MIAMI VALLEY RISK MANAGEMENT ASSOCIATION
CASH AND INVESTMENT POLICY

Originally Adopted by MVRMA Board: February 11, 1991

Amended by MVRMA Board:	03/20/95
	09/30/96
	06/15/98
	12/11/00
	09/22/03
	12/15/03

Purpose

The investment of public monies is a major responsibility of the MVRMA Board of Trustees. These responsibilities have become more difficult and complex due to the deregulation of the banking industry, the emergence of new investment vehicles, and the growth of the amount of funds available for investment.

The purpose of this policy is to indicate a conscious, formal effort by MVRMA officials to develop, implement, and monitor the investment of all MVRMA funds. It shall be considered an important means to communicate to staff and to the public MVRMA's policy views on management of cash assets.

Investment Objectives

The overall direction of MVRMA's investment program are defined in the following objectives, which have been prioritized and explained to clearly identify the results expected.

• Safety of principal is considered of greatest priority to MVRMA. Each investment that is made shall seek to insure that capital losses are avoided, whether they be from securities defaults or erosion of market values.
• Liquidity is considered to be the next important objective. MVRMA's investment portfolio shall remain sufficiently liquid to enable MVRMA to meet all operating requirements, insurance premiums, and settlement of claims which may be reasonably anticipated.
• Satisfactory rate of return. MVRMA's investment portfolio shall be designed to achieve a satisfactory rate of return, consistent with the risk limitations identified above, and prudent investment principles.
• Diversification. In order to guarantee further asset safety, MVRMA shall diversify investments to avoid incurring unreasonable risks from the practice of concentrating investments in specific security types and individual financial institutions.
• Public confidence in the investment program is imperative. MVRMA shall avoid any transaction which might impair its public confidence. 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. Such a standard, therefore, avoids speculation; emphasis is placed on the probable safety of capital rather than the probable income to be derived.

Management Responsibility

Responsibility for MVRMA's cash management and investment program is hereby delegated to the Executive Director. The Executive Director shall seek investment guidance from the MVRMA Treasurer and the MVRMA Finance Committee on an annual basis.

Management responsibility of the Executive Director shall include the timely preparation of cash flow projections. These cash flow projections shall be used to identify all cash requirements and project opportunities for investment placement which will earn the optimal rate of return, based upon current market conditions.

In making investments authorized by this policy, the Executive Director with the Board’s approval may retain the services of an investment advisor, provided the advisor is licensed by the Division of Securities or is registered with the Securities and Exchange Commission, and possesses experience in public funds investment management, specifically in the area of local government investment portfolios, or the advisor is an eligible financial institution.  The investment advisor and/or the financial institution will be required to comply with this policy.

Where deemed necessary, the Executive Director shall establish a system of internal controls, which shall be documented in writing. These internal controls and the Investment Policy shall be reviewed by an independent, certified public accountant in conjunction with the annual examination of the financial statements of MVRMA.

The internal controls shall be designed to prevent losses of MVRMA funds arising from fraud, employee error, misrepresentation by third parties, unanticipated changes in financial markets, or imprudent actions by employees of MVRMA. However, the Executive Director shall be relieved from any liability for the loss of any public monies deposited or invested pursuant to and in compliance with this policy, including, but not limited to, losses occasioned by the sale of any instruments, securities, or obligations, the closing of any deposit accounts or the failure of any depository.

Cash Management

MVRMA's policy regarding cash management is based upon the realization that there is a time-value to money. Temporarily idle cash may be invested depending upon the cash flow projections. Accordingly, the Executive Director shall utilize cash management procedures which shall include, but not be limited to, the following:

• Receipts: All monies due MVRMA shall be collected as promptly as possible. Monies that are received shall be deposited in an approved financial institution no later than the next business day following receipt by MVRMA. Amounts that remain uncollected after a reasonable period of time shall be subject to any available legal means of collection.
• Investments: Investments shall be limited to those instruments authorized in this policy.  No person may engage in an investment transaction except as provided under the terms of this policy.
• Settlement Disbursements: Settlements of claims/lawsuits shall be authorized in accordance with the provisions of the MVRMA By-Laws.
• Other Disbursements: Disbursements to suppliers of goods and services, or to employees, for salaries and wages, shall be contingent upon an available budget appropriation. Disbursements and payments for obligations not greater than $25,000, from accounts other than the Payroll Account, shall be rendered upon the approval of the Executive Director, who shall be covered by a crime policy or surety bond for an amount determined by the MVRMA Board. Copies of all disbursements and payments shall be provided to the MVRMA Treasurer for his/her review. Disbursements and payments for obligations greater than $25,000 shall be concurrently approved by any two of the following: the Executive Director, the MVRMA President or the MVRMA Treasurer. All disbursements from the Payroll Account shall be approved by either the MVRMA Treasurer or MVRMA President.

Accounting

MVRMA's accounting system is organized so that each fiscal/policy year may be evaluated independently, on its own merits. The assets, liabilities, revenues, and expenses of each year are maintained as separate entities on the full accrual basis, in compliance with GASB-10 or other successor rules promulgated by the Governmental Accounting Standards Board (GASB). All investment transactions shall be carried at market value in accordance with GASB-31 or other successor rules promulgated by the GASB.

Depository Institutions

A financial institution shall be named as an approved MVRMA depository only upon authorization of the MVRMA Board of Trustees through a formal resolution.

