The Board of County Commissioners has authority to invest all funds held by, or belonging to, Johnson County, its agencies or departments. The investment powers of the Board are derived from the statutory provisions of K.S.A. 12-1675, as amended, and have been established by home rule resolution. The provisions of this Investment Policy shall be enacted and interpreted in a manner that ensures compliance with all applicable state and federal laws and legal requirements, including specifically the provisions of K.S.A. 12-1675, as now adopted or hereafter amended.
The Investment Review Group (IRG) shall review the investment procedures at least annually and they shall suggest changes to the County Manager, who will have the authority to implement changes to procedures.
The County Treasurer, in the performance of his statutory duties, shall be responsible for the receipt and disbursement of funds for and on behalf of the County, and shall develop and implement procedures, within his office, that are consistent with the policies adopted by the Board for the use, investment, and management of County funds. The County Treasurer shall be responsible for establishing depository and banking practices which ensure that all funds received by the County, its agencies and departments are immediately available for and deposited in accounts and investments authorized by the Board.
The Finance Director shall be responsible for the establishment and development of cash management practices and shall adopt and implement administrative procedures to comply with and effectuate the investment policies and objectives of the Board. The Finance Director shall be responsible for establishing practices and procedures which ensure that funds held by, and belonging to, the County are managed in a manner that complies with all State and Federal Laws, and the policies and strategies of the Board, and that provides for adequate funds to be available to timely meet all disbursement requirements and obligations of the County.
The primary objectives of the Board of County Commissioners are (in order of priority) safety of principal, maintenance of adequate liquidity, and maximization of earnings from County funds. It is the policy of the Board of County Commissioners of Johnson County that all available funds shall be invested in conformance with this policy and with applicable legal and administrative guidelines at the highest rates obtainable at the time of investment, and that all investments made by, or on behalf of, the County shall seek to adhere to the following objectives:
These investment procedures shall conform to the policy statement.
The investment policy of Johnson County is adopted pursuant to the authority granted to the Board of County Commissioners under K.S.A. 12-1675, K.S.A.19-101 et seq. and other statutory provisions such as K.S.A. 10-131.
These investment procedures are, and any related changes will be, proposed by the IRG and staff and are approved by the County Manager.
The Investment Review Group (IRG), as established under BOCC Resolution, has as its function to assist the Board of County Commissioners in monitoring the performance and structure of the County's investments. Members of the IRG include a member of the Board of County Commissioners as designated by the Board and who will serve as the chair, the Director of Treasury and Financial Management, the Deputy Treasurer, and two outside investment professionals, who shall be appointed by the Board of County Commissioners upon the advice and recommendation of the IRG. The outside investment professionals of the IRG shall serve at the pleasure of the Board of County Commissioners, subject to biennial reappointment by the Board of County Commissioners. At a minimum, one outside investment professional shall have the Chartered Financial Analyst (CFA) and one investment professional shall have the Certified Cash Management (CCM) or Certified Treasury Professional (CTP) designation. The County Commissioner serving on the IRG shall serve for a term of two years and may be reappointed by the Board of County Commissioners. The IRG shall meet quarterly to discuss investment reports, investment strategy, and investment policy and procedures.
The primary duties of the IRG shall be the following:
As outlined in section 180.4 of the Investment Policy, the IRG has two members that are investment professionals from the community. When membership for one of the outside investment professional’s position needs to be submitted for reappointment or to be filled with a new person the following procedures shall be followed:
The following policies will assist the County with attaining the objectives stated in Section 180.2
In accordance with and subject to restrictions imposed by current statutes applicable to both the operating fund and proceeds of bonds or temporary notes, the following list represents the entire range of investments that Johnson County will consider and which shall be authorized for the investments of aforementioned funds by the County. Cited maturities represent maximum durations, which may be reduced depending upon applicable statutory authority:
Investment Instrument Guidelines
The Cash Manager will consider the composition of the current investments and determine whether the securities being considered will maintain the investments within procedural guidelines.
The following maximum limits, by instrument, are established for the County's total investments:
* These limits are adjusted during tax collection periods which run from ten days prior to the due date for taxes to be remitted through the distribution dates set by Kansas Statute. The Discount Obligation percent increases to 65%, Money Market Funds and Instruments percent increases to 50% and the limit on the MIP may be increased to 50%
To allow efficient and effective placement of proceeds from bond sales, the limit on either repurchase agreements or the MIP may be exceeded for up to five consecutive days, per bond issue, following the receipt of bond proceeds.
All investments of County funds shall be managed through the Treasury and Financial Management department consistent with this policy and in compliance with all applicable state and federal laws and regulations. The Treasury Division shall establish operating procedures to coordinate all financial transactions with the Cash Manager. The Cash Manager shall provide to the Treasury Division complete written records of all investment information.
