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HomeMy WebLinkAboutRes 04-42 Adopting an Investment PolicyTOWN OF WESTLAKE RESOLUTION NO. 44-42 A RESOLUTION OF THE BOARD OF ALDERMEN OF THE TOWN OF WESTLAKE, TEXAS, ADOPTING A TOWN OF WESTLAKE INVESTMENT POLICY. WHEREAS, Chapter 2256 of the Government Code, commonly known as the "Public Funds Investment Act," requires the town to adopt an investment policy by rule, order, ordinance, or resolution; and WHEREAS, the Public Funds Investment Act requires the investment officer of the Town to attend investment training; and WHEREAS, the Town of Westlake approves of the investment training course sponsored by the Texas Municipal League; and WHEREAS, the investment officer of the Town has attended an investment training course sponsored by the Texas Municipal League as required by the Public Funds Investment Act; and i WHEREAS, the attached investment policy and incorporated strategy comply with the Public Funds Investment Act, as amended, and authorize the investment of town funds in safe and prudent investments. NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF ALDERMEN OF THE TOWN OF WESTLAKE: SECTION 1: That Town of Westlake has complied with the requirements of the Public Funds Investment Act and the Board of Aldermen does hereby adopt a Town of Westlake Investment Policy, as proposed in the attached documents. SECTION 2: That this Resolution shall become effective upon the date of its passage. PASSED AND APPROVED ON THIS 23rd DAY OF AUGUST, 2004. t�&x A -444&-y' ATTEST: Scott Bradley, Mayor /-) /-7, i dingeirrosswy, Town S •etary APPROVED AS TO FORM: t -- L: tanton , own Attorney Trent O. Petty, Tow ager TOWN OF WESTLAKE INVESTMENT POLICY I. POLICY STATEMENT It is the policy of the Town of Westlake (the "Town") that the administration of its funds and the investment of those funds shall be handled as its highest public trust. Investments shall be made in a manner which will provide the maximum security of principal invested through limitations and diversification while meeting the daily cash flow needs of the Town and conforming to all applicable state and Town statutes governing the investment of public funds. The receipt of a market rate of return will be secondary to the requirements for safety and liquidity. It is the intent of the Town to be in completecompliance with local law and the Texas Public Funds Investment Act (the "Act", Texas Government Code 2256). The earnings from investments will be used in a manner that best serves the public trust and interests of the Town. II. SCOPE This Investment Policy applies to all the financial assets and funds held of the Town. Any new funds created by the Town will be managed under the provisions of this Policy unless specifically exempted by the Town Board of Aldermen and this Policy. III. OBJECTIVES AND STRATEGY It is the policy of the Town that all funds shall be managed and invested with four primary objectives, listed in order of their priority: safety, liquidity, diversification and yield. These objectives encompass the following. Safety of Principal Safety of principal is the foremost objective of the Town. Investments shall be undertaken in a manner that seeks to insure the preservation of capital in the overall portfolio. The suitability of each investment decision will be made on the basis of safety. Li uidi The Towels investment portfolio will remain sufficiently Iiquid to enable it to meet all operating requirements which might be reasonably anticipated. Investment decisions will be based on cash flow analysis of anticipated expenditures. Diversification Diversification is required in the portfolio's composition. Diversification of the portfolio will include diversification by maturity and market sector and will include the use of a number of broker/dealers or banks for diversification and market coverage. Competitive bidding will be used on each sale or purchase. Yield The Town's investment portfolio shall be designed with the objective of attaining a reasonable market yield, taking into account the Town's risk constraints and cash flow needs. A reasonable market yield for the portfolio will be defined as the six month (180 day) U.S. Treasury Bill which compares to the portfolio's maximum weighted average maturity of six months. The authorized investment purchased will be of the highest credit quality and marketability supporting the objectives of safety and liquidity. Securities, when not matched to a specific liability, will be short term to provide adequate liquidity. The portfolio shall be diversified to protect against market and credit risk in any one sector. The Town of Westlake VII. INTERNAL CONTROLS The Investment Officer shall establish a system of written internal controls which will be reviewed annually with the independent auditor of the Town. The controls shall be