File code: ADM.INVEST.POL
Approval Date: 11/19/99
Approved By: Board of Trustees
Policy on Investment
This policy applies to the investment of all University funds unless specified by approved restricted agreements or bond resolutions. The University will consolidate cash balances from all funds to maximize investment opportunities and will allocate investment income based upon participation of the various fund groups.
The primary objectives of investment activities shall be safety, liquidity, and yield.
Safety of principal is the foremost objective of the investment program. Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. The objective will be to mitigate credit risk and interest rate risk. The University will pre-qualify the financial institutions with which it will do business.
The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This will be accomplished by structuring the portfolio so that securities mature concurrent with cash needs to meet anticipated demands.
The investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs. Return on investment is secondary importance compared to the safety and liquidity objectives described above.
Standards of Care:
The standard of prudence to be used by the University shall be the "prudent person" standard and shall be applied in the context of managing an overall portfolio. Investment officers acting in accordance with written procedures and this 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 the liquidity and the sales of securities are carried out in accordance with the terms of this policy.
- Ethics and Conflicts of Interest
Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with the proper execution and management of the investment program, or that could impair their ability to make impartial decisions. Employees and investment officials shall disclose to the Vice President for Administrative Services any material interests in financial institutions with which they conduct business.
- Delegation of Authority
Responsibility for internal controls is delegated to the Vice President for Administrative Services by the Board of Trustees of Western Illinois University. The Vice President for Administrative Services will delegate responsibility for the operation of the investment program to a designated investment manager. This manager will act in accordance with established written procedures and internal controls for the operation of the investment program consistent with this investment policy.
Safekeeping and Custody:
- Authorized Institutions
The Board of Trustees of Western Illinois University will review and approve annually depositories authorized to provide investment services.
- Internal Controls
The University is responsible for:
- Establishing, maintaining, and evaluating internal control systems designed to ensure compliance with applicable law and effective management.
- Recording transactions properly.
- Protecting assets from loss, theft or misuse.
The investment manager is delegated the day-to-day responsibilities for establishing and maintaining internal control systems and written procedures for the operation of the investment program.
Suitable and Authorized Investments:
- Investment types currently authorized include:
- Certificates of Deposit.
- The Illinois Funds Investment Pool.
- United States Government Securities.
- Securities guaranteed by the full faith and credit of the United States Government.
- Any other security permitted by law and approved by the Board.
- Collateralization of Investments
Full collateralization will be required for all Board funds in excess of the amount insured by the FDIC and/or SAIF.
Collateral currently authorized includes:
- United States Treasury Bills,
- United States Treasury Notes,
- United States Treasury Bonds,
- Federal Farm Credit Bank Bonds,
- Federal Home Loan Bank Notes,
- Federal National Mortgage Association (Fannie Mae),
- Federal Land Bank Bonds,
- Government National Mortgage Association (Ginnie Mae),
- Federal Home Loan Mortgage Corporation.
Any instrument authorized for use as collateral may also be used for investment purposes.
The investments shall be diversified by:
- Investing in security with varying maturities.
- Continuously investing a portion of the portfolio in readily available funds such as the Illinois Funds Investment Pool, or money market funds to ensure that appropriate liquidity is maintained in order to meet ongoing obligations.
- Maximum Maturities
To the extent possible, the University shall attempt to match its investments with anticipated cash flow requirements. Unless matched to specific cash flow, the University will not directly invest in securities maturing more than five years from the date of purchase or in accordance with state statutes or revenue bond resolutions.
Revenue Bond Funds and Reserve Accounts may be invested in securities exceeding five years if the maturity of such investments is made to coincide as nearly as practicable with the expected use of funds.
The investment manager shall prepare a quarterly report of investment activities for submission to the Board of Trustees. The report will include the following:
- Individual securities held at the end of the reporting period by type, book value, income earned, and market value.
- Average interest rates in the portfolio of investments as compared to the 90 day Treasury Bill.
- Investments by maturity date.
- Percentage of the total portfolio by type of investment.
- Performance Standards
The 90-day maturity United States Treasury Bill shall be established as the benchmark against which to measure the portfolio performance. The University will measure performance against the benchmark monthly and periodically review the investment portfolio, its effectiveness in meeting needs for safety, liquidity, yield, diversification, and general performance.
- Marking to Market
The market value of the portfolio shall be calculated at least quarterly and a statement of the market value of the portfolio shall be issued at least quarterly.