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S-1546 - 09/11/2018 - INVESTMENT POLICY - Ordinances Supporting DocumentsBOT AGENDA Page 1 BOARD OF TRUSTEES MEETING SAMUEL E. DEAN BOARD ROOM BUTLER GOVERNMENT CENTER 1200 OAK BROOK ROAD OAK BROOK, ILLINOIS 630-368-5000 AGENDA ITEM Regular Board of Trustees Meeting of September 11, 2018 SUBJECT: Village Investment Policy Update FROM: Jason Paprocki, Finance Director BUDGET SOURCE/BUDGET IMPACT: N/A RECOMMENDED MOTION: I move that the Village Board adopt Ordinance 2018-FI- EX1-S-1546 “An Ordinance Amending the Investment Policy for the Village of Oak Brook, Illinois”. Background/History: The investment of Village funds is controlled by a formal investment policy. The policy was first adopted in 1995, and later revised in 1997, 1999, 2007, and 2012. An update to the Illinois Public Funds Act (30 ILCS 235) has recently been enacted. Previously, public funds were permitted to be invested in obligations of corporations organized in the United States with assets exceeding $500,000,000 with a maturity of no mor e than 270 days from purchase. Public Act 100-0752 has changed the permitted maturity of these instruments from 270 days to three (3) years. The attached investment policy (Exhibit A) contains the updated language. This change could result in an additional 0.25% to 1.00% yield depending on the maturity, investment rating, and amount of principal invested of an individual obligation. Staff will continue to evaluate investment opportunities to bala nce risk, yield, and future cash needs. In addition, we updated the Investment Instruments section to specifically state investments contained within 30 ILCS 235/2. These items are not new additions and have previously been permitted by the Illinois Public Funds Act. We are simply updating the language in this section to be more descriptive of permitted investment types. ITEM 6.E.1 BOT AGENDA Page 2 Recommendation I recommend that the Village Board approve Ordinance 2018-FI-EX1-S-1546 “An Ordinance Amending the Investment Policy for the Village of Oak Brook, Illinois”. AN ACT concerning finance. Be it enacted by the People of the State of Illinois, represented in the General Assembly: Section 5.The Public Funds Investment Act is amended by changing Section 2 as follows: (30 ILCS 235/2)(from Ch.85,par.902) Sec.2.Authorized investments. (a)Any public agency may invest any public funds as follows: (1)in bonds,notes,certificates of indebtedness, treasury bills or other securities now or hereafter issued, which are guaranteed by the full faith and credit of the United States of America as to principal and interest; (2)in bonds,notes,debentures,or other similar obligations of the United States of America,its agencies, and its instrumentalities; (3)in 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; (4)in short term obligations of corporations organized in the United States with assets exceeding HB4573 Enrolled LRB100 16602 HLH 31738 b Public Act 100-0752 $500,000,000 if (i)such obligations are rated at the time of purchase at one of the 3 highest classifications established by at least 2 standard rating services and which mature not later than 3 years 270 days from the date of purchase,(ii)such purchases do not exceed 10%of the corporation's outstanding obligations and (iii)no more than one-third of the public agency's funds may be invested in short term obligations of corporations;or (5)in money market mutual funds registered under the Investment Company Act of 1940,provided that the portfolio of any such money market mutual fund is limited to obligations described in paragraph (1)or (2)of this subsection and to agreements to repurchase such obligations. (a-1)In addition to any other investments authorized under this Act,a municipality,park district,forest preserve district,conservation district,county,or other governmental unit may invest its public funds in interest bearing bonds of any county,township,city,village,incorporated town, municipal corporation,or school district,of the State of Illinois,of any other state,or of any political subdivision or agency of the State of Illinois or of any other state, whether the interest earned thereon is taxable or tax-exempt under federal law.The bonds shall be registered in the name of the municipality,park district,forest preserve district, conservation district,county,or other governmental unit,or HB4573 Enrolled LRB100 16602 HLH 31738 b Public Act 100-0752 held under a custodial agreement at a bank.The bonds shall be 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. (b)Investments may be made only in banks which are insured by the Federal Deposit Insurance Corporation.Any public agency may invest any public funds in short term discount obligations of the Federal National Mortgage Association or in shares or other forms of securities legally issuable by savings banks or savings and loan associations incorporated under the laws of this State or any other state or under the laws of the United States.