2020 Comprehensive Annual Financial Report

Custodial Credit Risk For an investment, the custodial risk is the risk that in the event of the failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City has no formal policy on custodial credit risk, but the City utilizes a separate third party custodial trust agent for all book-entry transactions, all of which are held in the City’s name. Concentration of Credit Risk The City’s investment policy does not restrict the level of investment in money markets or federal agencies, but it restricts investment in commercial paper or bankers’ acceptances of a single issuer to no more than 10% of the total investment portfolio. As of June 30, 2020, the City owned the following investments, which exceed 5% of the City’s total investments, along with the percentage noted for each compared to the total portfolio:

Federal National Mortgage Association

6.33% 6.33% 6.60% 6.54% 19.87% 42.83%

Federal Home Loan Bank

Federal Home Loan Mortgage Corporation

Federal FarmCredit Bank NCCMT TermPortfolio NCCMT Government Portfolio

At June 30, 2020, the City’s OPEB Trust had $26,258,392 invested in the State Treasurer’s Local Government Other Post- Employment Benefits (OPEB) Trust; additionally at June 30, 2020 the City’s LEOSSA Trust had $7,580,635 invested in the State Treasurer’s Local Government Law Enforcement Officer’s Special Separation Allowance (LEOSSA) Trust. Both of the State Treasurer’s OPEB and LEOSSA Trust are pursuant to G.S. 159-30.1. The State Treasurer’s OPEB Trust and LEOSSA Trust may invest in public equities and both long-term and short-term fixed income obligations as determined by the State Treasurer pursuant to the General Statutes. At year-end, the State Treasurer’s OPEB Trust was invested as follows: State Treasurer’s Short Term Investment Fund (STIF) 3.07%, which is reported as cash and cash equivalents; State Treasurer’s Bond Index Fund (BIF) 37.22% and BlackRock’s MSCI ACQI EQ Index Non-Lendable Class B Fund (EIF) 59.71%. At year-end, the State Treasurer’s LEOSSA Trust was invested as follows: State Treasurer’s Short Term Investment Fund (STIF) 0.12%, which is reported as cash and cash equivalents; State Treasurer’s Bond Index Fund (BIF) 39.19% and BlackRock’s MSCI ACQI EQ Index Non-Lendable Class B Fund (EIF) 60.69%. At June 30, 2020 the State Treasurer’s BlackRock’s MSCI ACWI EQ Index Non-Lendable Class B Fund (EIF) equities were split with 57.49% in domestic securities and 42.51% in international securities. Level of the fair value hierarchy Ownership of the STIF is determined on a fair market valuation basis as of the fiscal year end in accordance with STIF operating procedures. STIF investments are valued by the custodian using Level 2 inputs which in this case involves inputs other than quoted prices included within Level 1 that are either directly or indirectly observable for the asset or liability. The STIF is valued at $1 per share. Ownership of the BIF is determined monthly at fair value using the same Level 2 inputs as the STIF and is based upon units of participation. Units of participation are calculated monthly based upon inflows and outflows as well as allocations of net earnings. The BlackRock’s MSCI ACWI EQ Index Non-Lendable Class B Fund, authorized under G.S. 147-69.2(b)(8), is a common trust fund considered to be comingled in nature. The Fund’s fair value is the number of shares times the net asset value as determined by a third party. At June 30, 2020 the fair value of the Fund was $23.107392 per share. Fair value for this BlackRock fund is determined using Level 1 inputs which are directly observable, quoted prices (unadjusted) in active markets for identical assets or liabilities.

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