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CITY OF MONTE VISTA, COLORADO I <br /> NOTES TO THE BASIC FINANCIAL STATEMENTS <br /> December 31, 2011 <br /> Use of Estimates <br /> The preparation of the financial statements in conformity with generally accepted accounting principles requires <br /> management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual <br /> results could differ from those estimates. <br /> NOTE 2 STEWARDSHIP, COMPLIANCE,AND ACCOUNTABILITY <br /> Budgets and Budgetary Accounting <br /> The City follows the procedures set forth in the Colorado Local Government Budget Law when preparing the I <br /> annual budget for each fund. Budget procedures include: <br /> • Preparation of budget documents by administrative staff,which shall be submitted to the Board no later <br /> than October 15 of each year. <br /> • Publication of a notice stating that the budget is available for public inspection. <br /> • Discussion of the budget in a meeting open to the public. <br /> • Adoption of the budget in a public meeting by appropriate resolution,no later than December 31. <br /> • Ordinance to adopt supplemental appropriations. I <br /> Formal budgetary integration is employed as a management control device for all funds of the City. The <br /> governmental funds budgets are adopted on a basis consistent with U.S. generally accepted accounting principles <br /> (GAAP). The proprietary funds budgets are adopted using the same accounting methods as governmental fund <br /> types; this procedure follows Colorado State Statute,but is not in accordance with GAAP. <br /> The total expenditures for each fund cannot exceed the budgeted amount unless a supplemental appropriation is <br /> adopted. The City Council adopted supplemental appropriations during 2011. All budget amounts presented in the <br /> accompanying supplementary information reflect the original budget and the final amended budget. I <br /> NOTE 3 CASH,DEPOSITS AND INVESTMENTS I <br /> CASH AND DEPOSITS <br /> Colorado State Statutes govern the City's deposits of cash. The statutes specify eligible depositories for public cash I <br /> deposits,which must be Colorado institutions and must maintain federal insurance(FDIC)on deposits held. <br /> The Colorado Public Deposit Protection Act(PDPA)requires that all units of local government deposit cash in <br /> eligible public depositories determined by state regulators. Amounts on deposit in excess of federal insurance <br /> levels must be collateralized in accordance with the PDPA. PDPA allows the institution to create a single collateral <br /> pool for all public funds to be maintained by another institution or held in trust for all the uninsured public deposits <br /> as a group. The market value of the collateral must be at least 102% of the aggregate uninsured deposits. <br /> Custodial Credit Risk—Deposits I <br /> Custodial credit risk is the risk that in the event of a bank failure,the City's deposits may not be returned to it. At <br /> December 31,2011, $2,706,830 was exposed to custodial credit risk. Deposits exposed to credit risk are <br /> collateralized with securities held by the pledging financial institutions through PDPA. <br /> 30 1 <br />