5.1. 2019 FINAL Audited Financial Statements

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CITY OF PEQUOT LAKES, MINNESOTA NOTES TO THE BASIC FINANCIAL STATEMENTS DECEMBER 31, 2019 33 NOTE 2 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)  Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment and is disclosed above by presenting maturity information. The City’s investment policy requires the City to diversify its investment portfolio to insure that capital losses are avoided. The policy also states the City’s investment portfolio will remain sufficiently liquid to meet all operating costs that may be reasonably anticipated. The City categorizes its fair value measurements within the fair value hierarchy established by accounting principles generally accepted in the United States of America. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. The City has the following recurring fair value measurements as of December 31, 2019:  Money market funds of $7,213 are deemed to be level 1 investments and are valued by using quoted market prices.  U.S. Treasury Notes of $305,555, Federal Home Loan Bank Notes of $149,984, Federal Farm Credit Bank Notes of $129,631, Federal Home Loan Mortgage Corporation Med Term Notes of $116,145, Certificates of Deposits of $1,388,303, and Municipal Bonds of $1,113,246 are deemed to be level 2 investments. Deposits and Investments Summary A reconciliation of cash, cash equivalents, and investments as shown on the Statement of Net Position for the City follows: Carrying Amount of Deposits 2,688,179$ Money Market Funds 2,925,538 Investments (See Investments Section) 3,210,077 Total 8,823,794$ Government-wide Cash, Cash Equivalents and Investments 8,806,319$ Debt Reserve Restricted Cash 17,475 Total 8,823,794$