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CITY OF GEM LAKE. Notes to Basic*floincial Statements December 31, 2021 NOTE 1-.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Organization The City of Gem. Lake, Minnesota. (the City) was- incorporated in 1950 and operates .under the state of Minnesota Statutory Plan A form Hof government.. The* City Council is the governing body. and 7s composed ofamelected mayor and four councilinembers. who exercise legislative authority and determine all matters of.pbliey. The City Council appoints personirei responsible for the proper administration of all affairs relating to the-C#y. The accounting policies of the. City conform to accounting principles generally accepted in the. United States of America as. applicable -to governmental units. The .Governmental. Accounting Standards; Board (GASB) is the accepted standard -setting body for establishing governmental accotinting:,and fiinaricial reporting principles. B. Reporting Entity As required by accounting -principles generally accepted in the United States of -America, these financial statements include the City (the primary government) and its component. units. Component units are legally separate entities for which the primary government is financially accountable, or for which the exclusion of Ih6 *coitiponerit unit would render the financial statements of the. primary government misleading. The criteria used. #o determine if the primary government is financially accountable for a component unit includes whether *or not. the primary government appoints the voting majority of the potential_ component unit'.s board, is. able -to impose its will on the potential component unit,: is-iti a relationship of financial benefit or burden with the potential component unit, or is fiscally depended upon by the potential comporent unit. Based on these criteria, there. are.no organizations considered to be component units bfthe.City. C. Government -Wide Financial Statements The governnieritswide *financial statements (Statement of Net Position - and Statement of * Activities) display information 'about the reporting government asa whole: These statementa- include all of the financial activitiesi of the City. O.overnmental activities,. whice - normally .are supported by ta4es and intergovernmental revenues, are reported :separately from. business -type -activities, which rely. to- a significant extent on sales, fees, and. charges for support. The Statement of Activities demonstrates the degree to which the 4rect. expenses ofa given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific. function or segment. Program revenues include; l) charges to. customers or applicants who purchase; We, or directly benefit from goods, services; or privileges provided by -a given function or segment,*2) operating grants and contributions, and.3) capital. -grants and contributions, including special assessments that. are restricted to. -meeting the *opdrational br capital requirements of a .particular function or segment.--Taxes.and otherinternally-directed.revenues are reported as general revenues: -1 &-