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POLICY TITLE:
Operating Funds Investment
APPLIES TO:
University officials responsible for the investment and management of KSU operating funds
ADMINISTRATIVE AUTHORITY:
Office of the President
Division of Finance & Administration
APPROVED BY:
Kentucky State University Board of Regents
## EFFECTIVE DATE:
## August 8, 2025
NEXT REVIEW DATE:
August 8, 2028
## POLICY STATEMENT:
This policy governs the investment of the operating funds of Kentucky State University (KSU). It establishes KSU's primary investment objectives, defines the authority and fiduciary responsibilities of those managing KSU funds, and outlines the approved strategies and guidelines for all investment transactions to ensure the prudent financial management of KSU assets.
## DEFINITIONS:
## Collateral
Securities, evidence of deposit, or other assets pledged by a third party (e.g., a financial institution) to secure the repayment of a KSU deposit that exceeds the coverage provided by the Federal Deposit of Insurance Corporation (FDIC).
## Operating Funds
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All funds of KSU available for day-to-day operational expenses, exclusive of funds that are otherwise restricted, such as endowment funds.
## Prudent Investor Standard
A standard of conduct requiring a fiduciary to manage a portfolio with the judgment and care that an institutional investor of ordinary prudence, discretion, and intelligence would exercise in the management of large investments, considering both the probable safety of capital and probable income.
## PROCESS:
## Management Responsibility and Authority
The Board of Regents delegates the authority to invest KSU operating funds to the President. The President may further delegate the performance of these duties to the Chief Financial Officer or another qualified designee.
## Standard of Prudence
All persons responsible for managing KSU's operating funds shall perform their duties in a manner consistent with the Prudent Investor Standards. Authorized personnel acting in accordance with this policy and exercising ordinary prudence will not be held personally responsible for a specific security's credit risk or market price changes, provided that deviations are reported in a timely manner and reasonable action is taken to control adverse developments.
## Investment Objectives
The investment program shall be managed to meet the following three (3) objectives, listed in order of priority:
1. Safety of Principal: The foremost objective is the preservation of capital. Investments shall be undertaken in a manner that seeks to ensure the security and safety of the principal in the overall portfolio.
### 2. Maintenance of Liquidity
The investment portfolio shall remain sufficiently liquid to enable KSU to meet all reasonably anticipated operating requirements, including but not limited to payroll, accounts payable, capital projects, and debt service.
### 3. Return on Investment
The funds shall be managed with the objective of attaining a market rate of return or higher, taking into account KSU's risk constraints and cash flow characteristics.
## Investment Strategy and Guidelines
To ensure sufficient liquidity and to guide investment decisions, the Chief Financial Officer, or a designee, shall develop and maintain a cash flow forecast. This forecast will be used to determine the amount of excess cash available for short-term (three months to one year) and long-term (one year or longer) investments.
## Authorized Investments
This policy authorizes the investment of operating funds only in the following types of securities:
• Insured and collateralized bank deposits.
Money market funds
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• Certificates of deposit
United States treasury obligations
United States government agency obligations
## Collateralization of Bank Deposits
All cash and other bank deposits maintained in any financial institution shall be either insured by the Federal Deposit Insurance Corporation (FDIC) or collateralized. All bank deposits of KSU in excess of the FDIC-insured amount shall be collateralized. KSU shall have either legal title to, or a perfected security interest in, any collateral. All physical collateral shall be held by an independent third-party custodial agent, and a safekeeping receipt shall be maintained by KSU as evidence of ownership. The right of collateral substitution is permitted only with the prior written permission of KSU.
## Reporting and Evaluation
The President, or his or her designee, shall periodically evaluate all investment decisions and outcomes to determine if the investment objectives outlined in this policy are being met. This review shall provide direction for any changes needed to maximize the total return on all investments within the stated risk parameters.
## REFERENCES AND RELATED MATERIALS:
## • Kentucky Revised Statutes (KRS) Chapter 164A
## CONTACTS: