91¶ÌÊÓƵ

No. 5-14

Rev. 05-06-14

Date: 4-8-81

 

I.   PURPOSE

To establish University guidelines and procedures related to the reporting and investment of public funds.

II.  REFERENCES

State Money Management Act, Section 51, Chapter 7, Utah Code Annotated, 1953, as amended
Rules of the State Money Management Council
Utah State Board of Regents Investment Policy (R541)
91¶ÌÊÓƵ PPM 5-4c, Banking Services
91¶ÌÊÓƵ PPM 5-25h, Procurement from Vendor in Which University Employee Has an Interest 
Uniform Management of Institutional Funds Act

III. DEFINITIONS

A. Public Funds

State money and all other funds, regardless of the source, which are owned, held or administered by the University.

1. State Funds

Funds from legislative appropriations for the support and operation of the University.

2. Donated Funds

Funds acquired by gift, devise or bequest. Also referred to as development and/or endowment funds.

3. Other Funds

Funds not identified under 1 and 2 above, primarily consisting of plant funds, student funds, auxiliaries and agency funds.

B. Public Treasurer

A 91¶ÌÊÓƵ employee who has been designated by the Board of Trustees as the University's public treasurer, as defined in the State Money Management Act, and who has been delegated the responsibility for the safekeeping and investment of the University's public funds as directed by the University Investment Committee.

IV.  GENERAL PROVISIONS

A. The investment of public funds by the University shall comply with applicable statutory provisions, including the State Money Management Act, the rules of the State Money Management Council, the policies of the State Board of Regents and the policies of the 91¶ÌÊÓƵ Board of Trustees.

B. The Board of Regents has delegated authority for management of investments of funds in the custody and control of the University to the Board of Trustees which in turn has delegated such authority to designated officers or employees of the University. The signatory powers may be delegated by corporate resolution or other appropriate written instrument.

C. The Vice President for Administrative Services shall recommend for appointment by the Board of Trustees an employee of the University to serve as the University's public treasurer. The nominee shall possess demonstrated skills and capabilities in the management of institutional cash and investments. An interim public treasurer may be appointed by the Vice President for Administrative Services to serve in the absence of the public treasurer. Such an interim appointment is effective until the return of the public treasurer or the next regular meeting of the Board of Trustees, whichever occurs first.

D. Beneficial Interests and Donor Restricted Investments In addition to public funds owned, held or administered by the University, the University may be the beneficiary of trust funds, which it does not own nor control, and which are administered by independent trustees or boards. This policy does not apply to such trusts nor to donated funds which the donor has directed to be invested in specific securities or properties.

V.   POLICY

A. Authority to Manage Public Funds

1. The authority to manage the University's public funds which authority has not otherwise been delegated, is delegated to the University's Investment Committee. The University's public treasurer is delegated the authority to implement strategies provided by the Investment Committee.

2. Qualified investment counsel may be appointed by the Investment Committee and approved by the Board of Trustees to provide investment advice to the Investment Committee and/or retained to manage one or more investment pools. Investment counsel and managers will be chosen on the basis of investment performance and investment reputation in the financial community as well as cost of services. Such appointments will be subject to annual review. Investment counsel and managers will be compensated for services as authorized by the Board of Trustees.

B. Approval of Investment Decisions

1. The public treasurer is authorized to purchase and sell repurchase agreements or money market funds and other investments in compliance with applicable law, rule, policy or regulation consistent with the direction of the Investment Committee.

2. The public treasurer must receive the approval of the Vice President for Administrative Services or the University President for individual investment transactions exceeding $1,000,000 in aggregate for one day, and for total transactions exceeding $10,000,000 during a calendar month, excluding repurchase agreements and transactions with the State treasurer's investment pool.

3. No person may engage in an investment transaction of public funds of the University except as provided under the terms of this policy.

C. Investment Pools

1. Ordinarily, investment funds will be pooled.

2. The investment pools of the University will consist of the following:

a. Cash Management Pool

Source of Funds

All funds of the University not assigned to the endowment pool, including but not limited to student activity accounts, internally restricted accounts, auxiliary accounts, agency accounts, service enterprise accounts, and general fund accounts.

