Section VI: Finance

Last Updated Date

April 1, 2023

FINANCIAL MANAGEMENT

The Addison Public Library’s fiscal year shall be the first day of May to the last day of April. Financial resources are the responsibility of the Board of Trustees. The Board shall:

Have a clear plan for acquisition of financial resources to pay for the programs and services provided by the Addison Public Library;
Provide guidelines for management and allocation of financial resources which shall produce optimum benefit for those it serves;
Monitor and evaluate the financial plans and guidelines of the Addison Public Library to ensure the financial integrity of the Addison Public Library.

BUDGETING

An annual operating budget shall be prepared by the Director and presented to the Board for final approval at the annual meeting. The budget shall reflect the cost of carrying out the programs and services of the Addison Public Library for the fiscal year. This budget shall also reflect the anticipated revenues of the Addison Public Library.

The budget shall be viewed by the Board as its financial plan for the Addison Public Library, and approval of the budget by the Board shall be authority for the Director to manage the Addison Public Library’s finances according to the plan without seeking further approval of the Board as long as the expenditures have been previously appropriated. However, the Director shall keep the Board well informed of the ongoing status of the financial plan and shall not make expenditures outside the budget plan without seeking Board approval to amend the budget. Amendments to the budget shall be presented to the Board for approval for any of the following reasons:

Addison Public Library enters into contracts that were not included in the approved budget;
Management proposes a major expenditure that was not included in the approved budget;
Significant unanticipated revenues are received or expenses are higher than projected.

According to the Illinois Local Library Act the Board of Trustees shall provide a statement of financial requirements for the library in its appropriation within 30 days after the expiration of each fiscal year.

FUND BALANCES

Maintaining stable and adequate fund balances is necessary to ensure financial stability, cash flow for operations and the assurance that the Library will be able to respond to emergencies with fiscal strength. Unreserved fund balance at year-end, defined as unreserved cash available at the completion of each fiscal year, can permit expenditures to temporarily exceed revenue until a permanent revenue enhancement or expenditure control is put into place.

The Library will strive to maintain a balance for every fund, with the exception of the Capital Improvement Fund, that is between 50-100% of average annual expenditures for the prior three years. Unexpected situations may cause fund balances to fall below the minimum level.

The Library Director is responsible for monitoring revenue and expenditures. If during the year, projections suggest that revenue will not meet expectations, the Director will take the following actions:

Review expenses with Department Heads
Reduce operational expenditures, where appropriate, while maintaining the adopted budget goals, and
Present to the Board of Trustees other expenditure control options, including those that might modify the goals established in the adopted budget.

Any time the unreserved fund balance for the General Corporate Fund the drops below the minimum targeted level of 50%, the Library Director will inform the Library Board of Trustees.

The Board will review all fund balances on an annual basis in conjunction with the annual budget review. Balances in excess of the required amount will be transferred to the Capital Improvement Fund each year following this annual review.

CAPITAL IMPROVEMENT FUND

The Addison Public Library maintains a working capital reserve in accordance with 75 ILCS 5/5-8 for the purposes authorized by statute. The Board of Trustees in its annual appropriation determination shall specify for what purposes these special funds are being accumulated and shall amend its building plan based upon an asset replacement schedule, reserving the right to alter or amend the plan as circumstances may require and as the Board may determine appropriate.

The Board also reserves the right to continue to reserve funds pursuant to 75 ILCS 5/5-8 without making any expenditure until such time as the Board determines the specific expenditures to be appropriate.

ACCOUNTING

The accounting system used by the Addison Public Library shall utilize generally accepted accounting principles that are required by regulatory agencies for government units. The Governmental Accounting Standards Board is the accepted standard-setting body for establishing governmental accounting and financial reporting principles.

The accounting practices and procedures used by the Addison Public Library shall allow for adequate management of the Addison Public Library’s revenues and expenditures and shall provide adequate systems of monitoring by the Board of Trustees as well as outside auditors.

Reporting Entity - As required by generally accepted accounting principles, the financial statements include all accounts of the Addison Public Library. The library has a separately elected Board from that of the Village of Addison and provides services to residents within the geographic boundaries of the Village.

Measurement Focus, Basis of Accounting, and Basis of Presentation - The accounts of the library are organized and operated on the basis of funds and account groups. A fund is an independent fiscal and accounting entity with a self-balancing set of accounts. Fund accounting segregates funds according to their intended purpose and is used to aid management in demonstrating compliance with finance-related legal and contractual provisions. The minimum number of funds is maintained consistent with legal and managerial requirements. The account group is a reporting device to account for certain assets of the governmental funds not recorded directly in those funds.

Governmental funds are used to account for the library’s general governmental activities. Governmental fund types follow the flow of current financial resources measurement focus and the modified accrual basis of accounting. Under the modified accrual basis of accounting revenues are recognized when susceptible to accrual (i.e., when they are “measurable and available”). “Measurable” means the amount of the transactions can be determined and “available” means collectible within the current period or soon enough thereafter to pay liabilities of the current period. The library considers all revenues available if they are collected within 60 days after year-end. Expenditures are recorded when the related fund liability is incurred, except for certain compensated absences and claims and judgments which are recognized when the obligations are expected to be liquidated with expendable available financial resources.

Property taxes and interest are susceptible to accrual. Other receipts, such as fines and other taxes, become measurable and available when cash is received by the library and are thus recognized as revenue at that time.

Entitlements and shared revenues are recorded at the time of receipt or earlier if the susceptible to accrual criteria are met. Expenditure-driven grants are recognized as revenue when the qualifying expenditures have been incurred and all other grant requirements have been met.

Governmental funds include the following fund types:

General Fund is the library’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund.
Special Revenue Funds account for revenue sources that are legally restricted to expenditures for specific purposes.
Capital Improvement Fund accounts for the acquisition of fixed assets or construction of major capital projects.

FINANCIAL REPORTS AND AUDITS

Reports reflecting the financial condition of the Addison Public Library shall be presented to the Board monthly. These financial reports shall include:

Monthly revenue and expenditure statements for the month and year-to-date with comparison to the budget in all funds;
Payroll distribution summary;
Disbursement report for the month.

