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CITY OF LAKE ELMO, MINNESOTA NOTES TO THE BASIC FINANCIAL STATEMENTS DECEMBER 31, 2024 40 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 1.B. BASIS OF PRESENTATION (Continued) The City reports the following nonmajor governmental fund types: The Special Revenue Funds account for funds received by the City with a specific purpose. The Capital Project Funds account for financial resources to be used for the acquisition or construction of capital projects (other than those financed by proprietary funds). Changes in Financial Reporting Entity The following funds were reported as major funds in the prior year, but shifted to a nonmajor fund presentation during the year ended December 31, 2024: • City Hall / Fire Station Bldg Project Fund • 2023 Street Improvements Fund Additionally, the 2024 Street & Utility Improvement and Hudson Blvd Imp-Seg A-InwdHdrx Funds were presented as nonmajor funds in the prior year, but have now met the requirements for major fund presentation. 1.C. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING Measurement focus is a term used to describe “which” transactions are recorded within the various financial statements. Basi s of accounting refers to “when” transactions are recorded regardless of the measurement focus applied. Measurement Focus On the government-wide Statement of Net Position and the Statement of Activities, both governmental and business -type activities are presented using the economic resources measurement focus as defined in the second bullet point below. In the fund financial statements, the current financial resources measurement focus or the economic resources measurement focus is used as appropriate: • All governmental funds utilize a current financial resources measurement focus. Only current financial assets and liabilities are generally included on their balance sheets. Their operating statements present sources and uses of available financial resources during a given period. These funds use fund balance as their measure of available financial resources at the end of the period. • The government-wide financial statements and proprietary funds utilize an economic resources measurement focus. The accounting objectives of this measurement focus are the determination of operating income, changes in net position (or cost recovery), financial position, and cash flows. All assets, deferred outflows, liabilities, and deferred inflows (whether current or noncurrent) associated with their activities are reported. Proprietary fund equity is classified as net position. Basis of Accounting In the government-wide Statement of Net Position and Statement of Activities, both governmental and business-type activities are presented using the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred, or economic asset used. Revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange -like transactions are recognized when the exchange takes place.