Preliminary Official Statement (1996)

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Summary of Significant Accounting Policies The Financial Reporting Entity. The City of Tustin was incorporated in 1927 as a "General Law" City governed by an elected five-member city council. As required by generally accepted accounting principles, these financial statements present the City of Tustin (the primary government) and its component units. The component units discussed below are included in the City's reporting entity because of the significance of their operational or financial relationship with the City. These entities are legally separate from each other. However, the City of Tustin elected officials have a continuing full or partial accountability for fiscal matters of the other entities. The financial reporting entity consists of: (1) the City (2) organizations for which the City is financially accountable and (3) organizations for which the nature and significance of their relationship with the City are such that exclusion would cause the City's financial statements to be misleading or incomplete. An organization is fiscally dependent on the primary government if it is unable to adopt its budget, levy taxes or set rates or charges, or issue bonded debt without approval by the primary government. In a blended presentation, a component units' balances and transactions are reported in a manner similar to the balances and transactions of the City. Component units are presented on a blended basis when the component unit's governing body is substantially the same as the City's or the component unit provides services almost entirely to the City. Blended Component Units. The Tustin Community Redevelopment Agency was established October 20, 1976 pursuant to the State of California Health and Safety Code, Section 33000, entitled "Community Redevelopment Law". Its purpose is to prepare and carry out plans for improvement, rehabilitation and redevelopment of blighted areas within the territorial limits of the City of Tustin. The City provides management assistance to the Agency, and the members of the City Council also act as the governing body of the Agency. The separate financial statements of the Tustin Redevelopment Agency may be obtained from the City of Tustin Finance Department located in the Tustin Civic Center. The City of Tustin Water Corporation was incorporated March 3, 1980 under the non-profit corporation law of the State of California. Its purpose is to provide financial assistance to the City of Tustin by acquiring, constructing and operating or providing for the operation of water facilities. The Corporation's original governing body was appointed by the City Council. The City makes annual lease payments to the Corporation, which are used for debt service on the Corporation's bonds. Separate financial statements for the City of Tustin Water Corporation are not issued. Description of Funds and Account Groups: 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 by providing a separate set of self-balancing accounts which comprise its assets, liabilities, equity, revenues and expenditures. The various funds and account groups are defined as follows: Governmental Fund Types: The General Fund is used to account for all financial resources except those required to be accounted for in another fund. Special Revenue Funds are used to account for the proceeds of specific revenue sources that are restricted by law or administrative action for specified purposes. B-105