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City of Mansfield Annual Budget and Service Program Fiscal Year 2025-2026 Table of Contents

Basis of Budgeting and Accounting

The City of Mansfield prepares and adopts its annual budget using accounting principles that closely align with Generally
Accepted Accounting Principles (GAAP). The basis of budgeting refers to the timing of when revenues and expenditures
are recognized for financial purposes. Mansfield applies different bases of budgeting depending on the type of fund.

Governmental Fund Types: Modified Accrual Basis
Governmental funds (General Fund, Special Revenue Funds, Capital Projects Funds, and Debt Service Funds) are
budgeted and accounted for using the modified accrual basis of accounting. The modified accrual basis is a combination
of cash and accrual accounting.

Definition – Modified Accrual Basis:
Revenues are recognized when they are both measurable and available to finance current period operations. "Measurable"
means that amounts can be reasonably determined within the current period. "Available" means that amounts are
collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period.
Expenditures are recognized when the liability is incurred, except for certain long-term items such as debt service and
compensated absences, which are recognized when due.

Under this basis:

Revenues such as sales tax, property tax, and fees are recorded when they are expected to be received soon enough
to pay current obligations.
Capital outlay is budgeted and recorded as an expenditure in the year the project is funded.
Depreciation and amortization are not budgeted in governmental funds.

This approach focuses on near-term financial resources and is appropriate for governmental activities that are primarily
tax-supported.

The Capital Project Fund is presented on a budgetary basis. State Law requires an adequate budget to pay for the entire
construction contract and is appropriated in the period in which the contract is entered; therefore, expenditures are
presented on a budgetary basis as opposed to a cash flow basis.

Funding sources for the Capital Improvement Program are also presented on a budgetary basis. The revenue sources are
presented in the period that the funding will be realized in order to provide continuity between the operating budget and
the capital budget. As a result of presenting on a budgetary basis, funding sources may not equal budgeted expenditures
in each period, creating a positive fund balance as cash accumulates for larger expenditures in later years.

Proprietary Fund Types: Full Accrual Basis
Proprietary funds (Water/Sewer Utility Fund and Environmental Services Fund) are budgeted on a full accrual basis.

Definition – Full Accrual Basis:

Revenues are recognized when they are earned , and expenses are recognized when they are incurred , regardless of when
cash is received or paid.

Under this basis:

Revenues are recorded when services are provided, not just when cash is collected.
Expenses are recorded when the obligation is created, even if payment occurs later.
Long-term assets and liabilities are included.
Depreciation is recognized as an expense.

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