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NOTE 1— SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) R. Budgets and Budgetary Accounting (continued) In the General Fund, total actual expenditures were less than appropriations by $77,903. In the Housing and Redevelopment Authority Special Revenue Fund expenditures exceeded appropriations by $2,073 with a fund balance that decreased by $228,532. The Housing and Redevelopment Authority adopted a 2011 budget that had expenditures exceeding revenues. The rationalization for the 2011 budget was that marketing and development effort costs associated with the 2009 COR land purchase would lead to future revenue generating land sales. 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. Self- Insurance Plan and 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. The City participates in the League of Minnesota Cities Insurance Trust (LMCIT), a public entity risk pool for its general property and casualty, workers' compensation, and other miscellaneous insurance coverages. LMCIT operates as a common risk management and insurance program for a large number of cities in Minnesota. The City pays an annual premium to LMCIT for insurance coverage. The LMCIT agreement provides that the trust will be self - sustaining through member premiums and will reinsure through commercial companies for claims in excess of certain limits The City has elected higher deductibles through LMCIT in order to keep premiums at a minimum To supplement the commercial coverages, the City established the Self - Insurance Internal Service Fund. This fund is funded primarily through dividend paybacks from LMCIT. Expenditures from this fund consist solely of payments of those insurance related costs that are below the individual and /or 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 2011. U. Loans payable to Met Council The City entered into a loan agreement with the Metropolitan (Met) Council to acquire property within the proposed right -of -way of highways designated as a part of the metropolitan highway system plan. State Highway 10, within Ramsey, is part of that highway system plan. The loans bear no interest, and are to be repaid upon the acquisition of the property by the State of Minnesota. V. Use of Estimates The preparation of financial statements, in accordance with accounting principles generally accepted in the United States of America, requires management to make estimates that affect amounts reported in the financial statements during the reporting period. Actual results could differ from such estimates. 68