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<br />-27- <br />NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) <br /> <br />2. Recording of Expenditures – Expenditures are generally recorded when a liability is incurred, <br />except for principal and interest on long-term debt and other long-term obligations, which are <br />recognized as expenditures to the extent they have matured. Capital asset acquisitions are <br />reported as capital outlay expenditures in the governmental funds. <br /> <br />Proprietary fund financial statements are reported using the economic resources measurement focus and <br />accrual basis of accounting, similar to the government-wide financial statements. Proprietary funds <br />distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses <br />generally result from providing services and producing and delivering goods in connection with a <br />proprietary fund’s principal ongoing operations. The principal operating revenues of the City’s enterprise <br />funds and internal service funds are charges to customers for sales and services. The operating expenses <br />for the enterprise funds and internal service funds include the cost of sales and services, administrative <br />expenses, and depreciation on capital assets. All revenues and expenses that do not meet this definition <br />are reported as nonoperating revenues and expenses. <br /> <br />Aggregated information for the internal service funds is reported in a single column in the proprietary <br />fund financial statements. Because the principal user of the internal services is the City’s governmental <br />activities, the financial statements of the internal service funds are consolidated into the governmental <br />column when presented in the government-wide financial statements. The cost of these services is <br />reported in the appropriate functional activity. <br /> <br />Description of Funds <br /> <br />The City reports the following major governmental funds: <br /> <br />General Fund – The General Fund is the City’s primary operating fund. It accounts for all financial <br />resources of the general government, except those required to be accounted for in another fund. <br /> <br />EDA Operating Fund – The EDA Operating Fund (special revenue fund) accounts for revenue <br />sources, including tax increments and other sources, that are legally restricted or committed to <br />expenditures for specified purposes (not including major capital projects). <br /> <br />Equipment, Building, and Replacement Fund – The Equipment, Building, and Replacement Fund <br />(capital project fund) was established for resources designated to be used for the purchase of capital <br />equipment and building repairs. <br /> <br />Permanent Improvement Revolving Fund – The Permanent Improvement Revolving Fund (capital <br />project fund) accounts for the acquisition of capital assets or construction for major capital project s <br />not being financed by proprietary funds. <br /> <br />The City reports the following major proprietary funds: <br /> <br />Water Fund – The Water Fund accounts for the water service charges, which are used to finance the <br />water system operations. <br /> <br />Sewer Fund – The Sewer Fund accounts for the sewer service charges, which are used to finance the <br />sanitary sewer system operations. <br /> <br />Surface Water Management Fund – The Surface Water Management Fund accounts for the <br />surface water charges, which are used to finance the surface water system operations.