Comprehensive Annual Financial Report 12/31/2000

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CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2000 Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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. The modified accrual basis of accounting is followed by the City for its Governmental Funds and Fiduciary- 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. "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Major revenue sources susceptible to accrual include property taxes (excluding delinquent taxes received over 60 days after year end), 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. Expenditures are generally recognized in the accounting period when the fund liability is incurred, except for interest on general long -term debt which is recognized when due. 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. Governmental Accounting Standards Board (GASB) Statement #20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities that Use Proprietary Funds, provides proprietary activities with a choice of authoritative guidance issued after November 30, 1989. The City of Lino Lakes has elected to follow GASB pronouncements exclusively after that date. The City reports deferred revenue on its combined balance sheet. Deferred revenues arise when a potential revenue does not meet both the "measurable" and "available" criteria for recognition m the current period. Deferred revenues also arise when resources are received by the government before it has a legal claim to them, as when grant monies are received prior to the incurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the government has a legal claim to the resources, the liability for deferred revenue is removed from the combined balance sheet and revenue is recognized. The City has reported as deferred revenues the amount of $3,300,435, which consists of the following: Oak Wilt Suppression and misc. $ 6,686 Property taxes receivable 50,431 Special assessments receivable 3,243,318 Total $ 3,300,435 21