5.1. ERMUSR 05-14-2013 - Laserfiche WebLink

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ELK RIVER MUNICIPAL UTILITIES ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31,2012 AND 2011 Note 2: DETAILED NOTES ON ALL FUNDS A. Deposits and investments Custodial credit risk for deposits and investments is the risk that in the event of a bank failure,the Utilities' deposits and investments may not be returned or the Utility will not be able to recover collateral securities in the possession of an outside party. In accordance with Minnesota statutes and as authorized by the Commission,the Utility maintains deposits at those depository banks,all of which are members of the Federal Reserve System. Minnesota statutes require that all Utility deposits be protected by insurance,surety bond or collateral.The market value of collateral pledged must equal 110 percent of the deposits not covered by insurance or bonds. Authorized collateral in lieu of a corporate surety bond includes: • United States government Treasury bills,Treasury notes,Treasury bonds; • Issues of United States government agencies and instrumentalities as quoted by a recognized industry quotation service available to the government entity; • General obligation securities of any state or local government with taxing powers which is rated"A"or better by a national bond rating service,or revenue obligation securities of any state or local government with taxing powers which is rated"AA"or better by a national bond rating service; • General obligation securities of a local government with taxing powers may be pledged as collateral against funds deposited by that same local government entity; • Irrevocable standby letters of credit issued by Federal Home Loan Banks to a municipality accompanied by written evidence that the bank's public debt is rated"AA"or better by Moody's Investors Service, Inc.,or Standard&Poor's Corporation; and • Time deposits that are fully insured by any federal agency. Minnesota statutes require that all collateral shall be placed in safekeeping in a restricted account at a Federal Reserve Bank,or in an account at a trust department of a commercial bank or other financial institution that is not owned or controlled by the financial institution furnishing the collateral.The selection should be approved by the government entity. At December 31,2012,the Utilities' carrying amount of deposits was$1 1,508,557 and the bank balance was $12,484,544.Of the bank balance$250,000 was covered by federal depository insurance,and the remaining balance was covered by collateral held by the pledging financial institution's agent in the Utilities' name. At December 31,2011,the Utilities' carrying amount of deposits was$8,669,521 and the bank balance was $10,032,467.Of the bank balance$250,000 was covered by federal depository insurance,and the remaining balance was covered by collateral held by the pledging financial institution's agent in the Utilities' name. 36