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CITY OF PARIS, TEXAS Notes to Financial Statements (Continued) September 30, 2025 1. Summaly of Si %unficant Accounting Policies (Continued) D. Basis of Presentation — Fund Financial Statements (Continued) The City reports the following major governmental funds: The General Fund is the primary operating fund of the City. It accounts for and reports all financial resources of the general government, except those accounted for in other funds. The Debt Service Fund is used to account for the accumulation of resources that are restricted, committed, or assigned for the payment of principal and interest on long-term general governmental obligations. The Capital Projects Fund accounts for the acquisition and construction of the City's major capital facilities, other than those financed by proprietary funds. The City reports nonmajor funds as Other Governmental Funds which include Special Revenue Funds and a Permanent Fund as follows: The Special Revenue Funds are used to account for and report the proceeds of specific revenue sources that are restricted, committed, or assigned to expenditures for specific purposes other than for debt service or capital projects. The Permanent Fund is used to account for and report resources that are restricted to the extent that only earnings and not principal may be used. The City reports the following enterprise funds as one major fund: The Water Fund accounts for the water distribution system as well as the billings and collections for that service. The Sewer Fund accounts for the sewer system as well as the collection activities for that service. The City reports the following fiduciary funds: The Court Costs and Fees Custodial Fund include court costs collected by the City on behalf of the State of Texas, which are remitted to the State quarterly. These assets are excluded from the government -wide financial statements as they cannot be used to support the government's own programs. Forestbrook Public Improvement District (PID) Custodial Fund issued special assessment revenue bonds for major capital improvements. These bonds, which were issued subsequent to year end, will be paid from the special assessments levied by the PID on property owners within the PID's geographical boundaries. The City collects the special assessment payments and makes the debt service payments for the PID. The debt service transactions of a special assessment for which the government is not obligated in any manner are reported in a custodial fund rather than a debt service fund, to reflect the fact that the government's duties are limited to acting as a custodian of funds for the assessed property owners and the bondholders. During the course of operations, the City has activity between funds for various purposes. Any residual balances outstanding at year end are reported as due from/to other funds and advances to/from other funds. While these balances are reported in fund financial statements, certain eliminations are made in the preparation of the government -wide financial statements. Balances between the funds included in governmental activities (e.g., the governmental and internal service funds) are eliminated so that only the net amount is included as internal balances in the governmental activities' column. Similarly, balances between the funds included in business - type activities (e.g., the enterprise fund) are eliminated so that only the net amount is included as internal balances in the business -type activities column. Interfund services provided and used are not eliminated in the process of consolidation. 31