Board of Finance Policies (PDF)

BOARD OF FINANCE 
POLICY REGARDING SUBMISSION OF AGENDA ITEMS 
The Board of Finance agenda is typically issued one (I) week before the meeting. Agenda items and 
supporting documentation should be sent to the Board of Finance Secretary by noon one week prior to the 
meeting date. 
On the rare occasion that a late agenda submission is unavoidable, the Board of Finance may vote to add 
the item to the regular meeting agenda or defer the item to the next scheduled meeting. The request to 
add the item to the agenda must be accompanied by an explanation as to why the submission was late. 
Please note that State Statute Section 1-225 (c) requires an affirmative vote of2/3 of the Board members 
present. 
If there is a need to provide additional information to the Board after the agenda has been sent, please 
send or give it to the Board of Finance Secretary. Do not distribute the information to the members prior 
to the start of the meeting as this does not allow for review of the information. 
If you are requested to provide additional information by the Board, please send that information to the 
Board of Finance secretary who will distribute the information to the members. Do not send the 
information directly to the Board of Finance members. 
Adopted: May 18, 2016 

POLICY REGARDING EXPENDITURE OF FUNDS FOR SERVICES OR ITEMS NOT 
DISCLOSED IN ANNUAL BUDGETS 
All expenditures of funds for services or items must be in conformance with budget justification 
disclosure or properly approved labor contracts. Exceptions: Expenditures for services or items not 
disclosed in the budget and which (I) are not emergencies (2) are in excess of $1,000 but less than 
$10,000,and (3) will not require an additional appropriation, shall not be made until the following 
procedure has been completed. 
It is the responsibility of the requesting agency to set a meeting with the Director of Finance, First 
Selectman, and a member of the Board of Finance (preferably the liaison). The requesting agency will 
give justification for such expenditure at that meeting. Upon majority approval of the Board of Finance 
representative, the First Selectman and the Director of Finance, the expenditure shall be made. Without 
such approval, the expenditure cannot be made unless approved by the Board of Finance. Note; No non­
budgeted expenditure exceeding $10,000 shall be made without Finance Board approval. 
Approved 12/12/2007 
Amended: May 18, 2016 



TOWN OF WATERFORD 
FUND BALANCE POLICY 
OBJECTIVE 
The Town ofWaterlbrd feels it necessary to maintain an adequate unrestricted fund balance in the General Fund to 
provide for a sound financial base for cw:rent and future budgets as well as mitigating risks such as revenue 
shortfalls or unexpected expenditures. An adequate level of unrestricted fund balance will also assist the Town in 
maintaining its bond rating. 
DISCUSSION 
Waterford recognizes the new Fund Balance components below in accordance with Government Accounting 
Standards Board (GASB) Pronouncement #54 
•
Non Spendable Fund Balance-Amounts that cannot be spent because they are either:
o
Not in a spendable form such as long-tenn receivables, inventory, or prepaid expenses
o
Legally or contractually required to be maintained intact. such as an endowment fond
•
Restricted Fund Balance -Amounts that have legally enforceable constraints placed on their
use by external parties or external laws and regulations.
•
Committed Fund Balance -Amounts that can only be used for specific purposes pursuant to
constraints imposed by fonnal action of the government's highest level of decision-making
authority (R.TM)
•
Assigned Fund Balance -Amounts intended to be used for specific purposes, but are neither
restricted nor committed
•
Unassigned Fund Balance-Amounts that do not fall within any other classification.
POLICY 
The Town will maintain an unassigned fund balance as of June 301ft of each year between 10% and 13% of the 
subsequent fiscal year's budgeted General Fund revenue. 
The use of General Fund Unassigned Fund balance in excess of the maximum level shall be limited to one-time, 
non-recurring purposes. Examples include Capital Projects, transfer to Capital Non-recurring firnd, 
emergency/storm response, debt service mitigation, land acquisition, and other one-time, nonsrecurring uses 
detennined to be in the best financial interest of the Town. 
