02-14-11 Regular Meeting of Fiscal Affairs Committee

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CITY OF LA PORTE, TEXAS Notes to the Financial Statements September 30, 2010 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 — 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. 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 Accounting Standards Board. The more significant accounting policies of the City are described below. B. Financial Reporting Entity 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 operational 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 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 proprietary fund type. The Tax Increment Reinvestment Zone One (the "Zone ") is governed by a nine - member board appointed by 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. The Section 4B Sales Tax corporation provides services that exclusively benefit the City of La Porte and is governed by a seven - member board appointed by City Council. The Section 4B Sales Tax Corporation is presented as a governmental fund type. Complete financial statements for each of the individual component units may be obtained through the City of La Porte. C. Basis of Presentation Government Wide Statements: The government -wide financial statements (i.e. the statement of net assets and the statement activities) report information on all of the nonfiduciary activities of the City, including the component units. As a general rule the effect of interfund activity has been removed from these statements. Exceptions to this general rule are payments reasonably equivalent in value to the interfund services provided and other charges between the City's various functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. 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. 45