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low <br />i <br />Mow <br />MEW <br />IMm <br />CITY OF LINO LAKES, MINNESOTA <br />NOTES TO FINANCIAL STATEMENTS <br />December 31, 2005 <br />Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) <br />B. BASIC FINANCIAL STATEMENTS (CONTINUED) <br />2. Fund Financial Statements (Continued) <br />Legacy Woods Edge Improvement Fund <br />The legacy woods edge improvement fund accounts for construction costs related to infrastructure <br />improvements in the Legacy Woods Edge development. <br />The City reports the following major proprietary funds: <br />Water Fund <br />The water fund accounts for customer water service charges that are used to finance water operating <br />expenses. <br />Sewer Fund <br />The sewer fund accounts for customer water service charges that are used to finance water operating <br />expenses. <br />Additionally, the City reports the following fiduciary funds: <br />Agency Funds - to account for assets held as an agent for individuals, private organizations, other <br />governmental units, and/or other funds. The City's agency fund accounts for pass - through contractor's <br />deposits relating to prospective developments. <br />C. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING <br />The government -wide and proprietary fund fund financial statements are reported using the economic <br />resources measurement focus and the accrual basis of accounting. Agency funds, which are included <br />in the Fiduciary Funds, do not have a measurement focus. Revenues are recorded when earned, and <br />expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. <br />Property taxes are recognized as revenues in the year for which they are levied. Grants and similar <br />items are recognized as revenue as soon as all eligibility requirements imposed by the provider have <br />been met. <br />Private - sector standards of accounting and financial reporting issued on or before November 30, 1989, <br />generally are followed in both the government -wide and proprietary fund financial statements to the <br />extent that those standards do not conflict with or contradict guidance of the Governmental Accounting <br />Standards Board. Governments also have the option of following subsequent private- sector guidance <br />for their business -type activities and enterprise funds, subject to this same limitation. The City has <br />elected not to follow subsequent private- sector guidance. <br />Governmental fund financial statements are reported using the current financial resources measurement <br />focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both <br />measurable and available. The City considers all revenues to be available if they are collected within 60 <br />days after the end of the current period. Property and other taxes, licenses, and interest are all <br />considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is <br />incurred, except for principal and interest on general long -term debt, compensated absences, and claims <br />and judgments, which are recognized as expenditures to the extent that they have matured. Proceeds of <br />general long -term debt and acquisitions under capital leases are reported as other financing sources. <br />When both restricted and unrestricted resources are available for use, it is the City's policy to use <br />restricted resources first, then unrestricted resources as they are needed. <br />35 <br />