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CITY OF RAMSEY Notes to Financial Statements (continued) December 31, 2002 NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Major revenue that is susceptible to accrual includes property taxes, special assessments, intergovernmental revenue, charges for services, and interest earned on investments. Property tax and special assessment revenue is generally considered as available if collected within 60 days after year -end. Grants and similar items are recognized when all eligibility requirements imposed by the provider have been met. State revenue is recognized in the year to which it applies according to Minnesota Statutes and accounting principles generally accepted in the United States of America. Federal revenue is recorded in the year in which the related expenditure is made. Major revenue that is not susceptible to accrual includes licenses and permits, fees, and miscellaneous revenue. Such revenue is recorded only when received because it is not measurable until collected. 2. Recording of Expenditures — Expenditures are recognized under the modified accrual basis of accounting when the related fund liability is incurred, except for principal and interest on general long -term debt which is recognized when due. Certain expenditures for approved disbursements or liabilities incurred in advance of the year in which the item is to be used are recorded as prepaid. Proprietary Funds are accounted for using the accrual basis of accounting. Under this method, revenues are recognized when earned and expenses are recognized when they are incurred. The City applies only those applicable pronouncements of the Financial Accounting Standards Board issued on or before November 30, 1989, in accounting and reporting for its proprietary operations. F. Cash and Investments Cash and temporary investments from all funds are combined and invested to the extent available in various securities as authorized by state law. Earnings from the pooled investments are allocated to the respective funds on the basis of applicable cash balance participation by each fund. Investments are reported at fair value. Securities traded on national exchanges are valued at the last reported sales price. G. Held by Trustee Cash and investments held by trustee include balances held in segregated accounts that are established for specific purposes, such as bond proceeds held in escrow. Earnings from investments held by trustee are allocated directly to the fund for which they are held. H. Property Taxes Property tax levies are set by the City Council in December of each year, and certified to the County Auditor for collection in the following year. In Minnesota, counties act as collection agents for all property taxes. A portion of the property taxes levied is paid by the State of Minnesota through various credits, which is included in intergovernmental revenue in the financial statements. -14-