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.
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.
The financial assets of the college include all funds accounted for in the college’s annual financial audit:
1. All Unrestricted Funds, including:
2. The Restricted Funds, including:
3. The Plant Fund, including:
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.
The primary objectives, in priority order, of the college’s investment shall be:
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:
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:
All financial institutions and broker/dealers who desire to become qualified bidders for investment transactions must agree to the following.
Authorized & Suitable Investments
The college is empowered by statute to invest in the following types of securities:
All securities and collateral should be priced on a marked to market basis.
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.
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.
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.
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.
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.
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
*State approved policy. This policy cannot be changed without the approval from the State of Maryland.