An independent auditor appointed by the Board shall conduct an annual audit of Addison Public Library’s finances in accordance with the law and generally accepted accounting principles. The scope of those audits shall be determined from time to time by the Board.

SIGNING CHECKS

The Director is authorized to sign checks under $500 for all fund accounts. Checks that are $500 or more must be signed by any two authorized signatories as follows: the President of the Board, the Treasurer of the Board, optional other Board member(s) designated as signatories by the Board, and the Director. The All Disbursements Report for the month is approved at the Board meeting before checks are distributed to the vendors.

It is the responsibility of the Director to ensure that signatures are procured from appropriate signatories so that payment can be made on obligations of the Addison Public Library. It is also the responsibility of the Director to establish adequate controls and safeguards to ensure disbursement of funds only for proper purposes.

It is the responsibility of all check signers to ensure that there is adequate documentation, consistent with good internal controls, for valid payment of checks they sign.

ROUTINE BILL PAYMENT

At each regular meeting of the Board of Trustees, routine bills are presented for consideration and approval by the Board.

If a quorum of the Board is not available or a regular monthly meeting is cancelled, the Finance Committee (a standing committee under Article V of the Addison Public Library By-Laws) is delegated the authority to meet to review and authorize payment of all routine bills that are within the Budget, and not exceeding it. The full Board will ratify such payment at the next regularly scheduled meeting of the Board. In such cases, the Finance Committee (a standing committee under Article V of the Addison Public Library By-Laws) will schedule a meeting in compliance with the Open Meetings Act.

Monthly General Disbursements

Librarian’s Checking Account - Checks from the Librarian’s Account are issued with the approval of the Library Director or, in the Director’s absence, the approval of the Assistant Director. With approval of the Monthly General Disbursements, the Board will ratify disbursements that have been made since its last meeting.
General Disbursements - The Board approves disbursements to vendors for good and services that are billed to the library since its last meeting.

Monthly Payroll Disbursements

Payroll Checks - The Board will ratify the payroll disbursements that have been paid according to the adopted compensation plan.

USE OF LIBRARIAN’S CHECKING ACCOUNT, PETTY CASH, AND CREDIT CARDS

Librarian’s Checking Account

The Board has established a librarian’s checking account, which is funded at a maximum of $1,000 to cover expenses that require payment before the next regularly scheduled Board meeting. Such expenditures include professional growth activities, programming materials, purchases of coins for the cash registers, refreshments for meetings, etc. Checks to be written must be approved and signed by the Director as well as being under $500 each. The Board of Trustees shall review these activities posted in the All Disbursements Report monthly and reimburse the account so that it is funded at $1,000.

Petty Cash

The Library shall maintain petty cash to be accountable to the Board and to be used only for those items that are impractical to use a credit card or check. Normally each transaction should be less than $20.

Credit Cards

The Director, Assistant Director, and Administrative Assistant shall be authorized to use the Addison Public Library’s credit card. The Director may recommend to the Board other staff members authorized to use the Addison Public Library’s credit card as well. The Board shall approve these recommendations prior to cards being issued and maintain a list of authorized individuals.

The card shall only be used for appropriate Addison Public Library business, and all uses shall be properly documented. The Addison Public Library credit card shall not be used for personal expenditures.

Monthly credit card billings shall be documented in the All Disbursement Report to the Board each month.

INVESTMENTS

Scope

This Investment Policy applies to the investment activities of all funds of the Addison Public Library. All financial assets of these funds, including the General Fund, Special Revenue Funds, Capital Improvement Fund, Debt Service Funds, Special Assessment Funds, and other funds that may be created from time to time, shall be administered in accordance with the provisions of this policy.

Objectives

The purpose of the Investment Policy of the Addison Public Library is to establish cash management and investment guidelines for the Addison Public Library Board of Trustees and staff responsible for the stewardship of public funds. Specific objectives include:

Safety of principle is the foremost objective of the Investment Policy of the Addison Public Library. Each investment transaction shall seek first to ensure that capital losses are avoided, whether they are from securities defaults or erosion of market value.
The library’s investment portfolio shall remain sufficiently liquid to enable the library to meet all operating requirements that may be reasonably anticipated in any library fund.
The investment portfolio of the library shall be designed with the objective of regularly exceeding the average return of three (3) month U.S. Treasury Bills. The investment program shall seek to augment returns above this threshold, consistent with risk limitations identified herein and prudent investment principles.
In managing its investment portfolio, library officials shall avoid any transaction that might impair public confidence in the management of the library. 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.

Compliance

The policy shall at all times comply with all applicable laws and statues, bylaws, and resolutions of the Addison Public Library.

Responsibility for the Investment Program

The Board of Trustees shall designate those officers and employees as having the authority and responsibility for implementing the policy.

Board of Trustees and employees involved in the investment process shall refrain from personal business activities that could conflict with proper execution of the investment program or which could impair their ability to make impartial investment decisions. Employees and Board of Trustees shall disclose to the authorized administrator of the policy any material financial interest in financial institutions that conduct business with this jurisdiction, and they shall further disclose any large personal financial/investment positions that could be related to the performance of this jurisdiction’s portfolio. Employees and Board of Trustees shall subordinate their personal investment transactions to those of this jurisdiction, particularly with regard to the timing of purchases and sales.

Accounting

The Addison Public Library maintains its accounting records on the basis of funds and account groups, each of which is considered a separate accounting entity. All investment transactions shall be recorded in the various funds of the library in accordance with generally accepted accounting principles as promulgated by the Government Accounting Standards Board.

Financial Institutions

The Board of Trustees shall approve all financial institutions with which the Addison Public Library deals. The library staff shall recommend to the Board those financial institutions that best meet the objectives of the policy.

