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NOTE I—SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) <br /> • Unassigned—The residual classification for the General Fund,which also reflects negative residual amounts <br /> in other funds. <br /> When both restricted and unrestricted resources are available for use,the City first uses restricted resources,then <br /> use unrestricted resources as they are needed. When committed,assigned,or unassigned resources are available <br /> for use,the City uses resources in the following order: 1)committed,2)assigned, and 3)unassigned. <br /> S. Budgets and Budgetary Accounting <br /> Each fall the City Council adopts a General Fund budget for the following fiscal year beginning <br /> January 1. In addition, an annual budget is legally adopted for the Economic Development Authority, a <br /> nonmajor special revenue fund. The City has established budgetary control at the function level based upon <br /> GAAP serving as the basis of budgeting. Budget appropriations lapse at year-end. <br /> The government's department heads may make transfers of appropriations within a function. Transfers of <br /> appropriations between functions require the approval of the council. The Economic Development <br /> Authority budget is recommended by their board and final approval comes from City Council. <br /> For the year ended December 31, 2021, expenditures were over budget in the Economic Development <br /> Authority Fund by $241,285. <br /> T. Statement of Cash Flows <br /> For purposes of the Statement of Cash Flows,the City considers all highly liquid debt instruments with an <br /> original maturity from the time of purchase by the City of three months or less to be cash equivalents. The <br /> Proprietary Funds' portion in the government-wide cash and investment management pool is considered to <br /> be cash equivalent. <br /> U. Risk Management <br /> The City is exposed to various risks of loss related to torts: theft of, damage to, and destruction of assets; <br /> errors and omissions; and natural disasters. The City participates in the League of Minnesota Cities <br /> Insurance Trust (LMCIT), a public entity risk pool for its general property and casualty, workers' <br /> compensation, and other miscellaneous insurance coverages. LMCIT operates as a common risk <br /> management and insurance program for a large number of cities in Minnesota. The City pays an annual <br /> premium to LMCIT for insurance coverage. The LMCIT agreement provides that the trust will be <br /> self-sustaining through member premiums and will reinsure through commercial companies for claims in <br /> excess of certain limits. <br /> The City has elected higher deductibles through LMCIT in order to keep premiums at a minimum. To <br /> supplement the commercial coverages,the City established the Self-Insurance Internal Service Fund. This <br /> fund is funded primarily through dividend paybacks from LMCIT. Expenses from this fund consist solely <br /> of payments of those insurance related costs that are below the individual and/or commutative deductible <br /> amounts. Premiums for LMCIT policies are not paid from the Self-Insurance Internal Service Fund, but <br /> rather are budgeted and paid from the respective operating funds. The City does not retain significant <br /> uncovered risk. <br /> The City also carries commercial insurance for certain other risks of loss. Settled claims resulting from <br /> these risks have not exceeded commercial insurance coverage in any of the past three fiscal years. There <br /> were no significant reductions in the City's insurance coverage in 2021. <br /> 69 <br />