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CITY OF SAN LEANDRO <br />NOTES TO BASIC FINANCIAL STATEMENTS <br />For The Year Ended June 30, 2016 <br /> <br /> <br />NOTE 2 - CASH AND INVESTMENTS <br /> <br />The City maintains a cash and investment pool, which includes cash balances and authorized investments <br />of all funds, which the Finance Director invests to enhance interest earnings. The pooled interest earned <br />is allocated to the funds based on average daily cash and investment balance in these funds. <br /> <br />A. Cash Deposits <br /> <br />The carrying amount of the City’s cash deposits is $9,301,109 at June 30, 2016. Bank balances before <br />reconciling items were $9,937,200, at that date, the total amount of which was insured or collateralized with <br />securities held by the pledging financial institutions in the City’s name as discussed below. <br /> <br />The California Government Code requires California banks and savings and loan associations to secure the <br />City’s cash deposits by pledging securities as collateral. This Code states that collateral pledged in this <br />manner shall have the effect of perfecting a security interest in such collateral superior to those of a general <br />creditor. Thus, collateral for cash deposits is considered to be held in the City's name. <br /> <br />The fair value of pledged securities must equal at least 110% of the City's cash deposits. California law also <br />allows institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% <br />of the City’s total cash deposits. The City may waive collateral requirements for cash deposits, which are <br />fully insured up to $250,000 by the Federal Deposit Insurance Corporation. The City, however, has not <br />waived the collateralization requirements. <br /> <br />The City follows the practice of pooling cash and investments of all funds, except for funds required to be <br />held by fiscal agents under the provisions of bond indentures. Interest income earned on pooled cash and <br />investments is allocated on an accounting period basis to the various funds based on the period-end cash and <br />investment balances. Interest income from cash and investments with fiscal agents is credited directly to the <br />related fund. <br />50