Page 70 - N. Richland Hills General Budget

INTRODUCTION

Accounting Basis

The city’s finances are accounted for in accordance with generally accepted accounting principles (GAAP) as
established by the Governmental Accounting Standards Board (GASB). The city uses modified accrual
accounting for governmental funds. Revenues are recognized as soon as they are both measurable and
available. Revenues are considered to be available when they are collectible within the current period or soon
enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be
available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are
recorded when a liability is incurred, as under accrual accounting.

Proprietary Funds are accounted for using the accrual accounting basis. Revenues are recognized when they
are earned and are measurable by the city, and expenses are recognized as incurred. Revenues are recorded
when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash
flows.

Budgetary Basis

The City Council adopts an annual legal budget, which covers the Governmental Funds, Enterprise and
Internal Service Funds. All appropriations lapse at fiscal year-end with the exception of capital projects, which
carry forward to completion of the project. The budgets for Governmental Funds are prepared on the modified
accrual basis, which is the same as the basis of accounting. Enterprise and Internal Service Funds are
prepared on the modified accrual basis and differ from the accounting basis by recognizing debt principal
payments, capital outlays as expenditures, and compensated absences as payments come due. Additionally,
depreciation is not included as a budgetary expense.

The City utilizes encumbrance accounting for Governmental and Proprietary funds, under which purchase
orders, contracts, and other commitments for the expenditure of monies are recorded to reserve a portion of
the applicable appropriation. Outstanding commitments for annual budgets at fiscal year-end are re-
appropriated and honored in the subsequent fiscal year through the Revised Budget. Outstanding
commitments for capital projects are rolled forward through project completion.

Budgetary level of control is exercised at the departmental level. Departments are authorized to make transfers
within their departments and between departments by completing a budget adjustment form and receiving
approval from the City Manager’s Office. The City Manager is authorized to make inter-departmental and inter-
fund transfers during the fiscal year as deemed necessary in order to avoid over-expenditure of particular
accounts.

GOALS, OBJECTIVES, AND PERFORMANCE MEASURES

The Annual Budget includes reporting of the operational goals, objectives and performance measures for each
department in relation to the City-wide goals as established by the City Council. Citywide goals are set by City
Council on a biannual basis. Each department is responsible for creating goals and objectives that align with the
City-wide goals and to track progress in achieving these goals and objectives through appropriate performance
measures focusing on efficiency, effectiveness, and outcomes. This information assists management in the
effective allocation of resources to meet the City-wide goals as established by the City Council.

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