Page 89 - Hurst FY20 Approved Budget

Financial Plan continued

Capital Improvement Funds

Street Bond Funds account for the financing and construction of various street projects. The
projects primarily involve street reconstruction and enhancement that will add to the value and life of
the infrastructure with very little impact on current operating costs. Many projects provide
substantial savings to the operating budgets by reducing maintenance costs.

Drainage Bond Funds account for the financing and construction of various drainage projects. All
drainage projects reduce operational costs for future years.

Water and Sewer Bond Funds account for capital improvement programs and capital equipment
financed by bond sales. Although this fund is part of the Enterprise Fund, it is included in this
section because the projects are addressed by priority and funding in the Capital Improvement
Program. The ongoing capital improvement program for the replacement of utility mains and lines
does not add operating costs to the Enterprise Fund budget.

The General Obligation Bond Fund will ensure all debt issued for voter approved projects is
appropriately expended. Creation of a separate GO bond fund also assists the City in complying
with arbitrage calculation requirements. New or expanded facilities constructed with GO bond funds
increase the city’s operational costs for utilities and maintenance.

Other Project Funds account for other project funds utilized by the City to manage pay-as-you-go
projects. For example, the Special Projects Fund is used to account for Council and City Manager
approved projects, which are funded by operational reserves.

BUDGETARY ACCOUNTING BASIS

Accounting procedures according to Section 5.11-3 of the City Charter shall be maintained to record
in detail all transactions affecting the acquisition, custodianship and disposition of anything of value.
They shall be reported to the City Council and to the public, as necessary, to show the full effect of
transactions upon the finances of the City. The City's accounting records for general governmental
operations are maintained on a modified accrual basis according to Generally Accepted Accounting
Principles (GAAP). The revenues are recorded when actually received, and expenditures are
recorded when the liability is incurred (for example, with purchase orders). Accounting records for
the City's utilities and other proprietary funds are maintained on a full accrual basis with the
exception of outstanding debt principal, which is included in the budget. For example, expenditures
are recognized when a liability is incurred, and revenues are recognized when they are obligated to
the City. Depreciation is budgeted as an operating expense. The budgetary basis follows GAAP
except that fund balances/retained earnings are presented in the budget, a measure of available
spendable resources. Unexpended appropriations for budgeted funds lapse at fiscal yearend.
Encumbrance accounting is used for all funds; however, appropriations of Capital Bond Funds uses
a full encumbrances method of budgetary accounting which means that appropriations lapse at year
end only to the extent of the unencumbered balance. Revenues are budgeted on a cash basis.
Indirect cost allocations to the General Fund are considered revenues in budgeting, but are a
reduction to expenditures in the accounting system at year-end.

BUDGET TYPE

For each operational fund, the 2019-2020 Budget is a program budget prepared on a line item
basis. The comprehensive budgetary process requires line item justification by departments each
year. The City Manager then presents budget programs and special issues to the City Council, but

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