business policies

Investment Policy

Business

Investment Policy

Policy for Investments and Deposits

Governing Authority

This document, in conjunction with Michigan Compiled Law (“MCL”), as amended, will govern the investments and the investment activities of Macomb Community College (“the College”). It will be reviewed annually for compliance and to assure the flexibility necessary to effectively manage the investment portfolio.

Purpose

The purpose of the investment policy is to ensure that the College’s Investment objectives of Safety, Liquidity and Return are adhered to while conforming to all applicable statutes governing the investment of public funds by a Michigan public entity.

Scope

This investment Policy applies to all financial assets of the College, including State and Federal funds held by it. Except for cash in certain restricted and special funds and at the discretion of the Office of the ExecutiveVice President for Business, the College can consolidate cash balances from multiple funds to maximize investment earnings.  Investment income will be allocated to the various funds based on their respective participation and in accordance with generally accepted accounting principles. Any practice not clearly authorized under these policies and The Michigan Community College Act (MCL 389.142, as amended) is prohibited. The guidance set forth herein is to be strictly followed by all those responsible for any aspect of the management or administration of these funds.

Objectives

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

  1. Safety:  Safety of principal is the foremost objective of the investment program.  College investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio.
  2. Liquidity:  The portfolio should be managed in such a manner to assure funds are available to meet those immediate and or future obligations of the College.
  3. Return:  The portfolio shall be managed in such a fashion as to attain a market rate of return throughout budgetary and economic cycles, within the context and parameters set forth by objectives 1 and 2 above.

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 probable safety of their capital as well as the probable income derived.

The standard of prudence to be used by the Office of the Executive Vice President for Business and others involved in the management of the investment portfolio shall be the “prudent person” standard and shall be applied in the context of managing the overall portfolio.  Acting in accordance with this Investment Policy and exercising due diligence shall relieve the Office of the Executive Vice President for Business and others involved in the management of the portfolio from personal responsibility for an individual security’s credit risk or market price changes, provided deviations from the expectations are reported to the Board of Trustees in a timely fashion and appropriate action is taken to control adverse developments.

Service Providers, Safekeeping and Custody

The College may engage the services of an investment advisor to assist in the management of the investment portfolio in a manner consistent with this investment policy.  Such investment advisor may be granted discretion to purchase and sell investment securities in accordance with this investment policy.  The investment advisor must be licensed as required by State statute and/or registered with the Securities and Exchange Commission and possess experience in public funds investment management specifically in the area of state and local government investment portfolios.  The investment advisor must enter into a written investment advisory agreement with the College.  In addition, the investment advisor must supply a copy of their Form ADV Part 2, or make a copy available, on an annual basis.

Should the College choose not to engage the services of an investment advisor, then a list will be maintained of financial institutions and broker/dealers who provide investment services.  All financial institutions and broker/dealers with which the College conducts business must supply proof of Financial Industry Regulatory Authority (“FINRA”) registration and State of Michigan registration, as appropriate.  The Office of the Executive Vice President for Business is responsible for evaluating and reviewing on an annual basis the regulatory status of such financial institutions and broker/dealers.

The College will also arrange to have any investment securities held in safekeeping by an independent third-party custodian.  Any advisor or broker/dealer doing business with the College cannot serve as a custodian or safekeeping agent.  Investment securities should be settled to the custody account on a delivery-versus-payment (DVP) basis.  The custodian must enter into a written custodial agreement with the College.

A copy of this policy will be forwarded to each investment advisor, financial institution and broker/dealer doing investment business with the College.  Their signature will be required indicating that they have received, read, comprehend, and will abide by its contents when managing assets or recommending or selling any investment security to the College.  Any third-party custodian providing services is excluded from this requirement if they are not managing assets, recommending, or selling any investment security to the College.

Authorized Investments

The College is permitted to invest in any security authorized by MCL 389.142, as amended, with restrictions as noted in Appendix B.

Maximum Maturities

Investments shall be made with the reasonable expectation they can be held to maturity, not to exceed 15 years.  Securities may be redeemed or sold prior to maturity to meet additional liquidity needs, to enhance the yield of the portfolio, to re-structure the portfolio or to realize any capital gains.

Prohibited Investment Practices

The College is prohibited by state law from investment in stripped principal or interest obligations, reverse repurchase agreements and derivatives.  The issuance of taxable notes for the purpose of arbitrage, as well as the use of leverage and short-term selling is also prohibited.

Any investment held in the portfolio as of the date of its adoption that does not meet the guidelines of this policy shall be exempt from the requirements of this policy.  At maturity or liquidation, such monies shall be reinvested only as provided by this policy.

Ethics and Conflict of Interest

Persons 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 and investment consultants shall disclose to the College any material financial interests in financial institutions that conduct business with the College and any material personal financial or investment positions that could be related to, or affected by, the performance of the College’s portfolio.

All employees, officers and investment consultants to the College shall subordinate their personal investment transactions to those of the College, particularly regarding the timing of purchases and sales.