It shall be the policy of the library to select financial institutions on the following basis:

Security: The library shall not maintain funds in any financial institution that is not a member of the FDIC. Furthermore, the library shall not maintain funds in any financial institution that is not willing and capable of posting required collateral for funds in excess of the FDIC insurable limits.
Size: The library shall not select as depository any financial institution in which the library funds on deposit shall exceed fifty percent (50%) of the institution’s capital stock and surplus.
Statement of Condition: The library shall maintain for public and managerial inspection current statements of condition for each financial institution named as depository. If, for any reason, the information furnished is considered by the Board of Trustees or the authorized administrator to be insufficient, the library may request additional data. The refusal of an institution to provide such data upon request may serve as sufficient cause for the withdrawal of library funds.
Services and Fees: Any financial institution selected by the library shall provide normal banking services, including, but not limited to: checking accounts, wire transfers, purchase and sale of investment securities and safekeeping services. Fees for banking services shall be mutually agreed to by an authorized representative of the depository bank and the Addison Public Library official.

Investment Selection

The Board of Trustees of the Addison Public Library shall approve a list of permitted investment instruments which shall meet all legal standards stated under the Compliance section and the prudent person standard stated under the Objectives section herein. [See Appendix A.]

Diversification and Maturities of Investments

Diversification and maturities management are two key aspects of prudent investment practices. Properly balanced, they help to minimize institutional and interest-rate risk and help to ensure liquidity.

The extent to which the Addison Public Library can vary investments shall be determined by the size of the investment portfolio. Diversification for its own sake may not always be practical if it requires that the library purchase smaller lower-yielding investments.

A careful analysis of the library’s short-, mid-, and long-term cash needs is the basis for developing the maturity structure.

Collateral

It is the policy of the Addison Public Library to require that funds on deposit in excess of FDIC or FSLIC limits be secured by some form of collateral. The library shall accept any of the following assets as collateral:

U. S. Government Securities;
Obligations of Federal Agencies;
Obligations of Federal Instrumentalities;
Obligations of the State of Illinois;
General Obligation Bonds of Illinois Municipalities rated “A” or better;
Any other collateral identified in Illinois Compiled Statutes as acceptable for use by the Treasurer of the State of Illinois.

The amount of collateral provided shall be not less than one-hundred-ten percent (110%) of the fair market value of the net amount of public funds secured. Pledged collateral shall be held by the library or in safekeeping and evidenced by a safekeeping agreement.

Documentation

The library staff shall develop appropriate procedures for the legal and financial review and approval of all documents entered into to implement the policy.

Reporting

The Addison Public Library staff shall report periodically to the Board the state of the various funds of the investment portfolio.

The investment report shall be used to measure performance and to demonstrate the degree of compliance with the policy.

In addition to interim reports an annual review shall be prepared. This report shall focus on the overall performance of investments during the year as well as a projection of what may be anticipated in the future.

Indemnification

The authorized administrator of the investments and employees of the Addison Public Library acting in accordance with this Investment Policy and written procedures as have been or may be established and exercising due diligence shall be relieved of personal liability for an individual security’s credit risk or market changes.

Amendment

This policy shall be reviewed from time to time and revisions shall be presented to the Board of Trustees for its approval.

FIXED ASSETS

Purpose

The purpose of the Fixed Asset Policy of the Addison Public Library is threefold:

To facilitate the accounting for fixed assets;
To maintain fiduciary responsibility for these assets;
To maintain a list of the particular projects and needs for expenditures from the Capital Improvement Fund.

Depreciation of the Addison Public Library fixed assets is not required under generally accepted accounting principles, since the library is categorized as a governmental fund type. Thus, depreciation is not addressed in this policy.

Criteria for Capitalization

All fixed assets that are purchased or received as gifts or donations shall be recorded as expenditures in the fund that paid for the fixed asset. Those fixed assets, equaling or exceeding $1,000, shall be capitalized and recorded in the library’s Asset Replacement Schedule on a timely basis.

The library shall maintain detailed asset records, listing the following information:

Fixed asset category;
Brief description;
Date of acquisition;
Purchase price;
Life expectancy.

However, it is understood that for assets acquired earlier, all the above information may not be available. Every effort shall have been made to acquire or estimate the information.

Library books and other library audiovisual material are not capitalized in the Asset Replacement Schedule.

Definitions/Descriptions of Fixed Asset Categories

Each fixed asset capitalized in the Asset Replacement Schedule shall be classified in the following categories for financial reporting purposes:

HVAC Equipment;
Building and Grounds;
Automation: Hardware/Software;
Furniture and Equipment.

Accounting for Disposals/Retirements of Fixed Assets

When the Board of Trustees has determined to sell or otherwise dispose of fixed assets that it deems no longer necessary or useful for library purposes, the library shall adhere to 75 ILCS 5/4-16 in the sale or disposition of such property. As fixed asset items are disposed of or retired, they shall be eliminated from the Asset Replacement Schedule on a timely basis.

Reconciliations

On a periodic basis, at least annually, the Asset Replacement Schedule shall be reconciled. To assure that the reconciliation process is properly completed, the Library shall take a physical inventory comparing the fixed assets per the Asset Replacement Schedule to what actually exists at the library. Adjustments to the Asset Replacement Schedule shall be made as appropriate.

SPENDING AUTHORIZATIONS

The Director may make expenditures consistent with the Board-approved budget without further Board approval. However, expenditures that are not within the Board approved budget must be formally approved by the Board of Trustees.

A list of anticipated major capital expenditures should be included with the annual budget and the yearly updated long range plan that are submitted to the Board for approval.

Unbudgeted emergency repairs to the physical plant or equipment that must be completed immediately and cannot be practically submitted to the Board for approval may be authorized by the Director. The Board of Trustees shall be informed of the expenditures as soon as possible.

INSURANCE/BONDING PROTECTION OF THE ADDISON PUBLIC LIBRARY

In compliance with 75 ILCS 5/4-9 the Director shall recommend to the Board all necessary bonding of Board and staff members who handle Addison Public Library funds and also any appropriate insurance protection to protect the finances of the Addison Public Library.

BAD DEBTS OWED TO THE ADDISON PUBLIC LIBRARY

Delinquent accounts may be assigned for collection to either legal counsel or a collection agency, or taken to small claims court as the Director deems appropriate. Collection efforts for accounts past due of $50 or more shall continue until actually collected or the attorney, collection agency, or small claims court deems further efforts shall be futile or not cost-effective.

