CITY OF GALESBURG BANKING SERVICES REQUEST FOR PROPOSAL

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1 I. INTRODUCTION A. General Information CITY OF GALESBURG BANKING SERVICES REQUEST FOR PROPOSAL The City of Galesburg (the City ), Illinois invites commercial banking institutions (the bank or proposer ) who possess the capability and expertise to provide depository and various other banking services for the City, to submit proposals for the provision of those services according to the requirement set forth in this document. The purpose of the Request for Proposal (RFP) is to identify the banking institution that can offer the highest quality service at the lowest cost. B. Instructions 1. Sealed Proposal: Responses to this RFP will be submitted in a sealed envelope, clearly identified as: and mailed or delivered to: Kraig Boynton Purchasing Agent City of Galesburg 55 W. Tompkins Street PO Box 1387 Galesburg, IL kboynton@ci.galesburg.il.us PROPOSAL FOR BANKING SERVICES 2. Response: Each proposer shall submit four proposals. The proposal should be submitted via a hard copy. Supporting material may be submitted; however, the decision in selecting the most responsive proposer will be based on the standard forms (exhibits) provided. 3. Questions and Additional Information: Requests for clarification or additional information should be ed to kboynton@ci.galesburg.il.us or gosborn@ci.galesburg.il.us. Responses to requests/questions will be furnished to all potential proposers that notify the City of their intent to submit a proposal. Cutoff date to receive request in writing will be August 3, Requests received after August 3, 2015, will not be answered. 1

2 4. Schedule: The following schedule will be adhered to: July 14, 2015 August 3, 2015 August 17, 2015 September 7, 2015 October 1, 2015 Distribution of Request for Proposals Deadline for requests/inquiries/questions/clarifications Proposals due to the City by 11AM. No exceptions! Recommendation of award Implementation date The City intends to adhere to the proposed schedule, however, it is expressly understood that your proposal will be valid for a period of ninety (90) days after August 17, The City may narrow their scope of financial institutions and request a meeting prior to making a final decision. 5. Bank Qualifications: For a proposal to this RFP to be considered and evaluated, the bank must: Be insured by the Federal Deposit Insurance Corporation (FDIC). Be eligible to be a depository of City funds with a full service branch in or near the City of Galesburg. All responding banks must complete Exhibit A. Be an on-line cash and securities member of the Federal Reserve. Be able to provide 120% of collateralization of all City deposits in compliance with the City s Investment Policy. The City s investment policy can be located in Exhibit E. Pledged securities in the name of the City will be deposited at a third party institution, a Federal Reserve Bank, and in the name of the City and comply with the requirement to have a GASB Statement #3 Category 1 classification. Quality of investment instruments must be in compliance with the State of Illinois Public Investment Act. All substitutions, withdrawals and exchanges must require approval before the securities transaction is executed. Pledged securities statements will be furnished to the City on a monthly basis. Provide a copy of a recent investment rating report provided by a nationally recognized rating agency. Have the capacity of providing all Required Services internally. The City prefers that the responding bank provide services without the use of joint ventures, consortiums or contract service providers because of control issues. The City will determine the acceptability of any arrangements with the objective of the RFP being a comprehensive proposal. 6. Selection Criteria: The following unranked criteria will be used to evaluate the responses and to select the winning proposer: a. Complete response to all required response items on the standard forms provided; b. Bank located in Galesburg; c. Provision of adequate and desired collateral; d. Financial condition of bank providing proposal; 2

3 e. Ability to meet current and projected service requirements over the term of the banking agreement (any past experiences with the bank will be taken into consideration); f. Ability to provide numerous electronic banking services; g. Cost and schedule of providing optional services; h. Best earnings credit rate (ECR) on required compensating balance, if any; i. Best rate of interest paid on accounts; j. Best availability schedule for deposit items, and k. Interest Rates / Fees for Services. When the City has tentatively selected the successful proposer, a conference may be requested to formulate plans in greater detail, to clarify any unclear items, and to otherwise complete negotiations prior to the formal award. At any time during the conference(s), the City may choose to modify the choice of a selected proposer, if there is just cause and the City determines that such a change would be in the best interest of the City. 7. Terms and Conditions: a. The City reserves the right to reject any or all proposals, to waive any irregularities or informalities in any proposal or in the proposal procedures, and to accept or reject any item or combination of items. The award will be to the proposer whose proposal complies with all the requirements set forth in this RFP, and whose proposal in the opinion of the City, is the best proposal taking into consideration all aspects of the proposer s response, including the total net cost to the City. Exception costs will be added or subtracted from the submitted proposal to arrive at a net cost to the City. Failure to include an exception will render the exception as invalid and the proposer will be treated as being in compliance with the specification, regardless of intent. b. In the event that the proposer to whom the services are awarded does not execute a contract within thirty (30) calendar days after the award of the bid, the City may give notice to such proposer of intent to award the contract to the next most qualified proposer or to call for new proposals and may proceed to act accordingly. The City assumes no cost by the proposers in preparation of this proposal. c. Proposers shall thoroughly examine and be familiar with these specifications. The failure or omission of any proposer to receive or examine this document shall in no way relieve any proposer of obligations with respect to this proposal or the subsequent contract. d. Exhibit A-2 indicates an estimate of the number of transactions for a year. This number is the City s best estimate of the average volume and the City in no way guarantees these as minimum or maximum volumes. e. The contract may be terminated by either party by giving written notice to the other party no later than ninety (90) calendar days before the proposed termination date. This 3

