Wiley GAAP for Governments 2013: Interpretation and Application of Generally Accepted Accounting Principles for State and Local Governments

CHAPTER 10

THE IMPORTANCE OF BUDGETS TO GOVERNMENTS

Introduction

Budget Background

Executive Budget

Appropriated Budget

Nonappropriated Budget

Budgetary Execution and Management

Budget Amendments

Budgetary Reporting

Which Funds of the Government Adopt Budgets?

General Fund

Special Revenue Funds

Capital Projects Funds

Debt Service Funds

Proprietary Funds

Fiduciary Funds

Differences between the Budget and GAAP

Basis of Accounting Differences

Timing Differences

Perspective Differences

Entity Differences

Budgetary Control

Summary

INTRODUCTION

Almost all organizations—governmental, commercial, or not-for-profit—operate using some form of budgeting to ensure that resources are used in accordance with management’s intentions and to facilitate obtaining results of operations consistent with management’s plans. In the governmental environment, budgets take on greater importance, because they provide the framework in which public resources are spent. From an accounting and financial reporting viewpoint, budgets in government are a key component in achieving the accountability objective described in Chapter 2. Budgets in government generally represent adopted law, which is far more significant than simply a financial planning tool. Because many governments do not follow GAAP to prepare their budgets, achieving the accountability objective by comparing a non-GAAP-based budget with GAAP-based results presents some unique challenges. GASBS 34 affirmed the importance of budgetary reporting by ...