RECOGNITION AND REWARDS

The Addison Public Library acknowledges that as a public entity, it must be a steward of the public funding it receives and ensure that the expenditures of Library funds are consistent with its statutory authority, which includes the establishment, maintenance and operation of a public library; as well as the performance of activities necessary for conducting library services.

The Library also recognizes the invaluable contributions made by its staff, volunteers and supporters, and recognizes that maintaining the morale of staff and volunteers is a necessary component to its success. The Addison Public Library hereby finds that maintaining the morale of its staff and volunteers is necessary for conducting library services. For these reasons, the Addison Public Library adopts this policy. No gift shall be provided to employees, volunteers or library supporters contrary to this policy.

Employee Service Awards – In December of each year the Library recognizes employees based on their years of service at the Library. Each employee who has completed five years of service at the Library (or an increment of five years) in that calendar year is recognized at the Library staff recognition event with a certificate of appreciation and a gift. Funds for these awards shall be paid from the budgeted funds of the Library. The Library shall determine the type of gift to be given. Gifts of cash or gift certificates will be avoided because such gifts are taxable income.

Employee and Employee Team of the Year Awards – The library staff will annually select one individual and one staff team to be recognized as Employee of the Year and Team of the Year who have given exemplary service to the Library and its users. These awards will be presented at a staff appreciation luncheon held each year during National Library Week. Funds for these awards shall be paid from the budgeted funds of the Library. The Library shall determine the type of gift to be given. Gifts of cash or gift certificates will be avoided because such gifts are taxable income.

Volunteers – Recognition is an important component of the Addison Public Library’s volunteer program. The Library recognizes that volunteer services are a necessary component to providing an adequate level of service to library patrons. Although individual, informal recognition of volunteers may occur on a regular basis, it is important that the Library formally recognize volunteers as a group on a regular basis, at least annually. It is the policy of this Board to formally recognize volunteers. It shall also be the policy of this Board to formally recognize volunteers and library supporters who have given extraordinary service to the Library by approving resolutions of the Board commemorating such service and dedicating books in the Library’s collection in honor of these individuals.

Retirement – The library will not give gifts of cash or tangible personal property to employees upon retirement. Employees with ten or more years of service to the library will be recognized upon retirement by a formal resolution from the Board. All employees will be recognized upon retirement with a book to be placed into the library’s collection in their honor.

Trustees – Trustees serve without any expectation of compensation in accordance with state statute, however, upon retirement the Board may decide to recognize an individual trustee at its discretion.

All recognition awards are at the discretion of the Board and based on available funds, staffing levels, and the needs of the Library. Programs and awards may be discontinued at any time with no expectations of grand-fathering clauses.

Appendix A:

https://ilga.gov/legislation/ilcs/ilcs3.asp?ActID=496&ChapterID=7

(30 ILCS 235/0.01) (from Ch. 85, par. 900) Sec. 0.01. Short title. This Act may be cited as the Public Funds Investment Act. (Source: P.A. 86-1324.)

(30 ILCS 235/1) (from Ch. 85, par. 901) Sec. 1. The words "public funds", as used in this Act, mean current operating funds, special funds, interest and sinking funds, and funds of any kind or character belonging to or in the custody of any public agency. The words "public agency", as used in this Act, mean the State of Illinois, the various counties, townships, cities, towns, villages, school districts, educational service regions, special road districts, public water supply districts, fire protection districts, drainage districts, levee districts, sewer districts, housing authorities, the Illinois Bank Examiners' Education Foundation, the Chicago Park District, and all other political corporations or subdivisions of the State of Illinois, now or hereafter created, whether herein specifically mentioned or not. This Act does not apply to the Illinois Prepaid Tuition Trust Fund, private funds collected by the Illinois Conservation Foundation, or pension funds or retirement systems established under the Illinois Pension Code, except as otherwise provided in that Code. This Act does not apply to the Illinois State Treasurer, whose investment of State funds shall be governed by the Deposit of State Moneys Act. The words "governmental unit", as used in this Act, have the same meaning as in the Local Government Debt Reform Act. (Source: P.A. 102-297, eff. 8-6-21.)

    (30 ILCS 235/2) (from Ch. 85, par. 902)
    Sec. 2. Authorized investments.
    (a) Any public agency may invest any public funds as follows:
        (1) in bonds, notes, certificates of indebtedness,

	treasury bills or other securities now or hereafter issued, which are guaranteed by the full faith and credit of the United States of America as to principal and interest;

(2) in bonds, notes, debentures, or other similar

	obligations of the United States of America, its agencies, and its instrumentalities;

(3) in interest-bearing savings accounts,

	interest-bearing certificates of deposit or interest-bearing time deposits or any other investments constituting direct obligations of any bank as defined by the Illinois Banking Act;

(4) in short-term obligations of corporations

	organized in the United States with assets exceeding $500,000,000 if (i) such obligations are rated at the time of purchase at one of the 3 highest classifications established by at least 2 standard rating services and which mature not later than 270 days from the date of purchase, (ii) such purchases do not exceed 10% of the corporation's outstanding obligations, and (iii) no more than one-third of the public agency's funds may be invested in short-term obligations of corporations under this paragraph (4);

(4.5) in obligations of corporations organized in the

	United States with assets exceeding $500,000,000 if (i) such obligations are rated at the time of purchase at one of the 3 highest classifications established by at least 2 standard rating services and which mature more than 270 days but less than 3 years from the date of purchase, (ii) such purchases do not exceed 10% of the corporation's outstanding obligations, and (iii) no more than one-third of the public agency's funds may be invested in obligations of corporations under this paragraph (4.5); or

(5) in money market mutual funds registered under the

	Investment Company Act of 1940, provided that the portfolio of any such money market mutual fund is limited to obligations described in paragraph (1) or (2) of this subsection and to agreements to repurchase such obligations.

