2024-09-25 Final PacketDebbie Vickery
From:
Sent:
rhonda.kokena@calhouncotx.org (rhonda kokena) < rhonda.kokena@calhouncotx.org >
Thursday, September 19, 2024 12:08 PM
To: Debbie.Vickery@calhouncotx.org
Subject: AGENDA ITEM / SEPT. 25
Attachments: INVESTMENT POLICY RESOLUTION.pdf; COUNTY INVESTMENT POLICY.pdf
Importance: High
Good Morning -
Please add to the next agenda on the 25 1h.
TO REVIEW & ADOPT the Calhoun County Invesbnent Policy for the annual renewal and
authorize County Treasurer to sign.
Thank you,
Rhonda S. Kokena
Calhoun Co Treasurer
202 S. Ann Street, Suite A
Port Lavaca, Texas 77979
361-553-4619
Calhoun County Texas
1
. . .
TexST~
. .
' '
APPLICATION FOR PARTICIPATION iN TEXSTAR --
The 1,mdersjgned local government (Applicant) applies and agrees to become a Participant in the Texas Short Term Asset
Reserve Program.(TEXSTAR). · · · · · · ·
1. Authorization. The governing body of Applicant has duly authorized this applic~Uon by adopting-the following
resol~tion at a meetjng of su_ch governing body duly calle~ced, and held in ~ccordance with the Texas Open
Meeting Law, chapter 551, Texas.GovemmentCode,.on ~-''J./6 ---, 20J& - : - - . --r . . . - -
WHEREAS, it is iri the best interests of this governmental unit (" App/icanf) to_ invest its funds jointly with other Texas
!peal governments in the Texas Short Temi Asset Reserve Program (TEXSTAR) in order better to preserve and
safeguard the priricipal and liquidity of such funds and to earn an acceptable-yield; and ·
WHEREAS, Applicant'is authorized to invest its pul:Jlic funds and funds i:mder its control ln TExSTAR and to enter info
the participation agreement authorized herein; · ·
Now, THEREFORE, BE iT RESOLVED THAT: .
SECTION 1. The form of applicatiori for participation in TEX~TAR a_ttached to this resolLJtion is approved. The
officers of f.ppljcarit .specified _ iri the application are authorized to execute and submit· the .application, to open
accounts, to c!eP.osit ahc! withdraw furids, to agree to the temis for use of the website for i::>nline transactions, to
designate otherauthorized representatives, and to take all other action required or permitted by Applicant under.the
Agreement created by the application, all in the name arid on behalf of Applicant.
. . ' .
SECTION 2. This resolution will continue in full force -and effect -until amended or revoked by Applicant and written
notice of the amendment or revocation is delivered to the TEXSTAR Boar<;i. .
SECTION 3. Terms used in this resolution h~ve the meanings given to them oy the application."
2. Agreement _ Applici:m\ c!grees with other TEXSTAR Participants ahd the TEXSTAR' Board to the Terms and
Qqhditions of P~rticipation in TexSTAR, effec:tive on this date, which are incorporated herein by reference.
Applicant makes the representations, designations, delegations, and representations described in the Tefms and
Conditions of Particjpation. ·
. . . . .
· 3. Taxpayer Identification Number. Applicant;s taxpayer identification number is 74~6001923
· 4. Contact Information. _ _ . _ _ _
Applicant primary mailing address: 202 S; Ann St., Ste A, Port Lavaca, TX 77979
Applicant physical address (if different): _(_s_a_m_e_) __ ------~~-----------
Applicantmainphpne riumber: __ 3_6_1_-_5_5~3-~_4_6_1_9 _____________ ~~--
Applicants main fax number: _3_6~1 __ -_5_5_3 __ -_4_6_1_4..,.._ -'~-----~~---~--------
. . '
5. Authorized Representatives. Each of the following Pa~iciparit officials is desigriate_d as Participant's Authorized
Representa,tjve aythorjzed to give notices and instructions to the Board in accordance with the· Agreemen~ the
Bylaws; the Investment Policy, and.the Operating Procedures: · · ·
HTSTSIP092620241247 CALHOUN COU('l,:Y 1
RESOLUTION
WHEREAS, the'Interlocal Cooperation Act, Chapter 791 of the Texas Government
Code, as amended (the."Act''.),-perinits axj.y '1ocal government'' to contract with one or more
other "local governments".and·with.agen~ies of the state· tp perform !'g~vernmental
. functions arid services/ in.chi.di~g investment of public funds through "public funds·
:--investment pools" ( as such phrases are defined in the Act);
WHEREAS, the Public.F~~ds Investment Act, Texas Government Code Chapter 2256
"(tpe "lnvestrrientAct"),-also ~uthorizes lo~al governments, state agencies and nonprofit
. .'-corporations-acting on pehalf-cif kuch entjties to invest public funds through investment
pools; ·· · · ·
_ WHEREAS; the Act also p~i;rni_ts the contracting-parties to any agreement to create .
