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

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CITY OF LA PORTE, TEXAS Notes to the Financial Statements - Continued ' September 30, 2004 1. Summary of significant accounting policies - Continued Proprietary Funds are accounted for using the economic resources measurement focus and the accrual basis of accounting. The accounting objectives are determinations of net income, financial position and cash flow. All assets and liabilities are included on the Statement of Net Assets. 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 a proprietary fund's principal ongoing operations. Operating expenses for the proprietary funds include the cost of personal and contractual services, supplies and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non -operating revenues and expenses. The City reports the following major proprietary funds: (a) Utility Fund - is used to account for the provision of water and sewer services to the residents of the City. All activities necessary to provide such services are accounted for in this fund, including, 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. (b) La Porte Area Water Authority Fund - is used to account for revenues and expenses related to ' obtaining raw surface water and converting it to potable water to be sold to La Porte and neighboring cities. (c) Bay Forest Golf Course - is used to account for the revenues and expenses relative to the administration, operation and maintenance of the public golf course. All costs are financed through fees charged to patrons. ' (d) Airport - is used to account for the operation of the City's airport. (e) Sylvan Beach - is used to account for activity surrounding the City's operation of the Sylvan Beach Pavilion and Convention Center ' The Bay Forest Golf Course, Airport and Sylvan Beach Convention Center are the three non -major proprietary funds that are reported as major funds. ' Additionally, the City reports the Internal Service Funds which are used to account for the Motor Pool, Technology and Insurance services provided to departments of the City. ' D. Measurement Focus and Basis of Accounting Measurement focus refers to what is being measured; basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurement made, regardless of the measurement focus applied. The government -wide financial statements and fund financial statements for proprietary funds are reported using the economic resources measurement focus and the accrual basis of accounting. The economic resources measurement focus means all assets and liabilities (whether current or non -current) are included on the statement of net assets. The operating statements present increases (revenues) and decreases (expenses) in net total assets. Under the accrual basis of accounting, revenues are recognized when they ' are earned. Expenses are recognized at the time the liability is incurred. Unbilled water and wastewater utility service receivables are accrued as revenues and reflected in the financial statements. r] 1 47