66.480 Investment of public funds -- Limitations -- Written investment policy --
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/ky/66-480A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
Duties of state local debt officer -- Investment pool -- Rating agency.
(1)The governing body of a city, county, urban-county, charter county, school district
(provided that its general procedure for action is approved by the Kentucky Board
of Education), or other local governmental unit or political subdivision, may invest
and reinvest money subject to its control and jurisdiction in:
(a)Obligations of the United States and of its agencies and instrumentalities,
including obligations subject to repurchase agreements, if delivery of these
obligations subject to repurchase agreements is taken either directly or through
an authorized custodian. These investments may be accomplished through
repurchase agreements reached with sources including but not limited to
national or state banks chartered in Kentucky;
(b)Obligations and contracts for future delivery or purchase of obligations backed
by the full faith and credit of the United States or a United States government
agency, including but not limited to:
1. United States Treasury;
2. Export-Import Bank of the United States;
3. Farmers Home Administration;
4. Government National Mortgage Corporation; and
5. Merchant Marine bonds;
(c)Obligations of any corporation of the United States government, including but
not limited to:
1. Federal Home Loan Mortgage Corporation;
2. Federal Farm Credit Banks;
3. Bank for Cooperatives;
4. Federal Intermediate Credit Banks;
5. Federal Land Banks;
6. Federal Home Loan Banks;
7. Federal National Mortgage Association; and
8. Tennessee Valley Authority;
(d)Certificates of deposit or other interest-bearing accounts issued through a bank
or savings and loan institution having a physical presence in Kentucky which
are insured by the Federal Deposit Insurance Corporation or similar entity or
which are collateralized, to the extent uninsured, by any obligations, including
surety bonds, permitted by KRS 41.240(4);
(e)Uncollateralized certificates of deposit issued by any bank or savings and loan
institution having a physical presence in Kentucky rated in one
(1)of the three
(3)highest categories by a competent rating agency;
(f)Bankers' acceptances for banks rated in one
(1)of the three
(3)highest
categories by a competent rating agency;
(g)Commercial paper rated in the highest category by a competent rating agency;
(h)Bonds or certificates of indebtedness of this state and of its agencies and
instrumentalities;
(i)Securities issued by a state or local government, or any instrumentality of
agency thereof, in the United States, and rated in one
(1)of the three
highest categories by a competent rating agency;
(j)Shares of mutual funds and exchange traded funds, each of which shall have
the following characteristics:
1. The mutual fund shall be an open-end diversified investment company
registered under the Federal Investment Company Act of 1940, as
amended;
2. The management company of the investment company shall have been
in operation for at least five
(5)years; and
3. All of the securities in the mutual fund shall be eligible investments
pursuant to this section;
(k)Individual equity securities if the funds being invested are managed by a
professional investment manager regulated by a federal regulatory agency.
The individual equity securities shall be included within the Standard and
Poor's 500 Index, and a single sector shall not exceed twenty-five percent
(25%) of the equity allocation; and
(l)Individual high-quality corporate bonds that are managed by a professional
investment manager that:
1. Are issued, assumed, or guaranteed by a solvent institution created and
existing under the laws of the United States;
2. Have a standard maturity of no more than ten
(10)years; and
3. Are rated in the three
(3)highest rating categories by at least two
competent credit rating agencies.
(2)The investment authority provided by subsection
(1)of this section shall be subject
to the following limitations:
(a)The amount of money invested at any time by a local government or political
subdivision in any one
(1)of the categories of investments authorized by
subsection (1)(e), (f), (g), (k), and
(l)of this section shall not exceed twenty
percent (20%) of the total amount of money invested by the local government;
(b)The amount of money invested at any one
(1)time by a local government or a
political subdivision in the categories of investments authorized in subsection
(1)(j), (k), and
(l)of this section shall not, aggregately, exceed forty percent
(40%) of the total money invested unless the investment is in a mutual fund
consisting solely of the investments authorized under subsection (1)(a), (b),
(c), (h), or
(i)of this section, or any combination thereof;
(c)No local government or political subdivision shall purchase any investment
authorized by subsection
(1)of this section on a margin basis or through the
use of any similar leveraging technique; and
(d)At the time the investment is made, no more than five percent (5%) of the
total amount of money invested by the local governments or political
subdivisions shall be invested in any one
(1)issuer unless:
1. The issuer is the United States government or an agency or
instrumentality of the United States government, or an entity which has
its obligations guaranteed by either the United States government or an
entity, agency, or instrumentality of the United States government;
2. The money is invested in a certificate of deposit or other interest-bearing
accounts as authorized by subsection (1)(d) and
(e)of this section;
3. The money is invested in bonds or certificates of indebtedness of this
state and its agencies and instrumentalities as authorized in subsection
(1)(h) of this section; or
4. The money is invested in securities issued by a state or local
government, or any instrumentality or agency thereof, in the United
States as authorized in subsection (1)(i) of this section.
(3)The governing body of every local government or political subdivision that invests
or reinvests money subject to its control or jurisdiction according to the provisions
of subsection
(1)of this section shall by January 1, 1995, adopt a written investment
policy that shall govern the investment of funds by the local government or political
subdivision. The written investment policy shall include but shall not be limited to
the following:
(a)A designation of the officer or officers of the local government or political
subdivision who are authorized to invest and oversee the investment of funds;
(b)A list of the permitted types of investments;
(c)Procedures designed to secure the local government's or political subdivision's
financial interest in the investments;
(d)Standards for written agreements pursuant to which investments are to be
made;
(e)Procedures for monitoring, control, deposit, and retention of investments and
collateral;
(f)Standards for the diversification of investments, including diversification with
respect to the types of investments and firms with whom the local government
or political subdivision transacts business;
(g)Standards for the qualification of investment agents which transact business
with the local government, such as criteria covering creditworthiness,
experience, capitalization, size, and any other factors that make a firm capable
and qualified to transact business with the local government or political
subdivision; and
(h)Requirements for periodic reporting to the governing body on the status of
invested funds.
