COG Comprehensive Annual Financial Report

explains that “long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the funds.”

The details of this $273,529,768 difference (including Premium of $12,242,147 and unamortized bond refunding charges of $912,288) are as follows:

Bonds and Notes Payable Certificates of Participation Payable Limited Obligation Bonds and Notes Payable Lease Purchase and Other Financing Agreements Payable Compensated Absences Payable Accrued Interest Payable Combined Adjustment

$

212,251,982 5,581,691 37,583,558 3,654,361 12,173,112 2,285,064 273,529,768

$

B. Explanation of certain differences between the governmental fund statement of revenues, expenditures, and change in fund balances and the government-wide statement of activities. The governmental fund statement of revenues, expenditures, and changes in fund balances include reconciliation between net changes in fund balances – total governmental funds and changes in net position of governmental activities as reported in the government-wide statement of activities. One element of that reconciliation explains that “Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense”. The details of this $14,255,457 difference are as follows:

Capital Outlay

$ 23,782,654

Contributed Capital

6,036,192 (254,511) (15,308,878)

Disposal

Depreciation/Amortization Expense

Combined Adjustment

$ 14,255,457

Another element of that reconciliation states that “the issuance of long-term debt (e.g., bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. Also, governmental funds report the effect of premiums, discounts, and similar items when debt is first issued, whereas these amounts are unearned and amortized in the statement of activities. Also included are compensated absences activities.” The details of this $(17,288,102) difference are as follows:

Issuance of Debt Principal Expenditure

$ (34,527,175)

15,487,723 (255,550) 2,600,310 (593,410)

Bond-Related Amortization

Interest Expenditures/PremiumAmortization

Compensated Absences Expense

Combined Adjustment

$ (17,288,102)

III. Stewardship, Compliance and Accountability A. Budgetary Information

In accordance with the General Statutes of the State of North Carolina, the City prepares and adopts its budgets on the modified accrual basis. The General Statutes also require balanced budgets for all funds for which a budget is required. The City adopts annual budgets for all funds except Capital Projects Funds, Grant Project Funds and Trust Funds. Annual budgets must be 38n