6020 Working Capital and Long Term Investment Management Policy

Scope of this Working Capital and Long Term Investment Management Policy

This policy reflects objectives and constraints of all working capital and investment assets of Washtenaw Community College (the “College”). These assets are accounted for in the various funds of the College and include the general fund, debt service funds, building and site funds, trust and agency funds and any other funds established by the College. Working capital and investment income will be allocated to the various funds based on their respective participation and in accordance with generally accepted accounting principles.

Purpose of this Working Capital and Long Term Investment Management Policy

It is the policy of the Board of Trustees to invest its funds in a manner which will provide the highest investment return with the maximum security while meeting the daily cash flow needs of the College and comply with all state statutes governing the investment of public funds.  The purpose of this document is to set forth the objectives, policies, and guidelines that are to govern the investment of the assets of this portfolio. They are not to be constructed as absolutes, but rather as benchmarks for guidance to be interpreted by the Board of Trustees. The investment policy should be reviewed annually to assure it serves the changing needs of the College. The working capital and investment policy will help the College:

1. Define and assign the responsibilities of all involved parties.
2. Establish a clear understanding for all involved parties of the investment goals and objectives of portfolio assets.
3. Establish a basis for evaluating investment results.
4. Seek guidance from the investment managers that deal with the College’s assets.

Delegation of Authority

The Treasurer of the Board of Trustees is a fiduciary as authorized by resolution of the Board of Trustees.  Daily management responsibility for the investment program is delegated to the Vice President of Administration and Finance and his/her designees. The Vice President of Administration and Finance is responsible for directing and monitoring the investment management of College assets. As such, the Vice President of Administration and Finance is authorized to delegate certain responsibilities to professional financial consulting experts which may aid the College with the management of long term investments, including the discretion to purchase, sell, or hold the specific securities that will be used to meet the College’s investment objectives.  Fees for such consulting services shall not exceed 0.20% of the average investment portfolio.

The Board of Trustees will not reserve any control over investment decisions, with the exception of specific limitations described in these statements.  If such experts employed are also deemed to be fiduciaries, they must acknowledge such in writing. All expenses for such experts must be customary and reasonable, and will be borne by the portfolio as deemed appropriate and necessary. This information will be disclosed at Board meetings.

General Investment Principles

1. Investments shall be made solely in the interest of the College as it pertains to the priorities as stated in our mission.
2. The portfolio shall be invested with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the investment of a fund of like character and with like aims.
3. The Board of Trustees may employ one or more investment managers of varying styles and philosophies, if it is deemed necessary, to attain the portfolio’s objectives.
4. Cash should be employed productively at all times by investment in short term cash equivalents to provide safety, liquidity, and return.

Permissable Investments

1. Bonds, bills, or notes of the United States, or of an agency or instrumentality of the United States, or obligations of this State.
2. Negotiable certificates of deposit, savings accounts, or other interest-earning deposit accounts of a financial institution. As used in this subdivision, "financial institution" means a bank that is a member of the Federal Deposit Insurance Corporation, a savings and loan association that is a member of the Federal Savings and Loan Insurance Corporation, or a credit union whose deposits are insured by the National Credit Union Administration.
3. Bankers' acceptances issued by a bank that is a member of the Federal Deposit Insurance Corporation.
4. Commercial paper that is supported by an irrevocable letter of credit issued by a bank that is a member of the Federal Deposit Insurance Corporation.
5. Commercial paper of corporations located in this state rated prime by at least one of the standard rating services.
6. Mutual funds, trusts, or investment pools composed entirely of instruments that are eligible collateral.
7. Repurchase agreements against eligible collateral, the market value of which must be maintained during the life of the agreements at levels equal to or greater than the amounts advanced. An undivided interest in the instruments pledged for these agreements must be granted to the community college.
8. Investment pools, as authorized by the surplus funds investment pool act, 1982 PA 367, MCL 129.111 to 129.118, composed entirely of instruments that are legal for direct investment by a community college.
9. Certificates of deposit issued in accordance with the following conditions:
   1. The funds are initially invested through a financial institution that is not ineligible to be a depository of surplus funds belonging to this state under section 6 of 1855 PA 105, MCL 21.146.
   2. The financial institution arranges for the investment of the funds in certificates of deposit in 1 or more insured depository institutions, as defined in 12 USC 1813, or 1 or more insured credit unions, as defined in 12 USC 1752, for the account of the community college district.
   3. The full amount of the principal and any accrued interest of each certificate of deposit is insured by an agency of the United States.
   4. The financial institution acts as custodian for the community college district with respect to each certificate of deposit.
   5. At the same time that the funds of the community college district are deposited and the certificate or certificates of deposit are issued, the financial institution receives an amount of deposits from customers of other insured depository institutions or insured credit unions equal to or greater than the amount of the funds initially invested by the community college district through the financial institution.
10. Deposit accounts that meet all of the following conditions:
    1. The funds are initially deposited in a financial institution that is not ineligible to be a depository of surplus funds belonging to this state under section 6 of 1855 PA 105, MCL 21.146.
    2. The financial institution arranges for the deposit of the funds in deposit accounts in 1 or more insured depository institutions, as defined in 12 USC 1813, or 1 or more insured credit unions, as defined in 12 USC 1752, for the account of the community college district.
    3. The full amount of the principal and any accrued interest of each deposit account is insured by an agency of the United States.
    4. The financial institution acts as custodian for the community college district with respect to each deposit account.
    5. On the same date that the funds of the community college district are deposited under subparagraph (ii), the financial institution receives an amount of deposits from customers of other insured depository institutions or insured credit unions equal to or greater than the amount of the funds initially deposited by the community college district in the financial institution.
11. Obligations of this state or any of its political subdivisions that at the time of purchase are rated as investment grade by at least 1 standard rating service.
12. Money in the funds of the College shall not be commingled for the purpose of making an investment authorized by this section, and all earnings on an investment shall become a part of the funds for which the investment was made.
13. Notwithstanding subsection (1), additional funds of the College shall not be invested or deposited in a financial institution that is not eligible to be a depository of surplus funds belonging to this state under section 6 of 1855 PA 105, MCL 21.146.
14. As used in this section, "eligible collateral" means all securities which otherwise would qualify for outright purchase under this act.