Internal Controls

The Office of the Executive Vice President for Business shall develop and maintain procedures for the operation of the College’s investment program in accordance with this Investment Policy.  These procedures shall be designed to prevent loss of the College’s funds due to fraud, error, misrepresentation, unanticipated market changes or imprudent actions. 

Whenever unusual deposits or investments are to be made, the Executive Vice President for Business will consult with the College President and the Chairperson and Treasurer of the Board of Trustees.

The Office of the Executive Vice President for Business shall routinely monitor the contents of the College’s investment portfolio, the list of depository institutions currently being utilized, and the available markets. 

A detailed report of all investments, which includes a description of each security, cost, par value, rate of return, along with the settlement and maturity dates, shall be submitted to the Board of Trustees on a monthly basis. 

The College will carefully review and monitor institutions to ensure they are not undercapitalized or overextended.  In most cases, this determination can be made by review of the annual financial statement or last report of examination by regulatory agencies.

Investment Policy Adoption

This Investment Policy adopted on August 19, 2020 shall be filed with any necessary regulatory entity as required by law. The policy shall be reviewed on a periodic basis by a committee designated by the Office of the Executive Vice President for Business and any modifications made thereto must be approved by the Board of Trustees and, upon adoption, be re-filed as required.

Approved by the Board of Trustees
Macomb Community College
August 19, 2020
Updated pursuant to Board authorization (1/23)

 

Appendix A

CERTIFICATION OF UNDERSTANDING AND ACCEPTANCE.

I, the undersigned acknowledge that I am authorized to sign this policy on behalf of my employer and have received and read this investment policy established by the Macomb Community College and will abide by the guidelines set forth.

Firm/Company:                                                 

By:                                                                  

Title:                                                               

Date:                                                                                 


Appendix B

Allowable Investments and Deposits

  1. Bonds, bills, or notes of the United States, or of an agency or instrumentality of the United States.
  2. Negotiable certificates of deposit, saving accounts, or other interest-earning deposit accounts of a financial institution.
  3. Bankers' acceptances that are issued by a bank that is a member of the federal deposit insurance corporation.
  4. Commercial paper that is supported by an irrevocable letter of credit issued by a bank that is a member of the federal deposit insurance corporation.
  5. Commercial paper of corporations rated prime by at least 1 of the standard rating services.
  6. Mutual funds, trusts, or investment pools composed entirely of instruments that are eligible collateral.
  7. Repurchase agreements against eligible collateral, the market value of which must be maintained during the life of the agreements at levels equal to or greater than the amounts advanced. An undivided interest in the instruments pledged for these agreements must be granted to the community college.
  8. Investment pools, as authorized by the surplus funds investment pool act, 1982 PA 367, MCL 129.111 to 129.118, composed entirely of instruments that are legal for direct investment by a community college.
  9. Certificates of deposit issued in accordance with the following conditions:
    1. The funds are initially invested through a financial institution that is not ineligible to be a depository of surplus funds belonging to this state under section 6 of 1855 PA 105, MCL 21.146.
    2. The financial institution arranges for the investment of the funds in certificates of deposit in 1 or more insured depository institutions, as defined in 12 USC 1813, or 1 or more insured credit unions, as defined in 12 USC 1752, for the account of the community college district.
    3. The full amount of the principal and any accrued interest of each certificate of deposit is insured by an agency of the United States.
    4. The financial institution acts as custodian for the community college district with respect to each certificate of deposit.
    5. At the same time that the funds of the community college district are deposited and the certificate or certificates of deposit are issued, the financial institution receives an amount of deposits from customers of other insured depository institutions or insured credit unions equal to or greater than the amount of the funds initially invested by the community college district through the financial institution.
  10. Deposit accounts that meet all of the following conditions:
    1. The funds are initially deposited in a financial institution that is not ineligible to be a depository of surplus funds belonging to this state under section 6 of 1855 PA 105, MCL 21.146.
    2. The financial institution arranges for the deposit of the funds in deposit accounts in 1 or more insured depository institutions, as defined in 12 USC 1813, or 1 or more insured credit unions, as defined in 12 USC 1752, for the account of the community college district.
    3. The full amount of the principal and any accrued interest of each deposit account is insured by an agency of the United States.
    4. The financial institution acts as custodian for the community college district with respect to each deposit account.
    5. On the same date that the funds of the community college district are deposited under subparagraph (ii), the financial institution receives an amount of deposits from customers of other insured depository institutions or insured credit unions equal to or greater than the amount of the funds initially deposited by the community college district in the financial institution.
    6. Deposits should be limited in any given financial institution to no more than 50 percent of the capitalization value of the institution. Deposits in any individual institution are subject to an upper limit of $17,500,000. The forgoing dollar limit shall not include funds that are subject to daily withdrawal. The dollar limitation of this policy shall be adjusted annually using the United States Consumer Price Index for all urban consumers. The change from year to year will be measured by the change in the annual average as reported by the State Treasurer.
    7. When all other things are equal, banking institutions physically located in Macomb County should be given preference.
  11. Obligations of this state or any of its political subdivisions that at the time of purchase are rated as investment grade by at least 1 standard rating service.