HomeMy WebLinkAboutNC Comprehensive Report (Finance) (45)CITY OF NATIONAL CITY
Notes to the Basic Financial Statements
(Continued)
(2) Cash and Investments, (Continued)
Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository
fmancial institution, a government will not be able to recover its deposits or will not be
able to recover collateral securities that are in the possession of an outside party. The
custodial credit risk for investments is the risk that, in the event of the failure of the
counterparty (e.g., broker -dealer) to a transaction, a government will not be able to
recover the value of its investment or collateral securities that are in the possession of
another party. The California Government Code and the City's investment policy do not
contain legal or policy requirements that would limit the exposure to custodial credit risk
for deposits or investments, other than the following provision for deposits: The
California Government Code requires that a financial institution secure deposits made by
state or local governmental units by pledging securities in an undivided collateral pool
held by a depository regulated under state law (unless so waived by the governmental
unit). The market value of the pledged securities in the collateral pool must equal at least
110% of the total amount deposited by the public agencies. California law also allows
financial institutions to secure City deposits by pledging first trust deed mortgage notes
having a value of 150% of the secured public deposits.
For investments identified herein as held by fiscal agent, the fiscal agent generally selects
the investment under the terms of the applicable trust agreement, acquires the investment,
and holds the investment on behalf of the reporting government.
Investment in State Investment Pool
The City is a voluntary participant in the Local Agency Investment Fund (LAIF) that is
regulated by the California Government Code under the oversight of the Treasurer of the
State of California. The fair value of the City's investment in this pool is reported in the
accompanying financial statements at amounts based upon the City's pro-rata share of the
fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized
cost of that portfolio). The balance available for withdrawal is based on the accounting
records maintained by LAIF, which are recorded on an amortized cost basis. LAIF is not
rated.
Investment in County Investment Pool
The City also participates in the San Diego County Treasurer's Pooled Money Fund
which is administered by the Treasurer -Tax Collector's Office. The fair value of
Commission's investment in the pool is reported at amounts based upon the City's pro-
rata share of the fair value provided by the County Treasurer for the entire portfolio (in
relation to the amortized cost of that portfolio). Earnings realized on investments based
on amortized cost are distributed to Investment Pool participants. Earnings realized on
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