The purpose of this section is to outline some of the significant accounting policies, procedures and authoritative guidance provided for the accounting and reporting of financial information by the
FORM OF VILLAGE GOVERNMENT
The Village annually retains services of a certified public accounting firm to conduct an audit of its financial statements in accordance with auditing standards generally accepted in the
The Village generally follows the procedures enumerated below in establishing the budgetary data reflected in the Adopted Budget and the Village’s financial statements:
a) Village department heads submit budget requests and estimates to the Village Manager and Village Treasurer. Meetings are held with department heads to discuss and review budget submissions, departmental operations, goals and objectives for the current and ensuing year.
b) On or before the first regular meeting of the Board of Trustees in November, the Village Manager submits to the Board of Trustees a tentative operating budget for the fiscal year commencing the following January 1st. The tentative budget, which is prepared upon the recommendations of department heads and review of the Village Manager, includes proposed expenditures and the means of financing.
c) The Board of Trustees meets with the Village Manager, Treasurer and department heads to review the budget submissions, operations, goals and objectives.
d) The Board of Trustees conducts a public hearing on the tentative budget to obtain taxpayer comments at the second regular meeting in November.
e) After the public hearing and on or before the first regular meeting in December, the Trustees meet to consider and adopt the budget, at which time they are required to file the document with the Village Clerk.
f) Formal budgetary integration is employed throughout the year as a management control device for General, Special Revenue and Debt Service Funds.
g) Budgets for General, Special Revenue and Debt Service funds are legally adopted annually on a basis consistent with generally accepted accounting principles. The Capital Projects fund is budgeted on a project basis. Annual budgets are not adopted by the Board of Trustees for the Fiduciary funds.
h) The Board of Trustees has established legal control of the budget at the function level of expenditures. Transfers between appropriation accounts, at the function level, require approval by the Board. Transfers within departmental budgetary accounts, if requested by a Department Head, require approval by the Village Treasurer. Any modification to appropriations resulting from an increase in revenue estimates or supplemental reserve appropriations also require a majority vote by the Board.
i) Appropriations in General, Special Revenue and Debt Service funds lapse at the end of the fiscal year, except that outstanding encumbrances are reappropriated in the succeeding year.
The accounts of the Village are organized and operated on the basis of funds and account groups. A fund is an independent fiscal and accounting entity with a self-balancing set of accounts which comprise of assets, liabilities, fund balance/ net assets, revenues and expenditures/expenses. Fund accounting segregates funds according to their intended purpose and is used to aid management in demonstrating compliance with finance related legal and contractual provisions. The Village maintains the minimum number of funds consistent with legal and managerial requirements. Account groups are a reporting device to account for certain assets and liabilities of governmental funds not recorded directly in those funds. The Village’s resources are reflected in the financial statements in generic fund types within three broad fund categories, as well as two account groups, in accordance with generally accepted accounting principles as follows:
A. Governmental Funds – Governmental funds are those through which most general government functions are financed. The acquisition, use and balances of expendable financial resources and the related liabilities are accounted through governmental funds. The
General Fund - The General Fund constitutes the primary operating fund of the Village in that it includes all revenues and expenditures not required by law to be accounted for in other funds.
Special Revenue Funds - Special revenue funds are established to account for the proceeds of specific revenue resources (other than capital projects, proprietary, or expendable trusts) that are generally restricted to expenditures for defined purposes. The special revenue funds of the Village are as follows:
Water and Sewer Funds – The Water and Sewer Funds are used to record the water and sewer utility operations of the Village which render services on a user charge basis to the general public.
Section 8 Housing Fund – The Section 8 Housing Fund is used to account for resources received from the U.S. Department of Housing and Urban Development for housing assistance payment purposes.
Special Purpose Fund – The Special Purpose Fund is used to account for assets held by the Village in accordance with the terms of a trust agreement. The Village budget does not include the Special Purpose Fund. Expenditures from special purpose trust funds require approval of the Board of Trustees.
Debt Service Fund - The Debt Service Fund is provided to account for the accumulation of resources to be used for the redemption of principal and interest on long-term debt.
Capital Projects Fund - The Capital Projects Fund is used to account for financial resources to be used for the acquisition or construction of major capital facilities, other than those used by proprietary funds.
