2003-12-31 Year End Financial Audit

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CITY OF CENTERVILLE, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2003 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED The City reports the following major governmental funds: The general fUnd is the government's primary operating fund. It accounts for all fInancial resources of the general government, except those required to be accounted for in another fund. The G.o. Improvement Bonds of 2002 fUnd accounts for the resources accumulated and payments made for principal and interest on long-term general obligation debt of the governmental fund. The G. O. Temporary Improvement Bonds of 2003 fund accounts for the resources accumulated and payments made for principal and interest on long-term general obligation debt of the governmental fund. The Peltier Preserve fUnd account for the resources to complete the capital project development. The City reports the following major proprietary funds: The water fUnd accounts for the activities of the water distribution system the City maintains. The sewer fUnd accounts for the activities of the City's sewage collection operations. Private-sector standards of accounting and fmancial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund ftnancial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board (GASB). Governments also have the option offollowing subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The government has elected not to follow subsequent private-sector guidance. As a general rule the effect of interfund activity has been eliminated from government-wide ftnancial statements. Exceptions to this general rule are charges between the government's water and sewer function and various other functions of the government. Elimination 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 goods, 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. 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 fund's principal ongoing operations. The principal operating revenues of the City enterprise funds are charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this deftnition are reported as nonoperating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources fIrst, then unrestricted resources as they are needed. -17-