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��Tv nF ROSEVILLE NOTES TO FINANCIAL STATEMENTS DFCFMBER 31. 1997 Nntr 1 Sunmarv of SiQnificant Accountine Policies - con[inued D. Basis of Accounting The modified accrual basis of accountir� is used by goverrunental fund types and agency funds. Undzr the modified accrual basis of accounting, revenues are recogniud when susceptible to acerual (i.e., when they become borh measurable and available). "Measurable" means the amount of the transaction can be detemiir�d, and "available" means coilectible wiChin the current period or soon enough thereafter to be used to pay liabilities of the current period. The Ciry coaciders property taxes as available if they are collected within 60 days after yearverd. Expenditures are recorded when the related fund Iiabiliry is incurred. Principal and interest on general long-term debt are recorded as fund liabilities when due or when amoun[s have been accwnulated in the debt service fund for paNnents to be inade early in the following year. Those revern�es susceptible to accrual are property taxes, special assessments, liceases, inrerest revenue, and charges for services. State aids held by the state at year-end on beltalf of ehe goverrunent also are recognized as revenue. Fines and pemiits are no[ sueceptibie to accrual becaase generalty they are not measurable un[il received in cash. The goverrsneru reports deferred revenue on its combined balance sheet. Defzrred revenues arise when a po[ential revenue does rrot meet both the "measurable" ard "available" criteria for recogni[ion in the current period. Deferred revenues aiso arise when resources are received by the government before it has a legal claim to [hem, as when grant monies are received prior to the incwrence of qualifyin@ expenditures. In subsequent penods, when both revenue reco�nition cnteria are met or when the goverrunent has a legal claim ro the resources, the liability foc deferted revenue is removed from the combined balance sheet and revenue is recogrtized. g�erdit�ue� yre ger�erally recognized urder the modified accrual basis of accounting when che rela[ed fund liability is incurred, except for prircipal azid interest on gereral long-term debt which is recognized when due, and accwnulated unpaid vacation and comperuamry time off which are recognized when they are expected to be financed from expendable available tinancial resources. The ucnul bacis of accountir� is utilized by proprietary fund types. Under diis method, revenues are recorded when earned and expenees are recorded at the time liabilities are incurred. E. Budgets and Budgetary Accounting TM Ciry adopts anrn�al budgets for the general and special revenue funds which are prepared on the modified accrual basis of accounting. The adopted budget indicates the amount that can be expended by each furx3 based on dewiled budget estimates for individual expenditure accounts. Managemen[ may make budget modifications within the fund level. All budget revisions at the fund level must be authorized by the Ciry Council at the request of the Ciry Manager. The Council, under Minnesoto Smtutes, Sec[ion 412.731, can modify or amend the budget if urtappropriared fwids are available. Budget modifica[ion at the fund level was necessary in 1997 for the Communiry Development Fwd ard t1�e Wireless Furd. The arnendments included increases of 5195,000 and S75Q000 respectively. All supplemental appropriations are financed either by transfers from the contingency section of the general fund budge[ or by revenues received in excess of the budgeted amounts. All budget unounts lapse at the end of the year ro the extent they have not been expended. The levet which experditures may not legally exceed appropriatio�u is at the fund level. F. Assets, Liabilities and Fund Equity Invesnnents - City investments are carried at wst (See Note 3 for disclosures relating to cash management and invesmients). Procertv Taxes - Property tax Ievies are se[ by the Ciry Council in December each year and are certified to Ramsey Counry for coilection the following yeac In Minnesow, coun[ies act as collection agents for all properry taxes. 31