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.Any such securities may be purchased at the offering or market price thereof at the time of such purchase.All such securities so purchased shall mature or be redeemable on a date or dates prior to the time when,in the judgment of such governing authority,the public funds so invested will be required for expenditure by such public agency or its governing authority.The expressed judgment of any such governing authority as to the time when any public funds will be required for expenditure or be redeemable is final and conclusive.Any public agency may invest any public funds in dividend-bearing share accounts,share certificate accounts or HB4573 Enrolled LRB100 16602 HLH 31738 b Public Act 100-0752 class of share accounts of a credit union chartered under the laws of this State or the laws of the United States;provided, however,the principal office of any such credit union must be located within the State of Illinois.Investments may be made only in those credit unions the accounts of which are insured by applicable law. (c)For purposes of this Section,the term "agencies of the United States of America"includes:(i)the federal land banks, federal intermediate credit banks,banks for cooperative, federal farm credit banks,or any other entity authorized to issue debt obligations under the Farm Credit Act of 1971 (12 U.S.C.2001 et seq.)and Acts amendatory thereto;(ii)the federal home loan banks and the federal home loan mortgage corporation;and (iii)any other agency created by Act of Congress. (d)Except for pecuniary interests permitted under subsection (f)of Section 3-14-4 of the Illinois Municipal Code or under Section 3.2 of the Public Officer Prohibited Practices Act,no person acting as treasurer or financial officer or who is employed in any similar capacity by or for a public agency may do any of the following: (1)have any interest,directly or indirectly,in any investments in which the agency is authorized to invest. (2)have any interest,directly or indirectly,in the sellers,sponsors,or managers of those investments. (3)receive,in any manner,compensation of any kind HB4573 Enrolled LRB100 16602 HLH 31738 b Public Act 100-0752 from any investments in which the agency is authorized to invest. (e)Any public agency may also invest any public funds in a Public Treasurers'Investment Pool created under Section 17 of the State Treasurer Act.Any public agency may also invest any public funds in a fund managed,operated,and administered by a bank,subsidiary of a bank,or subsidiary of a bank holding company or use the services of such an entity to hold and invest or advise regarding the investment of any public funds. (f)To the extent a public agency has custody of funds not owned by it or another public agency and does not otherwise have authority to invest such funds,the public agency may invest such funds as if they were its own.Such funds must be released to the appropriate person at the earliest reasonable time,but in no case exceeding 31 days,after the private person becomes entitled to the receipt of them.All earnings accruing on any investments or deposits made pursuant to the provisions of this Act shall be credited to the public agency by or for which such investments or deposits were made,except as provided otherwise in Section 4.1 of the State Finance Act or the Local Governmental Tax Collection Act,and except where by specific statutory provisions such earnings are directed to be credited to and paid to a particular fund. (g)A public agency may purchase or invest in repurchase agreements of government securities having the meaning set out in the Government Securities Act of 1986,as now or hereafter HB4573 Enrolled LRB100 16602 HLH 31738 b Public Act 100-0752 amended or succeeded,subject to the provisions of said Act and the regulations issued thereunder.The government securities, unless registered or inscribed in the name of the public agency,shall be purchased through banks or trust companies authorized to do business in the State of Illinois. (h)Except for repurchase agreements of government securities which are subject to the Government Securities Act of 1986,as now or hereafter amended or succeeded,no public agency may purchase or invest in instruments which constitute repurchase agreements,and no financial institution may enter into such an agreement with or on behalf of any public agency unless the instrument and the transaction meet the following requirements: (1)The securities,unless registered or inscribed in the name of the public agency,are purchased through banks or trust companies authorized to do business in the State of Illinois. (2)An authorized public officer after ascertaining which firm will give the most favorable rate of interest, directs the custodial bank to "purchase"specified securities from a designated institution.The "custodial bank"is the bank or trust company,or agency of government,which acts for the public agency in connection with repurchase agreements involving the investment of funds by the public agency.The State Treasurer may act as custodial bank for public agencies executing repurchase HB4573 Enrolled LRB100 16602 HLH 31738 b Public Act 100-0752 agreements.To the extent the Treasurer acts in this capacity,he is hereby authorized to pass through to such public agencies any charges assessed by the Federal Reserve Bank. (3)A custodial bank must be a member bank of the Federal Reserve System or maintain accounts with member banks.All transfers of book-entry securities must be accomplished on a Reserve Bank's computer records through a member bank of the Federal Reserve System.These securities must be credited to the public agency on the records of the custodial bank and the transaction must be confirmed in writing to the public agency by the custodial bank. (4)Trading partners shall be limited to