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Management's Discussion and Analysis <br />decreases in net position may serve as a useful indicator of whether the financial position of <br />the City is improving or deteriorating. <br />The Statement of Activities presents information showing how the City's net position <br />changed during the most recent fiscal year. All changes in net position are reported as soon <br />as the underlying event giving rise to the change occurs, regardless of the timing of related <br />cash flows. Thus, revenues and expenses are reported in this statement for some items that <br />will only result in cash flows in future fiscal periods (e.g. uncollected taxes and earned but <br />unused vacation leave). <br />Both of the government -wide financial statements distinguish functions of the City that are <br />principally supported by taxes and intergovernmental revenues (governmental activities) <br />from other functions that are intended to recover all or a significant portion of their costs <br />through user fees and charges (business -type activities). The governmental activities of the <br />City include general government, public safety, public services, conservation of natural <br />resources and community development. The business -type activities of the City include a <br />water utility and sewer utility. <br />The government -wide financial statements are statements 1 and 2 of this report. <br />Fund Financial statements. A fund is a grouping of related accounts that is used to <br />maintain control over resources that have been segregated for specific activities or objectives. <br />The City, like other state and local governments, uses fund accounting to ensure and <br />demonstrate compliance with finance -related legal requirements. All of the funds of the City <br />can be divided into three categories: governmental funds, proprietary funds, and fiduciary <br />funds. <br />Governmental funds. Governmental funds are used to account for essentially the same <br />functions reported as governmental activities in the government -wide financial statements. <br />However, unlike the government -wide financial statements, governmental fund financial <br />statements focus on near-term inflows and outflows of spendable resources, as well as on <br />balances of spendable resources available at the end of the fiscal year. Such information may <br />be useful in evaluating a government's near-term financial requirements. <br />Because the focus of governmental funds is narrower than that of the government -wide <br />financial statements, it is useful to compare the information presented for governmental <br />funds with similar information presented for governmental activities in the government -wide <br />financial statements. By doing so, readers may better understand the long-term impact of the <br />City's near term financial decisions. Both the governmental fund balance sheet and <br />governmental fund statement of revenues, expenditures and change in fund balance provide a <br />reconciliation to facilitate this comparison between governmental funds and governmental <br />activities. <br />18 <br />