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DRAFT <br />1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) <br />Assets, Liabilities and Net Assets or Equity (Continued) <br />Fund Equity <br />In the fund financial statements, governmental funds report reservations of fund balance <br />for amounts that are not available for appropriation or are legally restricted by outside <br />parties for use for a specific purpose. Designations of fund balance represent tentative <br />management plans that are subject to change. As of September 30, 2010, the Authority <br />does not have reservations or designations of fund balance. <br />NetAssets <br />Net assets represent the difference between assets and liabilities. Net assets are reported <br />as restricted when there are limitations imposed on their use either through the enabling <br />legislations adopted by the Authority or through external restrictions imposed by <br />creditors or laws or regulations of other governments. <br />Estimates <br />The preparation of financial statements, in conformity with generally accepted accounting <br />principles, requires management to make estimates and assumptions that affect the reported <br />amounts of assets and liabilities and disclosures of contingent liabilities at the date of the <br />financial statements and the reported amounts of revenue and expenses during the reporting <br />period. Actual amounts could differ from those estimates. <br />2. STEWARDSHIP AND ACCOUNTABILITY <br />Deficit Net Assets <br />A net asset deficit of $26,180 exists as of September 30, 2010. This deficit is the result of the <br />Authority borrowing money from the City of La Porte to finance capital improvements. As <br />of September 30, 2010, the amount outstanding that was used to finance construction of <br />assets was $615,026. <br />3. DETAILED NOTES ON ALL FUNDS <br />Deposits <br />Custodial Credit Risk. In the case of deposits, this is the risk that in the event of a bank <br />failure, the Authority's deposits may not be returned to it. State statutes require that all <br />deposits in financial institutions be fully collateralized by U. S. Government obligations or its <br />agencies and instrumentalities, or direct obligations of Texas or its agencies and <br />instrumentalities that have a fair value of not less than the principal amount of deposits. As <br />of September 30, 2010, $331,357 of the Authority's $581,357 deposit balance was <br />collateralized with securities held by the pledging financial institution. The remaining <br />balance, $250,000, was covered by FDIC insurance. <br />(continued) <br />Z <br />