a~ aqministrative agency to supervise the performance ofsucil_agreement and to employ
·. personnel and engag_e in other· ad~inistrative activities and provide other administrative
· _services necessary to execute the terrris of such agreement;
WHEREAS, the County :authorizes, RHONDA S. KO KENA, County Treasurer and
.Certified Investment Officer, .within th~ meaning· of this Resolution, with full power and
authority to execute an agreeipent with an investment pool as in accordance with the
· Public Funds Investment Act;._· ·
·.NOW, THEREFORE,-BE IT·RESdLVED: .· . . .. '• .
: · . ·. The Calhoun Count:y'Gmiunissi~ri~r's Court hereby authorizes RHONDA S. KO KENA,
_ County Treasurer and Cei11fie'd·Inyestment Officer. to .govern the-fonds of the County and
. ·.: . - · :. said funds.will be invested fri ·a:cc:0rdari~e with federal and state iaws and the Co1,1nty
. -.,Inve~tment Polfty. . . . . . . . . .
PPROVED this 27th day of June, 2013 .
. . M<cAd! LJI~
+-1'--'<.0~ ....... _._.~','t,4-~..,,--<-----_M_i.,...c:_•~,,.~~~
.-Vern Lyssy .
. Calho ~aunty Commi~-~r, Pct. 2
.V.~
• rits~h . . ..
un County Commissioner;-~-ct·3 Calhoun County Commissioner, Pct. 4
. -·· ..
Attest: Anita Fricke, County. Cle'rk · : . . ·.tM\J\~ ....
·By:·Deputy Clerk
CALHOUN COUNTY
· INVESTMENT POLICY
Reviewed & Adopted
Commissioner's. Court
January 13, 2005
May 11, 2006
March 22, 2007
February 28, 2008
April 9, 2009
January 28, 201 O
February 24, 2011
April 12, 2012
March 14, 2013
March 27, 2014
March 26, 2015
June 9, 2016
June 8, 2017
March 28, 2018
April 10, 2019
July 24, 2019 (revised)
October 5, 2020
2021
April 13, 2022 (revised)
APPRQ\/ED Se;t~:;~;Jf
2
1024
SEP 2 5 2024
INVESTMENT POUCY
TABLE OF CONTENTS
Page
I. PURPOSE·........................................... 1
II. INVESTMENT STRATEGY........................ 2
Ill. INVESTMENT OBJECTIVES..................... 3
IV. INVESTMENT TYPES ... _........................... 4
V. INVESTMENT PROTECTION &
RESPONSIBILITY................................... 6
Investment Institutions Defined
Safekeeping and Custody
Collateralization
Qualifications to Engage in Investments
Delivery vs. Payment
Audit Control
Standard of Care
Quarterly Reporting
Investment Strategy -Pooled Funds
RESOLUTION dated 06-27-2013
September 19, 2024
I. PURPOSE
CALHOUN COUNTY
INVESTMENT POLICY
FORMAL ADOPTION: This Investment Policy is authorized by the
Calhoun County Commissioners' Court in accordance with Chapter
2256, Texas Government Code, the Public Funds Investment Act, and
Section 116.112, Local Government Code: A copy of the Public Funds
Investment Act is attached hereto and incorporated by reference.
SCOPE: This Investment Policy applies to all the investment activities of
the County. This, Policy establishes guidelines for: 1) who can invest
County funds; 2) how County funds will be invested; and 3) when and
how a periodic review of investments will be made.
