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NOTE 2 – DEPOSITS AND INVESTMENTS (CONTINUED) Credit risk – This is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. Minnesota Statutes limit the City’s investments to direct obligations or obligations guaranteed by the United States or its agencies; general obligations rated “A” or better; revenue obligations rated “AA” or better; general obligations of the Minnesota Housing Finance Agency rated “A” or better; commercial paper issued by the United States corporations or their Canadian subsidiaries, rated of the highest quality category by at least two nationally recognized rating agencies, and maturing in 270 days or less; time deposits that are fully insured by the Federal Deposit Insurance Corporation or bankers acceptances of the United States banks and Guaranteed Investment Contracts guaranteed by a United States commercial bank or domestic branch of a foreign bank, or a United States insurance company, or their Canadian subsidiary, and with a credit quality in one of the top two highest categories by a nationally recognized rating agency. The City’s investment policies do not further address credit risk. Concentration risk – This is the risk associated with investing a significant portion of the City’s investment (considered 5 percent or more) in the securities of a single issuer, excluding United States guaranteed investments (such as Treasuries), investment pools and mutual funds. The City’s investment policies do not limit the concentration of investments. At year end, the City’s investment portfolio included 23% concentration in Federal Home Loan Banks and 6% in Federal National Mortgage Association. Interest rate risk – This is the risk of potential variability in the fair value of fixed rate investments resulting from changes in interest rates (the longer the period for which an interest rate is fixed, the greater the risk). The City does not have an investment policy limiting the duration of investments. NOTE 3 – INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS A. Short-Term Interfund Receivables/Payables Individual interfund due from and to other funds at year-end were as follows: Receivable FundPayable Fund Amount Major Governmental FundMajor Governmental Fund$ 46,284 Public Improvement RevolvingPublic Improving Revolving The COR Fund Capital Project FundFund Capital Project Fund Major Governmental FundNonmajor Governmental Fund 270,116 Public Improvement Revolving FundCenter Street Fund Capital Project FundCapital Project Fund Nonmajor Governmental FundNonmajor Governmental Fund 18,450 Economic Development AuthorityRALF Funded Project Fund Special Revenue FundCapital Project Fund Nonmajor Governmental FundNonmajor Governmental Fund 425,757 State-Aid Construction2012 Riverdale Drive Capital Project FundCapital Project Fund $ 760,607 These internal loans were utilized for cash flow purposes. Page 73