banks or trust companies authorized to do business in the State of Illinois or to registered primary reporting dealers. (5)The security interest must be perfected. (6)The public agency enters into a written master repurchase agreement which outlines the basic responsibilities and liabilities of both buyer and seller. (7)Agreements shall be for periods of 330 days or less. (8)The authorized public officer of the public agency informs the custodial bank in writing of the maturity details of the repurchase agreement. (9)The custodial bank must take delivery of and maintain the securities in its custody for the account of HB4573 Enrolled LRB100 16602 HLH 31738 b Public Act 100-0752 the public agency and confirm the transaction in writing to the public agency.The Custodial Undertaking shall provide that the custodian takes possession of the securities exclusively for the public agency;that the securities are free of any claims against the trading partner;and any claims by the custodian are subordinate to the public agency's claims to rights to those securities. (10)The obligations purchased by a public agency may only be sold or presented for redemption or payment by the fiscal agent bank or trust company holding the obligations upon the written instruction of the public agency or officer authorized to make such investments. (11)The custodial bank shall be liable to the public agency for any monetary loss suffered by the public agency due to the failure of the custodial bank to take and maintain possession of such securities. (i)Notwithstanding the foregoing restrictions on investment in instruments constituting repurchase agreements the Illinois Housing Development Authority may invest in,and any financial institution with capital of at least $250,000,000 may act as custodian for,instruments that constitute repurchase agreements,provided that the Illinois Housing Development Authority,in making each such investment, complies with the safety and soundness guidelines for engaging in repurchase transactions applicable to federally insured banks,savings banks,savings and loan associations or other HB4573 Enrolled LRB100 16602 HLH 31738 b Public Act 100-0752 depository institutions as set forth in the Federal Financial Institutions Examination Council Policy Statement Regarding Repurchase Agreements and any regulations issued,or which may be issued by the supervisory federal authority pertaining thereto and any amendments thereto;provided further that the securities shall be either (i)direct general obligations of, or obligations the payment of the principal of and/or interest on which are unconditionally guaranteed by,the United States of America or (ii)any obligations of any agency,corporation or subsidiary thereof controlled or supervised by and acting as an instrumentality of the United States Government pursuant to authority granted by the Congress of the United States and provided further that the security interest must be perfected by either the Illinois Housing Development Authority,its custodian or its agent receiving possession of the securities either physically or transferred through a nationally recognized book entry system. (j)In addition to all other investments authorized under this Section,a community college district may invest public funds in any mutual funds that invest primarily in corporate investment grade or global government short term bonds. Purchases of mutual funds that invest primarily in global government short term bonds shall be limited to funds with assets of at least $100 million and that are rated at the time of purchase as one of the 10 highest classifications established by a recognized rating service.The investments HB4573 Enrolled LRB100 16602 HLH 31738 b Public Act 100-0752 shall be subject to approval by the local community college board of trustees.Each community college board of trustees shall develop a policy regarding the percentage of the college's investment portfolio that can be invested in such funds. Nothing in this Section shall be construed to authorize an intergovernmental risk management entity to accept the deposit of public funds except for risk management purposes. (Source:P.A.97-129,eff.7-14-11;98-297,eff.1-1-14; 98-390,eff.8-16-13;98-756,eff.7-16-14.) Section 99.Effective date.This Act takes effect upon becoming law. HB4573 Enrolled LRB100 16602 HLH 31738 b Public Act 100-0752 ORDINANCE 2018-FI-EX1-S-1546 AN ORDINANCE AMENDING THE INVESTMENT POLICY FOR THE VILLAGE OF OAK BROOK, ILLINOIS WHEREAS, on January 24, 1995, the Board of Trustees of the Village of Oak Brook adopted a uniform and comprehensive investment policy encompassing funds governed by it; and WHEREAS, the Village Board last amended said investment policy with the passage of Ordinance S-1344 on August 14, 2012; and WHEREAS, it is in the best interests of the Village of Oak Brook that the attached Fifth Amended Investment Policy be adopted. NOW, THEREFORE, BE IT ORDAINED BY THE PRESIDENT AND BOARD OF TRUSTEES OF THE VILLAGE OF OAK BROOK, DU PAGE AND COOK COUNTIES, ILLINOIS as follows: Section 1: That the provisions of the preamble hereinabove set f orth are hereby adopted as though fully set forth herein. Section 2: That the Fifth Amended Investment Policy, a copy of which is attached hereto and incorporated herein as Exhibit A, is hereby approved and adopted in its entirety and supersedes all pri or editions of the Investment Policy. Section 3: That the Village Clerk is hereby authorized and directed to publish this ordinance in pamphlet form in the manner provided by law. Section 4: That all ordinances or parts thereof in conflict with the provisions of this ordinance be and the same are hereby repealed to the extent of such conflict. Section 5: That this ordinance shall be in full force and effect from and after passage and approval pursuant to law. [SIGNATURE PAGE FOLLOWS] Ordinance 2018-FI-EX1-S-1546 An Ordinance Amending The Investment Policy For The Village of Oak Brook, Illinois Page 2 of 2 APPROVED THIS 11th day of September, 2018. Gopal G. Lalmalani Village President PASSED THIS 11th day of September, 2018. Ayes: Nays: Absent: ATTEST: Charlotte K. Pruss Village Clerk Exhibit A FOURTH FIFTH AMENDED VILLAGE OF OAK BROOK INVESTMENT POLICY SCOPE This policy governs the investment practices of all funds of the Village of Oak Brook, excepting the Police Pension Fund and the Firefighters' Pension Fund, which are governed by the Boards of Trustees of each fund and who determine investment policies of those funds, in accordance with applicable law. The funds governed by this policy are accounted for in the Village's Comprehensive Annual Financial Report and include the General Corporate Fund, Special Revenue funds, Capital Project funds, Enterprise funds, Internal Service funds, and any other funds that may be created from time to time. All transactions involving the financial assets and related activity of the foregoing funds shall be administered in accordance with the provisions of this policy. OBJECTIVES 1. Safety of Capital - Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. To attain this objective, diversification is desired in order to avoid incurring unreasonable risks from concentrating investments in specific security types and/or particular financial institutions. 2. Liquidity - The Village's investment portfolio shall remain sufficiently liquid to enable the Village to meet all operating requirements which may be reasonably anticipated in any Village fund. Maturities of investments· in all funds covered by this policy shall not exceed five years, unless a temporary extension of maturities is approved by the Board of Trustees. 3. Maintenance of Public Trust - All participants in the investment process shall seek to act responsibly as custodians of the public trust and shall avoid any transaction that might impair public confidence in the Village. 4. 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 to be derived. The standard of prudence to be used by investment officials shall be the "prudent person" and shall be applied in the context of managing the overall portfolio. RESPONSIBILITY Management responsibility for the investment program of the Village of Oak Brook is hereby delegated to the Finance Director/Treasurer, who shall direct the investment program in a manner consistent with this policy. The Finance Director/Treasurer shall be responsible for all transactions undertaken, shall establish a written system of controls to regulate the activities of subordinate employees, and shall provide written approval for each investment placement. Village of Oak Brook Investment Policy Page 2 INVESTMENT INSTRUMENTS The Village may invest in any type of investment instrument permitted by Illinois law, as described in Chapter 30 of the Illinois Compiled Statutes, 30 ILCS 235/2. Permitted investment instruments include: 1. Bonds, notes, certificates of indebtedness, Treasury bills or other securities which are guaranteed by the full faith and credit of the United States of America as to principal and interest. 2. Bonds, notes, debentures, or other similar obligations of the United States of America or its agencies. 3. Commercial paper, provided that, (a) the issuer is a U.S. Corporation with more than $500 million in assets, (b) the security is rated within the 3 highest classifications by two standard rating services, (c) the security will mature within 270 days 3 years of purchase, and (d) such purchase does not exceed 10% of the issuer's outstanding obligations. 4. The State of Illinois Public Treasurer's Investment Pool (The Illinois Funds). 5. Money market mutual funds which are registered under the Investment Company Act of 1940, provided the portfolio is limited to bonds, notes, certificates, treasury bills, or other securities which are guaranteed by the United States of America as to principal and interest. 6. Repurchase Agreements which are collateralized by full faith and credit U.S. Treasury securities. 7. Insured accounts of credit unions whose principal office is in Illinois. 8. 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. 