03-11-13 Fiscal Affairs Committee

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CITY OF LA PORTE, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note 1 - Summary of Significant Accounting Policies (continued) The City reports the following major proprietary funds: TheUtility Enterprise Fund is used to account for operations of the water and sewer services to the residents of the City. All activities necessary to provide such services are accounted for in this fund, but not limited to administration, operations and maintenance of the water and sewer system and billing and collection activities. The fund also accounts for the accumulation of resources for, and the payment of, long-term debt principal and interest for water and sewer debt. All costs are financed through charges to utility customers with rates reviewed regularly and adjusted if necessary to ensure integrity of the fund. La Porte Area Water Authority is used to account for revenues and expenses related to obtaining raw surface water and converting it to potable water Airport Fund is used to account for financial activities of the airport which includes rentals, grants and other revenues. Additionally, the government reports the Internal Service Funds which are used to account for the Motor Pool, Technology and Insurance services provided to other departments of the City on a cost reimbursement basis. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with the proprietary fund’s principal ongoing operations. The principal operating revenues of the enterprise funds are charges to customers for sales and services. Operational expenses for the enterprise funds and internal service fund include the cost of sales and services, administrative expenses and depreciation on capital assets. All revenues not meeting this definition are reported as non-operating revenues and expenses. D.Assets, Liabilities and Net Assets or Fund Balance 1.Cash and Cash Equivalents Cash includes amounts in demand deposits, short-term investments which mature within ninety days of the fiscal year end, and various petty cash funds. The short-term investments are stated at cost or amortized cost, which approximate fair value. The short-term investments consist of U.S.Treasury Bills and deposits in the Texas Local Government Pool (TexPool), the Local Government Investment Cooperative (LOGIC) all of which have the general characteristics of a demand deposit account. For the purpose of the statement of cash flows, Proprietary Fund types consider temporary investments with a maturity of three months or less when purchased to be cash equivalents. In accordance with Statement no. 31, the City reports all investments at fair value, except for “money market investments” and “2a7-like pools”. Money market investments, which are short- term highly liquid debt instruments that may include U.S. Treasury and agency obligations, are reported at amortized costs. Investments positions in external investment pools that are operated in a manner consistent with the SEC’s Rule 2a7 of the Investment Company Act of 1940, such as TexPool and LOGIC are reported using the pools’ share price. 28