Annual Financial Report 12/31/1990

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ONO CITY OF LINO LAKES, MINNESOTA Page 3 of 23 NOTES TO FINANCIAL STATEMENTS December 31, 1990 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) MEASUREMENT FOCUS The accounting and reporting treatment applied to a fund is determined by its measurement focus. All Governmental Funds are accounted for on a spending or "financial flow" measurement focus. This means that only current assets and current liabilities are generally included on their balance sheets. Governmental Fund operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. All Proprietary Funds are accounted for on a cost of services or "capital maintenance" measurement focus. This means that all assets and liabilities (whether current or noncurrent) associated with this activity are included on their balance sheets. Their reported fund equity (net total assets) is segregated into contributed capital and retained earnings components. Proprietary Fund type operating statements present increases (revenues) and decreases (expenses) in net total assets. BASIS OF ACCOUNTING The modified accrual basis of accounting is followed by the City for its governmental funds (General, Special Revenue, Debt Service and Capital Project) and Agency Funds. Under this method of accounting, revenues are recognized when they become susceptible to accrual - that is, when they become both measurable and available to finance expenditures of the fiscal period. Also, under this method, expenditures are recognized in the accounting period when the liability is incurred, except for: • Interest on long -term debt which is recognized when due, except for January 1 maturities which are recognized in the previous fiscal period. Major revenue sources susceptible to accrual include property taxes, special assessments, intergovernmental revenues, charges for services and interest on investments. Major revenue sources not susceptible to accrual include licenses and permits, fees, and miscellaneous revenues. Such revenues are recorded as revenue when received because they are not measurable until collected. The accrual basis of accounting is followed for the Proprietary Funds. Under this method of accounting, revenues are recognized during the accounting period in which they are earned and become measurable and expenses are recognized in the accounting period in which they are incurred, if measurable. BUDGETARY DATA The City Council adopts an annual budget for the General Fund. During the budget year supplemental appropriations and deletions are or may be authorized by the City Council. The amounts shown in the financial statements as "Budget" represent the original budgeted amounts plus all revisions made during the year and/or for the year. The modified accrual basis of accounting is used by the City for budgetary data. The City monitors budget performance on the departmental basis. All amounts over budget have been approved by the City Council through the disbursement approval process.