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CITY OF RAMSEY Notes to Basic Financial Statements December 31, 2004 NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES A. Organization The City of Ramsey, Minnesota (the City) operates under the Home Rule Charter City form of government as defined in Minnesota Statutes. Under this plan, the government of the City is run by a City Council composed of an elected Mayor and elected Councilmembers. The City Council exercises legislative authority and determines all matters of policy. The accounting policies of the City conform to accounting principles generally accepted in the United States of America as applicable to governmental units. 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 the component unit would render the financial statements of the primary government misleading. The criteria used to determine if the primary government is financially accountable for a component unit include 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 in a relationship of financial benefit or burden with the potential component unit, or is fiscally depended upon by the potential component unit. 1. Blended Component Unit As a result of applying these criteria, the Ramsey Economic Development Authority (EDA) is included as a component unit of the City. Because the Ramsey EDA's five-member Board is made up of the City's Mayor and Councilmembers, its financial data has been blended with that of the City (i.e. reported as though its funds were funds of the City). The City has included the activities within the Ramsey EDA - Special Revenue Fund. 2. Jointly Governed Organization The City is a member of Local Governmental Information Systems (LOGIS), a consortium of Minnesota municipalities that provides data processing services and support to its members. LOGIS is a legally separate entity that is financially independent of the City. Further, the City does not appoint a voting majority of LOGIS' Board of Directors. Therefore, it has not been incorporated into the City's reporting entity. During the 2004 fiscal year, the City paid LOGIS approximately $100,346 for services provided. C. Government-Wide Financial Statements The government-wide financial statements (i.e. the Statement of Net Assets and the Statement of Activities) display information about the reporting government as a whole. These statements include all of the financial activities of the City. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on sales, fees, and charges for support. -28-