1991-01-14 Regular Meeting - Laserfiche WebLink

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CITY OF LA PORTE INTER-OFFICE MEMORANDUM T0: Robert T. Herrera, City Manager FROM: Jeff Litchfield, Director of Financ DATE: January 8, 1991 SUBJECT: Amending the 1990-91 Budget • I want to make a change in the method of accounting for purchase orders that are open at the end of the fiscal year. This change is very painless and will reduce our workload considerably. In the past, purchase orders at the end of the year are encumbered against the old fiscal year. What this means is that we show a portion of our Fund Balance as being "Reserved for Encumbrances". We do not actually expense the item in the old fiscal year. After the product is received, the payment goes against the new fiscal year because the expense does not occur until the money is paid. This process creates a series of journal entries where we credit each account with a "Reserve for Encumbrance". At the end of the year, we have to reverse the above mentioned entry. I also have to adjust the CAFR to show the correct budget and expense amounts. Because we have to charge the purchase order to the current year, it creates considerable confusion with the division heads. It appears to them that the expense will be charged against their current budget and because it is included in their totals, it provides them with an inaccurate expense amount to compare to the current budget. If we amend each budget for the open purchase orders, it will alleviate the above mentioned problem. The expense will still be shown in the current fiscal year, and will be offset by the increase in their budget. Their funds remaining will be accurate and it will completely do away with the adjustments that I have to make at the end of the fiscal year. The net effect on working capital under each method is the same. In addition, at this time, I would also like to adjust the budget for the following items that were budgeted in the last fiscal year but for some reason or another, the funds were not expended. There were $57,582 in funds remaining for the Houston Chemical Services permitting process. These funds were budgeted by Council to be used for the HCS process. I recommend we carry forward these funds to the current fiscal year.