02-08-17 Regular Meeting of the La Porte Area Water Authority

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G. Net Position Flow Assumption Sometimes the Authority will fund outflows for a particular purpose from both restricted (e.g., restricted bonds) and unrestricted resources. In order to calculate the amounts to report as restricted — net position and unrestricted --- net position in the Authority's financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the Authority's policy to consider restricted -- net position to have been depleted before unrestricted —.net position is applied. H. Estimates The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from those estimates. II. CASH AND CASH EQUIVALENTS Cash and cash equivalents represent the Authority's equity interest in the City's consolidated cash and cash equivalents account consisting of demand accounts and short-term investments with a maturity at date of purchase of three months or less. State statutes require that all fund in depository institutions be covered by federal depository insurance and/or be secured in the manner provided by law for security of funds. Cash and cash equivalent balances held by the City were entirely covered by federal depository insurance or securities held by the City's financial institution in the City's name as of September 30, 2016. III. TEMPORARY INVESTMENTS Temporary investments represent the Authority's equity interest in the City's investment pool. The carrying amount for temporary investments, at September 30, 2016, was $845,318. This represents 4.23% of the City's total portfolio. Pooled investments with the City consist of obligations of the United States and its agencies and investment pools in accordance with state statutes and the City's investment policies. Securities are registered and held by their agent in the City's name. Interest earnings are allocated on a pro-rata basis. The Authority categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. 13