As provided by statute, this policy shall be submitted to the State’s Pooled Money Investment Board (PMIB) for their review and approval annually, or at such time as the policy may be amended, and upon approval, investments may include those authorized through the PMIB. Investments made utilizing the “Expanded Powers” available through the PMIB shall be managed in accordance with the provisions of K.S.A. 12-1675, as amended, and the requirements of the PMIB.
The County shall follow the most aggressive investment guidelines allowed by State law. County funds shall be managed as multiple portfolios in order to meet liquidity needs of the organization while enhancing total yield of the portfolio.
Cash Management & Investment Practices
It is the policy of the County that its cash management practices shall ensure that funds held by, and belonging to, the County are managed in a manner that complies with all State and Federal Laws, and the policies and strategies of the Board, and that provides for adequate funds to be available to timely meet all disbursement requirements and obligations of the County.
It is in the interest of the County to solicit competitive rate quotations for all investment purchases and for the deposit of public funds. Therefore, the investment and/or deposit of County funds will be made on the basis of competitive investment rates that support the County’s investment strategies and objectives, as identified in Section 180.2. In addition, it is in the interest of the County to establish and use business relationships with financial institutions located in Johnson County for the investment and deposit of public funds, consistent with the requirements of K.S.A. 12-1675 and 12-1676. Therefore, investment and/or deposit of the County's public funds will be offered first, on a competitive basis to qualified financial institutions located within the County. The County Treasurer and the County’s Cash Manager shall establish and implement procedures for posting notice on a County website when funds are available for deposit or investment; for notifying local financial institutions of this website and the process for submitting bids; and for ensuring that, on days that funds are available, local financial institutions have a fair opportunity, until a designated time, as posted on the website, to respond with an offered rate for maturities matching the County’s cash flow needs. Financial institutions unable to access the website shall be given the opportunity to contact the Cash Manager by phone or email.
In the event that the County does not receive any qualified or responsive offerings to the posting or the offered rates do not equal or exceed the "investment rate" as defined by the State Treasurer, then the County may solicit offers for investments of those available funds in the State's investment pool or through brokers and dealers. At least three quotes must be obtained for all types of investments. All quotations received must be documented and filed for auditing purposes. In the case of tie bids, all bidders will be asked if they wish to break the tie. The first bidder who breaks the tie will win the bid. If no bidder breaks the tie then the Cash Manager will decide which broker wins the bid.
All trading accounts will be held in the name of “Johnson County, Kansas”. The Board shall have all trading authority for the investment of County funds, and that trading authority shall be exercised by the Cash Manager and the County Treasurer.
The Cash Manager shall be responsible for ensuring that the County’s investment practices comply with state and federal laws and regulations. The Cash Manager shall prepare and file such documents, applications, and other information as may be necessary or is required to comply with state statutes, including the information required by the provisions of K.S.A. 12-1675 (c).
US Treasury Bonds - 1 Year or Less = 101%, 1 Year to 5 Years = 102%, Over 5 Years = 103%
US Agencies Securities - 1 Year or Less = 101%, 1 Year to 5 Years = 102%, Over 5 Years = 104%
Investment Diversification - In order to enhance total yield and fulfill the objectives of these procedures, the investment management style will be directed toward an active rather than passive investment role. Market risk shall be minimized by diversification of investment types. The County shall diversify its investments so that reliance on any one issuer or financial institution will not place an undue financial burden on the County.
Master Repurchase Agreement - The County shall require each issuer of repurchase agreements to sign a copy of the County's Master Repurchase Agreement. An executed copy of this agreement must be on file before the County will enter into any repurchase agreements with an issuer.
Maturities for All Investments - Subject to the collateral and authorization statutory requirements, as now adopted or hereafter amended, the maximum maturity length shall strictly follow the Kansas Statutes.
Security Marketability - Only U.S. government and agency obligations with active secondary markets will be purchased. Marketability shall be determined by the Cash Manager, the Finance Director or the County Treasurer.
General County Funds - As outlined in section 180.5 of the Investment Policy, the General County funds shall be managed as multiple separate portfolios. An operating portfolio shall be managed with sufficient liquidity to meet all operating needs. The weighted average duration of the operating portfolio must be less than one and one half (1.5) years. A long-term portfolio shall be established and managed on a total return basis. The long-term portfolio may be at least 45% of the County’s total portfolio from the previous rolling two-year period but shall not exceed 65% of the total portfolio. The weighted average duration of the long-term portfolio must be less than three (3) years. If the long-term portfolio falls below 45% of the County’s average total portfolio, it should be reported to the IRG. The IRG will monitor the maturity level and recommend changes as appropriate.
