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CITY OF HUGO, MINNESOTA <br />MANAGEMENT'S DISCUSSION AND ANALYSIS <br />1. Government -wide financial statements, providing information for the City as a whole. <br />2. Fund financial statements, providing detailed information for the City's significant funds. <br />3. Notes to the financial statements, providing additional information that is essential to <br />understanding the government -wide and fund statements. <br />This report also contains other supplementary information in addition to the basic financial statements <br />themselves. Additional explanation of these sections of the financial statements follows. <br />Government -wide financial statements. The government -wide financial statements are designed to <br />provide readers with a broad overview of the City of Hugo's finances, in a manner similar to a private - <br />sector business. <br />The statement of net position presents information on all of the City of Hugo's assets and liabilities, with <br />the difference between the two reported as net position. Over time, increases or decreases in net <br />position may serve as a useful indicator of whether the financial position of the City of Hugo is <br />improving or deteriorating. <br />The statement of activities presents information showing how the City's net position changed during the <br />most recent fiscal year. All changes in net position are reported as soon as the underlying event giving <br />rise to the change occurs, regardless of the timing of the related cash flows. Thus, revenues and <br />expenses are reported in this statement for some items that will only result in cash flows in future fiscal <br />periods (e.g. uncollected taxes and earned, but not used, compensated absences). <br />Both of the government -wide financial statements distinguish functions of the City of Hugo that are <br />principally supported by taxes and intergovernmental revenues (governmental activities) from other <br />functions that are intended to recover all or a significant portion of their costs through user fees and <br />charges (business -type activities). The governmental activities of the City of Hugo include general <br />government, community development, public safety, highways and streets, and parks. The business - <br />type activities of the City of Hugo includes the sewer and water fund. The government -wide financial <br />statements can be found on pages 15-17 of this report. <br />Fund financial statements. A fund is a grouping of related accounts that is used to maintain control <br />over resources that have been segregated for specific activities or objectives. The City of Hugo, like <br />other state and local governments, uses fund accounting to ensure and demonstrate compliance with <br />finance -related legal requirements. All of the funds of the City of Hugo can be divided into two <br />categories: governmental funds and proprietary funds. <br />Governmental funds. Governmental funds are used to account for essentially the same functions <br />reported as governmental activities in the government -wide financial statements. However, unlike the <br />government -wide financial statements, governmental fund financial statements focus on near-term <br />inflows and outflows of spendable resources, as well as on balances of spendable resources available <br />at the end of the fiscal year. Such information may be useful in evaluating a government's near-term <br />financial requirements. <br />5 <br />