designed to prevent loss of public funds due to fraud, employee error, misrepresentation by third parties, or imprudent actions by employees of the Town. VIII. AUTHORIZED INVESTMENTS Acceptable investments under this policy shall be limited to the instruments listed below. The choice of high-grade government investments and high-grade, money market instruments are designed to assure the marketability of those investments should liquidity needs arise. A. Obligations of the United States Government, its agencies and instrumentalities, not to exceed two (2) years to stated maturity, and excluding mortgage backed securities; B. Fully insured or collateralized certificates of deposit from a bank doing business in the State of Texas and under the terms of a written depository agreement with that bank, not to exceed one year to stated maturity; C. No-load, SEC registered money market mutual funds. No more than 80% of the entity's monthly average balance may be invested in money market funds; and D. Constant dollar, AAA -rated Texas Local Government Investment Pools as defined by the Public Funds Investment Act. If additional types of securities are approved for investment by public funds by state statute, they will not be eligible for investment until this Policy has been amended and the amended version adopted by the Board of Aldermen. Delivery versus Payment All investment security transactions shall be conducted on a delivery versus payment (DVP) basis to assure that the Town has control of its assets and/or funds at all times. IX. AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS Securities broker/dealers may be primary or regional broker/dealers and will meet other criteria as determined by the Investment Officer including state registration and completion of a Town Broker/Dealer questionnaire (attached as Exhibit D). The following criteria must be met by authorized firms. annual provision of an audited fmancial statement, proof of certification by the National Association of Securities Dealers (NASD) proof of current registration with the Texas State Securities Commission, and completion of the Town's broker/dealer questionnaire. Every bank and broker/dealer with whom the Town transacts business will be provided a copy of this Investment Policy to assure that they are familiar with the goals and objectives of the investment program. The firm will be required to return a signed copy of the Certification Form (attached as Exhibit C) certifying that the Policy has been received and reviewed and only those securities approved by the Policy will be sold to the Town. X. DIVERSIFICATION AND MATURITY LIMITATIONS It is the policy of the Town to diversify its investment portfolio. Invested funds shall be diversified to minimize risk or loss resulting from over -concentration of assets in a specific maturity, specific issuer, or specific class of securities. Diversification strategies shall be established and periodically reviewed. The Town of Westlake XIV. INVESTMENT POLICY ADOPTION BY BOARD The Town's Investment Policy and its incorporated strategies shall be adopted by resolution annually by the Board. The approval and any changes made to the Policy will be noted in the approving resolution, The Town of Westlake (2) is price sensitive; that is, the estimated change in the price of the mortgage derivative product is more than 17 percent, because of an immediate and sustained parallel shift in the yield curve of plus or minus 300 basis points. Added by Acts 1997, 75th Leg, ch. 254, § 2, eff. Sept. 1, 1997, 2257.003. Chapter Not Applicable to Deferred Compensation Plans This chapter does not apply to funds that a public entity maintains or administers under a deferred compensation plan, the federal income tax treatment of which is governed by Section 401(k) or 457 of the Internal Revenue Code of 1986 (26 U.S.C. Sections 401(k) and 457), Added by Acts 1993, 73rd Leg., ch. 268, § 1, eff. Sept. 1, 1993. § 2257.004. Conflict With Other Law This chapter prevails over any other law relating to security for a deposit of public funds to the extent of any conflict. Added by Acts 1993, 73rd Leg, ch. 268, § 1, eff. Sept. 1, 1993. 