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ELK RIVER MUNICIPAL UTILITIES <br /> ELK RIVER,MINNESOTA <br /> NOTES TO FINANCIAL STATEMENTS <br /> DECEMBER 31,2003 AND 2002 <br /> Note 2: DETAILED NOTES ON ALL FUNDS <br /> A. Deposits and Investments <br /> Cash balances of the Utilities' funds are combined(pooled)and invested to the extent available in various <br /> investments authorized by Minnesota statutes. Each fund's portion of this pool(or pools)is displayed on the <br /> financial statements as"cash and temporary investments." For purposes of identifying the risk of investing <br /> public funds,the balances are categorized as follows: <br /> Deposits <br /> In accordance with Minnesota statutes and as authorized by the Commission,the Utilities maintains deposits at <br /> those depository banks,all of which are members of the Federal Reserve System. <br /> Minnesota statutes require that all Utilities deposits be protected by insurance,surety bond or collateral. The <br /> market value of collateral pledged must equal 110 percent of the deposits not covered by insurance or bonds <br /> (140 percent in the case of mortgage notes pledged). <br /> Authorized collateral includes the legal investments as prescribed by Minnesota statutes, as well as certain first <br /> mortgage notes,and certain other state or local government obligations. Minnesota statutes require that <br /> securities pledged as collateral be held in safekeeping by the Utilities Treasurer or in a financial institution <br /> other than that furnishing the collateral. <br /> At December 31,2003,the Utilities carrying amount of deposits was$4,954,286 and the bank balance was <br /> $5,749,355. Of the bank balance $200,000 was covered by federal depository insurance,$5,349,355 was <br /> covered by collateral held by the pledging financial institution's agent in the Utilities' name and$200,000 was <br /> uncollateralized. <br /> At December 31,2002,the Utilities carrying amount of deposits was$4,169,131 and the bank balance was <br /> $4,500,541. Of the bank balance $200,000 was covered by federal depository insurance and$4,300,541 was <br /> covered by collateral held by the Utilities'agent in the Utilities'name. <br /> B. Due From Other Governments <br /> The Utilities was awarded$137,313 from the State of Minnesota for a sales tax refund. Of this total,$54,645 <br /> is receivable for 2003 and$82,668 remains receivable from 2002 due to state holdback of funds. <br /> -16- <br />