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CITY OF LITTLE CANADA, MINNESOTA <br />NOTES TO BASIC FINANCIAL STATEMENTS <br />DECEMBER 31, 2022 <br /> <br /> <br /> <br />(38) <br /> <br />NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) <br />E. Budgets <br />Budgets are adopted on a basis consistent with GAAP. Annual appropriated budgets are <br />adopted for the General and all Special Revenue Funds. Budgeted expenditure <br />appropriations lapse at year-end. <br /> <br />Encumbrance accounting, under which purchase orders, contracts, and other <br />commitments for the expenditure of monies are recorded in order to reserve that portion <br />of the appropriation, is not employed by the City because it is, at present, not considered <br />necessary to assure effective budgetary control or facilitate effective cash management. <br /> <br />The City follows these procedures in establishing the budgetary data reflected in the <br />financial statements: <br /> <br />1. The City Administrator submits to the City Council a proposed operating budget for <br />the fiscal year commencing the following January 1. The operating budget includes <br />proposed expenditures and the means of financing them. <br />2. Public hearings are conducted to obtain taxpayer comments. <br />3. The budget is legally enacted through passage of a resolution on a departmental <br />basis and can be expended by each department based upon detailed budget <br />estimates for individual expenditure accounts. <br />4. The City Administrator is authorized to transfer appropriations within any department <br />budget. Additional interdepartmental or interfund appropriations and deletions are or <br />may be authorized by the City Council with fund (contingency) reserves or additional <br />revenues. <br />5. Formal budgetary integration is employed as a management control device during <br />the year for the General Fund and Special Revenue Funds. <br />6. Legal debt obligation indentures determine the appropriation level and debt service <br />tax levies for the Debt Service Funds. Supplementary budgets are adopted for the <br />Proprietary Funds to determine and calculate user charges. These Debt Service and <br />Proprietary budget amounts represent general obligation bond indenture provisions <br />and net income for operation and capital maintenance and are not reflected in the <br />financial statements. <br />7. A capital improvement program is reviewed annually by the City Council for the <br />Capital Project Funds. However, appropriations for major improvement projects <br />(subject to statutory purchasing requirements) are not adopted until the actual bid <br />award of the improvement. The appropriations are not reflected in the financial <br />statements. <br />8. Expenditures may not legally exceed budgeted appropriations at the total fund level. <br />Monitoring of budgets is maintained at the expenditure category level (i.e., salaries, <br />wages and benefits, supplies, services, capital outlay) within each activity. <br />9. The City Council may authorize the transfer of budgeted amounts between City <br />funds.