Cabarrus County Comprehensive Annual Financial Report

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Cabarrus County, North Carolina Notes to the Financial Statements For the Year Ended June 30, 2012 Treasurer’s agent in the name of the State Treasurer. Since the State Treasurer is acting in a fiduciary capacity for the County and its component units, these deposits are considered to be held by their agents in the entities name. The amount of 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 County, its component units or the escrow agent. Because of the inability to measure the exact amounts of collateral pledged for the County or its component units 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 depository that collateralizes public deposits under the Pooling Method. Cabarrus County has no formal policy regarding custodial credit risk for deposits, but relies on the State Treasurer to enforce standards of minimum capitalization for all pooling method financial institutions and to monitor them for compliance. The County complies with the provisions of G.S. 159-31 when designating official depositories and verifying that deposits are properly secured. The Cabarrus Health Alliance has no formal policy regarding custodial credit risk for deposits. At June 30, 2012 the carrying amount of the County's bank deposits (including fiduciary funds) was $29,117,492 and the bank balance was $29,713,281. There was $20,408,502 in an escrow account with a financial institution. Sufficient collateral was maintained at June 30, 2012 to secure the County's deposits. Of the bank balance, $928,016 was covered by federal depository insurance; the balance was covered by collateral held by authorized escrow agents in the name of the County. At June 30, 2012, the County had $7,200 of cash on hand. At June 30, 2012, the carrying amount of the Alliance's bank deposits was $1,125,919 and the bank balance was $1,268,952. Of the bank balance, $250,000 was covered by federal depository insurance or by collateral held by the Alliance’s agent in the Alliance’s name. At June 30, 2012, the Alliance had $3,000 of cash on hand. B. Investments Interest Rate Risk. As a means of limiting its exposure to fair value losses arising from rising interest rates, the County’s investment policy limits at least half of the County’s investment portfolio to maturities of less than 12 months. Also, the County’s investment policy requires purchases of securities to be laddered with staggered maturity dates and limits all securities to a final maturity of no more than three years. Credit Risk. The County’s investment policy limits investments to the provisions of G.S. 159-30 and restricts the purchase of securities to the highest possible ratings whenever particular types of securities are rated. State law limits investments in commercial paper to the top rating issued by nationally recognized statistical rating organizations (NRSROs). As of June 30, 2012, The County’s investment in commercial paper were rated A-1+ by Standard & Poor’s, F1+ by Fitch Ratings, and P-1 by Moody’s Investors Service. The County’s investments in the NC Capital Management Trust Cash Portfolio carried a credit rating of AAAm by Standard & Poor’s as of June 30, 2012. Custodial Credit Risk. For an investment, custodial credit risk is the risk that in the event of the failure of the counterparty, the County will not be able to recover the value of its investments or collateral securities that are in 50