Operational ServicesRevenue and InvestmentsRevenueThe Director or designee is responsible for making all claims for special State funds for specific programs and federal funds.InvestmentsThe Director shall either appoint a Chief Investment Officer or serve as one. The Chief Investment Officer shall invest money that is not required for current operations, in accordance with this policy and State law.The Chief Investment Officer and Director shall use the standard of prudence when making investment decisions. They shall use the judgment and care, under circumstances then prevailing, that persons of prudence, discretion, and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the safety of their capital as well as its probable income.A. ScopeThis investment procedure applies to all funds of DAOES. These funds are accounted for in DAOES' annual financial report and includes all current funds, and any other funds that may be created from time to time, except for DAOES pension funds to the extent the deposit and investment of such funds is otherwise regulated under the Illinois Pension Code. All transactions involving DAOES' funds and related activity of any funds shall be administered in accordance with the provisions of this procedure and the canons of the "prudent person rule".B. Objectives
C. Investment Instruments
- Safety of Principal - Investments shall be undertaken in a manner that seeks to ensure the preservation of principal in the overall portfolio. To attain this objective only appropriate investment instruments will be purchased and insurance or collateral may be required to ensure the returnof principal.
- Liquidity - DAOES' investment portfolio shall be structured in such manner as to provide sufficient liquidity to pay obligations as they come due.
- Return on Investments - The investment portfolio shall be designed to attain a market-average rate of return throughout budgetary and economic cycles, taking into account the risk constraints, the cash flow characteristics of the portfolio and legal restrictions for return on investments.
- Maintaining the Public's Trust - The investment officers shall seek to act responsibly as custodians of the public trust and shall avoid any transaction that might impair public confidence in DAOES, the Board or the Treasurer, Chief Investment Officer, or Business Manager.
The System may invest its funds only in those instruments listed below:
- Bonds, notes, certificates of indebtedness, treasury bills or other securities now or hereafter issued by the United States of America, its agencies and allowable instrumentalities;
- Interest bearing savings accounts, interest bearing certificates of deposit or interest bearing time deposits, or any other investments constituting direct obligations of any bank as defined by the Illinois Banking Act;
- Certificates of deposit with federally insured institutions that are collateralized or insured at levels acceptable to DAOES in excess of the amount provided by the Federal Deposit Insurance Corporation (FDIC) coverage limit;
- Collateralized repurchase agreements which conform to the requirements stated in paragraph 2(g) or 2(h) of the Act;3. Interest-bearing bonds of any county, township, city, village, incorporated town, municipal corporation, school district, the State of Illinois, any other state, or any political subdivision or agency of the State of Illinois or any other state, whether the interest earned is taxable or tax-exempt under federal law. The bonds shall be (a) registered in the name of the municipality, county, or other governmental unit, or held under a custodial agreement at a bank, and (b) rated at the time of purchase within the 4 highest general classifications established by a rating service of nationally recognized expertise in rating bonds of states and their political subdivisions.
- Commercial paper meeting the following requirements:
- The corporation must be organized in the United States.
- The corporation's assets must exceed $500,000,000.
- The obligations at the time of purchase must be rated within the two highest classifications by at least two of the four standard rating services (Standard and Poor's, Duff and Phelp's, Moody's, and Fitch Investors Service).
- Not more than 33% of the total investment fund can be invested in commercial paper at any time.
- The total investment in any one corporation cannot exceed 10% of the corporation's outstanding obligations.
- The total investment in any one corporation cannot be more than $20 million.
- The Illinois Public Treasurer's Investment Pool; and
- The Illinois School District Liquid Asset Fund.
- Investments may be made only in those savings banks or savings and loan associations the shares, or investment certificates of which are insured by the Federal Deposit Insurance Corporation.
- Investment products that are considered as derivatives are specifically excluded from approved investments.
The CSBO and Director shall regularly consider material, relevant, and decision-useful sustainability factors in evaluating investment decisions, within the bounds of financial and fiduciary prudence. Such factors include, but are not limited to: (1) corporate governance and leadership factors, (2) environmental factors, (3) social capital factors, (4) human capital factors, and (5) business model and innovation factors, as provided under the Ill. Sustainable Investing Act, 30 ILCS 238.D. DiversificationIt is the policy of the System to diversify its investment portfolio. Investments shall be diversified to eliminate the risk of loss resulting in over concentration in a specific maturity, issuer, or class of securities. Diversification strategies shall be determined and revised periodically by the School Treasurer, Chief Investment Officer, or Business Manager. The diversification shall be as follows:
- Up to 100% of C.1.
- Up to 90% of C.2., C.3.
- Up to 33% of C.4., C.5., C.6., and C.7.
