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NOTE 1- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) R. Self- Insurance Plan and Risk Management (continued) commutative deductible amounts. Premiums for LMCIT policies are not paid from the Self- Insurance Internal Service Fund, but rather are budgeted and paid from the respective operating funds. The City does not retain significant uncovered risk. The City also carries commercial insurance for certain other risks of loss. Settled claims resulting from these risks have not exceeded commercial insurance coverage in any of the past three fiscal years. There were no significant reductions in the City's insurance coverage in 2006. NOTE 2 — DEPOSITS AND INVESTMENTS A. Components of Cash and Investments Cash and investments at year - end consist of the following: B. Deposits Deposits $ 8,28 1,705 Investments 40,954,115 Cash on hand 625 Total $ 49,236,445 Cash and investments are presented in the financial statements as follows: Cash and temporary investments - Statement of Net Assets $ 44,909,096 Restricted cash and investments for debt service - Statement of Net Assets 1,569,529 Restricted cash and investments for capital projects - Statement of Net Assets 1,704,326 Cash and Investments held by trustee - Statement of Fiduciary Net Assets 1,053,494 Total $ 49,236,445 In accordance with applicable Minnesota Statutes, the City maintains deposits at depository banks authorized by the City Council, including checking accounts and certificates of deposits. The following is considered the most significant risk associated with deposits: Custodial credit risk -- In the case of deposits, this is the risk that in the event of a bank failure, the City's deposits may be lost. Minnesota Statutes require that all deposits be protected by federal deposit insurance, corporate surety bond, or collateral. The market value of collateral pledged must equal 110% of the deposits not covered by federal deposit insurance or corporate surety bonds. Authorized collateral includes treasury bills, notes, and bonds; issues of U.S. government agencies; general obligations rated "A" or better; revenue obligations rated "AA" or better; irrevocable standard letters of credit issued by the Federal Home Loan Bank; and certificates of deposit. Minnesota Statutes require that securities pledged as collateral be held in safekeeping in a restricted account at the Federal Reserve Bank 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 City has no additional deposit policies addressing custodial credit risk. -35-