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Policy: FS09
Title: Investments
Department/Division: Corporate Services/Revenue
Purpose
1.
The purpose of this policy is to ensure the prudent management of the City's
surplus funds and investment portfolio.
Scope
2.
This policy applies to all investments of Revenue Funds, Reserves and
Reserve Funds.
Definitions
3.
For the purposes of this policy,
"City" means The Corporation of the City of Owen Sound;
"Municipal Act" means the Municipal Act, 2001, S.O. 2001, c. 25;
"Reserve Funds" means funds that have been set aside by either by-law or
by requirement of provincial legislation to meet a future event. As a result,
funds are either "discretionary" being those created by Council or "statutory"
being those set up by virtue of a requirement of provincial statute.
Municipal Council may set up reserve funds for any propose from which they
have the authority to spend money ;
"Reserves" means an appropriation from net revenue at the discretion of
Council, after the provision for all known expenditures. It has no reference
to any specific asset and does not require the physical segregation of money
or assets as in the case of a reserve fund ;
"Revenue Funds" means cash on hand in excess of existing liabilities that
otherwise relate to operating balances, accounts payable, deposits on hand
or accumulated surpluses.
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Policy
Authority
4.
The City has the power to invest under section 418 of the Municipal Act and
only in those securities prescribed under O. Reg. 438/97.
Goals
5.
The assets of the City shall be invested and reinvested to:
a.
achieve the preservation of the capital in the overall portfolio;
b.
allow the City to remain sufficiently liquid to meet all operating or cash
flow requirements and to minimize temporary borrowing requirements;
c.
obtain a competitive rate of return to maximize the return earned on
the City's portfolio by seeking competitive bids for investment
products, seeking information and advice from financial sector
professionals and assessing the market conditions relative to the City's
need for cash.
Canadian currency
6.
The City shall invest only in securities that are expressed or payable in
Canadian dollars.
Authorized Investments
7.
The following are authorized investments:
a.
bonds, debentures, promissory notes or other evidence of
indebtedness issued or guaranteed by:
i.
the Government of Canada;
ii.
a Province or Territory of Canada;
iii.
a municipality in Canada;
iv.
a school board in Canada;
v.
the Ontario Strategic Infrastructure Financing Authority;
vi.
the Municipal Finance Authority of British Columbia;
vii.
a non-profit housing corporation incorporated under section 13
of the Housing Development Act, R.S.O 1990, c. H.18; and
Page 3 of 7
viii.
a local housing corporation as defined in section 2 of the Social
Housing Reform Act, 2000, S.O. 2000, c. 27;
b.
bonds, debentures, deposit receipts, deposit notes, certificates of
deposit or investment, acceptances of similar instruments issued,
guaranteed or endorsed by:
i.
a bank listed in Schedule I or II to the Bank Act, S.C. 1991, c.
46;
ii.
a loan corporation or trust corporation registered under the Loan
and Trust Corporation Act, R.S.O. 1990, c. L.25; or
iii.
a credit union or league to which the Credit Unions and Caisses
Populaires Act, 1994, S.O. 1994, c. 11 applies; and
c.
the Money Market Fund and Bond Fund administered by the Local
Authority Services Limited (One Investment).
8.
All authorized investments must meet or exceed the minimum credit ratings
as detailed in Authorized Investments and Sector Limitations found in
Appendix 'A' to this policy and are to be used in conjunction with the
Portfolio Term Limitations as detailed in Appendix 'B' to this policy.
Authority to Make Investments
9.
The Treasurer is authorized to:
a.
invest surplus funds of the City in accordance with section 418 of the
Municipal Act, O. Reg. 438/97 and this policy;
b.
enter into arrangements with banks, investment dealers and brokers,
and other financial institutions for the purchase, sale redemption,
issuance, transfer and safekeeping of securities;
c.
execute and sign documents on behalf of the City along with the
Deputy Treasurer, and or the Mayor;
d.
designate certain City staff to carry out the day-to-day management of
the investment program; and
e.
perform all other related acts in the day-to-day management of the
investment program.
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Controls
10.
