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NOTES TO FINARCIA� STATEMENTS (CONTiNUED) DECEMBER 37, 1990 Note 1- SumnarY ot Siqnificant Accountinq Poticies (Continued) Those revenue susceptible to accrual are property taxes, special assessments, �icenses, interest revenue and charges for servites. State aids held by the siate at year end on behalf of the goverrvnent also are recog- nized as revenue. Fines, and permits are not suscepti6te to accrual because generalty they are not measura- bLe until received in cash. The accrual basis of accounting is utitized hy proprietary fund types, pension irust funds and nonexpendable trust funds. Under this meihod, revenues are recorded uhen earned and expenses are recorded at the time liabitities are incurred. Unbitted utility service receiva6les are rerorded at year end. The government reports deferred revenue on its combined batance sheei. Deferred revenues arise uhen a potentiat revenue does not meet both the "measurahle" and "available" criteria tor recognition in the currenf period. Deferred revenues atso arise uhen resources are received by the goverrvnent betore it has a legal claim to them, as uhen grant monies are received prior to the incurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the goverrment has a legal claim to the �esources, the liability for deferred revenue is removed from the combined balance sheet and revenue is recognized. Expenditures are generatly recognized under the modified accrual basis of accounting uhen the reLated fund liabitity is incurred, except for principal and inierest on generat long-term debt uhich is recognized uhen due, and accumulated unpaid vacation and compensatory time otf uhich are recognized when paid. E. Budgets and Budgetary Accounting The City adopts an annual 6udget for the General and Speciat Revenue funds uhich are prepared on fhe modified accrual basis of accounting. The adopted budget indicates the amount [hat can be expended by . each fund based on detailed budget estimates for individual expenditure accounts. Att 6udget revisions, at the fund level, must be auChorized hy the City Council at ihe request of the City Manager. The Council, � under Minnesota State Statutes Section 412.731 can modify or amend the budge[ if unappropriated funds are available. Budget modificaiion uas necessary in 1990. The generat tund uas amended by the amount of �. � 8711,500. Atl supplemental appropriations uere financed either by 2ransfers from ihe ConTingency Section of the General iund budget or by revenues received in excess of the budgeted amounts. Alt budget amounts (apse at the end of the year to the extent they have not been expended. The level uhich expenditures may noT � legally exceed aporopriaiions is at the fund leve L . F. Assets, Liabilities and Fund Equity investments - City investments are wrried at cost, which approxfmates market. (See note 3 for disclosures relating to cash management and investments.) Imestments reported in the deferred compensation pLan are reported by ihe plan's trustees ai market value. Property Taxes - Property tax levies are set by the City Council in October each year and are ceriified to the County for collection the following year. In Minnesota, coun[ies act as coCteciion agents for att property taxes. 32