County Building Funds - No investment shall have a maturity exceeding the next lease payment date, unless the account is fully funded. If fully funded, investments can be made to the next unfunded date.
Investment Returns - Johnson County shall seek to optimize return on investments within the constraints of safety and liquidity. The objective of the County investment practices shall be to exceed the average rate of return on U.S. Treasury securities with similar maturities to the average weighted maturity of the County's portfolio or another appropriate performance measure as defined by the Investment Review Group. Progress on this objective will be reported to the Investment Review Group on a quarterly basis at a minimum.
Investments Maturity Management - When structuring the maturity composition of the investments, the Cash Manager shall evaluate current and expected interest rate yields. The longer the time remaining to maturity for a security, the greater the price fluctuation that will occur given a change in interest rate levels.
Current and Expected Yield Curve Analysis - The Cash Manager will monitor the current and expected yield curves. When interest rates are expected to decline, consideration will be given to extending maturity dates within investment and procedural constraints. When interest rates are expected to rise, consideration will be given to shortening maturity dates.
Portfolio Management - As outlined in section 180.5 of the Investment Policy, all investments of County funds shall be managed through Treasury and Financial Management. The office of the County Treasurer shall establish operating procedures to coordinate all financial transactions with Treasury and Financial Management. Treasury and Financial Management shall provide to the Office of the County Treasurer complete written records of all investment information.
a. Disbursement Scheduling
i. In order that all necessary disbursements may be met:
1) The County Treasurer shall submit to the Cash Manager a "Schedule of Anticipated Tax Disbursements". The Schedule should be updated and provided to the Cash Manager on an as needed basis.
2) The Operations Manager shall submit a schedule of accounts payables and payroll information.
3) The Accounting Department shall submit the appropriate debt schedules.
ii. In the interim, if changes are found to be necessary in such Schedules, written notice must be provided to the Cash Manager immediately, and if possible, in less than five business days prior to the anticipated disbursement date, so that funds may be made available with which to make such disbursement.
iii. The following information is to be provided in the Schedule of Anticipated Tax Disbursements: the date of the anticipated disbursement, the amount of the anticipated disbursement, how the disbursement is to be made (by check, ACH, wire transfer, etc.), and if by check, whether the check will be hand delivered or sent by mail.
b. Disbursement Funding
Based upon the County Treasurer’s Schedule of Anticipated Tax Disbursements and the responsibilities of the Cash Manager under this Section (180.5), the Cash Manager will be responsible for managing the County's investment portfolio in such a manner as to timely meet all necessary disbursements and all such other statutory and regulatory responsibilities.
Compliance Reporting - The Cash Manager shall be responsible for ensuring that the County’s investment practices comply with state and federal laws and regulations. The Cash manager shall prepare and file such documents, applications, and other information as may be necessary or is required to comply with state statutes, including the information required by the provisions of K.S.A. 12-1675 (c). In addition, the Cash Manager shall submit the County’s investment Policy to the PMIB at least annually or at such time as the County makes changes to the Investment Policy, and will include a certification from the investment management staff that the above procedures were followed and in compliance with all applicable statutes, including the information required by the provisions of K.S.A. 12-1675 (c).
The investment and/or deposit of County funds will be made on the basis of competitive investment rates that support the County’s investment strategies and objectives, as identified in Section 180.2 of the Investment Policy. In addition, it is in the interest of the County to establish and use business relationships with financial institutions located in Johnson County for the investment and deposit of public funds, consistent with the requirements of K.S.A. 12-1675 and 12-1676. Therefore, investment and/or deposit of the County's public funds will be offered first, on a competitive basis to qualified financial institutions located within the County. To inform the local financial institutions of the County’s requirements, the County will maintain the following information on the County website: (1) Qualifications of financial institutions that are eligible to respond to the County’s requests, (2) Contact information of County staff, and (3) Procedures that the financial institution will need to follow. Local financial institutions will be notified of this website and the procedures, via e-mail and a letter, and will be reminded at least quarterly of this information. Financial institutions unable to access the website may contact the investment manager by phone or email which will be provided in the letter sent to the financial institutions. When funds are available to the County for investment or deposit, the County will post a notice on the County website which provides the information necessary for local financial institutions to respond to the County’s request. Such information shall include (1) the deadline for responding to the County’s request, (2) the County’s cash flow needs, (3) process for submitting bids, and (4) any other information that the County deems necessary in order for the financial institution to submit a response to the County’s financial needs
If the offered rate does not equal or exceed the "investment rate" as defined by the State Treasurer, the County may solicit offers for investments in the State's investment pool or through brokers and dealers. It is in the interest of the County to solicit competitive rate quotations for all investment purchases. At least three quotes must be obtained for all types of investments. All quotations received must be documented and filed for auditing purposes. In the case of tie bids, all bidders will be asked if they wish to break the tie. The first bidder who breaks the tie will win the bid. If no bidder breaks the tie then the Cash Manager will decide which broker wins the bid.
