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<br />CITY OF CENTERVILLE, MINNESOTA <br />NOTES TO THE FINANCIAL STATEMENTS <br />DECEMBER 31, 2007 <br /> <br />Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED <br /> <br />Net Assets <br /> <br />Net assets represent the difference between assets and liabilities. Net assets are displayed in three components: <br /> <br />a. Invested in capital assets, net of related debt - Consists of capital assets, net of accumulated depreciation <br />reduced by any outstanding debt attributable to acquire capital assets. <br /> <br />b. Restricted net assets - Consist of net assets restricted when there are limitations imposed on their use <br />through external restrictions imposed by creditors, grantors, laws or regulations of other governments. <br /> <br />c. Unrestricted net assets - All other net assets that do not meet the definition of "restricted" or "invested in <br />capital assets, net of related debt". <br /> <br />Comparative DatalReclassifications <br /> <br />Comparative total data for the prior year have been presented only for the individual enterprise funds in the fund <br />financial statements in order to provide an understanding of the changes in the fmancial position and operations of <br />these funds. Also, certain amounts presented in the prior year have been reclassified in order to be consistent with <br />the current year's presentation. <br /> <br />Note 2: STEWARDSHIP, COMPLIANCE AND ACCOUNT ABILITY <br /> <br />A. Budgetary Information <br /> <br />Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States <br />of America for the General fund. All armual appropriations lapse at fiscal year end. The City does not use <br />encumbrance accounting. <br /> <br />In August of each year, all departments of the City submit requests for appropriations to the City Administrator so <br />that a budget may be prepared. Before September 15th, the proposed budget is presented to the Council for review. <br />The Council holds public hearings and a fmal budget is prepared and adopted in early December. <br /> <br />The appropriated budget is prepared by fund, function and department. The City's department heads, with the <br />approval of the City Administrator, may make transfers of appropriations within a department. Transfers of <br />appropriations between departments require the approval of the Council. The legal level of budgetary control is the <br />department level. Budgeted amounts are as originally adopted. <br /> <br />-28- <br />