ACCOUNTING SYSTEM AND BASIS OF BUDGETING
Lewisville's accounting and financial reporting system follows the principles established by the Governmental Accounting Standards Board. An annual audit of the City's system is performed by an independent public accounting firm with the subsequent issuance of a Comprehensive Annual Financial Report.
The accounts of the City are organized on the basis of funds or account groups, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts which comprise its assets, liabilities, fund balance/retained earnings, revenues, and expenses/expenditures.
Measurement focus refers to what is being measured and basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurement made, regardless of the measurement focus applied. The Governmental Fund Types use a financial resources measurement focus and the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recorded when susceptible to accrual, i.e. both measurable and available. Available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Expenditures are recorded when the related fund liability is incurred, if measurable. No fund liability or related expenditure is recognized for principal and interest on general obligation bonds until such amounts become due. Accrued vacation and sick leave are recorded when payable from current available financial resources, if material.
Franchise and sales tax revenues are recorded in the General Fund, ad valorem tax revenues are recorded in the General Fund and Debt Service Fund, and restricted purpose fees are recorded in the Special Revenue Fund and are fully accrued. Licenses, permits and inspections; fines, forfeitures and penalties; and miscellaneous revenues (except earnings on investments) are recorded as revenues when received in cash because they are generally not measurable until actually received. Investment earnings are recorded as earned since they are measurable and available.
The City's Proprietary Fund Types are accounted for on a cost of service or "capital maintenance" measurement focus, using the accrual basis of accounting, under which revenues are recognized when earned and expenses are recognized when the related liabilities are incurred.
The budgetary accounting basis follows the basis of accounting except that fund balances that are presented for the City's Proprietary Fund types do not reflect the total equity of the fund but rather only available spendable resources of the current fiscal period. Unexpended appropriations for budgeted funds lapse at fiscal year end. Encumbrance accounting is used for all funds.
