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<br />Paris Economic Development Corporation <br />(A Component Unit of the City of Paris, Texas) <br />Notes to Financial Statements (Continued) <br />September 30, 2005 <br /> <br />Note 2: Summary of Significant Accounting Policies (Continued) <br /> <br />B. Assets, Liabilities, and Net Assets <br /> <br />1) Deposits and Investments <br /> <br />Cash and cash equivalents are considered to be cash on hand, demand deposits, and short- <br />term investments with original maturities of three months or less from the date of <br />acquisition. <br /> <br />Investments are stated at market value. <br /> <br />2) Restricted Assets <br /> <br />Certain resources set aside for repayment of revenue bonds and related interest are <br />classified as restricted assets on the balance sheet because their use is limited by applicable <br />bond covenants. The Debt Service Fund is used to accumulate resources for debt service <br />payments over the next twelve months. <br /> <br />The Reserve Fund is accumulated for the purpose of retiring the last of any bonds as they <br />become due or for debt service when the Debt Service Funds are insufficient. <br /> <br />3) Fixed Assets <br /> <br />Fixed assets are valued at historical cost or estimated historical cost if actual historical cost <br />is not available. <br /> <br />4) Use of Estimates <br /> <br />The preparation of fmancial statements in conformity with accounting principles generally <br />accepted in the United States of America, requires management to make estimates and <br />assumptions that affect the reported amounts of assets and liabilities at the date of the <br />financial statements and the reported amounts of revenues and expenses during the reporting <br />period. Actual results could differ from those estimates. <br /> <br />Note 3: Deposits and Investments <br /> <br />PEDC maintains accounts in several fmancial institutions. At September 30, 2005, the carrying <br />amount of demand deposits and certificates of deposit was $577,561 and' the bank balance was <br />$626,739, which was covered by federal depository insurance in the amount of $625,421, leaving <br />$1,318 which was exposed to custodial credit risk since all deposits were not insured. <br /> <br />Note 4: Public Funds Investment Pools <br /> <br />Public funds investment pools in Texas (Pools) are established under authority of the Interlocal <br />Cooperation Act, Chapter 79 of the Texas Government Code, and are subject to the provisions of the <br />Public Funds Investment Act (the Act), Chapter 2256 of the Texas Government Code. In addition to <br />other provisions of the Act designed to promote liquidity and safety of principal, the Act requires <br />Pools to: 1) have an advisory board composed of participants in the Pool and other persons who do <br />not have a business relationship with the Pool and are qualified to advise the Pool; 2) maintain a <br />continuous rating of no lower than AAA or AAA-m or an equivalent rating by at least one nationally <br />recognized rating service; and 3) maintain the market value of its underlying investment portfolio <br />within one-half of one percent of the values of its shares. <br /> <br />5 <br />