    (a-1) In addition to any other investments authorized under this Act, a municipality, park district, forest preserve district, conservation district, county, or other governmental unit may invest its public funds in interest bearing bonds of any county, township, city, village, incorporated town, municipal corporation, or school district, 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 bonds shall be registered in the name of the municipality, park district, forest preserve district, conservation district, county, or other governmental unit, or held under a custodial agreement at a bank. The bonds shall be rated at the time of purchase within the 4 highest general classifications established by a rating service of nationally recognized expertise in rating bonds of states and their political subdivisions.
    (b) Investments may be made only in banks which are insured by the Federal Deposit Insurance Corporation. Any public agency may invest any public funds in short term discount obligations of the Federal National Mortgage Association or in shares or other forms of securities legally issuable by savings banks or savings and loan associations incorporated under the laws of this State or any other state or under the laws of the United States. Investments may be made only in those savings banks or savings and loan associations the shares, or investment certificates of which are insured by the Federal Deposit Insurance Corporation. Any such securities may be purchased at the offering or market price thereof at the time of such purchase. All such securities so purchased shall mature or be redeemable on a date or dates prior to the time when, in the judgment of such governing authority, the public funds so invested will be required for expenditure by such public agency or its governing authority. The expressed judgment of any such governing authority as to the time when any public funds will be required for expenditure or be redeemable is final and conclusive. Any public agency may invest any public funds in dividend-bearing share accounts, share certificate accounts or class of share accounts of a credit union chartered under the laws of this State or the laws of the United States; provided, however, the principal office of any such credit union must be located within the State of Illinois. Investments may be made only in those credit unions the accounts of which are insured by applicable law.
    (c) For purposes of this Section, the term "agencies of the United States of America" includes: (i) the federal land banks, federal intermediate credit banks, banks for cooperative, federal farm credit banks, or any other entity authorized to issue debt obligations under the Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.) and Acts amendatory thereto; (ii) the federal home loan banks and the federal home loan mortgage corporation; and (iii) any other agency created by Act of Congress.
    (d) Except for pecuniary interests permitted under subsection (f) of Section 3-14-4 of the Illinois Municipal Code or under Section 3.2 of the Public Officer Prohibited Practices Act, no person acting as treasurer or financial officer or who is employed in any similar capacity by or for a public agency may do any of the following:
        (1) have any interest, directly or indirectly, in any

	investments in which the agency is authorized to invest.

(2) have any interest, directly or indirectly, in the

	sellers, sponsors, or managers of those investments.

(3) receive, in any manner, compensation of any kind

	from any investments in which the agency is authorized to invest.

    (e) Any public agency may also invest any public funds in a Public Treasurers' Investment Pool created under Section 17 of the State Treasurer Act. Any public agency may also invest any public funds in a fund managed, operated, and administered by a bank, subsidiary of a bank, or subsidiary of a bank holding company or use the services of such an entity to hold and invest or advise regarding the investment of any public funds.
    (f) To the extent a public agency has custody of funds not owned by it or another public agency and does not otherwise have authority to invest such funds, the public agency may invest such funds as if they were its own. Such funds must be released to the appropriate person at the earliest reasonable time, but in no case exceeding 31 days, after the private person becomes entitled to the receipt of them. All earnings accruing on any investments or deposits made pursuant to the provisions of this Act shall be credited to the public agency by or for which such investments or deposits were made, except as provided otherwise in Section 4.1 of the State Finance Act or the Local Governmental Tax Collection Act, and except where by specific statutory provisions such earnings are directed to be credited to and paid to a particular fund.
    (g) A public agency may purchase or invest in repurchase agreements of government securities having the meaning set out in the Government Securities Act of 1986, as now or hereafter amended or succeeded, subject to the provisions of said Act and the regulations issued thereunder. The government securities, unless registered or inscribed in the name of the public agency, shall be purchased through banks or trust companies authorized to do business in the State of Illinois.
    (h) Except for repurchase agreements of government securities which are subject to the Government Securities Act of 1986, as now or hereafter amended or succeeded, no public agency may purchase or invest in instruments which constitute repurchase agreements, and no financial institution may enter into such an agreement with or on behalf of any public agency unless the instrument and the transaction meet the following requirements:
        (1) The securities, unless registered or inscribed in

	the name of the public agency, are purchased through banks or trust companies authorized to do business in the State of Illinois.

(2) An authorized public officer after ascertaining

	which firm will give the most favorable rate of interest, directs the custodial bank to "purchase" specified securities from a designated institution. The "custodial bank" is the bank or trust company, or agency of government, which acts for the public agency in connection with repurchase agreements involving the investment of funds by the public agency. The State Treasurer may act as custodial bank for public agencies executing repurchase agreements. To the extent the Treasurer acts in this capacity, he is hereby authorized to pass through to such public agencies any charges assessed by the Federal Reserve Bank.

(3) A custodial bank must be a member bank of the

	Federal Reserve System or maintain accounts with member banks. All transfers of book-entry securities must be accomplished on a Reserve Bank's computer records through a member bank of the Federal Reserve System. These securities must be credited to the public agency on the records of the custodial bank and the transaction must be confirmed in writing to the public agency by the custodial bank.

(4) Trading partners shall be limited to banks or

	trust companies authorized to do business in the State of Illinois or to registered primary reporting dealers.

(5) The security interest must be perfected.
(6) The public agency enters into a written master

	repurchase agreement which outlines the basic responsibilities and liabilities of both buyer and seller.

(7) Agreements shall be for periods of 330 days or

	less.

(8) The authorized public officer of the public

	agency informs the custodial bank in writing of the maturity details of the repurchase agreement.

(9) The custodial bank must take delivery of and

	maintain the securities in its custody for the account of the public agency and confirm the transaction in writing to the public agency. The Custodial Undertaking shall provide that the custodian takes possession of the securities exclusively for the public agency; that the securities are free of any claims against the trading partner; and any claims by the custodian are subordinate to the public agency's claims to rights to those securities.

(10) The obligations purchased by a public agency may

	only be sold or presented for redemption or payment by the fiscal agent bank or trust company holding the obligations upon the written instruction of the public agency or officer authorized to make such investments.

(11) The custodial bank shall be liable to the public

	agency for any monetary loss suffered by the public agency due to the failure of the custodial bank to take and maintain possession of such securities.

