POLICY MANUAL - Calhoun County Schools

America). Portfolio maturities shall be staggered in a way that avoidsundue concentration of assets in a specific maturity sector. Maturitiesshall be selected which provide stability of income and reasonableliquidity.Prudence:Investments shall be made with the judgment and care appropriate undercircumstances then prevailing and with the prudence, discretion andintelligence appropriate for the management of public funds. Investmentsshall not be made for speculation, but considering the probable safety oftheir principal as well as the probable income to be derived.In addition to these general policy considerations, the following specificpolicies will be strictly observed:• The Board shall not trade in options, futures, or any other derivativesecurities.• Before accepting funds or engaging in investment transactions with theBoard, officials of approved depository and securities dealers shall berequired to familiarize themselves with the Board’s investment objectivesand constraints.Risk Issues(1) Interest rate risk is the risk that changes in interest rates will adversely affect the fair marketvalue of an investment. The Board will disclose information about the interest rate risk of theirdebt investments by using the effective duration method (a method of disclosing interest raterisk using analytical software that measures the expected change in value of a fixed-incomesecurity or portfolio for a given change in interest rates). Such information shall be provided tothe CSFO by the investment official of the bank awarded the banking services of the Boardupon request, but no less than semi-annually (March 31 and September 30). In addition, theBoard has adopted the following “Investment Maturity Restrictions” as a means of managing itsexposure to decreases in the fair market value of its investments arising from increased interestrates.• U.S. Government or U.S. Government Agencies 24 months or less• Bank Instruments:Fixed Rate CDs12 months or lessFloating Rate CDs24 months or lessOvernight ReposNA(2) Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill itsobligations. The Board will “provide information about the credit risk associated with theirinvestments by disclosing the credit quality ratings of investments in debt securities asdescribed by nationally recognized statistical rating organizations – rating agencies – as of thedate of their financial statements…Obligations of the U.S. government or obligations explicitlyguaranteed by the U.S. government are not considered to have credit risk and do not requiredisclosure of credit quality” (GASBS 40).(3) Custodial credit risk for investments is the risk that, in the event of the failure of thecounterparty to a transaction, the Board will not be able to recover the value of investment orcollateral securities that are in the possession of an outside party. “Investment securities areexposed to custodial credit risk if the securities are uninsured, are not registered in the name ofthe government, and are held by either the counterparty or the counterparty’s trust departmentor agent but not in the government’s name” (GASBS 40). To avoid exposure to this type of risk,