F. Safekeeping of Securities
- It is the policy of DAOES to require that time deposits in excess of FDIC insurable limits be secured by collateral or private insurance to protect public deposits in a single financial institution if it were to default.
- Eligible collateral instruments are any investment instruments acceptable under the Act. The collateral must be placed in safekeeping at or before the time DAOES buys the investments so that it is evident that the purchase of the investment is predicated on the securing of collateral.
- Safekeeping of Collateral
- at a Federal Reserve Bank or its branch office;
- at another custodial facility in a trust or safekeeping department through book-entry at the Federal Reserve;
- by an escrow agent of the pledging institution; or
- by the trust department of the issuing bank.
- Third party safekeeping is required for all collateral. To accomplish this, the securities must be held at one or more of the following locations:
- Safekeeping will be documented by an approved written agreement between the Board of Directors and the governing board of the bank that complies with FDIC regulations. This may be in the form of a safekeeping agreement.
- Substitution or exchange of securities held in safekeeping for DAOES can be approved exclusively by the Treasurer, Chief Investment Officer, or Business Manager, and only if the market value of the replacement securities is equal to or greater than the market value of the securities being replaced.
G. Qualified Financial Institutions and Intermediaries
- Third party safekeeping is required for all securities and commercial paper. To accomplish this, the securities must be held only at one or more of the following locations:
- at a Federal Reserve Bank or its branch office;
- at another custodial facility, which shall be a trust or safekeeping department through book-entry at the Federal Reserve, unless physical securities are involved; or
- in an insured account at a primary reporting dealer.
- Safekeeping will be documented by an approved written agreement between the Board of Directors and the holder of the securities. This may be in the form of a safekeeping agreement, trust agreement, escrow agreement or custody agreement.
- Original certificates of deposits will be held by the originating bank. A safekeeping receipt will be acceptable documentation.
Any financial institution selected to be eligible for DAOES' competitive certificate of deposit purchase program must:
- Depositories - Demand Deposits
- Any financial institution selected by DAOES shall provide normal banking services, including, but not limited to: checking accounts, wire transfers and safekeeping services.
- DAOES will not maintain funds in any financial institution that is not a member of the FDIC system. In addition, the System will not maintain funds in any institution that does not first agree to post required collateral for funds or purchase private insurance in excess of FDIC insurable limits and in amounts acceptable to DAOES.
- To qualify as a depository, a financial institution must furnish the Treasurer, Chief Investment Officer, or Business Manager with copies of the latest two statements of condition which it is required to furnish to the Comptroller of Currency as the case may be. While acting as a depository, a financial institution must continue to furnish such statements to the Treasurer, Chief Investment Officer, or Business Manager within 45 days of the end of each quarter.
- Fees for banking services shall be mutually agreed to by an authorized representative of the depository bank and the Treasurer, Chief Investment Officer, or Business Manager on an annual basis. Fees for services shall be substantiated by a monthly account analysis.
- Each financial institution acting as a depository for the DAOES must enter into a depository agreement with an authorized System official that incorporates this policy by reference.
- Banks and Savings and Loans - Certificates of Deposit
- provide wire transfer and certificate of deposit safekeeping services;
- be a member of FDIC system and be willing and capable of posting required collateral or private insurance for funds in excess of FDIC insurable limits and in amounts required by the System; and
- meet at all times the financial criteria as established in the investment procedures of the System.
Any financial intermediary selected to be eligible for DAOES competitive investment program must:
H. Management of Program
- provide wire transfer and deposit safekeeping services;
- maintain appropriate federal and state registrations for the type of business in which they are engaged;
- provide an annual audit upon request;
- maintain an office within the State of Illinois and be licensed to conduct business in this State; and
- be familiar with the Board of Director's policy and accept financial responsibility for any investment not appropriate according to the policy.
