Sample Investment Policy

To Comply With Public Act 20 of 1943, as amended

This sample policy is provided to assist in the development of a policy which meets the requirements of the Act. The statutory requirement and reasons for each section are in normal print while sample language is in italics. The blank lines are for the unit's name.

Purpose--An investment policy should state the reason it is established.

It is the policy of __________ 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 __________ and comply with all state statutes governing the investment of public funds.

Scope--An investment policy should state the funds to which the policy applies.

This investment policy applies to all financial assets of the __________. These assets are accounted for in the various funds of the __________ and include the general fund, special revenue funds, debt service funds, capital project funds, enterprise funds, internal service funds, trust and agency funds and any new fund established by the __________.

Objectives--safety, diversification, liquidity and return on investment

The primary objectives, in priority order, or the __________'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: (Insert the board resolutions designating depositories, appropriate state statutes {County--County Treasurer per MCL 48.40; Township--Township Treasurer per MCL 41.76; Village Treasurer per MCL 64.9; Fourth Class City--City Treasurer per MCL 87.11; and Home Rule City--per charter provision} and or appropriate charter provisions). Management responsibility for the investment program is hereby delegated to the (County--County Treasurer per MCL 48.40; Township--Township Treasurer per MCL 41.76; Village Treasurer per MCL 64.9; Fourth Class City--City Treasurer per MCL 87.11; and Home Rule City--per charter provision), 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, 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 (title of the designated official) __________. The (title of the designated official) __________ shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities or subordinate officials.

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 include securities whose net asset value per share may fluctuate on a periodic basis.

The __________ is limited to investments authorized by Public Act 20 of 1943, as amended, and may invest in the following:
 
(List the investments authorized by Act 20 which the governing body wants to allow the local unit's funds to be invested in)

Safekeeping and Custody--This provision will provide comfort that the securities are physically safe.

All security transactions, including collateral for repurchase agreements and financial institution deposits, entered into by the __________ shall be on a cash (or delivery vs payment) basis. 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.

There are several additional matters which may be addressed in the investment policy, however, the provisions of the statute are met with those matters discussed above.

INVESTMENT POLICY

For additional information concerning investment policy provisions contact:

Michigan Municipal Treasurers Association (MMTA)
P.O. Box 324
Tawas City, MI 48764
www.mmta-mi.org
(989) 820-8389

Michigan Government Finance Officers Association (MGFOA)
4020 Copper View Suite 130
Traverse City, MI 49684
www.migfoa.org
(231) 947-0882