10 - PEDC 2015-2016 ANNUAL AUDIT REPORT

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PARIS ECONOMIC DEVELOPMENT CORPORATION (A Component Unit of the City of Paris, Texas) Notes to the Financial Statements (Continued) September 30, 2016 1. SummarSignificant Accounting Policies (Continued) D. Measurement Focus and Basis of Accounting (Continued) The financial transactions of PEDC are reported in two individual funds in the combined financial statements using the current financial resources measurement focus and the modified accrual basis of accounting. These funds are accounted for by providing a separate set of self - balancing accounts that comprise their assets, liabilities, fund equity, revenues, and expenditures. The focus of the governmental funds' measurement (in the fund statements column) is upon determination of financial position and changes in financial position (sources, uses, and balances of financial resources) rather than upon net income. PEDC considers all revenues available if they are collected within sixty days after year end and expenditures are recognized when the related liability is incurred. E. Budgetary Information Basis of Accounting Annual budgets are adopted on a basis consistent with generally accepted accounting principles for the general fund and the debt service fund. 2. Excess of Expenditures Over Appropriations For the year ended September 30, 2016, expenditures did not exceed appropriations (budget) in any function or line item. F. Assets, Liabilities, and Fund Balance/Net Position 1. Cash and Cash Equivalents Cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. 2. Investments PEDC's investments in the public funds investment pools in Texas (Pools) are reported at an amount determined by the fair value per share of the Pool's underlying portfolio, unless the Pool is 20-like, in which case they are reported at share value. A 20-like Pool is one which is not registered with the Securities and Exchange Commission (SEC) as an investment company, but nevertheless has a policy that it will, and does, operate in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. Financial statements for the Texas CLASS investment pool can be found at TexasClass.com. Information on the Lone Star investments can be found at FirstPublic.com. 3. Net Position Flow Assumption Sometimes PEDC will fund outlays for a particular purpose from both restricted (e.g., restricted bond proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted — net position and unrestricted — net position in the government -wide financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the PEDC's policy to consider restricted — net position to have been depleted before unrestricted - net position is applied.