University Operations – Financial Activities
|EWU Policy 202-02||Authority: EWU Board of Trustees|
|Effective: December 6, 2019||Proponent: Vice President for Business and Finance|
Purpose: This policy prescribes standards for managing investments within the treasury portfolio of Eastern Washington University.
History: This publication is a revision to the EWU Investment Policy, which was approved by the EWU Board of Trustees on June 22, 2011. Updates were approved by the Board of Trustees on December 6, 2019.
It is the policy of Eastern Washington University, an institution of higher education in the state of Washington, to invest public funds in a manner which will provide maximum security with the highest investment return while meeting the daily cash flow demands of the university and conforming to state statutes governing the investment of public funds.
2. Scope of Identification of Funds
This policy applies to all financial assets of the University with the exception of endowment funds and charitable gift annuity contracts. University endowment funds and charitable gift annuity contracts are managed under separate investment policies.
3. Standards of Care
The Vice President for Business and Finance or designee shall perform the investment duties in a manner consistent with this policy. Investments shall be made with judgment and care consistent with the standard of a prudent investor, in light of the purposes, terms, requirements and other circumstances then prevailing as to the assets entrusted to her or him.In investing, she or he shall exercise reasonable care, skill, diligence and prudence, considering investments not in isolation, but in the context of the portfolio as a whole and of an overall investment strategy. That strategy should incorporate the risk and return objectives set forth in this policy.
Safety and preservation of principal is the single most important objective of the investment program. Investments must be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. The objective will be to mitigate credit and interest rate risk.
The investment portfolio shall remain sufficiently liquid to meet all financial needs and obligations that may be reasonably anticipated. This will be accomplished by structuring the portfolio so that securities mature concurrently with anticipated cash requirements. While the University purchases securities with the intent of holding them to maturity, it may liquidate early to maximize the total return on assets, or to compensate for temporary shortfalls in liquidity.
c. Total Return
The investment portfolio shall be designed with the objective of achieving a maximum total return throughout budgetary and economic cycles, within the context of parameters set forth by objectives 4.1 and 4.2 above. Return on investment is of secondary importance as compared to the safety and liquidity objectives described above.
The overall objective of the University’s investment policy is to construct investment portfolios that are optimal or efficient from the investments allowable under section 10 below.
5. Portfolio Composition and Maturity
i) The University will seek to control interest rate risk in long-term investments by attempting to match anticipated cash requirements with investment maturities. Generally, in conjunction with maintaining proper liquidity, the investment program should remain flexible enough in its design to enable the University to take advantage of opportunities in a changing interest rate environment.
ii) The maximum maturity of any security purchased will be five (5) years. The weighted average maturity of any managed portfolio will not exceed thirty-six (36) months. For securities with puts or resets, the maturity date will be deemed the put or reset date of the security.
b. Asset Allocation. Investments will be diversified in order to minimize the risk of loss resulting from the concentration of assets. Individual investments and managed portfolios shall meet the following concentration limits:
|Security||Aggregate Portfolio Limit|
|Local Government Investment Pool (LGIP)||No Limit|
|Securities of the United States government||No Limit|
|Securities of the United States’ agencies or of any corporation wholly owned by the government of the United States||No Limit|
|General obligation bonds of any state or local government||No Limit|
|Federal home loan bank notes and bonds, federal land bank bonds, federal national mortgage association notes, debentures, and guaranteed certificates of participation||No Limit|
|Utility revenue bonds or warrants of any city or town in the State of Washington, or of the local improvement district||No limit|
|Repurchase agreements, collateralized (only securities authorized in statute for the investment of public funds will be accepted as collateral)||25% of Portfolio. Restricted to EWU’s bank of record, with a maximum term of 30 days|
|Securities of supranational institutions provided that the institution has the United States government as its largest shareholder at the time of investment||25% of Portfolio|
|Bankers’ acceptances purchased on the secondary market||25% of Portfolio|
|Commercial paper and corporate notes purchased on the secondary market||25% of Portfolio|
6. Delegation of Authority
The Board of Trustees of Eastern Washington University is vested by statute with responsibility for the management of the properties of the University.
To ensure effective cash management of these public funds the Vice President for Business and Finance, upon delegation of authority by the Board of Trustees, may assign investment responsibilities to individuals who will have the authority to perform these investment duties.
A list of individuals authorized to conduct trades for the portfolio will be found in appendix A of this policy, which will be modified, as necessary, to reflect personnel changes.
