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VADNAIS LAKE AREA WATER <br />MANAGEMENT ORGANIZATION <br />NOTES TO FINANCIAL STATEMENTS <br />December 31, 2004 <br />M. RECONCILIATION OF GOVERNMENT -WIDE AND FUND FINANCIAL STATEMENTS <br />In the fund financial statements, the governmental funds are reported using the modified accrual basis <br />of accounting. Under this method, governmental funds report only current assets and current <br />liabilities. In the government -wide financial statements, all funds are reported using the accrual basis <br />of accounting. The governmental funds of the WMO do not have any long-term assets or liabilities. <br />Therefore, no reconciling terms are noted. <br />Note 2 DEPOSITS AND INVESTMENTS <br />A. DEPOSITS <br />In accordance with Minnesota Statutes, the WMO maintains deposits at those depository banks <br />authorized by the Board, all of which are members of the Federal Reserve System. <br />Minnesota Statutes require that all WMO deposits be protected by insurance, surety bond, or <br />collateral. The market value of collateral pledged must equal 110% of the deposits not covered by <br />insurance or bonds. <br />Minnesota Statutes require that securities pledged as collateral be held in safekeeping by the Treasurer <br />or in a financial institution other than that furnishing the collateral. Authorized collateral includes the <br />following: <br />a) United States government treasury bills, treasury notes, treasury bonds; <br />b) Issues of United States government agencies and instrumentalities as quoted by a recognized <br />industry quotation service available to the goverment entity; <br />c) General obligation securities of any state or local government with taxing powers which is rated <br />"A" or better by a national bond rating service, or revenue obligation securities of any state or <br />local government with taxing powers which is rated "AA" or better by a national bond rating <br />service; <br />d) Unrated general obligation securities of a local government with taxing powers may be pledged as <br />collateral against funds deposited by that same local government entity: <br />e) Irrevocable standby letters of credit issued by Federal Home Loan Banks to a municipality <br />accompanied by written evidence that the bank's public debt is rated "AA" or better by Moody's <br />Investors Service, Inc. or Standard & Poor's Corporation; and <br />f) Time deposits that are fully insured by the Federal Deposits Insurance Corporation. <br />At year end the carrying amount of the WMO's deposits was $234,677 and the bank balance was <br />$234,677. Minnesota Statutes require that all of the WMO's deposits be protected by insurance, <br />surety bond, or collateral. The market value of collateral pledged must equal 110% of the deposits not <br />22 <br />