Management Report and Recommendations 12/31/1989

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City of Lino Lakes, Minnesota Management Report, Page 10 ACCOUNT BALANCE ANALYSIS OF THE COMBINED FINANCIAL STATEMENTS The combined financial statements of the City of Lino Lakes are presented in Statements 1 through 5 of the 1989 Annual Financial Report. The following comments relate to the Combined Balance Sheet - All Funds (Statement 1). Cash and Investments Cash and investments were as follows at December 31, 1989 and 1988: December 31, Increase Description 1989 1988 (Decrease) Treasurer's balance - checking ($69,847) ($17,198) ($52,649) Petty cash 150 150 0 Investments: Certificates of deposit 3,295,495 2,193,904 1,101,591 Commercial paper 2,230,875 0 2,230,875 4M money market fund 26,900 24,651 2,249 FNMA pool 231,348 264,505 (33,157) NOW account 494,035 359,043 134,992 Totals $6,208,956 $2,825,055 $3,383,901 The City maintains an average negative balance in the City's checking account. These negative balances are "book" balances only. These balances indicate that the City is depositing cash which is not needed for current expenses into interest bearing accounts. We recommend that the City continue this practice of minimal balances in the City's checking account to increase interest earnings. Interest on investments totaled $369,971 in 1989 and $147,742 in 1988. The ability of a city to generate investment earnings is an indication of sound fiscal management. Interest earnings are required for the City to meet bonded debt payments in those funds which have received assessment prepayments. Assessment prepayments reduce future interest generated from the assessment rolls and therefore must be replaced through investment earnings. Capital project monies are restricted through bond resolution and /or City Council policy. Interest earned in these funds increases the restricted assets which is intended to be expended at a future date. The interest earnings of the General and Special Revenue Type Funds indicate that the City is maintaining operating reserves in these funds. Operating reserves are mandatory to compensate for cash flow timing differences in the receipt of major revenue sources and for various other purposes as discussed later in this report (see "General Fund ").