Page 66 - CityofSouthlakeFY25AdoptedBudget

Basis of Accounting

The City of Southlake utilizes the modified accrual basis of accounting which is a method of accounting for
revenues and expenses when earned or incurred instead of when cash is received or spent.

Basis of Budgeting

The City of Southlake’s basis of budgeting for its major fund groups (General Fund, Utility Fund, Storm
Water Utility Fund, Southlake Parks Development Corporation Fund, Crime Control & Prevention District
Fund and Tax Increment Finance District Fund) and for all Special Revenue Funds is modified accrual, per
the Generally Accepted Accounting Principles (GAAP).

Revenues are budgeted according to when they are both measurable and available. Revenues are considered
to be available when they are collected within the current period, or soon enough thereafter to pay liabilities
Budget Basics
of the current period. The City considers property taxes, franchise taxes, licenses, and interest associated
with the current fiscal period susceptible to accrual if they are collected within 60 days of the end of the
current fiscal period. Only the portion of special assessments receivable due within the current fiscal period
is considered to be susceptible to accrual as revenue of the current period. All other revenue items are
considered to be measurable and available only when cash is received.

Expenditures are budgeted according to when the liability is incurred, regardless of the timing of related cash
flow. The exceptions are debt service, compensated absences, claims and judgments, which are budgeted
as expenditures according to when the payments are due. The City’s basis of budgeting is the same as the
basis of accounting, as reflected in the Popular Annual Financial Report.

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 over 50 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,
Debt Service Funds, 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, the Community
Enhancement and Development Corporation, and the Southlake Parks Development Corporation. 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 how 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.

66 FY 2025 City of Southlake | Budget Book