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CITY OF LINO LAKES, MINNESOTA <br />NOTES TO FINANCIAL STATEMENTS <br />December 31, 1998 <br />Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) <br />D. BUDGETS <br />Budgets are adopted on a basis consistent with generally accepted accounting principles. Annual <br />appropriated budgets are adopted for the General Fund and the Program Recreation Special Revenue <br />Fund. <br />Budgeted amounts are reported as originally adopted, or as amended by the City Council. Individual <br />amendments were not material in relation to the original appropriations which were adjusted. <br />Budgeted expenditure appropriations lapse at year end. <br />Encumbrance accounting, under which purchase orders, contracts, and other commitments for the <br />expenditure of monies are recorded in order to reserve that portion of the appropriation, is not <br />employed by the City because it is at present not considered necessary to assure effective budgetary <br />control or to facilitate effective cash management. <br />Reconciliation of Budgetary Basis to GAAP Basis <br />Governmental funds presented on Statement 3 are the General Fund and the Program Recreation <br />Special Revenue Fund. The following is a reconciliation of fund balances on a budgetary basis as <br />presented on Statement 3, to the GAAP basis as presented on Statement 2: <br />Special <br />Revenue <br />Funds <br />Governmental Fund: <br />Fund Balance — Budgetary Basis $ 37,195 <br />Fund Balances — Non - Budgeted Funds 25 <br />Fund Balances — GAAP Basis $ 37,220 <br />E. LEGAL COMPLIANCE - BUDGETS <br />The City follows these procedures in establishing the budgetary data reflected in the financial <br />statements: <br />1. The City Administrator submits to the City Council a proposed operating budget (including <br />the General Fund and Program Recreation Special Revenue Fund) for the fiscal year <br />commencing the following January 1. The operating budget includes proposed expenditures <br />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 basis and <br />can be expended by each department based upon detailed budget estimates for individual <br />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 may <br />be authorized by the City Council with fund (contingency) reserves or additional revenues. <br />5. Formal budgetary integration is employed as a management control device during the year <br />for the General Fund. <br />36 <br />