4 provision may be exercised only after the contract has been in effect for six (6) calendar months. The bank shall be entitled to just and equitable compensation for any satisfactory work completed to the termination date. Under no circumstances will any damages be paid as a result of the termination of this contract. If the bank exercises the right to terminate the contract early, they cannot bid on future proposals for a period of seven (7) years. f. Qualified proposing banks must submit financial statements for the past two fiscal years. These statements must also include an auditor s unqualified opinion and appropriate notes to the financial statements. g. Equal Employment Opportunity/Anti-Sexual Harassment Policy. During the term of this contract, the Financial Institution shall comply in all respects with the Equal Employment Opportunity Act/Illinois Human Rights Act. The Financial Institution shall have a written equal employment opportunity policy statement declaring that it does not discriminate on the basis of race, color, religion, sex, national origin, disability, or age. Findings of non-compliance with applicable state or federal equal employment opportunity laws and regulations may be sufficient reason for revocation or cancellation of this contract. h. Successful bidder shall comply with the provisions of the Illinois Drug Free Workplace Act and the Americans with Disabilities Act. i. Failure to comply with any of these terms and conditions of this RFP by the awarded bank will be cause for termination of the Banking Services Agreement to be entered into. j. Indemnity 1. Definitions For the purposes of indemnification requirements, the following terms shall have the meanings set forth below: i. The BANK means and includes BANK, all of its employees, agents, assignees, and all of its affiliates and subsidiaries, its subcontractors and/or assignees and their respective servants, agents and employees; and ii. Loss means any and all loss, damage, liability or expenses of any nature whatsoever, whether incurred as a judgement, settlement, penalty, fine or otherwise (including attorney s fees and cost of defense). 2. Indemnity For purposes of this Agreement, BANK hereby agrees to indemnify, defend and hold harmless the City, its employees and agents from any and all Loss where Loss is caused or incurred or alleged to be caused or incurred in whole or in part as a result of the negligence or other actionable fault of the BANK. It is agreed as a specific element of consideration of this Agreement that this 4

5 indemnity shall apply notwithstanding the joint, concurring or contributory or comparative fault or negligence of the City or any third party and, further notwithstanding any theory of law including, but not limited to, a characterization of the City s or any third party s joint, concurring or contributory or comparative fault or negligence as either passive or active in nature; provided, however, that the BANK s obligation hereunder shall not include amounts attributable to the fault or negligence of the City. Nothing in this section shall be deemed to impose liability on the BANK to indemnify the City for loss when the City s negligence or other actionable fault is the sole cause of loss. II. SCOPE OF BANKING SERVICES A. Term of Agreement The banking services detailed in this section will be performed for the City, on a contractual basis for five (5) years, with an option to extend for an additional one (1) year period or renew for an additional five (5) year period. Terms specified in this proposal will remain fixed for the duration of the initial 5- year contract period. B. Collateralization of Account Balances All City funds on deposit must be collateralized at 120% at all times and according to the terms in Exhibit F. Monthly reports detailing the adequacy of collateral must be supplied by the bank within five (5) business days of the close of each month to the City via to the Director of Finance & Information Systems. Any exception to this requirement must be detailed in proposal as an exception. C. Accounts Included: The City will require the following separate accounts: 1. Savings Account 2. Deposit Account 3. Payroll Account 4. Galesburg Public Library 5. Police Pension 6. Fire Pension 7. Revolving Loan 8. Flexible Spending Account 9. Controlled Disbursement Account D. Account Structure All accounts will be set up as interest bearing checking accounts. Interest will be calculated based on the daily balance of these accounts at a daily rate of interest. Interest earned will be posted to the account on the last day of the month. The account analysis statement will include an invoice for banking fees payable or banking fees that are waived per the agreement. 5