The General Fund Unassigned Fund Balance may be appropriated as authorized by the RTM. upon approval by the 
Board of Plnance. 
General Fund Unassigned Fund Balance in excess of the maximum level wllI not be allocated to ongoing operations 
to avoid a revenue gap in subsequent budget years. 
For purposes of fund balance classification, expenditures are to be spent ftom restricted fund balance first, followed 
in order by committed fund balance, assigned ftmd balance and lastly, unassigned fund balance. 
If Unassigned Fund Balance falls below the minimum level, the Board ofFimmce will propose a plan to restore it to 
the minimum 10% level within three years .. 
EFFECTIVE DATE 
Board of Finance approved this policy effi:ctive November 18, 2015. 

I. Introduction:
TOWN OF WATERFORD 
INVESTMENT POLICY 
The purpose of this investment policy is to provide a written document that discusses the guidelines
governing the short-term investing procedures and best practices for the Town of Waterford ("The
Town''). This investment policy is designed to conform to standards set by the Government Finance
Officers Association and the requirements of the Government Accounting Standards Board.
II. Governing Authority:
This investment program shall be operated in conformance with federal, state and other legal 
requirements. -Specifically, the Treasurer of the Town of Waterford is responsible for managing 
short-term investments. The scope of those investments is mandated under Connecticut General 
Statutes 7-400 and 7-403a and 7-362, which outlines the type and term of permissible investments. 
(Exhibits A & B attached). 
III. Scope:
This policy refers to the investment of all funds specifically excluding the investment of employees' 
retirement funds and post-employment benefit funds. Proceeds from bond issues as well as separate 
foundation 
or 
endowment 
assets 
are 
not 
specifically 
addressed 
in 
this 
policy. 
Consolidation ·(though no·co-mingling) of funds for investment purposes shall occur except for cash 
in certain restricted and special funds. The purpose of this is .to maximize earnings potential, increase 
efficiencies with regard to investment pricing, safekeeping and administration. Investment income is 
allocated to various funds dependent on their respective and proportional participation and in 
accordance with ɒneral accepted accounting principles (GAAP). 
The Town of Waterford segregates individual endowments made to the Town over time to 
distinguish them from Town operating and administrative funds. The Town has the option to 
choose an outside investment manager to handle these funds or may handle them internally. 
IV. General Objectives: 
The primary objectives of the Town of Waterford Investment activities shall be safety, 
liquidity and yield. There may be other factors, which can influence investing decisions but 
none that would violate the inherent principles of safety, liquidity and yield. 
1. Safety:
Safety of principal is the top objective of the Town of Waterford's investment program. 
Preservation of capital is the foremost objective in the overall portfolio. The methods of preserving 
capital are through limiting credit risk and interest rate risk. 
A.Credit Risk including Concentration Risk:
Credit risk .can be defined as the potential loss due to failure of the security issuer or backer. Pre­
qualifying institutions with which the Town may do business limit credit risk. This authorization
process will be defined in a later section.
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1)
Credit risk is also lessened by limiting the type of acceptable investments by type of financial
vehicle or security, which the Town is authorized to invest in. 
This is governed by
Connecticut General Statutes.
2)
Credit Jtisk can also be limited by avoiding concentration risk in a portfolio e.g. having too
much of one type of security or one institutional issuer or backer. The explicitly stated
exception is the Connecticut Short-Term Invest111e11t Fund, which is a short-term fund rated
AAA by Standard and Poors and run by the Treasurer of the State of Connecticut. The
Connecticut Short-Term Investment Fund ("STIF") represents a diverse pool of assets and
underlying investments. The Treasurer, in coordination with the Finance Department, will
set up credit/ concentration limits for each institution the Town of Waterford does business
with in a separate document. Those credit limits shall be reviewed from time to time.
3)
Credit risk also involves pre-qualifying and authorizing transactions with broker/ dealers,
intermediaries and advisors who do business with theTown.
