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Budget Process Basis of Budgeting The City of Louisville uses a "cash basis" of budgeting for all fund types. Encumbrances and depreciation are not budgeted. City expenditures may not exceed the amounts appropriated. In the case of an emergency or a contingency, which was not reasonably foreseeable, a budget amendment would be required. The City's budget is constructed on a calendar year basis as required by 29-1-101, et seq., C.R.S. The budget must present a complete financial plan for the City; setting forth all estimated expenditures, revenues, and other financing sources for the ensuing budget year, together with the corresponding figures for the previous fiscal year. In estimating the anticipated revenues, consideration must be given to any unexpected surpluses and the historical percentage of tax collections. Further, the budget must show a balanced relationship between the total proposed expenditures and the total anticipated revenues with the inclusion of beginning funds. Basis of Accounting All governmental fund types use the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual (i.e., when they become both measurable and available). "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Expenditures are recorded when the related fund liability is incurred. Principal and interest on general long-term debt are recorded as fund liabilities when due. Those revenues susceptible to accrual are sales taxes, property taxes, use taxes, and franchise tax. Proprietary fund types utilize the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred. Bridging the Basis of Budgeting and Accounting Some of the differences between the cash basis of budgeting and the accrual method of accounting are: 15 Dent payment for principal — budgeted as an expense item, adjusted at vear-end against the liability. Depreciation — recorded for proprietary funds on an accrual basis, eliminated for budget purposes. Encumbrances— recorded as a reserve of fund balance on the modified accrual basis, on a cash basis for budgeting recorded as a reserve of budgeted funds. Compensated absences — adjust annually using the accrual method, not budgeted but absorbed by turnover and usage. Tax revenue accruals — even though tax revenues are accrued when they become collectable it will translate to twelve months of tax revenue matching twelve months of budgeted revenue. Budget Amendment Policy In the case of emergency or a contingency, which was not reasonably foreseeable, the City Council may authorize the expenditure of funds in excess of the budget by a resolution adopted by a two-thirds vote of the City council following proper notice. If the City receives revenues which were unanticipated at the time of adoption of the budget, the City Council may authorize the expenditure thereof by adopting a supplemental budget appropriation resolution after proper notice and a hearing thereon. The transfer of budgeted and appropriated monies within a fund or benveen funds may be done only in accordance with state law. Budget Adoption Resolutions The City Council actually implements the City's budget by approving a series of resolutions. Resolutions adopt the budget, establish appropriations, and set tax levies, necessary to execute a program for raising revenue and the paying for services the City government provides. Each resolution adopted to implement the 2002 Operating Budget is summarized below. Resolution 45, Series 2003 A resolution adopting the City of Louisville's budget