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<br />CITY OF CENTERVILLE, MINNESOTA <br />NOTES TO THE FINANCIAL STATEMENTS <br />DECEMBER 31,2005 <br /> <br />Note 1: SUMMARY OF SIGNIF1CANT ACCOUNTING POLICIES - CONTINUED <br /> <br />Amounts reported as program revenues include 1) charges to customers or applicants for goods, services or <br />privileges provided, 2) operating grants and contribution, and 3) capital grants and contributions, including special <br />assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. <br />Likewise, general revenues include all taxes. <br /> <br />Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and <br />expenses generally result from providing services and producing and delivering goods in connection with a <br />proprietary fund's principal ongoing operations. The principal operating revenues of the City enterprise funds are <br />charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales and <br />services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this <br />definition are reported as nonoperating revenues and expenses. <br /> <br />When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted <br />resources first, then unrestricted resources as they are needed. <br /> <br />D. Assets, Liabilities and Net Assets or Equity <br /> <br />Deposits and Investments <br /> <br />The City's cash and cash equivalents are considered to be cash on hand, demand deposits and short-term <br />investments with original maturities of three months or less from the date of acquisition. <br /> <br />Cash balances from all funds are pooled and invested, to the extent available, in certificates of deposit and other <br />authorized investments. Earnings from such investments are allocated on the basis of applicable participation by <br />each of the funds. <br /> <br />The City may also invest idle funds as authorized by Minnesota statutes, as follows: <br /> <br />1. Direct obligations or obligations guaranteed by the United States or its agencies. <br /> <br />2. Shares of investment companies registered under the Federal Investment Company Act of 1940 and whose <br />only investments are in securities in (a) above. <br /> <br />3. General obligations of the State of Minnesota or any of its municipalities. <br /> <br />4. Banker's acceptances of Unites States banks eligible for purchase by the Federal Reserve System. <br /> <br />5. Commercial paper issued by United States banks corporations or their Canadian subsidiaries, of highest <br />quality, and maturing in 270 days or less. <br /> <br />6. Repurchase or reverse repurchase agreements with banks that are members of the Federal Reserve System <br />with capitalization exceeding $10,000,000, a primary reporting dealer in U.S. government securities to the <br />Federal Reserve Bank of New York, or certain Minnesota securities broker-dealers. <br /> <br />7. Guaranteed investment contracts (GIC's) issued or guaranteed by United States commercial banks or <br />domestic branches of foreign banks or United States insurance companies if similar debt obligations of the <br />issuer or the collateral pledged by the issuer is in the top two rating categories, or in the top three rating <br />categories for long-term GIC's issued by Minnesota banks. <br /> <br />Investments for the City are reported at fair value. The Minnesota Municipal Money Market (4M) fund operates in <br />accordance with appropriate state laws and regulations. The reported value of the pool is the same as the fair value <br />of the pool shares. Financial statements of the 4M fund can be obtained by contacting Voyageur Asset Management <br />at 100 South Fifth Street Suite 2300, Minneapolis, MN 55402-1240. The City has no formal investment policy. <br /> <br />-22- <br />