2257.005. Contract Governs Le ai Action A legal action brought by or against a public entity that arises out of or in connection with the duties of a depository, custodian, or permitted institution under this chapter must be brought and maintained as provided by the contract with the public entity. Added by Acts 1993, 73rd Leg, ch, 268, § 1, eff. Sept. 1, 1993. SUBCHAPTER B. DEPOSITORY,• SECURITY FOR DEPOSIT OF PUBLIC FUNDS 4 2257.021. Collateral Required A deposit of public funds shall be secured by eligible security to the extent and in the manner required by this chapter. Added by Acts 1993, 73rd Leg, ch. 268, § 1, eff. Sept. 1, 1993. § 2257.022. Amount of Collateral (a) Except as provided by Subsection (b), the total value of eligible security to secure a deposit of public funds must be in an amount not less than the amount of the deposit of public funds: (1) increased by the amount of any accrued interest; and (2) reduced to the extent that the United States or an instrumentality of the United States insures the deposit. (b) The total value of eligible security described by Section 45.201(4)(D), Education Code, to secure a deposit of public funds of a school district must be in an amount not less than 110 percent of the amount of the deposit as determined under Subsection (a). The total market value of the eligible security must be reported at least once each month to the school district. (c)The value of a surety bond is its face value. (d) The value of an investment security is its market value. Added by Acts 1993, 73rd Leg, ch. 268, § 1, eff. Sept. 1, 1993, Acts of 78th Leg eff. Sept. 1, 2003. §_2257.023. Collateral Policy (a) In accordance with a written policy approved by the governing body of the public entity, a public entity shall determine if an investment security is eligible to secure deposits of public funds. (b) The written policy may include: (1) the security of the institution that obtains or holds an investment security; (2) the substitution or release of an investment security; and (3) the method by which an investment security used to secure a deposit of public funds is valued. Added by Acts 1993, 73rd Leg, ch. 268, § 1, eff. Sept. 1, 1993. 2257.024. Contract for Securing Deposit of Public Funds (a) A public entity may contract with a bank that has its main office or a branch office in this state to secure a deposit of public funds. (b) The contract may contain a term or condition relating to an investment security used as security for a deposit of public funds, including a term or condition relating to the: (1) possession of the collateral; (2) substitution or release of an investment security; (3) ownership of the investment securities of the bank used to secure a deposit of public funds; and (4) method by which an investment security used to secure a deposit of public funds is valued. Added by Acts 1993, 73rd Leg, ch. 268, § 1, eff, Sept. 1, 1993. Amended by Acts 1999, 76th Leg., ch, 344, § 5.006, eff. Sept. 1, 1999. § 2257.025. Records of Depository (a) A public entity's depository shail maintain a separate, accurate, and complete record relating to a pledged investment security, a deposit of public funds, and a transaction related to a pledged investment security, (b) The comptroller or the public entity may examine and verify at any reasonable time a pledged investment security or a record a depository maintains under this section, § 2257.026. Change in Amount or Activity of Deposits of Public Funds A public entity shall inform the depository for the public entity's deposit of public funds of a significant change in the amount or activity of those deposits within a reasonable time before the change occurs. Added by Acts 1993, 73rd Leg, ch. 268, § 1, eff. Sept. 1, 1993 SUBCHAPTER C. CUSTODIAN; PERMITTED INSTITUTION § 2257.041. Deposit of Securities With Custodian (a) In addition to other authority granted by law, a depository for a public entity other than a state agency may deposit with a custodian a security pledged to secure a deposit of public funds. (b) At the request of the public entity, a depository for a public entity other than a state agency shall deposit with a custodian a security pledged to secure a deposit of public funds. (c) A depository for a state agency shall deposit with a custodian a security pledged to secure a deposit of public funds. The custodian and the state agency shall agree in writing on the terms and conditions for securing a deposit of public funds. (d) A custodian must be approved by the public entity and be: (1) a state or national bank that: (A) is designated by the comptroller as a state depository; (B) has its main office or a branch office in this state; and (C) has a capital stock and permanent surplus of $5 million or more; (2) the Texas Treasury Safekeeping Trust Company; (3) a Federal Reserve Bank or a branch of a Federal Reserve Bank; or (4) a federal home loan bank. (e) A custodian holds in trust the securities to secure the deposit of public funds of the public entity in the depository pledging the securities. Added by Acts 1993, 73rd Leg, ch. 268, § 1, eff, Sept. 1, 1993. Amended by Acts 1995, 74th Leg., ch. 1010, § 1, eff. June 17, 1995; Acts 1997, 75th Leg., ch. 891, § 3.17, eff. Sept. 1, 1997; Acts 1999, 76th Leg., ch. 344, § 5.007, eff. Sept. 1, 1999- § 2257.042. Deposit of Securities With Permitted Institution (a) A custodian may deposit with a permitted institution an investment security the custodian holds under Section 2257.041. (b) If a deposit is made under Subsection (a): (1) the permitted institution shall hold the investment security to secure funds the public entity deposits in the depository that pledges the investment security; (2) the trust receipt the custodian issues under Section 2257.045 shall show that the custodian has deposited the security in a permitted institution; and (3) the permitted institution, on receipt of the investment security, shall immediately issue to the custodian an advice of transaction or other document that is evidence that the custodian deposited the security in the permitted institution. Added by Acts 1993, 73rd Leg, ch. 268, § 1, eff. Sept. 1, 1993. 