Recording CFD Bond Reserve Money as Money Market Mutual Funds
The City is NOT the Purchaser of the Money Market Mutual Funds. They are not the City’s Assets; they are the Purchasers’ Assets
Recording the Beaumont CFD Bond Reserve Money as Money Market Mutual Funds
When federal municipal bonds are acquired; ten percent (10%) of the money goes into a Reserve Fund. The City is allowed to pick away at this Reserve Fund as the bonds are paid off; but 10% of the bond debt owed must remain in the Reserve Fund for the life of the bonds, which is 30 years.
On the City of Beaumont 2016 Audited Financial Statements, page 41, Note 2, Cash and Investments, records the CFD Bond Reserve funds as ‘Money Market Mutual Funds’ with a Maturity date of 12 months or Less.
When the question of the CFD Bond Reserves being recorded on the Audit as having a maturity date of 12 months or less was brought up at the November 28, 2017, Beaumont Audit & Finance Committee Meeting; Bret Van Lant from the Auditing Firm of Van Lant Fankhanel stated that the Bond Reserves are recorded under 12 months or less is because “they are Money Market Mutual Funds”.
The CFD Bond Reserve money is invested by the Bond Trustee into Money Market Mutual Funds, but the City does not own the money market mutual funds. The City is not the purchaser of the money market mutual funds. The money market mutual funds are not the City’s Assets; they are the Assets of whomever purchased the money market mutual funds.
How a Bond Trustee invests the bonds’ reserve money does not change the money’s status to the City; the money is still the CFD Bond Reserve, the bulk of which will remain unaccessible to the City of Beaumont for the life of the bonds.
Listing the Bonds’ Reserve Funds as Money Market Mutual Funds is intentionally misleading to give the appearance of having money invested when the City only has reserve because of debt.