B. Interest Rate Risk:
1) 
2) 
3) 
The Town of Waterford will minimize interest rate risk, which is the risk that the market 
value of the securities will fall due to changes in the market interest rates by structuring the 
investment portfolio so that the securities mature to meet cash requirements for ongoing 
operations, avoiding the need to sell securities on the open market prior to maturity. 
Investing in short-term securities, money market funds or similar investment pools and 
limiting the average maturity in the portfolio in accordance with this policy will minimize 
interest Rate Risk. 
This policy does not expressly state when the Treasurer may move the portfolio into fixed 
or floating rate securities that would be impacted by interest rates, as that is a market 
condition or trend left to the expertise and discretion of the Treasurer. The Treasurer 
would be expected, in strategizing, to react to market conditions to make investments that 
are prudent and without incurring unnecessary interest rate swings. Further, the Treasurer 
must adjust investments due to the seasonal nature of the Town's cash flow needs. 
2. LiquidJty:
The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may 
be reasonably anticipated, including express seasonal needs. This is accomplished by structuring the 
portfolio so that securities mature concurrent with cash needs to meet anticipated demands. Further, 
since all cash demands cannot always be anticipated, the portfolio should consist of securities with 
active secondary or resale markets. Alternatively, a portfolio in parts or its entirety may be invested 
in money ma.rket mutual funds or local govemmc;nt investment pools that offer same-day liquidity 
for short-term funds. It is a pre-requisite that all investment vehicles meet Connecticut General 
Statute standards, regardless of liquidity. 
J. Yield:
The investment portfolio 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 to the primary importance of 
safety and liquidity as described above. The portfolio should be limited to low risk securities. These 
securities should earn a fair return relative to the risk being assumed. Securities should be held to 
maturity with the following express exceptions: 
1)
A security with declining credit may be sold early to minimize potential loss of principal.
2)
A security purchase and sale that would improve the quality, yield or target duration in
the portfolio. (Security purchase and sale means trading one investment for another
investment, not the "swap" connoted as a derivative product. Derivatives are not
allowed in the portfolio.
3)
Unforeseen liquidity needs of the portfolio requiring that the security be sold.
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4. Foreign Currency Risk:
The Town does not and will not invest in any foreign investment pursuant to statute. The Town
does not accept payment for Town services in any foreign currency, only US dollars. The Town of
Waterford will not engage in any foreign currency risk.
5. Local Considerations:
\¼ere possible, funds may be invested for the bettettnent of the local economy or that of local
entities within the State. The Town of Waterford may accept a proposal from an eligible institution,
which provides for a reduced rate of interest provided that such institution documents the use of
deposited funds for community development projects. This type of proposal would require the
express approval ofrelevant Boards (both Selectmen and Finance Boards). In addition the Treasurer
would take into consideration any advice of the Director of Finance.
V.
Standards ofCare:
1. Prudence
The stan<lar<l to be used by investment officials shall be "the prudent person" standard and shall be
applied in the context of managing an overall portfolio. 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
deviations from expectations are reported in a timely fashion and the liquidity and the sale of
secutlties are ca.tried out in accordance with the te.rms of this policy.
The "prudent person" standard states that, "Investments shall be made with judgment and care, 
under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise 
in the management of their own affairs, not for speculation, but for investment, considering the 
probable safety of their capital as well as the probable income to be derived." 
2. Ethics and Conflicts of Interest
Town officials and town employees involved in the investment process shall refrain from personal
business activity that could conflict with the proper execution and management of the investment
program or that could impair their ability to make impartial decisions. Employees and officials shall
disclose any material interests in financial institutions with which they conduct business. They shall
further disclose any personal financial/ investment positions that could be related to the
performance of the.investment portfolio. Employees and officials are prohibited from undertaking
personal investment transactions with the same individual with which business is conducted on
behalf of the Town of Waterford.
