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Treasury Management Policy Responsibility for policy: Audit and Risk Committee Approving authority: Council Last reviewed: May 2014 Next review: May 2017 Application 1. This policy applies to all staff of the University with cash handling responsibilities Purpose 2. The purpose of this policy is to set out the high-level framework for the University's financial governance and management. Scope 3. The scope of this policy excludes endowment funds. Legislative context 4. The following documents provide the legislative context for this policy: Education Act 1989 Public Finance Act 1989 Crown Entities Act 2004. Related documents 5. This policy should be read in conjunction with the following documents: Financial Authority Policy Financial Ethics Policy Koha, Donations and Sponsorship Policy Purchasing Policy PCard Policy Travel Policy Governance and Management Guidelines Staff Code of Conduct Definitions 6. In this policy: borrowing means any financing that includes draw-down facilities and credit facilities with a maturity of more than 30 days; it does not include routine payment arrangements with vendors and credit card facilities cash means all forms of payment accepted by the University, including currency (notes and coins), cheques, money-orders, credit cards, EFTPOS and other electronic transactions cash handling means the receipt, storage, banking and distribution of cash credit risk means the risk of loss arising from a counterparty to a financial contract failing to discharge its obligations counterparty means a financial institution with which the University enters into a financial arrangement derivative instrument means a financial instrument whose value can be derived from an independent market endowment fund means an investment that is funded solely by way of donations and managed by the University of Waikato Foundation Trust Investment Committee financial instrument means a contract that creates both a financial asset in one entity and a financial liability or equity instrument in another; it includes cash deposits, lease arrangements, hire purchase agreements and derivative instruments foreign currency exposure means the value of expected payments or receipts in foreign currency based on the budget and subsequently the updated cashflow forecast foreign exchange risk means the risk of loss to an entity arising from an adverse movement in foreign currency exchange rates hedging means establishing parameters to offset or minimise costs and/or risks associated with foreign currency transactions liquid asset means cash or any other financial asset that can be liquidated within two working days purchasing card means a credit card facility for staff. Approved counterparties 7. The Chief Financial Officer must ensure that transactions are only conducted with banks or financial institutions which have either: a. a minimum Standard and Poors short-term rating of A-2 or long-term credit rating of A+, or b. a minimum Moody's Investors short-term rating of P-2 or long-term credit rating of A and which have been granted approved counterparty status by the Audit and Risk Committee. (The current schedule of approved counterparties is set out in Appendix 1.) 8. The Audit and Risk Committee is responsible for monitoring approved counterparties to ensure that they maintain the minimum credit ratings specified in section 7 of this policy. 9. The Chief Financial Officer must ensure that the University's financial exposure to any one counterparty does not exceed 40% of its total funds, or NZ$10 million, whichever is greater. 10. Counterparty limits are subject to the approval of the Audit and Risk Committee, on the recommendation of the Chief Financial Officer. Banking and financial arrangements 11. The Chief Financial Officer is responsible for ensuring that the University's banking arrangements comply with the Education Act 1989 and that, for control purposes, the number of University bank accounts is kept to a minimum. 12. Staff must not open or close bank accounts on behalf of the University without the prior approval of the Vice-Chancellor. (The current schedule of approved University bank accounts is set out in Appendix 2.) 13. The Chief Financial Officer is responsible for ensuring that short-term deposits are only placed with the banks or financial institutions which have been granted approved counterparty status under section 7 of this policy. 14. The Chief Financial Officer is responsible for ensuring that any investment of money by the University complies with the Education Act 1989. 15. The Chief Financial Officer is responsible for ensuring that approval by the Minister is obtained in advance for any term investments and investments in shares, derivatives, gold, silver or any other commodities that are not otherwise covered under section 14 of this policy. Authorised bank account signatories for financial transactions 16. Authority to act as a bank account signatory is subject to the approval of the Vice-Chancellor. 17. The Chief Financial Officer must report the schedule of approved bank account signatories to the Audit and Risk Committee annually. (The current schedule of approved bank account signatories is set out in Appendix 3 and Appendix 4.) 