LGMA - Local Government Management Association of British Columbia

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Policy 021-2011: Investment

POLICY STATEMENT:

It is the policy of the LGMA to protect the long-term financial health of the organization with an overall investment strategy that is conservative.


POLICY BACKGROUND:

The LGMA holds significant funds that if invested will provide a revenue stream for the Local Government Management Association of BC.


POLICY GOAL:

This policy provides a framework designed to maximize potential returns on investments, while minimizing the risk of eroding investment principal.


POLICY OBJECTIVES:

1. Cash on hand will be invested with the objective of preserving principal and maintaining liquidity while achieving a maximum rate of return. Invested funds will be divided into two components: (a) The Short Term Component; and (b) The Investment Component.

(a) The Short Term Component

The Short Term Component will be managed directly by the Accountant under the supervision of the Executive Director. This portion of available funds will be invested in an interest bearing bank account designed for liquidity and security with terms of daily interest calculation.

(b) The Investment Component

The Investment Component will be managed by the Accountant under the supervision of the Executive Director. This portion of the investment may be short-term and/or fixed income investments. Funds will be invested to provide a balance between the risk associated with higher expected returns, lower expected liquidity and principal preservation. These investments include:

  • Municipal Finance Authority of BC Pooled Investment Funds, including:
    • The Money Market Fund;
    • The Intermediate Fund; and
    • The Bond Fund.
  • Guaranteed Principal Investment Products
  • Securities issued by an institution covered by the Canada Deposit Insurance Corporation (CDIC)
2. The Accountant will structure the Investment Component so that when considered in combination with the Short-term Component, the total funds are appropriately structured to meet the need for cash flows on an ongoing basis.

3. The investment decisions will be undertaken with the same level of care, skill, and prudence that would be demonstrated by an individual when acting for the benefit of their own affairs.

POLICY PROCEDURES

1. The following investment vehicles are permitted:
(a) Short term instruments:
  • Cash;
  • Term deposits;
  • Treasury bills;
  • Guaranteed Investment Certificates;
  • Bankers acceptances; and
  • Money market funds.
(b) Fixed income instruments:
  • Bonds.
2. Securities issued by the following intuitions are permitted:
  • the government of Canada or a province of Canada;
  • organizations whose securities are guaranteed by the government of Canada or a province of Canada;
  • a local, municipal or regional government in Canada;
  • chartered bank or non-equity or membership shares of a credit union.

3. The following transactions are prohibited, unless authorized by a 2/3 majority vote of the Board of Directors:
  • Purchase of equities or stocks;
  • Loans to individuals; and
  • Investments in real estate, venture capital, resource properties, and commodity funds.

4. The Fund will not be used to guarantee any borrowing except in the case of unanticipated overdrafts when cash is not sufficient to settle a purchase expected to occur.

OTHER MATTERS

1. A conflict of interest is deemed to exist when a fiduciary of the Investments has an interest of sufficient substance and proximity to his/her duties and powers with respect to the Invested funds to impair his/her ability to render unbiased advice or to make unbiased decisions affecting the investment.

2. Each quarter, the Accountant will provide an investment report containing the following information:
  • Holdings at the end of the quarter;
  • Transactions during the quarter; and
  • Rates of return for the portfolio with comparisons to relevant benchmarks.
3. At the discretion of the Board, but at least once per year, the Accountant together with the Executive Director will :
  • Review and update on the investment policy and strategy;
  • Review the rate of return achieved;
  • Review market performance and expectations of future returns;
  • Provide any information concerning new developments affecting the organization and its services; and
  • Comment on the continued appropriateness of the Statement.
4. This policy will be reviewed each calendar year. Material changes in the following areas may require revisions to the policy:
  • Risk tolerance of Board of Directors;
  • Legislation or regulation; and
  • Shortcomings of this policy that emerge in its practical application, or significant modifications that are recommended to the Board of Directors.
Policy adopted March 4, 2011

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