2257.043. Depository as Custodian or Permitted Institution (a) A public entity other than a state agency may prohibit a depository or an entity of which the depository is a branch from being the custodian of or permitted institution for a security the depository pledges to secure a deposit of public funds. (b) A depository or an entity of which the depository is a branch may not be the custodian of or permitted institution for a security the depository pledges to secure a deposit of public funds by a state agency. Added by Acts 1993, 73rd Leg, ch. 268, § 1, eff. Sept. 1, 1993. 22.57.044. Custodian as Bailee (a) A custodian under this chapter or a custodian of a security pledged to an institution of higher education, as defined by Section 61.003, Education Code, whether acting alone or through a permitted institution, is for all purposes the bailee or agent of the pubtic entity or institution depositing the public funds with the depository. (b) To the extent of any conflict, Subsection (a) prevails over Chapter 8 or 9, Business & Commerce Code. Added by Acts 1993, 73rd Leg, ch. 268, § 1, eff. Sept. 1, 1993. §12257.045. Receipt of Security by Custodian On receipt of an investment security, a custodian shall: (1) immediately identify on its books and records, by book entry or another method, the pledge of the security to the public entity; and (2) promptly issue and deliver to the appropriate public entity officer a trust receipt for the pledged security. Added by Acts 1993, 73rd Leg, ch. 268, § 1, eff. Sept. 1, 1993. § 2257.046. Books and Records of Custodian: Inspection (a) A public entity's custodian shall maintain a separate, accurate, and complete record relating to each pledged investment security and each transaction relating to a pledged investment security. (b) The comptroller or the public entity may examine and verify at any reasonable time a pledged investment security or a record a custodian maintains under this section. The public entity or its agent may inspect at any time an investment security evidenced by a trust receipt. § 2257.481. Definition In this subchapter, "exempt institution" means. (1) a public retirement system, as defined by Section 802.001; or (2) the permanent school fund, as described by Section 43.001, Education Code. Added by Acts 1993, 73rd Leg, ch. 268, § 1, eff- Sept. 1, 1993. Amended by Acts 1997, 75th Leg., ch. 165, § 6.31, eff. Sept. 1, 1997. § 2257.082. Funds of Exempt Institution An exempt institution is not required to have its funds fully insured or collateralized at all times if: (1) the funds are held by: (A) a custodian of the institution's assets under a trust agreement; or (B) a person in connection with a transaction related to an investment; and (2) the governing body of the institution, in exercising its fiduciary responsibility, determines that the institution is adequately protected by using a trust agreement, special deposit, surety bond, substantial deposit insurance, or other method an exempt institution commonly uses to protect itself from liability. Added by Acts 1993, 73rd Leg, ch. 268, § 1, eff. Sept. 1, 1993. § 2257,083. Investment: Selection of Depository This chapter does not: (1) prohibit an exempt institution from prudently investing in a certificate of deposit; or (2) restrict the selection of a depository by the governing body of an exempt institution in accordance with its fiduciary duty. Added by Acts 1993, 73rd Leg, ch. 268, § 1, eff. Sept. 1, 1993 with the State Securities Board, a person who is an officer or principal of the investment management firm, (11) "School district" means a public school district. (12) "Separately invested asset" means an account or fund of a state agency or local government that is not invested in a pooled fund group, (13) "State agency" means an office, department, commission, board, or other agency that is part of any branch of state government, an institution of higher education, and any nonprofit corporation acting on behalf of any of those entities. Sec, 2256.003 Authority to Invest Funds; Entities Subject to this Chapter (a) Each governing body of the following entities may purchase, sell, and invest its funds and funds under its control in investments authorized under this subchapter in compliance with