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IV-22CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 imposed by the provider have been met. The City's only fiduciary funds are agency funds. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period at soon enough thereafter to pay liabilities of the current period. Fat this purpose, the City considers all revenues, except reimbursement grants, to be available if they are collected within 60 days of the end of the current fiscal period. Reimbursement grants are considered available if they are collected within one yea, of the end of the current fiscal period. Expenditures generally are recatded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recOtded only when payment is due. Property taxes, special assessments, intergovernmental revenues, chatges fat services and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the po,tion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the City. As a general rule the effect ofinterfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are transactions that would be treated as revenues, expenditures at expenses if they involved external organi,:ations, such as buying goods and services or payments in lieu of taxes, are similarly treated when they involve other funds of the City. Elimination of these chatges would distort the direct costs and program revenues reported fat the various functions concerned. Proprietary Funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the water and sewer enterprise funds are chatges to customers fat sales and services. Operating expenses fat enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. D. BUDGETS Budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America. Annual appropriated budgets are adopted fat the General Fund and the Program Recreation Special Revenue Fund. Budgeted expenditure appropriations lapse at yeat-end. Budgeted amounts are reported as originally adopted and as amended by the City Council. Budgeted expenditure appropriations lapse at yea, end. Encumbrance accounting, under which purchase Otders, contracts, and other commitments fat the expenditure of monies are recorded in Older to reserve that po,tion of the appropriation, is not employed by the City because it is at present not considered necessa,y to assure effective budgetary control or to facilitate effective cash management. CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 E. LEGAL COMPLIANCE-BUDGETS The City follows these procedures in establishing the budgetary data reflected in the financial statements: I. The City AdministratOt submits to the City Council a proposed operating budget (including the General Fund and Program Recreation Special Revenue Fund) for the fiscal yea, commencing the following January I. The operating budget includes proposed expenditures and the means of financing them. 2. Public heatings ate conducted to obtain taxpayer comments. 3. The budget is legally enacted through passage of a resolution on a depattmental basis and can expended by each depattment based upon detailed budget estimates fat individual expenditure accounts. 4. The City AdministratOt is authorized to transfer appropriations within any depattment budget. Additional interdepattmental or interfimd appropriations and deletions are at may be authorized by the City Council with fund ( contingency) reserves at additional revenues. 5. Fatmal budgetary integration is employed as a management control device during the yea, fat the General Fund. 6. Legal debt obligation indentures determine the appropriation level and debt service tax levies fat the Debt Service Funds. Supplementaty budgets ate adopted fat the Proprietary Funds to determine and calculate user chatges. These debt service and budget amounts represent general obligation bond indenture provisions and net income fat operation and capital maintenance and are not reflected in the financial statements. 7. A capital improvement program is reviewed periodically by the City Council for the Capital Project Funds. However, appropriations fat major projects are not adopted until the actual bid aWatd of the improvement. The appropriations are not reflected in the financial statements. 8. Expenditures may not legally exceed budgeted appropriations at the depattment level unless approved by the City Council. Therefore, the legal level of budgetary control is at the depattment level (i.e. administration, community development, public safety, public services, and other). 9. The City Council may authorize transfers of budgeted amounts between City funds. F. CASH AND INVESTMENTS Cash and investment balances from all funds are pooled and invested to the extent available in authorized investments. Investment income is allocated to individual funds on the basis of the fund's equity in the cash and investment pool. Investments are stated at fair value, except for investments in external investment pools that meet GASB 79 requirements, which are stated at amortized cost. Interest eatnings ate accrued at yea,-end. For purposes of the Statement of Cash Flows, the proprietary funds consider all highly liquid investments with a maturity of three months at less when purchased to be cash equivalents. All of the cash and investments allocated to the proprietary fund types have original maturities of 90 days at less. Therefore, the entire balance in such fund types is considered cash equivalents.