Investment performance is continually monitored and evaluated by the Cash Manager and the County Treasurer. Investment performance statistics and activity reports are generated by the Cash Manager. The Cash Manager will provide summary reports quarterly for the IRG.
A. Monthly Performance Analysis
The following reports will be produced monthly and be included in the monthly report to the Board of County Commissioners, Finance Director, and County Manager.
Other reports may include the following statistics:
A quarterly report will be prepared for the IRG, relating actual performance to policy and procedural objectives. This report may include:
C. Annual Review Procedures
Due to the constantly changing nature of types of investments, legislative changes, etc., an annual review will be made of the procedures. Every year at the beginning of the County's fiscal year, a review of the Investment Procedures will be made by the IRG. The Cash Manager will provide a summary report of recommended procedural changes to the Investment Review Group for review and deliberation.
A. Board of County Commissioners - The Board of County Commissioners may initiate or approve any changes to the Investment Policies as originally adopted.
B. Investment Review Group - As authorized by this document, the Investment Review Group (IRG) may suggest policy and procedural changes.
C. Annual Review of Investment Policies - According to section 180.4, the IRG will perform an annual review of Investment Policies and submit suggested changes to the Board of County Commissioners.
Procedure 180.600 Investment Procedures Revisions
A. County Manager - The County Manager shall have authority to make changes to procedures based upon recommendations from the IRG. Upon approval and adoption of any changes, the County Manager will provide documentation notifying the Finance Director, who in turn will ensure the Investment Procedure manual is updated.
B. Investment Review Group - As authorized by this document, the IRG may suggest procedural changes with any of the current procedures. Proposed changes to the procedures will require a simple majority vote of the IRG. Upon approval of any proposed changes, the Finance Director will submit the proposed procedural changes to the County Manager for final approval and adoption.
The Board of County Commissioners of Johnson County is granted the authority to invest temporarily idle funds under applicable Kansas Statutes. The statutes also identify the types of investments the County may purchase.
The Tax Reform Act of 1986 provides calculation requirements on the County's yield from investing tax-exempt General Obligation and Revenue bond and temporary note proceeds and debt service funds. These new arbitrage rebate provisions require that the County compute earnings on investments from each issue of bonds on an annual basis to determine if a rebate is required. To determine the County's arbitrage position, the County is required to calculate the actual yield earned on the investment of the funds and compare it to the yield that would have been earned if the funds had been invested at a rate equal to the yield on the bonds sold by the County. The rebate provisions state that periodically (not less than once every five years, and not later than sixty days after maturity of the bonds), the County is required to pay the U.S. Treasury a rebate of any excess earnings. These restrictions require extreme precision in the monitoring and record keeping of investments, particularly in computing yields to ensure compliance. Failure to comply can dictate that the bonds become taxable, retroactively from the date of issuance.
The County's investment position relative to arbitrage restrictions is to continue pursuing the maximum yield on applicable investments while ensuring the safety of capital and liquidity. It is a fiscally sound policy to continue maximization of yield and to rebate excess earnings, if necessary.
The County Manager and the Director of Treasurer and Financial Management shall adopt and implement procedures and practices for the efficient cash management of all funds held by, or belonging to, Johnson County, for the coordination of cash management practices with the operations and duties of the Treasury and Financial Management department, and for the prudent investment of funds.
All County employees, and officials, whether elected or appointed , who have authority or act on behalf of the County in the investment of County funds shall perform their duties impartially and in compliance with the ethical standards applicable to the investment of public funds, including the Code of Ethics for Johnson County Government adopted by the Board of County Commissioners, so as to assure fair, competitive access to and participation in the County’s investment process by all responsible financial institutions, suppliers, contractors, and providers of services. Public investing is a public trust balancing the objectives of this policy (Section 180.2) with protecting the integrity of the County. Employees and officials shall conduct themselves in such a manner as to foster public confidence in the integrity of the County’s investment process..
The Cash Manager, or any other County employee or official who makes or influences any investment decision for the County, shall refrain from any personal or financial business activity which would create an actual or apparent conflict of interest related to the proper performance and execution of the investment program. The Cash Manager will annually submit a disclosure statement as prescribed by the Investment Review Group and shall immediately report any potential conflict of interest to the Investment Review Group.
Employees and officials of the County who are involved in the investment of County funds shall not, at any time, receive, accept, take, seek, or solicit, directly or indirectly, anything of economic value as a gift, gratuity, award, reward, favor or other compensation of any type from any person or financial institution with whom the County does or may invest public monies or conduct investment related business.