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Management's Discussion and Analysis <br />Overview of the Financial Statements <br />This discussion and analysis is intended to serve as an introduction to the City's basic financial <br />statements. The City's basic financial statements comprise three components: 1) government - <br />wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. <br />This report also contains other supplementary information in addition to the basic financial <br />statements themselves. <br />Government -wide financial statements. The government -wide financial statements are <br />designed to provide readers with a broad overview of the City's finances, in a manner similar to <br />a private -sector business. <br />The Statement of Net Position presents information on all of the City's assets and deferred <br />outflows of resources, and liabilities and deferred inflows of resources, with the difference <br />between the two reported as net position. Over time, increases or decreases in net position may <br />serve as a useful indicator of whether the financial position of the City is improving or <br />deteriorating. <br />The Statement of Activities presents information showing how the City's net position changed <br />during the most recent fiscal year. All changes in net position are reported as soon as the <br />underlying event giving rise to the change occurs, regardless of the timing of related cash flows. <br />Thus, revenues and expenses are reported in this statement for some items that will only result in <br />cash flows in future fiscal periods (e.g. uncollected taxes and earned but 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) from <br />other functions that are intended to recover all or a significant portion of their costs through user <br />fees and charges (business -type activities). The governmental activities of the City include <br />general government, public safety, public works, culture and recreation, conservation of natural <br />resources, and community development. The business -type activities of the City include water, <br />sewer, and storm water utilities. <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 maintain <br />control over resources that have been segregated for specific activities or objectives. The City, <br />like other state and local governments, uses fund accounting to ensure and demonstrate <br />compliance with finance -related legal requirements. All of the funds of the City can be divided <br />into two categories: governmental funds and proprietary 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 be <br />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 financial <br />statements, it is useful to compare the information presented for governmental funds with similar <br />20 <br />