18. All payroll transaction require the signature of one approved bank account signatory from the list set out in Appendix 3, together with the signature of one approved bank account signatory from the list set out in either Appendix 3 or Appendix 4. 19. All other bank account transactions require the signature of two approved bank account signatories from the list set out in Appendix 3. 20. In situations where two signatories from the list set out in Appendix 3 are not available, the Chief Financial Officer may call upon one signatory from the list set out in Appendix 4 to counter-sign a non-payroll bank account transaction, together with one signatory from the list set out in Appendix 3. Purchasing card facilities 21. Only the Chief Financial Officer has authority to approve the establishment of any purchasing card facility for the University. 22. Conditions for the provision and use of University purchasing cards are set out in the PCard Policy. Borrowing 23. The Chief Financial Officer is responsible for ensuring that all borrowing by the University complies with the Education Act 1989. 24. The Chief Financial Officer is responsible for ensuring that the maturity dates of any drawdowns and bank facilities are spread in order to mitigate any pressure in re-funding any individual tranche of borrowing and to reduce exposure to adverse circumstances which might otherwise impact on the availability or price of such funding. Liquidity risk management 25. The Chief Financial Officer is responsible for ensuring that, unless approved otherwise in advance by Council, the University's funding commitments are managed to ensure that a minimum of 105% of the forecast peak funding requirements at any one point in time in the following 12 month period are covered on the day by a combination of: liquid assets, and secured committed financing arrangements. 26. The Chief Financial Officer must monitor funding commitments and the University's liquidity position on a monthly basis and report on such matters to each meeting of the Audit and Risk Committee. Foreign exchange risk management 27. In order to limit its exposure to foreign exchange risk, the University's preference to transact in NZ$ wherever practicable must be communicated to both suppliers and customers. 28. The Chief Financial Officer has the authority to use hedging instruments to mitigate University foreign exchange risks; however, active trading that is speculative in nature is prohibited. 29. The Chief Financial Officer may undertake hedging transactions with the approved counterparties set out in Appendix 1, provided that only the following financial instruments are used: a. foreign exchange spot contracts b. forward exchange contracts c. market and stop-loss orders. 30. The Chief Financial Officer must report the details of any net foreign currency exposures and related hedging to the next meeting of the Audit and Risk Committee following the relevant transaction. 31. Individual foreign currency expenses or receipts with an equivalent spot value of NZ$50,000 or less should be transacted at the spot rate on the date of payment or receipt; the Chief Financial Officer must monitor foreign exchange risk for these types of transactions, but may leave them unhedged at his or her discretion. 32. Wherever a confirmed foreign currency exposure has an equivalent spot value higher than NZ $50,000, the Chief Financial Officer is responsible for ensuring that the foreign currency exposure is 100% covered by foreign currency deposits or hedged in accordance with the provisions of sections 28-29 of this policy, within five working days of the commitment arising provided: a. there is reasonable certainty over the amount and timing of the exposure, and b. the term of the latest payment or receipt does not exceed 12 months. 33. Where, in the Chief Financial Officer’s view, a contract involving foreign currency is very likely to be entered into within six months, he or she may arrange for up to 70% of the foreign currency exposure to be covered by foreign currency deposits or hedged in accordance with the provisions of section 28-29 of this policy. 34. The Chief Financial Officer is responsible for ensuring that at least two competitive quotes from approved counterparties are obtained for any foreign currency transactions with an equivalent spot value higher than NZ$250,000 Cash handling 35. The Chief Financial Officer has authority to designate an area as a Cash Collection Point. 36. The Chief Financial Officer is responsible for ensuring that internal control procedures for a Cash Collection Point are appropriate, and that: a. duties for the receipting, distribution, and recording of cash transactions are segregated, or b. where the limited number of staff or the nature of the cash transactions makes segregation of duties impossible, alternative appropriate controls are built into the cash handling procedure of the Cash Collection Point. 37. The Chief Financial Officer is responsible for ensuring that cash received through the Cash Collection Point is kept physically secure at all times through appropriate safekeeping equipment and procedures, and that the safety and security of staff within the area is maintained. 38. Staff must maintain a formal accounting record of all cash transactions and must reconcile transactions at the close of each business day. 39. Staff who receipt cash on behalf of the University must ensure that it is deposited into the appropriate University bank account as soon as practicable. 