2026/27 FINANCIAL POLICIES · Attachment 2 - Investment Policy

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Attachment 2 – Investment Policy


ETHICS AND CONFLICTS OF INTEREST
Prudent Person Standard
The standard of prudence is to be used by investment officers when managing the overall portfolio.
Investments will be managed with the care, diligence and skill that a prudent person would exercise
in managing the affairs of other persons. This includes having in place appropriate reporting
requirements that ensure the investments are being reviewed and overseen regularly.
Investment officers are to manage investment portfolios not for speculation, but for investment and
in accordance with the spirit of this policy. Investment officers are to avoid any transactions that might
harm confidence in Council and will consider the safety of capital and income objectives when making
investment decisions.

Ethics and conflicts of interest
Consideration will be given to ethical investment principles in determining the approved counterparty
for investment of funds.

Investment officers shall refrain from personal activities that would conflict with the proper execution
and management of Council’s investment portfolio. This includes activities that would impair the
investment officer’s ability to make impartial decisions. This policy requires that employees and
investment officials disclose to the Chief Executive Officer (CEO) any conflict of interest or any
investment positions that could be related to the investment portfolio.

Delegation of authority
Authority for implementation of this policy is delegated by Council to the CEO in accordance with
section 257 (1) (b) of the Local Government Act 2009, Delegation of local government powers.

Authority for the day-to-day management of Council’s Investment Portfolio is delegated by the CEO
to the Director Corporate Services and to the Financial Services Manager in accordance with section
259 of the Local Government Act 2009 and is subject to regular review by the Chief Executive Officer.

GUIDING PRINCIPLES
Council’s overall objective is to invest its funds at the most advantageous rate of interest available
to it at the time, for that investment type, and in a way that it considers most appropriate given the
circumstances. In priority, the order of investment activities shall be preservation of capital, liquidity,
and return.

Preservation of capital
Preservation of capital shall be the principal objective of the investment portfolio. Investments are to
be performed in a manner that seeks to ensure security of principal of the overall portfolio. This would
include managing credit and interest rate risk within given risk management parameters and avoiding
any transactions that would prejudice confidence in Council or its associated entities.

Credit Risk
Council will evaluate and assess credit risk prior to investment. The investment officer will minimise
credit risk in the investment portfolio by prequalifying all transactions and counterparties, diversify the
portfolio and limit transactions to secure investments.

Interest Rate Risk
The investment officer shall seek to minimise the risk of a change in the market value of the portfolio
because of a change in interest rates. This would be achieved by measuring the investment term
against the cash flow requirements of Council and structuring the portfolio accordingly. This will avoid
having to break investments prior to maturity. Secondly, interest rate risk can be mitigated by favouring
shorter term investments where appropriate.

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Attachment 2 – Investment Policy

Maintenance of liquidity
The investment portfolio will maintain sufficient liquidity to meet all reasonably anticipated operating
cash flow requirements of Council, as and when they fall due, without incurring significant transaction
costs due to being required to sell an investment or breaking fixed terms. For these purposes, illiquid
investments are defined as investments that are not publicly traded in sufficient volume to facilitate,
under most market conditions, prompt sale without severe market price effect.

Return on Investments
The portfolio is expected to achieve a market average rate of return and take into account Council’s
ethical investment appetite, risk tolerance, current interest rates, budget considerations and the
economic cycle. Any additional return target set by Council will also consider the risk limitations,
ethical and prudent investment principles and cash flow characteristics identified within this policy.

Comparison of performance
For performance purposes, the portfolio will be compared to the Bloomberg AusBond Bank Bill Index
and/or the Bank Bill Swap Reference Rate over a rolling one-year period. The benchmark target is
to be set equal to or above the benchmark yield and consider the expected types of securities held
in each portfolio. In comparing performance, the portfolio will be market valued and take into account
all coupons, deposits and withdrawals to / from the portfolio.

ROLES AND RESPONSIBILITIES

Councillors
Councillors will consider and adopt the Policy.

Chief Executive Officer (CEO) and Executive Team
The CEO and Executive Team will endorse for Council adoption and provide leadership and
commitment in complying with the Policy and relevant legislation and documents.

Authorised personnel
The Director Corporate Services and the Financial Services Manager are authorised to invest funds
at their discretion in investments consistent with this policy and legislation.

The Financial Services Manager will report to Council for investment guidelines and oversight of
investment activities for the purposes of this policy.