FUNDS: This Investment Policy applies to all financial assets of all funds
of the County of Calhoun, Texas at the present time-and any funds to
be created in the future and any other funds held in custody by the
County Treasurer, unless expressly prohibited by law or unless it is in
contravention. of any depository contract between Calhoun County
and any depository bank.
COUNTY'S INVESTMENT OFFICER: In accordance with Section
116. l 12(a), Local Government Code and/or Chapter 2256, Sec.
2256.005(f) and (g), the Calhoun County Commissioner's Court, may
invest County funds that are not immediately required to pay
obligations of the County. If the Investment Officer has a personal
business relationship with an entity, or is related within the second
degree by affinity or consanguinity to an individual, seeking to sell an
investment to the County, the Investment Officer must file a statement
disclosing that personal business interest or relationship with the Texas
Ethics Commission and the Calhoun County Commissioner's Court in
accordance with Government Code 2256.00S(i). In order to allow the
maximum flexibility for the investment of Calhoun County funds, the
Calhoun County Commissioner's Court designates the County
Treasurer to serve as the Investment Officer with full authority for the
investment of Cdlhoun County funds between meetings of the
Commissioner's Court, official approval of which shall be made by said
Court at the next official meeting of the Commissioner's Court. On
June 27, 2013 the Calhoun County Commissioner's Court passed a
Resolution authorizing the County Investment Officer, within the
meanihg of the Resolution, with full power and authority to execute an
agreement with an investment pool as in accordance with the Public
Funds Investment Act. Said Resolution is attached hereto.
IL INVESTMENT STRATEGY
In accordance with the Public Funds Investment Act, Section
2256;005(d), a separate written investment strdtegywill be developed
and attached hereto for each of the funds under Calhoun County's
control. Each investment strategy must describe the investment
objectives for the particular fund using the objectives for the particular
fund by following the priorities of importance as listed hereto:
• Understanding of the suitability of the investment to the financial
requirements of the entity;
• Preservation and safety of the principal;
• Liquidity;
• Marketability of the investment if the need arises to liquidate the
investment before maturity;
• Diversification of the investment portfolio; and
• Yield.·
In accordance with the Public Funds Investment Act, Section
2256.00S(e), investment strategies will be reviewed and adopted by
resolution not less than annually~. (SEE ATTACHED)
Ill. INVESTMENT OBJECTIVES
Funds of the County will be invested in accordance with federal and
state laws and this Investment Policy. Calhoun County will invest
2
according to investment strategies for each fund as adopted by
Commissioner's Court · resolution in accordance with Section
2256.005( d).
SAFETY & LIQUIDITY: Safety of principal is a primary objective in any
investment transaction of Calhoun County. All investments must be
done in a prudent manner providing liquidity necessary to meet the
County's cash needs.
DIVERSIFICATION: It will be the policy of Calhoun County to diversify its
portfolio to eliminate the risk of loss resulting from over concentration
of assets in a specific maturity, a specific issuer or a specific class of
investments. Investments selected by the County shall always provide
for stability of income and reasonable liquidity.
YIELD: The objective of the County will be to earn the optimum rate of
return within current market conditions in accordance with the policies
imposed by its safety and liquidity objectives, investment strategies for
each fund, and state and federal law governing investment of public
funds. To determine portfolio performance, this Policy establishes the
"weighted average yield to maturity" as the standard performance
measurement
MATURITY: Portfolio maturities will be structured to meet the obligations
of the County first and then to achieve a competitive return on
investment. When the County has funds that will not be needed to
meet current-year obligations, maturity restraints will be imposed
based upon the investment strategy for each fund. The maximum
allowable stated maturity of any individual investment owned by the
County is two (2) years.
INVESTMENT TRAINING: Calhoun County shall provide training as
required by the Public Funds Investment Act, Section 2256.008 and
periodic training in investments for the. County Investment Officer
through courses and seminars offered by professional organizations
and associations in order to ensure the quality and capability of the
investment officer.
3
Approved training sources include: County Treasurers' Association of
Texas, Texas Association of Counties and the associated County
Investment Academy, National Association of County Collectors,
Treasurers & Finance Officers, Government· Finance Officers
Association of Texas, and Government Treasurers' Organization of
Texas.
