University of Arkansas at Little Rock
Policy Name: Investment Policy for Operating Funds
Policy Number: LR 309.8
Effective Date: August 4, 2023
Revised Dates: July 19, 2023; July 27, 2016
Most Recent Review Date: July 19, 2023
Policy
Purpose
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. In accordance with UA Board Policy 305.1, Bank Depositories and Fiscal Controls, a list of individuals and their titles will be provided to the Chief Financial Officer of the UA System by the Chancellors and Directors and updated when authorized individuals change, or, at a minimum, on an annual basis, indicating who is authorized to invest funds for UA Little Rock. Any two individuals on the list are jointly authorized to assign, sell, or otherwise dispose of any and all registered United States securities or securities for which the Treasury Department acts as transfer agency and any and all securities, including stocks and bonds
Standard of Prudence
Those responsible for the management of the university’s investment portfolio will perform their duties in a manner consistent with the standard of a prudent investor:
“In making investments, the fiduciaries shall exercise the judgment and care, under the circumstances then prevailing, which an institutional investor of ordinary prudence, discretion, and intelligence exercises in the management of large investments entrusted to it, not in regard to speculation, considering probable safety of capital as well as probable income.”
UA Little Rock personnel authorized to invest funds according to the list provided to the UA System office mentioned above, shall not be held personally responsible for a specific security’s credit risk or market price change provided these deviations are reported in a timely manner to the Chancellor and that reasonable and prudent action is taken to control adverse developments.
Objectives
The investment objectives include safety of principal, maintenance of liquidity, and return on investment.
- Safety of Principal – Safety of Principal is the foremost objective of the investment program. Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio.
- Maintenance of Liquidity – The university’s funds shall remain sufficiently liquid to enable the university to meet all operating requirements which might be reasonably anticipated, including but not limited to payroll, accounts payable, capital projects, debt service, and any other payments.
- Return on Investment – The university’s funds shall be managed with the objective of attaining a market rate of return (or higher) throughout the budgetary and economic cycles, taking into account the university’s risk constraints and cash flow characteristics of the portfolio.
Strategy and Guidelines
In order to determine the amount of excess cash available for investing, the Associate Vice Chancellor for Finance & Administration, or their designee, 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).
Authorized Investments
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 Corporation (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 any physical collateral or be the beneficiary of an irrevocable letter of credit with the designated financial institution responsible for providing such. Any physical 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.
The adequacy of the value of the collateral – whether through physical securities or letters of credit – should be reviewed and documented on a regular basis by the Vice Chancellor for Finance & Administration, or CFO, but at least semi-annually.
Summary
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
Status: Active
Approved By: Chancellor Christina Drale
Originator: Office of Finance and Administration
Custodian: Office of Finance and Administration