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CITY OF GEM LAKE, MINNESOTA <br />NOTES TO BASIC FINANCIAL STATEMENTS <br />DECEMBER 31, 2014 <br /> <br /> <br /> <br />(23) <br /> <br />NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) <br />M. Interfund Transactions <br /> <br />Interfund services provided and used are accounted for as revenues, expenditures or <br />expenses. Transactions that constitute reimbursements to a fund for expenditures/ <br />expenses initially made from it that are properly applicable to another fund, are recorded <br />as expenditures/expenses in the reimbursing fund and as reductions of expenditures or <br />expenses in the fund that is reimbursed. All other interfund transactions are reported as <br />transfers. <br /> <br />All interfund transactions are eliminated except for activity between governmental <br />activities and business-type activities for presentation in the entity-wide statements of <br />net position and statements of activities. <br /> <br /> <br />NOTE 2 DEPOSITS AND INVESTMENTS <br />A. Deposits <br /> <br />The City maintains a cash and investment pool that is available for use by all funds. <br />Each fund type’s portion of this pool is displayed on the statement of net position and the <br />balance sheet as “Cash and Investments.” In accordance with Minnesota Statutes, the <br />City maintains deposits at financial institutions which are authorized by the City Council. <br /> <br />Custodial Credit Risk – Custodial credit risk for deposits is the risk that in the event of a <br />bank failure, the City’s deposits may not be returned to it. The City does not have a <br />deposit policy for custodial credit risk and follows Minnesota Statutes for deposits. <br />Minnesota Statutes require that all deposits be protected by insurance, surety bond, or <br />collateral. The market value of collateral pledged must equal 110% of the deposits not <br />covered by insurance or corporate surety bonds. Authorized collateral include: U.S. <br />government treasury bills, notes, or bonds; issues of a U.S. government agency; general <br />obligations of a state or local government rated “A” or better; revenue obligations of a <br />state or local government rated “AA” or better; irrevocable standby letter of credit issued <br />by a Federal Home Loan Bank; and time deposits insured by a federal agency. <br />Minnesota Statutes require securities pledged as collateral be held in safekeeping in a <br />restricted account at the Federal Reserve Bank or in an account at a trust department of <br />a commercial bank or other financial institution not owned or controlled by the <br />depository. <br /> <br />At December 31, 2014, the carrying amount of the City’s deposits were $252,141. Of <br />these deposits $2,141 were not insured or collateralized.