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Vom <br />Now <br />CITY OF LINO LAKES, MINNESOTA <br />NOTES TO FINANCIAL STATEMENTS <br />December 31, 2005 <br />Note 2 DEPOSITS AND INVESTMENTS <br />A. Deposits <br />The City maintains a cash and investment pool that is available for use by all funds. <br />Each fund type's portion of this pool is displayed on the combined balance sheet as <br />"Cash and Temporary Investments." In accordance with Minnesota Statutes the City <br />maintains deposits at financial institutions which are authorized by the City Council. <br />Custodial Credit Risk — Custodial credit risk for deposits is the risk that in the event <br />of a bank failure, the City's deposits may not be returned to it. The City does not <br />have a specific deposit policy for custodial credit risk but rather follows Minnesota <br />Statutes for deposits. Minnesota Statutes require that all deposits be protected by <br />insurance, surety bond, or collateral. The market value of collateral pledged must <br />equal 110% of the deposits not covered by insurance or corporate surety bonds. <br />Authorized collateral include: U.S. government treasury bills, notes, or bonds; <br />issues of a U.S. government agency; general obligations of a state or Local <br />government rated "A" or better; revenue obligations of a state or local government <br />rated "AA" or better; irrevocable standby letter of credit issued by a Federal Home <br />Loan Bank; and time deposits insured by a federal agency. Minnesota statutes <br />require securities pledged as collateral be held in safekeeping in a restricted account <br />at the Federal Reserve Bank or at an account at a trust departments of a commercial <br />bank or other financial institution not owned or controlled by the depository. <br />The City's deposits in banks at December 31, 2005 in the amount of $4,194,130 were entirely <br />covered by federal depository insurance or by surety bonds and collateral in accordance with <br />Minnesota statutes. <br />B. Investments <br />The City may also invest idle funds as authorized by Minnesota Statutes as follows: <br />• Direct obligations or obligations guaranteed by the United States or its agencies. <br />• Shares of investment companies registered under the Federal Investment Company Act of <br />1940 and received the highest credit rating, is rated in one of the two highest rating <br />categories by a statistical rating agency, and all of the investments have a finial maturity <br />of thirteen months or less <br />• General obligations rated "A" or better; revenue obligations rated "AA" or better <br />• General obligations of the Minnesota Housing Finance Agency rate "A" or better <br />• Bankers acceptances of United States banks eligible for purchase by the Federal Reserve <br />System. <br />• Commercial paper issued by United States banks corporations or their Canadian <br />subsidiaries, of highest quality category by a least two nationally recognized rating <br />agencies, and maturing in 270 days or less. <br />• Guaranteed investment contracts guaranteed by United States commercial banks or <br />domestic branches of foreign banks or United States insurance companies if similar debt <br />obligations of the issuer or the collateral pledged by the issuer is in the top two rating <br />categories. <br />• Repurchase or reverse purchase agreement and securities lending agreements financial <br />institutions qualified as a "depository" by the government entity, with banks that are <br />members of the Federal Reserve System with capitalization exceeding $10,000,000, a <br />primary reporting dealer in U.S. government securities to the Federal Reserve Bank of <br />New York, or certain Minnesota securities broker - dealers. <br />41 <br />