I. SCOPE: This investment policy applies to activities of the Arapahoe Library District with regard to investing the financial assets of the Library District and all component units.
II. OBJECTIVES: Funds of the Arapahoe Library District will be invested in accordance with this policy and Colorado Revised Statutes (C.R.S.) § 24-75-601. The Arapahoe Library District’s investment portfolio shall be managed in a manner to attain a market rate of return throughout budgetary and economic cycles while preserving and protecting capital in the overall portfolio. Investments shall be based on statutory constraints. The primary investment criteria in priority sequence are safety, liquidity and yield.
III. DELEGATION OF AUTHORITY: The Director of Administrative Services or designee shall be the "Investment Officer" responsible for investment decisions and activities. The Investment Officer shall operate the investment management program consistent with this policy. In order to optimize total return through vigilant portfolio management, resources shall be allocated to the investment management program.
A. The standard of prudence to be applied by the Investment Officer shall be the "prudent investor" rule, which states, "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 to be derived." The prudent investor rule shall be applied in the context of managing the overall portfolio.
B. The Investment Officer, acting in accordance with this policy and exercising due diligence, shall not be personally responsible for a specific security's credit risk or market price changes.
V. MONITORING AND ADJUSTING THE PORTFOLIO: The contents of the portfolio shall be presented to the Board of Trustees for review monthly as an investment report.
VI. INTERNAL CONTROLS: The Investment Officer shall organize, control, and make decisions relating to cash flow needs and investment opportunities. The Custodian (financial institution or broker chosen by the District) shall receive copies of the confirmations and all securities to be held in safekeeping except those held by the Federal Reserve. Transfers made for investments may be made only to qualified institutions listed in item number XI. Money held in SEC Registered money market funds must comply with § 24-75-601 C.R.S. Money held in state pools must comply with § 24-75-701 C.R.S. Other controls may be adopted to prevent loss of public funds due to fraud, error, misrepresentation, unanticipated market changes or imprudent actions.
VII. SHORT AND LONG TERM PORTFOLIO DIVERSIFICATION:
A. All investments will be considered short-term (less than one year) or long-term (one to five years). Duration should be chosen by the Investment Officer to meet the objectives for cash flows set forth in the Strategic Plan and Budget.
B. All investments will be made in accordance with the Colorado Revised Statutes, which include the following: § 30-10-708 C.R.S., Deposit of funds in banks and savings and loan associations; § 11-10.5-101 C.R.S., et. seq. Public Deposit Protection Act; § 24-75-601 C.R.S., et. seq. Funds – Legal Investments; § 24-75-603 C.R.S., Depositories; and § 24-75-702 C.R.S., Local governments – authority to pool surplus funds. Any revisions or extensions of these sections of the statutes will be considered to be part of this Investment Policy immediately upon the effective date following enactment.
C. The Arapahoe Library District shall diversify its short-term investments by using multiple investment vehicles so that, whenever possible, no more than 65 percent of the total portfolio is in one investment type when the total portfolio exceeds $2,000,000. When the total portfolio is less than $2,000,000, diversification may not be necessary or possible.
D. Short-term investment maturities for all funds shall be scheduled to coincide with projected cash flow needs. No long-term investments shall exceed 5 years without approval by the Board of Trustees of the Arapahoe Library District.
VIII. LONG TERM PORTFOLIO DIVERSIFICATION: Instruments and diversification for the long-term portfolio shall be the same as for the short-term portfolio. Maturity scheduling shall be timed according to anticipated need. For example, investment of building construction funds shall be timed to meet contractor payments.
IX. COMPETITIVE SELECTION OF INVESTMENT INSTRUMENTS:
A. Before the Arapahoe Library District invests any surplus funds in fixed term investments, the Investment Officer shall obtain and record three competitive offers. If a specific maturity date is required, either for cash flow purposes or for conformance to maturity guidelines, offers will be requested for instruments which meet the maturity requirement. If no specific maturity is required, a market trend analysis, which includes a yield curve, will normally be conducted to determine which maturities would be most advantageous.
B. The Arapahoe Library District will accept the offer that provides the highest rate of return within the maturity required and within the parameters of these policies.
X. QUALIFIED DEPOSITORIES AND FINANCIAL INSTITUTIONS:
A. The Arapahoe Library District shall work from the State listing of Banking Institutions approved as depositories for its public funds which are qualified under § 24-75-603 C.R.S., are federally insured and which collateralize deposits over $100,000 according to the Public Deposit Protection Act. The Arapahoe Library District shall maintain cash balances with these approved depositories that are adequate to cover anticipated checks as well as any required compensating balances under bank service agreements, and such other deposits as the Investment Officer deems prudent.
B. Separate from the banking institutions approved as depositories, the Arapahoe Library District shall maintain a listing of Financial Institutions that are approved by the Investment Officer for investment purposes. The Investment Officer shall conduct a due diligence review of the condition and the regulatory history of each Financial Institution, including state pools, prior to its approval. This review shall be accomplished by requiring financial institutions to submit a Statement of Qualification covering all officers and control persons that includes full disclosure of all information that would be required on the NASD Form U4 for Broker Dealers or the SEC Form ADV Parts 1 and 2 for Investment Advisors.
C. Prior to the approval of any Financial Institution, other than institutions approved as depositories, the Investment Officer shall require that its authorized representative assigned to the Arapahoe Library District certify to having read and understood these investment policies and that the Financial Institution, through its representative, agrees to comply with them or be liable under § 24-75-601.5 C.R.S.
XI. SAFEKEEPING AND COLLATERALIZATION:
A. All fixed term investment securities purchased under this policy shall be held in third-party safekeeping by a custodial institution eligible under § 24-75-601 C.R.S. The custodian shall issue a safekeeping receipt listing the specific instrument, rate, maturity, and other pertinent information.
B. Deposit-type securities (such as certificates of deposit) shall be collateralized as required by PDPA for any amount exceeding FDIC or FSLIC coverage. Other investments requiring collateral including repurchase agreements will be secured by the actual security held in safekeeping by a third-party custodian.
C. Money market instruments such as SEC registered money market mutual funds qualified under § 24-75-601 C.R.S. and state pools under § 24-75-701 C.R.S. shall be collateralized as required by law.
XII. REPORTING REQUIREMENTS: The Investment Officer shall generate monthly reports for management purposes. In addition, the Board of Trustees of the Arapahoe Library District will be provided a monthly report that will include data on investment
instruments being held as well as any narrative necessary for clarification.
XIII. ADVISORY COMMITTEE: The Investment Officer may convene a group of knowledgeable citizens to act as an advisory committee. This group shall have no power to modify these investment policies or make any decision delegated to the Investment Officer under these policies, but shall be advisory only.
Adopted: November 1999
Revised: May 2009, May 2012