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Home My Public Portal AboutInvestment of Surplus Funds Policy SECTION: Finance COUNCIL Page 1 of 5 POLICY Effective Date: August 26, 2019 Amended: April 25, 2022 TITLE: Investment of Surplus Funds Policy PURPOSE: The purpose of this policy is to ensure that the Town’s practices and procedures in the investment of public funds are in compliance with statutory requirements of the Community Charter, while ensuring safety of capital, maintaining appropriate liquidity in meeting anticipated cash flow demands, and attaining a reasonable rate of return after taking into account the investment constraints and liquidity requirements. OBJECTIVES: Conservative management philosophy is followed in investment activities of all public funds held by the Town. Four fundamental objectives, in priority order, are as follows: a. Adherence to Statutory Requirements Authority for investment guidelines of municipal funds is provided in Section 183 of the Community Charter b. Safety of Capital Investment activities will be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. Preservation of capital will be accomplished through: • Diversification • Risk control, whereby portfolio components are limited to conservative types of investments c. Liquidity of Investment The investment portfolio will be administered to ensure adequate cash flow is available to meet all reasonably anticipated operating and capital requirements. d. Return on Investment The investment portfolio will be designed with the objective of maximizing the rate of return through budgetary and economic cycles, taking into account the investment constraints and liquidity requirements. Page 1 of 5 Investment of Surplus Funds Policy Page 2 of 5 POLICY ADMINISTRATION: This policy applies to: a. The investment of all cash assets of the Town b. The investment of the Town Cemetery Perpetual Care Fund assets RESPONSIBILITIES: The Chief Financial Officer and Chief Administrative Officer are assigned the responsibility of financial administration for the Town, which includes the following powers, duties and functions: a. Receiving all money paid to the Town; b. Ensuring the keeping of all funds and securities of the Town; c. Investing municipal funds, until required, in authorized investments; d. Expending municipal money in the manner authorized by Council; e. Ensuring that accurate records and full accounts of the financial affairs of the Town are prepared, maintained and kept safe; f. Exercising control and supervision over all other financial affairs of the Town. CREDIT RISK MONITORING: In addition to in house monitoring, the Town will make use of the credit analysis available through its financial institution, brokers and credit rating institutions. This includes but is not limited to the Fitch Ratings Inc, Standard & Poor’s (S&P), and Moody’s. It must be recognized that the use of any credit analysis is an assessment and not a guarantee for safety of principal. ETHICS AND CONFLICT OF INTEREST: The Chief Financial Officer and Chief Administrative Officer and any delegated individuals involved in the investment process will refrain from personal business activity that could conflict with the proper execution of the investment program or impair ability to make unbiased investment decisions. Parties will disclose any material personal financial interest in investments involved or in financial institutions that conduct business with the Town. Any deviation is to be reported to the Town’s solicitor immediately. Investment of Surplus Funds Policy Page 3 of 5 PERMITTED INVESTMENTS: Under the Community Charter Section 183 money held by a municipality that is not immediately required may only be invested or reinvested in one or more of the following: a. securities of the Municipal Finance Authority; b. pooled investment funds under section 16 of the Municipal Finance Authority Act; c. securities of Canada or of a province; d. securities guaranteed for principal and interest by Canada or by a province; e. securities of a municipality, regional district or greater board; f. investments guaranteed by a chartered bank; g. deposits in a savings institution, or non-equity or membership shares of a credit union; h. Other investments specifically authorized under this or another Act. PROHIBITED INVESTMENTS: a. Investments in shares, warrants, or other equities, convertible debt securities, derivatives, swaps, options or futures b. Investment categories that are not explicitly permitted. PORTFOLIO CONSTRAINTS: a. The portfolio will endeavor to have the investment mix of Investment Grade quality investments in accordance with the table below. Moody's S&P Fitch Up to Aaa AAA AAA 100% Aa AA AA 80% A A A 60% Baa BBB BBB 40% b. Investments in credit union deposits must carry adequate insurance protection through the credit union’s respective insurance corporation. c. Investments in any one security issue shall not exceed 10% of that security issue. Investment of Surplus Funds Policy Page 4 of 5 d. Investments with any one financial institution shall not exceed 50% of the Town’s maximum annual investment portfolio. Due to market fluctuations, maximum percentages may be exceeded at a point in time. Securities need not be liquidated to rebalance the portfolio; however, consideration should be given to this matter when future purchases are made to ensure appropriate diversification is maintained. e. The percentage limits specified in a) above do not apply to investments made in securities of Canada, provincially backed deposits or securities of the Municipal Finance Authority. PERFORMANCE OBJECTIVES: Updated April 25, 2022 a. Have a DBRS rating of R-1 (low) or higher for Short term debt and a rating of A- for Long term debt or Bonds or comparable ratings of another rating organization, indicating equal or superior credit quality (see Appendix 1 of the policy). b. To achieve an average rate of return greater than the FTSE TMX91 Day TBill. c. To achieve performance that matches or exceeds the Municipal Finance Authority of BC (MFA) Intermediate Fund and Money Market Fund for the same time frame. INVESTMENT PARAMETERS: a. Diversification The Town will diversify its cash reserve investment by security typed and institution, taking into consideration the impact on return on investment. b. Maturity To the extent possible the Town shall attempt to match its investments with anticipated cash flow requirements. However, because of inherent difficulties in accurately forecasting cash flow requirements, a portion of the portfolio shall be continuously invested in readily available funds to meet ongoing obligations. Long term investments may be acquired if the maturity is related to a specific program and is made to coincide as nearly as practicable with the expected use of the funds attached to that program. COMPETITIVE BIDS: The Town shall solicit competitive verbal quotations for the purchase and sale of securities when it is prudent to do so. This policy recognizes that, from time to time, offerings of value may require immediate action. Under such circumstances competitive bids may not be sought provided that value can be substantiated by market data information services. Investment of Surplus Funds Policy Page 5 of 5 AUTHORIZED INVESTMENT DEALERS AND FINANCIAL INSTITUTIONS: A list of approved investment dealers and financial institutions authorized to provide investment services will be maintained by the Town. All qualified bidders for investment transactions will be members in good standing of the Investment Industry Regulatory Organization of Canada (IIROC), Mutual Fund Dealers Association (MFDA) or the BC Securities Commission. POLICY REVIEW: This policy shall be reviewed periodically by the CFO to ensure symmetry with the changing activities of the Town, market conditions, technology, evolving regulatory standard and private industry best practices. In addition, this policy will be reconsidered each time the Town tenders its banking services. REPORTING OF RESULTS: The Chief Financial Officer will provide Council with an annual report on the performance of the portfolio in the first quarter of the following year. Updated April 25, 2022 Appendix 1: