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CITY OF ARDEN HILLS, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2004 n A, Reporting Entity ., n Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Arden Hills, Minnesota (the City), operates under the "Optional Plan A" form of government as defined in the State of Minnesota statutes. Under this plan, the government of the City is directed by a Council composed of n an elected Mayor and four elected Council members. The Council exercises legislative authority and detemaines all matters of policy. The Council appoints personnel responsible for the proper administration of all affairs relating to the City. The City has considered all potential onits for which it is fmancially accountable, and other organizations [ 1 for which the nature and significance of their relationship with the City are such that exclusion would cause the J City's fmancial statements to be misleading or incomplete. The Governmental Accounting Standards Board (GASB) has set forth criteria to be considered in detennining fmancial accountability, These criteria include appointing a [1 voting majority of an organization's governing body, and (I) the ability of the primary governmentto impose its will on that organization or (2) the potential for tbe organization to provide specific benefits to, or impose specific financial burdens on the primary government. Blended component onits, although legally separate entities, are, in substance, part of the City's operations and so data from these onits are combined with data of the City. The blended component onit has a December 31 year end, The City has the following component unit. [I Blended Component Unit n The Economic Development Authority (EDA) of the City was created pursnaot to Minnesota statutes 469,090 through 469.108 to carry out economic and industrial development and redevelopment consistent with policies established by the Council. It is comprised of the members of the City Council. The EDA activities are blended and reported in a separate special revenue fimd. Separate financial statements are not issued for this component onit. _ B. Government-wide and Fund Financial Statements [l The government -wide financial statements (i.e., the statement of net assets and the statement of changes in net assets) [-.J' report information on all of the nonfiduciary activities of the City and its component onit. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely f I to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from certain legally separate component units for which the City is fmancially accountable. J The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific fimction or segment. Program revenues include I) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given fimction or segment and 2) grants and contnbutions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. [I J Ll Separate fmancial statements are provided for governmental fimds and proprietary fimds. Major individual governmental fimds and major individual enterprise fimds are reported as separate columns in the fimd finaocial statements. If 11 ! : " -; ( t" -18-