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Finance staff explain ACFR vs. budget differences; audit on track
Summary
Finance staff told the committee the audit is on schedule and explained that differences between the Comprehensive Annual Financial Report (ACFR) and budget arise from accounting conventions (depreciation, encumbrances, timing) and reserve usage; members asked for reconciliations for multi‑year comparisons.
Finance department staff updated the Annapolis Finance Standing Committee on Oct. 1 that the audit is on target and that staff are preparing budget-to-actual reports for the council. Committee members pressed for clarity on why ACFR figures appear to differ substantially from budget figures over time.
A finance representative said the ACFR and city budgets use different accounting conventions: depreciation, encumbrances and timing differences affect reported expenditures; encumbrances and reserve usage mean budgeted amounts do not always appear as expenditures in the ACFR in the same year. "There are timing differences. There are differences in the base accounting ... and encumbrances," the finance staff said, adding that some apparent gaps reflect vacancies or reserves and that for FY25 the city expects roughly $3 million in savings in certain public-safety categories from vacancies.
Committee members discussed which document — the ACFR or the budget books — best serves different comparison questions. Staff recommended the budget documents for certain apples‑to‑apples comparisons and offered to prepare reconciled charts or tailored reports on request. The audit is proceeding and staff said they are on track to complete necessary work by the end of the calendar year.
