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IRENE <br />CITY OF LINO LAKES, MINNESOTA <br />NOTES TO FINANCIAL STATEMENTS <br />December 31, 2008 <br />Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES <br />The City of Lino Lakes is a public corporation formed under Minnesota Statute 410. As such, the City is under home <br />rule charter regulations and applicable statutory guidelines. <br />The basic financial statements of the City of Lino Lakes have been prepared in conformity with U.S. generally <br />accepted accounting principles as applied to governmental units by the Governmental Accounting Standards Board <br />(GASB). The following is a summary of the significant accounting policies: <br />A. FINANCIAL REPORTING ENTITY <br />As required by U.S. generally accepted accounting principles, the financial statements of the reporting <br />entity include those of the City of Lino Lakes and its component units. A component unit is a legally <br />separate entity for which the primary government is financially accountable, or for which the exclusion of <br />the component unit would render the financial statements of the primary government misleading. The <br />criteria used to determine if the primary goverment is financially accountable for a component include <br />whether or not the primary government appoints the voting majority of the potential component unit's <br />board, is able to impose its will on the potential component unit, is in a relationship of financial benefit or <br />burden with the potential component unit, or is fiscally depended upon by the potential component unit. <br />COMPONENT UNITS <br />In conformity with U.S. generally accepted accounting principles, the financial statements of component <br />units have been included in the financial reporting entity either as blended component units or as discretely <br />presented component units. <br />Blended Component Units <br />The Economic Development Authority (EDA) of Lino Lakes is an entity legally separate from the City. <br />However, for financial reporting purposes, the EDA is reported as if it were part of the City's operations <br />because the members of the City Council serve as commission members. The EDA does not issue separate <br />financial statements. The Housing and Redevelopment Authority (HRA) of Lino Lakes is an entity legally <br />separate from the City. However, for financial reporting purposes, the HRA is reported as if it were part of <br />the City's operations because the members of the City Council serve as commission members. The HRA has <br />not yet incurred any financial activity. <br />B. BASIC FINANCIAL STATEMENTS <br />1. Government -Wide Statements <br />The government -wide financial statements (i.e., the statement of net assets and the statement of activities) <br />display information about the primary government and its component units. These statements include the <br />financial activities of the overall City government, except for fiduciary activities. Governmental activities, <br />which normally are supported by taxes and intergovernmental revenues, are reported separately from <br />business -type activities, which rely to a significant extent on fees and charges to external parties for support. <br />As a general rule, the effect of interfund activity has been eliminated from the government -wide financial <br />statements. Exceptions to this general rule are charges between the City's enterprise funds and various other <br />functions of government. Eliminations of these charges would distort the direct costs and program revenues <br />reported for the various functions concerned. <br />34 <br />