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Atascadero USD |  AR  3430  Business and Noninstructional Operations


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Policy Statement

It is the policy of the District to invest funds in a manner which will provide maximum security of principal invested. The secondary objective is the liquidity of capital to meet expenditure requirements. The third objective is to achieve a positive return on the funds invested. This policy shall conform to all applicable State statutes governing the investment of public funds. (CA SB 564, SB 866)


This investment policy applies to all surplus funds not required for the immediate operating need of the District. These funds are accounted for in a monthly financial report and include all or a portion of:

* 9110 San Luis Obispo County Treasurer

* 9118 California Local Agency Investment Fund


Investment law imposes the role of the trustee on California's local government agencies or persons authorized to make investment decisions for them, in effect making them a fiduciary subject to the prudent investor's standards. (Government Code 53600.3)

A fiduciary is "a person who has legal responsibility for the conversion and management of property in which another person has a beneficial interest." As a governing body and fiduciary investing public funds, the standards of prudence to be used with the investing District funds shall be the "Prudent Investor Standard." This Standard states that the fiduciary shall act with, care, skill, prudence, and diligence, under the circumstances then prevailing, that a prudent person, acting in a like capacity and familiar with those manners, would use in the conduct of funds of a like character and with like aims to safeguard the principal and to maintain the liquidity needs of the agency. (Government Code 27000.3)


The primary objectives, in order of priority of the District's investment activities shall be:

A. Safety: Safety of principal is the foremost objective of the investment program. District investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio.

B. Liquidity: The investment portfolio will remain sufficiently liquid to enable the District to meet all operating requirements which might be reasonably anticipated.

C. Return of Investment: The District's investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the District's investment risk constraints and the cash flow characteristics of the portfolio.

Delegation of Authority

The Board of Trustees is responsible for the management and oversight of the investment program. The Assistant Superintendent of Business Services shall monitor and review all investments for consistency and compliance with this investment policy. The Board may delegate the daily investment decision making execution authority to the Assistant Superintendent of Business Services or his designee. The Assistant Superintendent of Business Services shall follow this policy and such other written instructions as provided. Further, he/she shall be responsible for all transactions undertaken and will establish a system of controls to regulate the activities of appropriate staff members

Authorized Financial Dealers and Institutions

Investment services may be provided only by institutions and security broker/dealers authorized by the District. Criteria used to select broker/dealers shall be credit worthiness and verification of authorization to provide investment services in California.

All financial institutions and broker/dealers who desire to become qualified bidders for investment transactions must supply the Assistant Superintendent of Business Services with the following:

* Annual Audited Financial Statements

* Proof of National Association of Security Dealers Certification

* Proof of California Registration

* Verification of having read the District's Investment Policy and agreement to comply with said policy.

Where applicable, the broker/dealer will facilitate a competitive pricing approach when purchasing securities. It is also understood that the broker/dealer will adhere to applicable Government Code specifications and stay abreast of Government Code revisions and advise the client in a timely fashion of changes that may affects the investment policy or portfolio assets.

Authorized and Suitable Investments

The Board is empowered by California Government Code 53601 to invest in the following types of securities:

* U.S. Treasury obligations

* Federal agency securities

* Obligations of the State of California, its agencies, and local agencies within California

* Repurchasing Agreements

* Certificates of Deposit

* Bankers' Acceptances

* Commercial Paper

* Medium-Term Notes

* Shares of beneficial interest issued by diversified management companies

* Mortgage Pass-Through Certificates

* Equipment Lease-Backed Securities

* California Local Agency Investment Fund

* Local Treasury

* Insured savings account or money market account

The Board further reduces its investment risk by establishing a fixed income portfolio restricted to the following types of securities:

* U.S. Treasury obligations

* Federal agency securities

* Corporate Medium-Term Notes, including corporate bonds

* Mortgage Pass-Through Securities

* Consumer Receivable Pass-Through Certificates (Asset-Backed Securities)

* Commercial Paper

* Bankers' Acceptances

* Negotiable Certificates of Deposit (CD)

* Cash Equivalent Securities

Funds may also be invested with:

* California Local Agency Investment Fund

* Local Treasury

Additionally, each individual portfolio established by an approved broker/dealer will adhere to the following guidelines:

1. Corporate securities shall be rated at least 'A' by Moody's and 'A' by Standard and Poor's. If a security rating drops below 'A', the security will be evaluated by the District for continuance in the portfolio. A report of the downgrade and the course of action taken will be presented to the Board at the next regularly scheduled meeting.

2. No securities shall have a stated maturity date in excess of five years.

3. The portfolio shall be comprised of no more than 30 percent in Medium-Term Notes or corporate bonds, or any combination of the two.

4. The portfolio shall be comprised of no more than 20 percent in Mortgage Pass-Through Securities, or Consumer Receivable Pass-Through Certificates, or any combination of the two.

5. Purchases of eligible Commercial Paper may not exceed 180 days maturity nor represent more than 10 percent of the portfolio.

6. Purchases of Bankers' Acceptances may not exceed 270 days maturity or 40 percent of the portfolio.

7. The portfolio shall be comprised of no more than 30 percent in negotiable CDs

8. All assets selected for the portfolio must have a readily available market value and be marketable.

Further, the District's approved security broker/dealer shall not invest in derivatives, such as, but not limited to, inverse floaters, range notes, or interest-only strips that are derived from a pool of mortgages, or in any security that could result in zero interest accrual if held to maturity.

Safekeeping and Custody

All security transactions entered into by the District conducted on a delivery-versus-payment (DVP) basis. Securities will be held by a third-party custodian designated by the District and evidenced by safekeeping receipts. (Government Code 53635)


In an effort to reduce overall portfolio risk while attaining market average rates of return, diversification will be utilized in terms of maturity, as well as security type and issuer. The portfolio will be well diversified to avoid undue exposure to any single economic sector, industry group, or individual security.

Maximum Maturities

The District will match its investments with anticipated cash flow requirements. Furthermore, the District will not invest in any single security with a stated maturity date in excess of five years.

Internal Control

Internal controls shall be utilized to maintain efficiency and prevent fraud. Controls may include, but are not limited to, separation of functions, checks and balances, screening of employees and consultants, and training. The Assistant Superintendent of Business Services shall establish an annual process of independent review by an external auditor. This review will provide internal control by assuring compliance with policies and procedures.

Performance Standards

The investment portfolio will be designed to obtain a positive market rate of return, taking into account the District's investment risk constraints and cash flow needs.

Market Return-on-Investments (Benchmark)

The basis used by the District to determine whether market returns are being achieved shall be the return for the California Local Agency Investment Fund (LAIF).


This report shall show the amount of all current investments, including the amount on a deposit in the County and State Investment Pools, the name of the issuer, the amount of accrued interest shown on the County Treasurer's last report, and the maturity dates of the investments.


approved: April 4, 2000 Atascadero, California