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City of Centerville, Minnesota <br />Notes to the Financial Statements <br />December 31, 2021 <br /> <br />Note 3: Detailed Notes on All Funds <br />A.Deposits and Investments <br /> <br />Deposits <br /> <br />Custodial credit risk for deposits and investments is the risk that in the event of a bank failure, the Citys deposits and <br />investments may not be returned or the City will not be able to recover collateral securities in the possession of an outside <br />party. In accordance with Minnesota statutes and as authorized by the City Council, the City maintains deposits at those <br />depository banks, all of which are members of the Federal Reserve System. <br /> <br />Minnesota statutes require that all City deposits be protected by insurance, surety bond or collateral. The fair value of <br />collateral pledged must equal 110 percent of the deposits not covered by insurance or bonds, with the exception of <br />irrevocable standby letters of credit issued by Federal Home Loan Banks as this type of collateral only requires collateral <br />pledged equal to 100 percent of the deposits not covered by insurance or bonds. <br /> <br />Authorized collateral in lieu of a corporate surety bond includes: <br /> <br />United States government Treasury bills, Treasury notes, Treasury bonds; <br /> <br />Issues of United States government agencies and instrumentalities as quoted by a recognized industry quotation <br />service available to the government entity; <br /> <br />General obligation securities of any state or local government with taxing powers which is rated A or better by a <br />national bond rating service, or revenue obligation securities of any state or local government with taxing powers <br />which is rated AA or better by a national bond rating service; <br /> <br />General obligation securities of a local government with taxing powers may be pledged as collateral against funds <br />deposited by that same local government entity; <br /> <br />Irrevocable standby letters of credit issued by Federal Home Loan Banks to a municipality accompanied by <br />written evidence that the banks public debt is rated AA or better by Moodys Investors Service, Inc., or Standard <br />& Poors Corporation; and <br /> <br />Time deposits that are fully insured by any federal agency. <br /> <br />Minnesota statutes require that all collateral shall be placed in safekeeping in a restricted account at a Federal Reserve <br />Bank, or in an account at a trust department of a commercial bank or other financial institution that is not owned or <br />controlled by the financial institution furnishing the collateral. The selection should be approved by the City. <br />arrying amount of deposits was $7,269,826, and the bank balance was $7,365,941. Of the bank <br />balance, $527,673 was covered by federal depository insurance and the remaining balance was covered by collateral held <br /> <br />53 <br /> <br />