Moody’s Investor Service.  This is limited to 5% of the total portfolio in accordance with Maryland law
  • Money Market Mutual Funds
  • Maryland Local Government Investment Pool

All securities and collateral should be priced on a marked to market basis.

Collateralization

Collateralization will be required on two types of investments: certificates of deposit and repurchase (and reverse) agreements.  In order to anticipate market changes and provide a level of security for all funds, the collateralization level will be (102%) of market value of principal and accrued interest.

Collateral will always be held by an independent third party with whom the college has a current custodial agreement or with the Federal Reserve Bank in a segregated account.  A clearly marked evidence of ownership (safekeeping receipt) must be supplied to the college and retained.

Acceptable collateral is specified under Section 6-202 of Title 6 of the State Finance and Procurement Article of the Annotated Code of Maryland.  However, the third party trust custodian, who holds the collateral, has the right to reject otherwise acceptable collateral based on their discretion concerning market conditions.

The right of collateral substitution is granted and all associated costs will be paid by the seller (Financial Institution).

Safekeeping and Custody

All security transactions, including collateral for repurchase agreements, entered into by the college shall be conducted on a delivery-versus-payment (DVP) basis.  Securities will be held by a third party custodian designated by the Vice President of Administration and Finance and evidenced by safekeeping receipts or with the Federal Reserve Bank in a segregated account.  All repurchase agreements will be governed by a Master Repurchase Agreement.

Diversification

The college will diversify its investments by security type and institution.  With the exception of U.S. Treasury securities and the Maryland Government Investment Pools, no more than 50% of the college’s total investment portfolio will be invested in a single security type or with a single financial institution.

Maximum Maturities

To the extent possible, the college will attempt to match its investments with anticipated cash flow requirements.  Unless matched to a specific cash flow, the college will not directly invest in securities maturing more than one (1) year from the date of purchase.  However, the college may collateralize its repurchase agreements using longer-dated investments not to exceed five years to maturity.

Reserve funds may be invested in securities exceeding one (1) year, but no longer than five (5) years if the maturity of such investments are made to coincide as nearly as practicable with the expected use of the funds.  Investments in long-term maturities will be limited to direct federal government obligations and to securities issued by U.S. Government agencies.

Internal Control

A system of adequate internal controls will be maintained to assure compliance with the investment program policy and procedure.  An audit of the internal controls of the investment operation is part of the annual financial audit conducted by the outside independent audit company.

Performance Standards

The investment portfolio shall be designed with the objective of obtaining a rate of return throughout budgetary and economic cycles, commensurate with the investment risk constraints and the cash flow needs.  The basis used to determine whether market yields are being achieved shall be the three-month U.S. Treasury Bill, the average Federal Funds rate, or other recognized indices.

Reporting

An investment officer shall provide to the President periodic investment reports that provide a clear picture of the status of the current investment portfolio.  The management report should include data on investment instruments being held, as well as any narrative necessary for clarification.

In accordance with Article 95, Section 22 of the Annotated Code of Maryland, the Vice President of Administration and Finance shall prepare a bi-annual report on a form adopted by the State Treasurer to report all investments held by the college.  This form will be submitted to the President who shall review the form, certify that the information complies with the investment policy.

Investment Policy Adoption

The college’s investment policy shall be adopted by resolution of the college’s Board of Trustees.  The policy shall be reviewed annually by the Vice President of Administration and Finance and any modifications made thereto must be approved by the Board of Trustees.

Policy Manual Review/Revision:  7/1/00
Office Review:   05/05/11

*State approved policy.  This policy cannot be changed without the approval from the State of Maryland.