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NOTE 1 —SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) <br /> V. Use of Estimates <br /> The preparation of financial statements, in accordance with accounting principles generally accepted in the <br /> United States of America, requires management to make estimates that affect amounts reported in the <br /> financial statements during the reporting period. Actual results could differ from such estimates. <br /> NOTE 2—DEPOSITS AND INVESTMENTS <br /> A. Components of Cash and Investments <br /> Cash and investments at year-end consist of the following: <br /> Deposits $ 3,594,479 <br /> Investments 87,03 8,842 <br /> Cash on hand 300 <br /> Total $ 90,633,621 <br /> B. Deposits <br /> In accordance with applicable Minnesota Statutes, the City maintains deposits at depository banks <br /> authorized by the City Council, including checking accounts and certificates of deposits. <br /> The following is considered the most significant risk associated with deposits: <br /> Custodial credit risk—In the case of deposits, this is the risk that in the event of a bank failure, the <br /> City's deposits may be lost. <br /> Minnesota Statutes require that all deposits be protected by federal deposit insurance, corporate surety <br /> bond,or collateral. The market value of collateral pledged must equal 110%of the deposits not covered <br /> by federal deposit insurance or corporate surety bonds. Authorized collateral includes treasury bills, <br /> notes, and bonds; issues of U.S. government agencies; general obligations rated"A"or better;revenue <br /> obligations rated"AA"or better;irrevocable standard letters of credit issued by the Federal Home Loan <br /> Bank; and certificates of deposit. Minnesota Statutes require that securities pledged as collateral be <br /> held in safekeeping in a restricted account at the Federal Reserve Bank or in an account at a trust <br /> department of a commercial bank or other financial institution that is not owned or controlled by the <br /> financial institution furnishing the collateral. The City has no additional deposit policies addressing <br /> custodial credit risk. <br /> At year end,the carrying amount of the City's deposits was $3,594,479 while the balance on the bank <br /> Records was $3,622,987. At December 31,2021,all deposits were fully covered by federal depository <br /> insurance, surety bonds, or by collateral held by the City's agent in the City's name. <br /> 70 <br />