Page 72 - City of Westlake FY20 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.

Modified Accrual Basis,
• Revenues are recognized in the period when they became available and measurable
• Expenditures are recognized when the liability is incurred

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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