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Finance staff explain differences between budget and audited financial reports to committee
Summary
Finance staff told the committee that accounting differences, timing, encumbrances and evolving reporting formats explain apparent disparities between annual budgets and Comprehensive Annual Financial Reports (CAFR). Committee members asked for guidance on comparing city spending across years.
City finance staff briefed the Finance Standing Committee on why the city's adopted budgets and its Comprehensive Annual Financial Report (CAFR) or ACR figures can differ substantially, and discussed best practices for comparing spending across multiple years.
A staff member said differences arise from timing, accounting conventions and reporting formats. "There are some accounting differences between budgetary accounting and, account like, GAAP rules or, you know, the depreciation and all of those things are not recorded in the same way that we budget for them," the finance staff member said, noting that encumbrances, depreciation and other reconciliations can create differences between budgeted amounts and audited expenditures. The staff member also noted that vacancies and departmental underspending can affect year-to-year comparisons.
Why it matters: Several committee members had observed large discrepancies when comparing budgeted totals with the ACR for fiscal year 2024. Finance staff recommended using budget-to-budget comparisons to measure trends in planned spending and to rely on reconciled budget-to-actual schedules for year-by-year analysis rather than directly comparing top-line CAFR totals to adopted budgets without reconciliation.
Committee members asked staff to prepare comparative charts if needed. Finance staff said they can produce detailed reconciliations and advised that the budget document is generally the clearest source for year-to-year policy comparisons, while the CAFR captures GAAP accounting items like depreciation and other adjustments that do not reflect budgetary appropriations.
Ending: The committee did not take a formal vote on the briefing. Staff said the audit remains on schedule and that they are preparing budget-to-actual reconciliations for council review.