6 Interest Earnings The City seeks to earn a competitive return on Bank balances with a simple account structure. For determining interest earnings, all City collected balances will be entitled to earn interest. While the City does not commit to keeping a specific bank balance, the City bank balances (all accounts, not including investments) from May 2014 through April 2015 have ranged as follows: Average Balances Average $12,230,149 Low $10,210,064 High $14,374,953 All charges for banking services shall be reported on a monthly account analysis statement rather than being debited directly against City deposits. The monthly account analysis report shall be delivered to the City within 10 business days of the last day of each month and shall contain a detailed itemization of charges of types and volume, similar to those provided in Exhibit A. Total charges will then be compared to total accumulated earnings credits to determine the total net debit (due the bank) or credit (due the City). It is the goal of the City to maximize the interest earnings on accounts and not pay charges, or for charges to be paid from interest earned. E. Controlled Disbursement Account Structure It is the City s intent to maintain a zero-balance account for its Controlled Disbursement Account. Funds will be transferred to a holding account for this account until required to cover the amount of checks presented in the account (Controlled Disbursement Account). All accounts payable disbursements will flow through the separate zero balance account. This account will be reimbursed at the end of the day or at the opening of the business day in which the checks are presented for payment, depending upon the Bank's policy. This zero-balanced account will always have a zero ledger balance at the beginning of each business day and during the business day. Transfers from the holding account to the account will take place automatically without City initiation. Transfers between this account and all City accounts maintained at the Bank will be recorded as transfers and not as items deposited and checks paid. Any balance remaining in the holding account at 6:30 P.M., including any wire transfers in, will be automatically invested in an overnight investment by the Bank as per the provisions of the automatic Overnight Investment Program. In addition, the City reserves the option to open similar accounts during the Agreement period provided the awarded Bank is furnished with at least thirty (30) calendar days notice before the implementation date. F. On-Line Banking Services The City requires the successful proposer to provide On-Line web-based banking services and software. Please provide a description of the bank s web-based products and services available in Exhibit A-1. The software should be internet-based and include what security 6

7 measures are in place to ensure protection of the City s assets. At a minimum, the City wishes to use PC-based banking for the following: Daily Balance Reporting (ledger, available and collected). Detailed debit and credit postings (cleared checks, deposits, chargebacks, wire transfers in and out, interest payments, etc.) with ability to download data into Microsoft Excel spreadsheet format. Initiation of internal account-to-account transfers. Initiation of regular recurring wire transfers. Initiation of ACH debit and credit transactions. Ability to create saved instructions for recurring ACH debit (collection) or credit (direct deposit) type transactions. Placement of stop payment orders. Multi-level security for various City staff (e.g. inquiry only vs. full system administrator rights). Returned checks for insufficient funds with automated re-presentment tracking. Electronic storage of canceled checks and deposit terms for a minimum of 90 days with access granted to the City. Positive pay exception item images. Debit fraud filter to manage ACH debit transactions Transfers Between Accounts On a regular basis, the City will make transfers between the various accounts listed in Section II C. Only transfers involving bank personnel will be charged. Any transfers between these accounts will be posted to the City only as transfers and not also as items deposited and checks paid. All transfers will be done electronically via the PC by the City. Credit for any transfers must be given on the same day that the transfer is made, no matter what time of day the transfer occurs. G. Payee Positive Pay The City would like to consider utilizing payee positive pay; therefore, the proposing bank must be able to provide this service along with full account reconciliation services, ARP. The payee positive pay must be integrated with the bank teller lines. The City endeavors to reduce the risk of fraud conscious and is willing to entertain any suggestions/products that further address this issue. H. Automated Clearing House (ACH) The bank must be both a sending and receiving bank on the Automated Clearing House system to accommodate a payroll direct deposit program, a utility billing and accounts receivable electronic payment collection program as well as future revenue collection systems. This service must also include full account blocks and filters. The City pays approximately 75% of its vendors via ACH. Presently, the City s payroll and corresponding ACH direct 7

8 deposit file and utility bill collection and corresponding ACH direct deposit files are transmitted to the bank s processing center electronically. I. Availability of Funds Deposits may be made periodically during the business day (9:00 a.m. to 3:00 p.m.) to a designated cashier or location mutually agreed upon by the City and the awarded bank. If the City chooses to utilize the Remote Deposit option, deposits may be made up until 4:00 p.m. and funds deposited via Remote Deposit will have same day availability. The City will be given credit as collected funds, all items which are cleared by your bank on the same day on which the deposit is made. Items deposited which clear at institutions located within the Chicago Federal Reserve Region will be considered collected funds within one business day, as a minimum. All other items deposited will be given credit as collected funds within two business days, as a minimum. The bank will also credit the City s accounts for incoming wire transfers on the day received regardless of the time of receipt during the day. All proposing banks are required to attach a copy of their current availability schedule to the proposal. J. Wire Transfers Incoming The City intends to consider all wire transfers received by the bank prior to the end of the business day, as available for investment by the City, regardless of the time of actual receipt by the bank. Should a wire transfer not be received by the bank, as specified above, then the wire transfer will be traced from origin to destination to ascertain the party responsible for delaying the transfer. If necessary, adjustments will be made as soon as possible for any lost interest. Outgoing The awarded bank agrees to execute any wire transfer order within one (1) hour after notification by the Finance Department through the computer terminal, or by telephone, or by FAX, if necessary. Wire transfers ordered and not received by the destination party by 5:00 p.m. will be traced by the bank from origin to destination to ascertain the party responsible for delaying the transfer. If necessary, adjustments will be made for any lost interest, or charges resulting from a fail to consummate an investment transaction. Other Bank agrees to provide copies of the wire transfer confirmation evidencing the amount, date and time, as well as the wire transfer number for all outgoing wires on a daily basis to the City Finance Department via an transmission to bchockle@ci.galesburg.il.us. 8

