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CITY OF LAKE ELMO, MINNESOTA NOTES TO THE BASIC FINANCIAL STATEMENTS DECEMBER 31, 2023 47 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 1.G. REVENUES, EXPENDITURES, AND EXPENSES (Continued) Interfund Transfers Permanent reallocation of resources between funds of the reporting entity are classified as interfund transfers. For the purpose of the Statement of Activities, all interfund transfers between individual governmental funds, as well as all interfund transfers between individual proprietary funds, have been eliminated. See additional information at Note 2.E. 1.F. RECLASSIFICATIONS Certain amounts from 2022 have been reclassified to conform to the 2023 presentation in the Management’s Discussion and Analysis section. NOTE 2 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS The following notes present detail information to support the amounts reported in the basic financial statements for its various assets, liabilities, deferred outflows/inflows of resources, equity, revenues, and expenditures/expenses. 2.A. CASH, CASH EQUIVALENTS, AND INVESTMENTS Deposits In accordance with applicable Minnesota Statutes, the City maintains deposits at depository banks authorized by the City Council. Minnesota Statutes require that all City deposits be protected by insurance, surety bond, or collateral. The market value of collateral pledged must equal 110 percent of the deposits not covered by insurance or bonds (100% if collateral pledged is irrevocable standby letters of credit issued by the Federal Home Loan Bank). The City complies with such laws. Authorized collateral in lieu of a corporate surety bond includes: • United States government Treasury bills, Treasury notes, Treasury bonds; • Issues of United States government agencies and instrumentalities as quoted by a recognized industry quotation service available to the government entity; • A general obligation of a state or local government, with taxing powers, rated “A” or better; • A revenue obligation of a state or local government, with taxing powers, rated “AA” or better; • Unrated general obligation securities of a local government, with taxing powers, pledged as collateral against funds deposited by that same local government entity; • Irrevocable standby letter of credit issued by a Federal Home Loan Bank accompanied by written evidence that the Federal Home Loan Bank’s public debt is rated “AA” or better by Moody’s or Standard and Poor’s; or • Time deposits insured by any federal agency. Minnesota Statutes require that all collateral shall be placed in safekeeping in a restricted account at a Federal Reserve Ba nk, or in an account at a trust department of a commercial bank or other financial institution that is not owned or controlled by the financial institution furnishing the collateral. The selection should be approved by the City. At December 31, 2023, the City’s deposits, including certificates of deposit, were not exposed to custodial credit risk. The City’s deposits were sufficiently covered by federal depository insurance and collateral held by the City’s agent in the City’s name.