ATTACHMENT NO. 5
QUESTIONS & ISSUES TO CONSIDER BEFORE ENTERING A GOVERNMENT POOL
Questions & Issues to Consider Yes No Further Explanation
I SECURITIES
Government pools may have broader range of securities than your agency invests in. It is important that you are aware of, and are comfortable with, the securities the pool buys.
1. Does the pool provide a written statement of investment policy and objectives?
2. Does the statement contain:
a. a description of eligible investment instruments?
b. the credit standards of investments?
c. the maximum allowable dollar weighted average
portfolio maturity?
d. the limits of portfolio concentration permitted for each type of security?
e. the policy on reverse repos. Options, short sales and futures?
f. The changes in policies communicated to the pool
participants?
g. Does the pool contain only the types of securities that are permitted by your investment policy?
II INTEREST
Interest is not reported in a standard format, so it is important that you know how interest is quoted, calculated and distributed so that you can make comparisons with other investment
alternatives.
Interest Calculations
1. Does the pool disclose the following about yield
calculations?
a. the methodology used to calculate interest? (Simple
maturity yield to maturity etc.)
b. the frequency of interest payments?
c. how interest is paid? (credited to principal at the end of the month, each quarter, mailed?)
d. how are gains/losses reported ? Factored monthly or
only when realized?
Reporting
1. Is the yield reported to participants of the pool monthly (If not, how often?)
2. Are expenses of the pool deducted before quoting the yield?
Questions & Issues to Consider Yes No Further Explanation
III SECURITY
The following questions are designed to help you safeguard your funds from loss of principal and loss of market value.
1. Does the pool disclose safekeeping practices?
2. Is the pool subject to audit by an independent auditor?
3. Is the copy of the audit available to participants?
4. Who makes the portfolio decisions?
5. How does the manager monitor the credit risk of the
securities in the pool?
6. Is the pool monitored by someone on the board or a separate neutral party external to the investment function to endure compliance with written procedures?
7. Does the pool have specific policies with regards to repurchase agreements?
a. what are those policies?
8. Does the pool mark the portfolio to its market value?
9. Does the pool disclose the following about portfolio valuations?
a. the frequency with which the portfolio securities are valued?
b. the method used to value the portfolio. (cost, current value, or some other method?)
IV OPERATIONS
The answers to these questions will help you determine whether this pool meets your operations requirements.
1. Does the pool limit eligible participants?
a. what entities are permitted to invest in the pool?
2. Does the pool allow multiple accounts and sub accounts?
3. Is there a minimum or maximum account size?
4. Does the pool limit the number of transactions each month? a. Are expenses of the pool deducted before quoting the yield?
5. Is there a limit on transaction amounts for withdrawals and deposits?
a. what is the minimum and maximum withdrawal
amount permitted?
b. what is the minimum and maximum deposit amount
permitted?
6. Does the pool require one or more days notice for deposits and/or withdrawal?
7. What is the cutoff time for deposits and withdrawals?
8. Are the funds 100% withdrawable at any time?
Questions & Issues to Consider Yes No Further Explanation
9. What are the procedures for making deposits and
withdrawals?
a. what is the paperwork required if any?
b. what is the wiring procedure?
10. Can an account remain open with a zero balance?
11. Are confirmations sent following transactions?
V STATEMENTS
It is important for you and the agency’s trustee (when
applicable), to receive statements monthly so the pool’s records of your activity and holdings is reconciled by you and your trustee.
1. Are statements for each account sent to participants? a. do statements show balances, transactions and yield?
2. Does the pool distribute detailed reports of its holdings? (regularly or on request only?)
VI FEES
Administrative fees vary from pool to pool. It is important to know the pool’s fee and its impact on the yield of the pool.
1. Are the fees or administrative costs disclosed?
a. what are the fees?
b. how often are they assessed?
c. how are they paid?
d. are there additional fees for wiring funds? (what is the fee?)
2. Are expenses deducted before quoting the yield?
VII QUESTIONS TO CONSIDER FOR BOND PROCEEDS
It is important to know (1) whether the pool accepts bond proceeds and (2) whether the pool qualifies with the U.S.
Department of the Treasury as an acceptable commingled fund.
1. Does the pool accept bond proceeds subject to arbitrage rebate?
2. Does the pool provide accounting and investment records suitable for proceeds or bond issuance’s subject to arbitrage rebate?
3. Will the pool accept transaction instructions from a trustee?
4. Are you allowed to have separate accounts for each bond issue so that you don not commingle the interest earnings of funds subject to rebate with funds not subject to the
regulations?