J; Delegation of Authority 
Authority to manage the investment program is granted to the Treasurer of the Town of\Vaterford 
by provision of the following CT General Statutes: CGS 7-400. The Treasurer (Investment Officer) 
shall act in accordance with established written procedures and internal controls for the operation of 
the investment program consistent with the Town's investment policy. Procedures should include 
references to: safekeeping, delivery vs. payment, investment accounting, repurchase agreements, wire 
transfer agreements and collateral/ depository agreements. No person may engage in an investment 
transaction except as provided under the terms of this policy and the procedures. The investment 
officer shall be responsible for all investment transactions undertaken and shall establish a system of 
controls with the cooperation of the Director of Finance of the Town of Waterford to regulate the 
activities of subordinate officials. 
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In the event of an absence, the Treasurer may expressly transfer specific powers and responsibilities 
to an appropriate person in the Finance Office, either the Director or Staff Accountant. However, 
that transfer must be made in writing (or electronically) and state specifically the time and duration of 
the transfer powers. The Director and Staff Accountant during that period would be bound by all 
the same rules and standards to which the Treasurer would be subject en absentia. Further, the 
Director of Finance and Staff Accountant must report all actions and transactions to the Treasurer 
t1pon the Treasurer's return. 
VI. Authorized Financial Institutions, Depositories and Broker/Dealers
1..Authorized Financial Institutions, Depositories and Broker/Dealers 
A list will be maintained of financial institutions and depositories authorized to provide investment 
services. In addition, a list will be maintained of approved security broker/ dealers selected by 
creditworthiness (e.g. a minimum capital requirement of $10,000,000 and at least five years of 
operation). These may include "primary" dealers or regional dealers that qualify under the Securities 
and .Exchange Commission (SEC) Rule 15C3-1 (unifonn net capital rule). All financial institutions 
and broker/ dealers who desire to become qualified for investment transactions must supply the 
following as appropriate: 
• 
• 
• • 
• 
• 
Audited financial statements demonstrating compliance with state and federal capital 
adequacy guidelines 
Proof of National Association of Securities Dealers (NASD) certification (not applicable to 
Certificate of Deposit or Bank money fund counter parties) 
Proof of state registration 
Completed broker/ dealer questionnaire (not applicable to Certificate of deposit or bank 
money fund counter parties). 
Certification of having read and understood and agree to comply with the Town's 
investment policy. 
Evidence of adequate insurance coverage . 
An annual review. of the financial condition and registration of all qualified financial institutions and 
broker/ dealers will be conducted by the Treasurer in coordination with the Director of Finance. 
2. Minority and Community Financial Institudons:
From time to time, the Treasurer may choose to invest in instruments offered by minority and
community financial institutions. In such situations, a waiver to certain parts of the criteria listed 
above may be granted. All terms and relationships will be fully disclosed prior to purchase and will
be reported to the appropriate entity on a consistent basis and should be consistent with state or
local law. These types of investment purchases would require the express approval of relevant
Boards (both Selectmen and Finance Boards). In addition the Treasurer would take into account any
advice of the Director of Finance.
VII. Safekeeping and Custody
1. Delivery vs. Payment
All trades of marketable securities will be executed by delivery vs. payment (DVP) to ensure that
securities are deposited in an eligible financial institution prior to release of funds.
2. Safekeeping
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Securities will be held by an independent third party custodian selected by the Town or accepted by 
the Town, evidenced by safekeeping receipts in the Town of Waterford's name. The safekeeping 
institution shall annually provide a copy of their most recent report on internal controls. 
3, Internal Controls 
The Treasurer/Investment Officer is responsible for establishing and maintaining an internal control 
structure designed to ensure that the assets of the Town of Waterford are protected from loss, theft 
or misuse. Details of the internal control system are documented in this investment procedures 
policy which shall be reviewed and updated periodically as needed. The internal control structure 
shall be designed to provide reasonable assurance that these objectives are met. TI1e concept of 
reasonable assurance recognizes that 1) the cost of the control should not exceed the benefits likely 
to be derived and 2) the valuation of costs and benefits requires estimates and judgments by 
management. 