(4)Sheriffs, county clerks, county attorneys, and jailers, who for the purposes of this
section shall be known as county officials, may invest and reinvest money subject to
their control and jurisdiction, including tax dollars subject to the provisions of KRS
Chapter 134 and 160.510, as permitted by this section.
(5)The provisions of this section are not intended to impair the power of a county
official, city, county, urban-county, charter county, school district, or other local
governmental unit or political subdivision to hold funds in deposit accounts with
banking institutions as otherwise authorized by law.
(6)The governing body or county official may delegate the investment authority
provided by this section to the treasurer or other financial officer or officers charged
with custody of the funds of the local government, and the officer or officers shall
thereafter assume full responsibility for all investment transactions until the
delegation of authority terminates or is revoked.
(7)All county officials shall report the earnings of any investments at the time of their
annual reports and settlements with the fiscal courts for excess income of their
offices.
(8)The state local debt officer is authorized and directed to assist county officials and
local governments, except school districts, in investing funds that are temporarily in
excess of operating needs by:
(a)Explaining investment opportunities to county officials and local governments
through publication and other appropriate means; and
(b)Providing technical assistance in investment of idle funds to county officials
and local governments that request that assistance.
(a)The state local debt officer may create an investment pool for local
governments, except school districts, and county officials; and counties and
county officials and cities may associate to create an investment pool. If
counties and county officials and cities create a pool, each group may select a
manager to administer their pool and invest the assets. Each county and each
county official and each city may invest in a pool created pursuant to this
subsection. Investments shall be limited to those investment instruments
permitted by this section. The funds of each local government and county
official shall be properly accounted for, and earnings and charges shall be
assigned to each participant in a uniform manner according to the amount
invested. Charges to any local government or county official shall not exceed
one percent (1%) annually on the principal amount invested, and charges on
investments of less than a year's duration shall be prorated. Any investment
pool created pursuant to this subsection shall be audited each year by an
independent certified public accountant, or by the Auditor of Public Accounts.
A copy of the audit report shall be provided to each local government or
county official participating in the pool. In the case of an audit by an
independent certified public accountant, a copy of the audit report shall be
provided to the Auditor of Public Accounts, and to the state local debt officer.
The Auditor of Public Accounts may review the report of the independent
certified public accountant. After preliminary review, should discrepancies be
found, the Auditor of Public Accounts may make his or her own investigative
report or audit to verify the findings of the independent certified public
accountant's report.
(b)If the state local debt officer creates an investment pool, he or she shall
establish an account in the Treasury for the pool. He or she shall also establish
a separate trust and agency account for the purpose of covering management
costs, and he or she shall deposit management charges in this account. The
state local debt officer may promulgate administrative regulations, pursuant to
KRS Chapter 13A, governing the operation of the investment pool, including
but not limited to provisions on minimum allowable investments and
investment periods, and method and timing of investments, withdrawals,
payment of earnings, and assignment of charges.
(c)Before investing in an investment pool created pursuant to this subsection, a
local government or county official shall allow any savings and loan
association or bank in the county, as described in subsection (1)(d) of this
section, to bid for the deposits, but the local government or county official
shall not be required to seek bids more often than once in each six
(6)month
period.
(a)With the approval of the Kentucky Board of Education, local boards of
education, or any of them that desire to do so, may associate to create an
investment pool. Each local school board which associates itself with other
local school boards for the purpose of creating the investment pool may invest
its funds in the pool so created and so managed. Investments shall be limited
to those investment instruments permitted by this section. The funds of each
local school board shall be properly accounted for, and earnings and charges
shall be assigned to each participant in a uniform manner according to the
amount invested. Charges to any local school board shall not exceed one
percent (1%) annually on the principal amount invested, and charges on
investments of less than a year's duration shall be prorated. Any investment
pool created pursuant to this subsection shall be audited each year by an
independent certified public accountant, or by the Auditor of Public Accounts.
A copy of the audit report shall be provided to each local school board
participating in the pool. In the case of an audit by an independent certified
public accountant, a copy of the audit report shall be provided to the Auditor
of Public Accounts, and to the Kentucky Board of Education. The Auditor of
Public Accounts may review the report of the independent certified public
accountant. After preliminary review, should discrepancies be found, the
Auditor of Public Accounts may make his or her own investigative report or
audit to verify the findings of the independent certified public accountant's
report.
(b)The Kentucky Board of Education may promulgate administrative regulations
governing the operation of the investment pool including but not limited to
provisions on minimum allowable investments and investment periods, and
methods and timing of investments, withdrawals, payment of earnings, and
assignment of charges.
(11)As used in this section, "competent rating agency" means a rating agency certified
or approved by a national entity that engages in such a process. The certification or approval process shall include but not necessarily be limited to the following elements the subject rating agency must possess:
(a)A requirement for the rating agency to register and provide an annual updated
filing;
(b)Record retention requirements;
(c)Financial reporting requirements;
(d)Policies for the prevention of misuse of material nonpublic information;
(e)Policies addressing management of conflicts of interest, including prohibited
conflicts;
(f)Prohibited acts practices;
(g)Disclosure requirements;
(h)Any policies, practices, and internal controls required by the national entity;
and
(i)Standards of training, experience, and competence for credit analysts.