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Indian River County, Florida Notes To Financial Statements Year Ended September 30 , 2002 NOTE 2 - RECONCILIATION OF GOVERNMENT WIDE AND FUND FINANCIAL STATEMENTS - Continued B . Explanation of Differences Between Governmental Fund Operating Statements and the State- ment of Activities The net change in fund balances" for governmental funds ($ 11 ,035 ,866) differs from the "change in net assets" for governmental activities ($22,674,468) 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 ofthe differences is illustrated below. Capital related items When capital assets that are to be used in governmental activities are purchased or constructed, the resources ex- pended for those assets are reported as expenditures in governmental funds. However, in the statement of activities, the costs of those assets is 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 assets decrease by the amount of depreciation expense charged for the year. Capital outlay $ 30,270 , 897 Depreciation expense (7, 655 , 599) Difference $ 22 ,615 ,298 In the statement of activities , only the gain and loss on the sale of capital assets are reported. However, in the govern- mental funds , the proceeds from the sale increase financial resources . Thus, the change in net assets differs from the change in fund balance by the cost of the capital assets sold. Sale of fixed assets $ ( 1 , 996 ,218 ) Contributions reported in the statement of activities do not provide current financial resources , therefore , are not reported as revenues in the governmental funds . Contributions $ 15220,001 Long-term debt transactions In the statement of activities, debt and capital lease proceeds increase long-term liabilities. However, in the governmen- tal funds, debt and capital lease proceeds are treated as other financing sources since they provide current financial resources to governmental funds . Debt proceeds $( 11 ,000 ,000) Capital lease proceeds (275 , 000) Net adjustment $( 112275 ,000) Repayments of bond principal and capital lease principal 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. However, the principal payments reduce the liabilities in the statement of net assets and do not result in an expense in the statement of activities. Bond principal payments made $ 137655000 Capital lease principal payments made 4649201 Total $ 2 ,2295201 48