IV. INVESTMENT TYPES
Investments described below are authorized by the Public Funds
Investment Act as eligible securities for the County. County funds
governed by this Policy may be invested in:
l ) Obligations of the United States or its agencies and
instrumentalities, including the Federal Home Loan Banks. Section
2256.009(a)(l), Gov. Code.
2) Direct obligations of the State of Texas, or its agencies and
instrumentalities. Section 2256.009 (a)(2), Gov. Code.
3) Other obligations, the principal and interest of which are
unconditionally guaranteed or insured by, or backed by the full faith
and credit of, the State of Texas or the United States or their respective
agencies and instrumentalities. Section2256.009(a) (4), Gov. Code.
4) Obligations of states, agencies, counties, cities, and other political
subdivisions of any state having been rated as to investment quality by
a nationally recognized investment rating firm and having received a
rating of not less than "A" or it equivalent. Section 2256.009 (a)(5),
Gov. Code.
5) Certificates of Deposit, and other evidences of deposit, issued by
a depository institution that has its main office or a branch office in
Texas that ere: Section 2256.010 (1-3), Gov; Code.
• guaranteed or insured by the Federal Deposit insurance
Corporation or its successor; or
• secured in any other manner and amount provided by law for
deposits of the County; and
• Governed by a Depository Agreement.
4
6) A fully collateralized repurchase agreement, as defined in the
Public Funds Investment Act, if it:
a) has a defined termination date;
b) is secured by cash or obligations described by Section
2256.009 (a)(l) of the Public Funds Investment Act; and
c) requires the securities being purchasedby the County to be
pledged to the County, held in the County's name, and
deposited at the time the investment is made with the County
or with a third party selected and approved by the County;
and
d) is placed through a primary government securities dealer, as·
defined by the Federal Reserve, or a financial institution doing
business in this state.
7) Eligible local government investment pools ( as discussed in the
Public Funds Investment Act, Section 2256:016-2256.0l 9). An
investment pool shall invest the funds if receives from entities in
authorized investments permitted by the Public Funds Investment Act.
A county by contract may delegate to an investment pool the
authority to hold legal title as custodian of investments purchased .with
its local funds.
8) SEC registered, no load money market mutual funds that comply
with the requirements of the Public Funds Investment Act and seek to
maintain a stable net asset value of $1.0000.
The County expressly prohibits any direct investment in asset or
mortgage backed securities. The County expressly prohibits: interest-.
only and principal only mortgage backed securities and collateralized
mortgage obligations with stated final maturities in excess of ten years
or with coupon rates that float inversely to market index movements.
The County expressly. allows money market mutual funds to invest to
the full extent permissible within the Public Funds Investment Act.
The County will not be required to liquidate an investment that
becomes unauthorized subsequent to its purchase ..
5
V. INVESTMENT PROTECtlON AND RESPONSIBILITY
The County shall seek to control the risk ofloss due to the failure of an
issuer or granter. Such risk shall be confroiled by investing only in the
safest types of investments as defined in the Policy; by collateralization
as required by law; and through portfolio diversification by maturity
and type.
Diversification by investment type shall be maintained by ensuring an
active and efficient secondary market in applicable portfolio
investments, and by controlling the market and opportunity risks
associated with specific investment types. It is the County's policy to
diversify its portfolio to eliminate the risk of loss resulting from the
concentration of assets in a specific maturity ( except zero duration
funds), a specific issuer, or a specific class of investments. County
investments shall always be selected to provide stability of income and
reasonable liquidity.
Diversification by investment maturity shall not exceed the anticipated
cash flow requirements of the funds, and maintaining a maximum
dollar weighted maturity of less than one year wiil help minimize risk of
loss due to interest rate fluctuations.
Liquidity shall be achieved by anticipating cash flow requirements of
the County consistent with the objectives of this Policy, and
maintaining a scheduled maturity of investments. An investment may
be liquidated or redeemed to meet unanticipated cash requirements,
to re-deploy cash into other investments expected to outperform
current holdings, or otherwise to adjust the portfolio.
All prudent measures will be ·taken to liquidate an investment that is
downgraded to less than the required minimum rating.
