Investment Policy Tool
Developed by the City of Toronto
An investment policy/plan guides how corporations invest capital reserves and other long-term funds. It states how the funds will be invested, how long these funds should be invested and what returns should be expected as well as who has the authority to make and approve investment and reinvestment decisions
The Board of Directors is responsible for safeguarding the corporation’s assets, and ensuring that corporate funds are used to further the corporation’s goals. As such, the Board of Directors must make certain that cash and other investments are managed wisely.
Determine corporation’s investment principles
- Outline any limits or preferences the corporation wants.
- Determine how much risk the corporation is willing to take.
- Ensure that investment principles follow allowable investments as per the Housing Services Act or your operating agreement.
Confirm the funds that the policy applies to
- Capital reserve fund
- Tenant/Member deposits
- Operating surplus
Outline the corporation’s goals for the investment policy.
- To sustain future and current capital needs
- Address the impact of rising operational costs
- Maximize returns within an established risk tolerance
Assign authority and direction for investing funds.
Outline roles of Board/Finance Committee & Management
The Board should adopt an investment policy and commit to revisit it as corporate needs and/or conditions change. The plan should include a planned review date.
Develop procedures to implement the investment policy/plan. Identify who takes ownership for each step (ie. Finance Committee, Board, Staff)
Step One: Review statement of accounts from Financial Institution
- Review the demand deposit balance and compare to the operating cash flow requirements.
- If the deposit balance exceeds the operating cash flow requirements by a pre-determined amount (i.e. $10,000), prepare an investment recommendation for board approval.
- Determine who does this step (ie. property manager).
Step Two: Review and pass a motion on investment recommendation
- Review and discuss the recommendation.
- Put forward a motion to approve the recommendation, amend the recommendation, or give instructions for additional information.
- Determine who does this step (ie. Board).
Step Three: Implement the Board’s motion
- Based on the board’s direction, take the appropriate action to implement the motion.
Step Four: Monitor investment statements
- Monitor investment performance and identify opportunities to improve the rate of return.
- If opportunities are identified, repeat steps 2 & 3 above.
- Determine who is responsible for monitoring investment performance (Finance Committee, Property Manager)
Ensure the policy is followed
The Board of Directors can ensure that the corporation’s investment policy is followed by
- Being familiar with the corporation’s investment policies and procedures.
- Asking management for quarterly reports on investment earnings.
- Asking to see quarterly statements issued by your investment company.
- Asking staff/committees if the policy is being followed.