Obtain a copy of a recent operating budget document of a government.* Familiarize yourself with the organization of the operating budget document; read the letter of transmittal or any narrative that accompanies the budget.

   Budgetary practices may differ from the GAAP reporting model as to basis, timing, perspective, and entity. GASB standards (Codification, Section 2400. 110–199) define these differences as:

    1. Basis differences arising through the employment of a basis of account ing for budgetary purposes that differs from the basis of accounting applicable to the fund type when reporting on the operations in accordance with GAAP.

    2. Timing differences that can result in significant variances between bud getary practices and GAAP may include continuing appropriations, project appropriations, automatic reappropriations, and biennial budgeting.

    3. Perspective differences resulting from the structure of financial information for budgetary purposes. The perspectives used for budgetary purposes include fund structure and organizational or program structure. In addition, some subsidiary perspective, such as nature of revenue source, special projects, or capital and operating budgets, may also be used. The fund structure and individual fund definitions establish which assets, liabilities, equities, and revenue and expenditure/expense flows are recorded in a fund. In the traditional view, budgeting, accounting, financial reporting, and auditing would follow the fund perspective.

    4. Entity differences occur when "appropriated budget" either includes or excludes organizations, programs, activities, and functions that may or may not be compatible with the criteria defining the governmental reporting entity.

Required

Answer the following questions, which aid in assessing the quality of the budget document you are reviewing.**

   Policy Document. Does the operating budget you are reviewing include a coherent statement of entity-wide long-term financial policies and nonfinancial goals and objectives? Does the budget document describe the entity's short-term initiatives that guide budget development for the upcoming year? Does the budget document include a coherent statement of goals and objectives of organizational units? Does the document include a budget message that articulates priorities and issues for the budget for the new year? Does the message describe significant changes in priorities from the current year and the factors that led to those changes?

   Financial Plan. Does the budget document describe all funds that are subject to appropriation? Does the document present a summary of major revenues and expenditures as well as other financing sources and uses? Does the document include summaries of revenues, other financing sources, and expenditures and other financing uses for prior-year actual, current-year budget and/or estimated current-year actual, and proposed budget year? Are major revenue sources described? Are the underlying assumptions for revenue estimates and significant revenue trends explained Does the document include projected changes in fund balances for governmental funds included in the budget presentation, including all balances potentially available for appropriation?

   Does the budget document include budgeted capital expenditures (even if these are authorized in a separate capital budget)? Does the document describe whether, and to what extent, significant and nonroutine capital expenditures or other major capital spending will impact the entity's current and future operating budget? Are financial data on current debt obligations provided, describing the relationship between current debt levels and legal debt limits, and explaining the effects of existing debt levels on current and future operations? Is the basis of budgeting explained for all funds, whether cash, modified accrual, or some other statutory basis?

   Operations Guide. Does the operating budget document describe activities, services, or functions carried out by organizational units? Are objective measures of progress toward accomplishing the government's mission, as well as goals and objectives, provided for specific units or programs Does the budget document include an organizational chart for the entire organization? Is a schedule(s) or summary table provided giving personnel or position counts for prior, current, and budget years?

*Contact the budget officer of the city, town, or county of your choice and request a copy of the most recent available operating budget document. 

**These questions are paraphrased from the awards criteria established by the Government Finance Officers Association for its Distinguished Budget Presentation Awards Program.