FIN-025: Internal Investment Program for University Units

University units may not invest cash directly with banks or financial institutions. (See policy FIN-020, Establishing and Managing Bank, ATMs, and Other Financial Institution Accounts for University Funds.) University units holding surplus cash balances may invest those funds with the University’s Internal Bank provided the guidelines of the policy are met. University units may choose from two investment pools offered under the Program, provided pool guidelines are met. Investment in multiple pools is permitted. The two pools are designed to offer investors short-term (ST) and intermediate-term (IM) options. In general, larger investments made for a longer term will earn a higher rate of return; however, preservation of the principal is not guaranteed. Treasury Management will oversee the investment pools to assess compliance with minimum balance and term requirements, as well as monitor for operating cash balance deficits.

1. Pool Structure:

   The Internal Investment Program consists of two pools, each with differing minimum average balance and minimum term requirements as follows:

   Pool	Minimum Avg. Balance	Minimum Term
   Short-term	$10,000	1 year
   Intermediate-term	$100,000	2 years

   University units should use these requirements to determine which Internal Investment Pools are appropriate for the surplus cash balances they hold. A University unit that fails to meet the minimum pool requirements may be subject to penalties and/or be required to remove funds from the pool in which they are invested.

2. Qualifying Fund Sources:

   Cash balances eligible to be invested in the Internal Investment Program include:

   Qualifying Fund Sources	Award Type (GA)	Fund Source (GL)
   Gift & Endowment Distribution Funds	DR ER DU EU	2075 2090 1100 1105
   Local Plant Funds	LP	5045 / 5055 / 5110 / 5215 / 5430
   E & G Reserves	SP SS	5212 1005
   Auxiliary Operating and Reserve Funds	SP LP SA LA	5210 5215 1010 / 1120 / 1140 1125
   Unrestricted: Other Sources (Local)	IP	1165
   Medical Center Operating and Reserve Funds	All funds.

   [Note: For a detailed description of the award types, see Mapping Prefix to Award Types.]

3. Minimum Average Balance Requirements:

   For the short-term pool, the minimum average balance requirement represents the minimum average quarter-end balance required during a calendar quarter. Investors in the ST Pool are permitted to move money into and out of any ST Pool investment account provided the minimum average balance is maintained.

   For the intermediate-term pool, the minimum average balance requirement represents the minimum average quarter-end balance required during a calendar quarter. Investors in this pool must maintain any initial and subsequent investments in the pool for the minimum term described above. Withdrawals made prior to the requirements being met are subject to fees and corrective actions as defined below in Section 6.

   An exception may be granted if a University unit is making its first investment into the Program in the middle of a calendar quarter. University units failing to meet the minimum balance requirements may be subject to a fee and/or removal from the pool holding the funds.

4. Minimum Term Requirements:

   Minimum term requirements represent the amount of time an investment, which meets a pool’s minimum average balance requirement, must be kept in the pool. University units failing to meet minimum term requirements may be subject to a fee and/or removal from the pool holding the funds.

5. Compliance Tracking:

   Treasury Management will track the following items to monitor compliance with the Program’s guidelines:

   1. Minimum Average Balance – At the end of each calendar quarter, Treasury Management will review the average quarter-end balance for each investment in the Program for the past quarter to determine if any balance failed to meet the minimum average balance requirement.
   2. Minimum Term Requirements – At the end of each calendar quarter, Treasury Management will monitor the beginning, ending and average daily balances for investments in the Program to determine if funds have been kept in the Program for the required term.
   3. Negative Cash Balances – At the end of each calendar quarter Treasury Management will monitor operating cash balances to determine if deficits exist in other accounts held by the investing University unit.
6. Fees Assessed for not Meeting Minimum Requirements:

   The following table lists the fees which may be assessed, and the actions that may be taken, for failure to meet Program requirements:

   Requirement Not Met	Fee	Action
   Minimum Balance	Forfeiture of interest for the quarter where balance was below minimum.	Removal from pool.
   Minimum Term	Forfeiture of interest for the quarter where balance was below minimum.	Removal from pool.
   Negative Operating Cash Balance	Forfeiture of interest for the quarter where balance was below minimum.	Required redemption of investments equal to any negative operating cash balances; potential removal from pool.

7. Interest Rates:

   Interest rates offered under the Program will be market-based rates. The rate structure by pool is as follows:

   Short-term Pool	90 day t-bill
   Intermediate Pool	BoA US TSY 1-5 yr

   [t-bill: treasury bill; BoA: Bank of America]

8. Advance Notification Requirements:

   University units investing or redeeming aggregate funds in excess of $10 million within any calendar month are required to provide written notification to Treasury Management at least 45 days in advance of the transactions. In cases where advance notification is not provided, Treasury Management will make a best-efforts attempt to meet the University unit’s request in a timely manner. Treasury Management does not guarantee the preservation of principal invested in the program; however, it does make all attempts to insulate investors from earnings volatility and periods of negative return.

9. Making an Investment:

   Before making an investment, a University unit must decide which pools are appropriate based on the size and term of its investment. University units may invest in multiple pools simultaneously provided the minimum average balance and minimum term requirements are met for each pool. If University units anticipate having a cash balance in excess of $1 million for at least five years, they may wish to consider creating a quasi endowment account (see policy FIN-026, Creating and Managing Quasi Endowment Accounts) after considering the risks inherent in longer-term investments.