Page 65 - Ord 866 Adopting a revised Fiscal Year 17-18 and new proposed Fiscal Year 18-19 budget

Section 2 Financial Analysis
Budget 101 Overview

Budgets are prepared on the same basis of accounting that is used in financial statements. The
basis of budgeting refers to when revenues and expenditures are recognized in the
corresponding accounts and reported in financial statements.

Governmental fund types, including the general fund, are budgeted using the current financial
resources measurement focus and the modified accrual basis of accounting.

WHAT IS A FUND BALANCE?

It should be noted that each fund summary ends with a line named “ ending fund balance.”

Fund balance is defined as:
The excess of an entity’ s assets over its liabilities in a fund.
In other words, it is the balance that remains once the fund’ s expenditures have been
deducted from its revenues. In the Town of Westlake, the amount of fund balance for
each fund is dictated by different parameters.

In the case of the General Fund and the Utility Fund, fund balance is defined in the Town’ s
Financial Policies ( see the Appendix). Balances are determined by other parameters such as
bond covenants for other funds. Fund balance is a fundamental barometer of fiscal wellness
and it is important to note that the fund balance for all funds meets every established
requirement.

LONG TERM FORECASTING

Most annual operating budget documents focus on a single 12-month period where spending
and revenue decisions made today will have effects that extend beyond that fiscal year.
Because of that, the Town requires that long-term forecasting be made part of the Annual
Operating Budget document.

The purpose of this is to:
Ensure on-going financial sustainability beyond a single fiscal year or budget cycle
Achieve the Academy’ s mission and vision
Systematically link the annual budget to a multi-year master financial plan.

Should long term forecasts and analysis show that the Town does not have a “positive operating
balance” over the multi-year period, the Finance department shall bring this to the attention of
the Town Manager.

A “ positive operating balance” means that the ending fund balance meets or exceeds the
minimum levels prescribed in the Town’ s reserve policies.

We anticipate the General Fund will maintain its minimum reserve for each of the four fiscal
years beyond the current proposed budget year as shown in the chart below.

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