City of Cedar Rapids, Iowa

Effective August 27, 2003
Honorable Mayor, City Council, Depositories, Fiduciaries, Auditor and Assisting Third Parties of or for the City of Cedar Rapids, Iowa

Presented herein is the revised investment policy for the City of Cedar Rapids, Iowa as required to be adopted by all public entities of the state. This document is meant not only as a working guideline for the City Treasurer, other staff and external auditors, but to communicate with all third parties assisting with the facilitating the process of the investment of public funds.

All known statutory requirements of Senate File 2036 signed into law April 28, 1992 have been addressed. It is felt that this policy of the City captures both the spirit and the intent of the law and is scheduled to be reviewed at least every three years.

Respectfully submitted,

City Treasurer
Susan L. Vavroch

Effective August 27, 2003

The investment policy of the City of Cedar Rapids, hereinafter the “City,” shall apply to investment transactions of all operating and reserve funds, bond proceeds and other funds accounted for in the financial statements of the City. Each investment made pursuant to this investment policy must be authorized by applicable law and this written investment policy.

The investment of bond funds or sinking funds shall comply not only with this investment policy, but also be consistent with any applicable bond resolution.

This investment policy is intended to comply with Iowa Code Chapter 12B and 12C.

Upon passage and upon future amendment, if any, copies of this investment policy shall be delivered to all of the following:

In accordance with Section 12B.10, the responsibility for conducting investment transactions resides with the City Treasurer. Only the City Treasurer and those authorized by resolution may invest public funds and a copy of any empowering shall be attached to this investment policy.

All contracts or agreements with outside persons investing public funds, advising on the investment of public funds, directing the deposit of investment of public funds or acting in fiduciary capacity for the City shall require the outside person to notify in writing the City Treasurer within thirty days of receipt of all communication from the Auditor of the outside person or any regulatory authority of the existence of a material weakness in internal control structure of the outside person or regulatory orders or sanctions regarding the type of services being provided to the City by the outside person.

The records of investment transactions made by or on behalf of the City are public records and are the property of the City whether in the custody of the City or in the custody of a fiduciary or other third party.

The Treasurer shall establish a written system of internal controls and investment practices. The controls shall be designed to prevent losses of public funds, to document those officers and employees of the City responsible for elements of the investment process and to address the capability of investment management. The controls shall provide for receipt and review of the audited financial statement and related report on internal control structure of all outside persons performing any of the following for this public body:

A Bank, Savings and Loan Association or Credit Union providing only depository services shall not be required to provide an audited financial statement and related report on internal control structure.

The City Treasurer and all employees authorized to place investments shall be bonded.

In accordance with Iowa Code Section 12B.10 (2), the primary objectives, in order of priority, of all investment activities involving the financial assets of the City shall be the following:

The City Treasurer when investing or depositing public funds, shall exercise the care, skill, prudence and diligence under the circumstances then prevailing that a person acting in a like capacity and familiar with such matters would use to attain the Section III investment objectives. This standard requires that when making investment decisions, the Treasurer shall consider the role that the investment or deposit plays within the portfolio of financial assets of the City and the investment objectives stated in Section III.

Financial assets of the City may be invested in the following:

Interest bearing savings accounts, interest bearing money market accounts, and interest bearing checking accounts at any bank, savings and loan association or credit union in the State of Iowa. Each financial institution shall be properly declared as a depository by City Council resolution. Deposits in any financial institution shall not exceed the maximum amounts approved by the resolution.

Obligations of the United States government, its agencies and instrumentalities.

Certificates of deposit and other evidences of deposit at federally insured Iowa depository institutions approved pursuant to Chapter 12C.

Iowa Public Agency Investment Trust (IPAIT).

Prime bankers’ acceptances that mature within 270 days of purchase and that are eligible for purchases by a Federal Reserve Bank.

Commercial paper or other short-term corporate debt that matures within 270 days of purchase and is rated within the two highest classifications, established by a least one of the standard rating services approved by the superintendent of banking rules adopted pursuant to Chapter 17A.

Repurchase agreements, provided that the underlying collateral consists of obligations of the United States government, its agencies and instrumentalities and the City Treasurer takes delivery of the collateral either directly or through an authorized custodian.