Working Capital Asset Management Policy and Objectives

The College considers bank demand deposit accounts, savings accounts, and highly liquid investments with an initial maturity of three months or less to be components of its working capital.  Working capital is managed so as to meet the operational needs of the College including but not limited to payroll, accounts payable, capital, debt service and other obligations and therefore deems it necessary to maintain a working capital cash and cash equivalents balance of no less than five percent of its annual operating budget.  Throughout the course of normal operations, investments may be called, matured, or sold.  Proceeds from these investments may be held in cash or money market accounts while awaiting reinvestment or transfer to working capital.  The College does not consider these funds as working capital components but instead as a part of its long term investment assets.   

Long Term Investment Management Policy and Objectives

1. Preservation of Capital - Safety of principal is the foremost objective of the investment program. Long term investments shall be undertaken in a manner that seeks to insure the preservation of capital in the overall portfolio. Consistent with their respective investment styles and philosophies, investment managers should (to the extent they are utilized), based on the College’s investment objectives, make reasonable efforts to preserve capital, understanding that losses may occur in individual securities.
2. Risk Aversion - Understanding that risk is present in all types of securities and investment styles, the Board of Trustees recognizes that some risk is necessary to produce long term investment results that are sufficient to meet the portfolio's objectives. However, in conjunction with the Board of Trustees, the investment managers are to make reasonable efforts to control risk and will be evaluated regularly to ensure that the risk assumed is commensurate with the given investment style and objectives. The long term investments will be diversified by security type, financial institution and maturity of securities in order to reduce portfolio and market risks.
3. Liquidity - The long term investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated.

Long Term Investment Asset Allocation Guidelines

The portfolio shall be allocated within a target range as follows:

Investment Type                                                  Target Range      Target             

Bonds, bills, or notes of the United States                    25-65%             30%
Bonds, bills, or notes of the State of Michigan              10-45%             25%
Bonds of political subdivisions of State of Michigan     15-65%             45%
Cash, cash equivalents, and short-term investments       0-30%               0%

Cash, cash equivalents, and short term investments included in the above long term investment asset allocation guidelines are those earmarked for reinvestment.  Short term investments consist of certificates of deposit, commercial paper, and other investments with an initial maturity between three and twelve months.

For the bonds of political subdivisions of the State of Michigan, a further target range shall be used as follows:

Credit Rating                                                Target Range                         Target

Rated AAA to AA                                    40-80%                                   50%
Rated AA-/Aa3 to A                                10-50%                                   30%
Rated A3/A- to Baa3/BBB-                        0-30%                                   20% 

In the event that the above aggregate asset allocation guidelines are violated for reasons including but not limited to market price fluctuations, the College management will instruct the investment firm (to the extent utilized) to bring the portfolio into compliance with these guidelines as promptly and prudently as possible.

Guidelines for Investments and Cash Equivalents Ratings

1. Portfolio assets may be invested only in investment grade bonds rated BBB- (or equivalent) or better.
2. Portfolio assets may be invested only in investment grade commercial paper rated A- (or equivalent) or better.
3. Money Market Funds selected for investment should be rated investment grade by Standard and Poor’s, and/or Moody's.
4. All long term investments shall come with a maturity of 20 years or less.

Performance Review and Evaluation

Performance reports on the College’s long term investments are compiled by the Director of Treasury Management and shall be reported monthly to the Board of Trustees (for all months for which there are scheduled Board meetings).  On an annual basis, the Board of Trustees intends to evaluate the portfolio(s) over a three, five, ten and twenty year period.

Adopted: August 9, 1966
Revised: May 26, 1970
Revised: March 26, 1974
Revised: February 27, 1979
Revised: September 23, 1980
Revised: March 14, 1985
Revised: June 24, 2003
Revised: May 28, 2015
Revised: September 21, 2015
(6020)