9. Interest bearing bonds registered in the name of any county, township, city, village, incorporated town, municipal corporation, or school district, of the State of Illinois, of any other state, or of any political subdivision or agency of the State of Illinois or of any other state, whether the interest earned thereon is taxable or tax-exempt under federal law. The bonds shall be 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. For purposes of this section, the term "agencies of the United States of America" include: the federal land banks, federal intermediate credit banks, banks for cooperative, federal farm credit banks, or any other entity authorized to issue debt obligations under the Farm Credit Act of 1971; the federal home loan banks and the federal home loan mortgage corporation; and any other agency created by act of Congress. This policy expressly prohibits investments in derivative type securities. Village of Oak Brook Investment Policy Page 3 DIVERSIFICATION It is the policy of the Village to diversify its investment portfolio. Investments shall be diversified in order to reduce the risk of loss resulting from concentration in a specific maturity, issuer, or class of securities. In order to achieve a diversified investment portfolio, no one financial institution shall hold more than 25% of the Village's investments, exclusive of securities guaranteed by the full faith and credit of the United States of America, or obligations of the United States of America agencies. COLLA TERALIZATION 1. It is the policy of the Village to require that all deposits in excess of FDIC insurable limits, except those in the Illinois Metropolitan Investment Fund (IMET), be secured by collateral to protect public deposits in a single financial institution if it were to default. 2. Eligible collateral instruments and collateral ratios (market value divided by deposit) are as follows: a) U.S. Government Securities b) Obligations of Federal Agencies c) Obligations of the State of Illinois d) Local and Municipal Bonds rated "A" or better by Moody's = 110% = 115% = 115% = 115% The ratio of fair market value of collateral to the amount of funds secured shall be reviewed at least quarterly and additional collateral shall be requested when the ratio declines below the level required. 3. Safekeeping of Collateral a) Third party safekeeping is required for all collateral. To accomplish this, the securities can be held at the following locations: 1) A Federal Reserve Bank or branch office. 2) At another custodial facility- generally in a trust department through book-entry at the Federal Reserve, unless physical securities are involved. If physical securities are involved, at a third party depository in a suitable vault and insured against loss by fire, theft and similar causes. 3) By an escrow agent of the pledging institution. b) Safekeeping of collateral shall be documented by a written agreement approved by the Village. This may be in the form of a safekeeping agreement, trust agreement, escrow agreement or custody agreement. Village of Oak Brook Investment Policy Page 4 c) Substitution or exchange of securities held in safekeeping as collateral may occur without prior written notice to the Village provided that the market value of the replacement securities are equal to or greater than the market value of the securities being replaced. The Village shall be notified in writing within two days of all substitutions. SAFEKEEPING OF SECURITIES 1. Third party safekeeping is required for all securities owned by the Village. To accomplish this, the securities shall be held in a trust department through book-entry at the Federal Reserve. 2. Safekeeping shall be documented by an approved written agreement. The agreement may be in the form of a safekeeping agreement, trust agreement, escrow agreement or custody agreement. Fees for this service shall be mutually agreed upon by the Village and the safekeeping bank selected by the Village. QUALIFIED FINANCIAL INSTITUTIONS All depositories of the Village shall execute a contract every three years which shall designate the requirements of serving as depository for the Village, including collateralization of Village funds invested at such depository and the related safekeeping requirements of pledged securities. The Village shall have a separate contract with an "operating bank" for demand deposits, which shall also execute a contract with the Village for such service at least once every three years. Such financial institutions shall provide such financial data to the Finance Director/Treasurer as may be required by the Finance Director/Treasurer to evaluate the financial condition of the institution. Such data may be in the form of audited financial statements, FDIC regulatory reports, and shall be provided at least annually to the Finance Director/Treasurer. Any refusal to provide such information to the Village may cause termination of the depository contract with such institution. 1. Depositories - Demand Deposits a) The Village shall select one financial institution to provide operating banking services including, but not limited to: checking accounts, wire transfers, credit card processing, ACH processing, etc. b) The Village shall not maintain funds in any financial institution that is not a member of the FDIC. In addition, the Village shall not maintain funds in any institution not willing or capable of posting required collateral for funds in excess of FDIC insurable limits. c) Fees for banking services shall be mutually agreed to by an authorized representative of the depository bank and the Village from time to time. Village of Oak Brook Investment Policy Page 5 2. Depositories - Certificates of Deposit Any financial institution selected to be eligible for the Village's competitive certificate of deposit purchase program must meet the following requirements. a) Shall provide wire transfer and safekeeping services. b) Shall be a member of FDIC system and shall be willing and capable of posting required collateral for funds in excess of FDIC or insurable limits. 