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CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2008 11 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 41� D. Budgets Budgets are adopted on a basis* consistent With' U:S. generally accepted, accounting: principles. An. annual ..appropriated budget is adopted for the General Furitf-Budgeted expenditure appropriations lapse at year-end. E. Cash and. investments Cash and investment, balances from all funds are pooled. and invested to the extent ayailable 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 T investment pool.. The city provides temporary advances to. funds that have insufficient cash balances by means .of an advance from another fund shown. as interfund receivables in the advancing fund i6the governmental fund financial statements, and an interfund payable in the fund .with the deficit, until adequate resources are received. These interfund payables are eliminated for statement of net assets presentation. Investments are stated ai 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.. Alf of the cash and investments allocated to the proprietary fund types Have original maturities, of W days or Jess. Therefore, the entire balance in such fund types is considered cash equivalents. F. Prepaid Expenses Certain payments to vendors reflect costs -..applicable. to future accounting. periods -and are recorded as prepayments. Prepaid items are reported using the consumptioh method ano recorded -as an expense or expendiitUre :at the time d consumption: That portion of the relevant funds` balances equal to -.material prepaid items has .been reserved. G. Property Tax Credits Property. taxes on homestead property .(as defined by State Statutes) are partially reduced'by property tail credits. These credits are paid to the City by the State .in:lieu of taxes levied against homestead property. The State remits these predits through installments: each year. These credits are recognized as .revenue by the City at the time of collection. (17)