2004 CAFR - Laserfiche WebLink

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NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Q. Budgets and Budgetary Accounting Each fall the City Council adopts a General Fund budget for the following fiscal year beginning January 1. The City has established budgetary control at the function level. Budget appropriations lapse at year-end. Budget amounts are presented on a modified accrual basis of accounting. The City Council budget revisions decreased General Fund appropriations by $158,822. Encumbrance accounting is not used and there were no significant purchase commitments outstanding at year-end. In the General Fund, total actual expenditures exceeded budgeted amounts by $16,592 in the general government function and $42,036 for interest and fiscal charges. R. Statement of Cash Flows For purposes of the Statement of Cash Flows, the City considers all highly liquid debt instruments with an original maturity from the time of purchase by the City of three months or less to be cash equivalents. The Proprietary Funds' portion in the city-wide cash and investment management pool is considered to be cash equivalent. S. Self-Insurance Plan and Risk Management The City is exposed to various risks of loss related to torts: theft of, damage to, and destruction of assets; errors and omissions; and natural disasters. The City participates in the League of Minnesota Cities Insurance Trust (LMCIT), a public entity risk pool for its general property and casualty, workers' compensation, and other miscellaneous insurance coverages. LMCIT operates as a common risk management and insurance program for a large number of cities in Minnesota. The City pays an annual premium to LMCIT for insurance coverage. The LMCIT agreement provides that the trust will be self-sustaining through member premiums and will reinsure through commercial companies for claims in excess of certain limits. The City has elected higher deductibles through LMCIT in order to keep premiums at a minimum. To supplement the commercial coverages, the City established the Self-Insurance Internal Service Fund. This fund is funded primarily through dividend paybacks from LMCIT. Expenditures from this fund consist solely of payments of those insurance related costs that are below the individual and/or commutative deductible amounts. Premiums for LMCIT policies are not paid from the Self-Insurance Internal Service Fund, but rather are budgeted and paid from the respective operating funds. The City does not retain significant uncovered risk. The City also carries commercial insurance for certain other risks of loss. Settled claims resulting from these risks have not exceeded commercial insurance coverage in any of the past three fiscal years. There were no significant reductions in the City's insurance coverage in 2004. T. Change in Accounting Principle For the year ended December 31, 2004, the City has implemented GASB Statement No. 34, Basic Financial Statements--and Management's Discussion and Analysis--for State and Local Governments. GASB Statement No. 34 sets forth a new financial reporting model for state and local governments, and its implementation has resulted in a number of significant changes to the City's financial statements. Some of the most significant changes include: the addition of Management's Discussion and Analysis, the addition of two new government-wide financial statements prepared on the accrual basis of accounting, and fund financial statements that present information for Major Individual Funds rather than by fund type, which had been the mode of presentation in previously issued financial statements. -34-