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ADOPTED | BUDGET

Internal Service Funds - funds designed to account for charging fees to user departments to
recover the full cost of services rendered. The City’s internal service funds include the Equipment
Services Fund, Building Services Fund, Information Services Fund, and the Self Insurance Fund.

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 account level within the City’s financial software.
Transfers of expense budget are allowed within each fund by completing a budget adjustment
form and receiving approval from the Budget Office and 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

94 NRH | TEXAS