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City of Redwood City 7.1.A. - Page 63 <br /> Notes to the Basic Financial Statements <br /> For the year ended June 30, 2014 <br /> NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) <br /> B. Basis of Presentation <br /> The City's basic financial statements are prepared in conformity with accounting principles generally <br /> accepted in the United States of America. The Governmental Accounting Standards Board is the <br /> acknowledged standard setting body for establishing accounting and financial reporting standards <br /> followed by governmental entities in the U.S.A. <br /> These statements require that the financial statements described below be presented. <br /> Government -wide Statements: The Statement of Net Position and the Statement of Activities display <br /> information about the primary government (the City) and its component units. These statements <br /> include the financial activities of the overall City government, except for fiduciary activities. Certain <br /> eliminations have been made as prescribed by GASB Statement No. 34 in regards to interfund activities, <br /> payables, and receivables. All internal balances in the Statement of Net Position have been eliminated <br /> except those representing balances between the governmental activities, which are presented as <br /> internal balances and eliminated in the total primary government column. These statements distinguish <br /> between the governmental and business -type activities of the City. Governmental activities generally <br /> are financed through taxes, intergovernmental revenues, and other non- exchange transactions. <br /> Business -type activities are financed in whole or in part by fees charged to external parties. <br /> The Statement of Activities presents a comparison between direct expenses and program revenues for <br /> each segment of the business -type activities of the City and for each function of the City's governmental <br /> activities. Direct expenses are those that are specifically associated with a program or function and, <br /> therefore, are clearly identifiable to a particular function. Program revenues include (a) charges paid by <br /> the recipients of goods or services offered by the programs, (b) grants and contributions that are <br /> restricted to meeting the operational needs of a particular program, and (c) fees, grants, and <br /> contributions that are restricted to financing the acquisition or construction of capital assets. Revenues <br /> that are not classified as program revenues, including all taxes, are presented as general revenues. <br /> Fund Financial Statements: The fund financial statements provide information about the City's funds, <br /> including fiduciary funds and blended component units. Separate statements for each fund category — <br /> governmental, proprietary, and fiduciary —are presented. The emphasis of fund financial statements is <br /> on major individual funds, each of which is displayed in a separate column. All remaining governmental <br /> and enterprise funds are aggregated and reported as non -major funds. <br /> Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating <br /> revenues, such as charges for services, result from exchange transactions associated with the principal <br /> activity of the fund. Exchange transactions are those in which each party receives and gives up <br /> essentially equal values. Non - operating revenues, such as subsidies and investment earnings, result <br /> from non - exchange transactions or ancillary activities. Operating expenses for proprietary funds are <br /> those expenses that are essential to the primary operations of the funds. All other expenses are <br /> reported as non - operating expenses. <br /> 35 <br />