9 L. Statement and Advice Frequency Monthly bank statements will be for the full calendar month and will be delivered to the City within five (5) business days after the end of the month. The City requests that the statements, processed checks, deposit items and miscellaneous bank advices be stored, on-line, by the bank and on-line access be given to the City. The City also requests check truncation. A monthly account analysis statement will be completed and delivered to the City within ten (10) business days after the end of the month. K. Designated Account Executive The City requests that the proposing banks provide the names of a designated account executive, as well as an alternate. The designated account executives must have the authority to make timely decisions in the normal course of business on their own. Resumes must be provided for all key account executives designated to service this account. L. Other Banking Services and Conditions 1. All returned checks due to insufficient funds will be automatically re-deposited. If the City s account ultimately needs to be debited, then the Operating account should be charged. 2. All debit and credit memos required to adjust errors caused by the bank will not be charged to the City. All deposit errors must be accompanied by a copy of the particular deposit slip. All bank errors must be corrected within five (5) business days of notification by the City. 3. The banking institution shall provide the following supplies as needed at no cost: 1) printed duplicate deposit slips and 2) locked moneybags. It is estimated a minimum of ten moneybags will be needed. 4. The banking institution will provide one safety deposit box, at no cost, for safekeeping of the City s backup tapes. The size of the box will be 10 x 10. M. Community Reinvestment Act It is important to the City that the awarded bank demonstrates its commitment to provide banking services to the community and that the bank s rating under the Community Reinvestment Act (CRA) is a measure of this commitment. All proposers are required to submit their latest CRA rating as it relates to the Galesburg community with their proposal. All proposers are required to furnish their bank s community involvement and investment program. The City will use this rating and any supporting documentation in the evaluation process (Exhibit C). 9

10 N. Remote Deposit Option The City is interested in utilizing remote deposit. The proposal should include the cost of leasing or purchasing the equipment to accommodate volume and the cost of each deposit and the per item charge. O. Reference Please include the following references (if applicable): Provide three (3) client references of municipal accounts which the bank has served over the past two years and is currently serving. Provide a contact person and telephone number for each customer. Provide two (2) references of similar sized and/or municipal accounts, which have recently left (within the past two years) the bank. Provide a contact person and a telephone number of each organization. How does the City fall in terms of the bank s customer size and complexity of services? P. New Services Are there any additional services that this proposal did not address? Are there services presently in development? What is the bank s track record for implementing new services? Is the bank proactive about staying/being on the cutting edge of the banking services industry? If so, how? Q. Safekeeping Services The City of Galesburg has custodial services established for some of the City s investments. It is requested that the respondent be a trust department of a commercial bank or another qualifying financial institution as specified by the City s Investment Policy. The custodian may not be owned or controlled by the depository institution or its holding company unless it is a separately operated trust institution. The City is not seeking portfolio management services in this RFP. 1. The City will be provided a safekeeping receipt for each security held in trust for the benefit of the City. 2. The custodian must be able to accept physical delivery securities through a correspondent banking relationship in New York City and by the Depository Trust Company of New York (DTC). 10

11 3. The custodian shall provide the City with a statement of securities held in safekeeping at the end of each month. This statement will include all assets held by the custodian s correspondent banks, as well as those held in DTC. A separate securities holding statement will be prepared for the Director of Finance as well as a consolidated statement of holdings. These reports should include the following minimum information for each security held: Securities listed by type Name of issue CUSIP number Date of purchase Maturity date, if applicable Coupon rate, if applicable Face amount of bonds Book value Market value Unrealized gain or loss Interest received for the period Estimated annual income per issue Gain or loss on sales Gross purchases for the month and year to date Gross sales for the month and year to date Brokerage fees for the period These reports will be received by the City no later than 15 days after month end. 4. A separate investment clearing account known as The Investment Safekeeping Account will be established with the custodian. All deposits, withdrawals, securities transactions including purchases and sales, maturities and interest payments will clear through this account. This account will be a money market mutual fund or other type fund as approved by the Director of Finance. If the account is a money market mutual fund it must be disclosed to the City if the custodian will receive 12b-1 or other fees from the fund and in what amount. These fees will be considered by the City to be part of the compensation paid to the custodian. Estimated Volume of Activity: The City intends to transfer all of its assets held, with the exception of certificates of deposit, to the custodian. It is estimated that the City s safekeeping account will generate the following monthly activity. Average number of transactions, sales, purchases and maturities Number of fixed income securities held 1.83/month 9.17/month 11

