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IV-25CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2019 NOTE 2 STEWARDSHIP AND ACCOUNTABILITY NOTE3 A. Deficit Fund Balance The following funds had deficit fund balances at December 31, 2019: Capital Projects Funds: Park Dedication TIF Districts Fund DEPOSITS AND INVESTMENTS A. Components of Cash and Investments Fund Balance $ (208.560) (2,229,030) Cash and investments are presented in the financial statements as follows: Statement of Net Position: Cash and Investments Restricted Cash and Investments Cash and Investments -Discrete CU Total B. Deposits Primary Government $ 92,196,460 1,261,359 i 93457 812 Component Total Primary Unit-HRA ....Q2_vandCU $ $ 92, 196,460 1,261,359 831,014 831,014 ! 8311014 ! 94 288,833 In accordance with applicable Minnesota Statutes, the City maintains deposits at depository banks authorized by the City Council, including checking accounts and certificates of deposit. The following is considered the most significant risk associated with deposits: Custodial Credit Risk -In the case of deposits, this is the risk that in the event of a bank failure, the City's deposits may be lost. Minnesota Statutes require that all deposits be protected by federal deposit insurance, corporate surety bond, or collateral. The fair value of collateral pledged must equal 110% of the deposits not covered by federal deposit insurance or corporate surety bonds. Authorized collateral includes treasury bills, notes, and bonds; issues of U.S. government agencies; general obligations rated "A" or better; revenue obligations rated "AA" or better; irrevocable standard letters of credit issued by the Federal Home Loan Bank; and certificates of deposit. Minnesota Statutes require that securities pledged as collateral be held in safekeeping in a restricted account at the 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. CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2019 NOTE 3 DEPOSITS AND INVESTMENTS (CONTINUED) B. Deposits (Continued) The City (including Elk River Municipal Utilities) has an investment policy in place to address custodial credit risk for deposits, stating all deposits and investments must be in compliance with Minnesota Statutes 118A, with collateralization levels of 110% of the market value of the principal and accrued interest. At year-end, the carrying amount of the City's deposits was $21,407,619 while the balance on the bank records was $21,479,992. At December 31, 2019, all deposits were fully covered by federal depository insurance, surety bonds, or by collateral held by the City's agent in the City's name. At year-end, the carrying amount of deposits for the HRA, a discretely presented component unit, was $831,014 and the bank balance was $831,014. At December 31, 2019, all deposits were fully covered by federal depository insurance, surety bonds, or by collateral held by the City's agent in the City's name. C. Investments Minnesota Statutes and the City's investment policy authorize the City to invest in the following: a. Direct obligations or obligations guaranteed by the United States or its agencies. b. Shares of investment companies registered under the Federal Investment Company Act of 1940 and whose only investments are in securities described in (a)above. c. General obligations of the state of Minnesota or any of its municipalities. d. Bankers acceptances of United States Banks eligible for purchase by the Federal Reserve System. e. Commercial paper of the highest quality issued by United States corporations or their Canadian subsidiaries and maturing in 270 days or less. 173