Investment Objectives

The University shall manage the cash management pool according to the following objectives:

1. The investments will be made in accordance with Section 51-7-11 of the State Money Management Act as well as in conformity with any other applicable laws, rules, policies, regulations, pertinent bond covenants, donor instructions or other applicable laws, rules, policies, regulations, pertinent bond covenants, donor instructions or other pertinent legal restrictions.

2. Protection and safety of principal.

3. Liquidity or availability of funds.

4. At least 25 percent of pool's cost basis must be invested in securities with maturities not to exceed 1 year. No more than 25 percent of pool's cost basis can be invested in securities with maturities greater than 5 years. No individual investment in this pool will have a maturity exceeding 8 years.

5. Maximization of the rate of return consistent with the objectives stated above.

6. Selection of investments shall be made with the exercise of judgment and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence would ordinarily exercise in the management of their own affairs, not for speculation but for investment, considering the safety of their capital as well as the expected benefits to be derived and the duration for which such investment is to be made.

b. Endowment Pool

Source of Funds

Endowment funds including quasi endowments (funds functioning as endowments) specifically assigned to the endowment pool by President's Council.  The minimum balance required to create a new endowment is on Schedule "A".

Investment Objectives

1. Protection and safety of principal or historical dollar value of the pool.

2. Meet annual cash needs of donor directed endowment purposes through distribution of income.

3. Protect and enhance, to the extent possible, the purchasing power of the pool.

4. Endowment investments shall be made in accordance with the Utah State Board of Regents Investment Policy R541, section "4.6. Endowment Funds".  These investments must also be in conformity with any other applicable laws, rules, policies, regulations, pertinent bond covenants, donor instructions or other pertinent legal restriction.

Income Distribution

Endowment income includes dividends, interest, rents, profits, appreciation, realized and unrealized, in fair value of the fund over historic dollar value of the fund.  Historic dollar value is the aggregate fair value in dollars of (1) an endowment fund at the time it became an endowment fund, (2) each subsequent donation to the fund at the time it is made, and (3) each accumulation made pursuant to a direction in the applicable gift instrument at the time the accumulation is added to the fund.

The Investment Committee will determine the annual allocation return for all endowments and will provide overall direction regarding the basis for allocations. 

Allocation to Endowment Spending Accounts:

1. Allocations will be distributed quarterly.

2. The average fair value per unit is determined for the previous 12 quarters.

3. The amount to be allocated for spending per unit is calculated by applying a fixed percent to the average fair market value per unit.

4. The amount determined in item two is applied to the time- weighted average units owned by each endowment in the pool at the end of each quarter.

Other Allocations:

A fixed percentage of the average fair value of the pool for the previous 12 quarters, not to exceed 100 basis points, may be distributed to supplement fund raising efforts of the university.

c. Separate Investments

Certain funds may be separately invested, rather than included in a pool, if one or more of the following conditions exist:

1. The investment of the funds has been specified or restricted by the donor in a manner which makes it impractical to co-mingle with funds in investment pools.

2. The funds have been pledged or dedicated and must be invested in accordance with the objectives and guidelines stated in bond resolutions or other debt agreements.

d. Foundation and Other Component Units Funds of the University Foundation and other component units which are assigned by the individual organization's Board of Directors to be invested by the University. These funds are invested according to the same guidelines established for the University's investments.

e. Other Pools Additional investment pools designed to accomplish alternative investment objectives may be created when deemed appropriate and approved by the Board of Trustees.

D. Distribution of Income from Investment Pools to Non-Endowment Accounts

Realized earnings will be allocated quarterly to eligible accounts. Eligible accounts are gift accounts, and any other account so designated by the President's Council that maintains a minimum balance indicated on Schedule "A". Allocation is based on the monthly average book value. All other investment income will be distributed to the institutional discretionary fund account.

E. Donated Securities

1. All donated securities will be processed through the Development Office. The value of donated securities shall be established for donor purposes in accordance with appropriate IRS regulations and receipted accordingly.

2. Ordinarily, securities which are received by gift or bequest shall promptly be sold. Exceptions are granted only by the Vice President for Administrative Services with disclosure to the Investment Committee at least by the next quarterly meeting or by restrictions specified by the donor which preclude the University from selling the securities. All securities will be held in the name of the University or in street name with a qualified safe keeping agent. 

