Comprehensive Annual Financial Report - Fiscal Year ended 6/30/2017

Note 3. Detailed Notes on All Funds A. Deposits and investments Deposits . All of the City's deposits are either insured or collateralized by the Pooling Method. Under the Pooling Method, a collateral pool, all insured deposits are collateralized with securities held by the State Treasurer's agent in the name of the State Treasurer. Since the State Treasurer is acting in a fiduciary capacity for the City, these deposits are considered to be held by the City's agent in the City's name. The amount of the pledged collateral is based on an approved averaging method for non-interest bearing deposits and the actual current balance for interest bearing deposits. Depositories using the Pooling Method report to the State Treasurer the adequacy of their pooled collateral covering uninsured deposits. The State Treasurer does not confirm this information with the City or the escrow agent. Because of the inability to measure the exact amount of collateral pledged for the City under the Pooling Method, the potential exists for under collateralization, and this risk may increase in periods of high cash flows . However, the State Treasurer of North Carolina enforces strict standards of financial stability for each Pooling Method depository. The City relies on the State Treasurer to monitor these financial institutions. It is the City’s policy to utilize only the pooling method of collateralization. The City complies with the provisions of G.S. 159-31 when designating official depositories and verifying that the deposits are properly secured. At June 30, 2017, the City's bank balance in operating accounts was $36,179,741 and the carrying amount of the City's deposits was $32,693,015. The difference represents reconciling items such as deposits and payments in transit. Of the bank balance, $258,088 was covered by federal depository insurance and $35,921,653 was covered by collateral held under the Pooling Method. Investments . At June 30, 2017, the City had the following investments and maturities : Investment Type Fair Value % < 1 Year 1- 3 Years >3 - 5 Years > 5 Years US Government Treasuries Fair Value, Level 1 101,817,149 $ 11.9% 67,315,653 $ 786,312 $ 24,424,447 $ 9,290,737 $ Federal Home Loan Bank Fair Value, Level 2 234,777,541 27.5% 30,116,840 - 202,526,081 2,134,620 Freddie Mac Fair Value, Level 1 86,635,521 10.2% 58,705,126 - 20,452,328 7,478,067 Fannie Mae Fair Value, Level 1 206,479,922 24.2% 60,110,293 36,301 138,098,253 8,235,075 Federal Farm Credit Bank Fair Value, Level 1 124,793,816 14.6% 68,765,966 - 56,027,850 - NCCMT - Cash Portfolio Amortized Cost 19,789,521 2.3% 19,789,521 - - - NC Municipal Bonds Fair Value, Level 1 26,991,574 3.2% 10,637,810 1,498,545 13,908,796 946,423 Other investments Fair Value, Level 1 5,558,779 0.7% 5,558,779 - - - Commercial Paper Amortized Cost 45,893,244 5.4% 40,293,561 1,959,097 2,942,418 698,168 Total City-wide investments 852,737,067 $ 100.00% 361,293,549 $ 4,280,255 $ 458,380,173 $ 28,783,090 $ Valuation Measurement Method All investments are measured using the market approach: using prices and other relevant information generated by market transactions involving identical or comparable assets or a group of assets. Level of fair value hierarchy: Level 1: Debt securities valued using directly observable, quoted prices (unadjusted) in active markets for identical assets. Level 2: Debt securities are valued using a matrix pricing technique. Matrix pricing is used to value securities based on the securities’ benchmark quoted prices. City of Raleigh _____________________________________________________________ Financial Section ____________________________________________________________ __________________________________________________________ 30 __________________________________________________________

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