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DRAFT LA PORTE REDEVELOPMENT AUTHORITY NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2010 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reporting Entity The City of La Porte, Texas (the "City") authorized the creation of the La Porte Redevelopment Authority (the "Authority") by the Resolution No. 2000-19 passed on December 11, 2000. The Authority was set up as a local government corporation pursuant to provisions of Chapter 394 of the Texas Local Government Code. The Authority is organized as a public nonprofit corporation for the purpose of aiding, assisting, and acting on behalf of the City in the performance of its governmental function to promote the common good and general welfare of Tax Increment Reinvestment Zone (the "TIRZ") and neighboring areas and to promote, develop, encourage and maintain housing, educational facilities, employment, commerce and economic development in the City. The Authority may issue bonds with consent of City Council. The Authority is managed by a Board of Directors consisting of 9 members who are appointed by the Mayor with the approval of City Council. Government -wide and Fund Financial Statements The government -wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the activities of the government. Governmental activities are supported by property taxes and investment revenue. The statement of activities demonstrates the degree to which the direct expenses of a given function are offset by program revenue. Direct expenses are those that are clearly identifiable with a specific function. Program revenue includes 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Property taxes and other items not properly included among program revenue are reported instead as general revenue. The government -wide and fund financial statements are provided for the governmental fund of the Authority with a column for adjustments between the two statements. Measurement Focus. Basis of Accounting and Financial Statement Presentation The government -wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenue is recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenue in the year for which they are levied. (continued) 7