Internal controls
The Financial Services Manager in consultation with the Director Corporate Services shall establish
internal controls and processes that will ensure investment objectives are met and that the
investment portfolios are protected from loss, theft or inappropriate use. The established processes
will include monthly and quarterly reporting, as well as an annual review of the policy. The internal
controls will address the following:
•     control of collusion
•     accounting and record keeping
•     evidence of quotes for each investment transaction
•     delegated authority to investment officers
•     compliance and oversight of investment parameters
•     reporting guidelines.

The internal controls will be subject to periodic reviews by Council’s Internal Audit function to verify
compliance with policy and legislation.



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INVESTMENT PARAMETERS
Investable funds
For the purposes of this policy, investable funds are the moneys available for investment at any one
time and include Council’s bank account balance. Included in this balance is any moneys held by
Council on behalf of external parties (for example cash performance bonds).

Investable funds will be determined against the cash flow needs of Council following the adoption of
the annual budget.

Authorised investments
Without specific approval from Council or the Treasurer, investments are limited to those prescribed
by section 6 of the Statutory Bodies Financial Arrangements Act 1982 for local governments with
Category 1 investment power, which include:
•       deposits with a financial institution
•       interest bearing deposits
•       commercial paper
•       bank accepted/endorsed bank bills
•       bank negotiable certificates of deposit
•       short term bonds
•       floating rate notes
•       QIC Cash Fund
•       QTC Capital Guaranteed Cash Fund, Debt Offset Facility, Fixed Rate Deposit (up to 12
        months) and QTC Working Capital Facility.

Prohibited Investments
This Policy prohibits any investment carried out for speculative purposes. The Financial Services
Manager may include a prohibited investments list within the Investment Guidelines.

The following investments are prohibited by this Investment Policy:
•     derivative based instruments (excluding floating rate notes)
•     principal only investments or securities that provide potentially nil or negative cash flow
•     stand-alone securities issued that have underlying futures, options, forward contracts and
      swaps of any kind
•     securities issued in non-Australian dollars.

Portfolio investment parameters and credit requirements
The following table shows the credit ratings and counterparty limits for Council:

    Short Term Rating (Standard & Poor’s) or equivalent             Individual      Total Limit
                                                                   Counterparty
                                                                      Limit
    A1+ - Financial Institutions                                         35%           100%
    A1+ - Bond Mutual Funds                                              30%            50%
    A1 – Financial Institutions                                          30%            30%
    A2 – Financial Institutions                                          15%            30%
    A3 – Financial Institutions                                           5%            10%
    Unrated                                                               Nil            Nil
    QIC / QTC Pooled Cash Management Fund                               100%           100%




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It is noted that for the purposes of this investment portfolio, the percentage limits apply effective from
the date of purchase as a percentage of the market value of the portfolio. No more than 20 per cent
of the portfolio is to be invested in Floating Rate Notes.

When considering investment options, the investment officer will establish a margin of 10 basis
points in interest rate returns to give preference to those institutions considered to be responsible
investors (e.g. do not invest in fossil fuel companies).

Council also recognises the contributions made within the region and as such, for local community
banks with a physical presence in the region and a Standard and Poor’s Long Term Rating of A3
better, council will allow limited investments with these entities in accordance with the Portfolio
Investment Parameter table listed above.

Maturity
The maturity structure of the portfolio will reflect a maximum term to maturity of no longer than 12
months.

Liquidity requirement
Given the nature of the funds invested, no more than 20 per cent of the investment portfolio will be
held in illiquid securities and at least 10 per cent of the portfolio will be at call at no cost or will mature
within 0-7 days.

Breaches
Any breach of this policy is to be reported to the Chief Executive Officer and rectified within 24 hours
of the breach occurring.

Where Council holds an investment that is downgraded below the minimum acceptable rating level,
as prescribed under regulation for the investment arrangement, Council shall within 28 days after
the change becomes known to the local government, either obtain Treasurer’s approval for
continuing with the investment arrangement or sell the investment arrangement (including, for
example, withdrawing a deposit).

Where limits for different risk categories or where counterparty limits are breached, the Financial
Services Manager will bring the matter to the attention of the Director Corporate Services with a
recommendation on potential options (e.g. continuing with the investment through until maturity or
withdrawing a deposit).

Safekeeping and custody
Each transaction will require written confirmation by the broker/dealer/bank. Council will hold security
documents, or alternatively a third-party custodian authorised by the Financial Services Manager
and evidenced by safekeeping receipts may hold security documents.

Criteria of authorised dealers and broker
Council will maintain a list of authorised financial institutions and securities brokers that the
investment officers may deal with. These financial intermediaries must have a minimum long-term
rating of at least either A+/A1/A+ from Standard and Poors, Moodys or Fitch IBCA.