    (i) Notwithstanding the foregoing restrictions on investment in instruments constituting repurchase agreements the Illinois Housing Development Authority may invest in, and any financial institution with capital of at least $250,000,000 may act as custodian for, instruments that constitute repurchase agreements, provided that the Illinois Housing Development Authority, in making each such investment, complies with the safety and soundness guidelines for engaging in repurchase transactions applicable to federally insured banks, savings banks, savings and loan associations or other depository institutions as set forth in the Federal Financial Institutions Examination Council Policy Statement Regarding Repurchase Agreements and any regulations issued, or which may be issued by the supervisory federal authority pertaining thereto and any amendments thereto; provided further that the securities shall be either (i) direct general obligations of, or obligations the payment of the principal of and/or interest on which are unconditionally guaranteed by, the United States of America or (ii) any obligations of any agency, corporation or subsidiary thereof controlled or supervised by and acting as an instrumentality of the United States Government pursuant to authority granted by the Congress of the United States and provided further that the security interest must be perfected by either the Illinois Housing Development Authority, its custodian or its agent receiving possession of the securities either physically or transferred through a nationally recognized book entry system.
    (j) In addition to all other investments authorized under this Section, a community college district may invest public funds in any mutual funds that invest primarily in corporate investment grade or global government short term bonds. Purchases of mutual funds that invest primarily in global government short term bonds shall be limited to funds with assets of at least $100 million and that are rated at the time of purchase as one of the 10 highest classifications established by a recognized rating service. The investments shall be subject to approval by the local community college board of trustees. Each community college board of trustees shall develop a policy regarding the percentage of the college's investment portfolio that can be invested in such funds.
    Nothing in this Section shall be construed to authorize an intergovernmental risk management entity to accept the deposit of public funds except for risk management purposes.
(Source: P.A. 102-285, eff. 8-6-21.)

(30 ILCS 235/2.3) Sec. 2.3. Russian or Belarusian investments prohibited. Notwithstanding any provision of law to the contrary, a public agency shall not invest public funds in Russian or Belarusian sovereign debt, Russian or Belarusian government-backed securities, any investment instrument issued by an entity that is domiciled or has its principal place of business in Russia or Belarus, or any investment instrument issued by a company that is subject to Russian Harmful Foreign Activities Sanctions, as that term is defined under Section 1-110.16 of the Illinois Pension Code, and shall not invest or deposit public funds in any bank that is domiciled or has its principal place of business in Russia or Belarus or in any other financial institution that is domiciled or has its principal place of business in Russia or Belarus or that is subject to Russian Harmful Foreign Activities Sanctions. (Source: P.A. 102-1108, eff. 12-21-22.)

    (30 ILCS 235/2.5)
    Sec. 2.5. Investment policy.
    (a) Investment of public funds by a public agency shall be governed by a written investment policy adopted by the public agency. The level of detail and complexity of the investment policy shall be appropriate to the nature of the funds, the purpose for the funds, and the amount of the public funds within the investment portfolio. The policy shall address safety of principal, liquidity of funds, and return on investment and shall require that the investment portfolio be structured in such manner as to provide sufficient liquidity to pay obligations as they come due. In addition, the investment policy shall include or address the following:
        (1) a listing of authorized investments;
        (2) a rule, such as the "prudent person rule",

	establishing the standard of care that must be maintained by the persons investing the public funds;

(3) investment guidelines that are appropriate to the

	nature of the funds, the purpose for the funds, and the amount of the public funds within the investment portfolio;

(4) a policy regarding diversification of the

	investment portfolio that is appropriate to the nature of the funds, the purpose for the funds, and the amount of the public funds within the investment portfolio;

(5) guidelines regarding collateral requirements, if

	any, for the deposit of public funds in a financial institution made pursuant to this Act, and, if applicable, guidelines for contractual arrangements for the custody and safekeeping of that collateral;

(6) a policy regarding the establishment of a system

	of internal controls and written operational procedures designed to prevent losses of funds that might arise from fraud, employee error, misrepresentation by third parties, or imprudent actions by employees of the entity;

(7) identification of the chief investment officer

	who is responsible for establishing the internal controls and written procedures for the operation of the investment program;

(8) performance measures that are appropriate to the

	nature of the funds, the purpose for the funds, and the amount of the public funds within the investment portfolio;

(9) a policy regarding appropriate periodic review of

	the investment portfolio, its effectiveness in meeting the public agency's needs for safety, liquidity, rate of return, and diversification, and its general performance;

(10) a policy establishing at least quarterly written

	reports of investment activities by the public agency's chief financial officer for submission to the governing body and chief executive officer of the public agency. The reports shall include information regarding securities in the portfolio by class or type, book value, income earned, and market value as of the report date;

(11) a policy regarding the selection of investment

	advisors, money managers, and financial institutions; and

(12) a policy regarding ethics and conflicts of

	interest.

    (a-5) The investment policy shall include a statement that material, relevant, and decision-useful sustainability factors have been or are regularly considered by the agency, within the bounds of financial and fiduciary prudence, in evaluating investment decisions. Such factors include, but are not limited to: (i) corporate governance and leadership factors; (ii) environmental factors; (iii) social capital factors; (iv) human capital factors; and (v) business model and innovation factors, as provided under the Illinois Sustainable Investing Act.
    (b) For purposes of the State or a county, the investment policy shall be adopted by the elected treasurer and presented to the chief executive officer and the governing body. For purposes of any other public agency, the investment policy shall be adopted by the governing body of the public agency.
    (c) The investment policy shall be made available to the public at the main administrative office of the public agency.
    (d) The written investment policy required under this Section shall be developed and implemented by January 1, 2000.
(Source: P.A. 101-473, eff. 1-1-20.)

(30 ILCS 235/2.10) Sec. 2.10. Unit of local government; deposit at reduced rate of interest. The treasurer of a unit of local government may, in his or her discretion, deposit public moneys of that unit of local government in a financial institution pursuant to an agreement that provides for a reduced rate of interest, provided that the institution agrees to expend an amount of money equal to the amount of the reduction for senior centers. (Source: P.A. 93-246, eff. 7-22-03.)

