|University of Arkansas at Little Rock|
|Policy Name: Investment Policy for Operating Funds|
|Policy Number: 309.8|
|Effective Date: July 27, 2016|
The purpose of this policy is to define management responsibility and authority for investment transactions, and to identify investment objectives, strategy, and guidelines. This policy pertains primarily to investing operating funds maintained by the University of Arkansas at Little Rock.
Responsibility and Authority
The University of Arkansas at Little Rock’s management is responsible for the oversight and monitoring of the investing of operating funds, with the Vice Chancellor for Finance & Administration, or CFO, having the authority to invest these funds. Individuals identified by the Chancellor in accordance with UA Board Policy 305.1, Bank Depositories and Fiscal Controls, have authority to invest funds (Attachment A).
Individuals responsible for managing university investments will perform their duties in a manner consistent with the standard of a “prudent person.” This standard requires that a fiduciary entrusted with funds for investment may invest such funds only in securities that any reasonable individual interested in receiving a good return of income while preserving his or her capital would purchase.
The investment objectives include safety of principal, maintenance of liquidity, and return on investment. Preservation of the principal investment is most important, so investments should be considered carefully to ensure this preservation. The Vice Chancellor for Finance & Administration, or CFO, should also ensure that operating funds remain sufficiently liquid in order to meet current obligations, such as payroll, accounts payable, capital projects, debt service, etc. The funds invested shall be managed to obtain a market rate of return (or higher), taking into account the risk constraints and cash flow requirements.
Strategy and Guidelines
In order to determine the amount of excess cash available for investing, the Vice Chancellor for Finance & Administration, or CFO, should develop and utilize a cash management procedure. The cash management procedure shall provide guidelines for forecasting excess cash available. The cash forecasting information will strategically determine the need for short-term investments (three months to one year) and long-term investments (one year or longer).
This policy authorizes investment of operating funds in the following types of securities:
Insured and collateralized bank deposits
Money market funds
Certificates of deposit
Security repurchase agreements
United States Treasury Obligations
United States Government Agency Obligation
External investment pool sponsored by the UA Board of Trustees or UA Foundation, Inc.
Collateralization of Bank Deposits
All cash and other bank deposits maintained in any financial institution shall be either insured or collateralized. All bank deposits of the University of Arkansas at Little Rock in excess of the amount protected by the Federal Deposit Insurance Cooperation (FDIC) shall be collateralized in accordance with this policy. The university shall have either legal title to, or a prior perfected security interest in, the investments constituting the collateral. Collateral shall always be held by an independent third party custodial agent. A clearly marked safekeeping receipt will be maintained by the university as evidence of ownership. The right of collateral substitution is allowed with the advanced written permission of the university.
Competitive Selection of Certificates of Deposit
When choosing to invest in certificates of deposit, multiple banks will be contacted to request rate quotes for the dollar amount and time period for each investment. The funds will be invested with the bank providing the highest rate of return with sufficient securities pledged by the bank.
Investment decisions and information shall be periodically evaluated by the Vice Chancellor for Finance & Administration, or CFO, to determine if the investment objectives of the University of Arkansas at Little Rock are being met and to provide direction for the university if changes are needed in order to maximize the total return for all investments.
Source: Initial Policy
Approved By: Chancellor’s Cabinet, July 27, 2016
Custodian: Office of Finance and Administration