Governmental Accounting Finance Budget “101”

1. Governmental Accounting FinanceBudget “101”

2. Topics for Discussion • Generally Accepted Accounting Principles (GAAP) • Basis of Accounting • Fund Accounting • Governmental Budgeting • Property Taxes • Bond Issuance

3. Generally Accepted Accounting Principles • Common standards and procedures set by policy boards used to record and report accounting information and compile financial statements

4. Basis of Accounting • Determined by when transactions are recorded in the financial statement • 4 Bases • Cash • Accrual • Modified Accrual • Budgetary

5. Budgetary Basis of Accounting Cash Basis of Accounting • Transactions recorded when cash is received and disbursed • Easy to understand • Not GAAP compliant for governmental financial statements • Used for budget preparation • Not GAAP compliant for governmental financial statements

6. Modified Accrual Basis of Accounting Accrual Basis of Accounting • Used to prepare government-wide & fund financial statements • Revenue recorded when earned or expected to be realized • Expenses recorded when incurred or goods/services used • Cash exchange is not a factor • GAAP compliant • Used to prepare fund financial statements • Cross between Cash Basis of Accounting and Accrual Basis of Accounting • Revenue recorded when measurable &available to pay current expenses • Expenditures recorded in period the liability is incurred • GAAP compliant

7. Fund Accounting • Consists of financial statements for governmental accounting entities (Funds) • The number of separate entities (funds) varies by agency • Legal requirements • Management judgement • City of Friendswood uses 19 separate funds for financial reporting

8. City of Friendswood Funds Listing • GENERAL FUND • POLICE INVESTIGATION FUND • FIRE/EMS DONATION FUND • COURT SECURITY/TECHNOLOGY FUND • TDRA GRANT FUND • SIDEWALK INSTALLATION FUND • PARK LAND DEDICATION FUND • STREETS IMPROVEMENT FUND • ECONOMIC DEVELOPMENT IMPROVEMENTS FUND • TAX DEBT SERVICE FUND • GO BOND CONSTRUCTION FUNDS • VEHICLE REPLACEMENT FUND • WATER & SEWER FUND • 2006 WATER & SEWER BOND CONSTRUCTION FUND • 2009 WATER & SEWER BOND CONSTRUCTION FUND • 2016 WATER & SEWER BOND CONSTRUCTION FUND • WATER & SEWER CIP/IMPACT FEE FUNDS • WATER & SEWER REVENUE DEBT SERVICE FUND • 1776 PARK TRUST FUND City of Friendswood uses, both, Accrual Basis of Accounting and Modified Accrual Basis of Accounting.

9. City’s Budget Process • December – January (Multi-Year Financial Plan Update) • February – March (Departmental Narratives & Goals Determined) • April (Departmental Decision Package Submission) • May (Current Services Budget “Scrubbing”) • June (Revenue Projections) • July (Tax Rate Calculations & Property Tax Revenue Projections) • August (Proposed Budget Delivered to City Council) • September (Budget Work Sessions) • October (Budget and Tax Rate Adoption)

10. Property Tax Rate & Levy • Certified Property Values • Galveston County received in Late July / Harris County received in September • Net Taxable Value = Appraised value less exemptions • Effective Tax Rate generates same levy on properties taxed in current and prior tax years. • Total Tax Rate has 2 parts • Debt Service Rate and Maintenance & Operations Rate • Friendswood’s tax rate is $0.5324 (I&S Rate = $0.0952 and M&O Rate = $0.4372) • Debt Service Rate is determined 1st • Set to meet principal and interest payments on outstanding G.O. debt • Debt Service Rate = Levy needed / Net taxable property value • Maintenance & Operations Rate is based levy needed for City operations.

11. Financial Transparency • https://www.ci.friendswood.tx.us/budget-and-financial-reports • City of Friendswood is a great source of financial information! • Financial Policy • Comprehensive Annual Financial Reports • Adopted Annual Budgets • Debt Information

12. Questions???