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CITY OF RAMSEY, MINNESOTA <br />' NOTES TO FINANCIAL STATEMENTS <br />December 31,1996 <br />Note 1. SLTNIlI'IARY OF SIGNIFICANT ACCOUNTING POLICIES <br />' A. Organization <br /> The City operates under the "Home Rule Charter City" form of government as defined in the State of Minnesota <br /> Statutes. The City Council, composed of an elected mayor and four elected councilmembers, exercises <br /> legislative authority and determines all matters of policy. <br /> The accounting policies of the City conform to generally accepted accounting principles as applicable to <br /> governmental units. <br /> B. R sporting Entitv <br /> As required by generally accepted accounting principles, these fmancial statements include the City of Ramsey <br /> (the primary government) and its component units. Component units are legally separate entities for which the <br /> primary government is financially accountable, or for which the exclusion of the component unit would render <br />' the financial statement of the primary government misleading. The criteria used to determine if the primary <br /> government is financially accountable for a component unit include whether or not the primary government <br /> appoints the voting majority of the potential component's board, is able to impose its will on the potential <br /> component unit, or is fiscally depended upon by the potential component unit. <br /> Based on these criteria, the Ramsey Economic Development Authority (EDA) is included as a component unit of <br /> the City. Because the EDA's five-member board is made up of Ramsey's Mayor and councilmembers, its <br />' financial data has been blended with that of the City (i.e., reported as though its funds were funds of the City.) <br /> C. Basis of Statement Presentation <br /> The accounts of the City are organized on the basis of funds and account groups, each of which is considered a <br /> separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing <br /> accounts that comprise its assets, liabilities, equities, revenues, and expenditures or expenses as appropriate. The <br /> various funds aze grouped by type in the fmancial statements. The following fund types and account groups are <br /> used by the City. <br /> 1) Governmental Fund Types <br /> a) General Fund -The General Fund accounts for all revenues and expenditures of the City which are <br /> not accounted for in other funds. Revenues are primarily derived from property taxes, licenses, <br /> permits, fees and revenues from the state. Expenditures are for general government services <br /> including police and fire protection, parks and recreation, and general administration. <br /> b) ~ecial Revenue Funds - The Special Revenue Funds are used to account for the proceeds of <br /> specific revenue sources (other than major capital projects) that are legally restricted to expenditures <br /> for specified purposes. They are also used to finance specified activities as required by law or <br /> administrative regulation. <br /> c) Debt Service Funds - The Debt Service Funds are used to account for the accumulation of <br />' resources for, and the payment of, general long-term debt principal, interest, and related costs. <br /> d) ~a_ itap 1 Project Funds -The Capital Project Funds are used to account for financial resources to be <br /> used for the acquisition or construction of major capital facilities (other than those financed by <br /> Proprietary Funds). <br />-10- <br />