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Indian River County, Florida Notes To Financial Statements Year Ended September 30, 2015 NOTE 2 -RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS - Continued B. Explanation of Differences Between Governmental Fund Operating Statements and the Statement of Activities The "net change in fund balances" for governmental funds, $5,669,165, differs from the "change in net position" for governmental activities, $17,386,971 reported in the statement of activities. The differences arise primarily from the long-term economic focus of the statement of activities versus the current financial resources focus of the governmental funds. The effect of the differences is illustrated below. Capital related items When capital assets that are to be used in governmental activities are purchased or constructed, the resources expended for those assets are reported as expenditures in governmental funds. However, in the statement of activities, the costs of those assets are allocated over their estimated useful lives and reported as depreciation expense. As a result, fund balances decrease by the amount of financial resources expended, whereas net position decreases by the amount of depreciation expense charged for the year. Capital outlay $ 22,495,325 Depreciation expense (20,914,788) Loss on assets (264,773) Difference $ 1,31.5,764 Long-term debt transactions Payments of bond principal, bond premium, notes payable, medicaid and pollution remediation costs are reported as an expenditure in the governmental funds and, thus, have the effect of reducing fund balance because current financial resources have been used. The issuance of debt is reported as an other financing source in the governmental funds, and, thus, has the effect of increasing fund balance. However, the issuance increases and the payments reduce the liabilities in the statement of net position and do not result in an expense in the statement of activities. Bond principal payments made $ 4,180,000 Bond refunding payment to escrow agent 20,340,959 Note issuance proceeds (20,369,000) Medicaid settlement costs 158,087 Pollution remediation costs 120,600 Total $ 4,430,646 Governmental funds report interest and OPEB expenditures based on when they are paid. The statement of activities reports interest expense as it is incurred. This is the net number of the previous year accrual and the current year accrual. Net accrued bond interest expense $ 252,543 Net accrued OPEB expense 119,542 Total $ 372,085 64