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CITY OF RAMSEY Notes to Financial Statements (continued) December 31, 1999 NOTE 1 -SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The City has elected higher deductibles through the LMCIT in order to keep premiums at a minimum. To supplement the commercial coverages, the City established the Self-Funding Insurance Internal Service Fund. This fund is funded primarily through dividend paybacks from the 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 the LMCIT policies are not paid from the Self-Funding 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 1999. NOTE Z -DEPOSITS AND INVESTMENTS 1 A. Deposits In accordance with applicable Minnesota Statutes, the City maintains deposits at depository banks authorized by the City Council. Minnesota Statutes require that all deposits be protected by federal deposit insurance, corporate suretybond, 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 $3,493,233, while the balance on the bank records was $3,806,569. At December 31, 1999, all deposits were insured or collateralized by securities held by the City's agent in the City's name. i~ i~ ~ '"