3. The total amount of Village funds deposited and/or invested in a financial institution shall not exceed 25% of the institution's capital stock, surplus, and undivided profits. PERFORMANCE STANDARDS The investment portfolio will be managed in accordance with the parameters specified within this policy and shall strive to attain a market average rate of return that exceeds the interest rate on 90 day U.S. Treasury Bills, taking into account the Village's risk constraints, cash flow characteristics, and legal restriction on eligible investments. REPORTING On a monthly basis, the Finance Director/Treasurer shall submit to the Village Board an investment report which shall describe the portfolio in terms of investment securities, maturities and cost by fund, market value, and earnings for the current period and year to date. On an annual basis, the Finance Director/Treasurer shall submit a comprehensive annual report on the investment program and activity, including a review of the overall performance for the year. POOLING OF CASH AND INVESTMENTS The Village may pool the cash and investments of various funds in order to maximize investment earnings. Investment income shall be allocated to the various funds based upon their respective participation. 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 of the investment program, or which could impair their ability to make impartial investment decisions. Village of Oak Brook Investment Policy Page 6 INDEMNIFICATION Investment officers and employees of the Village acting in accordance with this Investment Policy and such written procedures as have been or may be established, in relation thereto, and exercising due diligence, shall be relieved of personal liability for an individual security's credit risk or market changes. AMENDMENT This policy may be amended by the Village President and Board of Trustees, upon recommendation of the Finance Director/Treasurer and Village Manager. · CONFLICT In the event of any conflict between this Policy and the Illinois Compiled Statutes or case decisions of the State of Illinois, the Statutes and case law decisions shall control. ADOPTION Adopted as amended by the Village President and Board of Trustees by Ordinance # S-1344 S- 1546 on August 14, 2012 September 11, 2018. Cash and Investment Procedures and Internal Controls Manual Introduction The Finance Department is responsible for conducting cash and investment transactions for all funds held by or for the benefit of the Village of Oak Brook. The responsibility for the administration of the cash and investment program has been delegated to the Finance Director, who shall implement the following investment procedures and internal controls, as prescribed by the Village's Investment Policy. Objective This Procedures and Internal Control Manual provides an outline for cash and investment transactions. This manual shall be reviewed on a yearly basis for possible revisions by the Finance Director to ensure that the manual is current with investment industry standards and practices. Prudence and Standard of Prudence The standard of prudence to be used by the investment staff shall be that of a "prudent person" and shall be applied in the context of managing the overall portfolio. The Finance Director, or persons performing the investment functions, acting in accordance with written policies and procedures and exercising due diligence, shall not be responsible for an individual security's credit risk or market price changes, provided that deviations from expectations are reported in a timely fashion and appropriate action is taken to control or mitigate adverse developments. The "prudent person" standard is herewith understood to mean that 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. Investment Decisions The Finance Department staff shall adhere to the guidelines of the Village of Oak Brook's Investment Policy and the Procedures and Internal Control Manual regarding all investment procedures or any other cash and investment transactions. Duties and Responsibilities The Finance Director shall be responsible for the management of the cash and investment program (i.e., purchase and sale of securities, bank account transfers, wire transfers, and reporting) and the Accounting Manager shall be responsible for the accounting of all transactions. The Accounting Manager shall have the authority to perform operational duties as authorized by the Finance Director in his/her absence. Separation of Duties Finance Department staff shall observe proper segregation of duties while engaged in cash and investment activities whenever possible. Persons responsible for initiating cash and investment transactions should not perform the reconciliation of bank or safekeeping account statements. Village Bank Accounts The Finance Director is responsible for establishing the appropriate number of bank accounts in order to transact Village business. The Village President, Village Manager, and Finance Director shall be named as authorized signers on all Village accounts. One signature is required for all disbursements under $10,000. Two signatures are required for all disbursements in excess of $10,000. The use of a facsimile signature for signing Village checks is allowed. The plates bearing the facsimile signatures shall be kept in the possession of each authorized signer, with proper care taken to secure the plates in order to avoid the potential for unauthorized use. A facsimile signature is not allowed for the second required signature on checks in excess of $10,000. Bank