Page 157 - Haltom City FY19 Annual Budget

CITY OF HALTOM CITY
ACCOUNTING SYSTEM AND BUDGETARY CONTROL

Haltom City’s accounting and financial reporting system follows the principles established by the
Governmental Accounting Standards Board. An annual audit of the City’s system is performed
by an independent public accounting firm with the subsequent issuance of a comprehensive
annual financial report.

The accounts of the City are organized on the basis of funds or accounts groups, each of which
is considered to be a separate accounting entity. The operations of each fund are accounted
for with a separate set of self-balancing accounts, which comprise its assets, liabilities, retained
earnings/fund balance, revenues and expenses/expenditures. The various funds are grouped
by type in the financial statements. The City’s accounting records for the Water and Sewer Fund
and the Drainage Fund are maintained on an accrual basis whereby revenues and expenses
are recorded in the accounting period in which they are earned or incurred. The remainder of
the City’s funds are maintained on the modified accrual basis whereby revenue is recorded when
measurable and available and expenditures are recorded when the liability is incurred except for
interest on general long-term debt.

One of the objectives of the City’s financial accounting system is to provide internal controls.
Internal controls are designed to provide reasonable, but not absolute, assurance regarding the
safeguarding of assets against loss from unauthorized use or disposition and the reliability of
financial records for preparing financial statements and maintaining accountability for assets.
The concept of reasonable assurance recognizes that the cost of a control should not exceed
the benefits likely to be derived and the evaluation of costs and benefits requires estimates and
judgment by management.

Budgetary Control is accomplished by the adoption of an annual operating budget for various
funds of the City. Detail control is accomplished by maintaining appropriations and expended
balances by line item account within each operating department within each budgeted fund.
Purchase orders or payments that would result in an over expenditure of a line item account are
not processed without the approval of the Finance Director or the City Manager.

BASIS OF BUDGETING

The financial data throughout this document, for all funds, is presented by using a cash basis of
budgeting. This means that expenditures and revenues are measured and forecasted on an
inflow, outflow basis for the 12 months that comprise the budget year. Capital outlay and debt
service are included in the Water and Sewer Fund budget as a budgetary control of cash
expenditures. Under Generally Accepted Accounting Principles (GAAP), these items will be
reported as additions to capitalized assets and as a reduction of a liability, respectively. Certain
accounting adjustments based on GAAP will be applied when the City closes its books for the
year but these types of adjustments are not part of the budget presentation. The application of
GAAP forms the basis of accounting for the city using the cash, accrual, and modified accrual
methods of revenue and expenditure measurement. Where applicable, the effect of these end-
of-year adjustments for historical data has been reversed to maintain the cash basis of budgeting
consistently throughout the document.

Page 138