F. Internal Controls

The University shall establish a system of internal controls which shall be evaluated annually by the University's internal auditors and/or by independent auditors. The controls shall be designed to prevent losses of public funds arising from fraud, employee error, misrepresentation by third parties or imprudent actions by University employees and officers. Such controls shall provide for, but not be limited to, the following:

1. Separation of transaction authority from accounting and record keeping

2. Appropriate segregation of other related duties

3. Custodial safekeeping of securities

4. Avoidance of bearer-form securities

5. Clear delegation of investment authority

6. Written confirmation of telephone transactions

7. Supervisory control and oversight

8. Documentation of transactions and strategies

G. Reporting Requirements

1.  Reports to the University's Board of Trustees:

a.  Monthly Reports - The public treasurer shall submit a summarized monthly investment report to the University's Board of Trustees in a timely manner.

b.  Quarterly Reports - The public treasurer shall also submit quarterly reports to the University's Board of Trustees in a timely manner.  These quarterly reports shall provide detailed information regarding the University's investment portfolio (individual investments, historical cost, market value, maturities, etc.).

2.  Reports to the Utah State Board of Regents

Copies of both the monthly and quarterly investment reports submitted to the University's Board of Trustees shall also be submitted to the Utah State Board of Regents in a timely manner.  These investment reports will be submitted with an accompanying transmittal letter stating that the University President has reviewed the reports.

3. Annually, no later than the date required by the  Utah System of Higher Education (USHE), the University shall submit, on forms provided by the USHE, a summary report of its money management activities for the prior fiscal year. This report shall include the University's internal auditor's opinion regarding (1) the fairness of presentation of the report in accordance with generally accepted accounting principles and (2) compliance with the applicable state statutes, in particular, the State Money Management Act, rules of the State Money Management Council and policies of the Board of Trustees and of the State Board of Regents. A copy of the report will be presented by the Vice President for Administrative Services to the Board of Trustees for its information at its next regularly scheduled meeting.

4. Reports of the performance of any independent investment managers will be submitted by the Vice President for Administrative Services each calendar quarter to the Board of Trustees for its information.

5.  Semi-annually, no later than the deadlines set by the Utah Money Management Council, the University shall submit, on forms prescribed by the Money Management Council, a listing of all deposits and investments outstanding, along with additional information requested on the form.  Endowment funds are exempted from the Utah State Money Management Act and this report.

VI.  INVESTMENT COMMITTEE

The University Investment Committee, chaired by the Vice President for Administrative Services and consisting of a representative of the Business Committee of the Board of Trustees, the University President, the Vice President for Administrative Services, the Vice President for University Relations, the Associate Vice President for Financial Services, one community member appointed by the University President, and one representative from the University Foundation Board of Directors. Additional members may be appointed by the President to Provide additional investment expertise. The Public Treasurer and Internal Audit Director shall be ex-officio members of the committee.

The committee shall meet not fewer than two times each calendar year to do the following:

A. Recommend to the Board of Trustees adoption of appropriate policies or practices relating to the investment of public funds and allocation of earnings.

B. Review current economic conditions and future economic forecast

C. Review the University's current investment strategy, investment portfolio and institutions in which University funds are invested

D. Formulate the investment strategy to be employed for the next quarter

E. Recommend to the Board of Trustees the engagement, termination or continuation of external investment counsel or investment managers

F. Review the annual Money Management Report and auditor's opinion

VII. RELATIONSHIPS WITH FINANCIAL INSTITUTIONS

Qualified depositories as defined by the State Money Management Act shall be selected through the banking services procurement process, which shall include a formal request for proposals issued every four years in accordance with the University Banking Services Policy (PPM 5-4c).

VIII. ETHICS AND CONFLICTS OF INTEREST

The public treasurer and other officers involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or which would impair their ability to make impartial investment decisions. University investment officials shall disclose in advance to the University President any material financial interests in financial institutions, investment counselors or investment managers with which the University has or is considering to have an investment. Such officers shall subordinate their personal investment transactions to those of the University, particularly with regard to the timing of purchases and sales.

Investment of Public Funds

Schedule "A"

1)  The minimum balance required to create a new endowment, including quasi endowments, is $35,000.  An endowment can be created from a multi-year contribution pledge, totaling $35,000, with a signed pledge agreement from the donor to be fully funded within 5 years.

2)  Quarterly distribution of income from investment pools to non-endowment accounts, including gift accounts and other accounts so designated by the President's Council, must maintain a minimum balance of $5,000 to participate in the distribution of income.