12 Estimated balance in the investment account $6,682,501/month Actual monthly activity will vary from these figures, depending upon market conditions and cash flow requirements. Bids may be submitted in three different formats; flat fee, percentage of assets, or a special fee schedule detailing all services. For any of the fee structures, please include an example of the expected annual fee based upon a $6,682,501 portfolio using the enclosed expected volume of activity outlined above. Respondents will submit the following in Exhibit A-4: 1. Proposed fee schedule. 2. If a money market mutual fund will be used as the investment account, enclose a current prospectus for the fund. 3. Any additional information (not to exceed three pages in length), which may describe your institution s unique ability to provide the services requested by the City. 4. Provide a copy of your standard custodial agreement. 5. What is the source used by your institution to provide market pricing for report purposes? 6. Would your institution provide on-line access to the City? Is this included in your price schedule? 7. Sample monthly report outlining items requested in the services described above in Section Q, Item 3. III. SUMMARY Please note that the City would like to keep our banking relationship as simple as possible. The City requests that all banks complete the form Proposal for Banking Services, attach the requested forms, reports and Exhibits and return the package (4 copies) to the City in accordance with the instructions in Section I B. The City intends to enter into a formal Banking Services Contract with the awarded bank which will incorporate all provisions of the Request for Proposal. Additional terms and conditions will not be included in the contract unless mutually agreed to by both parties. 12

13 Proposal for Banking Services City of Galesburg Proposal Submitted by: Bank: Address: Telephone: Address: This proposal contains all the information requested in the Request for Proposal, including the following exhibits: Exhibit A-1 Consolidated Proposal Form Exhibit A-2 Summary of Estimated Transactions Provided by City (informational purposes) Exhibit A-3 Additional Information Exhibit A-4 Safekeeping Services Exhibit B Exception to the Proposal Form Exhibit C Community Reinvestment Act Information Exhibit D Certification Exhibit E Investment Policy (informational purposes) Exhibit F Certification of Compliance Banks Audited Financial Statements for the previous two years (submit only one set) Signature Typed Name Title Date 13

14 City of Galesburg Banking Services Proposal Form Exhibit A-1 Bank: Bank Depository Services Account maintenance (9 accounts) Checks paid Deposit slips processed Items deposited FDIC assessment fee Wire transfers: Incoming Outgoing Notification ( ) of wire transfer transaction Transfers between accounts ACH transactions: ACH in ACH out ACH origination ACH returned Re-presentment Check Entry (RCK) Notification ( ) of incoming ACH transaction Return checks converted to RCK Currency processing Stop payments Payee positive pay/ Account Reconciliation Plan (ARP) Electronic Data Interchange (EDI) Payee posit pay per check Payee positive pay exceptions On-line check/deposit archiving Monthly account maintenance Check truncation Charge Per Item 14

15 City of Galesburg Banking Services Proposal Form Exhibit A-1 (Cont d) Bank: Bank Depository Services Remote deposit - Deposit transmission - Transactions - Lease of Equipment/month - Purchase of equipment - File storage / viewing capabilities Charge Per Item Other Base Level Fees (not previously listed above) Expected Monthly Fee Given Transaction History Please add any additional charges that your institution would apply to the City s account(s). 15

16 City of Galesburg Banking Services Proposal Form Exhibit A-3 Additional Information Requested 1. Is your bank insured by FDIC? 2. What is the location of the bank/branch that would be servicing the City? 3. Is your bank an on-line cash and securities member of the Federal Reserve? 4. Will your bank be able to provide the required collateral? 5. Please attach a copy of your most recent investment rating report by a nationally recognized rating agency. 6. Will your bank be providing 100% of the services proposed in the RFP? 7. Provide descriptions of your bank s policy of handling daylight overdrafts. 8. Provide a detailed description of the bank s PC based banking software products available. Please include common features and functionality along with security features which will ensure protection of City assets. 9. Please explain how your proposed Remote Deposit system works. 10. Will your bank be able to provide one 10 x10 or larger safety deposit box, at no cost? If so, please provide location of safety deposit box. 11. Will your bank be able to provide payee positive pay option along with full account reconciliation services, ARP? 12. Will your bank be able to provide debit fraud filter or requirement of prior approval of payment to manage ACH debit transactions? 16

17 City of Galesburg Banking Services Proposal Form Exhibit A-4 SAFEKEEPING SERVICES 1. Include a proposed fee schedule. 2. If a money market mutual fund will be used as the investment account, enclose a current prospectus for the fund. 3. Any additional information (not to exceed three pages in length), which may describe your institution s unique ability to provide the services requested by the City. 4. Provide a copy of your standard custodial agreement. 5. What is the source used by your institution to provide market pricing for report purposes? 6. Would your institution provide on-line access to the City? Is this included in your price schedule? 7. Sample monthly report outlining items requested in the services described under Safekeeping Services of Section Q, Item 3. 17

