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City of San Leandro Notes to Basic Financial Statements For the year ended June 30, 2012 53 NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES, Continued M. New Funds, Renamed Fund and Closed Funds, continued Public Access, Educational and Government Fund (PEG). This fund accounts for the Digital Infrastructure and Video Competition Act (DIVCA) of 2006, collecting 1% of gross revenues from state franchise holders. The fund accounts for user fees charged to cable television customers to provide public education on government programs. The Underground Utility Fund is used to account for utility conversion project assessments levied to provide for the placement of overhead facilities underground. Assessments shall be expended only for expansion of maintenance of or construction of Underground Utility. N. Implementation of New GASB Pronouncements In December 2009, GASB issued Statement No. 57, “OPEB Measurements by Agent Employers and Agent Multiple- Employer Plans”, which expands the use of alternative measurement method to an agent employer government that has an individual-employer OPEB plan with fewer than 100 total plan members. The Statement also provides guidance about the frequency and timing measurements must be coordinates with the reporting needs of the agent multiple-employer OPEB plan itself. The provisions of this Statement related to the use and reporting of the alternative measurement method were effective immediately upon the Statement’s issuance in December 2009. The provisions related to the frequency and timing of measurements are effective for actuarial valuations first used to report funded status information in OPEB plan financial statement for periods beginning after June 15, 2011. Statement has no significant impact to the financial statements of the City. In June 2011, GASB issued Statement No. 64, “Derivative Instruments: Application of Hedge Accounting Termination Provisions, an amendment of GASB Statement No. 53”. The objective of this Statement is to improve financial reporting for state and local governments by clarifying whether an effective hedging relationship continues after the replacement of a swap counterparty or a swap counterparty’s credit support provider. This statement has no significant impact to the financial statements of the City. NOTE 2 - CASH AND INVESTMENTS The City maintains a cash and investment pool, which includes cash balances and authorized investments of all funds, which the Finance Director invests to enhance interest earnings. The pooled interest earned is allocated to the funds based on average daily cash and investment balance in these funds. A. Cash Deposits The carrying amount of the City’s cash deposits were $9,347,524 at June 30, 2012. Bank balances before reconciling items were $7,756,528 at that date, the total amount of which was insured or collateralized with securities held by the pledging financial institutions in the City’s name as discussed below. The California Government Code requires California banks and savings and loan associations to secure the City’s cash deposits by pledging securities as collateral. This Code states that collateral pledged in this manner shall have the effect of perfecting a security interest in such collateral superior to those of a general creditor. Thus, collateral for cash deposits is considered to be held in the City's name. The fair value of pledged securities must equal at least 110% of the City's cash deposits. California law also allows institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the City’s total cash deposits. The City may waive collateral requirements for cash deposits, which are fully insured up to $250,000 by the Federal Deposit Insurance Corporation. The City, however, has not waived the collateralization requirements.