Centerville 2010 Financial Report

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CITY OF CENTERVILLE, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDEDDECEMBER 31, 2010 Note 1:SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A.Reporting entity The City of Centerville, 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 an elected Mayor and four elected Council Members. The Council exercises legislative authority and determines 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 units for which it is financially accountable, and other organizations for which the nature and significance of their relationship with the City are such that exclusion would cause the City’s financial statements to be misleading or incomplete. The Governmental Accounting Standards Board (GASB) has set forth criteria to be considered in determining financial accountability. These criteria include appointing a voting majority of an organization’s governing body, and (1) the ability of the primary government to impose its will on that organization or (2) the potential for the organization to provide specific benefits to, or impose specific financial burdens on the primary government. The City does not have any component units. B.Government-wide and fundfinancial statements The government-wide financial statements (statement of net assets and the statement of activities) report information Governmental activities, on all of the nonfiduciary activities of the City. which normally are supported by taxes and business-type activities, intergovernmental revenues, are reported separately from which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is Direct expenses offset by program revenues. are those that are clearly identifiable with a specific function or Program revenues segment. include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other general revenues. items not properly included among program revenues are reported instead as Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. C.Measurement focus, basis of accounting and financial statement presentation economic resources measurement focus The government-wide financial statements are reported using the and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. current financial resources measurement focus Governmental fund financial statements are reported using the and modified accrual basis of accounting. the Revenues are recognized as soon as they are both measurable and available available. Revenues are considered to be when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. -49-