1998-4 County Investment Policy
March 2, 1998
TO: County Treasurers
FROM: Richard L. Baldermann, CPA, CGFM
Administrator, Local Audit and Finance Division
SUBJECT: Public Act 196 of 1997--Amendments to Public Act
20 of 1943--Basic Investment Policy
As was discussed at the Mid-Winter Conference, a policy specifically
for the counties which meets the minimum requirements as the Act follows.
The policy must be adopted within 180 days after the end of the county's
first fiscal year that ends after December 30, 1997. Required dates by
which a policy must be adopted are:
|September 30, 1998
November 30, 1998
|| May 31,
If a county, as of December 30, 1997, has adopted an investment policy
that substantially complies with the minimum requirements in the Act, the
local unit is not in violation of the requirement as long as that policy
remains in effect.
The investment policy, at a minimum, must include all of the following:
(a) A statement of the purpose, scope, and objectives
of the policy, including safety, diversification, liquidity, and return
(b) A delegation of authority to make investments.
(c) A list of authorized investment instruments.
If the policy authorizes an investment in mutual funds, it shall indicate
whether the authorization is limited to securities whose intention is to
maintain a net asset value of $1.00 per share or also includes securities
whose net asset value per share may fluctuate on a periodic basis.
(d) A statement concerning safekeeping, custody,
If you have any questions please contact:
Michigan Department of Treasury
Local Audit and Finance
P.O. Box 30728
Lansing, Michigan 48909-8228
Telephone (517) 373-3227
SAMPLE COUNTY INVESTMENT POLICY
To Comply With Public Act 20 of 1943, as amended
The blank spaces are for the County name.
Purpose--It is the policy of __________ County 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 County
and comply with all state statutes governing the investment of public funds.
Scope--This investment policy applies to all financial assets
of the County. These assets are accounted for in the various funds of the
County and include the general fund, special revenue funds, debt service
funds and capital project funds (unless bond ordinances and resolutions
are more restrictive), enterprise funds, internal service funds, trust
and agency funds and any new fund established by the County.
Objectives--The primary objectives, in priority order, or the
County's investment activities shall be:
Safety--Safety of principal is the foremost objective of the investment
program. Investments shall be undertaken in a manner that seeks to insure
the preservation of capital in the overall portfolio.
Diversification--The investments will be diversified by security type and
institution in order that potential losses on individual securities do
not exceed the income generated from the remainder of the portfolio.
Liquidity--The investment portfolio shall remain sufficiently liquid to
meet all operating requirements that may be reasonably anticipated.
Return on Investment--The investment portfolio shall be designed with the
objective of obtaining a rate of return throughout the budgetary and economic
cycles, taking into account the investment risk constraints and the cash
flow characteristics of the portfolio.
Delegation of Authority to Make Investments
--Authority to manage
the investment program is derived from the following:__________ County
Board of Commissioners' most current resolution designating depositories
and MCL 48.40 requiring the County Treasurer to be the custodian of the
County's funds. Management responsibility for the investment program is
hereby delegated to the __________ County Treasurer who shall establish
written procedures and internal controls for the operation of the investment
program consistent with this investment policy. Procedures should include
references to: safekeeping, cash purchase or delivery vs payment, investment
accounting, repurchase agreements, wire transfer agreements, collateral/depository
agreements and banking service contracts. No person may engage in an investment
transaction except as provided under the terms of this policy and the procedures
established by the __________ County Treasurer. The __________ County Treasurer
shall be responsible for all transactions undertaken and shall establish
a system of controls to regulate the activities of subordinate officials.
SAMPLE INVESTMENT POLICY
To Comply With Public Act 20 of 1943, as amended
List of authorized investments--if mutual funds are authorized, a
statement indicating whether the authorization is limited to securities
whose intention is to maintain a net asset value of $1.00 per share or
also includes securities whose net asset value per share may fluctuate
on a periodic basis.
The __________ County Treasurer is limited to investments authorized
by Public Act 20 of 1943, as amended, and may invest in the following:
NOTE--the following list includes all investments authorized by Public
Act 20 of 1943, as amended. Each county may remove or limit each section
of the list as the county desires.
(a) Bonds, securities, and other obligations of the
United States or an agency or instrumentality of the United States.
(b) Certificates of deposit, savings accounts, deposit
accounts, or depository of a financial institution. Authorized depositories
shall be designated by the __________ County Board of Commissioners at
the Board's organizational meeting after each regular election of commissioners.
(c) Commercial paper rated at the time of purchase
within the 2 highest classifications established by not less than 2 standard
rating services and that matures not more than 270 days after the date
(Recommendation--a limit by fund and in accordance with the diversification
requirement in the policy.)
(d) Repurchase agreements consisting of instruments
listed in (a).
(e) Bankers' acceptances of United States banks.
(f) Obligations of this state or any of its political
subdivisions that at the time of purchase are rated investment grade by
not less than 1 standard rating service.
(g) Mutual funds registered under the Investment
Company Act of 1940, title I of chapter 686, 54 Stat. 789, 15 U.S.C. 80a-1
to 80a-3 and 80a-4 to 80a-64, with the authority to purchase only investment
vehicles that are legal for direct investment by the County. This authorization
is limited to securities whose intention is to maintain a net asset value
of $1.00 per share.
(Recommendation--the above limitation is recommended, however, the
County may also include mutual funds whose net asset value may fluctuate
on a periodic basis by so stating in this area.)
(h) Investment pools through an interlocal agreement
under the Urban Cooperation Act, PA 7 of 1967 (Ex Sess), MCL 124.501 to
(i) Investment pools organized under the Surplus
Funds Investment Pool Act, PA 367 of 1982, 129.111 to 129.118.
(j) The investment pools organized under the Local
Government Investment Pool Act, PA 121 of 1985, MCL 129.141 to 129.150.
Safekeeping and Custody--All security transactions, including
collateral for repurchase agreements and financial institution deposits,
entered into by the __________ County Treasurer may be on a cash basis
or a delivery vs payment basis as determined by the County Treasurer. Securities
may be held by a third party custodian designated by the treasurer and
evidenced by safekeeping receipts as determined by the Treasurer.
Prudence--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, not for speculation,
but for investment, considering the probable safety of their capital as
well as the probable income to be derived.