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account for certain assets and liabilities of the government funds not
recorded directly in those funds. Governmental funds are used to account
for the government’s general government activities and include the
General, Special Revenue, Debt Service, and Capital Project funds.

b. Governmental fund types use the flow of current financial resources
measurement focus and the modified accrual basis of accounting. Under
the modified accrual basis of accounting revenues are recognized when
susceptible to accrual (i.e., when they are “measurable and available”).
“Measurable” means the amount of the transaction can be determined and
“available” means collectible within the current period or soon enough
thereafter to pay liabilities of the current period. Substantially all revenues
are considered to be susceptible to accrual. Ad Valorem, sales, franchise,
and other tax revenue recorded in the General Fund and Ad Valorem tax
revenues recorded in the Debt Service Fund are recognized under the
susceptible to accrual concept. Licenses and permits, charges for
services, fines and forfeitures, and miscellaneous revenues (except
earnings on investments) are recorded as revenue when received in cash,
because they are generally not measurable until actually received.
Investment earnings are recorded as earned since they are measurable
and available. Expenditures are recognized when the related fund liability
is incurred, if measurable, except for principal and interest on general long
term debt, which are recorded when due, and compensated absences,
which are recorded when payable from currently available financial
resources.

c. The City utilizes encumbrance accounting for its governmental fund types,
under which purchase orders, contracts and other commitments for the
expenditures of monies are recorded in order to reserve that portion of the
applicable appropriation.

d. The City’s Proprietary Fund types are accounted for on a flow of economic
resources measurement focus and use the accrual basis of accounting.
Under this method, revenues are recorded when earned and expenses
are recorded at the time liabilities are incurred.

2. The City’s annual budget shall be prepared and adopted on a basis consistent
with the modified accrual and accrual basis for all governmental and proprietary
funds except the capital projects funds, which adopt project-length budgets.
Also, depreciation of fixed assets is not recognized in proprietary fund budgets.
All annual appropriations lapse at fiscal year end.

BUDGET ADMINISTRATION

1. All expenses of the City shall be made in accordance with the adopted annual
budget. The department level is the legal level of control enacted by the City’s

City of Azle 2020-2021 Budget 24