Page 64 - Ord 866 Adopting a revised Fiscal Year 17-18 and new proposed Fiscal Year 18-19 budget

Section 2 Financial Analysis
Budget 101 Overview

BASIS OF ACCOUNTING & BUDGETING

The Town of Westlake utilizes the modified accrual basis of accounting and budgeting for
governmental funds; and full accrual for proprietary funds. The term "basis of
accounting/ budgeting" is used to describe the timing of recognition, that is, when the effects of
transactions or events should be recognized. This refers to the conversions for recognition of
costs and revenue in budget development and in establishing and reporting appropriations that
are the legal authority to spend or collect revenues.

The Town’ s accounting system is organized and operated on a fund basis. A fund is a group of
functions combined into a separate accounting entity having its own assets, liabilities, equity,
revenue and expenditures/ expenses.

The budget is fully reconciled to the accounting system at the beginning of the fiscal year, and
in preparing the CAFR at the end of the fiscal year. GAAP adjustments are made to reflect
balance sheet requirements and their effect on the budget. These include changes in
designations and recognition, via studies and analysis, of accrued liabilities.

Amounts needed for such long-term liabilities as future payoff of accumulated employee
vacation is budgeted as they budgeted as projections and once recognized are adjusted for
actual amounts.

In the Modified Accrual Basis,
revenues are recognized in the period when they became available and
measurable
expenditures are recognized when the liability is incurred

In the Accrual Basis,
revenues are recorded when earned
expenses when the liability is incurred

The basis of budgeting and accounting is shown in the chart below
Annual Audited
Operating Budget Financial Statements
GOVERNMENTAL FUNDS
General Fund Modified Accrual Modified Accrual
Special Revenue Funds Modified Accrual Modified Accrual
Debt Service Funds Modified Accrual Modified Accrual
Capital Project Funds Modified Accrual Modified Accrual
Academic Funds Modified Accrual Modified Accrual

PROPRIETARY FUNDS
Enterprise Funds Full Accrual Full Accrual
Internal Service Funds Full Accrual Full Accrual

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