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CITY OF HUGO, MINNESOTA <br />NOTES TO FINANCIAL STATEMENTS (CONTINUED) <br />1. Summary of Significant Accounting Policies (Continued) <br />D. Assets, Liabilities, Deferred Inflows of Resources, and Net Position or Equity (continued) <br />5. Compensated absences benefits (continued) <br />The City compensates employees upon termination for the balance of unused personal <br />time off (PTO) and compensatory time up to specified maximum accumulations. The <br />maximum PTO accumulation per employee is 520 hours and the maximum compensatory <br />time accumulation is 40 hours for exempt employees and 120 hours for nonexempt <br />employees. The compensation is computed at the employee's rate of pay at the time of <br />termination. The City has created a debt service fund to ensure funds are available to <br />pay for compensated absences. Transfers are made from the General Fund as deemed <br />necessary to fund the Compensated Absences Debt Service Fund. <br />6. Long-term obligations <br />In the government -wide financial statements, and proprietary fund types in the fund <br />financial statements, long-term debt and other long-term obligations are reported as <br />liabilities in the applicable governmental activities, business -type activities, or proprietary <br />fund type statements of net position. <br />Bond premiums and discounts are deferred and amortized over the life of the bonds using <br />the effective interest method. Bonds payable are reported net of the applicable bond <br />premium or discount. <br />In the fund financial statements, governmental fund types recognize bond premiums and <br />discounts during the current period. The face amount of debt issued is reported as other <br />financing sources. Premiums received on debt issuances are reported as other financing <br />sources while discounts on debt issuances are reported as other financing uses. Issuance <br />costs, whether or not withheld from the actual debt proceeds received, are reported as <br />debt service expenditures. <br />7. Pensions <br />For purposes of measuring the net pension liability, deferred outflows of resources, and <br />pension expense, information about the fiduciary net position of the Public Employees <br />Retirement Association (PERA) and additions to/deductions from PERA's fiduciary net <br />position have been determined on the same basis as they are reported by PERA except <br />that PERA's fiscal year end is June 30. For this purpose, plan contributions are <br />recognized as of employer payroll paid dates and benefit payments and refunds are <br />recognized when due and payable in accordance with the benefit terms. Investments are <br />reported at fair value. <br />37 <br />