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Indian River County, Florida <br />Notes To Financial Statements <br />Year Ended September 30, 2007 <br />NOTE 2 - RECONCILIATION OF GOVERNMENT -WIDE AND FUND FINANCIAL <br />STATEMENTS - Continued <br />B. Explanation of Differences Between Governmental Fund Operating Statements and the <br />Statement of Activities <br />The "net change (decrease) in fund balances" for governmental funds ($43,760,013) differs from the <br />"change in net assets" for governmental activities ($50,643,009) reported in the statement of activities. <br />The differences arise primarily from the long-term economic focus of the statement of activities versus <br />the current financial resources focus of the governmental funds. The effect of the differences is <br />illustrated below. <br />Capital related items <br />When capital assets that are to be used in governmental activities are purchased or constructed, the <br />resources expended for those assets are reported as expenditures in governmental funds. However, in <br />the statement of activities, the costs of those assets is allocated over their estimated useful lives and <br />reported as depreciation expense. As a result, fund balances decrease by the amount of financial <br />resources expended, whereas net assets decrease by the amount of depreciation expense charged for the <br />year. <br />Capital outlay <br />Depreciation expense <br />Loss on assets <br />Difference <br />$ 107,776,962 <br />(14,6861564) <br />X1,501,635) <br />$ 91,588,763 <br />Long -Term Debt Transactions <br />Capital lease proceeds provide current financial resources to governmental funds, but the capital lease <br />increases liabilities in the statement of net assets. <br />Capital lease proceeds <br />S (264.467) <br />Repayments of bond principal and capital lease principal are reported as an expenditure in the <br />governmental funds and, thus, have the effect of reducing fund balance because current financial <br />resources have been used. However, the principal payments reduce the liabilities in the statement of net <br />assets and do not result in an expense in the statement of activities. <br />Bond principal payments made $ 4,6155000 <br />Bond premium payments made 935225 <br />Capital lease principal payments made 255,876 <br />Total X4,964,101 <br />Some expenses reported in the statement of activities do not require the use of current financial <br />resources, therefore, are not reported as expenditures in governmental funds. <br />Net change in compensated absences <br />58 <br />x(396,475) <br />rn <br />