(2) Summary of Significant Accounting Policies
(a) Basis of Presentation
The financial condition and results of operations of the City's funds are presented as of and for the year ended June 30, 1995, except for the System, which is presented as of and for the year ended December 31, 1994 and the RBDC which is presented as of and for the year ended September 30, 1994. The accounting policies of the City conform with generally accepted accounting principles ("GAAP"), except that the City does not maintain, and therefore does not report, a general fixed assets account group. Such departure from GAAP is permissible under the Massachusetts Uniform Municipal Accounting System.
(b) Fund Accounting
The operations of the City are recorded in the following fund types and account group:
• Governmental Fund Types
Governmental funds are used to account for the City's expendable financial resources and related liabilities. The measurement focus is upon determination of changes in financial position. The following are the City's governmental fund types:
General Fund - The general fund is the general operating fund of the City. It is used to account for all financial resources except those required to be accounted for in another fund.
Special Revenue Funds - Special revenue funds are used to account for the proceeds of specific revenue sources (other than expendable trusts or major capital projects) that are legally restricted to specified purposes.
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CITY OF REVERE, MASSACHUSETTS
Notes to General Purpose Financial Statements
Capital Project Funds - Capital project funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities. Such resources are derived principally from proceeds of general obligation bonds and from federal and state grants.
• Fiduciary Fund Types
Trust and Agency Funds - Fiduciary funds are used to account for assets held by the City in a trustee capacity or as an agent. Trust funds include expendable trust funds and pension trust funds. Expendable trust funds are accounted for similar to governmental funds. Pension trust funds are reported on the accrual basis of accounting. Agency funds are custodial in nature and do not involve measurement of results of operations.
• Account Group
General Long-term Obligations Account Group - This account group is used to account for all long-term obligations of the City.
(c) Basis of Accounting
The modified accrual basis of accounting is followed by governmental funds, expendable trust funds, and agency funds. Under the modified accrual basis of accounting, revenues are recorded when they become measurable and available to pay liabilities of the current period. Revenues not considered available are recorded as deferred revenues. Expenditures are recorded when the liability is incurred except for (1) interest on general long-term obligations, which is recorded when due, and (2) the noncurrent portion of compensated absences and judgments and claims, which are recorded in the general long-term obligations account group.
In applying the susceptible to accrual concept to intergovernmental revenues, there are essentially two types of revenues. In one, monies must be expended on the specific purpose or project before any amounts will be paid to the City; therefore, revenues are recognized based upon the expenditures incurred. In the other, monies are virtually unrestricted and are usually revocable only for failure to comply with prescribed compliance requirements. These resources are reflected as revenues at the time of receipt or earlier if the susceptible to accrual criteria are met.
Property taxes are recognized as revenue in the year for which taxes have been levied, provided they are collected within 60 days after year-end. Special assessments are recorded as revenue in the year the individual installments are due. Licenses and permits, fines and forfeitures, and miscellaneous revenues are recorded as revenues when received in cash because they are generally not measurable until actually received. Investment earnings are recorded as earned.
The accrual basis of accounting is used by the pension trust fund.
(d) Encumbrances and Continuing Appropriations
Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of funds are recorded in order to reserve that portion of the applicable appropriation, is employed in governmental funds. Open encumbrances at year-end are reported as reservations of fund balances. Encumbrances do not constitute expenditures or liabilities, except for budgetary purposes.
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CITY OF REVERE, MASSACHUSETTS
Notes to General Purpose Financial Statements
Certain unexpended and unencumbered appropriations for incompleted projects are carried over to succeeding years. Such continuing appropriations are accounted for similar to encumbrances.
(e) Compensated Absences
Employees are granted sick and vacation leave in varying amounts. Upon retirement, termination, or death, certain employees are compensated for unused sick and vacation leave (subject to certain limitations) at specified payment rates established by contract, regulation or policy. The amount of sick and vacation costs which are not due and payable is recorded in the general long-term obligations account group. The amount recorded is the unused days earned at the current rate of pay.
(f) Total Columns
Total columns on the general purpose financial statements are captioned "Memorandum only" to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position, results of operations or changes in financial position in conformity with generally accepted accounting principles. Such data are not comparable to a consolidation.