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BASIS OF BUDGETING

The accounts of the Town of Morrisville are organized on the basis of

funds. A fund is an independent fiscal and accounting entity, with a self-

balancing set of accounts. Funds maintain independent records of cash

and/or other resources, together with all related liabilities, obligations,

reserves and equities. The purpose of a fund is to carry out specific

activities or attain certain objectives in accordance with special financial

regulations, restrictions or limitations. The budget covers the activities

and expenditures for a fiscal year that runs from July 1 to June 30 of the

following year.

The Town develops its budget as required by the North Carolina Local

Government Budget & Fiscal Control Act. All budgets are prepared and

adopted using the modified accrual basis whereby revenues are recognized

when measurable and available and expenditures are recognized when a

liability is incurred. Expenditures may not legally exceed appropriations

at the departmental level for all annually budgeted funds. During the year,

the Town’s accounting system is maintained on the same basis as the

adopted budget. Unexpended funds revert to fund balance at close of year,

while unexpended capital reserve funds carry forward from year to year.

At year-end, the Town’s Comprehensive Annual Financial Report (CAFR)

is prepared on the basis consistent with Generally Accepted Accounting Principles (GAAP).

The main differences

between Budget and CAFR

for proprietary funds are:

•

Capital Outlay and Debt

Service principal payments

are recorded as expenditures

for budgetary purposes as

opposed to adjustments of

balance sheet accounts in the

financial statements.

•

Depreciation is not

recognized for budgetary

purposes and is recorded as a

charge applied against the

capital assets in the CAFR.