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VADNAIS LAKE AREA WATER <br />MANAGEMENT ORGANIZATION <br />NOTES TO FINANCIAL STATEMENTS <br />December 31, 2003 <br />Authorized collateral includes the legal investments described below, as well as certain first mortgage <br />notes, and certain other state or local government obligations. Minnesota Statutes require that <br />securities pledged as collateral be held in safekeeping by the Organization treasurer or in a financial <br />institution other than that furnishing the collateral. <br />In accordance with the provisions of GASB No. 31, the Organization reports investments at fair value <br />in the financial statements. Also in accordance with the provisions of GASB No. 31, the Organization <br />has reported all investment income, including changes in fair value of investments, as revenue to the <br />operating statements. <br />At year end the carrying amount of the Organization's deposits was $305,236 and the bank balance <br />was $305,236. Minnesota Statutes require that all of the Organization's deposits be protected by <br />insurance, surety bond, or collateral. The market value of collateral pledged must equal 110% of the <br />deposits not covered by insurance or bonds (140% in the case of mortgage notes pledged). At <br />December 31, 2003, the Organization's deposits were entirely insured by the FDIC or collateral. <br />B. INVESTMENTS <br />Minnesota Statutes authorize the Organization to invest in the following: <br />a) Direct obligations or obligations guaranteed by the United States or its agencies, its <br />instrumentalities or organizations created by an act of Congress, excluding mortgage -backed <br />securities defined as high risk. <br />b) Shares of investment companies registered under the Federal Investment Company Act of 1940 <br />and whose only investments are in securities described in (a) above. <br />c) General obligations of the State of Minnesota or any of its municipalities. <br />d) Bankers acceptance of United States banks eligible for purchase by the Federal Reserve System. <br />e) Commercial paper issued by United States corporations or their Canadian subsidiaries, of the <br />highest quality, and maturing in 270 days or less. <br />f) Repurchase or reverse repurchase agreements with banks that are members of the Federal Reserve <br />System with capitalization exceeding $10,000,000; a primary reporting dealer in U.S. government <br />securities to the Federal Reserve Bank of New York; certain Minnesota securities broker -dealers; <br />or, a bank qualified as a depository. <br />The Organization did not invest in any of the above listed investments during 2003. <br />15 <br />