INVESTMENT INSTITUTIONS DEFINED:
6
The Calhoun County Investment Officer shall invest County funds with
any and all of the following institutions or groups consistent with
federal and state law and the current Depository Bonk cohtract:
~ Depository bank -PROSPERITY BANK;
~ Other state or national banks with a main or branch office in
Texas that are insured by FDIC;
i) Public funds investment pools approved by the Commissioner's
Court which are rated no lower than AAA or AAA-m or an
equivalent rating by at least one nationally recognized rating
service and located in the State of Texas.
• Government securities broker/dealers approved by the
Commissioner's Court.
SAFEKEEPING AND CUSTODY:
The County shall retain clearly marked safekeeping receipts providing
proof of the County's ownership. The County may delegate, however,
to an investment pool the authority to hold legal title as custodian of
investments purchased with County funds by the investment pool.
The County shall contract with a third-party financial institution for the
safekeeping of securities owned by the County as a part of its
investment portfolio.
COLLATERALIZATION:
Consistent with the requirements of state law, the County requires all
financial institution deposits to be federally insured or collateralized
with eligible obligations. · Financial institutions serving as County
depositories will be required to sign an agreement with the County in
compliance with federal regulations. The agreement shall require
compliance with Government Code 2256 and this Investment Policy,
establish an independent custodian for all pledged collateral, define
the eligible collateral and the County's rights to the collateral in case
of default, bankruptcy, or closing, and establish a perfected security
7
interest in compliance with federal and state regulations, and
specifically:
• the agreement must be in writing;
e1 the agreement must be executed by the depository and
the County contemporaneously with the acquisition of the
asset;
0 the agreement must be approved by resolution of the
Board of Directors or the designated committee of the
depository; and a copy of the meeting minutes or resolution
reference must be delivered to the County; ond
• the agreement must be part of the depository's official
record continuously since its execution.
For financial institution deposits, eligible collOteral is defined by the
Government Code 2257. The eligibility of specific issues as collateral
may at times be restricted or prohibited, at the sole discretion of the
County.
For financial institution deposits, the market value of securities
pledged as collateral for deposits must dt all times be equal to or
greater than · 102% of the par value of the deposit plus accrued
interest, less the amount insured by the· FDIC or its successor. The
depository shall be liable for monitoring and maintaining the collateral
and collateral margins at dll times.· Letters of credit pledged as
collateral shall at all times be equal to the total value of the deposits
plus anticipated interest less the applicable level of FDIC insurance.
For financial institution deposits, the County requires monthly reports
with market values of pledged securities from all the custodians of
financial institutions {or other independent valuation sources) with
which the County has collateralizeddeposits. The County will regularly
monitor the adequacy of collateral.
Should the collateral's market value exceed the required amount,
any broker/dealer or financial institution may request approval from
the Investment Officer in writing to reduce collateral. Collateral
8
reductions may be permitted only if the County's records indicate
that the collateral's market value exceeds the required amount.
All collateral securing financial institution deposits must be held by an
independent, third~party financial institution approved by the County,
a Federal Home Loan Bank, or the Federal Reserve Bank.
QUALIFICATIONS TO ENGAGE IN INVESTMENT TRANSACTIONS:
In accordance with 2256.00S(k), a written copy of this investment
policy shall be presented to any local government investment pool or
discretionary investment management firm seeking to sell to the
County an authorized investment. The qualified representative of the
business organization seeking to sell an authorized investment shall
execute a written instrument substantially to the effect that the
business organization has:
a) Received and reviewed the Investment Policy of the County;
and
b) Acknowledged that . the organization has implemented
reasonable procedures and controls in an effort to preclude
imprudent investment activities arising out of investment
transactions conducted between the County and the
organization, except to the extent that this authorization:
1) is dependent on an analysis of the makeup of the
County's entire portfolio;
2) requires an interpretation · of subjective investment
standards; or
3) relates to investment transactions of the County that are
not made through accounts or other contractual
arrangements over which the business organization has
accepted discretionary investment authority.
The investment officer may not buy any authorized investments from
a local government investment pool or discretionary investment
management firm who has not delivered to the County an instrument
9
in substantially the form provided above according to Section
2256.005 ( 1 ) .
The County willprovide all investment providers with updates to the
Investment Policy and will require acknowledgement of receipt of
the Policy from the investment providers.
Securities shall only be purchased from broker/dealers approved by
the Commissioner 1 s Court. This list of approved broker/dealers must
be reviewed at least annually by the Court.
