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CITY OF RAMSEY Notes to Financial Statements (continued) December 31, 2002 NOTE 1— SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) L. Long -Term Obligations For long -term obligations, only that portion expected to be financed from expendable available resources is reported as a fund liability of a governmental fund. The remaining portion of such obligations is reported in the General Long -Term Debt Account Group. Long -term obligations financed by Proprietary Funds are reported as liabilities in the appropriate fund. M. Compensated Absences The City compensates employees upon termination for unused vacation leave at the current rate of pay times the employee's unused vacation leave. City employees are entitled to sick leave at a rate of one day for each calendar month of full -time service, to a cumulative total determined by the applicable labor agreement or the City Code. Terminating employees are paid for unused sick leave in accordance with the prevailing agreement or code up to a maximum of one -third of their unused sick leave at their current rate of pay. All compensated absences are paid out of the General Fund and the Economic Development Authority Special Revenue Fund. Employee compensation for vacation and sick leave accrued through December 31, that is payable from available expendable resources, is shown as an expenditure and established as a short-term liability. Long -term liabilities for compensated absences are recorded in the General Long -Term Debt Account Group. N. Contributed Capital Contributed capital is recorded in Proprietary Funds that have received capital grants or contributions from developers, customers, or other funds. Beginning January 1, 2001 to be in accordance with GASB Statement No. 33, Accounting and Financial Reporting for Nonexchange Transactions, external capital contributions received have been reported as revenue and closed to retained earnings rather than as direct additions to contributed capital. O. Budgets and Budgetary Accounting The City follows the following procedures in establishing the budgetary data reflected in the financial statements. 1. The City Administrator submits to the City Council proposed operating budgets for the following fiscal year beginning on January 1. The operating budgets include proposed expenditures and the means of financing them. The Council is provided with budgets that set forth the total for each budgeted fund and each department, function or program, with segregation as to objects and purpose of expenditures. 2. Public hearings are conducted to obtain public comments. 3. The budgets are legally enacted through passage of a resolution. -16-