Investment Policy

This policy applies to the investment of short-term operating funds and longer-term funds.

  1. Pooling of Funds – The Township can consolidate cash balances from all funds to maximize investment earnings. It will be up to the clerk to keep the records according to the funds involved.

General Objectives
The primary objectives, in priority order, of investment activities shall be safety, liquidity, and yield:

  1. Safety – Safety of principal is the foremost objective of the investment program. Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall investment. The objective will be to mitigate credit risk and interest rate risk.

Credit Risk
The Township will minimize credit risk, the risk of loss due to the failure of the security issuer or backer, by:

  • Limiting investments to the safest types of securities
  • Pre-qualifying the financial institutions, broker/dealers, intermediaries, and advisers with which the township will do business.
  • Investments shall be protected by FDIC insurance or similar coverage.

Interest Rate Risk
The Township will minimize the risk that the market value of securities in the investment will fall due to changes in general interest rates, by:

  • Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations; thereby avoiding the need to liquidate investments prior to maturity.
  • Invest operating funds in primarily, NOW accounts, money market funds, or short-term certificates.
  • Interest rate yield curve will be considered when choosing an investment maturity.

The investment shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This is accomplished by structuring the investment so that NOW and Money Market accounts anticipated demands. Furthermore, since all possible cash demands cannot be anticipated, the investment should consist largely of securities with ladder maturities.

The investments shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs. Return on investment is of secondary importance compared to the safety and liquidity objectives described above. Securities shall not be sold prior to maturity with the following exceptions:

  • A security with declining credit may be sold early to minimize loss of principal.
  • A security swap would improve the quality, yield, or target duration in the investment.
  • Liquidity needs of the investment require that the security be sold.

Standards of Care

  1. Prudence – Investment officers acting in accordance with written procedures and this investment policy and exercising due diligence shall be relieved of personal responsibility for an individual security’s credit risk or market price changes. Provided the township is notified in a timely fashion and the liquidity and the sale of securities are carried out according to this policy. Investments shall be made with judgment and care, not for speculation, but for investment, considering the probable safety of their capital.
  2. Ethics and Conflicts of Interest - Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with proper execution and management of the investment program, or that could impair their ability to make impartial decisions.
  3. Delegation of Authority – Authority to manage the investment program is granted to the Township Clerk after being approved by the Board of Supervisors. The clerk shall be responsible for all transactions undertaken by motion of approval from the Board of Supervisors. The transactions will all be documented in the minutes at the time the transaction took place.

Safekeeping and Custody

  1. Authorized Financial Dealers and Institutions - A list will be maintained of financial institutions authorized to provide investment services. A list will be maintained by approved security dealers selected by creditworthiness (a minimum capital requirement of $1,000.00 and at least five years of operation).

All financial institutions who desire to become qualified for investment transaction must supply the following as appropriate:

  • Audited Financial Statements or copy of most recent call report
  • Proof of National Association of Securities Dealers (NASD) certification
  • Proof of state registration
  • Certification of having read and understood and agreeing to comply with the townships investment policy.
  • Secure 110% of investment balances with pledges or FHLB letter of credit as required by MN Statute 118A.01 and 118A.08.

An annual review of the financial condition and registration of qualified financial institutions and authorized financial dealers is required. All terms and relationships will be fully disclosed prior to purchase and will be reported to the township on a consistent basis and should be consistent with state or local law. These types of investment purchases should be approved by the Township Board of Supervisors in advance.

B. Internal Controls – The clerk is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the township are protected from loss, theft or misuse.

The clerk shall establish a process for an annual independent review by an external auditor to assure compliance with policies and procedures. The clerk shall address the following points:

  • Separation of transaction authority from accounting and record keeping.
  • Custodial safekeeping
  • Written confirmation of transactions for investments

Suitable and Authorized Investments 

A. Investment Types – The following investments will be permitted by this policy and are those defined by state and local law where applicable.

  • Certificate of deposit and other evidence of deposit at financial institution, rated in the highest tier.
  • Money Market Mutual funds regulated by the Securities and Exchange Commission and whose portfolios consist only of dollar-denominated securities.
  • U.S. Government obligations, U.S. government agency obligations, and U.S. government instrumentality obligations, which have a liquid market with a readily determinable market value.

Investment in the above instruments shall required authorization by the Board of Supervisors for the Town of Maine Prairie and registered in their minutes.

B. Not Acceptable Investment Types

  • Stocks, Bonds, Mutual Funds
  • Unsecured investments of any type
  • Derivatives, real estate investment trusts
  • Private Businesses

Interest Earned from Investments

  1. Specific Fund – Any money invested to be used for a specific fund shall have the interest remain in that fund.
  2. Grouped Funds – Any money taken from a group of funds, the interest will go to the General Fund.


  1. Methods – The clerk shall prepare an investment report monthly. The clerk will present an investment report at each monthly meeting.
  2. Performance Standards – The investments will be managed in accordance with the specified standards within this policy. The investments should obtain a market average rate of return during a market environment of stable interest rates.

Policy Considerations

  1. Amendments – This policy shall be reviewed on an annual basis. Any changes must be approved by the Board of Supervisors for Maine Prairie Township, as well as the clerk in charge with maintaining internal controls.

Date adopted: July 10, 2007