Account Transfers Routine transfers of funds from one bank account to another within the same financial institution may be initiated by staff members authorized by the Finance Director. For all transfers, a bank transfer form must be completed which contains, at a minimum, the account number the funds are transferred from, the account number the funds are transferred to, the amount of the transfer, an explanation as to the reason for the transfer, and a notation as to the bank representative contacted and the time the contact is made. The individual initiating the account transfer shall prepare the necessary journal entry form for entry into the Village's accounting system. Wire Transfers The Village Manager and Finance Director are authorized to wire funds from one financial institution to another. For all wire transfers initiated, a wire transfer form must be completed which contains, at a minimum, the account number the funds are transferred from, the account number the funds are transferred to, the amount of the transfer, an explanation as to the reason for the transfer, and a notation as to the bank representative contacted and the time the contact is made. Proper care shall be taken to safeguard any personal identification numbers or security codes given by the Village's financial institutions in order to prevent unauthorized use. The financial institution is not required to confirm wire transfers initiated by the Village Manager or Finance Director with another authorized signer. Bank Account Reconciliations All bank accounts and investment accounts shall be reconciled on a monthly basis by the Accounting Manager. Any deviations from the procedures prescribed in the Village's Investment Policy or this Procedures and Internal Control Manual noted during the reconciliation process shall be reported immediately to the Finance Director and/or the Village Manager. Investment of Village Funds The Village shall utilize the Illinois Funds and money market sweep accounts for the investment of its short term funds. Funds available for longer term investing may be invested in any investment vehicle allowed by the Village's Investment Policy. Security Selection Process When purchasing securities, the Finance Department shall select the security which provides both the highest rate of return within the established parameters of the Investment Policy and satisfies the current objectives and needs of the Village's portfolio. These selections shall be made based on a minimum of two (2) bids/quotes (unless securities are being purchased at the FED window) being obtained from banks and/or broker/dealers on the securities in question. Two bids/quotes are not necessary in the following situations: 1) When time constraints preclude the use of the competitive bidding process. 2) When no active market exists for the issue being traded due to the age or depth of the issue. 3) When a security that the Village is purchasing is not widely traded. 4) When the transaction involves a new issue being sold at no greater than par value. When using the competitive bid process, all bids shall become part of the record of the specific security involved. Settlement Procedures for Investment Transactions Settlement for all "book entry" securities transactions shall be made "delivery vs. payment" (DVP) by the Village's designated custodian for safekeeping. The Village's designated safekeeping institution shall be notified of the trade prior to or on the day of settlement. Confirmation of the delivery will include the type of security purchased/sold, CUSIP number, coupon rate (if applicable), maturity, purchase and settlement dates, par value and purchase price. Certificates of deposit purchased by the Village shall be settled by wire transfer once documentation has been received indicating that the appropriate amount of collateral has been placed with an independent third party financial institution. Accounting for Investment Transactions In order to maximize interest earnings, the Village shall pool the cash and investment balances of its funds whenever possible. Investments shall be recorded in the financial records at amortized historical cost. Interest income will be recognized monthly based on the effective interest method of amortization. In accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments, investment balances will be adjusted at the end of the fiscal year to fair market value. Trust Account Statements Original statements for the Village's investment accounts which are held by the custodian shall be reconciled by the Accounting Manager on a monthly basis. A duplicate copy of the statement shall be sent directly by the custodian to the Village Manager for review. Reporting A Treasurer's Report detailing cash and investment balances as of the end of each month shall be prepared and forwarded to the Village Board. At a minimum, the Report shall contain the following information: a) Security/Account description b) Purchase date c) Maturity date d) Coupon rate e) Purchase yield rate f) Book value g) Market value The Report will also present each fund's share of cash and cash equivalents, investments, earnings for the month, and total earnings for the year. A yield calculation will be performed monthly based on the original purchase yield, along with a comparison to the benchmark rate based on the yield of the 90 day U.S. Treasury Bill as specified in the Village's Investment Policy.