Delegations related to the management of the University’s investment portfolios are as follows:
a. Board of Trustees elects to:
• Delegate the responsibility for overseeing the investment program of the University to the Vice President for Business and Finance.
• Appoint members of the Investment Advisory Committee. The Investment Advisory Committee shall meet quarterly and be composed of the chair of the Board of Trustees Business and Finance Committee and one additional member of the Board and three members with experience in the United States financial industry. The chair of the Business and Finance Committee shall be the chair of the Investment Advisory Committee. The University President, Vice President for Business and Finance, Chief Financial Officer, and Investment Officer shall be ex- officio members of the Investment Advisory Committee.
• Approve investment policies that establish broad guidelines for the management of the University’s investment portfolios based upon recommendation of the Investment Advisory Committee and the administration.
b. Investment Advisory Committee shall:
• Oversee the University’s investment programs within the broad guidelines established by the investment policy. The Committee shall act in an advisory capacity to the Vice President for Business and Finance and Chief Financial Officer.
c. Vice President for Business and Finance shall:
• Sign investment agreements, custody agreements and other investment related documents.
• Provide management oversight of the investment program of the University.
• Establish written investment procedures for the operation of the investment program consistent with this policy.
d. Associate Vice President and Chief Financial Officer shall:
• Provide supervisory oversight of the cash
• Implement and monitor compliance with investment procedures.
7. Investment Procedures
The Vice President for Business and Finance shall establish written investment policy procedures for the operation of the investment program consistent with this policy.
The procedures should include reference to: safekeeping, repurchase agreements, wire transfer agreements, banking service contracts, and collateral/depository agreements. Such procedures shall include explicit delegation of authority to persons responsible for investment transactions.
No person may engage in an investment transaction except as provided under the terms of this policy and pursuant to the procedures established by the Vice President for Business and Finance.
8. Ethics and Conflict of Interest
Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions.
Employees and investment officials shall disclose in writing to the Chief Financial Officer and Vice President for Business and Finance any material financial interests in financial institutions that conduct business within their jurisdiction, and they shall further disclose any large personal financial or investment positions that could be related to the performance of the University. Such persons will have an ongoing duty to report any changes in this information and to keep the disclosure current.
9. Authorized Financial Institutions
The Vice President for Business and Finance or designee will maintain a list of brokers/dealers and financial institutions authorized to provide investment services to the University. Authorized brokers/dealers and financial institutions will be limited to those that meet one or more of the following:
• Financial institutions approved by the Washington Public Deposit Protection Commission (RCW 39.58); or,
• Primary dealers recognized by the Federal Reserve Bank; or,
• Non-primary dealers qualified under U.S. Securities and Exchange Commission Rule 15C3-1, the Uniform Net Capital Rule, and a certified member of the National Association of Securities Dealers.
Each authorized dealer or institution will regularly submit to the University annual reports, including audited financial statements, and other information as determined by the Vice President for Business and Finance or designee.
10. Eligible Investments
Eligible investments are only those securities and deposits authorized by statute (RCW 39.58, 39.59, 43.84.080 and 43.250). The following is a list of eligible investments and the RCW cites for them:
a. RCW 39.59.020:
• Bonds of any state or local government
o Bonds must have, at the time of investment, one of the three highest credit ratings of a nationally recognized rating agency.
o Certificates, notes, or bonds of the United States and United States’ agencies, or of any corporation wholly owned by the government of the United States
o United States dollar denominated bonds, notes, or other obligations that are issued or guaranteed by supranational institutions provide that, at the time of investment, the institution has the United States government as its largest shareholder
• Federal home loan bank notes and bonds, federal land bank bonds, and federal national mortgage association notes, debentures and guaranteed certificates of participation
o Includes obligations of any other government sponsored corporation whole obligations are or may become eligible as collateral for advances to member banks as determined by the board of governors of the Federal Reserve System
• Bankers’ acceptances purchased on the secondary market
• Commercial paper and corporate notes purchased in the secondary market, provided that any local government of the State of Washington that invests in such commercial paper must adhere to the investment policies and procedures adopted by the state investment board
b. RCW 35.39.030:
• Utility revenue bonds or warrants of any city or town in the State of Washington.
