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CITY OF HUGO, MINNESOTA <br />NOTES TO FINANCIAL STATEMENTS (CONTINUED) <br />Summary of Significant Accounting Policies (Continued) <br />C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (continued) <br />The property and equipment acquisition fund accounts for the accumulation of resources <br />(special assessments, intergovernmental revenues, developers' fees, etc.) for <br />acquisition of high dollar value property and equipment for use in the operation of the <br />City. <br />The City reports the following major proprietary funds: <br />The sewer and water utility fund accounts for the operation of the City owned sewer and <br />water utility system. <br />As a general rule the effect of interfund activity has been eliminated from the government -wide <br />financial statements. Exceptions to this general rule are payments -in -lieu of taxes and other <br />charges between the City's enterprise funds and various other functions of the City. Elimination of <br />these charges would distort the direct costs and program revenues reported for the various <br />functions concerned. <br />Amounts reported as program revenues include 1) charges to customers or applicants for goods, <br />services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and <br />contributions, including special assessments. Internally dedicated resources are reported as <br />general revenues rather than as program revenues. Likewise, general revenues include all taxes. <br />Proprietary funds distinguish operating revenues and expenses from nonoperating items. <br />Operating revenues and expenses generally result from providing services and producing and <br />delivering goods in connection with a proprietary fund's principal ongoing operations. The <br />principal operating revenues of the City's enterprise funds are charges to customers for sales and <br />services. Operating expenses for enterprise funds include the cost of sales and services, <br />administrative expenses, and depreciation of capital assets. All revenues and expenses not <br />meeting this definition are reported as nonoperating revenues and expenses. <br />When both restricted and unrestricted resources are available for use, it is the City's policy to use <br />restricted resources first, then unrestricted resources as they are needed. <br />33 <br />