(30 ILCS 235/3) (from Ch. 85, par. 903) Sec. 3. If any securities, purchased under authority of Section 2 hereof, are issuable to a designated payee or to the order of a designated payee, then the public agency shall be so designated, and further, if such securities are purchased with money taken from a particular fund of a public agency, the name of such fund shall be added to that of such public agency. If any such securities are registerable, either as to principal or interest, or both, then such securities shall be so registered in the name of the public agency, and in the name of the fund to which they are to be credited. (Source: Laws 1943, vol. 1, p. 951.)

(30 ILCS 235/4) (from Ch. 85, par. 904) Sec. 4. All securities purchased under the authority of this Act shall be held for the benefit of the public agency which purchased them, and if purchased with money taken from a particular fund, such securities shall be credited to and deemed to be a part of such fund, and shall be held for the benefit thereof. All securities so purchased shall be deposited and held in a safe place by the person or persons having custody of the fund to which they are credited, and such person or persons are responsible upon his or their official bond or bonds for the safekeeping of all such securities. Any securities purchased by any such public agency under authority of this Act, may be sold at any time, at the then current market price thereof, by the governing authority of such public agency. Except as provided in Section 4.1 of "An Act in relation to State finance", all payments received as principal or interest, or otherwise, derived from any such securities shall be credited to the public agency and to the fund by or for which such securities were purchased. (Source: P.A. 84-1378.)

(30 ILCS 235/5) (from Ch. 85, par. 905) Sec. 5. This Act, without reference to any other statute, shall be deemed full and complete authority for the investment of public funds, as hereinabove provided, and shall be construed as an additional and alternative method therefor. (Source: Laws 1943, vol. 1, p. 951.)

    (30 ILCS 235/6) (from Ch. 85, par. 906)
    Sec. 6. Report of financial institutions.
    (a) No bank shall receive any public funds unless it has furnished the corporate authorities of a public agency submitting a deposit with copies of the last two sworn statements of resources and liabilities which the bank is required to furnish to the Commissioner of Banks and Real Estate or to the Comptroller of the Currency. Each bank designated as a depository for public funds shall, while acting as such depository, furnish the corporate authorities of a public agency with a copy of all statements of resources and liabilities which it is required to furnish to the Commissioner of Banks and Real Estate or to the Comptroller of the Currency; provided, that if such funds or moneys are deposited in a bank, the amount of all such deposits not collateralized or insured by an agency of the federal government shall not exceed 75% of the capital stock and surplus of such bank, and the corporate authorities of a public agency submitting a deposit shall not be discharged from responsibility for any funds or moneys deposited in any bank in excess of such limitation.
    (b) No savings bank or savings and loan association shall receive public funds unless it has furnished the corporate authorities of a public agency submitting a deposit with copies of the last 2 sworn statements of resources and liabilities which the savings bank or savings and loan association is required to furnish to the Commissioner of Banks and Real Estate or the Federal Deposit Insurance Corporation. Each savings bank or savings and loan association designated as a depository for public funds shall, while acting as such depository, furnish the corporate authorities of a public agency with a copy of all statements of resources and liabilities which it is required to furnish to the Commissioner of Banks and Real Estate or the Federal Deposit Insurance Corporation; provided, that if such funds or moneys are deposited in a savings bank or savings and loan association, the amount of all such deposits not collateralized or insured by an agency of the federal government shall not exceed 75% of the net worth of such savings bank or savings and loan association as defined by the Federal Deposit Insurance Corporation, and the corporate authorities of a public agency submitting a deposit shall not be discharged from responsibility for any funds or moneys deposited in any savings bank or savings and loan association in excess of such limitation.
    (c) No credit union shall receive public funds unless it has furnished the corporate authorities of a public agency submitting a share deposit with copies of the last two reports of examination prepared by or submitted to the Illinois Department of Financial Institutions or the National Credit Union Administration. Each credit union designated as a depository for public funds shall, while acting as such depository, furnish the corporate authorities of a public agency with a copy of all reports of examination prepared by or furnished to the Illinois Department of Financial Institutions or the National Credit Union Administration; provided that if such funds or moneys are invested in a credit union account, the amount of all such investments not collateralized or insured by an agency of the federal government or other approved share insurer shall not exceed 50% of the unimpaired capital and surplus of such credit union, which shall include shares, reserves and undivided earnings and the corporate authorities of a public agency making an investment shall not be discharged from responsibility for any funds or moneys invested in a credit union in excess of such limitation.
    (d) Whenever a public agency deposits any public funds in a financial institution, the public agency may enter into an agreement with the financial institution requiring any funds not insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration or other approved share insurer to be collateralized by any of the following classes of securities, provided there has been no default in the payment of principal or interest thereon:
        (1) Bonds, notes, or other securities constituting

	direct and general obligations of the United States, the bonds, notes, or other securities constituting the direct and general obligation of any agency or instrumentality of the United States, the interest and principal of which is unconditionally guaranteed by the United States, and bonds, notes, or other securities or evidence of indebtedness constituting the obligation of a U.S. agency or instrumentality.

(2) Direct and general obligation bonds of the State

	of Illinois or of any other state of the United States.

(3) Revenue bonds of this State or any authority,

	board, commission, or similar agency thereof.

(4) Direct and general obligation bonds of any city,

	town, county, school district, or other taxing body of any state, the debt service of which is payable from general ad valorem taxes.

(5) Revenue bonds of any city, town, county, or

	school district of the State of Illinois.

(6) Obligations issued, assumed, or guaranteed by the

	International Finance Corporation, the principal of which is not amortized during the life of the obligation, but no such obligation shall be accepted at more than 90% of its market value.

(7) Illinois Affordable Housing Program Trust Fund

	Bonds or Notes as defined in and issued pursuant to the Illinois Housing Development Act.

(8) In an amount equal to at least market value of

	that amount of funds deposited exceeding the insurance limitation provided by the Federal Deposit Insurance Corporation or the National Credit Union Administration or other approved share insurer: (i) securities, (ii) mortgages, (iii) letters of credit issued by a Federal Home Loan Bank, or (iv) loans covered by a State Guarantee under the Illinois Farm Development Act, if that guarantee has been assumed by the Illinois Finance Authority under Section 845-75 of the Illinois Finance Authority Act, and loans covered by a State Guarantee under Article 830 of the Illinois Finance Authority Act.