The Treasurer is responsible for the development and maintenance of
suitable procedures to provide for effective control and management of
investments. These procedures shall include that:
a.
the Treasurer designates all persons authorized to enter into
investment transactions on behalf of the City;
b.
all cash management transactions shall be recorded and interest
earnings distributed to the various funds, as the case may be, in
accordance with City policies and generally accepted accounting
practices for Ontario municipalities;
c.
annual reviews shall be carried out to determine whether or not the
investment guidelines provided by this policy are being followed and to
evaluate the adequacy of internal controls; and
d.
in the event that the rating of an investment held by the City falls
below the minimum requirements set out in Appendix "A", the
Treasurer shall create a workout plan that includes an expected
timeline for disposing of the downgraded investment and then
disposing of it in accordance with the plan. This could involve the City
selling the investment prior to maturity or allowing the investment to
mature. The plan shall utilize information and/or advice provided by
the City's financial advisors and shall take into consideration current
market conditions, the time horizon of the City, the remaining tenure
of the investment, the credit risk of the investment, as well as the
current market value and book value of the investment.
Reporting
11.
The Treasurer shall prepare and provide to Council each year an investment
report. The investment report shall contain:
a.
a statement about the performance of the portfolio of investments of
the municipality during the period covered by the report;
b.
a description of the estimated proportion of the total investments of a
municipality that are invested in its own long-term and short-term
securities to the total investment of the municipality and a description
of the change, if any, in that estimated proportion since the previous
report;
c.
a statement by the Treasurer as to whether or not, in their opinion, all
investments were made in accordance with this Policy;
Page 5 of 7
d.
a record of the date of each transaction in or disposal of its own
securities, including a statement of the purchase and sale price of each
security; and
e.
such other information that Council may require or that, in the opinion
of the Treasurer, should be included.
Related Policies & Legislation:
Internal
12.
N/A
External
13.
The Municipal Act.
14.
O. Reg. 438/97.
Appendices:
15.
Appendix 'A' - Authorized Investments and Sector Limits
16.
Appendix 'B' - Portfolio Term Limitations
Revision History:
By-law Number
Date
2022-088
July 25, 2022
Page 6 of 7
Appendix 'A' to Policy No. FS09
Authorized Investments and Sector Limitations
Minimum Credit
Rating *
Issuer
Bond
Market
Money
Market
Sector/Credit
Exposure Limitation
(Maximum Portfolio
Limit)
Sector Term
Limitation
(Maximum
Portfolio Limit)
(A)
(B)
(C)
(D)
(F)
Government of Canada
or their Agencies
N/A
N/A
100%
15 years
Provinces or their
Agencies
N/A
N/A
75%
15 years
Canadian Municipalities
and School Boards
AAA
50%
10 years
AA
25%
10 years
A
10%
5 years
Municipal Investment
Pools (LAS - ONE
Investments)
50%
n/a
Schedule I Banks and
guarantees: CIBC,
Bank of Montreal, Bank
of Nova Scotia,
National Bank of
Canada, Royal Bank of
Canada, Toronto-
Dominion Bank
AA(low)
R1 mid
75%
10 years
A(low)**
R1 low
25%
5 years
Other Schedule I
Banks**
AA(low)
R1 mid
15%
5 years
A(low)**
R1 low
5%
5 years
Schedule II Banks and
guarantees
A(low)**
R1 mid
5%
5 years
Loan or trust
corporations
AA(low)
R1 mid
5%
5 year
Credit unions
5%
1 year
Municipal Finance
Authority of British
Columbia
A(low)
R1 mid
5%
15 Years
Non-Profit or Local
Housing Corporation
AA(low)
* Ratings based on DBRS, Moody's or Standard & Poor's
** 2 year minimum term for bond, debenture, promissory note or other evidence of indebtedness with a credit rating between
A(low) and A(high)
Page 7 of 7
Appendix 'B' to Policy No. FS09
Portfolio Term Limitations
Term Limitation
Percentage
Minimum
Maximum
Less than 90 days
20%
100%
Less than 1 year
30%
100%
From 1 year up to, but not including 5 years
0%
60%
From 5 years up to, but not including 10 years
0%
40%
From 10 years up to 20 years
0%
20%