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CITY .OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2008 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) M. Interfund. Transactions Interfund services provided and used are accounted for.as-revOriues, expenditures or* expenses. Transactions that constitute. reirnburserrrerits to a fitrid for expenditures/ expenses initially made from it that are properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund. and as reductions of expenditures or expenses in the fund that is reimbursed. All other interfund transactions are reported: as transfers. .All Interfund transactions are eliminated except for activity between governmental activities and business -type activities for presentation in the entity -wide. statements of net assets and statements of activities. NOTE 2 DEPOSITS AND INVESTMENTS A. Deposits The C..ity . maintains a cash and investment pool that is available for use by all funds. Each fund type°s.portion of this pool is, displayed on the statement -of net assets and the balance sheet as "Cash and lnvestments:' In accordance with .Minnesota Statutes the City maintains deposits. at financial. institutions which are :au#horized by the City CQuncil. Custodial Cradit Risk— Custodial credit risk for deposits is the risk that in the event of a. bank failure, -the City's deposits may not be returned to it. The City does not have a deposit policjr for custodial credit risk and* follows Minnesota Statutes for deposits. Minnesota. Statutes require that all deposits be. protected by insurance, surety bond, or- collatetal.3..he market value *of collateral pledged must equal *110% of the deposits -not covered* by insurance or corporate surety bonds. Authorized collateral include... U.S.. government.: treasury bills, notes,. or bonds; issues of a U.S: government agency; .general obligations of a state ar *local government rated "A" or better; revenue" obligations of a state or*local government rated "AA' or better; irrevocable standby letter of -credit issued by a Federal Home Loan Bank; and time deposits 'insured by federal agency. Minnesota Statutes require securities pledged as collateral be held in safekeeping in a restricted account at the Federal Reserve Bank or in ;an account at a trust department of a commercial bank or other. financial institlition not. owned or controlled :by the. deposkory. The carrying -value and bank balanced the City's deposits in banks at December 31, 2008 is $783,057 and .$783,248, respectivelyi and were entirety covbred by federal depository insurance or by surety bonds and collateral in acco.rdanca wit Minnesota Statutes.. --; (21)