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

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r • • CITY OF LA PORTE, TEXAS r Notes to the Financial Statements - Continued September 30, 2004 1. Summary of significant accounting policies ' A. General Statement The City of La Porte, Texas (the City), was incorporated on August 10, 1892, and operates under a "Council r — Manager" form of government and provides the following services as authorized by its charter: public safety, development services, public health and welfare, culture and recreation, and waterworks. r The accounting and reporting policies of the City relating to the funds included in the accompanying basic financial statements conform to U.S. Generally Accepted Accounting Principles (GAAP) applicable to state and local governments which include those principles prescribed by the Governmental Accounting Standards Board (GASB), the American Institute of Certified Public Accountants and the Financial rAccounting Standards Board. The more significant accounting policies of the City are described below. B. Financial Reoortina Entity r The City's basic financial statements include the accounts of all City operations. The City, with its elected governing body of mayor and eight council members, is considered a primary government. As required by generally accepted accounting principles, the basic financial statements include the City and its component units, entities for which the government is considered to be financially accountable. Blended component units, although legally separate entities, are, in substance, part of the government's operations. All component units have been included as blended component units because of the significance of their roperational and financial relationships with the City. The La Porte Area Water Authority (the Authority) is governed by a five- member board appointed by the City Council. Although it is a legally separate entity, the Authority provides services almost exclusively for the r City's water operations, and is in substance a part of the City's primary operations. The Authority was created by the City to finance the operations involved in obtaining surface water supplies and converting these supplies to potable water. This water is sold primarily to the City of La Porte (86%) with the remainder being sold to other neighboring political subdivisions. The operations of the Authority are reported as a rproprietary fund type. The Tax Increment Reinvestment Zone One (the Zone) is governed by a nine -member board appointed by r the City Council. The Zone provides benefits exclusively for the City through reinvestment financing of ad valorem taxes, which are utilized for capital improvements for the City of La Porte. The Zone is presented as a governmental fund type. r The Section 4B Sales Tax corporation is governed by a seven -member board appointed by City Council and was organized to undertake projects that the board determines to promote new or expanded business enterprises and various projects as described in Section 4B of Article 5190.6. The Section 4B Sales Tax rCorporation is presented as a governmental fund type. Complete financial statements for each of the individual component units may be obtained through the City r of La Porte. C. Basis of Presentation rGovernment Wide Statements: The government -wide financial statements (i.e. the statement of net assets and the statement of changes in net assets) report information on all of the nonfiduciary activities of the City, including the component units. ' The effect of interfund activity has been removed from these statements. Governmental activities, which are normally supported by taxes and intergovernmental revenues, are reported separately from business -type activities, which rely significantly on fees and charges for support. Likewise, the primary government is ' reported separately from certain legally separate component units for which the primary government is financially accountable. 1 45