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OTY OF ARDEN HILLS, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2004 Notel: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED The City reports the following major governmental fimds: The Generalfund is the City's primary operating fimd. It accounts for all financial resources of the City, except those required to be accouoted for in another fimd. The Tax Increment Bonds of I 998Afund accounts for the accumulation of resources and payment of general obligation bond principal and interest from governmental resources and special assessment bond principal and interest from special assessment levies when the City is obligated in some manner for the payment The Economic Development Authority fund accounts for revenue sources that are legally restricted to expenditures for specified purposes (not including major capital projects). The Non-Assessable Road Improvements fund accounts for the acqnisition of fixed assets or construction for this major capital project not being financed by proprietary fimds. The Permanent Improvement Revolving fimd accounts for the acquisition of fixed assets or construction for this major capital project not being financed by proprietary fimds. The City reports the following major proprietary fimds: The Water fund accounts for costs associated with the City's water system and insure that user charges are sufficient to pay for those costs. f1 . n n o fJ f] 11 [l The Sewer fund accounts for the costs associated with the City's sewer system and insure that user charges ara.1 sufficient to pay for those costs. ~ Private-sector standards of accounting and financial reporting issued prior to December I, 1989, generally are followed in both the government-wide and proprietary fimd financial statements to the extent that those standards do not conflict with or contradict guidance ofGASB. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds. subject to this same limitation. The City has elected not to follow subsequent private-sector guidance. As a general rule the effect of interfimd activity has been eliminated from government-wide financial statements. Exceptions to this general rule are payments-in-lieu of taxes and other charges between the City's water and sewer fimction and various other fimctions of the City. Elinrination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include 1) charges to customers or applicants for goodsl services, or privileges provided, 2) operating grants and contribution, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. n [f 1 u [l u Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fimd's principal ongoing operations. The principal operating revenues of the City's enterprise fimds are charges to customers for sales and services. The City also recognizes as operating revenue the portion of tap fees intended to recover the cost of connecting new customers to the system. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. When both restricted and unrestricted reSOUTces are available for use, it IS the City's policy to use restricted resource' ; fITst, then unrestricted resources as they are needed. I -20- ! L t.i