4:35 - Revenue and Investments

Policy 4:35

Business and Non-Instructional Operations

Revenue and Investments

Revenue

The Superintendent or designee is responsible for making all claims for property tax revenue, State Aid, special state funds for specific programs, federal funds, and categorical grants.

Investments

The Board of Education shall designate a School Treasurer in accordance with Policy 2:400. The School Treasurer shall act as the chief investment officer for the District, and shall be responsible for establishing the internal controls and written procedures for the operation of the investment program. The School Treasurer shall invest money that is not required for current operations, in accordance with this policy and State law.

The School Treasurer shall use the standard of prudence when making investment decisions. He/She shall use the judgment and care, under circumstances when prevailing, that persons of prudence, discretion, and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the safety of their capital as well as its probable income.

Investment Objectives

The objectives for the School District's investment activities are:

  1. Safety of Principal. Every investment is made with safety as the primary and over-riding concern. Each investment transaction shall ensure that capital loss, whether from credit or market risk, is avoided.
  2. Liquidity. The investment portfolio shall provide sufficient liquidity to pay District obligations as they become due. In this regard, the maturity and marketability of investments shall be considered.
  3. Rate of Return. The highest return on investments is sought, consistent with the preservation of principal and prudent investment principles.
  4. Diversification. The investment portfolio is diversified as to financial instruments and investments, as appropriate to the nature, purpose, and amount of funds.

Authorized Investments

The Board of Education will annually review the District's investment objectives and strategies. The School Treasurer may invest any District funds:

  1. In bonds, notes, certificates of indebtedness, treasury bills or other securities now or hereinafter 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 or its agencies, and its instrumentalities.

    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 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.
  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 $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 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.
  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) and (2) of this subsection and to agreements to repurchase such obligations.
  6. 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 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 the School Treasurer, the public funds so invested will be required for expenditure by such public agency or its governing authority.
  7. In dividend-bearing share accounts, share certificate accounts or 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.
  8. In a Public Treasurer's 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 public funds.
  9. In the Illinois School District Liquid Asset Fund Plus.
  10. In repurchase agreements of government securities having the meaning set out in the Government Securities Act of 1986 subject to the provisions of said Act and the regulations issued there under. 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.

    Except for repurchase agreements of government securities which are subject to the Government Securities Act of 1986, 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 transaction meet the following requirements:
    1. The securities, unless registered or inscribed in the name of public agency, are purchased through banks or trust companies authorized to do business in the State of Illinois.
    2. The School Treasurer, 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 repurchase agreements involving the investment of funds by the public agency. The State Treasurer may act as custodial bank for public agencies executing repurchase agreements.
    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 School Treasurer 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 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 School Treasurer.
    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.
  11. In any investment as authorized by the Public Funds Investment Act, and Acts amendatory thereto. Paragraph 11 supercedes paragraphs 1-10 and controls in the event of conflict.

Investments may be made only in banks which are insured by the Federal Deposit Insurance Corporation, unless the District enters into an agreement with the institution requiring any funds not insured to be collateralized as provided below.

Selection of Depositories, Investment Managers, Dealers, and Brokers

The School Treasurer shall establish a list of authorized depositories, investment managers, dealers and brokers based upon the creditworthiness, reputation, minimum capital requirements, qualifications under State law, as well as a long history of dealing with public fund entities.

In order to be an authorized depository, each institution must submit copies of the last 2 sworn statements of resources and liabilities or reports of examination, which the institution is required to furnish to the appropriate state or federal agency. Each institution designated as a depository shall, while acting as such depository, furnish the District with a copy of all statements of resources and liabilities or all reports of examination, which it is required to furnish to the appropriate state or federal agency.

All banks used as depositories for School District funds shall be approved by the Board of Education, and shall meet the criteria of the Public Funds Deposit Act. Persons authorized to sign checks shall be approved by the Board of Education. At least one of the signers shall be the District Treasurer except for individual School Activity Fund Accounts.

Collateral Requirements

All amounts deposited or invested with financial institutions in excess of any insurance limit shall be collateralized by securities eligible for District investment or any other high-quality, interest-bearing security rated at least AA/Aa by one or more standard rating services to include Standard & Poor's, Moody's, or Fitch. The Board or the School Treasurer may at any time declare any particular security ineligible to qualify as collateral when, in the public agency's judgment, it is deemed desirable to do so. The market value of the pledged securities shall equal or exceed the portion of the deposit requiring collateralization. The School Treasurer shall determine other collateral requirements.

Safekeeping and Custody Arrangements

The preferred method for safekeeping is to have securities registered in the District's name and held by a third-party custodian. Safekeeping practices should qualify for the General Accounting Standards Board's Statement III, Category I, the highest recognized safekeeping procedures.

Controls Report

The School Treasurer shall establish a system of internal controls and written operational procedures to prevent losses arising from fraud, employee error, misrepresentation by third parties, or imprudent employee action.

The School Treasurer shall provide a quarterly investment report to the Board. The report will: (1) assess whether the investment portfolio is meeting the District's investment objectives, (2) identify each security by class or type, book value, income earned, and market value, (3) identify those institutions providing investment services to the District, and (4) include any other relevant information. The investment portfolio's performance shall be measured by appropriate and creditable industry standards for the investment type.

The School Board shall determine, after receiving the Superintendent's recommendation, which fund is in most need of interest income and what unrestricted interest is available for transfer, and, by resolution enacted before June 30 of each year, direct the School Treasurer to execute any transfers of any unrestricted interest accordingly.

Ethics and Conflicts of Interest

The School Board and District officials will avoid any investment transactions or practice that in appearance or fact might impair public confidence. Board Members are bound by the Board Member Conflict of Interest Policy 2:100. No District employee having influence on the District's investment decisions shall:

  1. have any interest, directly or indirectly, in any investments in which the District 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 from any investments in which the agency is authorized to invest.

Adopted: September 8, 1997
Revised: January 20, 2004
Revised: March 19, 2012 

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