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CITY OF PEQUOT LAKES, MINNESOTA <br />NOTES TO THE BASIC FINANCIAL STATEMENTS <br />DECEMBER 31, 2019 <br /> <br /> <br />30 <br />NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) <br /> <br />In the fund financial statements, expenditures are classified as follows: <br /> <br /> Governmental Funds - By Character Current (further classified by Function) <br /> Debt Service <br /> Capital Outlay <br /> <br /> Proprietary Fund - By Operating and Nonoperating <br /> <br />In the fund financial statements, governmental funds report expenditures of financial resources. Proprietary funds report expenses <br />relating to use of economic resources. <br /> <br />Interfund Transfers <br /> <br />Permanent reallocation of resources between funds of the reporting entity are classified as interfund transfers. For the purpose of <br />the Statement of Activities, all interfund transfers between individual governmental funds, as well as all interfund transfers <br />between individual proprietary funds, have been eliminated. See additional information at Note 2.D. <br /> <br /> <br />NOTE 2 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS <br /> <br />The following notes present detail information to support the amounts reported in the basic financial statements for its various <br />assets, liabilities, deferred outflows/inflows if resources, equity, revenues and expenditures/expenses. <br /> <br />2.A. CASH, CASH EQUIVALENTS AND INVESTMENTS <br /> <br />Deposits <br /> <br />In accordance with applicable Minnesota Statutes, the City maintains deposits at depository banks authorized by the City Council. <br />Minnesota Statutes require that all City deposits be protected by insurance, surety bond, or collateral. The market value of <br />collateral pledged must equal 110 percent of the deposits not covered by insurance or bonds (100% if collateral pledged is <br />irrevocable standby letters of credit issued by the Federal Home Loan Bank). The City complies with such laws. <br /> <br />Authorized collateral in lieu of a corporate surety bond includes: <br /> <br /> United States government Treasury bills, Treasury notes, Treasury bonds; <br /> <br /> Issues of United States government agencies and instrumentalities as quoted by a recognized industry quotation service <br /> available to the government entity; <br /> <br /> A general obligation of a state or local government, with taxing powers, rated “A” or better; <br /> <br /> A revenue obligation of a state or local government, with taxing powers, rated “AA” or better; <br /> <br /> Unrated general obligation securities of a local government, with taxing powers, pledged as collateral against funds <br /> deposited by that same local government entity; <br /> <br /> Irrevocable standby letter of credit issued by a Federal Home Loan Bank accompanied by written evidence that the <br /> Federal Home Loan Bank’s public debt is rated “AA” or better by Moody’s or Standard and Poor’s; or <br /> <br /> Time deposits insured by any federal agency.