All transactions undertaken on behalf of the investment portfolio of Council will be executed either
by Council directly, or through securities brokers registered as Australian Financial Service
Licensees (ASIC) with an established sales presence in Australia, or direct issuers that directly issue
their own securities which are registered on Council’s approved list of brokers/dealers and direct
issuers.



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REPORTING
The Financial Services Manager will prepare a monthly report and evaluation of the transactions,
concentrations, performance and compliance of the investment portfolio. The report will include:
•    summary of securities held at the end of the reporting period by counterparty;
•     percentage of the portfolio held by investment risk category
•     performance of the portfolio [relative to Bloomberg AusBond Bank Bill Index benchmark and/or
      BBSW].

On an annual basis, this policy will be reviewed and amended where required, with any amendments
to be approved by Council prior to implementation as part of annual budget adoption.


PERFORMANCE MEASUREMENT
The investment return for the portfolio shall be measured using the market value of the portfolio,
including withdrawals and deposits, and total performance of the portfolio compared to the
Bloomberg AusBond Bank Bill Index. This is to include changes in the capital value of assets held
(where applicable), income from managed investment portfolio assets, proceeds of sales of assets
sold and cost of assets acquired. The market value of the portfolio is to be calculated at least monthly
to coincide with monthly reporting. In defining market value, at least two pricing sources should be
included in the valuation of the securities.

DEFINITIONS
BBSW – Bank Bill Swap Rate – This is the daily calculation of the yields on bank bills of 1, 2, 3, 4,
5, and 6 month maturities used for the setting of financial arrangements.
Bloomberg AusBond Bank Bill Index – widely considered to be the industry benchmark for short
term cash fund performance and is used by market participants as a means of comparing the returns
generated by the various cash funds available in the market.
Credit Risk – is the risk of loss due to the failure of an investment issuer or guarantor
Ethical Investment Principles – Investment in companies or industries that promote positive
approaches to environmental, social and corporate governance issues; or the avoidance of
investment in industries deemed harmful to health or the environment. These principles have been
recognised by the United Nations Principles for Responsible Investment.1
Financial Institution is defined as an authorised deposit-taking institution within the meaning of the
Banking Act 1959 (Cwlth), section 5.2
Investments are defined as arrangements that are undertaken or acquired for producing income
and apply only to the cash investments of Noosa Shire Council.
Market Value of the portfolio is the book value of fixed term fixed interest deposits plus a market
value assessment of commercial paper, bank bills, and bonds or floating rate notes.
QIC – Queensland Investment Corporation.
QTC – Queensland Treasury Corporation.

RELEVANT POLICIES AND LEGISLATION
Statutory Bodies Financial Arrangements Act 1982
Statutory Bodies Financial Arrangements Regulation 2007
Local Government Act 2009
Banking Act 1959 (Cwlth)
Noosa Council Financial Sustainability Policy
Noosa Council Management of Restricted Cash Policy
Noosa Council Employee Code of Conduct
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Noosa Council Enterprise Risk and Opportunity Management Policy

HUMAN RIGHTS COMPATIBILITY STATEMENT

In developing this policy, the subject matter has been considered in accordance with the requirements
of the Queensland Human Rights Act 2019. It is considered that the subject matter does not conflict
with any human rights and supports a human rights approach to decision making by Council.

This policy should be read in conjunction with the Queensland Human Rights Act 2019 and Council’s
Human Rights Policy.




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Attachment 2 – Investment Policy
Version control:
   Version         Reason/ Trigger                      Change (Y/N)   Endorsed/ Reviewed by         Date

   1.0             Create new on de-amalgamation from   Y              Manager Financial Services    22/12/2013
                   Sunshine Coast Regional Council

   2.0             Annual Review                        Y              Manager Financial Services    02/06/2014

   3.0             Annual Review                        Y              Manager Financial Services    13/05/2015

   4.0             Annual Review                        N              Manager Financial Services    20/05/2016

   5.0             Annual Review                        Y              Director Corporate Services   19/05/2017

   6.0             Annual Review                        Y              Council                       06/07/2018

   7.0             Annual Review                        N              Council                       28/06/2019

   8.0             Annual Review                        Y              Council                       10/07/2020

   9.0             Annual Review                        N              Council                       30/06/2021

   10.0            Annual Review                        N              Council                       28/6/2022

   11.0            Annual Review                        N              Council                       30/06/2023

   12.0            Annual Review                        Y              Council                       28/06/2024

   13.0            Annual Review                        Y              Council                       30/06/2025

   14              Annual Review                        Y              Council                       23/06/2026




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