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<br />CITY OF CENTERVILLE, MINNESOTA <br />NOTES TO THE FINANCIAL STATEMENTS <br />DECEMBER 31, 2005 <br /> <br />Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED <br /> <br />Accounts Receivable <br /> <br />Accounts receivable include amounts billed for services provided before year end. Unbilled utility enterprise fund <br />receivables are also included for services provided in 2005. The City annually certifies delinquent water and sewer <br />accounts to the County for collection in the following year. Therefore, there has been no allowance for doubtful <br />accounts established. <br /> <br />Interfund Receivables and Payables <br /> <br />Activity between funds that are representative oflending/borrowing arrangements outstanding at the end of the <br />fiscal year are referred to as either "due to/from other funds" (i.e., the current portion ofinterfund loans) or <br />"advances to/from other funds" (i.e., the non-current portion ofinterfund loans). All other outstanding balances <br />between funds are reported as "due to/from other funds." Any residual balances outstanding between the <br />governmental activities and business-type activities are reported in the government-wide financial statements as <br />"internal balances." <br /> <br />Property Taxes <br /> <br />The Council annually adopts a tax levy in December and certifies it to the County for collection in the following <br />year. The County is responsible for collecting all property taxes for the City. These taxes attach an enforceable lien <br />on taxable property within the City on January 1 and are payable by the property owners in two installments. The <br />taxes are collected by the County Auditor and tax settlements are made to the City during January, July and <br />December each year. <br /> <br />Taxes payable on homestead property, as defined by Minnesota statutes, were partially reduced by a market value <br />credit aid. The credit is paid to the City by the State of Minnesota (the State) in lieu of taxes levied against the <br />homestead property. The State remits this credit in two equal installments in October and December each year. <br /> <br />Delinquent taxes receivable include the past six years' uncollected taxes. Delinquent taxes have been offset by a <br />deferred revenue liability for delinquent taxes not received within 60 days after year end in the fund financial <br />statements. <br /> <br />Special Assessments <br /> <br />Special assessments represent the financing for public improvements paid for by benefiting property owners. These <br />assessments are recorded as receivables upon certification to the County. Special assessments are recognized as <br />revenue when they are received in cash or within 60 days after year end. All governmental fund special <br />assessments receivable are offset by a deferred revenue liability in the fund financial statements. <br /> <br />Inventories and Prepaid Items <br /> <br />All inventories are valued at cost using the first-inlfirst-out (FIFO) method. Inventories of governmental funds are <br />recorded as expenditures when consumed rather than when purchased. <br /> <br />Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items <br />in both government-wide and fund [mandaI statements. <br /> <br />-23- <br />