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CITY OF GEM LAKE, MINNESOTA <br />NOTES TO BASIC FINANCIAL STATEMENTS <br />DECEMBER 31, 2017 <br /> <br /> <br /> <br />(16) <br /> <br />NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) <br />E. Cash and Investments <br /> <br />Cash and investment balances from all funds are pooled and invested to the extent <br />available in investments authorized by Minnesota Statutes. Earnings from investments <br />are allocated to individual funds on the basis of the fund’s equity in the cash and <br />investment pool. <br /> <br />The City provides temporary advances to funds that have insufficient cash balances by <br />means of an advance from another fund shown as interfund receivables in the <br />advancing fund in the governmental fund financial statements, and an interfund payable <br />in the fund with the deficit, until adequate resources are received. These interfund <br />payables are eliminated for statement of net position presentation. <br /> <br />Investments are stated at fair value as of the balance sheet date. Interest earnings are <br />accrued at the balance sheet date. <br /> <br />For purposes of the statement of cash flows the Proprietary Fund considers all highly <br />liquid investments with a maturity of three months or less when purchased to be cash <br />equivalents. All of the cash and investments allocated to the proprietary fund types have <br />original maturities of 90 days or less. Therefore, the entire balance in such fund types is <br />considered cash equivalents. <br /> <br />F. Prepaid Items <br /> <br />Certain payments to vendors reflect costs applicable to future accounting periods and <br />are recorded as prepayments. Prepaid items are reported using the consumption <br />method and recorded as an expense or expenditure at the time of consumption. That <br />portion of the relevant funds’ balances equal to material prepaid items has been <br />segregated as nonspendable. <br /> <br />G. Property Tax Credits <br /> <br />Property taxes on homestead property (as defined by state statutes) are partially <br />reduced by property tax credits. These credits are paid to the City by the state in lieu of <br />taxes levied against homestead property. The state remits these credits through <br />installments each year. These credits are recognized as revenue by the City at the time <br />of collection.