Page 93 - CityofWataugaAdoptedBudgetFY24

BUDGET SUMMARY

Basis of Budgeting vs. Basis of Accounting

The basis of budgeting differs from the basis of accounting only by the assumptions that
are made in regard to the timing of recognition of revenues and expenditures. The budget
assumes that all revenues and expenditures, as well as the associated cash, will be
expended or received during the budget period. Conversely, the basis of accounting only
recognizes revenues when they become both measurable and available when incurred.
Cash is not necessarily received and expended at the same time.

Each year the City of Watauga completes its annual audit and presents the Annual
Comprehensive Financial Report (ACFR). The Annual Comprehensive Financial Report
(ACFR) shows the status of the City's finances on the basis of "generally accepted
accounting principles" (GAAP). We develop our budget to follow this basis of accounting
to provide greater efficiency during our annual audit.

Basis of Presentation– Fund Accounting

For financial reporting purposes, all City accounts are organized based on funds, or
account groups, of which is considered a separate accounting entity. The operations of
each fund are accounted for with a separate set of self-balancing accounts, which
comprise its assets, liabilities, fund balance/retained earnings, revenues, and
expenditures/expenses. Using these accounts, the revenues and expenditures are
budgeted and approved before the beginning of each fiscal year by an ordinance passed
by the City Council.

Understanding the fund structure is an important part of understanding the City’s finances.
The City funds can be divided into two categories: governmental funds and proprietary
funds. The City’s major funds are the General Fund and the Water and Sewer Fund.

The various funds are primarily grouped into two types, governmental fund and
proprietary fund types. Governmental funds finance most of the City's functions and
include, but are not limited to, the General Fund, Debt Service Fund, Special Revenue
Fund, and Capital Projects Funds. Proprietary funds are used to account for the City's
organizations and activities which are like those often found in the private sector.

The Financial Structure of the City is shown on the following page and is followed with a
description of each fund.

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