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CITY OF FALCON HEIGHTS, NIINNESOTA • NOTES TO THE FINANCIAL STATEMENTS For the Year Ended December 31, 2003 NOTE 2 -STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY Budgetary Information (Continued) 5. Expenditures may not legally exceed budgeted appropriations at the department level. No fund's budget can be increased without City Council approval. The City Council may authorize transfer of budgeted amounts between departments within any fund. Management may amend budgets within a department level, so long as the total department budget is not changed. 6. Annual appropriated budgets are adopted during the year for the General and Special Revenue Funds. Annual appropriated budgets are not adopted for Debt Service Funds because effective budgetary control is alternatively achieved through bond indenture provisions. Budgetary control for Capital Project Funds is accomplished through the use of project controls and formal appropriated budgets are not adopted. 7. Budgeted amounts are as originally adopted or as amended by the City Council. Individual amendments were not material in relation to the original amounts budgeted. Budgeted expenditure appropriations lapse at year-end. • Encumbrances outstanding at year-end expire and outstanding purchase orders are canceled and not reported in the financial statements. NOTE 3 -DETAILED NOTES ON ALL FUNDS A. Deposits and Investments Cash balances of the City's funds are combined (pooled) and invested to the extent available in various investments authorized by Minnesota Statutes. Each fund's portion of this pool (or pools) is displayed on the financial statements as "cash and investments (including cash equivalents)." For purposes of identifying risk of investing public funds, the balances and related restrictions are summarized as follows: Deposits -Minnesota Statutes require that all deposits with financial institutions must be collateralized in an amount equal to 110% of deposits in excess of FDIC insurance. 51