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<br />CITY OF CENTERVILLE, MINNESOTA <br />NOTES TO THE FINANCIAL STATEMENTS <br />DECEMBER 31, 2005 <br /> <br />Note 3: DETAILED NOTES ON ALL FUNDS <br /> <br />A. Deposits and Investments <br /> <br />Custodial credit risk for deposits and investments is the risk that in the event of a bank failure, the City's deposits <br />and investments may not be returned or the City will not be able to recover collateral securities in the possession of <br />an outside party. <br /> <br />The 4M fund is a customized cash management and investment program for Minnesota public funds. Sponsored <br />and governed by the League of Minnesota Cities since 1987, the 4M fund is a unique investment alternative <br />designed to address the daily and long term investment needs of Minnesota cities and other municipal entities. <br />Allowable under Minnesota statutes, the 4M fund is comprised of top quality, rated investments. <br /> <br />In accordance with Minnesota statutes and as authorized by the Council, the City maintains deposits at those <br />depository banks, all of which are members of the Federal Reserve System. <br /> <br />Minnesota statutes require that all City deposits be protected by insurance, surety bond, or collateral. The market <br />value of collateral pledged must equal 11 0 percent of the deposits not covered by insurance or bonds (140 percent in <br />the case of mortgage notes pledged). <br /> <br />Authorized collateral includes the legal investments described below, as well as certain first mortgage notes, and <br />certain other State or local government obligations. Minnesota statutes require that securities pledged as collateral <br />be held in safekeeping by the City or in a financial institution other than that furnishing the collateral. <br /> <br />At year end, the City's carrying amount of deposits was $6,274,739 and the bank balance was $6,338,338. Of the <br />bank balance, $4,436,333 was covered by federal depository insurance or by collateral held by the City's agent in <br />the City's name. The remaining balance of $1,902,005 was collateralized with securities held by the pledging <br />fInancial institution's trust department or agent in the City's name. <br /> <br />As of December 31, 2005, the City had the following investments that are insured or registered, or securities held by <br />the City or its agent in the City's name. <br /> <br /> Fair Value <br /> Credit Segmented Concentration and <br /> Quality/ Time of Carrying <br />Investment Type Ratings (1) Distribution (2) Credit Risk Amount <br />Pooled investments <br />Broker money market N/A N/A N/A $ 167,503 <br />Nonpooled investments <br />U.S. Government Securities AAA More than 3 years 91% 1,715,288 <br />Total investments $ 1.882.791 <br /> <br />1. Ratings are provided by various credit rating agencies where applicable to indicate associated credit risk. <br />2. Interest rate risk is disclosed using the segmented time distribution method. <br />N/ A Indicates not applicable or available. <br /> <br />-27- <br />