Western Michigan University
Western Michigan University
Notes to Financial Statements Notes to Financial Statements June 30, 2012 and 2011 June 30, 2012 and 2011 Note 2 - Cash and Investments (Continued)
Custodial Credit Risk - Custodial credit risk is the risk that in the event of the failure of the bank or counterparty, the University will not be able to recover the value of its deposits or investments that are in the possession of an outside party. The University’s cash investment policy does not limit the value of deposits or investments that may be held by an outside party. Investments in external investment pools and in open-ended mutual funds are not exposed to custodial credit risk because their existence is not evidenced by securities that exist in physical or book entry form. At June 30, 2012 and 2011, the carrying amount of the University’s deposits was $31,021,642 and $18,582,038, respectively. These amounts include Foundation balances of $4,754,456 and $801,519. Of that amount, $1,121,501 and $1,602,775 was insured as of June 30, 2012 and 2011, respectively. The remaining $29,900,141 and $16,979,263 at June 30, 2012 and 2011, respectively, was uninsured and uncollateralized. The University does not require deposits to be insured or collateralized. Concentration of Credit Risk - Concentration of credit risk is the risk of loss attributed to the magnitude of investment in a single issuer. The University’s cash investment policy provides that investment pool direct placements are to be sufficiently diversified and provides that no more than 10 percent of its assets can be in any particular issue. The foregoing restrictions do not apply to securities that are issued or fully guaranteed by the United States government. The University did not have investments in any single issuer that equaled 5 percent or more in 2012 or 2011. Foreign Currency Risk - Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment. At June 30, 2012 and 2011, the University had approximately $10,500,000 and $8,700,000, respectively, invested in mutual funds that have funds invested in various countries throughout the world and therefore, exposes the University to foreign currency risk indirectly. The University did not have any direct investments or deposits denominated in foreign currencies at June 30, 2012 and 2011. These amounts include foundation balances of $1,400,000 and $800,000, respectively.
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