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CITY OF LAKE ELMO, MINNESOTA NOTES TO THE BASIC FINANCIAL STATEMENTS DECEMBER 31, 2024 39 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 1.B. BASIS OF PRESENTATION Government-wide Financial Statements The Statement of Net Position and Statement of Activities display information about the reporting government as a whole. They include all funds of the reporting entity except for fiduciary funds (of which the City has none). The statements distinguish between governmental and business-type activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange revenues. Business-type activities are financed in whole or in part by fees charged to external parties for goods and services. Fund Financial Statements Fund financial statements of the reporting entity are organized into funds, each of which is considered to be a separate accounting entity. Each fund is accounted for by providing a separate set of self-balancing accounts that constitute its assets, deferred outflows, liabilities, deferred inflows, fund equity, revenues, and expenditures/expenses. Funds are organized into two major categories: governmental and proprietary. An emphasis is placed on major funds within the governmental and proprietary categories. A fund is considered major if it is the primary operating fund of the City or meets the following criteria: • Total assets and deferred outflows, liabilities and deferred inflows, revenues, or expenditures/expenses of that individual governmental or proprietary fund are at least 10 percent of the corresponding total for all funds of that category or type; and • Total assets and deferred outflows, liabilities and deferred inflows, revenues, or expenditures/expenses of that individual governmental or proprietary fund are at least 5 percent of the corresponding total for all governmental and proprietary funds combined. The City reports the following major governmental funds: The General Fund is the primary operating fund of the City and is always classified as a major fund. It is used to account for all activities except those legally or administratively required to be accounted for in other funds. The Debt Service Fund accounts for the accumulation of financial resources for the payment of interest and principal on general long-term debt of the City other than debt service payments made by proprietary funds. Ad valorem taxes and special assessments are used for the payment of principal and interest on the City’s indebtedness. The 2024 Street & Utility Improvement Fund is a capital project fund used to account for financial resources related to the street & utility improvement project that initiated in 2023. The Hudson Blvd Imp-Seg A-InwdHdrx Fund is a capital project fund used to account for financial resources related to the Hudson Blvd. improvement project that initiated in 2023. The City reports the following major proprietary funds: The Water Fund accounts for the activities of the City’s water distribution operations. The Sewer Fund accounts for revenues and costs associated with the City’s sewer system. The Storm Sewer Fund accounts for costs associated with the City’s storm sewer system. These costs are financed by the storm sewer surcharge.