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INVESTMENT POLICY

SCOPE

This policy applies to all financial assets of Mecklenburg County except authorized petty cash accounts and trust funds administered by the Social Services Director. The County pools the cash resources of its various funds into a single pool in order to maximize investment opportunities. These funds are accounted for in the County's Comprehensive Annual Financial Report. Each fund's portion of total cash and investments is summarized by fund type in the combined balance sheet as equity or deficit in pooled cash and investments. This policy applies to all transactions involving the financial assets and related activity of all the various funds accounted for in the County's Comprehensive Annual Financial Report.

OBJECTIVES

Funds of the County will be invested in accordance with North Carolina General Statute 159-30 Cash Management and Investment Policy, and written administrative procedures. The County's investments shall be undertaken in a manner that (1) seeks to ensure the preservation of capital in the overall portfolio, (2) provides for sufficient liquidity to meet the cash needs of the County's various operations and (3) attain a fair market rate of return. Cash management functions will be conducted in such a manner as to insure that adequate funds will always be available to meet the County's financial obligations and to provide the maximum amount of funds available for investment at all times.

RESPONSIBILITY

In accordance with N.C. General Statutes, the Finance Officer is charged with the responsibility of cash management and investment and has delegated this duty to the Investment Officer. Such delegation shall not relieve the Finance Director of responsibility for all transactions undertaken. The Investment Officer is responsible for investment decisions and activities and shall develop and maintain written administrative procedures for the operation of the cash management and investment program, consistent with N.C. Statutes and these policies.

The standard of prudence to be used by the Investment Officer shall be the "Prudent Investor" Rule, which states, "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." This standard of prudence shall be applied in the context of managing the overall portfolio. The Investment Officer acting in accordance with North Carolina General Statues, this policy, and written administrative procedures and exercising due diligence shall be relieved of personal responsibility for an investment credit risk, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments.

ETHICS AND CONFLICTS OF INTEREST

To avoid the appearance of potential conflict of interest or favoritism to a particular bank or broker, the Investment Officer or any delegate employee who has investment responsibilities shall make full disclosure to the Finance Director of any relationship or dealings with any financial institution that has business dealings with the County. This disclosure need not include normal banking or brokerage relationships that are at normal market rates and conditions available to the general public. Investment officials shall be familiar with N.C. General Statutes and County policy regarding gifts and favors and shall act accordingly.

STATUTORY AUTHORIZATION

The legal limitations of local government investments are defined in N.C.G.S. 159-30. Accordingly, the following classes of securities are indicative of the investments utilized by Mecklenburg County:

A. Obligations of the United States or obligations fully guaranteed both as to principal and interest by the United States.

B. Obligations of the Federal Financing Bank, the Federal Farm Credit Bank, the Bank for Cooperatives, the Federal Intermediate Credit Bank, the Federal Land Banks, the Federal Home Loan Banks, the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, the Government National Mortgage Association, the Federal Housing Administration, the Farmers Home Administration and the U.S. Postal Service.

C. Obligations of the State of North Carolina.

D. Bonds and notes of any North Carolina local government or public authority, subject to such restrictions as the Secretary of the Local Government Commission may impose.

E. Deposits at interest or purchase of certificates of deposit with any bank, savings and loan association or trust company in North Carolina, provided such deposits or certificates of deposit are fully collateralized.

F. Prime quality commercial paper bearing the highest rating of at least one nationally recognized rating service and not bearing a rating below the highest (A1, P1, F1) by any nationally recognized rating service which rates the particular obligation.

G. Bankers' Acceptances provided that the accepting bank or its holding company is either (1) incorporated in the State of North Carolina or (2) has outstanding publicly held obligations bearing the highest rating of at least one nationally recognized rating service and not bearing a rating below the highest (Aaa or AAA) by any nationally recognized rating service which rates the particular obligations.

H. Participating shares in a mutual fund for local government investment (such as the N.C. Cash Management Trust) which is certified by the N.C. Local Government Commission.

ADMINISTRATIVE RESTRICTIONS

In addition to the previously noted limitations on appropriate securities, Mecklenburg County's investment activities are further restricted in the following manner:

A. It is the policy of Mecklenburg County to diversify its investment portfolio. Assets held shall be diversified to eliminate the risk of loss resulting from the over concentration of assets in a specific maturity, a specific issuer or a specific class of securities. Diversification shall be determined and revised periodically by the Investment Officer. Portfolio maturities shall be staggered to avoid undue concentration of assets in a specific maturity sector. Maturities selected shall provide for stability of income and reasonable liquidity.

B. Mecklenburg County recognizes that investment risks can result from issuer defaults, market price changes or various technical complications leading to temporary illiquidity. Portfolio diversification is employed as a way to minimize default risk. No individual investment transaction shall be undertaken that jeopardizes the capital position of the overall portfolio. In the event of a default by a specific issuer, the Investment Officer shall review and, if appropriate, proceed to liquidate securities having comparable credit risks.

C. No investments in Repurchase Agreements shall be made unless the underlying collateral shall be placed in safekeeping in the trust department of a third-party designated by the County.

D. The combined total investment in commercial paper and bankers' acceptances shall not exceed thirty five percent (50%) of the total portfolio and the investment in commercial paper or bankers' acceptances of a single issuer shall not exceed the lesser of ten million dollars ($10,000,000) or ten percent (10%) of the total portfolio at the time of investment.

E. No investment shall be made in any security with a maturity greater than five (5) years from the date of purchase.

SELECTION OF SECURITIES

The Investment Officer will determine which instruments shall be purchased and sold and the desired maturity date(s) that are in the best interest of the County. The selection of an instrument will involve the evaluation of, but not be limited to, the following factors:

A. Cash flow projections and requirements.

B. Current market conditions.

C. Overall portfolio balance and makeup.

CUSTODY AND SAFEKEEPING OF SECURITIES

Mecklenburg County will maintain a third party safekeeping account for all investments (generally provided by the County's primary bank). Transactions should be processed on a delivery versus payment basis. Some securities, primarily certificates of deposit, will not be kept in the third party safekeeping account, but will be kept by the Investment Officer in the vault of the County Finance Department.

INTERNAL CONTROLS

The Finance Director is responsible for establishing a system of internal controls. These controls are designed to prevent losses of public funds arising from fraud, employee error, misrepresentation by third parties or imprudent actions by County employees.

REPORTING

The Investment Officer shall submit a monthly investment report to the Finance Director. The report shall include a general description of the portfolio in terms of investment securities, maturities, yields and other features. The report will show investment earnings for the month and fiscal year-to-date, including the annualized earned yield percentage for the portfolio. The report will compare actual investment earnings with budgeted earnings.

If you have any additional questions that are not addressed, please email Cheryl.Duke@mecklenburgcountync.gov for a detailed response.  Please reference the Finance  Department web page in the subject line of your message.



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