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Policy
for Purchase of Certificates
of Deposit
March 2005
Background
Many Affiliated Funds of the Nebraska Community Foundation (hereinafter
Foundation) choose to invest a portion of charitable gifts under
management within their Affiliated Fund in their local community, usually
with a local bank in the form of a Certificate of Deposit. Therefore, the Foundation has established the following
Policy for the purchase of Certificates of Deposit:
Account Name And Location
The Foundation requires that all Certificates of Deposit purchased for the
benefit of one of its Affiliated Funds be titled:
“Nebraska
Community Foundation for the benefit of [affiliated fund name].”
The Foundation also
requires that the Certificate of Deposit shall list the Federal ID Number
for Nebraska Community Foundation. Furthermore,
the Certificate of Deposit shall be held in the safe deposit box owned by
Nebraska Community Foundation.
Soliciting Bids
The Foundation requires that bids be solicited from three (3) local banks
before purchasing the CD. The
Foundation will contact and request CD interest rates from three (3) banks
of the Affiliated Fund’s local community. If there are less than three (3) banks within the town, then
interest rates will be solicited from a bank(s) within the county, nearby
town or surrounding region. The
CD will be purchased at the bank with the highest rate of interest return.
If
the Foundation is unable to obtain three (3) non-affiliated competitive
bids on the CD from non-affiliated financial institutions, the yield on
the CD will be compared to an outside survey of comparable CD terms and
balances to satisfy the Foundation that the CD yield is competitive and
appropriate.
Investment
Diversification
Fiduciary prudence
requires investment diversification for endowed funds.
According to the Foundation’s investment policy, the investment
of permanently endowed funds must match one of the Foundation’s three
(3) investment portfolio models:
a.
Moderately Conservative—25% Equities/75% Fixed Income
b.
Moderate—50% Equities/50% Fixed Income
c.
Moderately Aggressive—75% Equities/25% Fixed Income
Therefore, each
permanent fund needs to have some portion of their investment in the stock
market and not be invested entirely in bank CDs.
Based on the Affiliated Fund’s needs and wishes, the Foundation
will help in calculating the correct percentage that can be invested in
CDs. The investment mix
percentages will be reviewed and adjusted whenever major amounts of new
funds are being added to the endowment.
The investment mix percentage will also be reviewed annually and
adjustments will be made.
Non-permanent funds
will be allowed to invest money in CDs, but will not be required to match
one of the Foundation’s three investment portfolio models.
Personal
Inurement
The Foundation does not allow a donor to stipulate that their gift be
invested in CDs in a bank in which the donor has an ownership interest.
This practice would result in a conflict of interest whereas the
donor would have a personal interest in and benefit from the investment of
the CD. Such a material
restriction could exempt the charitable nature of the gift.
Purchase and Signatures
The Foundation requires that all Certificates of Deposit be purchased
directly by the Foundation. The
Foundation requires that all Certificates of Deposit have two (2) of the
three (3) following signatures: Jeff
Yost, President/CEO; Jina Morris, Controller/CPA; Kerry Hagemeier,
Accountant/Legal Consultant. Members
of Affiliated Fund Advisory Committees are not
to be signators on Certificates of Deposit.
Maturity
The Foundation requires that Certificates of Deposit have maturity periods
ranging from six (6) months to five (5) years unless approval to waive
this Policy has been granted by the President of the Foundation.
If the President of the Foundation grants a maturity waiver, the
waiver applies only to this specific provision.
All other terms within this policy are still in effect and shall be
abided to by the Affiliated Fund.
Amount
The Foundation requires that
Certificates of Deposit not be held in amounts less than $10,000 or more
than $100,000 unless approval to waive this Policy has been granted by the
President of the Foundation. If
the President of the Foundation grants an amount waiver, the waiver
applies only to this specific provision.
All other terms within this policy are still in effect and shall be
abided to by the Affiliated Fund.
Amounts of $100,000 and Greater
The
Foundation requires that if the amount to be invested with the local bank
for the benefit of one of its Affiliated Funds exceeds $100,000 – the
maximum FDIC guarantee for a Certificate of Deposit – such excess funds
shall be invested in a “Repurchase Agreement” whereby the Bank issues
to the Foundation a “Repurchase Certificate” evidencing the purchase
of an undivided fractional interest in an underlying, larger face amount
government security or an undivided interest in an identified pool of
government securities subject to the Bank’s unconditional obligation to
repurchase that interest for a pre-determined amount. It is the Policy of the Foundation to purchase Repurchase
Certificates only with respect to securities fully backed by the full
faith and credit of the United States government, unless approval to waive
this Policy has been granted by the President of the Foundation. If the President of the Foundation grants a Repurchase
Agreement waiver, the waiver applied only to this specific provision.
All other terms within this policy are still in effect and shall be
abided to by the Affiliated Fund.
Fees
The Foundation charges an annual administrative fee on the fund balance of
all endowments invested in long-term investment instruments, including
certificates of deposit.
For
more information, contact:
NCF
Accounting Staff at info@nebcommfound.org
or (402) 323-7330
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This
page last updated 05/07/2007
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