18 City of Galesburg Banking Services Proposal Exception Form Exhibit B The bank wishes to take exceptions to the following items: Page# Item Estimated Costs 18

19 City of Galesburg Banking Services Proposal Form Exhibit C COMMUNITY REINVESTMENT ACT INFORMATION 1. Please provide your Corporate Headquarters (Parent) in Illinois CRA report of last examination including rating and the period of time the rating occurs. 2. Please define the service area this rating applies to. 3. Please provide the CRA report of last examination for the branch(es) showing Galesburg as part of its geographic area. 19

20 Certification - Exhibit D The undersigned, being an authorized representative of the Contractor, hereby certifies that the Contractor is not barred form submitting a proposal for this contract as a result of a violation of either Section 5/33E-3 or Section 5/33E-4 of Chapter 38 of the Illinois Compiled Statutes concerning bid rigging, rotating, kickbacks, bribery, and interference with public contracts. The undersigned hereby also certifies that the Contractor has adopted an anti-sexual harassment policy in accordance with the Illinois Human Rights Act, as amended. The undersigned hereby also certifies that the Contractor shall comply with all local, state, and federal safety standards. The undersigned hereby also certifies that the Contractor is not delinquent in the payment of any tax administered by the State of Illinois Department of Revenue, unless the amount and/or liability is being properly contested in accordance with the procedures established by the appropriate revenue act. The undersigned hereby also certifies that this proposal is genuine and not collusive or sham; that said Contractor has not colluded, conspired, connived, or agreed, directly or indirectly, with any other Contractor or person, to put in a sham proposal or to refrain from submitting a proposal; and has not in any manner, directly or indirectly, sought by agreement or collusion, or communication or conference with any person, to fix the proposed price elements of said proposal, or that of any other Contractor, or to secure any advantage against any other contractor or any person interested in the proposed contract. Dated at this day of, 20. By: (Signature) Its: (Title), being duly sworn, deposes and says that he/she is the of and that the statement above is true and correct. Subscribed and sworn before me this day of, 20 Notary public: My commission expires: 20

21 Table of Contents Investment Policy Exhibit E POLICY STATEMENT SCOPE OBJECTIVE Safety Credit Risk Interest Rate Risk Liquidity Yield STANDARDS OF CARE Prudence Ethics and Conflicts of Interest Delegation of Authority SAFEKEEPING AND CUSTODY Authorized Financial Dealers and Institutions Internal Controls Delivery vs. Payment SUITABLE INVESTMENTS Investment Types Collateralization Repurchase Agreements INVESTMENT PARAMETERS Diversification Maximum Maturities Competitive Bid REPORTING Methods Performance POLICY CONSIDERATIONS Exemptions Amendments ATTACHMENTS

22 ADOPTION LIST OF AUTHORIZED PERSONNEL CURRENT INVESTMENT BIDDERS LIST GLOSSARY OF CASH MANAGEMENT TERMS AUTHORIZED FINANCIAL DEALERS INVESTMENT POLICY ACCEPTANCE CITY OF GALESBURG, ILLINOIS INVESTMENT POLICY Exhibit E POLICY STATEMENT It is the policy of the City of Galesburg to invest public funds in a manner which will provide the highest investment return with the maximum security while meeting the daily cash flow demands of the City and conforming to all state and local statutes governing the investment of public funds. SCOPE The investment policy applies to all investment transactions and activities of the City except for the Police Pension Fund and the Fire Pension Fund, which are subject to the order of the Board of Trustees of each respective fund. All financial assets of current funds, and other funds that may be created from time to time, shall be administered in accordance with the provisions of this policy. The Board of Trustees of the Galesburg Public Library may establish a separate investment policy to govern the investment activities of the City s Public Library Fund and any special revenue, debt service, or capital projects funds that the City may create specifically for the Library s benefit, subject to the approval of the City Council. In the absence of a separate, validly approved investment policy for the Library funds, this policy shall govern the investment activities of the Library. OBJECTIVE The primary objective, in priority order of the City of Galesburg investment activities shall be safety, credit risk, liquidity and yield. 22

