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Solicitor urges formal investment policy after audit flags custodial credit exposure
Summary
Solicitor Mr. King singled out custodial credit risk in district deposits and urged the board to adopt a formal investment policy requiring depository collateralization and limits on liquid‑asset mutual‑fund exposure.
During questions following the audit presentation, solicitor Mr. King told the board the audit’s footnotes highlight custodial credit risk and recommended the board adopt a formal investment policy to reduce exposure.
“There must be a policy for credit risk,” Mr. King said, explaining that some bank and credit‑union deposits can exceed FDIC insurance limits and that a formal policy can require the district to confirm collateralization (for example by requiring depository banks to secure funds at a fixed percentage above deposits).
The solicitor offered to supply sample policies and to work with district administration to draft language. Auditors and board members discussed options including purchasing FDIC‑insured CDs or limiting amounts placed in mutual‑fund‑style liquid asset pools. The auditor said those exposures are not uncommon but recommended the district document choices and limits in board policy.
Board members directed administration and the finance committee to review page 42 of the audit report and return with policy language and options for reducing custodial exposure.
