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COUNTY OF HAWAII Notes to the Basic Financial Statements June 30,2006 Cash The County maintains approximately 18 bank accounts for various purposes at locations throughout the state. Bank deposits are under the custody of the Director of Finance. For financial statement reporting purposes,cash and short-term investments consist of cash,time certificate of deposit,and money market accounts. Cash and short-term investments also include repurchase agreements and U.S.government securities with original maturities of three months or less. The carrying amount of the County's unrestricted and restricted deposits(cash,time certificates of deposit,and money market accounts)as of June 30,2006 was$67,087,809 and $320,032,respectively,for the primary government and$4,946,390 and$637,000, respectively,for the fiduciary funds. Information relating to bank balance,insurance and collateral of cash deposits is determined on a county-wide basis. Total bank balances of deposits for the primary government and fiduciary funds amounted to$167,271,737 at June 30,2006. Of that amount,$167,016,137 represent bank balances covered by federal deposit insurance or by collateral held by the County's fiscal agents in the name of the County. The remaining bank balances of$255,600 represent deposits held by a management agent and were uncollateralized. Accordingly,these deposits were exposed to custodial credit risk. Custodial credit risk is the risk that in the event of a bank failure,the County's deposits may not be returned to it. For demand or checking accounts and time certificates of deposit,the County requires, in accordance with State statutes,that the depository banks pledge collateral based on the available bank balances to limit its exposure to custodial credit risk. All securities pledged as collateral are held by the County's fiscal agents in the name of the County. The County also requires that no more than 60%of the County's total funds available for deposit may be deposited in any one financial institution,in accordance with State statutes. Investments The County holds investments both for its own benefit and on behalf of some of the Fiduciary Funds. The County's investments of funds not required for immediate payments are predominately comprised of U.S.government securities and repurchase agreements,while equity securities are held by the fiduciary fund. -56-