investment policies approved by the governing body and according to the standard of care prescribed by Section 2256.006: (1) a local government; (2) a state agency; (3) a nonprofit corporation acting on behalf of a local government or a state agency; or (4) an investment pool acting on behalf of two or more local governments, state agencies, or a combination of those entities. (b) In the exercise of its powers under Subsection (a), the governing body of an investing entity may contract with an investment management firm registered under the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.) or with the State Securities Board to provide for the investment and management of its public funds or other funds under its control, A contract made under authority of this subsection may not be for a term longer than two years. A renewal or extension of the contract must be made by the governing body of the investing entity by order, ordinance or resolution. (c) This chapter does not prohibit an investing entity or investment officer from using the entity's employees or the services of a contractor of the entity to aid the investment officer in the execution of the officer's duties under this chapter. Sec. 2256.004 Applicability (a) This subchapter does not apply to: (1) a public retirement system as defined by Section 802,001; (2) state funds invested as authorized by Section 404.024; (3) an institution of higher education having total endowments of at least $95 million in book value on May 1, 1995 (4) funds invested by the Veterans Land Board as authorized by Chapter 161, 162, or I64, Natural Resources Code, (5) registry funds deposited with the county or district clerk under Chapter 117, Local Government Code, or (6) a deferred compensation plan that qualifies under either Section 401(k) or 457 of the Internal Revenue Code of 1986 (26 U.S.C. Section 1 et seq.) as amended. (b) This subchapter does not apply to an investment donated to an investing entity for a particular purpose or under terms of use specified by the donor, Sec. 2256.005 Investment Policies; Investment Strategies; Investment Officer. (a) The governing body of an investing entity shall adopt by rule, order, ordinance, or resolution, as appropriate, a written investment policy regarding the investment of its funds and funds under its control. (b) The investment policies must: (1) be written; (2) primarily emphasize safety of principal and liquidity; (3) address investment diversification, yield, and maturity and the quality and capability of investment management; and (4) include: (A) a list of the types of authorized investments in which the investing entity's funds may be invested; (B)the maximum allowable stated maturity of any individual investment owned by the entity; (C) for pooled fund groups, the maximum dollar -weighted average maturity allowed based on the stated maturity date for the portfolio. (D)methods to monitor the market price of investments acquired with public funds; and (3) the investment officer has acquired from the business organization during the previous year investments with a book value of $2,500 or more for the personal account of the investment officer. 0) The governing body of an investing entity may specify in its investment policy that any investment authorized by this chapter is not suitable. (k) A written copy of the investment policy shall be presented to any person offering to engage in an investment transaction with an investing entity or to an investment management firm under contract with an investing entity to invest or manage the entity's investment portfolio. For purposes of this subsection, a business organization includes investment pools and an investment management firm under contract with an investing entity to invest or manage the entity's investment portfolio. Nothing in this subsection relieves the investing entity of the responsibility for monitoring the investments made by the investing entity to determine that they are in compliance with the investment policy. The qualified representative of the business organization offering to engage in an investment transaction with an investing entity shall execute a written instrument in a form acceptable to the investing entity and the business organization substantially to the effect that the business organization has: (1) received and reviewed the investment policy of the entity; and (2) acknowledged that the business organization has implemented reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and the organization that are not authorized by the entity's investment policy, except to the extent that this authorization is dependent on an analysis of the makeup of the entity's entire portfolio or requires an interpretation of subjective investment standards. (1) The investment officer of an entity may not acquire or otherwise obtain any