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<br />2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) <br /> <br />E. Physical Facilities and Depreciation <br /> <br />Capital assets, which consist of a water production and distribution system, are shown at <br />original cost. Interest paid during construction of facilities, if any, is also included in this <br />cost. Depreciation has been provided for the Authority's water production and distribution <br />system using the straight-line method over a 30-year estimated useful life. <br /> <br />3. CASH AND CASH EQUIVALENTS <br /> <br />Cash and cash equivalents represent the Authority's equity interest in the City's consolidated cash <br />and cash equivalents account consisting of demand accounts and short-term investments with <br />maturity at date of purchase of three months or less. State statutes require that all funds in <br />depository institutions be covered by federal depository insurance and/or be secured in the manner <br />provided by law for security of funds. Cash and cash equivalent balances held by the City were <br />entirely covered by federal depository insurance or security as required at September 30, 2007. <br /> <br />4. TEMPORARY INVESTMENTS <br /> <br />Temporary investments represent the Authority's equity interest in the City's investment pool. <br />At year-end, a portion ofthe Authority's temporary investments was restricted as follows: <br /> <br />Restricted for retirement of current debt service liabilities <br />and reserve requirements per bond covenants <br /> <br />$ <br /> <br />758,531 <br /> <br />Total restricted temporary investments <br /> <br />$ <br /> <br />758,531 <br /> <br />The carrying amount for temporary investments at September 30, 2007, was $547,022 and <br />includes the recognition of a gain of $894, which represents the difference between the book <br />value and quoted market value of the temporary investments. <br /> <br />Pooled investments with the City consist of obligations of the United States and its agencies, <br />commercial paper and investment pools in accordance with state statutes and the City's <br />investment policies. Securities are registered and held by their agent in the City's name. The <br />Authority's portion of the investment pool is 8.41 %. Interest earnings are allocated on the same <br />prorate basis. The investment pool is not registered with the Securities Exchange Commission or <br />subject to any regulatory oversight. The fair value of the position in the pool is the same as the <br />value of pool shares. The City has adopted GASB Statement No. 31, which establishes <br />accounting and reporting standards for all of the City's investments. In accordance with <br />Statement No. 31, the City reports all investments at fair value, except for "money market <br />investments" and "2a7-1ike pools." Money market investments, which are short-term highly <br />liquid debt instruments that may include U. S. Treasury and agency obligations, are reported at <br />amortized costs. Investment positions in external investment pools that are operated in a manner <br />consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940, such as TexPool <br />and LOGIC, are reported using the pools' share price. <br /> <br />(continued) <br /> <br />TENT ATI VE <br /> <br />c< <br /> <br />11 '1:.') 1:;' L I 1\ IT I N AR "\7 <br />luf ,f~,^- .J:..~. .... ! .. J. '< :\. ~ <br />