02-10-16 Regular Meeting of the La Porte Area Water Authority

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DRAFT The La Porte Area Water Authority is considered a component unit of the City of La Porte, Texas by virtue of meeting the criteria noted above. The primary factor in determining component unit status is that the Authority provides approximately 86% of its services for the exclusive benefit of the City of LaPorte. The Authority's financial operations are included as an Enterprise Fund in the City's Comprehensive Annual Financial Report as a blended component unit. The City of La Porte is referred to as "Primary Government" throughout the Authority's financial statements. B. Fund Accounting The operations of the Authority are recorded in an enterprise fund. Enterprise funds are used to account for operations (a) that are financed primarily through user charges or (b) where the governing body has decided that determination of net income is appropriate. The enterprise fund is a proprietary fund type. C. Basis of Accounting Enterprise Funds are accounting for on a flow of economic resources measurement focus. With this measurement focus, all assets and all liabilities associated with the operation of these funds are presented on the statement of net position is a classified format to distinguish between current and long-term assets and liabilities. Net position is presented in three components: net investment in capital assets; restricted; and unrestricted. Enterprise fund operating statements present increases (e.g., revenues), decreases (e.g., expenses) and changes in net position. D. Cash Equivalents For purposes of the statement of cash flows, the Authority considers cash held in demand accounts and all short-term investments with a maturity date of purchase of three months or less to be cash equivalents. E. Physical Facilities and Depreciation Fixed assets, which consist of a water production and distribution system, are shown at original cost. Interest paid during construction of facilities, if any, is also included in this cost. Depreciation has been provided for the Authority's water production and distribution system using the straight-line method over a 30-year estimated useful life. III. CASH AND CASH EQUIVALENTS Cash and cash equivalents represent the Authority's equity interest in the City's consolidated cash and cash equivalents account consisting of demand accounts and short-term investments with a maturity at date of purchase of three months or less. State statutes require that all fund in depository institutions be covered by federal depository insurance and/or be secured in the manner provided by law for security of funds. Cash and cash equivalent balances held by the City were entirely covered by federal depository insurance or security as required at September 30, 2015. 12