Office of the Superintendent of Schools
Office of Finance and Operations
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Annual Review And Adoption Of Investment Policy And Strategies
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In accordance with the Public Funds Investment Act (PFIA), the School Board must review and adopt by resolution, not less than annually, the district’s Cash Management and Investment Policy and strategies. The PFIA requires the review and approval of any changes to the investment policy and strategies by the governing body of a governmental entity.
A comprehensive review of the Houston Independent School District (HISD) Cash Management and Investment Policy was performed to ensure all required components of the PFIA are included. Accordingly, the following revisions are proposed:
1. Revision for flow and continuity - Overall formatting and reorder of paragraphs revised to maintain flow and continuity; several paragraphs were reordered, renamed, and/or combined to enhance the overall flow of content.
2. Revision for clarity - The second paragraph titled OBJECTIVES was formatted to emphasize, using italics, the major objectives of safety, liquidity, diversification, and rate of return (yield). Note: the reference to the word “yield” was added for further clarity. The following three paragraphs titled SAFETY, LIQUIDITY AND MATURITY, and DIVERSITY were removed due to redundancy, all content being addressed in other portions of the policy.
3. Paragraph added - PRUDENCE: This paragraph was added to include the “Prudent Person” statement relating to the standard of care that must be exercised when investing public funds. PFIA 2256.006 (a-b)
4. Paragraph added - ETHICS AND CONFLICTS OF INTEREST: The Investment Policy must require the investment officer(s) to file a disclosure statement with the Texas Ethics Commission and the governing body if:
a. the officer has a personal business relationship with a business organization offering to engage in an investment transaction with the district (as defined in 2256.005 (i) (1-3)); or
b. the officer is related within the second degree by affinity or consanguinity, as determined under Chapter 573 of the Texas Government Code, to an individual seeking to transact investment business with the entity. PFIA 2256.005 (i)
5. Paragraph added - TRAINING: Investment training is required for the treasurer, chief financial officer, and the investment officer(s) of a local government. Training must be received from an independent source, approved by the entity’s governing body or investment committee, and must include education in investment controls, security risks, strategy risks, market risks, diversification of investment portfolio, and compliance with PFIA. The hours of training vary and must be completed within a specific number of months of taking office or assuming duties. Thereafter, renewal training hours must be completed every two years, concurrent with the district’s fiscal year.
6. Paragraph added - AUTHORIZED BROKER/DEALERS AND FINANCIAL INSTITUTIONS: This replaces the paragraph titled SELLERS OF INVESTMENTS. The Investment Policy must require either the entity’s governing body or its Investment Committee to, at least annually, review, revise, and adopt a list of qualified brokers/dealers and financial institutions that are authorized to engage in investment transactions with the entity. PFIA 2256.025
7. Revision for clarity - Paragraph titled SOLICITING BIDS FOR INVESTMENTS was revised to include (1) types of individual securities that do not require bids and (2) where dealers do not offer the exact security, offers on the closest comparable investment may be used to establish a fair market price for the security.
8. Paragraph added - COLLATERALIZATION: The governing body must approve a written policy relating to collateralization. It should be included in the Investment Policy and require collateralization for all uninsured collected balances, plus accrued interest, if any. In addition, the policy should address acceptance, substitution, release, and valuation of collateral. Collateral for Public Funds, Chapter 2257, Texas Government Code
9. Revision for clarity - Paragraph titled SAFEKEEPING AND CUSTODY: Meaningful change to this paragraph was to relocate the “delivery vs. payment (DVP)” provision from the paragraph titled INVESTMENT AUTHORITY to this one.
10. Revision for clarity - Paragraph titled QUARTERLY REPORTS: Language included that the reporting is in accordance with the PFIA.
A copy of the Cash Management and Investment Policy with revisions is attached. Also attached is a copy of the resolution to approve the revisions.
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COST/FUNDING SOURCE(S): |
None |
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STAFFING IMPLICATIONS: |
None |
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THIS ITEM DOES NOT ESTABLISH, MODIFY, OR DELETE BOARD POLICY.
recommendation
RECOMMENDED: That the board adopts the resolution approving the revised HISD Cash Management and Investment Policy, effective May 10, 2024.