authorized investment described in the investment policy of the investing entity from a person who has not delivered to the entity the instrument required by Subsection (k). (m) An investing entity other than a state agency, in conjunction with its annual financial audit, shall perform a compliance audit of management controls on investments and adherence to the entity's established investment policies. (n) Except as provided by Subsection (o), at Ieast once every two years a state agency shall arrange for a compliance audit of management controls on investments and adherence to the agency's established investment policies. The compliance audit shall be performed by the agency's internal auditor or by a private auditor employed in the manner provided by Section 321.020. Not later than January 1 of each even -numbered year, a state agency shall report the results of the most recent audit performed under this subsection to the state auditor. A state agency also shall report to the state auditor other information the state auditor determines necessary to assess compliance with laws and policies applicable to state agency investments. A report under this subsection shall be prepared in a manner the state auditor prescribes. (o) The audit requirements of Subsection (n) do not apply to assets of a state agency that are invested by the comptroller under Section 404.024, See. 2256.006 Standard of Care. (a) investments shall be made with judgment and care, under prevailing circumstances, that a person of prudence, discretion, and intelligence would exercise in the management of the person's own affairs, not for speculation, but for investment, considering the probable safety of capital and the probable income to be derived. Investment of funds shall be governed by the following investment objectives, in order of priority: (1) preservation and safety of principal; (2) liquidity; and (3) yield. (b) In determining whether an investment officer has exercised prudence with respect to an investment decision, the determination shall be made taking into consideration: (1) the investment of all funds, or funds under the entity's control, over which the officer had responsibility rather than a consideration as to the prudence of a single investment; and (2) whether the investment decision was consistent with the written investment policy of the entity. Sec, 2256.007 Investment Training; State Agency Board Members and Officers. (a) Each member of the governing board of a state agency and its investment officer shall attend at least one training session relating to the person's responsibilities under this chapter within six months after taking office or assuming duties. (5) obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm not less than A or its equivalent and (6) bonds issued, assumed, or guaranteed by the State of Israel. (b) The following are not authorized investments under this section: (1) obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal; (2) obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest; (3) collateralized mortgage obligations that have a stated final maturity date of greater than 10 years; and (4) collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index. Sec. 2256.010 Authorized Investments: Certificates of Deposit. A certificate of deposit is an authorized investment under this subchapter if the certificate of deposit is issued by a state or national bank domiciled in this state or a savings bank domiciled in this state, or state or federal credit union domiciled in this state and is: (1) guaranteed or insured by the Federal Deposit Insurance Corporation, or its successor or the National Credit Union Share Insurance Fund or its successor; (2) secured by obligations that are described by Section 2256.009(a), including mortgage backed securities directly issued by a federal agency or instrumentality that have a market value of not less than the principal amount of the certificates, but excluding those mortgage-backed securities of the nature described by Section 2256.009(b); or (3) secured in any other manner and amount provided by law for deposits of the investing entity. Sec. 2256.011 Authorized Investments: Repurchase Agreements. (a) A fully collateralized repurchase agreement is an authorized investment under this subchapter if the repurchase agreement: (1) has a defined termination date; (2) is secured by obligations described by Section 2256.009(a)(1); and (3) requires the securities being purchased by the entity to be pledged to the entity, held in the entity's name, and deposited at the time the investment is made with the entity or with a third party selected and approved by the entity; and (4) is placed through a primary government securities dealer, as defined by the Federal Reserve, or a financial institution doing business in this state. (b) In this section, "repurchase