Treasury - Investments

The scope of this section is to outline specific procedures necessary to oversee and administer the Treasury function and the resulting investments of the District. These procedures will (1) identify and outline fund accounts, debt service requirements, and allowable investments, (2) the manner in which each will be maintained and (3) the designated responsible individuals.

The Chief Financial Officer of the District is authorized to invest available funds, according to the guidelines within this policy.

This responsibility has been delegated to the Executive Director of Finance and Treasury. Records will be kept by the Executive Director of Finance and Treasury who will provide a detail accounting of all investment activity to the Chief Financial Officer for presentation to the Board at each regular meeting.

The primary investment strategy will be developed in accordance with Board Policy and will be designed to meet the needs of District-wide cash requirements. Cash budgets or forecasts should be prepared and updated on a regular basis. See Section 11.4.1 Cash Management, below.

It is the policy of the Board (Lone Star College System Policy Manual, Section CAK (Local)) that only the following authorized investments shall be eligible as District investments:

1. Obligations of the United States or its agencies and instrumentality’s;

2. Other obligations, the principal of and interest on which are unconditionally guaranteed or insured by the United States;

3. Fully collateralized repurchase agreements having a defined termination date and secured by obligations (See more complete definition in Section CAK);

4. Certificates of deposit issued by state and national banks domiciled in the State (See more complete definition in Section CAK);

5. LOGIC, Lone Star Investment Pool and TexPool, as approved specifically by the Board.

The District needs for cash for operational purposes is the underlying goal in the development of its cash management policies and resulting procedures. These procedures can be divided by beginning of the year, daily, weekly, monthly, quarterly and year end activities.

1. Beginning of the Year
   A Cash Flow Analysis is performed for the upcoming year, projecting anticipated revenues (using projected tax rate calculations) and expenditures. This is updated as specified below. (An example of this schedule can be found at the end of this section.)
   
   A Summary Bond Amortization Schedule and Bond Series Payment Schedule are prepared indicating cash requirement payment deadlines. These are updated as specified below. (Examples of these schedules can be found at the end of this section.)
   
   

2. Daily
   Payments made by accounts payable are through a controlled disbursement account .
   
   The District’s operating bank account deposits are made to the payment requirements of the controlled disbursement account. If necessary, funds are transferred from money market investments or investment pools.
   
   All of the District bank accounts are monitored for balances in excess of current requirements. Any excess balance is invested to maturities that match the fund account needs.
   
   Deposits at each College are made into a central depository account and are monitored by the Finance Department.
   
   Tax collection deposits are split into operating and debt service. The debt service deposits are invested to maturities matching bond payment requirements and the operating deposits are invested to match anticipated needs.
   
   All investments made are entered into an investment tracking program and reports are run to update earnings and cash flow maturities.

3. Weekly
   Cash forecasts are reviewed on a weekly basis for comparison to actual or known expenditures and for anticipated cash requirements.

4. Monthly
   Monthly cash forecasting is used to match the needs of Plant Operations construction in progress, Renewals and Replacements projects, and for payroll requirements.
   
   Investment Activity and Investment Summary Reports are prepared for the Board of Trustees. These reports give the investment portfolio diversification, book values, yields, and weighted average maturities. (Examples of these reports can be found at the end of this section.)
   
   An Ad Valorem Tax Revenue Collection Comparison Report is generated on the tax collections indicating the current year to date collections and updating the ATV used to produce the year to date collection percentage. (An example of this report can be found at the end of this section.)
   
   A Pledged Security Deposits Report is prepared comparing the actual outstanding demand deposit account balances and certificates of deposit at each bank to the amount of FDIC insurance and other securities pledged as collateral to meet minimum security requirements. Banks are contacted to pledge additional security if the minimum requirements are not satisfied. (An example of this report can be found at the end of this section.)

5. Quarterly
   An Investment Portfolio Report is prepared comparing the investment book values with current market values. All purchases and maturities since the last quarter are indicated as well as the previous quarter investment book and market values. This report reflects compliance with the investment strategy expressed in the Investment Policy of the Board of Trustees (as outlined above) and the Public Investment Act as amended by HB 2459. (An example of this report can be found at the end of this section.)

