Comprehensive Annual Financial Report - City of Santa Monica

CITY OF SANTA MONICA, CALIFORNIA
Notes to Basic Financial Statements, Continued
For the fiscal year ended June 30, 2009
and case reserves and claims analysis. It is the City's intent to maintain cash reserves in the selfinsurance
funds equal to or greater than estimated losses.
Use of Estimates
The preparation of basic financial statements in conformance with GAAP requires management to
make estimates and assumptions that affect the amounts reported in the basic financial statements
and accompanying notes. Actual results may differ from those estimates.
(2) BUDGETARY AND LEGAL COMPLIANCE
The City Council is required to adopt an annual budget resolution by June 30 each fiscal year for the
General Fund and each special revenue fund (except the Rent Control and Asset Seizure Funds). The
City Council also approves any revisions that alter the total expenditures of any major object or program
category (salaries, supplies including capital outlay or capital improvements) by department within the
same fund (the legal level of budgetary control).
The City Council also approves annual operating budgets for the City’s proprietary, capital projects and
internal service funds to facilitate management evaluation and control.
The budget is prepared on a non-GAAP budgetary basis, which considers encumbrances outstanding at
year end as an expenditure of that year. Encumbrances outstanding at the beginning of a fiscal year,
which were recognized as budgetary expenditures in the prior year, are recognized as GAAP-basis
expenditures but not as budgetary expenditures unless re-appropriated. It is the City’s policy to only reappropriate
capital encumbrances and unencumbered balances of specific capital appropriations. In
addition, capital leases are budgeted on a cash basis, whereas GAAP requires the full amount of the
leased asset purchased to be shown as an expenditure of the current year. Appropriations in
governmental funds outstanding at year end lapse, except for encumbered amounts, for which fund
balances are reserved at year-end for governmental funds.
A Comprehensive Annual Financial Report Budget Supplement is prepared to reconcile
expenditures/expenses at the legal level of control to the summarized amounts presented in the
Comprehensive Annual Financial Report and can be obtained from the Finance Department.
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