Page 420 - Keller FY20 Approved Budget

BASIS OF ACCOUNTING

Basis of Accounting and Budgeting. The accounts of the City are organized on the basis of funds or account groups, each of which is
considered to be a separate accounting entity. All funds are budgeted (except as otherwise stated earlier) and accounted for on a
Generally Accepted Accounting Principles (GAAP) basis for purposes of financial statement presentation in the City's audited financial
statements. The Governmental Fund Types, e.g., General and Special Revenue Funds, use a financial resources measurement focus and
are accounted and budgeted for using the modified accrual basis of accounting. Under the modified accrual basis, revenues are recorded
when susceptible to accrual, i.e., both measurable and available. Available means collectible within the current period or soon enough
thereafter to be used to pay liabilities of the current period. Expenditures represent a decrease in net financial resources and, other than
interest on general long-term debt, are recorded when the fund liability is incurred, if measurable. Interest on general long-term debt is
recorded when due.
In the City's audited financial statements, Proprietary (Enterprise) Fund types, e.g., the Water and Wastewater Fund, are accounted and
budgeted on a cost of services or "capital maintenance" measurement focus, using the full accrual basis of accounting. Under the accrual
basis of accounting, revenues are recognized when earned and expenses are recognized when incurred. However, for purposes of this
budget presentation, depreciation is not budgeted, and capital expenditures and bond principal payments are shown as uses of funds
(expenditures). Unless otherwise noted, working capital, rather than retained earnings, is used to represent fund balance in all funds,
including Enterprise Funds. Working capital is generally defined as the difference between current assets (e.g., cash and receivables,
etc.) and current liabilities − excluding the current portion of principal and interest due (e.g., accounts payable) − and provides a better
comparative analysis of proprietary fund reserves for budget purposes than does the presentation of retained earnings as presented in the
audited financial statements. In addition, budgeting capital outlay as expenditures for budgetary purposes allows the proposed capital
purchases to be reviewed and authorized by City Council each year.

FUND ACCOUNTING

The City utilizes fund accounting procedures to prepare the annual operating budget. By definition, a "fund" is a distinct fiscal entity,
accounting for receipts and disbursements that are for specific activities. A fund is a self-balancing set of accounts, in which assets equal
liabilities plus fund balance. The City primarily uses the following fund types:
Governmental funds - Governmental fund types are those funds through which most governmental functions of the City are financed. The

● General Fund – the general operating fund of the City, used to account for and report all financial sources not accounted for and
reported in another fund. Typical governmental functions, such as police, fire, library, streets, parks, and administration, are funded in the
General Fund.
● Special Revenue Funds – these funds are used to account for and report proceeds of specific revenue sources that are restricted or
committed to expenditure for specified purposes, other than debt service or capital projects.
● Debt Service Funds – used to account for and report financial resources that are restricted, committed, or assigned to expenditure for
principal and interest. The City utilizes two debt service funds.
● Capital Projects Funds – used to account for and report financial resources that are restricted, committed, or assigned to expenditure for
capital outlays, including the acquisition or construction of capital facilities and other capital assets. Funding sources are typically bond
proceeds, operating fund transfers, or impact fees.

Proprietary funds - Proprietary fund types are used to account for operations that are financed in a manner similar to private business
enterprises. The City utilizes the following two types of properietary funds:
● Enterprise Funds – these funds are business-like governmental activities which are intended to be self-supporting and fund the
operation, maintenance, and captial improvments related to the enterprise services.
● Internal Service Funds – these are funds that support internal operations.

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