40. Staff must not alter University accounting records, misappropriate cash received on behalf of the University, or use cash received on behalf of the University for personal purposes. Compliance 41. The Audit and Risk Committee is responsible for monitoring compliance with this policy, by way of six-monthly reports from the Chief Financial Officer. 42. Breaches of the policy must be reported to the Vice-Chancellor and the Chairperson of the Audit and Risk Committee, and may result in disciplinary action under the Staff Code of Conduct. TREASURY MANAGEMENT POLICY APPENDICES Appendix 1 - Approved Counterparties The University's approved counterparties, their exposure limits are: Standard & Poors Counterparty short-term credit rating long-term credit ratings, and their associated Standard & Poors longterm credit rating Moody's shortterm credit rating Moody's long-term credit rating Exposure Limit as a % of Total Funds ANZ Bank NZ Limited A-1+ AA- P-1 Aa3 0 - 40% ASB Bank Limited A-1+ AA- P-1 Aa3 0 - 40% Bank of New Zealand A-1+ AA- P-1 Aa3 0 - 40% Commonwealth Bank of Australia A-1+ AA- P-1 Aa2 0 - 40% Rabobank A-1+ AA P-1 Aa2 0 - 40% Westpac Banking Corporation A-1+ AA- P-1 Aa3 0 - 40% Western Union A-2 BBB P-2 Baa2 0 - 40% Appendix 2 - Bank Accounts The schedule of bank accounts held by the University and its subsidiaries, as approved by the ViceChancellor, is provided below. Counterparty Account Type Current Accounts ASB Bank Limited Current Account - University ASB Bank Limited Current Account - Foundation ASB Bank Limited Current Account - WaikatoLink ASB Bank Limited Current Account – iEngagEd Ltd ASB Bank Limited Business Saver Account - University ASB Bank Limited Business Saver Account - Foundation ASB Bank Limited Business Saver Account - WaikatoLink ASB Bank Limited Current AUD Account - University ASB Bank Limited Current EUR Account - University ASB Bank Limited Current GBP Account - University ASB Bank Limited Current JPY Account - University ASB Bank Limited Current USD Account - University ASB Bank Limited Current USD Account - WaikatoLink ASB Bank Limited Current USD Account - US Federal Funds Commonwealth Bank of Australia Business Cheque Account Commonwealth Bank of Australia Business Transaction Account Foreign Currency Transacting Accounts Western Union Foreign Currency Transacting-University Call Accounts ANZ Bank NZ Limited Call Account - University ASB Bank Limited Call Account - University Bank of New Zealand Call Account - University Westpac Banking Corporation Call Account - University Term Deposits ANZ Bank NZ Limited Term Deposit - University ASB Bank Limited Term Deposit - University ASB Bank Limited Term Deposit - Foundation Bank of New Zealand Term Deposit - University Westpac Banking Corporation Term Deposit - University At its own discretion, each bank typically opens a new bank account for the University upon the deposit of short term funds. Appendix 3 - Approved bank account signatories Holders of the following positions are approved as bank account signatories: Title Chief Financial Officer Manager, Financial Management Project and Financial Information Manager Accountant/Financial Advisor Appendix 4 - Approved bank account signatories for electronic payroll authorisations only Holders of the following positions are approved as bank account signatories for electronic payroll authorisations only: Title Director of Human Resource Management Human Resources Manager Appendix 5 - Delegated Authority Framework Activity Delegated Authority Banking Opening new bank account Vice-Chancellor Closing existing bank account Vice-Chancellor Assigning & removing signatory Vice-Chancellor status Establishing new credit card Chief Financial Officer facilities Financial Instruments and Financial Arrangements Audit and Risk Approval of financial instruments Committee Approval of short-term investment Vice-Chancellor of funds over NZ$ 10,000,000 Approval of short-term investment Chief Financial Officer of funds up to NZ$ 10,000,000 Approval of financial arrangements Chief Financial Officer Interest Rate Risk Management Establishing debt arrangements Liquidity Risk Management Council Setting of funding requirements Audit and Risk Committee Foreign Exchange Risk Management Hedging of foreign currency Chief Financial Officer Parameters Public Finance Act 1989 Must be an approved counterparty Council to be notified at next meeting Council to be notified at next meeting Must be an approved counterparty Public Finance Act 1989 Must be an approved counterparty Must be an approved counterparty Must be a major NZ trading bank Must be an approved counterparty Must be a major NZ trading bank Public Finance Act 1989 Must be an approved counterparty Must be an approved counterparty Public Finance Act 1989 expenses and receipts over NZ$ 50,000 Credit Risk Management Must be an approved counterparty Approval of counterparties Audit and Risk Committee Setting of counterparty exposure limits Audit and Risk Committee Minimum Standard and Poors shortterm credit rating of A-2 or long-term credit rating of A+, or equivalent Minimum Moody's Investors’ ratings Appendix 6 - Approved Financial Instruments The University's approved financial instruments and their associated maximum maturity are: Instrument Maximum Maturity Bank Bills 90 days Bank Deposits 5 years New Zealand Government Stock 5 years