Fiscal Year 2013 Recommended Budget Book - Lake County

Financial StructureBasis of Budgeting – Refers to the conventions forrecognition of costs and revenues in budget developmentand in establishing and reporting appropriations, whichare the legal authority to spend or to collect revenues. AllGovernmental Funds are accounted for using themodified accrual basis and all Proprietary Funds areaccounted for by using the accrual basis of accounting.Measurement FocusGovernmental Fund Types are accounted for using thecurrent financial resources measurement focus and themodified accrual basis of accounting. This means thatonly current assets and current liabilities are generallyincluded on the balance sheets. Accordingly, the reportedunreserved fund balances (net current assets) areconsidered a measure of available, spendable, orappropriable resources. Governmental Fund Typeoperating statements present increases (revenues andother financing sources) and decreases (expenditures andother financing uses) in net current assets.Proprietary Fund Types are accounted for on an“income determination” measurement focus.Accordingly, all assets and liabilities are included ontheir balance sheets, and the reported fund equity (totalreported assets less total reported liabilities) provides anindication of the economic net worth of the fund.Operating statements for Proprietary Fund types (on anincome determination measurement focus) reportincreases (revenues) and decreases (expenses) in totaleconomic net worth.Basis of Accounting and Measurement FocusExcept for the Enterprise Fund, Lake County developsthe revenue and expenditure/expense estimates containedin the annual budget in accordance with GAAP. Thebudget for the Enterprise Fund is prepared on an annualbasis and is in conformance with GAAP, except thatcapital outlay expenses are budgeted for managementpurposes and subsequently recorded as fixed assets atyear end. In addition, depreciation expense is notbudgeted.Because the revenue and expenditure/expense estimatesare based on Generally Accepted Accounting Principles(GAAP), it is important for the reader to have anunderstanding of accounting principles as they relate tothese estimates. The following is a brief overview of themeasurement focus and basis of accounting.All Governmental Fund Types are accounted for usingthe modified accrual basis of accounting. Under themodified accrual basis, revenues are recognized whenthey become measurable and available.Primary revenues, including property taxes, specialassessments, intergovernmental revenues, charges forservices and interest are treated as susceptible to accrualunder the modified accrual basis. Other revenue sourcesare considered measurable and available only when cashis received by the County. Expenditures are generallyrecognized under the modified accrual basis of accountingwhen the related fund liability is incurred. Exceptions tothis general rule include: 1) principal and interest ongeneral long-term debt which is recognized when due; 2)accumulated sick pay and accumulated vacation pay,which are not recorded as expenditures until paid; and 3)certain inventories of supplies which are consideredexpenditures when purchased.All Proprietary Funds are accounted for using theaccrual basis of accounting. Their revenues arerecognized when they are earned and their expenses arerecognized when they are incurred.Relationship between Budget and AccountingDuring the year, the accounting system is maintained onthe same basis as the adopted budget. This enablesdepartmental budgets to be easily monitored, monthly,via accounting system reports. Accounting adjustmentsare made at fiscal year end to conform to GAAP.The major differences between this adopted budget andGAAP for Governmental Fund Types are:a) encumbrances are recorded as the equivalent ofexpenditures (budget) as opposed to a reservation of netassets (GAAP); b) certain revenues and expenditures notrecognized for budgetary purposes are accrued (GAAP).Enterprise Fund differences include:a) encumbrances are recorded as the equivalent ofexpenditures (budget) as opposed to a reservation of netassets (GAAP); b) certain items, e.g., principal expenseand capital outlay are recorded as expenditures forbudgetary purposes as opposed to adjustments of theappropriate balance sheet accounts (GAAP); c)depreciation is recorded as an expense (GAAP) and notrecognized for budgetary purposes.D - 4