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City of San Leandro <br />Notes to Basic Financial Statements <br />For the year ended June 30, 2012 <br /> <br /> <br />50 <br /> <br /> <br />NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES, Continued <br /> <br />C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation, continued <br /> <br />Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed <br />in both government-wide and proprietary fund financial statements to the extent that those standards do not conflict <br />with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of <br />following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this <br />same limitation. The City has elected not to follow subsequent private-sector guidance. <br /> <br />D. Recognition of Interest Liability <br /> <br />In the government -wide financial statements, interest payable of long-term debt is recognized as the liability is <br />incurred for governmental fund types as wells as proprietary fund types. <br /> <br />In the fund financial statements, the Governmental fund types do not recognize the interest payable when the liability <br />is incurred. Interest on long-term debt is recorded in the fund statement when payment is made. Proprietary fund types <br />recognize the interest payable when the liability is incurred. <br /> <br />E. Use of Restricted and Unrestricted Net Assets <br /> <br />When an expense is incurred for purposes for which both restricted and unrestricted net assets are available, the City’s <br />policy is to apply restricted net assets first. <br /> <br />F. Cash, Cash Equivalents and Investments <br /> <br />The City pools cash and investments from all sources, except the fiscal agent cash and investments, for the purpose of <br />increasing income through investment activities. Interest income on investments is allocated on the basis of average <br />month-end cash and investment balances in each fund. Cash and cash equivalents represent cash and investments and <br />restricted cash and investments with an original maturity term of three months or less. Po oled cash and investments <br />allocated to proprietary fund types are considered cash and cash equivalents since specific investments held in the <br />City’s pooled cash and investments are not allocated to each fund. <br /> <br />The City invests in the California Local Agency Investment Fund (“LAIF”), which is part of the Pooled Money <br />Investment Account operated by the California State Treasurer. LAIF funds are invested in high quality money market <br />securities and are managed to insure the safety of the portfolio. A portion of LAIF’s investments are in structured <br />notes and asset-backed securities. As of June 30, 2012 LAIF had invested 3.47% of its funds in such securities. <br /> <br />LAIF determines fair value on its investment portfolio based on market quotations for these securities where market <br />quotations are readily available, and on amortized cost or best estimate for those securities where market value is not <br />readily available. <br /> <br />In accordance with GASB Statement No. 31, highly liquid money market investments with maturities of on e year or <br />less at time of purchase are stated at amortized cost. All other investments are stated at fair value. Market value is <br />used as fair value for those securities for which market quotations are readily available.