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COUNTY OF HAWAII Notes to the Basic Financial Statements June 30,2005 Unexpended Allotments Allotment accounting is employed in the general and capital projects funds to reserve appropriations to complete capital projects that were funded during a given fiscal period. Unexpended allotments represent reserves of capital projects appropriations that are available to complete such projects in future fiscal periods. Cash and Investments Cash and cash equivalents include cash on hand,amounts in demand deposits and short-term investments with a maturity date of three months or less from the date acquired by the County. Investments consist of time certificates of deposit at financial institutions and bank repurchase agreements with original maturities exceeding three months. Included are participating interest-earning investment contracts(repurchase agreements)that have remaining maturities at the time of purchase of one year or less,as well as nonparticipating interest-earning investment contracts(time certificates of deposit and repurchase agreements). Both categories of investments are stated at amortized cost(see Note 3). Investments also consist of equity securities in the fiduciary fund financial statements. These investments are stated at fair value. Real Property Taxes The County's real property taxes are levied July 1 each year on assessed valuation as of January 1. The taxes become a lien on the property assessed as of the levy date. Taxes are due and payable in two equal annual installments on August 20 and February 20. Accordingly,real property taxes receivable as of June 30 are delinquent. Each delinquent installment bears interest at 1%per month and penalties of up to 10%of the amount due. Assessments are based on 100%of estimated fair market values. Inventories Inventories consist of materials and supplies and are reported as expenditures at the time of purchase(purchase method). Police and fire department inventories are stated using the first in,first out(FIFO)method. Other inventories are stated at average cost. Liquor Control Section 281 of the Hawaii Revised Statutes requires that liquor license revenues collected be used only for costs and expenses directly relating to operational and administrative costs actually incurred by the liquor commission collecting such fees. The unexpended fees at June 30,2005 of$736,877 are reflected as a reserve of general fund balance. - 50-