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<br /> 58 <br />City of Elk River <br />Notes to Basic Financial Statements <br /> <br /> <br />NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) <br /> <br />A. Reporting Entity (Continued) <br /> <br />2. Discretely Presented Component Unit <br />The Housing and Redevelopment Authority (HRA) is a legally separate entity created to carry out <br />community development consistent with policies established by the City Council. The HRA is <br />governed by five council appointed members, one of which is a Council Member; however, the <br />City does not have a financial benefit or burden relationship and does not have operational <br />responsibility. The criteria that result in the HRA being reported as a discretely presented <br />component unit include 1) the five council appointed member board and 2) the ability of the City <br />to impose its will on the HRA by significantly influencing the programs, projects, activities, or <br />level of service performed by the HRA by approving the HRA's budget. The HRA does not issue <br />separate financial statements and are included in the financial section of this report. <br /> <br />B. Government-wide and Fund Financial Statements <br />The government-wide financial statements (i.e., the Statement of Net Position and the Statement of <br />Activities) report information on all of the nonfiduciary activities of the City. The fiduciary funds are <br />only reported in the statement of fiduciary net position and the statement of changes in fiduciary <br />net position at the fund financial statement level. Governmental activities, which normally are <br />supported by taxes and intergovernmental revenues, are reported separately from business-type <br />activities, which rely to a significant extent on fees and charges for support. <br /> <br />The Statement of Activities demonstrates the degree to which the direct expenses of a given <br />function or segment is offset by program revenues. Direct expenses are those that are clearly <br />identifiable with a specific function or segment. Interest on general long-term debt is considered an <br />indirect expense and is reported separately in the Statement of Activities. Program revenues include <br />1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or <br />privileges provided by a given function or segment and 2) grants and contributions that are restricted <br />to meeting the operational or capital requirements of a particular function or segment. Taxes and <br />other items not properly included among program revenues are reported instead as general <br />revenues. Internally dedicated revenues are reported as general revenues rather than program <br />revenues. <br /> <br />Separate financial statements are provided for governmental funds and proprietary funds. Major <br />individual governmental funds and major individual enterprise funds are reported as separate <br />columns in the fund financial statements. <br /> <br />C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation <br />The government-wide financial statements are reported using the economic resources measurement <br />focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial <br />statements. Revenues are recorded when earned and expenses are recorded when a liability is <br />incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in <br />the year for which they are levied. Grants and similar items are recognized as revenue as soon as all <br />eligibility requirements imposed by the provider have been met. <br /> <br />Page 179 of 464