Fort Walton Beach Council agenda — 03-19-12--special--audit — reading text

account for inventory. Under the consumption method, inventory items are recorded as expenditures during the period inventory is used. A portion of the General Fund balance equal to the inventory amount is considered nonspendable in the fund financial statements to indicate that it is not available for appropriation. 37  3. t. a City of Fort Walton Beach, Florida NOTES TO FINANCIAL STATEMENTS September 30, 2012 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) E. Assets, Liabilities, and Net Assets or Equity (Continued) Restricted Assets Certain resources in the following funds are restricted for specific purposes: in the Debt Service Fund, for the repayment of the Capital Improvement Bonds. Series 2001 and the Capital Improvement Note, Series 2011; in the Utility Fund, for the repayment of the Utility System Revenue Bonds, Series 2005; in the Golf Fund, for the repayment of the Capital Improvement Note. Series 2011; and, customer utility deposits and impact fees received are restricted in the Utilities Fund and Sanitation Fund. Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets roads, bridges, curbs and sidewalks, drainage systems, lighting systems and similar items). are reported in the applicable governmental or business -type activities columns in the government -wide financial statements. Capital assets are defined by the City as assets with an initial cost more than the following: Land All Buildings and improvements S Moot) Infrastructure $ 10, 000 Improvements - other $ 10, 000 Equipment, vehicles, computers $ 1, 000 All Library books In the case of the initial capitalization of general infrastructure assets ( i. e. those reported by governmental activities) the government chose to include all such items regardless of their acquisition date or amount. The government was able to estimate the historical cost for the initial reporting of these assets through various allowable estimating techniques. As the government constructs or acquires additional capital assets each period. including infrastructure assets, they are capitalized and reported at historical cost. The reported value excludes normal maintenance and repairs which are essentially amounts spent in relation to capital assets that do not increase the capacity or efficiency of the item or extend its useful life beyond the original estimate. Donated capital assets are recorded at estimated fair market value at the date of donation. Major outlays for capital assets and improvements are capitalized in proprietary funds as projects are constructed. The amount of interest to be capitalized is calculated by offsetting interest expense incurred from the date of the borrowing until the completion of the project with interest earned on the invested proceeds over the same period. 38 Packet , 4  3. 1. a City of Fort Walton Beach, Florida NOTES TO FINANCIAL STATEMENTS September 30, 2012 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) E. Assets, Liabilities, and Net Assets or Equity ( Continued) Capital Assets ( Continued) property, plant, and equipment of the primary government are depreciated using the straight -line method over the following estimated useful lives: Years Assets 20 -50 Years Buildings 7 -40 Years Improvements other than buildings 30 -40 Years System infrastructure 3 - 10 Years Machinery and equipment Compensated Absences It is the City's policy to permit employees to accumulate eamed but unused vacation and sick leave based on the length of service to the City . All vacation leave is accrued when incurred in the government -wide and proprietary fund financial statements. Sick leave is accrued in the government -wide and proprietary fund financial statements based on a ratio of the sum of sick leave paid over the last several years to the total balance of sick leave at the end of each fiscal year. A liability for the amounts of vacation and sick leave is reported in the governmental fund financial statements only if they have matured, for example. as a result of employee resignations and retirements. Compensated absences of the governmental activities are primarily paid from the General Fund. Lone -Term obligations In the government -wide financial statements, and proprietary fund types in the fund financial statements, long -term debt and other long -term obligations are reported as liabilities in the applicable governmental activities, business -type activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective and straight -line interest methods. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. 39  3. 1. a City of Fort Walton Beach, Florida NOTES TO FINANCIAL STATEMENTS September 30, 2012 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) E. Assets, Liabilities, and Net Assets or Equity ( Continued) Classification of Fund Balance GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, establishes fund balance classifications that comprise a hierarchy based primarily on the extent to which a government is bound to observe constraints imposed upon the use of the resources reported in governmental funds. Fund balance classifications, under GASB 54, are comprised of the following: Nonsnendable — includes amounts that are ( a) not in spendable form. or ( b) legally or contractually required to be maintained intact. The " not in spendable form" criterion includes items that are not expected to be converted to cash, for example: inventories, deposits, prepaid items, and advances to other funds. Restricted — includes amounts that can be spent only for the specific purposes stipulated by external resource providers, constitutionally or through enabling legislation. Restrictions may effectively be changed or lifted only with the consent of resource providers. Committed — includes fund balance amounts that can be used only for the specific purposes that are internally imposed by a formal action ( a Resolution) of the government' s highest level of decision making authority, the City Council. Commitments may be changed or lifted only by the City taking the same formal action ( a Resolution) that imposed the constraint initially. Contractual obligations are included to the extent that existing resources in the fund have been specifically committed for use in satisfying those contractual obligations. Assirined — includes spendable fund balance amounts that are intended to be used for specific purposes that are neither considered restricted or committed. Intent is expressed by ( a) the City Council or ( b) a body ( for example: a budget or finance committee) or official to which the City Council has delegated the authority to assign amounts to be used for specific purposes. This indicates that resources in these funds are, at a minimum, intended to be used for the purposes of that fund. The City Council has delegated authority to the City Manager and Finance Director in accordance with the City' s fund balance policy. 40 aek? 8sis"  3. 1. a City of Fort Walton Beach, Florida NOTES TO FINANCIAL STATEMENTS September 30, 2012 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) c E. Assets, Liabilities, and Net Assets or Equity (Continued) C LL Classification a( Fund Balance ( Continued) m Unas.siened — includes residual positive fund balance within the General Fund which has not been classified within the other above mentioned categories. a Unassigned fund balance may also include negative balances for any governmental fund if expenditures exceed amounts restricted, committed, or assigned for those specific purposes. rvu