Administrative Read Reference

Finances

Investment of Funds

Illinois statute 50 ILCS 340/1 specifically authorizes certain local governmental units, including libraries, upon adoption of a resolution by the board, to invest in:

  • their own tax anticipation warrants;
  • their own general obligation bonds;
  • bonds or other interest-bearing obligations of the United States or the state of Illinois;
  • savings accounts and certificates of deposit of any state or national bank, provided such accounts and certificates are fully insured by the FDIC (meaning the amount of the account or certificate cannot exceed applicable insurance limits) and state or federally chartered savings and loan associations, provided such accounts and certificates are fully insured by the FSLIC; and
  • treasury notes and other securities issued by agencies of the United States.

Under 50 ILCS 340/2, any warrants purchased under the authority granted by 50 ILCS 340/1 may, by ordinance or resolution of the board, be either resold or canceled and reissued in the same principal amount, in either case at the same or an adjusted rate of interest. Proceeds from such resale or reissuance are to be applied first to repayment of the funds used to purchase the warrants, with the balance to revert to the fund for which the tax anticipation warrants were originally issued.

Probably far more importantly, 30 ILCS 235/2, 235/3, 235/4, and 235/5 authorize investment by local governments, including libraries, in:

  1. bonds, notes, certificates or indebtedness, treasury bills or other securities guaranteed by the full faith and credit of the United States government;
  2. interest-bearing savings accounts, certificates of deposit or time deposit, or other investments constituting direct obligations of any bank, as defined by the Illinois Banking Act [205 ILCS 5/];
  3. short-term obligations of corporations organized in the United States with assets exceeding $500 million if:
    1. such obligations are rated at the time of purchase within the three highest classifications established by at least 2 standard rating services and which mature not later than 180 days from the date of purchase, and such purchases do not exceed 10% of the corporations' outstanding obligations;
    2. in money market mutual funds registered under the Investment Company Act of 1940, provided the portfolio is limited to obligations specified in the statute and to agreements to repurchase such obligations.

Investments may be made only in banks that are insured by the FDIC. Any public agency may invest any public funds in short-term discount obligations of the Federal National Mortgage Association or in shares or other forms of securities issuable by savings and loan associations. Investments may be made only in those savings and loan associations, the shares or certificates of which are insured by the FSLIC. Any such securities may be purchased at the offering or market price thereof at the time of such purchase. Such securities so purchased shall mature or be redeemable on a date or dates prior to the time when, in the judgment of the governing authority, the public funds so invested will be required for expenditure. The expressed judgment of any such governing authority as to when public funds will be required for expenditure or be redeemable is final and conclusive.

Public agencies may invest in the Public Treasurer's Investment Pool or in a fund managed, operated, and administered by a bank. Public agencies may also invest in repurchase agreements of government securities, subject to the Government Securities Act. Under 30 ILCS 235/2(b) public agencies may also invest in certain types of accounts of Illinois- or Federally-chartered credit unions, so long as their principal office is in Illinois and the accounts are fully insured by applicable law.

75 ILCS 16/35-25(d) and 30 ILCS 235/6 provide that no bank, savings and loan, or credit union shall receive public funds unless it has complied with the requirements established in the Act. Briefly stated, the requirements include the furnishing of the last two sworn statements of resources and liabilities that the institution has filed (and is required to file) with its respective regulatory agency. Additionally, the funds not insured (i.e., historically greater than $l00,000, except that the insured limit has been undergoing some variation by federal authorities) or collateralized by a federal agency shall not exceed 75% of a bank's capital stock and surplus, 75% of a savings and loan's net worth, or 50% of the unimpaired capital and surplus of a credit union.