These documents include:
- The following individuals are authorized to purchase and sell investments, authorize wire transfers, authorize the release of pledged collateral, and to execute any documents required under this procedure:
- Business Manager
- Chief Investment Officer
- Wire Transfer Agreement
- Depository Agreement
- Safekeeping Agreement
- Custody Agreement
I. PerformanceThe Treasurer, Chief Investment Officer, or Business Manager will seek to earn a rate of return appropriate for the type of investments being managed given the portfolio objectives defined in Section B of this document for all funds. In general, the Treasurer, Chief Investment Officer, or Business Manager will strive to earn an average rate of return equal to or greater than the U.S. Treasury Bill rate for a given period of time for the average weighted maturity of DAOES' investments.J. Ethics and Conflicts of InterestOfficers and employees involved in the investment process shall refrain from personal business activity that could conflict with the proper execution of the investment program, or which could impair their ability to make impartial investment decisions. Further, except as permitted under Section 3.2 of the Public Officer Prohibited Practices Act, no officer involved in the investment process shall have any interest in, or receive any compensation from, any investments in which the System is authorized to invest, or the sellers, sponsors or managers of those investments.K. IndemnificationInvestment officers and employees of DAOES acting in accordance with this Investment Procedure and such written operational policies as may be established by DAOES, and who otherwise exercise due diligence and act with reasonable prudence, shall be relieved of personal liability for an individual security's credit risk or market changes.L. ReportingThe Treasurer, Chief Investment Officer, or Business Manager shall submit to the Board of Directors and the Director a monthly investment report which shall include information regarding securities in the portfolio by class or type, book value, income earned, and market values as of the report date. Generally accepted accounting principles shall be used for valuation purposes. The report shall indicate any areas of policy concern and planned revision of investment strategies.M. AmendmentThis procedure shall be reviewed from time to time by the Treasurer, Chief Investment Officer, or Business Manager with regards to the procedure's effectiveness in meeting DAOES' needs for safety, liquidity, rate of return, diversification, and general performance. Any substantive changes will be reported to the Board of Directors.Investment of DAOES FundsIn accordance with the Illinois Public Funds Investment Act, 30 ILCS 235/0/01 et seq. (the "Act"), DAOES shall maintain a set of procedures for the investment of DAOES funds that includes the following elements:
- Management responsibility for the investment program is hereby delegated to the Treasurer, Chief Investment Officer, or Business Manager, who shall establish a system of internal controls and written operational procedures designed to prevent losses of funds that might arise from fraud, employee error, misrepresentation by third parties, or imprudent actions by employees of the entity. Such procedures shall include explicit delegation of authority to persons responsible for the execution under the direction of the Treasurer, Chief Investment Officer, or Business Manager for specific financial transactions, including: investment transactions; check signing, check reconcilement, deposits, bond payments, report preparation and wire transfers. No person may engage in any investment transaction except as provided for under the terms of this policy. The Treasurer, Chief Investment Officer, or Business Manager shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinates.
- The wording of agreements necessary to fulfill the investment responsibilities is the responsibility of the Treasurer, Chief Investment Officer, or Business Manager who shall periodically review them for their consistency with DAOES policy and State law and who shall be assisted in this function by the Assistant Treasurer, Chief Investment Officer, or Business Manager, System legal counsel and auditors. These agreements include but are not limited to:
- Wire Transfer Agreement
- Depository Agreement
- Safekeeping Agreement
- Custody Agreement
- The Treasurer, Chief Investment Officer, or Business Manager, may use financial intermediaries, brokers, and/or financial institutions to solicit bids for securities and certificates of deposit. These intermediaries shall meet the criteria set forth in Section G(3) above and shall be approved by the Board of Directors
- All wire transfers made by the Treasurer shall require a secondary authorization by the Chief Investment Officer, Business Managers or Treasury Clerk/Bookkeeper/Accountant.
- The Treasurer, Chief Investment Officer, or Business Manager shall be further authorized to enter into joint investment agreements as authorized under Section 8-7 of the School Code.
The Treasurer, Chief Investment Officer, or Business Manager of DAOES shall establish and submit such procedures for the Board's approval and shall periodically review and propose needed amendments thereto. Such procedures and all policies shall be kept available at all times for public review at DAOES' administrative offices.
- A listing of authorized investments.
- The standard of care that must be maintained by the persons investing the public funds.
- Investment and diversification guidelines that are appropriate to the nature of the funds, the purpose for the funds, and the amount of the public funds within the investment portfolio.
- Guidelines regarding collateral requirements, if any, for the deposit of public funds in a financial institution made pursuant to the Act, and, if applicable, guidelines for contractual arrangements for the custody and safekeeping of that collateral.
- A system of internal controls and written operational procedures designed to prevent losses of funds that might arise from fraud, employee error, misrepresentation by third parties, or imprudent actions by employees of DAOES.
- Performance measures that are appropriate to the nature of the funds, the purpose for the funds, and the amount of the public funds within the DAOES' investment portfolio.
- Appropriate periodic review of the investment portfolio, its effectiveness in meeting DAOES' needs for safety, liquidity, rate of return, and diversification, and its general performance.
- At least quarterly written reports of investment activities by the Treasurer, Chief Investment Officer, or Business Manager for submission to the Board of Directors and the Director, including information regarding securities in the portfolio by class or type, book value, income earned, and market value as of the report date.
- A procedure for the selection of investment advisors, institutions.
- A policy regarding ethics and conflicts of interest.
LEGAL REF.:30 ILCS 235/1 et seq.105 ILCS 5/8-7, 5/17-1, and 5/17-11. CROSS REF.: 2:100 (Conflict of Interest) ADOPTED: February 20, 2020