B. Proprietary Funds – Proprietary funds consist of internal service funds. Internal service funds account for operations that provide services to other departments or agencies of the government, or to other governments, on a cost reimbursement basis. The Village has established its Workers’ Compensation Benefits and General Liability Claims funds as internal service funds for financial statement reporting. For budgeting purposes, presentation of such activities are limited to the operating funds that provide the financial resources reported in the internal service funds.
C. Fiduciary Funds – Fiduciary Funds are used to account for assets held by the Village in an agency capacity on behalf of others. The Agency Fund is primarily utilized to account for payroll withholdings and various deposits that are payable to other jurisdictions or individuals.
Account Groups are used to establish accounting control and accountability for the Village’s general capital assets and general long-term debt. The two account groups are not "funds". They are concerned with measurement of financial position and not results of operations.
Non-Current Government Assets Account Group – formerly referred to as the General Fixed Assets Account Group, used to account for land, buildings, improvements other than buildings, equipment and infrastructure utilized for general government purposes, other than those accounted for in proprietary fund types.
Non-Current Government Liabilities Account Group – formerly referred to as the Long-Term Debt Account Group, used to account for all long-term liabilities that are not a specific liability of the proprietary fund types.
MEASUREMENT FOCUS/BASIS OF ACCOUNTING
The accounting and financial reporting treatment applied to a fund is determined by its measurement focus and basis of accounting. Measurement focus indicates the type of resources being measured, such as current financial resources (current assets less current liabilities) or economic resources (all assets and liabilities). The basis of accounting indicates the timing of transactions or events for recognition in the financial reports.
Governmental fund types and expendable trust funds are presented using the current financial resources measurement focus. With this measurement focus, only current assets and current liabilities are generally included on the fund balance sheets. Operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. The reported unreserved fund balance is a measure of “available spendable resources”.
The Agency Fund is custodial in nature and does not measure results of operations or have a measurement focus.
The modified accrual basis of accounting is followed in the governmental fund types, expendable trust and agency funds. Under the modified accrual basis of accounting, revenues are recorded in the accounting period in which they are “measurable” and “available” to finance current operations. “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. GASB has specified the principles to be used in the recognition of real property tax revenue. These principles provide that real property taxes be recognized as revenue only when received in cash during the current period, or soon enough thereafter to be “available” to meet the obligations of the current period. The term “available” has been limited to a period not to exceed sixty days subsequent to the end of the fiscal year unless unusual circumstances are present. A one year availability period is used for revenue recognition for all other governmental and expendable trust fund revenues. Revenues susceptible to accrual include real property taxes, services to other governments and intergovernmental revenues. Permits, fees and other similar revenues are not susceptible to accrual because generally they are not measurable until they are received in cash. If expenditures are the prime factor for determining eligibility, revenues from Federal and State grants are accrued when the expenditure is made.
Expenditures, under the modified accrual basis, are generally recognized when the related fund liability is incurred. Exceptions to this general rule are (1) unmatured principal and interest on general long-term debt which is recognized as an expenditure when due, (2) interest on short-term debt which is recognized as an expenditure when due and (3) compensated absences which are charged as an expenditure when paid and recorded in the General Long-Term Debt Account Group.
Encumbrance accounting, under which purchase orders, contracts and other commitments for the expenditure of monies are recorded in order to reserve applicable appropriations, is generally employed as an extension of formal budgetary integration in the General, Special Revenue and Capital Project Funds. Encumbrances outstanding at year-end are reported as a reserve of fund balance since they do not constitute expenditures or liabilities.
Quasi-external transactions are accounted for as revenues or expenditures/ expenses. Transactions that constitute reimbursements to a fund for expenditures/expensed initially made from it that are properly applicable to another fund are recorded as expenditures/expenses in the reimbursing fund and as a reductions of expenditures/expenses in the fund that is reimbursed. All other interfund transactions, except quasi-external transactions and reimbursements, are reported as transfers. Non-recurring or non-routine permanent transfers of equity are reported as residual equity transfers. All other interfund transfers are reported as residual equity transfers. All other interfund transfers are reported as operating transfers.
- updated December 2008