• Bonds or warrants of a local improvement district- must be within the protection of the local improvement guaranty fund law
• Bond proceeds subject to the arbitrage provisions of section 148 of the federal internal revenue code may be invested in:
o Shares of mutual funds that invest in United States government bonds or United States government guaranteed bonds issued by federal agencies with average maturities less than four years, or bonds of state and local governments that have one of the four highest credit ratings of a nationally recognized rating agency;
o United States government bonds or United States government guaranteed bonds issued by federal agencies with average maturities less than four years, or bonds of state and local governments that have one of the four highest credit ratings of a nationally recognized rating agency;
o Shares of money market funds that invest in bonds of states and local governments or other issuers authorized by law for investment by local governments, which bonds have one of the two highest credit ratings of a nationally recognized rating agency; or, securities otherwise authorized by law for investment by local governments.
c. RCW 43.84.080:
• Treasury Bills
• Treasury Bonds
• Federal Home Loan Bank Bonds
• Federal Home Loan Bank Discount Notes
• Federal National Mortgage Association Bonds
• Federal National Mortgage Association Discount Notes
• Federal Farm Credit Banks Consolidated System-Wide Bonds
• Federal Farm Credit Banks Consolidated System-Wide Discount Notes
• Federal Home Loan Mortgage Corporation Bonds
• Federal Home Loan Mortgage Corporation Discount Notes
• Government National Mortgage Association Bonds
• Student Loan Marketing Association Bonds
• Student Loan Marketing Association Discount Notes
• Small Business Administration Bonds
• Export-Import Bank Bonds
• Maritime Administration Bonds
• Obligations of any other government sponsored corporation whose obligations are or may become eligible as collateral for advances to member banks as determined by the board of governors become eligible as collateral for advances to member banks as determined by the board of governors
• Bankers’ acceptances purchased on the secondary market.
• Commercial paper and corporate notes purchased on the secondary market, provided that the Treasurer adheres to the investment policies and procedures adopted by the State Investment Board.
o State, county, municipal, or school district bonds, or in warrants of taxing districts of the state.
o Such bonds and warrants shall be only those found to be within the limit of indebtedness prescribed by law for the taxing district issuing them and to be general obligations.
• General obligation bonds of any state and general obligation bonds of local governments of other states;
• Bonds, at the time of investment, must have one of the three highest credit ratings of a nationally recognized rating agency.
d. RCW 43.250.040
• The Local Government Investment Pool
e. Non-Eligible Investments
• The University is prohibited from any investment activity that would be considered speculative in nature according to principles of conservative investment management, whether or not the activity is specifically prohibited elsewhere in this policy.
• The purchase of collateralized mortgage obligations is not allowed.
All security transactions, including collateral for repurchase agreements, entered into by the University shall be conducted on a delivery-versus-payment basis. Securities will be held by a third party custodian designated by the Vice President for Business and Finance and evidenced by safekeeping receipts.
12. Maximum Maturities
To the extent possible, the University will attempt to match its investments with anticipated cash flow requirements. Unless matched to a specific cash flow, the University generally will not directly invest in securities maturing more than five years from the date of purchase.
Reserve funds may be invested in securities exceeding five years if the maturity of such investments is made to coincide as nearly as practicable with the expected use of the funds. Reserve funds are those funds designated for plant and equipment renewal and replacement and repayment of bonds.
13. Professional Services
The Vice President for Business and Finance or designee may contract for professional services as necessary for the efficient management of investments.
14. Internal Controls
• The Vice President for Business and Finance or designee will maintain internal controls to protect against the loss of public funds arising from negligence, theft or misuse. These controls will include, but not be limited to:
• The execution of securities transactions will be made on a delivery-versus-payment basis, which requires dual authorization by at least two of the designated individuals identified in Appendix A;
• The clear delegation of investment authority
• The separation of duties, such as the separation of transaction authority from record keeping;
• Supervisory oversight;
• Oversight by the Investment Advisory Committee of the Board of Trustees
The Investment Advisory Committee, Chief Financial Officer, Vice President for Business and Finance, and authorized investment officers will review this policy every three years.
As prescribed by RCW 43.09.050, the state auditor may audit the accounts and inspect the books of the University to determine the compliance of investment activities with state statutes and this policy.
The Chief Financial Officer will provide monthly compliance and performance reports to the Vice President for Business and Finance.
The Chief Financial Officer will provide quarterly reports on compliance and performance to the President, Vice President for Business and Finance, and Investment Advisory Committee.
The benchmark for the treasury portfolio will be the Local Government Investment Pool (LGIP) average monthly return for the applicable quarter.
Appendix A – Investment Authorities
Positions authorized to conduct trades for Eastern Washington University are listed below. Authorization is granted to named individuals as deemed appropriate and delegated by the Vice President for Business and Finance.
• Treasury Analyst
• University Controller
• Associate Vice President & Chief Financial Officer
• Vice President for Business & Finance