09 - PEDC 2016-17 Annual Audit Report

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Wev'"Arm (A Component Unit of the City of Paris, Texas) Notes to the Financial Statements (Continued) September 30, 2017 I. Summa ry of SienifiggLit Accounting Policies (Continued) F. Assets, Liabilities, and Fund Balance/Net Position (Continued) 8. Capital Assets (Continued) Assets capitalized have an original cost of more than S5,000 and useful life in excess of one year. Depreciation has been provided over the estimated useful lives using the straight-line method of depreciation. The estimated useful lives are as follows: Equipment 5-7 Years Buildings, 40 Years Improvements Other Than Buildings 50 Years 11. Detailed Notes, on All Activities and Funds A. Cash Deposits with Financial Institutions Custodial credit risk for deposits is the risk that in the event of a bank failure, the entity's deposits may not be returned or PEDC will not be able to recover collateral securities in the possession of an outside party. PEDC's policy requires deposits to be: secured by collateral valued at market or par, whichever is lower, less the amount of the Federal Deposit Insurance Corporation insurance (FMC). Deposited funds may be invested in certificates of deposits in institutions that are domiciled in the State of Texas. Collateral agreements must be approved prior to deposit of funds as provided by law. As of September 30, 2017, PEDC was not exposed to custodial credit risk since deposits are insured or collateralized with securities pledged held in the name: of the entity. The entity's carrying amount of demand deposits was $3,082,633 and the bank balance was $3,111,647, B. Investments The public funds investment pools in Texas are established under authority of the Interlocal Cooperation Act, Chapter 79 of the Texas Government Code, and are subject to the provisions of the: Public Funds Investment Act (the Act), Chapter 2256 of the Texas Government Code. In addition to other provisions of the Act designed to promote liquidity and safety of principal, the Act requires Pools to: 1) have an advisory board composed of participants, in the Pool and other persons who do not have a business relationship with the Pool and' are qualified to advise the Pool; 2) maintain a continuous rating of no lower than AAA or AAArn or an equivalent rating by at least one nationally recognized rating service; 3) maintain the market value of its underlying investment portfolio within one-half of one percent of the values of its shares. The Texas Class Investment Pool and Lone Star Investment Pool (Pools) have a credit rating of AAAm from Standard & Poor's, Financial Services, Local government investment pools in this, rating category meet the highest standard for extremely strong capacity to maintain principal stability and to limit exposure to, principal losses, due to credit risk. The pools invest in a high quality portfolio of debt securities investments legally permissible for municipalities and school districts in the state.