Question: Shown below is an excerpt from a note headed Budgets

Shown below is an excerpt from a note, headed Budgets, from the City of Raleigh, North Carolina, annual report for the fiscal year ended June 30.
1. The note distinguishes between the “budget ordinance” and the “more detailed line item budgets.”
a. Provide examples of expenditures that you would expect to see in the budget ordinance.
b. Provide examples of expenditures that you would expect to see in the line-item budgets.
2. Why do you suspect that budgetary control is not exercised in trust and agency funds?
3. Generally accepted accounting principles require that governments reconcile differences between the entity’s budget practices and GAAP in either the financial statements themselves or in accompanying notes. Raleigh’s budget-to-actual comparison contained no such reconciliation. Why do you think a reconciliation was also omitted from the notes?
4. Explain how Raleigh’s appropriation process for its general fund would differ from that for its capital projects fund. How would this difference most likely affect the city’s budgetary entries?
5. The schedule included in the notes shows the original budget, total amendments, and the final budget. Where would a reader look to compare actual general fund expenditures with budgeted expenditures?
Note from City of Raleigh Annual Report Budgetary control is exercised in all funds except for the trust and agency funds. The budget shown in the financial statements is the budget ordinance as amended at the close of the day of June 30. The city is required by the General Statutes of the State of North Carolina to adopt an annual balanced budget by July 1 of each year.
The General Statutes also provide for balanced project ordinances for the life of projects, including both capital and grant activities, that are expected to extend beyond the end of the fiscal year. The city council officially adopts the annual budget ordinance and all project ordinances and has the authority to amend such ordinances as necessary to recognize new resources or reallocations of budget. As of June 30, the effect of such amendments, less eliminating transfers, is shown below.
All budgets are prepared on the modified accrual basis of accounting, as is required by North Carolina law. Appropriations for funds that adopt annual budgets lapse at the end of the budget year. Project budgeted appropriations do not lapse until the completion of the project.
Budget control on expenditures is limited to departmental totals and project totals as specified in the budget ordinances. Administrative control is maintained through the establishment of more detailed line-item budgets, which correspond to the specific object of the expenditure. All budget transfers, at both the ordinance and the line-item levels, are approved by the city council. The city manager is authorized to transfer line-item budgeted amounts up to $1,000 within a fund prior to their formal approval by the city council.
Encumbrances represent commitments related to unperformed contracts for goods or services. Encumbrance accounting—under which purchase orders, contracts, and other commitments for the expenditure of resources are recorded to reserve that portion of the applicable appropriation—is utilized in all funds. Outstanding encumbrances at year-end for which goods or services are received are reclassified to expenditures and accounts payable. All other encumbrances in the annual budgeted funds are reversed at year-end and are either canceled or are included as re-appropriations of fund balance for the subsequent year. Outstanding encumbrances at year-end in funds that are budgeted on a project basis automatically carry forward along with their related appropriations and are not subject to an annual cancellation andre-appropriation.

View Solution:

Sale on SolutionInn
  • CreatedAugust 13, 2014
  • Files Included
Post your question