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NOTE 2 — DEPOSITS AND INVESTMENTS (CONTINUED)
<br />B. Deposits (continued)
<br />At year -end, the carrying amount of the City's deposits was $8,281,705 while the balance on the bank
<br />records was $10,267,945. At December 31, 2006, $10,267,945 of deposits were fully covered by federal
<br />depository insurance, surety bonds, or by collateral held by the City's agent in the City's name.
<br />C. Investments
<br />The City has the following investments at year end:
<br />Credit Risk
<br />U.S Treasuries
<br />N/A Not Applicable
<br />N/R Not Rated
<br />Investment Type
<br />Rating Agency Less Than 1 1 to 5 5 to 10 10 to 15 >15 Total
<br />N/A N/A $ - $ - $ - $ $ 25,178 $ 25,178
<br />Interest Risk- Maturity Duration in Years
<br />U.S Agencies Aaa Moodys 5,834,387
<br />U.S Agencies . AAA S &P - 498,400. 990,315
<br />Municipal Bonds Al -Aaa Moodys 567,304 1,385,042 206,806
<br />9,854,716 3,476,238 1,921,862 - 945,074 22,032,277
<br />- - • 1,488,715
<br />2,159,152
<br />Negotiable Certificates of Deposit N/A N/A 5,136,320 3,372,310 - 96,275 - 8,604,905
<br />Investment pools
<br />Minnesota Municipal Money Market NIR N/A 589,263 - - - - 589,263
<br />First American Treasury Obligation AAA S &P - 4,522,685 4,522,685
<br />Guaranteed Investment Contract Aaa Moodys - - - - 1,531,940 1,531,940
<br />Total Investments $40,954,115
<br />The Minnesota Municipal Money Market Fund is an external investment pool not registered with the Securities Exchange Commission (SEC) that
<br />follows the same regulatory rules of the SEC under rule 2a7. The fair value of the position in the pool is the same as the value of the pool shares.
<br />Investments are subject to various risks, the following of which are considered the most significant:
<br />Custodial credit risk -- For investments, this is the risk that in the event of a failure of the
<br />counterparty to an investment transaction (typically a broker - dealer) the City would not be able to
<br />recover the value of its investments or collateral securities that are in the possession of an outside
<br />party. The City does not have a formal investment policy addressing this risk, but typically limits its
<br />exposure by purchasing insured or registered investments, or by the control of who holds the
<br />securities.
<br />Credit risk -- This is the risk that an issuer or other counterparty to an investment will not fulfill its
<br />obligations. Minnesota Statutes limit the City's investments to direct obligations or obligations
<br />guaranteed by the United States or its agencies; general obligations rated "A" or better; revenue
<br />obligations rated "AA" or better; general obligations of the Minnesota Housing Finance Agency rated
<br />"A" or better; commercial paper issued by the United States corporations or their Canadian
<br />subsidiaries, rated of the highest quality category by at least two nationally recognized rating
<br />agencies, and maturing in 270 days or less; time deposits that are fully insured by the Federal Deposit
<br />Insurance Corporation or bankers acceptances of the United States banks and Guaranteed Investment
<br />Contracts guaranteed by a United States commercial bank or domestic branch of a foreign bank, or a
<br />United States insurance company, or their Canadian subsidiary, and with a credit quality in one of the
<br />top two highest categories by a nationally recognized rating agency. The City's investment policies
<br />do not further address credit risk.
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