6. Year End
   A journal entry for taxes estimated but not yet received is made only once a year, at the end of the fiscal year. An example of this schedule and calculation can be found at the end of this section referred to as Schedule Of Changes In Taxes Receivable.
   
   Other reports and schedules are prepared to supplement the year end audit. These reports are Bonds Payable and Debt Service Requirements, Schedule of Pledged Revenues and Fund Balances for Revenue Bonds Outstanding, End of Fiscal Year Bank Account Transfers, Certificates of Deposits, Safekeeping Investments, TexPool Series and Lone Star Fund. (Examples of these schedules and reports can be found at the end of this section.)

The Board is authorized to issue negotiable bonds for the construction and equipment of school buildings and the purchase of the necessary sites. Bonds payable of the District consist of general obligation, combined fee revenue and contractual obligation. Debt service requirements are payable solely from future revenues of the Plant Retirement of Indebtedness Funds which consist principally of ad valorem taxes collected by the District, tuition and fee allocation and investment income. Certain outstanding bonds may be redeemed at their par value prior to their normal maturity dates in accordance with the terms of the related bond indentures.( Examples of Bonds Payable and Debt Service Requirements reports and schedules can be found at the end of this section.)

11.1.2.1.1 General Obligation

Bonds issued to purchase, construct, repair or equip school buildings or purchase necessary sites. They are pledged by the levy of annual ad valorem taxes sufficient to pay the principal and interest on the bonds as they come due.

11.4.2.1.2 Combined Fee Revenue

Bonds issued to acquire, purchase, construct, improve, enlarge, equip, operate, and/or maintain any property, buildings, structures, activities, operation or facilities, of any nature. They are pledged by laboratory fees, registration fees, technology fees, tuition revenue, community education fees, investment interest, and any additional revenue of the District which may in the future be pledged. Refer to the Schedule of Pledged Revenues and Fund Balances for Revenue Bonds Outstanding, located at the end of this section.

11.4.2.1.3 Contractual Obligation

Bonds issued to fund specific endeavors and they are pledged by the levy of annual ad valorem taxes and other revenue specifically pledged. For example, a bond issued for technology and the technology fee charged to students is pledged specifically in addition to the tax support.

11.4.2.1.4 Bond Refunding

The District will, on occasion, issue Refunding Bonds with lower interest rates to refund in advance Bonds with higher interest rates.

The Board may, when deemed necessary, borrow money for the purpose of paying maintenance expenses and may evidence these loans with negotiable notes, provided that these loans never exceed 75% of the previous year’s income. Notes are payable from any available funds of the District.

The Board may issue interest-bearing time warrants in the amounts sufficient to repair or renovate school buildings, to purchase school buildings and equipment or to equip school properties with necessary heating, water, sanitation, lunchroom and electric facilities, when the District’s funds are insufficient to cover these items. They are payable out of available funds and must be issued according to requirements as outlined in the Board Policy, Section CAE.

Capital Lease/Purchase agreements are made as an alternative to capital purchases, but must follow the same considerations as followed when purchasing any item of a capital nature. The equipment is capitalized at the present value of future minimum lease payments.

1. Cash Flow Analysis

2. Summary Bond Amortization Schedule

3. Bond Series Payment Schedule

4. Investment Activity and Investment Summary (Monthly Report)

5. Ad Valorem Tax Revenue Collection Comparison Report (Monthly Report)

6. Pledged Security Deposits Report (Monthly Report)

7. Investment Portfolio Report (Quarterly Report)

8. Schedule of Changes In Taxes Receivable (End of Year Report)

9. Bonds Payable and Debt Service Requirements (End of Year Report)

10. Schedule of Pledged Revenues and Fund Balances for Revenue Bonds Outstanding (End of Year Report)

11. End of Fiscal Year Bank Account Transfers (End of Year Report)

12. Certificates of Deposit (End of Year Report)

13. Safekeeping Investments (End of Year Report)

14. TexPool (End of Year Report)

15. Lone Star (End of Year Report)