DELIVERY VS. PAYMENT:
It will be the policy of the County that all Treasury Bills, Notes and Bonds
and Government Agencies I securities shall be purchased using the
11 Delivery versus Payment 11 (DVP) method through the Federal Reserve
System, or other independent settlement system. By so doing, County
funds are not released until the County has received the securities
purchased. Section 2256.00S(b) ( 4) (E), Gov. Code;
AUDIT CONTROL:
The Investment Officer is subject to audit by the Calhoun County
Auditor. In addition, the Calhoun County Commissioner 1 s Court, at a
minimum, will have an annual financial audit of all County funds by
an independent auditing firm, as well as an annual compliance audit
of the management controls on investments and adherence to the
entity 1 s established investment policies in accordance with
Government Code 2256.00S(m).
STANDARD OF CARE:
In accordance with Government Code 2256.006, investments shall be
made with judgment and care, under prevailing circumstances, that
a person of prudence, discretion, and intelligence would exercise in
the management of the person's own affairs, not for speculation, but
for investment, considering the probable safety of capital and
10
probable income to be derived. Investment of funds shall be
governed by the following investment objectives, in order of priority:
• Preservation and safety of principal;
~ Liquidity; and
e Yield.·
In determining whether an investment officer has exercised prudence
with respect to any investment decision, the determination shall be
made taking into consideration:
l) Investment of all funds, or funds under the County's control, over
which the officer had responsibility rather than a consideration as
to the prudence of a single investment; and
2) Whether the investment decision was consistent with the
written Investment Policy of the County.
QUARTERLY REPORTING:
In accordance with Government Code 2256.023, not less than
quarterly, the Investment Officer shall prepare and submit to the
Commissioner's Court a written report of investment transactions for
all funds for the preceding reporting period.
It shall be the duty of the County Investment Officer to notify the
Commissioners Court of ·any significant changes in current investment
methods and procedures prior to their implementation, regardless of
whether they are authorized by this policy or not.
In conjunction with the quarterly investment report, the Investment
Officer will verify from reliable sources market value of all securities
and the current credit rating for each held investment that has a PFIA-
required minimum rating.
11
12
<fl)
---R ONDA S. KOKE A
· UNTY TREASURER, CERTIFIED
INVESTMENT OFFICER
LIST OF AUTHORIZED BROKER/DEALERS
FHN Financial
Frost Bank
Hilltop Securities Co.
Multi-Bank Securities, Inc.
Rice Financial
Wells Fargo Securities
13
UST OF AUTHORIZED LOCAL GOVERNMENT INVESTMENT POOLS
Texas CLASS Government
TexStar
14
INVESTMENT STRATEGY
Pooled Funds
Investment Objective:
To purchase investments that will preserve the safety of capital, maintain
adequate liquidity, and optimize yield (in that order of priority), taking into
account the County's monthly operating expenses, the timing of such expenses,
and the maintenance of any reserve that may be designated by the
Commissioners' Court.
Investment Strategy:
To invest in any of the authorized investments listed in the County's Investment
Policy with the following objectives:
l . Suitability -Any investment eligible in the Investment Policy is suitable for
Pooled Funds of the County.
2. Safety of Prindpal -All investments shall be of high quality with no
perceived default risk. Market price fluctuations will occur. However, managing
the weighted average days to maturity of the County's portfolio to less than 270
days and restricting the maximum allowable maturity to two years will minimize
the price volatility of the portfolio.
3. Liquidity -Demand deposit accounts, money market accounts, short-
term Investment Pools, and money market mutual funds will provide daily liquidity
and may be utilized as a competitive yield alternative to fixed maturity
investments.
4. Marketability -Securities with active and efficient secondary markets
improve liquidity in the event of an unanticipated cash flow requirement. The
historical market 11 spreads" between the bid · and offer prices of a particular
security-type of less than ten basis points will define an efficient secondary market.
5. Diversification -Investment maturities should be staggered throughout
the budget cycle to provide cash flow based on the anticipated operating needs
of the County. Diversifying the appropriate maturity structure up to the two-year
maximum will reduce interest rate risk.
6. Yield -Attaining a competitive market yield for a portfolio with
comparable security-types and restrictions is the desired objective. The yield of
an equally weighted, rolling three-month Treasury-Bill portfolio will be the minimum
yield objective.
