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CITY OF ROSEVILLE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting entity The City of Roseville is a municipal corporation formed under Section 412 of Minnesota State Statutes and operates under a Council-Manager form of government. T'he five-member Council and Mayor are elected on rotating terms in each odd-numbered year. The accompanying financial statements present the government entities for which the City is considered to be financially accountable. B. Government-wide and fund financial statements The government-wide financial statements (i.e., the statement of net assets and the statement of changes in net assets} report information on all of the nonfiduciary activities of the City. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovemmental revenues, are reported separately from business-type activities, 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, are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use or directly benefit from goods, service 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 particulaz function or segment. Taxes and other items not properly included among program revenues are reported instead of general revenues. Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter aze excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as sepazate columns in the fund fmancial statements. C. Measurement focus, basis of accounting, and financial statement presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as aze the proprietary fund and fiduciary fund financial statements. Revenues aze recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of the related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Crrants and similar items are recognized as revenue as soon as a11 eligibility requirements imposed by the provider have been met. 38