The intern.al controls structure includes the following points: 
•
Control of collusion
•
Separation of transaction authority from accounting and record keeping
•
Custodial safekeeping
•
Avoidance of physical delivery securities
•
Clear delegation of authority to subordinate staff members
•
Printed confirmation of transactions for investments and wire transfers authorizations of
wire transfers
•
The wire transfer agreement with the lead bank and third-party custodian which is usually
required by the bank.
The Director of Finance shall establish a process for an annual independent review by an external 
auditor to assure compliance with policies and ptocedures or alternatively, compliance should be 
assured through Town of Waterford's annual independent audit. 
VII. Suitable and Authorized Investment
Investment Types:
The Town of Waterford investments are consistent with and in accordance with Connecticut 
General Statutes Please refer to the CGS 7-400, 403a, 362, which delineates the parameters of the 
Town of Waterford's investment activities. 
Collateralizadon: 
Collateralization for Town of Waterford investments is consistent and in accordance with 
Connecticut General Statute 36a-336. 
Repurchase Agreements: 
Repurchase agreements for the Town of Waterford should be consistent and in accordance with 
Connecticut General Statute 7-400. Additionally, repurchase agreements should follow the required 
need for collateral that is put aside to back up any repurchase agreement. The amount of collateral 
depenc:ls on the type of collateral that is pledged (Treasuries, Ginny Mae's etc.). 
VIII. Investment Parameters
Diversification: 
Investments shall conform to state statute and further be diversified by: 
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•
Limiting investments to avoid over concentration from a specific issuer or business sector
(excluding U.S. Treasury stcurities and the State of Connecticut Short-Term Investment
Fund also known as "STIF'')
•
Limiting investments in securities that have higher credit risks
•
Investing in securities with varying maturities (the exception being keeping the portfolio in
daily funds which are completely liquid)
•
Making sure at least a portion of funds is liquid enough to meet ongoing obligations of the
Town of Waterford.
•
Appropriate portfolio diversification should also take into account the seasonality of the
Town of Waterford's funds and invested to complement that cash cycle.
Maturity: 
•
All maturities must confortn to state statute.
•
With the exception ot the U.S. Treasury or the Connecticut Short-Term Investment Fund,
no issuer of a securities or money fund may make up more than 15% of the Townis
portfolio at any given time and perceived concentrations of risk should be avoided.
•
There must always be funds invested on a daily basis to ensure liquidity since cash
forecasting cann.ot always accurately predict all calls on the Town's financial needs.
•
When contemplating an investment the Treasurer must look at two or more sources
(institutions) before pfacing money.
IX.• Rep<>rting 
Methoda 
The Treasurer shall prepare an investment report at least quarterly including a management summary 
that provides an analysis of the status of the current investment portfolio. 
This management 
summary will be prepared in a timely manner and will be prepared in a way that will allow 
comparison to the Town's investment policy. The report should be provided to the Board of 
Selectmen of the Town of Waterford, the Board of Finance and the Representative Town Meeting as 
well as others ripon request. 
The report should show where the portfolio is currently placed (by institution) and the revenue 
generated during the quarterly period. Individual transactions will be available for audit. 
Performance Standards: 
The investment portfolio will be managed in accordance with the parameters specified within this 
policy. The portfolio should obtain a market average rate of return during the market/ economic 
environment. The portfolio will be measured against benchmarks as appropriate. 
X. Policy Consideration
Any investment cunently held that does not meet the guidelines of this policy shall be exempted
from the requirements of this policy. At maturity or liquidation, such monies shall be reinvested only 
as provided by this policy. 
XI. Approval of Investment Policy
The invesnnent policy shall be formally approved by the Board of Finance and Treasurer and
reviewed annually. The opinions and advice of the Dir.ector of Finance will be included in the
review.
Adopted by Board of Finance - November 12, 2008 
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