3. Cash, Cash Equivalents and Marketable Securities

The following table summarizes our cash and investments in cash equivalents and marketable securities held by investment managers and overnight investments:

	September 30,			December 31,
	2012			2011
	(in thousands)
Overnight Holdings
Money market funds (cash equivalents)	$	46,079		$	71,350
Investment Holdings
Money market funds (cash equivalents)		67,395			59,587
Marketable securities		51,702			56,987
		165,176			187,924
Cash held in demand accounts		102,761			113,968
Outstanding checks		(14,017	)		(33,697	)
Total cash, cash equivalents and marketable securities	$	253,920		$	268,195

Cash and cash equivalents	$	202,218		$	211,208
Marketable securities		51,702			56,987

253,920

268,195

Our cash and overnight holdings fluctuate based on the timing of the client's payroll processing cycle. Included in the cash balance as of September 30, 2012 and December 31, 2011, are $96.5 million and $150.8 million, respectively, in funds associated with federal and state income tax withholdings, employment taxes and other payroll deductions, as well as $12.4 million and $10.4 million in client prepayments, respectively.

Insperity accounts for its financial assets in accordance with Accounting Standard Codification ("ASC") 820, Fair Value Measurement. This standard defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The fair value measurement disclosures are grouped into three levels based on valuation factors:

Level 1 - quoted prices in active markets using identical assets

Level 2 - significant other observable inputs, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other observable inputs

Level 3 - significant unobservable inputs

The following table summarizes the levels of fair value measurements of our financial assets:

	Fair Value Measurements
	(in thousands)
	September 30,
	2012		Level 1		Level 2		Level 3

Money market funds	$	113,474	$	113,474	$	—	$	—
Municipal bonds		51,702		—		51,702		—
Total	$	165,176	$	113,474	$	51,702	$	—

	Fair Value Measurements
	(in thousands)
	December 31,
	2011		Level 1		Level 2		Level 3

Money market funds	$	130,937	$	130,937	$	—	$	—
Municipal bonds		56,987		—		56,987		—
Total	$	187,924	$	130,937	$	56,987	$	—

The municipal bond securities valued as Level 2 investments are primarily pre-refunded municipal bonds that are secured by escrow funds containing U.S. Government securities. Valuation techniques used by Insperity to measure fair value for these securities during the period consisted primarily of third party pricing services that utilized actual market data such as trades of comparable bond issues, broker/dealer quotations for the same or similar investments in active markets and other observable inputs.

The following is a summary of our available-for-sale marketable securities:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Estimated
	Cost		Gains		Losses			Fair Value
			(in thousands)
September 30, 2012:
Municipal bonds	$	51,584	$	133	$	(15	)	$	51,702

December 31, 2011:
Municipal bonds	$	56,945	$	90	$	(48	)	$	56,987

During the periods ended September 30, 2012 and 2011, we had no realized gains or losses recognized on sales of marketable securities.

As of September 30, 2012, the contractual maturities of our marketable securities were as follows:

	Amortized Cost		Estimated Fair Value
	(in thousands)

Less than one year	$	23,513	$	23,552
One to five years		28,071		28,150
Total	$	51,584	$	51,702