Finance in Illinois

In almost every session of the General Assembly in recent years, legislation has emerged which required school districts to adopt certain new school policies. As noted above, the 1997 school reform bill required school districts to adopt policies concerning social promotion and "no-pass/no play". From the 1998 session comes a new policy requirement in the area of finance. This new law (P.A. 90-688, effective July 31, 1998), obliges school districts and community colleges to adopt "written investment policies." Such policies must be in effect as of January 1, 2001.

Public agencies have long been subject to the strictures of the Illinois Public Funds Investment Act. This law amends that Act to specify that public agencies must adopt policies concerning liquidity and safety of principal and investment return and be structured so as to provide sufficient liquidity to pay obligations as they come due. The policies must address a host of specific issues such as:

- portfolio diversification

- collateral requirements

- operational procedures

- selection of investment advisors

- conflicts of interest

The policy must provide for periodic review of the investment portfolio. The law also states that the policy must identify the chief investment officer who is responsible for establishing internal controls and operational procedures. Perhaps most significant, the law requires that the policy require at least quarterly written reports regarding securities in the portfolio by the agency's chief financial officer to the governing body.

Not surprisingly, the policy must be made available to the public at the main administrative office of the agency. Although the requirements seem complex, it would appear that some could be fulfilled rather simply. For example, regarding the mandate that the policy include a listing of "authorized" investments, the policy would simply state (absent special situations) that the authorized investments are those authorized under the Public Funds Investment Act.