6.1. SR 06-03-2013 - Laserfiche WebLink

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ELK RIVER FIRE RELIEF ASSOCIATION ELK RIVER,MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2012 AND 2011 Note 3: DETAILED NOTES ON ACCOUNTS-CONTINUED The Association's investments are subject to the following risks: • Credit Risk.Is the risk that an issuer or other counterparty to an investment will not fulfill its obligations.Ratings are provided by various credit rating agencies and where applicable,indicate associated credit risk Minnesota statutes,section I IA.24,contains a specific list of asset classes available for investment,including common stocks,bonds,short term securities,real estate,private equity,and resource funds.The statutes prescribe the maximum percentage of fund assets that may be invested in various asset classes and contain specific restrictions to ensure the quality of the investments. • Custodial Credit Risk.The custodial credit risk for investments is the risk that,in the event of the failure of the counterparty to a transaction,a government will not be able to recover the value of investment or collateral securities that are in the possession of an outside party. • Concentration of Credit Risk. Is the risk of loss attributed to the magnitude of a government's investment in a single issuer. • Interest rate risk. Is the risk that changes in interest rates will adversely affect the fair value of an investment. Investment policy.The Association has adopted an investment policy with regard to investing the financial assets of the Association.All assets will be invested in accordance with this policy,Minnesota statutes chapter 69.775 and written administrative procedures.It shall be the policy of the Association to invest the assets in accordance with the minimum and maximum range for each asset class as stated below: Minimum Maximum Asset Class Percentage Percentage Stocks 25% 75% Bonds 0% 50% Non-fluctuating share value 0% 10% Cash 0% 10% Note 4: FUNDING STATUS AND PROGRESS The amount of the total accrued pension liability is based on a standardized measurement established by the Governmental Accounting Standards Board(GASB)that,with some exceptions,must be used by the relief associations for fmancial statement presentation.This standardized measurement is based on Minnesota statute 69.772.This pension valuation method reflects the present value of estimated pension benefits that will be paid in future years as a result of service years performed by the members of the Association.A standardized measure of the accrued pension liability was adopted by GASB to enable the readers of relief association financial statements to(a)assess the relief association's funding status on a going-concern basis,(b)assess progress being made in accumulating sufficient assets to pay benefits when due,and(c)make comparisons among relief associations. Because the standardized measure is used only for disclosure purposes by the Association,the measurement is independent of an actuarial computation made to determine contributions to the Association. -31-