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1 ' CITY OF ST. ANTHONY NOTES TO FINANCIAL STATEMENTS DECEMBER 31 , 1999 Note 1 . Significant Accounting Policies, continued rD. Basis of Accounting, continued ' Expenditures are generally recognized under the modified accrual basis of accounting when the related fund liability is incurred, except for principal and interest on general long-term debt which are recognized when due. The liability for accumulated compensated absences (vacation, sick and severance pay) are transferred to the Internal Service Fund as earned by the employee. Proprietary funds are accounted for using the .accrual basis of accounting. Revenues ' are recognized when earned and expenses are recognized when incurred. Compensated absences are considered expenses when they are incurred. In accordance with GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities that Use Proprietary Fund Accounting, the City applies all -ap- plicable GASB pronouncements and any applicable Financial Accounting Standards Board (FASB) pronouncements and Accounting Principles Board (APB) opinions issued on or before Novemeber 30, 1989 in accounting for the operations of its proprietary funds. E. Budgets and Budgetary Accounting ' A plan of financial operation for the City is established in the budget adopted by the City Council. The budget outlines proposed expenditures and the means of finan- cing them. Budgets are adopted on a basis consistent with generally accepted ac- counting principles for the General Fund and Special Revenue Funds. Budgeted amounts ' shown in the accompanying financial statements are as originally adopted or as amended. No budget revisions were made during the year. Budgeted expenditure appro- priations lapse at year-end. . ' Budgetary control for Debt Service Funds is achieved through general obligation bond indenture provisions.. For Capital Project Funds, budgetary control is accomplished ' through the adoption .of project-length financial budgets.' F. Cash and Investments ' Cash and investments include cash on hand, demand deposits, and investments. Cash balances from all funds, except the Liquor Fund, are pooled and invested to the ' extent available in authorized investments. State statutes authorize the City to invest in (1) certificates of deposit, (2) direct, guaranteed or insured obligations of the U.S. Treasury or other federal agencies, (3) registered investment companies, (4) bankers acceptances, (5) commercial paper, (6) guaranteed investment contracts, ' (7) repurchase agreements. This cash management pool operates as a demand deposit account for participating funds. Investments are stated at fair market value. Investment income is recognized as earned and is allocated among participating funds on the basis of the average cash balance participation of each fund throughout the year. The change in fair values 1 is reflected as net increase (decrease) in fair value of investments. -15-