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Investment Program for Public Funds

GFOA Newsletter  February 16, 2017

Type: Best Practice

Governments have a fiduciary responsibility in managing their funds, including the ongoing management and monitoring of investment activity. Developing a public funds investment program is essential to effective financial management, and it sets the foundation for creating protocols and internal controls, constructing and managing the portfolio, navigating changing economic conditions, and communicating information to stakeholders. While different types and sizes of governments require differing levels of complexity in their investment programs, all governments need to recognize their fiduciary responsibility. Having an established public funds investment program provides the structure to effectively set policy, make decisions, and safeguard a government’s financial assets.


GFOA recommends that all governments establish a public funds investment program by completing the following steps:

  1. Develop an investment leadership team – The investment leadership team should identify appropriate individuals to provide oversight, set policy and strategy, and administer the program. Typically, this would include senior-level representatives from finance, administration, risk, legal, and the governing body. This group will participate in establishing the public funds investment program.
  2. Identify the funds being invested and their cash flow characteristics – Determine which funds will be invested and whether they are excess operating funds, bond proceeds, pension fund assets, other some other type of funds. To establish the proper investment parameters for each classification of funds, estimate how frequently they will be used; this will require an understanding of cash flow requirements and preparation of an appropriate model.
  3. Review all applicable laws and regulations – Research all applicable federal, state/provincial, and local laws and regulations to become familiar with required parameters that may have been established by an overlapping entity.
  4. Establish a risk profile – For each classification of funds, establish a risk profile that is consistent with the government’s risk tolerance.
  5. Determine the portfolio management team – Decide if the investment portfolio will be managed using internal staff and/or engaging an external investment consultant.
  6. Create an investment policy1 – For each classification of public funds, create a written investment policy, which will be adopted by the governing body. The investment policy documents key guidelines and expected outcomes during the process of establishing the public funds investment program, as well as other criteria.
Treasury and Investment Management

1 See GFOA Best Practice, Investment Policy.

Approved by GFOA’s Executive Board:
January 2017

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