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ITown of Palisade, Colorado <br /> INOTES TO FINANCIAL STATEMENTS <br /> December 31, 2009 <br /> INOTE C—CASH AND INVESTMENTS - CONTINUED <br /> I Colorado state statutes authorize the Town to invest in U.S. Treasury bills, obligations of any other U.S. <br /> agencies, obligations of the World Bank, general obligation bonds of any state or any of their subdivisions, <br /> revenue bonds of any state or any of their subdivisions, bankers acceptance notes, commercial paper, <br /> I repurchase agreements, money market funds and guaranteed investment contracts. All investments must be <br /> held by the Town in its name, or in custody of a third party on behalf of the local government. <br /> Credit Risk <br /> ICredit risk is the risk that an issuer or other counter party to an investment will not fulfill its obligation. <br /> Custodial Credit Risk <br /> I The custodial credit risk for deposits is the risk that, in the event of a bank failure, the Town will not be <br /> able to recover deposits or will not be able to recover collateral securities that are in possession of an <br /> outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the <br /> counterparty to a transaction, a government will not be able to recover the value of investments or <br /> I collateral securities that are in the possession of an outside party. The Town's deposits are either covered <br /> by depository insurance or are collateralized under the Colorado Public Deposits Protection Act and are <br /> therefore not deemed to be exposed to custodial credit risk. The Town's investments are not deemed to be <br /> I exposed to custodial credit risk because they are held by the Town or by the Town's custody agent in the <br /> Town's name. <br /> I Concentration of Credit Risk <br /> Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a <br /> single issuer. The Town places no limit on the amount the Town may invest in any one issuer. <br /> I Interest Rate Risk <br /> Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an <br /> investment. <br /> The Town also places money in public entity cash investment pools authorized by Colorado statutes. On <br /> December 31, 2009 the Town had $609,988 and $1,301,473, respectively, invested in the Colorado <br /> I Government Liquid Asset Trust (COLOTRUST) and C-SAFE, investment vehicles established for local <br /> government entities in Colorado to pool surplus funds. COLOTRUST and C-SAFE consist of U.S. <br /> Treasury notes, U.S. Government Agency Securities, repurchase agreements collateralized by U.S. <br /> Treasury securities, and Commercial Paper. Designated custodial banks provide safekeeping and <br /> I depository services to COLOTRUST and C-SAFE in connection with the direct investment and withdrawal <br /> functions of COLOTRUST and C-SAFE. Substantially all securities owned by COLOTRUST and C- <br /> SAFE are held by the Federal Reserve Bank in the account maintained for the custodial banks. The <br /> I custodian's internal records identify the investments owned by COLOTRUST and C-SAFE. The State of <br /> Colorado's Division of Securities is responsible for regulatory oversight for these pools. These pools are <br /> not required to and are not registered with the SEC. Colotrust funds carry a Standard &Poors AAA rating. <br /> is also rated by Standard and Poors AAA. <br /> IC-Safe <br /> At December 31, 2009 the Town's investments consisted of the following: <br /> I COLOTRUST <br /> C-SAFE $ 609,988 <br /> 1,301,473 <br /> Certificate of deposit 82,992 <br /> Total investments $1,994,453 <br /> -25- <br /> ' <br />