Investment Policy

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1.     
SCOPE

This policy applies to the investment of all funds of the Faulkton Area Schools 24-4. Except for funds held in trust or special funds that are otherwise specifically provided for, the FASD will consolidate the balances from all funds to maximize investment earnings and meet the liquidity requirements, subject to the primary objective of providing security of principal. Investment income will be allocated to the various funds based on their respective participation of capital in the overall portfolio in accordance with generally accepted accounting principles.

 

2.      POLICY

Pursuant to SDCL 4-5-8 it is the policy of the FASD to invest idle public funds in a manner to meet the daily cash flow demands with the primary objective, in priority order, being: a) Safety of Principal b) Liquidity and c) Return on Investments.

            A)    Safety of Principal

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 the following risks.

            1.      Credit Risk

FASD will minimize credit risk, which is the risk of loss due to the failure of the  investment issuer or backer, by limiting the portfolio to the types of investments listed in section 5. Authorized and Suitable Investments of this policy and diversifying the investment portfolio to diminish the impact of potential losses from any one type of investment or from any one individual issuer.

            2.      Custodial Credit Risk

FASD will minimize Custodial Credit Risk for deposits, which is the risk that in the event of the failure of depository financial institution the deposits or collateral securities that are in the possession of an outside party would not be able to be recovered, as addressed in section 6. Collateralization.

              B)    Liquidity

The investment portfolio shall remain sufficiently liquid to meet all operating requirements that maybe reasonably anticipated.

            C)    Return

The investments 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 of secondary importance compared other safety and liquidity objectives described above. The core of the portfolio is limited to relatively low risk investments in anticipation of earning a fair return relative to the risk being assumed.

3.      DELEGATION OF AUTHORITY

Authority to manage the investment program is granted to the Business Official who shall refrain from personal business activity that could impair his/her ability to make impartial decisions. The Business Official, acting in accordance with written procedures and this investment policy and exercising due diligence shall be relieve of personal responsibilities for an individual investment’s credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and the liquidity and the sale of investments are carried out in accordance with the terms of his policy.

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.

In case of extended leave of absence the Governing Board shall appoint a replacement Officer.

4. AUTHORIZED FINANCIAL DEALER AND INSTITUTION

The Governing Board authorizes the placement of cash resources in the following federally insured financial institutions:

·         Dacotah Bank, Faulkton

·         FIT Investment Trust

Any changes to authorized financial institutions shall be made at the annual meeting held in August of each year.

5. AUTHORIZED AND SUITABLE INVESTMENTS

FASD is empowered by statute to invest in the following instruments:

·         Interest bearing checking accounts

·         Savings accounts

·         Certificates of Deposit (CDs) (SDCL 13-16)*

·         Certificates of Deposit (CDs) purchased through CDARS (Certificate of Deposit Account

·         Registry Service) (SDCL 4-5-6.1)*

·         Local Government Investment Pool (SD FIT)

The above listed authorized deposits will be kept in banks in South Dakota as required by SDCL 13-16-15. And SDCL 13-16-18.

6. COLLATERALIZATION

In accordance with the SDCL 4-6S and 51A-10-9 Qualified Public Depositories will furnish collateral in the sum equal to one hundred percent (100%) of the public deposit accounts that exceed deposit insurance. The financial institution shall submit a copy of their collateralization report to the Business Manager.

SDCL 4-6A-3 required that collateral be segregated by each depository in such manner as approved by the South Dakota Public Deposit Protection Commission. Collateral may not be held in any safety deposit vault owned or controlled either directly or indirectly by the pledging financial institution but must be deposited for safekeeping in a financial institution that is a member of the Federal Reserve

7. REPORTING

The Business Official shall include an investment report; within the Monthly Financial Statement, that provides a clear picture of that status of the current investments.

8. INTEREST EARNED

At year end all investment income will be transferred to the General Fund (SDCL 4-5-9). (June, 2012)