(9) Certificates of deposit or share certificates

	issued to the depository institution pledging them as security. The public agency may require security in the amount of 125% of the value of the public agency deposit. Such certificate of deposit or share certificate shall:

(i) be fully insured by the Federal Deposit

	Insurance Corporation, the Federal Savings and Loan Insurance Corporation, or the National Credit Union Share Insurance Fund or issued by a depository institution which is rated within the 3 highest classifications established by at least one of the 2 standard rating services;

(ii) be issued by a financial institution having

	assets of $15,000,000 or more; and

(iii) be issued by either a savings and loan

	association having a capital to asset ratio of at least 2%, by a bank having a capital to asset ratio of at least 6% or by a credit union having a capital to asset ratio of at least 4%.

    The depository institution shall effect the assignment of the certificate of deposit or share certificate to the public agency and shall agree that, in the event the issuer of the certificate fails to maintain the capital to asset ratio required by this Section, such certificate of deposit or share certificate shall be replaced by additional suitable security.
    (e) The public agency may accept a system established by the State Treasurer to aggregate permissible securities received as collateral from financial institutions in a collateral pool to secure public deposits of the institutions that have pledged securities to the pool.
    (f) The public agency may at any time declare any particular security ineligible to qualify as collateral when, in the public agency's judgment, it is deemed desirable to do so.
    (g) Notwithstanding any other provision of this Section, as security a public agency may, at its discretion, accept a bond, executed by a company authorized to transact the kinds of business described in clause (g) of Section 4 of the Illinois Insurance Code, in an amount not less than the amount of the deposits required by this Section to be secured, payable to the public agency for the benefit of the People of the unit of government, in a form that is acceptable to the public agency.
    (h) Paragraphs (a), (b), (c), (d), (e), (f), and (g) of this Section do not apply to the University of Illinois, Southern Illinois University, Chicago State University, Eastern Illinois University, Governors State University, Illinois State University, Northeastern Illinois University, Northern Illinois University, Western Illinois University, the Cooperative Computer Center and public community colleges.
(Source: P.A. 95-331, eff. 8-21-07.)

    (30 ILCS 235/6.5)
    Sec. 6.5. Federally insured deposits at Illinois financial institutions.
    (a) Notwithstanding any other provision of this Act or any other statute, whenever a public agency invests public funds in an interest-bearing savings account, demand deposit account, interest-bearing certificate of deposit, or interest-bearing time deposit under Section 2 of this Act, the provisions of Section 6 of this Act and any other statutory requirements pertaining to the eligibility of a bank to receive or hold public deposits or to the pledging of collateral by a bank to secure public deposits do not apply to any bank receiving or holding all or part of the invested public funds if (i) the public agency initiates the investment at or through a bank located in Illinois and (ii) the invested public funds are at all times fully insured by an agency or instrumentality of the federal government.
    (b) Nothing in this Section is intended to:
        (1) prohibit a public agency from requiring the bank

	at or through which the investment of public funds is initiated to provide the public agency with the information otherwise required by subsection (a), (b), or (c) of Section 6 of this Act as a condition of investing the public funds at or through that bank; or

(2) permit a bank to receive or hold public deposits

	if that bank is prohibited from doing so by any rule, sanction, or order issued by a regulatory agency or by a court.

(c) For purposes of this Section, the term "bank" includes any person doing a banking business whether subject to the laws of this or any other jurisdiction.
(Source: P.A. 98-703, eff. 7-7-14; 98-756, eff. 7-16-14; 99-78, eff. 7-20-15.)

(30 ILCS 235/7) (from Ch. 85, par. 907) Sec. 7. When investing or depositing public funds, each custodian shall, to the extent permitted by this Act and by the lawful and reasonable performance of his custodial duties, invest or deposit such funds with or in minority-owned financial institutions within this State. (Source: P.A. 84-754.)

    (30 ILCS 235/8)
    Sec. 8. Consideration of financial institution's commitment to its community.
    (a) In addition to any other requirements of this Act, a public agency shall consider the financial institution's record and current level of financial commitment to its local community when deciding whether to deposit public funds in that financial institution. The public agency may consider factors including, but not necessarily limited to:
        (1) for financial institutions subject to the federal

	Community Reinvestment Act of 1977, the current and historical ratings that the financial institution has received, to the extent that those ratings are publicly available, under the federal Community Reinvestment Act of 1977;

(2) any changes in ownership, management, policies,

	or practices of the financial institution that may affect the level of the financial institution's commitment to its community;

(3) the financial impact that the withdrawal or

	denial of deposits of public funds might have on the financial institution;

(4) the financial impact to the public agency as a

	result of withdrawing public funds or refusing to deposit additional public funds in the financial institution; and

(5) any additional burden on the resources of the

	public agency that might result from ceasing to maintain deposits of public funds at the financial institution under consideration.

    (a-5) Effective January 1, 2022, no public funds may be deposited in a financial institution subject to the federal Community Reinvestment Act of 1977 unless the institution has a current rating of satisfactory or outstanding under the Community Reinvestment Act of 1977.
    (a-10) When investing or depositing public funds, the public agency may give preference to financial institutions that have a current rating of outstanding under the federal Community Reinvestment Act of 1977.
    (b) Nothing in this Section shall be construed as authorizing the public agency to conduct an examination or investigation of a financial institution or to receive information that is not publicly available and the disclosure of which is otherwise prohibited by law.
(Source: P.A. 101-657, eff. 3-23-21.)

(30 ILCS 235/9) Sec. 9. Municipal and county investment in not-for-profit community development financial institutions. Municipalities and counties may invest up to $250,000 per year in public funds in not-for-profit community development financial institutions across all institutions. These financial institutions must have at least $5,000,000 in net assets and have earned at least an "A" rating by an investment rating organization that primarily provides services for community development financial institutions. Investments made under this Section shall be made for a term and at a rate acceptable to the municipality or county and the municipality or county may set benchmarks in order to continue investing in the not-for-profit community development financial institution. (Source: P.A. 99-676, eff. 7-29-16.)

Read our Board of Trustees Policies

Policy Type

Board of Trustees Policies