15
9/19/24, 11:22AM GOVERNMENT CODE CHAPTER 2256. PUBLIC FUNDS.INVESTMENT
Sec. 2256.005. INVESTMENT POLICIES; INVESTMENT STRATEGIES; INVESTMENT
OFFICER. (a) The governing body of an investing entity shall adopt by
rule, order, ordinance, or resolution, as appropriate, a written investment
policy regarding the investment of its funds and funds under its control.
(b) The investment policies must:
(1) be written;
(2) primarily emphasize safety of principal and liquidity;
(3) address investment diversification, yield, and maturity and
the quality and capability of investment management; and
(4) include:
(A) a list of the types of authorized investments in which
the investing entity's funds may be inYested;
(B) the maximum allowable stated maturity of any individual
investment owned by the entity;
(C) for pooled fund groups, the maximum dollar-weighted
average maturity allowed based on the stated maturity date for the
portfolio;
(D) methods to monitor the market price of investments
acqu~red with public funds;
(E) a requirement for settlement of all transactions, except
investment pool funds and mutual funds, on a delivery versus payment basis;
and
(F) procedures to monitor rating changes in investments
acquired with public funds and the liquidation of such investments
consistent with the provisions of Section 2256.-021.
(c) The investment policies may provide that bids for certificates of
deposit be solicited~
(1) orally;
(2) in writing;
(3) electronically; or
(4) in any combination of those methods.
(d) As an integral part of an investment policy, the governing body
shall adopt a separate written investment strategy for each of the funds or
group of funds under its control. Each investment strategy must describe
the investment objectives for the particular fund using the following
priorities in order of importance:
(1) understanding of the suitability of the investment to the
financial requirements of the entity;
(2) preservation and safety of principal;
https:l/statutes.capitol.texas.gov/Docs/GV/htm/GV.2256.htm 1/5
9/19/24; 11 :22 AM GOVERNMENT CODE CHAPTER 2256, PUBLIC FUNDS iNVESTMENT
(3) liquidity;
(4) marketability of the investment if the need arises to
liquidate the investment before maturity;
(5) diversification of the investment portfolio; and
(6) yield.
(e) The governing body of an investing entity shall review its
investment policy and investment strategies not less than annually. The
governing body shall adopt a written instrument by rule, order, ordinance,
or resolution stating that it has reviewed the investment policy and
investment strategies and that the written instrument so adopted shall
record any changes made to either the investment policy or investment
strategies.
(f) Each investing entity shall designate, by rule, order, ordinance,
or resolution, as appropriate, one or more officers or employees of the
state agency, local government, or investment pool as investment officer to
be responsible for the investment of its funds consistent with the
investment policy adopted by the entity. If the governing body of an
investing entity has contracted with another investing entity to invest its
funds, the investment officer of the other investing entity is considered
to be the investment officer of the first ~nvesting entity for purposes of
this chapter. Authority granted to a person to invest an entity's funds is
effective until rescinded by the investing entity, until the expiration of
the officer's term·or the termination of the person's employment by the
investing entity, or if an investment management firm, until the expiration
of the contract with the investing entity. In the administration of the
duties of an investment officer, the person designated as investment
officer shall exercise the judgment and care, under prevailing
circumstances, that a prudent person would exercise in the management of
the person's own affairs, but the governing body of the investing entity
retains ultimate responsibility as fiduciaries of the assets of.the entity.
Unless authorized by law, a person may not deposit, withdraw, transfer, or
manage in any other manner the funds of the investing entity.
(g) Subsection (f) does not apply to a state agency, local
government, or investment pool for which an officer of the entity is
assigned by law the function of investing its funds.
Text of subsec. (h) as amended by Acts 1997, 75th Leg., ch. 685, Sec. 1
(h) An office.r or employee of a commission created under Chapter 391,
Local Government Code, is ineligible to be an investment officer for the
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commission under Subsection (f) if the officer or employee is an investment
officer designated under Subsection (f) for another local government.
Text of subsec. (h) as amended by Acts 1997, 75th Leg., ch. 1421, Sec. 3
(h) An officer or employee of a commission created under Chapter 391,
Local Government Code, is ineligible to be designated as an investment
officer under Subsection (f) for any investing entity other than for that
commission.
