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CITY OF LINO LAKES, MINNESOTA <br />NOTES TO FINANCIAL STATEMENTS <br />December 31, 2016 <br />Restricted - consists of amounts related to externally imposed constraints established by creditors, <br />grantors or contributors; or constraints imposed by state statutory provisions. <br />Committed - consists of internally imposed constraints. These constraints are established by a <br />resolution approved by the City Council, and committed amounts cannot be used for any other <br />purpose unless the City Council removes or changes the specified use by resolution. <br />Assigned - consists of internally imposed constraints for the specific purpose of the City's intended <br />use. These constraints are established by the City Council and/or management. The City Council <br />passed a resolution authorizing the Finance Director to assign fund balances and their intended <br />uses. <br />Unassigned - is the residual classification for the general fund and also reflects negative residual <br />amounts in other funds. <br />When both restricted and unrestricted resources are available for use, it is the City's policy to first use <br />restricted resources, and then use unrestricted resources as they are needed. <br />When committed, assigned or unassigned resources are available for use, it is the City's policy to use <br />resources in the following order: 1) committed 2) assigned and 3) unassigned. <br />The City formally adopted a fund balances policy for the general fund. The policy establishes an <br />unassigned fund balance range of 40% - 50% of general fund operating expenditures. <br />R. USE OF ESTIMATES <br />The preparation of financial statements in accordance with generally accepted accounting principles <br />(GAAP) requires management to make estimates that affect amounts reported in the financial <br />statements during the reporting period. Actual results could differ from such estimates. <br />Note 2 DEPOSITS AND INVESTMENTS <br />A. DEPOSITS <br />In accordance with Minnesota Statutes, the City maintains deposits at those depository banks authorized <br />by the City Council, all of which are members of the Federal Reserve System. <br />Custodial Credit Risk — Custodial credit risk is the risk that in the event of a bank failure, the City's <br />deposits may not be returned to it. Minnesota Statutes require that insurance, surety bonds or collateral <br />protect all City deposits. The market value of collateral pledged must equal 110% of deposits not <br />covered by insurance or bonds. The City has no additional deposit policies addressing custodial credit <br />risk. As of December 31, 2016, the bank balance of the City's deposits was insured by the FDIC or <br />covered by pledged collateral held in the City's name. <br />53 <br />