SCHOOL DISTRICT INVESTING

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SCHOOL DISTRICT INVESTING

• Questions Answers
• PASBO Annual Conference
• March 7, 2008
• Adele Huntzinger, CPA
• Asst. Director of Business Services
• Conestoga Valley School District

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• Adele Huntzinger, CPA
• Asst. Director of Business Services
• Conestoga Valley School District
• [phone] ext. 1010
• adele_huntzinger_at_cvsd.k12.pa.us

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Authorized Investments

• Deposits in Financial Institutions
• Short-term Obligations of US Government Agencies
• Short-term long-term Obligations of US
  Government
• Short-term long-term State Municipal Bonds
• Investment Pools

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Deposits in Financial Institutions

• Must be insured by FDIC
• FDIC limit is 100,000
• Must consider all school district funds when
  calculating the limit
• Amounts above FDIC limit must be collateralized
• Specific pledged collateral
• Pooled collateral per Act 72 of 1971

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Pooled Collateral

• Pooled collateral must consist only of
  investments permitted for school districts
• Value of pooled collateral must exceed value of
  secured deposits
• Third party custodian must hold pledged
  collateral
• Recommend confirming collateral annually

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Certificates of Deposit

• CD should be purchased at amount less than
  100,000 to account for accrual of interest
  income
• Recommend receiving interest income from CD
  monthly or quarterly
• Caution when purchasing CDs through different
  investment companies - Do not buy more than
  100,000 CDs from same bank

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Short-Term Obligations of US Government Agencies

• Short-term defined as 397 days or less
• Agencies are not direct obligations of US
  Treasury
• Usually slightly higher interest yield
• Long-term investment in agencies not permitted
  unless backed by full faith and credit of the US
  Government

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Short-Term Obligations of US Government Agencies

• Examples of permitted short-term agencies
• Federal Home Loan Banks
• Federal Home Loan Mortgage Corp.
• Government National Mortgage Association
• Federal National Mortgage Association
• Student Loan Marketing Association
• Federal Farm Credit Bank

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Government National Mortgage Association

• GNMA is only US Government agency backed by full
  faith and credit of the US Government
• GNMA is only US Government agency that can be
  invested long term

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Short-term Long-term US Government Obligations

• Permitted to invest in US Government Obligations
  short-term and long-term
• Examples
• US Treasury Bill
• US Treasury Note
• US Treasury Bond

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Short-term Long-term State Municipal Bonds

• Obligations of Commonwealth of PA its agencies
  must be backed by full faith credit of
  Commonwealth
• Obligations of political subdivisions of
  Commonwealth of PA their agencies must be
  backed by full faith and credit of political
  subdivisions
• Permitted to invest short-term and long-term if
  backed by full faith and credit of Commonwealth
  of PA, political subdivisions
• Interest rates usually lower

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Investment Pools

• PLIGIT (PA Local Government Investment Trust)
• PSDLAF (PA School District Liquid Asset Fund)
• Designed for Pennsylvania schools and/or
  municipalities
• Invest according to PA School Code section 440.1

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Investment Policy

• Investment policy should address
• Legality
• Safety
• Liquidity
• Yield
• Diversification
• Authority to invest/Delegation
• Definition of Short-term, Long-term