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CITY Op' RAMSEY Notes to Financial Statements December 31, 1998 NOTE 1 -SIGNIFICANT ACCOUNTING POLICIES A. Organization The City operates under Home Rule Charter City form of government as defined. in the State of Minnesota Statutes. Under this plan, the government of the City is run by a council composed of an elected mayor and four elected councilmembers. The Council exercises legislative authority and determines all matters of policy. The accounting policies of the City conform to generally accepted accounting principles as applicable to governmental units. ~ B. Reporting Entity As required by generally accepted accounting principles, these financial statements include the City of Ramsey (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. Based on these criteria, the Ramsey Economic Development Authority (EDA) is included as a component unit of the City. Because the EDA's five-member board is made up of Ramsey'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). C. Fund Accounting The accounts of the City are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self- balancing accounts that comprise its assets, liabilities, equities, revenues, and expenditures or expenses as appropriate. The various funds are grouped by type in the financial statements. The City maintains the following funds, grouped by fund type and account group: 1. Governmental Fund Types a. General Fund -The General Fund accounts for all revenues and expenditures ofthe City which are not accounted for in other funds. Revenues are primarily derived from property taxes, licenses, permits, fees, and revenues from the state. Expenditures are for general government services, including police and fire protection, parks and recreation, and general administration. -11-