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 7. Summary of significant accounting policies - Continued ' N. Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets, are reported in the applicable governmental or business -type activities columns in the government -wide financial statements and in the fund financial statements for proprietary funds. Capital assets are defined by the government as assets with an initial unit cost of $5,000 or more and an estimated useful life exceeding two years. Such ' assets are recorded at historical cost or estimated historical cost if actual historical cost is not available. Donated capital assets are recorded at their fair market value on the date donated. Repairs and maintenance that do not add to the value of the asset or extend assets lives are recorded as expenses. Interest cost during construction is capitalized when the effect of capitalization materially impact the financial statements. During the year ended September 30, 2004, no interest costs were capitalized. Property, plant, and equipment of the primary government, as well as the component units, are depreciated ' using the straight line method over the following estimated useful lives: Buildings 20 years Water and Sewer System 20 - 40 years Infrastructure 20 - 30 years Machinery and Equipment 4 -10 years Improvements 20 years 1 O. Comg_ensated Absences The City's employees earn vacation and sick leave, which may either be taken or accumulated, up to certain amounts, until paid upon termination or retirement. For all funds, this liability reflects amounts attributable to cumulative employee services already rendered, where the payment is probable and can be reasonably estimated. The current and long-term portions of the governmental fund type liabilities are recorded in the Government -Wide Statement of Net Assets. The proprietary fund type liability is recorded as a liability in the individual proprietary funds since payment of this liability will be made from resources of these funds. Policies relating to the accrual and payment of these benefits are as follows: M■ Vacation - Employees earn from 10 to 25 days of vacation per year. Upon separation, employees are paid for all accumulated vacation leave (up to one and one half times their annual accrual rate). ' ■ Sick Leave - Employees earn an average of 10 sick hours per month of service. Non -civil service employees hired after November 19, 1991, and who have completed 10 consecutive years of service with the City, are paid for accumulated sick leave, subject to a limit of 480 hours. Civil ' service employees are subject to a limit of 720 hours. The liability for compensated absences at September 30, 2004 is comprised of the following: Governmental Business Type Total Vacation $ 636,859 $ 137,153 $ 774,011 Sick Leave 1,505,239 269,318 1,774,558 ' Total All Funds $ 2,142,098 $ 406,471 $ 2,548,569 51