06-20-07 FPAC Minutes - Laserfiche WebLink

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For cash management funds: • • Liquidity shall be assured through practices ensuring that the next disbursement date and payroll date are covered through maturing investments or marketable U.S. Treasury bills. • Positions in securities having potential default risk(e.g., commercial paper) shall be limited in size so that in case of default,the portfolio's annual investment income will exceed a loss on a single issuer's securities. • Risks of market price volatility shall be controlled through maturity diversification such that aggregate price losses on instruments with maturities exceeding one year shall not be greater than coupon interest and investment income received from the balance of the portfolio. • The investment committee/investment officer shall establish strategies and guidelines for the percentage of the total portfolio that may be invested in securities other than repurchase agreements,Treasury bills or collateralized certificates of deposit. The committee shall conduct a quarterly review of these guidelines and evaluate the probability of market and default risk in various investment sectors as part of its considerations. AND/OR The following diversification limitations shall be imposed on the portfolio: • Maturity: No more than xx percent of the portfolio may be invested beyond 12 months, and the weighted average maturity of the portfolio shall never exceed one year. • • Default risk: No more than xx percent of the overall portfolio may be invested in the securities of a single issuer,except for securities of the U.S.Treasury. No more than xx percent of the portfolio may be invested in each of the following categories of securities: a) Commercial paper, b) Negotiable certificates of deposit, c) Bankers' acceptances, d) Any other obligation that does not bear the full faith and credit of the United States government or which is not fully collateralized or insured and e) No more than xx percent of the total portfolio may be invested in the foregoing instruments at any time. • Liquidity risk: At least xx percent of the portfolio shall be invested in overnight instruments or in marketable securities which can be sold to raise cash in one day's notice. 2. Maximum Maturities To the extent possible,the [entity] shall attempt to match its investments with anticipated cash flow requirements. Unless matched to a specific cash flow,the [entity]will not directly invest in securities maturing more than five(5)years from the date of purchase or in accordance with state and local statutes and ordinances.The [entity] shall adopt weighted average maturity limitations (which often range from 90 days to 3 years), consistent with the investment objectives. Reserve funds and other funds with longer-term investment horizons may be invested in securities exceeding five(5)years if the maturities of such investments are made to coincide as nearly as • practicable with the expected use of funds. The intent to invest in securities with longer maturities shall be disclosed in writing to the legislative body. (See the GFOA Recommended Practice on