Page 92 - CityofWataugaAdoptedBudgetFY24

BUDGET SUMMARY

FINANCIAL PLAN

PURPOSE OF FINANCIAL PLAN

The main purpose of a financial plan is to guide the City in financing cost effective
services, programs and capital needs, while focusing on a stabilized tax levy and
appropriate levels for fees and service charges as prescribed by approved financial
objectives. The annual audit, internal audits, and review of Monthly Financial Reports
assure the compliance of financial objectives.

Basis of Accounting and Budgeting

Basis of Accounting

The city’s accounting records for general governmental operations are maintained on a
modified accrual basis according to Generally Accepted Accounting Principles (GAAP).
Revenues are recognized in the accounting period in which they become both
measurable and available to finance expenditures of the fiscal period. "Measurable"
means the amount of the transaction can be determined and "available" means collectible
within the current period or soon enough thereafter to be used to pay liabilities of the
current period.

Proprietary funds use the accrual basis of accounting. Under this method, revenues are
recorded when earned (for example, water & sewer and drainage utility fees are
recognized as revenue when bills are produced) and expenses are recorded when a
commitment is made (e.g., through a purchase order).

Basis of Budgeting

Basis of budgeting refers to the methodology used to include revenues and expenditures
in the budget. The City of Watauga budgets on a cash basis. The City does not budget
for non-cash items such as depreciation. The revenues and expenditures are assumed
to be collected or spent during the period appropriated. Using this assumption, the current
year revenues are compared to expenditures to ensure that each fund has sufficient
revenues to cover a revenue shortfall. The City’s operating budget is adopted on an
annual basis (the fiscal year begins with the first day in October and ends on the last day
of September), with all appropriations lapsing at fiscal year-end. Capital project funds
and grant funds have multi-year budgets. Outstanding encumbrances at fiscal year-end
are re-appropriated by Council ordinance and carry-over to the following fiscal year.

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