An open-end management investment company, organized in trust form, registered with the Securities and Exchange Commission under the federal Investment Company Act of 1940, 15 U.S.C.Section 80(a) and operated in accordance with 17 C.F.R.Section 270.2a-7.

Financial assets of the City shall not be invested in the following:

Financial assets of the City shall not be invested pursuant to the following investment practices:

Operating Funds must be identified and distinguished from all other funds available for investment. Operating Funds are defined as those funds which are reasonably expected to be expended during a current budget year or within fifteen months of receipt.

All investments authorized in Section V are further subject to the following investment maturity limitations:

Certain other instruments if held by the City are subject to the following diversification requirements:

Prime bankers’ acceptances:

Commercial paper or other short-term corporate debt:

Where possible, it is the policy of the City to diversify its investment portfolio. Assets shall be diversified to eliminate the risk of loss resulting from overconcentration of assets in a specific maturity, a specific issuer, or a specific class of securities. In establishing specific diversification strategies, the following general policies and constraints shall apply:

All invested financial assets of the City involving the use of a public funds custodial agreement, as defined in section 452.10, shall comply with all rules adopted pursuant to Section 452.10C. All custodial agreements shall be in writing and shall contain a provision that all custodial services be provided in accordance with the laws of the state of Iowa.

The City Treasurer and all officers and employees of the City involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions. Any personal investments or loans in excess of $10,000.00 in or with any entity that the City regularly conducts investment business with shall be disclosed in writing to the Mayor and City Council.

The Treasurer shall submit a monthly investment report that summarizes investment level by market sectors, average maturity and yield to demonstrate compliance with the major objectives of this investment policy.

The investment policy of the City shall be reviewed every three (3) years or more frequently as appropriate. Notice of amendments to the investment policy shall be promptly distributed to all parties noted in Section I.

City of Cedar Rapids, Iowa
Internal Procedures, Practices and Controls For Investment Transactions

The City Treasurer and qualified employees will routinely monitor the contents of the portfolio(s), the current market conditions, the available markets and the relative values of competing instruments and will make adjustments to the portfolio(s) accordingly.

The City Treasurer and qualified employees will determine the City’s cash position daily and also forecast the probable cash flows to arrive at amounts available to invest at given maturities.

The City Treasurer or approved designee will follow different protocol depending on the investment instrument being purchased as follows: For investment instruments purchased in the secondary market, a competitive bid process will be conducted. If a specific maturity date is required, either for cash flow purposes or for conformance to a maturity guideline, bids will be requested for instruments which meet the maturity requirement. If no specific maturity is required, a yield curve and market analysis will be performed to determine which maturities would be most advantageous. Bids will be requested from financial institutions and other third party facilitators (securities brokers, dealers) for various options with regard to term and instrument. The City Treasurer will accept the bid which provides the highest rate of return, among like securities within the maturity required and within the parameters of these procedures.

Investments purchased on a “when issued” basis through the Treasury, or “at the window” which are new issues of an investment, are not competitively bid.

Records will be kept of the bids offered and the bid accepted along with an analysis of the investment decision.

The City Treasurer will maintain a list of financial institutions and third party facilitators (securities brokers, dealers) which are approved for investment purposes. Banks shall provide their most recent Consolidated Report of Condition (“call” report) and security brokers and dealers are required to file a “Public Funds Investment Broker/Dealer Profile and Certification” as well as the firm’s most recent audited financial statement to the City Treasurer which is evaluated annually to determine whether it should remain on the “Qualified Institution” listing.

The City utilizes a custody and safekeeping agreement with a local bank for all investments except certain physical, certificated GNMA’s which are held in the City Treasurer’s vault, or those purchased directly through the U.S. Treasury. All investment transactions are handled delivery versus payment which means that the City’s agent matches the wire transfer with the securities which have been delivered to the City’s account at the bank. All investments are registered in the name of the City.

The monthly safekeeping report from the bank is reconciled with the records of the City.

The City Treasurer, or approved designee, are the only employees authorized to initiate the purchase or the sale of an investment. Other qualified employees complete the paper and wire transactions. Records detailing the transaction begin with an internal investment worksheet, include the confirmation from the dealer and finally the wire transfer documentation outlining the delivery and payment for or receipt of the security. No employee has the ability to perform an investment transaction from origination to delivery and payment acting alone.