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CITY OF PEQUOT LAKES, MINNESOTA <br />NOTES TO THE BASIC FINANCIAL STATEMENTS <br />DECEMBER 31, 2019 <br /> <br /> <br />23 <br />NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES <br /> <br />The financial statements of the City of Pequot Lakes (the City), have been prepared in conformity with accounting principles <br />generally accepted in the United States of America (GAAP) as applied to governmental units. GAAP includes all relevant <br />Governmental Accounting Standards Board (GASB) pronouncements. <br /> <br />The City has a mayor-council form of government that is governed by an elected mayor and four-member council. The City <br />provides the following services: water, sewer, public safety (police and fire), public works, parks and recreation, public <br />improvements, planning and zoning and general administrative services. <br /> <br />1.A. FINANCIAL REPORTING ENTITY <br /> <br />The City’s financial reporting entity is comprised of the primary governmental unit of the City of Pequot Lakes, Minnesota. <br /> <br />In determining the financial reporting entity, the City complies with the provisions of GASB Statement No. 14, The Financial <br />Reporting Entity, and includes all component units of which the City appointed a voting majority of the units’ board; the City is <br />either able to impose its will on the unit or a financial benefit or burden relationship exists. <br /> <br />Blended Component Units <br /> <br />Blended component units are separate legal entities that meet the component unit criteria described above and whose governing <br />body is the same or substantially the same as the City Council or the component unit provides services entirely to the City. These <br />component units’ funds are blended into those of the City’s by appropriate activity type to compose the primary government <br />presentation. Currently, the City has no blended component units. <br /> <br />Discretely Presented Component Units <br /> <br />Discretely presented component units are separate legal entities that meet the component unit criteria described above but do not <br />meet the criteria for blending. Currently, the City has no discretely presented component units. <br /> <br />Related Organizations <br /> <br />The Pequot Lakes Fire Relief Association is organized as a non-profit organization by its members to provide benefits to such <br />members in accordance with Minnesota Statutes. Its Board of Directors is appointed by the membership of the organization. The <br />City has no significant influence over the management, budget or policies of the association. All funding is conducted in <br />accordance with Minnesota Statutes, whereby State Aids flow through the City to the Association. <br /> <br />1.B. BASIS OF PRESENTATION <br /> <br />Government-wide Financial Statements <br /> <br />The Statement of Net Position and Statement of Activities display information about the reporting government as a whole. They <br />include all funds of the reporting entity. The statements distinguish between governmental and business-type activities. <br />Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange revenues. <br />Business-type activities are financed in whole or in part by fees charged to external parties for goods and services. <br /> <br />Fund Financial Statements <br /> <br />Fund financial statements of the reporting entity are organized into funds, each of which is considered to be a separate accounting <br />entity. Each fund is accounted for by providing a separate set of self-balancing accounts that constitute its assets, deferred <br />outflows, liabilities, deferred inflows, fund equity, revenues and expenditures/expenses. Funds are organized into two major <br />categories: governmental and proprietary. An emphasis is placed on major funds within the governmental and proprietary <br />categories.