In order to ensure the quality of MVRMA depository institutions, it shall be MVRMA's policy to empower its Finance Committee to receive proposals from financial institutions in such detail as they may require and to make recommendations to the Board of Trustees for periodic designation of depositories to serve the needs of the Association. The Finance Committee, in making recommendations to the Board, shall consider such criteria as the financial institution's insured status, size, financial condition, location, and fee structure.

Investment Instruments

MVRMA may invest in the type of securities described in the Ohio Revised Code or permitted by the Ohio Uniform Depository Act.  Approved investments may include any of the following when permitted by law:

    a) United States treasury bills, notes, bonds, or any other obligation or security issued by the United States treasury or any other obligation guaranteed as to principal and interest by the United States

     b) Bonds, notes, debentures, or any other obligations or securities issued by any federal agency or instrumentality, including government sponsored enterprises.  All federal agency securities shall be direct issuances of federal government agencies or instrumentalities

    c) Deposits in eligible financial institutions

    d) Bonds, notes, or other obligations of the State of Ohio and its political subdivisions

    e) The State Treasury Asset Reserve of Ohio (STAR-Ohio) or such successor investment pools operated or managed by the Treasurer of the State of Ohio

    f) No-load money market mutual funds consisting exclusively of obligations described in sections a) and b) above

Selecting Investment Instruments

Except for MVRMA's cash management accounts (such as NOW, SUPERNOW, Maxsaver Plus and money market accounts) and government securities, all investments shall be selected on the basis of competitive quotations. In obtaining competitive quotations, at least four (4) qualifying institutions will be contacted each time an investment is placed.

The results of the competitive investment quotations shall be maintained in writing, and attested to by the Executive Director A permanent record of the competitive quotation results shall be kept on file at the Association's offices.

Investments shall be placed with the institution that best exhibits the ability to meet the investment criteria and objectives in this policy.

Safekeeping of Securities

Investments purchased for the portfolio will be delivered to MVRMA’s custodial agent using standard delivery versus payment procedures, with the accompanying trust receipts promptly forwarded to MVRMA.

Diversification and Maturities

In order to reduce the risk of default, MVRMA will diversify the portfolio by security and institution.  Diversification will be achieved through approved investment instruments as described in this policy.  Further, no more than 25% of the total investment portfolio shall be invested with any one eligible financial institution as a time deposit at the time a deposit is made, exclusive of United States Treasury securities, all Federal Agency securities, and STAR-Ohio.

Maturities of MVRMA investments shall be determined to enable MVRMA to have sufficient cash available for all purposes.  MVRMA will not invest in securities exceeding five years in maturity.  Further, no investment shall be made that will cause the average duration of the portfolio to exceed three years.

Collateral

It shall be MVRMA's policy to encourage that all funds on deposit in banks in excess of FDIC limits be secured by some form of collateral. It shall also be MVRMA's policy to require that all funds on deposit in savings and loan associations in excess of FSLIC limits be secured by some form of collateral. Direct investments guaranteed by the United States or an agency of the United States, including a government sponsored enterprise, do not require collateral.

At all times, the investment portfolio of MVRMA shall contain at least 50% of its investments covered by collateral held by a third party, or United Sates obligations or United States agency obligations, including government sponsored enterprises, or a combination thereof.

MVRMA shall enter into a collateral agreement with any financial institution willing to pledge said collateral; this agreement shall outline the types of assets which may be placed as collateral, the amount of collateral required, and the placement procedures. MVRMA shall accept any of the investment instruments approved in this policy as collateral.

The amount of collateral provided will not be less than 110% of the fair market value of the net amount of MVRMA funds secured, except in the case of pooled collateral, which will not be less than 105% and overnight repurchase agreements, where the collateral will not be less than 100% of the fair market value of the net amount of MVRMA funds secured. The rate of fair market value of collateral to the amount of funds secured will be reviewed quarterly and additional collateral shall be required when the ratio declines below the standards set forth above. Collateral shall be held by MVRMA or in safekeeping and evidenced by a safekeeping agreement. If collateral is held in safekeeping, it may be held by a third party identified by MVRMA or by an escrow agent of the pledging institution. A collateral agreement will preclude the release of the pledged or pooled assets without the concurrent authorization of any two of the following: The Executive Director, the MVRMA President or the MVRMA Treasurer, although the agreement may allow for an exchange of collateral of like value, if approved by the Executive Director.

Internal Reporting Requirements

The Executive Director shall submit periodic investment reports to the MVRMA Finance Committee for presentation and approval of the MVRMA Board of Trustees.

The Annual Comprehensive Financial Report of MVRMA shall include all investment information required by GASB-10 or other rules promulgated by the Government Accounting Standards Board.

From time to time, the MVRMA Treasurer, Finance Committee, or Executive Director may recommend improvements and enhancements to the investment/cash management program. Changes to this policy shall be incorporated only upon approval of the MVRMA Board of Trustees.

Standards Of Prudence

The standard of prudence to be used by MVRMA officials and employees responsible for the investment of public funds shall be the "prudent person" standard, subject to the foregoing limitations, which state:

"Investments shall be made with judgment and care, under circumstances then prevailing, which persons knowledgeable of investment practices, and 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 possible income to be derived."

This standard is established as the standard of professional responsibility and shall be applied in the context of managing MVRMA's overall portfolio. This policy recognizes that there are circumstances beyond the control of even the most prudent investor which impacts the return obtained. Officials and employees of MVRMA acting in accordance with the Investment Policy and written procedures as may be established and exercising due diligence, shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided that deviations from expectation are reported in a timely fashion, and appropriate remedial action is taken to control adverse developments.