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NOTE 1— SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Assigned — Consists of internally imposed constraints. These constraints consist of amounts intended to be used by the City for specific purposes but do not meet the criteria to be classified as restricted or committed. In governmental funds, assigned amounts represent intended uses established by the governing body itself or by an official to which the governing body delegates the authority. Pursuant to City Council resolution, the city administrator or finance director is authorized to establish assignments of fund balance. • Unassigned — The residual classification for the General Fund which also reflects negative residual amounts in other funds. When both restricted and unrestricted resources are available for use, it is the City's policy to first use restricted resources, then use unrestricted resources as they are needed. When committed, assigned, or unassigned resources are available for use, it is the City's policy to use resources in the following order: 1) committed, 2) assigned, and 3) unassigned. S. Statement of Cash Flows For purposes of the Statement of Cash Flows, the City considers all highly liquid debt instruments with an original maturity from the time of purchase by the City of three months or less to be cash equivalents. The proprietary funds' portion in the government -wide cash and investment management pool is considered to be cash equivalent. T. Use of Estimates The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates U. Risk Management The City is exposed to various risks of loss related to torts: theft of, damage to, and destruction of assets; errors and omissions; and natural disasters for which the City carries commercial insurance. The City retains risk for the deductible portions of the insurance policies and for any exclusion from said policies. These amounts are considered to be immaterial to the financial condition of the City. There were no significant reductions in insurance from the previous year or settlements in excess of insurance coverage for the past three fiscal years. Workers' compensation is provided through a pooled self-insurance program through the League of Minnesota Cities Insurance Trust (LMCIT). The City pays an annual premium to the LMCIT. The City is subject to supplemental assessments if deemed necessary by the LMCIT. The LMCIT reinsures through Workers' Compensation Reinsurance Association as required by law. The City has a $5,000 deductible for which it retains the risk. These deductibles are considered to be immaterial to the financial statements. Property, casualty, and automobile insurance coverage are provided through a pooled self-insurance program through the LMCIT. The City pays an annual premium to the LMCIT. The City is subject to supplemental assessments if deemed necessary by the LMCIT. The LMCIT reinsures through commercial companies for claims in excess of various amounts. The City has a $25,000 deductible for which it retains the risk. These deductibles are considered to be immaterial to the financial statements. -41-