Accounting Procedures Handbook

INVESTMENTS 11.3 ASSETS I. OVERVIEW The Wicomico Board of Education supports a safe and sound investment program. We are committed to ensuring that the Board’s funds remain intact while achieving a reasonable rate of return based upon appropriate risk tolerance. The Board is authorized to invest monies for which it has custody or control. The types of investments are in accordance with §6-222 of the Maryland State Finance and Procurement Article. The Board’s investment policy for its non-pension funds authorizes its Comptroller to invest money in any of the following types of investments: a. U.S. Treasury Obligations b. Local Government Investment Pool c. Repurchase Agreements d. Collateralized Certificates of Deposit The policy requires that the investments be on a short-term (less than one year) basis to reduce interest rate risk and establishes maximum portfolio percentages for investments as follows: Maximum Percent Diversification by Instrument of Portfolio U.S. Treasury Obligations 100% Local Government Investment Pool 100% Repurchase Agreements 30% (Master Repurchase Agreements Required) Collateralized Certificates of Deposit 10% (Only Maryland Commercial Banks) The policy requires collateralization for certificates of deposit and repurchase agreements. Such collateral must be at least 102% of fair value of principal and accrued interest. The Annotated Code of Maryland, §17-101, requires that deposits with financial institutions by local boards of education be fully collateralized. The Board’s policy requires collateral to be held by a custodian in accordance with §6-209(c) of the State Finance and Procurement Article of the Annotated Code of Maryland and acceptable collateral as specified under §6-202 of the same document. These collateralization requirements are established to reduce custodial risk which is the risk that in the event of a bank failure, the Board’s deposits may not be returned to it. The Board invests in the Maryland Local Government Investment Pool (MLGIP) in accordance with §17-302 of the Annotated Code of Maryland. The MLGIP is managed by PNC Safe Deposit and Trust Company which is under administrative control of the State Treasurer. A MLGIP Advisory Committee of current participants has been formed to review the activities of the Fund on a quarterly basis and provide suggestions to enhance the pool. The MLGIP is rated AAAm by Standard and Poor’s. The Board maintains two accounts with MLGIP: the General account and the Health Care Consortium account. II. CONTROL OBJECTIVES • To ensure investments are reported in accordance with generally accepted accounting