Page 25 - CityofColleyvilleFY25AdoptedBudget

While the target reserve balance is generally set at three months of operating expenses, the City may increase this target
when large scal challenges, signi cant capital needs, or other emergencies are anticipated. The reserves ensure the City
can meet unexpected nancial needs without disrupting the provision of essential services or long-term goals.

In calculating reserves, the City uses the concept of Available Funds rather than Fund Balance. Available Funds are
de ned as those items readily convertible to cash, less liabilities and encumbrances. Items such as inventories and
unrealized gains or losses on investments are excluded from Available Funds. Inventories are maintained at stable levels
from year to year and are not available for appropriation, while unrealized investment changes are excluded because the
City generally holds its investments to maturity.

Reserves greater than the three-month target are generally transferred to capital project funds, used for capital items, or
saved for future one-time expenses, depending on the City’s current and future needs.

General and Administrative Charges
The General Fund is compensated by enterprise funds for administrative services such as management, nance, and
personnel. The City will also recover allowable indirect costs from grants to offset administrative costs.

Grant-in-Aid Policy
Federal and state assistance is evaluated based on:
Community bene t.
Future nancial impact and local funding requirements.
Alignment with current operations and future plans.

Grants are expected to cover their share of City administrative costs through an indirect cost rate, where applicable.

Capital Acquisition/Improvement Policy
The City plans for capital replacements and improvements through an annually updated ve-year Capital Improvement
Plan (CIP). Capital replacements are budgeted in department operating budgets, limited to items no longer functional,
repairable, or safe. Major capital projects may use debt nancing, with repayment schedules designed to align with the
asset's useful life. The City employs a pay-as-you-go approach for minor capital replacements, passing a portion of utility
extension costs to developers. Capital projects over $50,000 are prioritized based on asset condition, usage, classi cation,
available funding, alignment with the City’s long-term vision, project bene ts, and risk management.

Debt Policies
The City follows prudent debt management, preferring pay-as-you-go nancing where possible. Debt is issued only for
capital projects and is structured with level repayment schedules. The City avoids balloon payments, and any revenue
bonds are issued with a coverage ratio of at least 1.25 times the average annual principal and interest requirements. All
debt issuances are carefully matched to project needs, and any required arbitrage rebates are calculated annually.

Accounting and Auditing Policy
The City of Colleyville adheres to GAAP and follows the standards set by the Governmental Accounting Standards Board
(GASB). The City's accounting practices include:

Modi ed accrual accounting for governmental funds, ensuring revenues are recognized when measurable and
available, and expenditures when liabilities are incurred.
Full accrual accounting for proprietary funds, recognizing revenues when earned and expenses when incurred.

The City undergoes an annual audit by an independent CPA rm to assess nancial statements' accuracy and
compliance with GAAP. An audit committee meets periodically throughout the year to oversee the audit process, with
the results presented to the City Council and posted on the City's website. Any audit ndings are transparently reported
and addressed by management.

The City maintains internal controls designed to prevent fraud and ensure nancial accuracy. These controls are reviewed
by the Finance Department and the City Manager's Of ce, which have the authority to conduct internal reviews. Fraud
prevention is integrated within the internal control framework.

Budget monitoring is conducted monthly by the Finance Department and department heads, with regular
presentations made to the City Council. The City complies with all federal and state regulations regarding grant
management, and audit reports are publicly available online.

City of Colleyville | Budget Book 2025 Page 25