(i) An investment officer of an entity who has a personal business
relationship with a business organization offering to engage in an
investment transaction with the entity shall file a statement disclosing
that personal business interest. An investment officer who is related
within the second degree by affinity or consanguinity, as determined under
Chapter 573, to an individual seeking to sell an investment to the
investment officer's entity shall file a statement disclosing that
relationship. A statement required under this subsection must be filed
with the Texas Ethics Commission and the governing body of the entity. For
purposes of this subsection, an investment officer has a personal business
relationship with a business organization if:
(1) the investment officer owns 10 percent or more of the voting
stock or shares of the business organization or owns $5,000 or more of the
fair market value of the business organization;,
(2) funds received by the investment officer from the business
organization exceed 10 percent of the investment officer's gross income for
the previous year; or
(3) the investment officer has acquired from the business
organization during the previous year investments with a book value of
$2,500 or more for the personal account of the investment officer.
(j) The governing body of an investing entity may specify in its
investment policy that any investment authorized by tbis chapter is not
suitable.
(k) A written copy of the investment policy shall be presented to any
business organization offering to engage in an investment transaction with
an investing entity. For purposes of this subsection and Subsection (1),
"business organization" means an investment pool or investment management
firm under contract with an investing entity to invest or manage the
entity's investment portfolio that has accepted authority granted by the
entity under the contract to exercise investment discretion in regard to
the investing entity's funds. Nothing in this subsection relieves the
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investing entity of the responsibility for monitoring the investments made
by the investing entity to determine that they are in compliance with the
investment policy. The qualified representative of the business
organization offering to engage in an investment transaction with an
investing entity shall execute a written instrument in a form acceptable to
the investing entity and the business org~nization substantially to the
effect that the business organization has:
(1) received and reviewed the investment policy of the entity;
and
(2) acknowledged that the business organization has implemented
reasonable procedures and controls in an effort to preclude investment
transactions conducted between the entity and the organization that are not
authorized by the entity's investment policy, except to the extent that
this authorization:
(A) is dependent on an analysis of the makeup of the entity's
entire portfolio;
(B) requires an interpretation of subjective investment
standards; or
(C) relates to investment transactions of the entity that are
not made through accounts or other contractual arrangements over which the
business organization has accepted discretionary investment authority.
(1) The investment officer of an entity may not acquire or otherwise
obtain any authorized investment described in the investment policy of the
investing entity f~om a business organization that has not delivered to the
entity the instrument required by Subsection (k).
(m) An investing entity other than a state agency, in conjunction
with its annual financial audit, shall perform a compliance audit of
m~nagement controls on investments and adherence to the entity's
established investment policies.
(n) Except as provided by Subsection (o), at least once every two
years a state agency shall arrange for a compliance audit of management
controls on investments and adherence to the agency's established
investment policies. The compliance audit shall be performed by the
agency's internal auditor or by a private auditor employed in the manner
provided by Section 321.020. Not later than January 1 of each even-
numbered year a state agency shall report the results of the most recent
audit performed under this subsection to the state auditor. Subject to a
risk assessment and to the legislative audit committee's approval of
including a review by the state auditor in the audit plan under Section
321.013, the state auditor may review information provided under this
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section. If review by the state auditor is approved by the legislative
audit committee, the state auditor may, based on its review, require a
state agency to also report to the state auditor other information the
state auditor determines necessary to assess compliance with laws and
policies applicable to state agency investments. A report under this
subsection shall be prepared in a manner the state auditor prescribes.
(o) The audit requirements of Subsection (n) do not apply to assets
of a state a.gency that are invested by the comptroller under Section
404.024.
Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995; Acts
1997, 75th Leg., ch. 685, Sec. 1, eff. Sept. 1, 1997; Acts 1997, 75th
Leg., ch. 1421, Sec. 3, eff. Sept. 1, 1997; Acts 1999, 76th Leg., ch.
1454, Sec. 4, eff. Sept. 1, 1999; Acts 2003, 78th Leg., ch. 785, Sec. 41,
eff. Sept. 1, 2003.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 1004 (H.B. 2226), Sec. 1, eff. June
17, 2011.
Acts 2017, 85th Leg., R.S., Ch. 149 (H.B. 1701), Sec. 1, eff.
September 1, 2017.
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