5.2. SR 06-19-2006 - Laserfiche WebLink

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CITY OF ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31,2005 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED obligations. Minnesota Statutes require that securities pledged as collateral be held in safekeeping by the City Treasurer or in a fmancial institution other than that furnishing the collateral. At year end, the City's carrying amount of deposits was $4,585,183 and the bank balance was $5,366,417. The bank balance was covered by federal depository insurance totaling $410,909 and the remaining balance was covered by securities held by the pledging financial institution's agent in the City's name. The carrying amount of deposits for the HRA, a discretely presented component unit, was $232,421 and the bank balance was $232,411. The bank balance was covered by federal depository insurance totaling $100,000 and the remaining balance was covered by securities held by the pledging financial institution's agent in the HRA' s name. Investments Minnesota Statutes authorize the City to invest in the following: a. Direct obligations or obligations guaranteed by the United States or its agencies. b. Shares of investment companies registered under the Federal Investment Company Act of 1940 and whose only investments are in securities described in (a) above. c. General obligations of the State of Minnesota or any of its municipalities. d. Bankers acceptances of United States Banks eligible for purchase by the Federal Reserve System. e. Commercial paper of the highest quality issued by United States corporations or their Canadian subsidiaries and maturing in 270 days or less. f. Repurchase or reverse repurchase agreements with banks that are members of the Federal Reserve System with capitalization exceeding $10,000,000, a primary reporting dealer in U.S. government securities to the Federal Reserve Bank of New York or certain Minnesota securities broker-dealers. g. Guaranteed investment contracts (GIC's) issued or guaranteed by United States commercial banks or domestic branches of foreign banks or United States insurance companies if similar debt obligation of the issuer or the collateral pledged by the issuer is in the top two rating categories, or in the top three rating categories for long- term GIC's issued by Minnesota banks. The City's investment policy does not allow the City to invest in reverse repurchase agreements or guaranteed investment contracts. The City's investments are potentially subject to various risks including the following: · Custodial credit risk - The risk that in the event of a failure of the counterparty to an investment transaction (typically a broker) the government would not be able to recover the value of the investment or collateral securities. · Credit risk - The risk that an issuer or other counterparty to an investment will not fulfill its obligations. · Concentration risk - Investing 5 percent or more of the City's investments in the securities ofa single issuer. At year end, the City's investment portfolio included securities held with Sunbelt Funding of $2,580,055 and General Electric of $5,256,480. The City's investment policy does not allow for the undue concentration of investments with one broker or fmancial institution, or any one type of instrument. · Interest rate risk - 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 41 I I I I I I I I I I I I I I I I I I I