Prospect resident Mickey Locklear became concerned when reviewing the City
Prospect resident Mickey Locklear became concerned when reviewing the City of Prospect annual report because the amount of property taxes reported for the governmental funds in the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances differs significantly from the amount of property taxes reported for governmental activities in the government-wide Statement of Activities. The resident is certain an error has occurred and calls it to the attention of Mayor Carol Hunt, who immediately calls in the chief accountant, Sheila Prevatte, to explain how such an error has occurred. Can such a discrepancy exist under generally accepted accounting principles applicable to governments? Explain.

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