Page 73 - City of Westlake FY20 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 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 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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