23 Safety Safety of principal is the foremost objective of the City. Investments of the City shall be undertaken in a manner that seeks to insure the preservation of capital in the portfolio. Credit Risk Credit Risk is the risk of loss due to the failure of the security issuer or backer. Credit risk may be mitigated by: Limiting investments to the safest types of securities Pre-qualifying the financial institutions, broker/dealers and advisors with which an entity will do business, and Diversifying the investment portfolio so that potential losses on individual securities will be minimized. Interest Rate Risk Interest rate risk is the risk that the market value of securities in the portfolio will fall due to changes in general interest rates. Interest rate risk may be mitigated by: Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity, and By investing operating funds primarily in shorter-term securities Liquidity The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This is accomplished by structuring the portfolio so that securities mature concurrent with cash need to meet anticipated demands (static liquidity). Furthermore, since all possible cash demands cannot be anticipated, the portfolio should consist largely of securities with active secondary or resale markets (dynamic liquidity). A portion of the portfolio also may be placed in money market mutual funds or The Illinois Funds, a local government investment pool sponsored by the State of Illinois, which offers same-day liquidity for short-term funds. Yield The City s investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the City s risk constraints and liquidity needs. The core of investments is limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed. Securities shall not be sold prior to maturity with the following exceptions: 1) a declining credit security could be sold early to minimize loss of principal; 2) a security swap would improve the quality yield, or target duration in the portfolio; or 3) liquidity needs of the portfolio require that the security be sold 23

24 STANDARDS OF CARE Prudence The standard of prudence to be used in the investment function shall be the Prudent Person standard and shall be applied in the context of managing the overall portfolio. This standard states 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 expected income to be derived. The Investment Officer and those delegated with investment authority under this policy, when acting in accordance with the written procedures and this policy, and in accord with the Prudent Person Rule, shall be relieved of personal responsibility and liability in the management of the portfolio. Ethics and Conflicts of Interest Officers and 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. Delegation of Authority Authority to manage the City of Galesburg s investment program is granted to the Director of Finance and derived from the state statutes. The Director of Finance is designated as the Investment Officer and is responsible for investment management decisions and activities. All participants in the investment process shall seek to act responsibly as custodians of the public trust. The Investment Officer shall develop and maintain written administrative procedures for the operation of the investment program, which are consistent with this investment policy. Procedures will include reference to selection of broker/dealers and financial institutions, safekeeping, repurchase agreements, wire transfer agreements, banking services contracts, and other investment related activities. The Investment Officer shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials and staff. The Investment Officer shall designate the Senior Accountant as a liaison/deputy in the event circumstances require timely action and the Investment Officer is not available. No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the Investment Officer. SAFEKEEPING AND CUSTODY Authorized Financial Dealers and Institutions A list will be maintained of financial institutions authorized to provide investment services. In addition, a list will also be maintained, by the Investment Officer, of approved security brokers/dealers selected by creditworthiness. No public deposit shall be made except to a qualified public depository as established by the state statutes. 24

25 The Investment Officer may approve a broker or dealer to sell securities to the City if the broker or dealer meets the following criteria: Provides an audited financial statements for the past three fiscal years. Provides proof of membership in the Securities Investor Protection Corporation. Provides proof of registration with the Securities and Exchange Commission. Provides proof of membership in a self-regulatory organization such as the National Association of Securities Dealers, the Financial Industry Regulatory Authority or the New York Stock Exchange. Provides proof of state registration. Has been in operation for at least 10 years, or in the case of broker/dealer companies that have been created as result of mergers or acquisitions, have a substantial operating history. Once a broker/dealer is approved to sell securities to the City, the broker/dealer must continue to provide its audited annual financial statements to the Investment Officer within 180 days of the end of its fiscal year. All security brokers/dealers with whom the City transacts business will be provided a copy of this Investment Policy. All security broker/dealers will provide the City with certification of having read and understood and agreeing to comply with the City s investment policy. An annual review of the registration of qualified broker/dealers will be conducted by the Director of Finance. Internal Controls The Investment Officer is responsible for establishing and maintaining an internal control structure designed to ensure that assets of the City are protected from loss, theft or misuse. The controls shall be designed to insure that the assets of the entity are protected from loss, theft or misuse. The internal control structure shall be designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognized that (1) the cost of a control should not exceed the benefits likely to be derived and (2) the valuation of costs and benefits require estimates and judgments by management. Accordingly, the Director of Finance shall establish a process for an annual review by an external independent review by the City s independent auditor to assure compliance with policies and procedures. The internal controls shall address the following points: Control of collusion Separation of transaction authority from accounting and recordkeeping Custodial safekeeping Avoidance of physical delivery securities Clear delegation of authority to subordinate staff members Written confirmation of transactions for investments and wire transfers Development of a wire transfer agreement with the lead bank and third-party custodian 25

