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n r. [1 fJ f] [l [I n l1 [1. [' J u II [; 1, l d ( , I I . CITY OF ARDEN HILLS, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2004 Note 1: SUMMARY OF SIGNIF1CANT ACCOUNTING POLICIES - CONTINUED Compensated Absenees It is the City's policy to permit employees to accunmlate earned but unused vacation and sick pay benefits. Employees with at least ten years of service are entitled to receive one-third of their unnsed sick leave up to a maximum of 800 hours upon termination in addition to any unused vacation and compensatory time. All vacation pay is accrued wben incurred in the government-wide and proprietary finaocial statements. A liability for these amounts is reported in governmental fimds only if they have matured, for example, as a result of employee resignations and retirements. Long-term Ohligations In the government-wide fmancial statements, and proprietary fimd types in the fimd financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business- type activities, or proprietary fund type statement of net assets. Bond premiums and disCOlUlts, as well as issuance costs, are deferred aod amortized over the life of the bonds using the effective interest metho<l Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fimd fmaocial statements, governmental fimd types recognized bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other fInancing sources while discounts on debt issuances are reported as other financing uses, Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Fund Equity In the fimd fmaucia1 statements, governmental fimds report reservations of fimd balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. Comparative DatalReclassifications Comparative total data for the prior year have not been presented for the governmental-wide aod all fimd fmandal statements as this is the first year of implementation of GASB Statement No. 34. Note 2: STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A, Budgetary Information Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America for the General, special revenue and Debt Service fimds. The capital projects fimds adopt project length budgets. All annual appropriations lapse at fiscal year end. The City does not use encumbrance accounting. In August of each year, all departments of the City submit requests for appropriations to the City Administrator so that a budget may be prepared. Before September 15", the proposed budget is presented to the Council for review. The Council bo1ds public hearings and a fmal budget is prepared and adopted in December. The appropriated budget is prepared by fimd, nmction and department. The City's department heads, with the approval of the City Administrator, may make transfers of appropriations within a department. Transfers of approprialions between departments require the approval of the CounciL The legal level of budgetary control is the fund level. Budgeted amounts are as amended by the Council. -23-