03-23-15 Fiscal Affairs Committee Meeting

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CITY OF LA PORTE, TEXAS NOTES TO THE FINANCIAL STATEMENTS (continued) Note 1 - Summary of Significant Accounting Policies (continued) B.Government-wide and Fund Financial Statements The government-wide financial statements (i.e., the Statement of Net Position and the Statement of Activities) report information about the City as a whole. These statements include all activities of the primary government and its component units. For the most part the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The Statement of Activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services or privileges provided, 2) operating grants and contributions and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than program revenues. Likewise, general revenues include all taxes. When both restricted and unrestricted resources are available for use, it is the City’s policy to use restricted resources first, then unrestricted resources as they are needed. GASB Statement No. 34 established standards for external financial reporting for all state and local governmental entities, which includes a Statement of Net Position and a Statement of Activities. It requires the reclassification of net position into three components – net investment in capital assets; restricted; and unrestricted. These classifications are as follows: Net investment in capital assets – This component of net position consists of capital assets, including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, notes or other borrowings. Restricted – This component of net position consists of constraints placed on net asset use through external constraints imposed by creditors, grantors, contributors, or laws or regulations of other governments or constraints imposed by law through contractual provisions or enabling legislation. Unrestricted net position – This component of net position consists of net position that do not meet the definition of “restricted” or “net investment in capital assets.” 3/5/2015 Separate financial statements are provided for governmental funds and proprietary funds. Major Separate financial statements are provided for Separate financial statements are provided for Separate financial statements are provided for Separate financial statements are provided for governmental funds and prgovernmental funds and proprietary funds. Major oprietary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in individual governmental funds and major individual individual governmental funds and major individual individual governmental funds and major individual individual governmental funds and major individual enterprise funds are reported as separate columns in enterprise funds are reported as separate columns in the fund financial statements. the fund financial statements. the fund financial statements. 26