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CITY OF LINO LAKES, MINNESOTA <br />NOTES TO FINANCIAL STATEMENTS <br />December 31, 2014 <br />Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) <br />B. BASIC FINANCIAL STATEMENTS (CONTINUED) <br />2. Fund Financial Statements (Continued) <br />Area and Unit Charge Fund <br />The area and unit charge fund accounts for the collection of water and sewer unit charges to be used for <br />debt payments and construction of governmental infrastructure. <br />The City reports the following major proprietary funds: <br />Water Fund <br />The water fund accounts for customer water service charges that are used to finance water operating <br />expenses. <br />Sewer Fund <br />The sewer fund accounts for customer water service charges that are used to finance sewer operating <br />expenses. <br />Additionally, the City reports the following fiduciary funds: <br />Agency Funds - to account for assets held as an agent for individuals, private organizations, other <br />governmental units, and/or other funds. The City's agency fund accounts for pass-through contractor's <br />deposits relating to prospective developments. <br />C. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING <br />The government -wide and proprietary fund financial statements are reported using the economic resources <br />measurement focus and the accrual basis of accounting. Agency funds, which are included in the Fiduciary <br />Funds, do not have a measurement focus. Revenues are recorded when earned, and expenses are recorded <br />when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as <br />revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon <br />as all eligibility requirements imposed by the provider have been met. <br />Governmental fund financial statements are reported using the current financial resources measurement <br />focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both <br />measurable and available. The City considers all revenues to be available if they are collected within 60 <br />days after the end of the current period. Property and other taxes, licenses, and interest are all considered to <br />be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for <br />principal and interest on general long-term debt, compensated absences, and claims and judgments, which <br />are recognized as expenditures to the extent that they have matured. Proceeds of general long-term debt <br />and acquisitions under capital leases are reported as other financing sources. <br />37 <br />