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<br />City of Paris, Texas <br />Notes to Financial Statements <br />September 30,2006 <br /> <br />II. Reconciliation of Government-wide and Fund Financial Statements (Continued) <br /> <br />B. Explanation of Certain Differences Between the Governmental Fund Statement of Revenues, <br />Expenditures, and Changes in Fund Balances and the Government-Wide Statement of Activity <br />( Continued) <br /> <br />allocated over their estimated useful lives and reported as depreciation expense." The details of <br />this $2,055,166 difference are as follows: <br /> <br />Capital outlay <br />Depreciation expense <br />Net adjustment to increase net changes in fund balances - <br />total governmental funds to arrive at changes in net assets <br />of governmental activities <br /> <br />$ 4,550,646 <br />(2,495,480) <br /> <br />$ 2,055,166 <br /> <br />Another element of that reconciliation states that "the issuance of long-term debt (e.g. bonds, <br />leases) provides current financial resources to governmental funds, while the repayment of the <br />principal of long-term debt consumes the current financial resources of governmental funds. <br />Neither transaction, however, has any effect on net assets. Also, governmental funds report the <br />effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas <br />these amounts are deferred and amortized in the statement of activities." The details of this <br />$854,461 difference are as follows: <br /> <br />Amortization of issuance costs <br />Principal repayments <br />Net adjustment to increase net changes in fund balances - <br />total governmental funds to arrive at changes in net assets <br />of governmental activities <br /> <br />$ (10,497) <br />864,958 <br /> <br />$ 854,461 <br /> <br />III. Stewardship. Compliance and Accountability <br /> <br />A. Budgetary Information <br /> <br />Annual budgets are adopted on a basis consistent with generally accepted accounting principles <br />for all governmental funds except the capital projects funds, proprietary funds, and library trust <br />funds. The budget for the Capital Projects Funds is legally adopted for specific projects and may <br />exceed one year. Formal budgetary integration is not employed for the proprietary funds. The <br />City adopts an annual, informal budget as a financial plan for all proprietary funds. The library <br />trust funds include non-budgeted financial activities, which are not subject to an appropriated <br />budget and the appropriation process or to any legally authorized non-appropriated budget review <br />and approval process. At the close of each fiscal year, any unencumbered appropriation balance <br />(appropriations including prior year encumbrances less current year expenditures and <br />encumbrances) lapse or revert to the undesignated fund balance. <br /> <br />At least thirty days prior to the beginning of each fiscal year, the City Manager submits to the City <br />Council a proposed budget for the fiscal year beginning on the following October 1. The <br />operating budget which represents the financial plan for the ensuing fiscal year includes proposed <br />expenditures and the means of fmancing them. Public hearings are conducted at which all <br />interested persons' comments concerning the budget are heard. <br /> <br />33 <br />