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CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS ©ECEMBER 31, 2019 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Budgets Budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America. An annual appropriated budget is adopted for the General Fund.. Budgeted expenditure appropriations lapse at. yea r-end. E. Cash and Investments Cash and investment: balances from all funds are pooled and invested. to the extent available in investments. authorized by Minnesota. Statutes. Earnings from investments are allocated to individual funds on the basis. of the fund's equity In the cash and investment pool; The City provides temporary advances to funds that have insufficient cash balances.by means of an: advance from another fund shown as interfuhd receivables in the advancing fund in the governmental fund financial statements, and an interfund payable in the fund with the deficit, until adequate resources are received. These interfund payables are eliminated far statement of net position presentation. Investments are stated at fair value as of the balance sheet date. Interest earnings are accrued at. the balance sheet date. For purposes of the statement of cash. flows; the Proprietary Fund considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. All of the cash. and. investments allocated to the proprietary fund types have original maturities of 90 days or less. Therefore, the entire balance in such fund types is considered cash equivalents. F. Prepaid Items Certain :payments to vendors reflect costs applicable to future accounting periods and are recorded as prepayments. Prepaid items are reported using the consumption method and recorded as. an expense or expenditure at. the time of consumption.. That portion of the relevant funds' balances equal to material prepaid items has been. segregated as .nonspendable. G. Property Tax Credits Property taxes on homestead property (as defined by state statutes) are partially reduced .by property tax credits. These credits are paid to the City by the state in lieu of taxes levied against homestead property. The state remits these credits through installments each year. These credits are recognized as revenue by the City at the time of collection.