agreement" means a simultaneous agreement to buy, hold for a specified time, and sell back at a future date, obligations described by Section 2256.009(a)(1) at a market value at the time the fiords are disbursed of not Iess than the principal amount of the funds disbursed. The term includes a direct security repurchase agreement and a reverse security repurchase agreement. (c) Notwithstanding any other law, the term of any reverse security repurchase agreement may not exceed 90 days after the date the reverse security repurchase agreement is delivered. (d) Money received by an entity under the terms of a reverse security repurchase agreement shaII be used to acquire additional authorized investments, but the term of the authorized investments acquired must mature not later than the expiration date stated in the reverse security repurchase agreement. Sec. 2256.0115 Authorized Investments: Securities Lending (a) A securities lending program is an authorized investment under this subchapter if it meets the conditions provided by this section. (b) To qualify as an authorized investment under this subchapter: (1) the value of securities loaned under the program must be not less than 100 percent collateralized, including accrued income; (2) a loan made under the program must allow for termination at any time; (3) a Ioan made under the program must be secured by: (A) pledged securities described by Section 2256.009; (B) pledged irrevocable letters of credit issued by a bank that is: (i) organized and existing under the laws of the United States or any other state; and (c) .An entity is not authorized by this section to: (1) invest in the aggregate more than 15 percent of its monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service, in mutual funds described in Subsection (b); or (2) invest any portion of bond proceeds, reserves and funds held for debt service, in mutual funds described in Subsection (b); or (3) invest its funds or fiends under its control, including bond proceeds and reserves and other funds held for debt service, in any one mutual fund described in Subsection (a) or (b) in an amount that exceeds 10 percent of the total assets of the mutual fund. Sec. 2256.015 .Authorized Investments: Guaranteed Investment Contracts, (a) A guaranteed investment contract is an authorized investment for bond proceeds under this subchapter if the guaranteed investment contract: (1) has a defined termination date; (2) is secured by obligations described by Section 2256.009(a)(1), excluding those obligations described by Section 2256,009(b), in an amount at least equal to the amount of bond proceeds invested under the contract; and (3) is pledged to the entity and deposited with the entity or with a third party selected and approved by the entity, (b) Bond proceeds, other than bond proceeds representing reserves and funds maintained for debt service purposes, may not be invested under this subehapter in a guaranteed investment contract with a term of longer than five years from the date of issuance of the bonds. (c) To be eligible as an authorized investment: (1) the governing body of the entity must specifically authorize guaranteed investment contracts as an eligible investment in the order, ordinance, or resolution authorizing the issuance of bonds; (2) the entity must receive bids from at least three separate providers with no material financial interest in the bonds from which proceeds were received; (3) the entity must purchase the highest yielding guaranteed investment contract for which a qualifying bid is received; (4) the price of the guaranteed investment contract must take into account the reasonably expected drawdown schedule for the bond proceeds to be invested; and (5) the provider must certify the administrative costs reasonably expected to be paid to third parties in connection with the guaranteed investment contract. Sec. 2256.016 Authorized Investment: Investment Pools. (a) An entity may invest its funds and funds under its control through an eligible investment pool if the governing body of the entity by rule, order, ordinance, or resolution, as appropriate, authorizes investment in the particular pool. An investment pool shall invest the funds it receives from entities in authorized investments permitted by this subchapter. (b) To be eligible to receive funds from and invest funds on behalf of an entity under this chapter, an investment pool must furnish to the investment officer or other authorized representative of the entity an offering circular or other similar disclosure instrument that contains, at a minimum, the following information: (1) the types of investments in which money is allowed to be invested; (2) the maximum average dollar -weighted maturity allowed, based on the stated maturity date, of the pool; (3) the maximum stated maturity date any investment security