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NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The implementation of GASB Statement No. 34 caused the opening fund balances of the Governmental Funds at December 31, 2003, to be restated in terms of "net assets" as follows: Total fund balances - Governmental Funds Fund balances in Trust Funds reclassified as Special Revenue Funds (Governmental Funds) under GASB Statement No. 34 Cost of capital assets Accumulated depreciation Bonds payable Lease revenue bonds Capital equipment certificates Compensated absences payable Accrued interest payable Revenues deferred on the modified accrual basis of accounting, but recognized on the full accrual basis Assets and liabilities of the Internal Service Fund are included in the governmental activities in the Statement of Net Assets Net assets - governmental activities $ 18,823,209 6,656,369 10,545,623 (3,471,228) (10,235,000) (1,510,000) (983,000) (351,416) (154,659) 1,023,138 410,689 $ 20,753,725 NOTE 2 - DEPOSITS AND INVESTMENTS A. Deposits 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. 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 At year-end, the carrying amount of the City's deposits was $5,273,391, while the balance on the bank records was $5,590,482. At December 31, 2004, all deposits were insured or collateralized by securities held by the City's agent in the City's name. -35-