Page 57 - Southlake FY20 Budget

Budget 101

Fund Accounting
Funds are unique to governmental type agencies. In the corporate world, “Funds” do not exist. The company receives
revenues and writes checks to pay for its expenses and reports them for the company as a whole. Governments handle
this process differently.

The City of Southlake has 53 funds with specific purposes which are defined by federal, state, or local laws. They
include the General Fund which is used for general City operations, the Utility Fund which is used to support the City’s
water, sewer, drainage, and solid waste service, and a multitude of Special Revenue and Capital Project Funds. Simply
stated, funds are set up like separate companies which must operate under specific parameters.

For example, the City receives $0.02 of sales tax for every dollar spent in our city limits. One of those pennies goes to
the General Fund and can be spent on general operating costs, like supplies, salaries, and general maintenance. The
other penny is split between our Crime Control and Prevention District (CCPD), the Community Enhancement and
Development Corporation (CEDC), and the Southlake Parks Development Corporation (SPDC). These three units of the
City of Southlake were voted on by the residents, but state law determines how that money is spent. The City can only
use it for the purposes outlined in the original referendum presented to the voters, so the separate funds were set up
to account for the revenues and expenditures of each unit.

In another example, the City receives proceeds from bonds issued for various projects. The Official Statement for a
bond issue outlines how much money the City will receive, how that money will be repaid, and on what the money
can be spent. This document is legally binding on City officials and is enforced by federal, state, and local laws. If the
Official Statement says we received $12,000,000 for roadway improvements, City Council and management may not
opt to spend it on equipment or supplies. The money is recorded in a Capital Project Fund for roadway improvements
and can only be spent on roadway improvements.

Although these examples are for three very specific funds, the same concept of expense restrictions applies to all 54
funds. As a result, reporting revenues and expenses for the City of Southlake includes 54 miniature financial statements
in addition to a Citywide financial statement. It may appear that money is available to spend when in fact the majority
of the money is restricted by law.

What follows is an explanation of the funds themselves and how they contribute to the overall budget.

• General Fund:
The City’s principal operating fund, which is supported by taxes, fees, and other revenues that may be used for
any lawful purpose. This fund accounts for all activity not specifically accounted for in other funds. It includes
such operations as police, fire, engineering, planning, finance and administration. It is City policy to maintain an
undesignated fund balance (reserves) for emergencies or unforeseen circumstances equivalent to 15-25% of planned
expenses.

• Strategic Initiative Fund:
This fund was created in 2006 for the purpose of taking fund balance reserves in excess of the City identified
optimal fund balance level and using them for one-time expenditures for high-impact projects such as infrastructure
maintenance, community enhancement, technology and capital acquisition.

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