10-25-04 Regular Meeting of La Porte Audit Committee

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CITY OF LA PORTE, TEXAS Management's Discussion and Analysis For the Year Ended September 30, 2004 Fund financial statements - A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance -related legal requirements. All of the funds of the City can be divided into two categories - governmental funds and proprietary funds. Governmental funds - Governmental funds are used to account for essentially the same functions reported as governmental activities in the government -wide financial statements. However, unlike the government - wide financial statements, governmental fund financial statements focus on current sources and uses of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near -term financing requirements. Because the focus of governmental funds is narrower than that of the government -wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government -wide financial statements. By doing so, readers may better understand the long-term impact of the government's near -term financing decisions. Both the governmental funds balance sheet and the governmental fund statements of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains 13 governmental funds. Information is presented separately in the Governmental Fund Balance Sheet and in the Governmental Fund Statement of Revenues, Expenditures, and Changes in Fund Balances for the General, Debt Service and Section 413 Sales Tax, all of which are considered to be major funds. Data from the other 10 governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non -major governmental funds is provided in the form of combining statements elsewhere in this report. The basic governmental fund financial statements can be found on pages 30-37 of this report. Proprietary funds - The City maintains two types of proprietary funds. Proprietary funds are used to report the same functions presented as business -type activities in the government -wide financial statements. The City uses proprietary funds to account for its utilities, airport, water authority, convention center and golf course. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City's various functions. The City uses its internal service funds to account for its motor pool services, technology services and employee health insurance program. Because these services predominantly benefit governmental rather than- business -type functions, they have been included within governmental activities in the government -wide financial statements. Proprietary funds provide the same type of information as the government -wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the Utility and La Porte Area Water Authority funds since they are considered to be major funds of the City. Because the Airport, Bay Forest Golf Course and Sylvan Beach Convention Center are the only remaining proprietary funds, they are being presented as major funds even though they do not meet the criteria of a major fund established in Government Accounting Standard Board (GASB) Statement No. 34. All internal service funds are combined into a single aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining statements elsewhere in this report. The basic proprietary fund financial statements can be found on pages 38-43 of this report. Notes to the Financial Statements - The notes provide additional information that is essential to a full understanding of the data provided in the government -wide and fund financial statements. The notes to the financial statements can be found on pages 45-68 of this report. Ii K