26 Delivery vs. Payment All security transactions, where applicable, entered into by the City, shall be conducted on a delivery-versus-payment (DVP) basis to ensure that securities are deposited in an eligible financial institution before the release of funds. SUITABLE INVESTMENTS Investment Types The City may invest in any type of security allowed for in Illinois statutes under the Public Funds Investment Act (30 ILCS 235/1) regarding the investment of public funds for home rule municipalities. With Council s approval prior to the purchase of the following type of investment, approved investments also include an adjustment to the following section of 30 ILCS 235/1 a-1: With Council s prior approval, the City may also invest in unrated bonds or debt certificates issued by any local governmental unit of the State of Illinois, of any other state, or of any political subdivision or agency of the State of Illinois or of any other state, whether the interest earned thereon is taxable or tax-exempt under federal law. The debt certificates shall be registered in the name of the City or held under a custodial agreement at a bank. If Illinois State statutes for investment of public funds approve additional types of securities they will be eligible for investment by the City. This policy shall be amended to reflect the additional types of securities for investment and the amended version approved by the City Council. Direct specific investment parameters for the investment of public funds in Illinois are found in the Illinois State Statutes, Public Funds Investment Act 30ILCS 235. Collateralization Securities will be held by an independent third party custodian designated by the City Council and evidenced by safekeeping receipts and a written custodial agreement. All security serving as collateral shall be specifically pledged to the City and placed in a custodial account at a Federal Reserve Bank, a trust department of a commercial bank or through another financial institution. The custodian may not be owned or controlled by the depository institution or its holding company unless it is a separately operated trust institution. Funds on deposit in excess of FDIC or SIPC limits must be secured by some form of collateral, witnessed by a written agreement. The amount of collateral provided will not be less than 120 percent of the fair market value of the net amount of public funds secured. Pledged collateral shall be held in safekeeping by an independent third party depository, trust institution, or a Federal Reserve Bank and evidenced by a safekeeping agreement in an effort to satisfy the Uniform Commercial Code (UCC) requirement for control. The UCC states that the depositor does not have a perfected interest in a security unless the depositor controls it. Control means that swaps, sales, and transfers cannot occur without the depositor s written approval. A detail monthly statement listing a description of securities pledged and held in safekeeping must be provided to the City. The City will accept any of the following securities as collateral: Negotiable obligations of the United States Government; or 26

27 Negotiable obligations of any agency or instrumentality of the United States Government guaranteed by the full faith and credit of the United States Government; or Negotiable obligations of the State of Illinois Substitutions of collateral should meet the requirements of the collateral agreement, be approved in writing prior to release, and the collateral should not be released until the replacement collateral has been received. Repurchase Agreements Repurchase agreements shall be consistent with GFOA Recommended Practices on Repurchase Agreements. INVESTMENT PARAMETERS Diversification The investments shall be diversified by: Limiting investments to avoid overconcentration in securities from a specific issuer or business sector (excluding U.S. Treasury securities or investments federally insured such as with FDIC), Limiting investment securities that have higher credit risks, Investing in securities with varying maturities and Continuously investing with a portion of the portfolio in readily available funds such as IL Funds, money market or overnight repurchase agreements to ensure that appropriate liquidity is maintained in order to meet ongoing obligations. Maximum Maturities To the extent possible, the City will attempt to match its investments with anticipated cash flow requirements. We recognize that there is a permanent part of the portfolio, and when the increase in return for extending maturities is compelling, the Director of Finance may consider extending a segment of the portfolio into longer-term maturities. The maximum maturity for City investments shall be ten (10) years. The average maturity of the total portfolio shall not exceed five (5) years. Because of inherent difficulties in accurately forecasting cash flow requirements, a portion of the portfolio should be continuously invested in readily available funds such as IL Funds, money market funds, or overnight repurchase agreements to ensure that appropriate liquidity is maintained to meet ongoing obligations. Competitive Bid A competitive bid shall be conducted, except for funds placed in the Public Treasurers Investment Pool and/or approved savings accounts or, when the City directly invests surplus funds in investment instruments. 27

28 REPORTING Methods The Investment Officer shall submit quarterly reports to the City Manager and the City Council containing sufficient information to permit an informed outside reader to evaluate the performance of the investment program. The report should summarize investment securities held at the end of the reporting period, maturities, returns, percentage of the portfolio which each type of investment represents or other factors of importance. The market value of the portfolio shall be included within the quarterly reports. Performance The investment portfolio will be managed in accordance with the parameters specified within this policy. The portfolio, taking into account the City s investment constraints and cash flow needs, should obtain a comparable rate of return during a market/economic environment of stable interest rates. A series of appropriate benchmarks shall be established against which portfolio performance shall be compared on a regular basis. POLICY CONSIDERATIONS Exemptions Any investment currently 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. Amendments This policy shall be reviewed on an annual basis. Any changes must be approved by the Director of Finance and any other appropriate authority, as well as the individual(s) charged with maintaining internal controls. ATTACHMENTS The following documents, as applicable, are attached to this policy: 1. List of authorized personnel 2. Relevant investment statutes and ordinances 3. List of current authorized Broker/Dealers and Financial Institutions 4. Glossary of Terms 5. Authorized Financial Dealers Investment Policy Acceptance ADOPTION The City s investment policy shall be adopted by the City Council. The Investment Officer, City Manager and City Council shall review the policy on an annual basis. The investment policy is available in the City Clerk s office at City Hall, 55 West Tompkins Street, Galesburg, IL. This policy supersedes all prior investment policies. 28