Comprehensive Annual Financial Report 12/31/1995

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CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 1995 PROPRIETARY FUNDS Enterprise Funds - to account for operations: (a) that are financed and operated in a manner similar to private business enterprises - where the intent of the governing body is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges; or, (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. FIDUCIARY FUNDS Trust and Agency Funds - to account for assets held by a governmental unit in a trustee capacity or as an agent for individuals, private organizations, other govemmental units, and/or other funds. These include (a) expendable trust funds, (b) nonexpendable trust funds, (c) pension trust funds, and (d) agency funds. ACCOUNT GROUPS The govemmental fund types are designed to account for the financial flow of a particular fund; therefore, they generally include only current assets and current liabilities on their balance sheets. The City maintains two account groups to account for noncurrent assets and long -term liabilities as follows: General Fixed Assets - The City maintains a separate account group which contains the fixed assets used in the governmental fund type operations. They are assets of the City as a whole and not of individual funds. General Long -Term Debt - This account group contains the long -term obligations of the City including general obligation bonds, certificates of indebtedness, contracts payable and compensated absences payable. These long -term liabilities are expected to be financed by the governmental funds. C. BASIS OF ACCOUNTING The accounting and reporting treatment applied to a fund is determined by its measurement focus. All governmental funds are accounted for on a current financial resources 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 flow of economic resources measurement focus. This means that all assets and all 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. 28