03-22-21 Regular Meeting of the La Porte City Council

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CITY OF LA PORTE, TEXAS Exhibit A-10 NOTES TO FINANCIAL STATEMENTS (continued) Note 1 Î Summary of Significant Accounting Policies (continued) W. Implementation of New Standards The following standards have been issued, but have not been implemented as not yet effective. GASB Statement No. 84, Fiduciary Activities. This Statement establishes standards of accounting and financial reporting for fiduciary activities. GASB Statement No. 87, Leases. This Statement establishes standards of accounting and financial reporting for leases by lessees and lessors. GASB Statement No. 89, Accounting for Interest Cost Incurred before the End of a Construction Period. This Statement establishes accounting requirements for interest cost incurred before the end of a construction period. Note 2 Î Deposits and Investments The Texas Public Funds Investment Act (PFIA), as prescribed in Chapter 2256 of the Texas Government Code, regulates deposits and investment transactions of the City. In accordance with applicable statues, the City has a depository contract with an area bank (depository) providing for interest rates to be earned on deposited funds and for banking charges the City incurs for banking services received. The City may place funds with the depository in interest and non-interest bearing accounts. State law provides that collateral pledged as security for bank deposits must have a market value of not less than the amount of the deposits and must consist of: (1)obligations of the United States or its agencies and instrumentalities; (2) direct obligations of the State of Texas or its agencies; (3) other obligations, the principal and interest on which are unconditionally guaranteed or insured by the State of Texas; and/or (4) obligations of states, agencies, counties, cities, and other political subdivisions of any state having been rated as investment quality by a nationally recognized investment rating firm and having received a rating of not less than A or its equivalent. City policy requires the collateralization level to be at least 102% of market value of principal and accrued interest. The Council has adopted a written investment policy regarding the investment of City funds as required by the Public Funds Investment Act (Chapter 2256, Texas Government Code). The investments of the City are in compliance with the CityÓs investment policy. The CityÓs investment policy is more restrictive than the PFIA requires. It is the CityÓs policy to restrict its direct investments to obligations of the U.S. Government or U.S. Government Agencies, fully collateralized certificates of deposit, bankersÓ acceptances, mutual funds, repurchase agreements and local government investment pools. The maximum maturity allowed is five years from date of purchase. The CityÓs investment policy does not allow investments in collateralized mortgage obligations, floating rate investments or swaps. Draft 3-12-21 46 Fiscal Year 2020 Annual Report