C.A.F.R., FY 2005-06 - Laserfiche WebLink

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City of Paris, Texas Notes to Financial Statements September 30, 2006 IV. Detailed Notes on All Funds and Component Unit (Continued) A. Deposits and Investments (Continued) As of September 30, 2006, the City and Component Unit had the following investments: Credit Weighted Average Type of Security Fair Value Rating Maturity (Years) Primary Government Mortgage Backed Securities: Government National Mortgage Corporation $ 55,115 N/A 2.79 Federal Home Loan Mortgage Corporation 1,609,592 N/A 3.04 Federal National Mortgage Association 2,127,525 N/A 4.46 Notes: Federal Home Loan Mortgage Corporation 1,271,435 AAA 0.19 Federal National Mortgage Association 497,345 AAA 0.25 Totals $ 5,561,012 2.68 Component Unit - PEDC Certificates of Deposit $ 483,332 N/A 0.29 Interest Rate Risk. Generally, the City will attempt to match its investments with anticipated cash flow requirements. Unless matched to a specific cash flow, the City will not directly invest in securities maturing more than 10 years from the date of purchase. The basis used by the Finance Director to determine whether market yields are being achieved shall be the six-month U.S. Treasury Bill and the Average Fed Funds rate. Credit Risk is the risk that an issuer or other counter-party will not fulfill its obligations, Investing is perfonned in accordance with the City's investment policy adopted by the City Council complying with State law and the City Charter. City funds may be invested in securities authorized by Chapter 2256 of the State of Texas Government Code. Concentration of Credit Risk. The City diversifies its investments by security type and institution. With the exception of obligations of the United States or its agencies and authorized pools, no more than 50% of the City's total investment portfolio will be invested in a single financial institution with the exception of its local depository. Custodial Credit Risk - Deposits. In the case of deposits, this is the risk that in the event of a bank failure, the City's deposits may not be returned to it. As of September 30, 2006, the City's bank balance was not exposed to custodial credit risk. As of the same date PEDC had exposure to custodial credit risk because $178,987 of the PEDC bank balance of$854,787 was uninsured. Custodial Credit Risk - Investments. For an investment, this is the risk that in the event of the failure of the counter-party, the City may not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. As of September 30, 2006, the City did not have custodial credit risk exposure. 35