What should be part of an entity's debt policy regarding investment of bond proceeds?

An effective debt policy for an entity, particularly regarding the investment of bond proceeds, should include a list of permitted investments and liquidity considerations. This is crucial because when bond proceeds are raised, they are often held for a period before being used for their intended purpose, which can lead to the need for short-term investments.

Including a clear list of permitted investments ensures that the proceeds are managed in a way that complies with legal and regulatory requirements, safeguarding the entity from poor investment choices that may jeopardize the intended use of the funds. Additionally, liquidity considerations are essential; the invested proceeds must be readily accessible when required for project expenditures. This balance between earning a return and ensuring availability is key to effective financial management.

In contrast, while a plan for future tax increases and an assessment of potential borrowing rates could be components of broader financial planning, they do not directly pertain to the investment strategies for bond proceeds specifically. Similarly, requirements for selling municipal bonds, while important for the overall debt issuance process, do not impact how the proceeds from those bonds should be managed once raised. Hence, the focus on permitted investments and liquidity directly addresses the management of bond proceeds and enhances financial stability and compliance.