FY2021 Adopted Budget

FY2021 Adopted Budget Budget and Finance Policy Basis of Budgeting

Budgets for governmental funds are prepared using the modified accrual basis which combines the cash method and full accrual method of accounting. The modified accrual basis is widely used by government agencies to focus on current year obligations and to confirm that current revenues are sufficient to cover the obligations. However, this method is at variance with Generally Accepted Accounting Principles *$$3 7KH &RXQW\¶ s budgetary basis differs from GAAP as follows: x Encumbrances are recorded as expenditures x Principal payments on debt are recorded as expenditures x Inventories and capital assets are recorded as expenditures at the time of purchase x 7KH XVH RI SULRU \HDUV¶ fund balance is reported as revenue (other financing source/budgeted use of fund balance) x Depreciation is not recorded as an expense Also there is one difference between the figures presented in this document as actual and the figures reported in the Comprehensive Annual Financial Report. In our financial system, all encumbrances at year-end are re-appropriated and expensed in the following year, when the item/service is received. However, budgetary basis has already recorded these encumbrances in the prior year. Therefore, these transactions are backed out when reporting the actual expenditures for budgetary basis in the budget documents. Budgets for enterprise and internal service funds are prepared using the full accrual basis except for capital item purchases, which are budgeted as an expense. When reporting actuals, the budget documents will reflect full accrual basis with no exceptions. Committed General Fund Balance Policy Section 2-7-1(a) (2) of the Frederick County, Maryland Code of Ordinances provides for the County to maintain a committed General Fund balance equal to seven percent of General Fund expenditures and transfers to the Board of Education and Frederick Community College on a budgetary basis. Investment Policy The County has a written investment policy that ensures that the investment program is strictly adhered to and the security of County investments is maximized. Cash held temporarily idle during the year E\ )UHGHULFN &RXQW\¶V SULPDU\ government, was invested in certificates of deposits, obligations of federal government agencies and the State of Maryland Local Government Investment Pool, all of which are fully collateralized by United States Government obligations for periods ranging from one day to three years. The County also has a delivered collateral policy. General Fund Revenue Surplus Appropriation Policy Provides management with the flexibility to appropriate financial resources from the current fiscal year or projected surplus General Fund revenues in the current or immediate subsequent fiscal year budget. This policy requires the annual review of property tax and income tax revenues. If a surplus is determined, those funds may be appropriated to offset nonrecurring expenditures.

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