Annual Comprehensive Financial Report 2021

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CITY OF RED OAK, TEXAS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity The City of Red Oak, Texas (the "City") was incorporated in 1949, and operates under a Council- Manager form of government. The accompanying financial statements present the government and its component units, entities for which the government is considered to be financially accountable. Blended Component Units The City of Red Oak Economic Development Corporation, Inc. (Economic Development Corporation) is responsible for collecting and disbursing the one-half percent sales tax to be used for economic development within and for the benefit of the City. The City Council is the governing board for the Corporation. The members of the Corporation's boardPageP are appointed by the City. The City holds operational responsibility for the Corporation. The Corporation is presented as a governmental fund type and has a September 30 year-end. The City of Red Oak Industrial Development Corporation, Inc. (Industrial Development Corporation) is responsible for collecting and disbursing the one-half percent sales tax to be used for economic development within and for the benefit of the City. The City Council is the governing board for the Corporation. The members of the Corporation's board are appointed by the City. The City holds operational responsibility for the Corporation. The Corporation is presented as a governmental fund type and has a September 30 year-end. Separate financial statements for the component units are not issued. B. Government-wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of Net Position and the statement of changes in Net Position) report information on all of the primary government and its blended component units. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statement. C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. 24
Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within sixty days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, inventories of materials and supplies are considered expenditures when used and debt service expenditures, as well as expenditures related to accumulated unpaid sick pay, are recorded only when payment is due. Property and taxpayer-assessed taxes estimated to be collectible within sixty days after balance sheet date, interest, and expenditure driven grants are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the government. The City reports the following major governmental funds: The General Fund is the City’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The Industrial Development Corporation Fund is responsible for collecting and disbursing the one-half cent sales tax to be used for industrial development within the City. The Economic Development Corporation Fund is responsible for collecting and disbursing the one-half cent sales tax to be used for economic development within the City. The Debt Service Fund accounts for the property tax revenues received which were specifically levied for the purpose of covering debt service requirements. The 2021 Certificates of Obligation Bond Fund is used to account for the proceeds from the bonds issued for major capital projects. The Parks Improvements Fund is used to account for restricted revenue sources used to improve parks facilities in the City. The City reports the following major proprietary funds: The Utility Fund accounts for the activities of the sewage treatment plant, sewage pumping stations and collection systems, and the water distribution system. The Storm Water Drainage Fund accounts for the City's storm water revenues and related projects. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are charges between the City's utility function and various other functions of the City. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the utility fund are charges to customers for sales and services and the portion of tap fees intended to recover the cost of connecting new customers to the system. Operating expenses for the utility fund include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the government's policy to use restricted resources first, then unrestricted resources, as they are needed. 25
Page 1: City of Red Oak, Texas Annual Compr
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Page 10 and 11: THE CITY The City of Red Oak (the
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Page 14 and 15: OTHER INFORMATION Independent Audit
Page 16: CITIZENS City Attorney Robert Hager
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Annual Comprehensive Financial Report 2021

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