The following information was drawn from a county’s general fund budgets and accounts for a particular year (in millions):
• For purposes of budgeting, the county recognizes encumbrances as the equivalent of expenditures in the year established; for financial reporting, it recognizes expenditures when the goods or services are received, as required by GAAP.
• For purposes of budgeting, it recognizes supplies expenditures when the supplies are acquired; for financial reporting, it recognizes the expenditure when the supplies are consumed.
• For purposes of budgeting, it recognizes wages and salaries when paid; for financial reporting, it recognizes the expenditures when the employees perform their services.
• For purposes of budgeting, it recognizes as revenues only taxes actually collected during the year; for financial reporting, it recognizes taxes expected to be collected within the first sixty days of the following year.
1. Prepare the following four separate schedules in which you compare the budget-to-actual results and compute the budget variance. You need to present only the total revenues, total expenditures, and excess of revenues over expenditures.
a. Actual results on a budget basis to the amended budget
b. Actual results on a budget basis to the original budget
c. Actual results as would be reflected in the financial statements to the amended budget restated so that it is on a financial reporting basis
d. Actual results as would be reflected in the financial statements to the original budget restated so that it is on a financial reporting basis
2. The county executive has boasted that the ‘‘better than anticipated results’’ (based on the comparison of the schedule that appears in the financial statements) are evidence of ‘‘sound fiscal management and effective cost controls’’ on the part of the county administration. Do you agree?
3. Which of the three schedules best demonstrates legal compliance? Explain.
4. Which schedule best demonstrates effective management? Explain.