Investment Policy

Purpose and Intent

The purpose of Council’s Investment Policy is to ensure that:

• Responsible Council officers invest surplus funds with approved financial institutions.
• All funds are invested in accordance with legislative and council requirements.
• Investment decisions are based on the security of funds by limiting exposure to risk.
• The financial yield is enhanced through prudent investment of funds, whilst ensuring sufficient liquidity for Council’s day to day operational commitments.

Scope

This policy applies to investments made by Council Officers (Finance) in accordance with the requirements of Section 143 of the Local Government Act 1989 (the Act) and enhances the legislative requirements by providing additional requirements in managing Council’s investment activities of its surplus funds.  Council’s objective is to maintain the purchasing power of the surplus funds that will be required to fund projects in the future. 

Definitions

Policy

The Local Government Act 1989 provides local Councils in Victoria with guidelines and restrictions as to the types of investments that they can make.  The City of Casey has established an Investment Policy that specifies the framework within which investments will be made.

This policy is to be read in conjunction with Section 143 – (Investments) of the Local Government Act 1989 (as amended), which sets out the requirements in relation to the Financial Institutions with whom a Council may invest.

Pursuant to section 143(f) of the Local Government Act 1989, the Minister for Local Government has approved the following manners of investment to apply generally to all councils:

1. In Government securities of the Commonwealth,
2. In securities guaranteed by the Government of Victoria,
3. With an authorized deposit-taking institution,
4. With any financial institution guaranteed by the Government of Victoria,
5. On deposit with an eligible money market dealer within the meaning of the Corporations Act.
6. In any other manner approved by the Minister, after consultation with the Treasurer, either generally or specifically, to be an authorized manner of investment for the purposes of this subsection.
7. Investments in the Treasury Corporation of Victoria.
8. Investments in managed investment schemes, which:

• Have a rating of AAm or a rating of AAf from Standard and Poor’s Australian Ratings,
• Are registered under section 601EB of the Corporations law 2001
• (Commonwealth), and
• Are liquid within the meaning of section 601KA(4) of the Corporations Law 2001 (Commonwealth) and have a constitution that provides for members to withdraw from the scheme.

Investments in the fixed interest securities of the other Australian States and Territories subject to these securities:

1. Being issued and guaranteed by a State or Territory Government, and
2. Having a credit rating equivalent to a Standard and Poor’s rating of AA or better.
3. All investments are to be denominated in Australian dollars

In addition to the above statutory investment directives, the following requirements are also to be met:

Council’s Own Direct Investments

1. Maximise the return on funds, taking into account the need to provide payments out of investment funds on a timely basis.  Adequate funds should be retained in the current account to meet daily cash flow requirements.
2. A minimum of three quotes will be sought from approved financial institutions before investing or re-investing funds.
3. The best possible investment rate must then be used subject to limits outlined in Table 1.  These limits apply at the time of investment.
4. All quoted interest rates and actions taken must be recorded.
5. An evaluation of future cash flow needs, and investment strategies must be undertaken bi-monthly.
6. Based on the credit rating, the amount invested with any one financial institution should not exceed the following percentages or term to maturity of total funds invested.  When placing investments, consideration should be given to the relationship between credit rating and interest rate.
7. If the credit rating of a financial institution in which Council has funds invested is downgraded so that they no longer fall within the Council’s policy guidelines, they must be divested as soon as practicable or at maturity.
8. If a different level of rating for the Short Term and Long-Term rating of a financial institution is applied by one of the Rating Agencies, the lower of the ratings will be utilised by Council in assessing the rating of that financial institution for investment purposes.
9. Council has an ongoing arrangement with Bendigo Bank to invest $3,000,000 (negotiable certificate of deposit) tied to the Narre Warren South Community Bank branch and $2,000,000 (negotiable certificate of deposit) tied to the Tooradin Community Bank branch.  This arrangement will continue until otherwise advised by council.

Table 1

 # - A 15% maximum limit will apply to Bendigo and Adelaide Bank, whilst it has its current S&P Rating of A2/A-, noting the Council commitment to support the Community Bank branches in Narre Warren South and Tooradin.

Council’s Investments with Fund Managers

Managed cash, enhanced cash funds and fixed interest funds are to have a minimum credit rating of AAm or AAf respectively, by Standard and Poor’s.

Limits apply to the amount of Council’s investment funds that can be invested with a fund.  No one AAA rated fund should hold more than 40%, and no one AA rated fund should hold more than 30% of Council’s total amount of average funds.

Investment Advisors utilised by Council to select and identify recommended Managed Fund investments must be licensed by the Australian securities and Investments Commission.

The combined average weighted days to maturity and the overall volatility of any managed funds should be appropriate to Council’s investment objectives and long-term financial plan, consistent with the guidelines provided in table 2.

Table 2: Minimum Time Horizon of Investments

Minimise the Costs

The offset balance of Council’s linked bank accounts, where possible, should be retained in positive Funds, unless directed by the Chief Executive officer.

Produce Reports

A quarterly report must be produced for the Audit and Risk Committee detailing the percentage exposure of the portfolio, comparing actual investments held with investment policy.

Investments will be monitored on an ongoing basis for appropriateness, and to ensure that they meet the Council’s cash requirements at any point in time.

Authority and Delegation

The Chief Financial Officer has responsibility for managing and reviewing Council’s cash balances and investment decisions in accordance with this Policy.

The Chief Financial Officer is responsible for presenting investment information to the Executive Leadership Team and council on a periodic basis.

At least two approved authorisers are required to approve any movement of funds from any of the City of Casey bank and investment accounts

Responsibilities

Breaches

Any breaches of this policy will be reported to the Audit and Risk Committee.

Relevant Forms

NA

Document History