within the portfolio has;. (4) the objectives of the pool; (5) the size of the pool; (6) the names of the members of the advisory board of the pool and the dates their terms expire; (7) the custodian bank that will safekeep the pool's assets; (8) whether the intent of the pool is to maintain a net asset value of one dollar and the risk of market price fluctuation; (9) whether the only source of payment is the assets of the pool at market value or whether there is a secondary source of payment, such as insurance or guarantees, and a description of the secondary source of payment; (10) the name and address of the independent auditor of the pool; (11) the requirements to be satisfied for an entity to deposit funds in and withdraw funds from the pool and any deadlines or other operating policies required for the entity to invest funds in and withdraw funds from the pool; and Sec. 2256.0201 Authorized Investment; Municipal Utility (a) A municipality that owns a municipal electric utility that is engaged in the distribution and sale of electric energy or natural gas to the public may enter into a hedging contract and related security and insurance agreements in relation to fuel oil, natural gas, and electric energy to protect against loss due to price fluctuations. A hedging transaction must comply with the. regulations of the Commodity Futures Trading Commission and the Securities and Exchange Commission. If there is a conflict between the municipal charter of the municipality and this chapter, this chapter prevails. (b) A payment by the municipally owned electric or gas utility under a hedging contract or related agreement in relation to fuel supplies or fuel reserves is a fuel expense, and the utility may credit any amounts it receives under the contract or agreement against fuel expenses. (c) The governing body of a municipally owned electric or gas utility or the body vested with power to manage and operate the municipally owned electric or gas utility may set policy regarding hedging transactions. (d) In this section, "hedging" means the buying and selling of fuel oil, natural gas, and electric energy futures or options or similar contracts on those commodity futures as a protection against loss due to price fluctuations. Sec. 2256.021 Effect of Loss of Required Rating. An investment that requires a minimum rating under this subchapter does not qualify as an authorized investment during the period the investment does not have the minimum rating. An entity shall take all prudent measures that are consistent with its investment policy to liquidate an investment that does not have the minimum rating. Sec. 2256.022 Expansion of Investment Authority. Expansion of investment authority granted by this chapter shall require a risk assessment by the state auditor or performed at the direction of the state auditor, subject to the legislative audit commit approval of including the review in the audit plan under Section 321.013_ Sec. 2256.023 Internal Management Reports. (a) Not less than quarterly, the investment officer shall prepare and submit to the governing body of the entity a written report of investment transactions for all funds covered by this chapter for the preceding reporting period. (b) The report must: (1) describe in detail the investment position of the entity on the date of the report; (2) be prepared jointly by all investment officers of the entity; (3) be signed by each investment officer of the entity; (4) contain a summary statement prepared in compliance with generally accepted accounting principles of each pooled fund group that states the: (A) beginning market value for the reporting period; (B) additions and changes to the market value during the period; (E) ending market value for the period; and (F) fully accrued interest for the reporting period. (5) state the book value and market value of each separately invested asset at the beginning and end of the reporting period by the type of asset and fund type invested; (6) state the maturity date of each separately invested asset that has a maturity date; (7) state the account or fund or pooled fund group in the state agency or local government for which each individual investment was acquired; and (8) state the compliance of the investment portfolio of the state agency or local government as it relates to: (A) the investment strategy expressed in the agency's or local government's investment policy; and (B) relevant provisions of this chapter. (c) The report shall be presented not less than quarterly to the governing body and the chief executive officer of the entity within a reasonable time after the end of the period. (d) If an entity invests in other than money market mutual funds, investment pools or accounts offered by its depository bank in the form of certificates of deposit, or money market accounts or similar accounts, the 10