5.1. ERMUSR 04-14-2009 - Laserfiche WebLink

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ELK RIVER MUNICIPAL UTILITIES ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2008 AND 2007 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -CONTINUED Compensated Absences All vacation benefits can be carried over from year to year and will be payable upon termination. Sick leave can be accumulated to a maximum of 960 hours from year to year. Upon termination or retirement, employees will have 50% of unused sick leave, up to a maximum of 800 hours, converted to cash and deposited into their Post Health Care Savings account. The liability for vacation and sick pay is reported as a liability in the respective funds at year end. Net Assets Net assets represent the difference between assets and liabilities. Net assets are displayed in three components: a. Invested in capital assets, net of related debt -Consists of capital assets, net of accumulated depreciation reduced by any outstanding debt attributable to acquire capital assets. b. Restricted net assets -Consist of net assets restricted when there are limitations imposed on their use through external restrictions imposed by creditors, grantors, laws or regulations of other governments. c. Unrestricted net assets -All other net assets that do not meet the defmition of "restricted" or "invested in capital assets, net of related debt". Comparative Data and Reclassifications Comparative total data for the prior year have been presented in the selected sections of the accompanying fmancial statements in order to provide an understanding of changes in the Utilities' fmancial position and operations. Also, certain amounts presented in the prior year data have been reclassified in order to be consistent with the current year's presentation. 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 may not be returned or the Utilities 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 Utilities maintains deposits at those depository banks which are members of the Federal Reserve System. Minnesota statutes require that all Utilities' 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 includes the legal investments as prescribed by Minnesota statutes, as well as certain first mortgage notes, and certain other state or local government obligations. Minnesota statutes require that securities pledged as collateral be held in safekeeping by the Utilities' Treasurer or in a fmancial institution other than that furnishing the collateral. At December 31, 2008, the Utilities carrying amount of deposits was $4,229,599 and the bank balance was $5,531,879. Of the bank balance $467,335 was covered by federal depository insurance, and the remaining balance was covered by collateral held by the pledging fmancial institution's agent in the Utilities' name. At December 31, 2007, the Utilities carrying amount of deposits was $4,662,052 and the bank balance was $4,828,304. Of the bank balance $1,191,000 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. -17-