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The basis of accounting used for preparation of the County’s annual operating budget and CIP is different from the basis of accounting used to prepare the County’s annual audited financial statements.

Definitions:

The term “basis of accounting” is used to describe the timing of recognition for financial transactions—i.e., when the effects of transactions or events should be recognized. The basis of accounting used for purposes of financial reporting in accordance with GAAP is not necessarily the same basis used in preparing the annual operating budget document.

Basis of Accounting for Financial Statements

The modified accrual basis of accounting is used for governmental funds. Under this basis of accounting, revenues are recognized when the revenues are both measurable and available to finance expenditures of the current fiscal period. “Measurable” means the amount of the transaction can be determined, and “available” means collectible within the current period or soon enough thereafter to pay liabilities of the current period. Expenditures are generally recognized in the accounting period in which the fund liability is incurred, except for unmatured interest on general long-term debt, which is recognized when due.

The accrual basis of accounting is used for proprietary funds. Under this basis of accounting, revenues are recognized when earned and expenses are recognized when liabilities are incurred.

Basis of Accounting for Annual Operating Budget

The modified accrual basis of accounting is used for governmental funds, with the following exceptions:

  • operating transfers in are classified as revenues and operating transfers out are classified as expenditures in the annual operating budget.
  • changes in the fair value of investments are not treated as adjustments to revenues in the annual operating budget.

The accrual basis of accounting is used for proprietary funds, with the following exceptions:

  • property tax revenues are recognized as revenue in the year collected, and not the year billed, in the annual operating budget.
  • operating transfers in are classified as revenues and operating transfers out are classified as expenses in the annual operating budget.
  • changes in the fair value of investments are not treated as adjustments to revenues in the annual operating budget.
  • accrued vacation and sick pay benefits are not recognized as proprietary fund expenses in the annual operating budget.
  • debt service and capital lease principal payments are treated as expenses in the annual operating budget.
  • debt service interest costs are recognized when due, and not when incurred, in the annual operating budget.
  • depreciation expense is not recognized in the annual operating budget.
  • capital purchases are recognized as expenses in the annual operating budget.

Open encumbrances for outstanding purchase orders do not lapse at the end of the fiscal year and continue as an obligation of the prior year budget.